Tuesday’s analyst upgrades and downgrades

Inside the Market’s roundup of some of today’s key analyst actions

TD Cowen analyst David Kwan thinks Monday’s 3.8-per-cent pullback in shares of Constellation Software Inc. (CSU-T), which he attributes to “concerns of [it] buying more declining businesses and the related negative impact on organic growth and valuation,” is “overdone.”

“The acquisition of two U.S. healthcare businesses in Q3 that are experiencing some large customer churn has negatively impacted organic growth, and we think caused investor concern, especially after the decline last quarter in part due to another (expected) large customer loss,” he explained. “As CSU’s organic growth calculation assumes it owns these businesses a year ago, these organic growth headwinds will continue for another few quarters.

“CSU may continue to selectively acquire businesses facing revenue pressure, assuming they meet/exceed its hurdle rate, but management confirmed that these deals are not a core part of their M&A strategy.”

In a client note, Mr. Kwan said he would not be surprised to see “steps taken to discourage pursuing more of these deals” due to “investor concern and the negative impact on organic growth and valuation.” Those moves could include " having a (materially) higher hurdle rate for acquisitions of declining businesses and/or higher level approvals."

“Playbook continues to drive solid margin gains,” added Mr. Kwan. “Deal activity remains robust, with software valuations continuing to recover and significant activity behind the scenes, although competition from PE and larger platforms remains intense. Higher rates have yet to meaningfully pressure private-market valuations, as many buyers remain well-capitalized and sellers appear reluctant to transact at lower valuations.

“CSU continues to execute well on its playbook, as it focuses on strengthening acquisitions in the first year. CSU noted that the Q1 cohort margins increased from negative 16 per cent to 27 per cent and Q2 from 12 per cent to 21 per cent.”

Keeping his “buy” rating for Constellation shares, he hiked his target to $4,500 from $4,200, believing " the M&A pipeline remains robust without these deals, with F2026 set to be a record year for M&A and there is a favourable backdrop shaping up for 2027." The average on the Street is $3,838.22.

“We view Constellation as one of the highest quality companies we have come across,” he concluded. “The company has consistently delivered superior M&A-driven growth with strong margins, FCF, and ROIC, while maintaining a solid balance sheet. Since 2003, Constellation has delivered an 20-30-per-cent CAGR [compound annual growth rate] in key metrics, including revenue, EBITDA, Adj. EPS, and FCF, with a ROIC [return on invested capital] of more than 20 per cent annually. We believe the stock is attractively valued and, like the business, we believe the shares should outperform if there is an economic downturn, given its defensive business model. Despite the leadership transition and the perceived increased AI risk, we believe Constellation’s top-tier and long-tenured management team will continue to deliver superior shareholder returns over the long term, including through additional spin-outs.”

Elsewhere, other target adjustments include:

* Desjardins Securities’ Jerome Dubreuil to $4,100 from $4,000 with a “buy” rating.

“We believe CSU’s 4-per-cent share-price decline was overdone, particularly in contrast with the NASDAQ’s 3-per-cent gain [Monday]. We think the main reason for the stock’s weakness was the FCF miss, which was mostly negatively impacted by timing or non-recurring items. We highlight that our 2027 estimates are lower than the Street, but we see continued strong capital deployments as an attractive long-term value-creation opportunity,” said Mr. Dubreuil.

* Canaccord Genuity’s Doug Taylor to $4,100 from $3,700 with an “outperform” rating.

“Overall, Q3 reinforces our thesis, with record LTM [last 12-month] deployment, recovering organic growth and improving profitability more than offsetting ongoing healthcare attrition,” said Mr. Taylor.

While Desjardins Securities analyst Doug Young thinks the outlook for Trisura Group Ltd.’s (TSU-T) primary businesses is “encouraging,” he downgraded his rating for its shares, pointing to “uncertainties” south of the border.

“While operating EPS was in line with our estimate and consensus, there was noise at its U.S. programs business,” he said. “While we like TSU’s primary lines businesses (especially the outlook for the Surety division), the uncertainties at its U.S. programs division (eg DryStone Capital bankruptcy and adverse reserving trends) are causing us to move.”

Trisura dropped 29.9 per cent on Friday and an additional 0.4 per cent on Monday after it acknowledged its exposure to the fallout from DryStone’s Chapter 7 filing on Oct. 26. The Washington-based firm had provided loss-adjustment expense management services to Trisura with its affiliated company, DryStone Re, acting as a reinsurer on four of runoff programs.

“Positives. (1) Operating EPS was in line with our estimate and consensus. (2) Growth in the primary-line businesses, including the expansion into the US surety and corporate insurance markets, was robust. Of note, surety GWP increased 26% yoy (this includes the US business). On the US surety expansion, it added another state (Oregon). (3) Both the corporate insurance and warranty divisions had a good quarter. (4) Investment income was above our expectation,” said Mr. Young.

“Concerns. (1) There was noise in the U.S. programs business. Management increased reserves for both the current and prior accident years for casualty risks, and increased reserves in both exited lines and in run-off programs (the latter is included in the operating results). It plans to do a deeper dive on reserves in 4Q26 and will update the market if there’s anything to flag. (2) The unknown related to the bankruptcy of a claims management firm TSU deals with in the U.S. (DryStone Capital). While the financial impact is still unclear, management expects any charge to be less material than for past issues (eg 4Q22). Management also stated several times that it’s in a much different financial position today (vs in the past), which should enable it to better absorb any charges. (3) The top- and bottom-line pressures on the Canadian fronting business were more than we anticipated, and this likely persists through 2027.”

Moving Trisura to a “hold” recommendation from “buy” previously, Mr. Young cut his target to $36 from $56. The average is $47.

Following strong third-quarter results, Scotia Capital analyst Jonathan Goldman views Adentra Inc. (ADEN-T) as “the best cyclical torque risk/reward in our coverage given best-in-class management team, structurally higher/lower margin profile/earning volatility, capital optionality, and valuation support.”

Shares of the Langley, B.C.-based distributor of architectural building products soared 7.1 per cent on Monday after it quarterly adjusted EBITDA of $55.2-million, exceeding the Street’s expectation of $51.6-million by 7 per cent. The beat was driven by both higher-than-anticipated sales ($619-million versus the consensus estimate of $605-million) and higher margins (8.9 per cent versus 8.5 per cent).

“A couple of things stand out from 3Q: 1) revenues have remained resilient despite higher yields (30-year mortgage rates still at multi-decade highs but off peak); and 2) the company continues to punch above its weight in a challenging operating backdrop,” said Mr. Goldman. “On the first point, organic sales increased 4 per cent year-over-year. Yes, volumes were down low single difits, but that was more than offset by higher pricing up mid-single-digits. We are more concerned with the net number and the pricing aspect is more important as it underscores structural improvements in the business. On the call, management noted the internal processes to manage pricing, but also value-add including global sourcing, just-in-time delivery, inventory, credit, marketing, and product expertise. But, to us, strong pricing gains and resilient gross margins – in an inflationary environment (tariffs, fuel, freight, logistics) – speak to at least some degree of pricing power, with an intentional mix shift to higher margin, more resilient: 1) pro dealer and home center channels (via the transformational acquisitions of Novo and Mid-Am); 2) specialty, branded, and imported products; and 3) e-commerce.

“On the second point, the company is outperforming its end-markets. Management noted potential share gains in 3Q (which is highly credible given the perennial lack of self-promotion) while pricing gains exceeded CPI. Gross margins remain 300 basis points above 2019 levels (and in the low-20s for 22 quarters in a row), and cost control continues to impress with OpEx down 0.6 per cent year-over-year in 3Q (flat year-to-date) despite higher revenues. B/S remains in a good place at 2.3-times net debt to EBITDA ex leases (down from 2.5 times) last quarter and at the low-end of the target range. Seller expectations remain ‘reasonable” (unchanged). Management remains keen on M&A but can be lumpy. Recall, full cycle KPIs call for deploying $50 million to $150-million per year on M&A and thus far in 2026 the company only acquired Mount Storm for $6-million (adding annualized revenues of $20-million, or 0.9 per cent of our 2026 estimate).”

In a client report titled Worth the Price, Mr. Goldman raised his 2026 and 2027 estimates by 4 per cent and 1 per cent, respectively, leading him to increased his Street-low target for Adentra shares to $46 from $43 with a “sector outperform” rating. The average target is $61.

“Both the 3Q results and guide (albeit one month) suggest the industry is holding up better than feared amid higher rates,” he said. “Further, the company continues to demonstrate superior execution in a challenging macro with revenue growth outperforming end-markets, gross margins remaining in the 21-per-cent range (up 300 basis points v. 2019), and B/S leverage decreasing (again) to 2.3 times from 2.5 times last quarter, near low-end of target range of 2-3 times.”

Elsewhere, other changes include:

* Desjardins Securities’ Frederic Tremblay to $53 from $49 with a “buy” rating.

“With industry volumes down by low single digits, ADEN continues to demonstrate impressive resilience through pricing discipline, cost control and market share gains. We expect the macro backdrop to remain subdued into 2027, but believe current performance increasingly demonstrates that earnings growth does not require a strong market recovery. Combined with M&A capacity and significant operating leverage to an eventual volume recovery, we see an attractive path to higher earnings through the cycle,” said Mr. Tremblay.

* TD Cowen’s Kasia Trzaski Kopytek to $50 from $48 with a “buy” rating.

“We believe ADEN’s Q3 results stack up favourably to peers this quarter; sustained price passthrough actions, resilient/improving margins, and strong FCF generation are evidence of good execution in a sluggish macro and reinforce our positive investment stance. ADEN has financial flexibility to pursue value-accretive capital deployment, including its stated strategy of growing through acquisition,” she said.

* Acumen Capital’s Nick Corcoran to $54 from $50 with a “buy” rating.

“ADEN remains well positioned for an improved operating environment and additional M&A,” he said.

TD Cowen analyst Menno Hulshof recommends investors of Greenfire Resources Ltd. (GFR-T) “put the proceeds to work elsewhere,” moving his rating for its shares to “sell” from “buy” following Monday’s announcement of its acquisition by fellow heavy-oil producer Strathcona Resources Ltd. (SCR-T) for about $2.4-billion in cash and stock.

“We see little interloper risk given WEF’s control and CVE’s focus on ATH (closing Dec.) and Christina Lake North (MEG),” said Mr. Hulshof. “3Q results were in line, while Pad 7 achieved first oil and Pad 5SE timing moved forward, supporting confidence in execution.”

Mr. Hulshof sees “few, if any, impediments” to the closing of the deal, which isl aimed at consolidating holdings controlled by Calgary-based Waterous Energy Fund

“We expect the transaction to receive the required shareholder, Court and regulatory approvals and close in late January 2027, with 2027 guidance likely released shortly thereafter,” he said. “WEF owns 72 per cemt of GFR and 57 per cemnt of SCR and has agreed to support the transaction and elect the share consideration, improving deal certainty.

“Interloper risk appears very low CVE. (BUY, $38.98) is the most credible alternative given GFR (including recently acquired privco Connacher) and ATH are all in close proximity to one another. The industrial logic is admittedly very strong. However, with CVE still closing ATH (SELL, $11.50) and having recently acquired MEG, another transaction looks unlikely and could be unwelcome to shareholders. WEF’s 72-per-cent ownership also means any competing bid would effectively need to be friendly. While a $12-$13/sh or higher offer could muddy the waters, we view that outcome as remote given the very low likelihood of WEF support.”

Mr. Hulshof maintained a $11 target for Greenfire shares. The average on the Street is $7.99.

“Our $11.00/sh target is unchanged and reflects the cash consideration, in line with our pretransaction target,” he said. “Holders may instead elect 0.25 SCR shares per GFR share (or $9.00/sh) based on today’s close. However, with GFR trading at or near our target, we believe investors should realize gains rather than retain exposure to residual transaction uncertainty.”

Elsewhere, National Bank’s Travis Wood moved Greenfire to “tender” from “outperform” with an $11 target, down from $11.50.

“Although the transaction was executed ahead of our estimated window (sometime in 2027/28), GFR folding up within Strathcona Resources Ltd. (SCR:TSX; Outperform, $62 Target Price) was the logical outcome, with the business to continue operating semi-autonomously as a business unit (’SCR Central Athabasca’) under current Greenfire President Colin Germaniuk moving forward,” said Mr. Wood.

“ro forma, GFR shareholders can elect to receive either: 1) 0.25 SCR shares per GFR share or 2) $11.00/share in cash. The cash offer appears fair based on our $11.50 target price. The deal expected to close in January 2027.”

In a separate report, Mr. Wood cut his Strathcona target to $59 from $62 with an “outperform” rating.

“We have made changes to our forecast in connection with the acquisition announcement and quarter update .... Altogether, these changes have led to revisions to our 2026e and 2027e cash flow forecasts, with 2026 and 2027 estimates up by 1 per cent and 18 per cent, respectively. We are maintaining our Outperform rating but are decreasing our target price ... on account of higher near-term debt levels related to the GFR acquisition and revised cash flow per share estimates,” he explained.

Following “good” third-quarter results, RB Global Inc. (RBA-N, RBA-T) “continues to execute well,” according to RBC Dominion Securities analyst Sabahat Khan, who now sees ”several levers to sustain earnings growth through 2027."

“RBA revised its full-year 2026 GTV [gross transaction value] growth and adj. EBITDA guidance above consensus heading into Q3 reporting (implied Q4 GTV/adj. EBITDA also ahead of consensus),” he said in a note titled Well positioned.

“Outlook commentary was constructive, with mgmt. citing the runway/opportunity for top-line growth, margin expansion, and operational efficiency, all supported by the recent leadership realignment (more thoughts here). Supportive underlying trends (e.g., improving insurance affordability, stable total loss frequency, continued share gains, etc.) position the business well into 2027, in our view.”

On Monday, the Illinois-based company, formerly known as Ritchie Bros. Auctioneers Inc., reported GTV of US$4.676-billion, up 20.1 per cent year-over-year and above Mr. Khan’s US$4.238-billion. Revenue grew 16.6 per cent to US$1.274-billion, topping his US$1.179-billion projection, while adjusted earnings per share of US$1.03 beat the Street (US$1.01) while falling under the analyst’s US$1.11 expectation.

“Looking ahead, management. noted their intention to improve take rate over time across their various end-markets; however, they did acknowledge that some end-markets will continue to have nuances,” said Mr. Khan. “For instance, transactions involving real estate (take rate in the low-single-digits range) and agriculture have unique characteristics that will lead to their specific take rates likely remaining below the historical company average.

“Our thoughts on the whole car strategy – U.S. remarketed vehicles now represent 24 per cent of RB Global’s total automotive unit volume, with the GSA [U.S. General Services Administration] contract being the primary growth driver over the recent periods (60 basis points headwind to Take Rate but generating attractive per-unit economics + leveraging existing physical footprint). On the call, mgmt. described the remarketing of distressed used cars as complementary with the existing buyer base (seeing early signs of crossover).”

Keeping his “outperform” rating for RB Global’s NYSE-listed shares, Mr. Khan cut his target to US$134 from US$152 to “fairly [reflect] the current operating backdrop, RB Global’s organic growth outlook, and its FCF profile.” The average on the Street is US$129.36.

“Over the last decade, RB Global has undertaken a strategic shift toward becoming a multi-channel, full-service marketplace for customers looking to buy, sell, and manage their used equipment (as compared to its historical positioning as purely an auctioneer). To support this evolution, the company has leveraged investments in its technology platforms and undertaken a number of tuck-in acquisitions. Further, the evolution of the legacy business combined with the opportunity ahead for IAA provides a favorable setup for investors over the medium-to-long term, in our view,” he added.

In other analyst actions:

* TD Cowen’s John Mould raised his Atco Ltd. (ACO.X-T) target to $100 from $98 with a “buy” rating. The average on the Street is $92.

“Q3/26 results at Structures & Logistics beat our forecast, with CU results delivering a slight beat (inflation indexing benefits in Australia). Momentum remains solid for the structures business and longer-dated defence-related opportunities,” said Mr. Mould.

* Mr. Mould also raised his target for Atco subsidiary Canadian Utilities Ltd. (CU-T) to $58 from $57 with a “buy” rating. The average is $56.80.

“Modest Q3 beat; we anticipate ATCO Australia’s favorable inflation indexing will continue to normalize through Q4. CU reiterated interest in interties, and expanding midstream and gas-fired generation within the non-regulated platform,” said Mr. Mould.

* Desjardins Securities’ Gary Ho reduced his Diversified Royalty Corp. (DIV-T) target to $4.50 from $4.75 with a “buy” rating. The average is $5.33.

“3Q normalized EBITDA of $23.4-million was slightly below our $23.9-million and consensus of $23.7-million. Mr. Lube (ML) SSSG turned negative at 5.1 per cent (key investor focus) as higher fuel costs reduced driving, although DIV reaffirmed its $58.7-million ML adj EBITDA contribution and 18 openings in 2026. Sutton took a further $4.7-million non-cash impairment. We lowered our ML SSSG outlook and trimmed our estimates,” said Mr. Ho.

* Desjardins Securities’ Frederic Tremblay lowered his target for Doman Building Materials Group Ltd. (DBM-T) to $12 from $12.50 with a “buy” rating. The average is $12.71.

“DBM continues to navigate a challenging building materials environment relatively well, with resilient volumes reinforcing our confidence in the underlying business. While lumber pricing and incomplete freight cost recovery remain near-term margin headwinds, both should become less onerous over time. Meanwhile, continued deleveraging provides greater flexibility for M&A and internal growth investments, leaving DBM well positioned to drive earnings growth,” said Mr. Tremblay.

* Desjardins Securities’ Lorne Kalmar bumped his Dream Office Real Estate Investment Trust (D.UN-T) target to $17.50 from $17 with a “hold” rating. The average is $20.34.

“Notwithstanding the ILAC [International Language Academy of Canada] departure, our funds from operations per unit estimates increased 2 per cent on the back of the NOI-driven beat in 3Q and constructive leasing commentary. While metrics are trending in the right direction, our conviction around the timing of a more fulsome recovery remains somewhat limited given our view that a more broad-based rebound in leasing demand will require improved economic growth and office-using employment, which have yet to materialize,” said Mr. Kalmar.

* National Bank’s Gabriel Dechaine raised his iA Financial Corporation Inc. (IAG-T) target to $221 from $215, maintaining a “sector perform” rating, while TD Cowen’s Mario Mendonca increased his target to $225 from $219 with a “hold” rating. The average target is $219.57.

“Core EPS was better than expected reflecting strong experience gains (CAD & U.S. mortality, home/auto), partially offset by higher U.S. lapses (broader issue than the Q1/26 lapse issue - management will offer more on this on the CC). We expect experience to be nil to modestly positive going forward. WM remained very strong and U.S. improved. IAG surprised with a 7-per-cent dividend increase,” said Mr. Mendonca.

* National Bank’s Mohamed Sidibé reduced his target for IsoEnergy Ltd. (ISO-T) to $18 from $20 with an “outperform” rating, while RBC’s Andrew Wong cut his target to $20 from $25 with an “outperform” rating. The average is $22.83.

“New drilling results at IsoEnergy’s flagship Hurricane deposit gives us greater confidence in a potential future resource upgrade. Results confirm high- grade mineralization, and we are encouraged by a previously low-grade domain being reinterpreted as high-grade. Furthermore, step-out holes 500 meters east of the L fault zone could indicate a larger resource footprint. Management believes this extension raises potential for further high-grade zones. We reiterate our Outperform, Spec. Risk rating, but adjust our P/NAV lower to reflect broader market multiple compression,” said Mr. Wong.

* RBC’s Jimmy Shan, who is the lone analyst covering Morguard Corp. (MRC-T), cut his target to $140 from $150 with a “sector perform” rating.

Operationally, we expect modest SP NOI growth in 2027. While we think cap rate on the TDAM acquisition has moved slightly higher since announced earlier in the year, the transaction remains accretive to NAV and FFO when management fees are considered – we estimate unlevered/levered yield of 6 per cent/20 per cent (inclusive of fees). Proforma transaction, residential accounts for 67 per cent – over time, we see MRC’s weighting to residential to further increase. From that perspective, stock remains highly undervalued for investors willing to be patient, at implied 7.6-per-cent cap & 6 times 2027 estimated AFFO," said Mr. Shan.

* National Bank’s Travis Wood bumped his target for Peyto Exploration & Development Corp. (PEY-T) to $30 from $29 “on account of marginally higher corporate volumes and improved margins driven mainly by product mix forecast next year.” He kept an “outperform” rating. The average target is $27.70.

* RBC’s Walter Spracklin, who is currently the lone analyst covering Westshore Terminals Investment Corp. (WTE-T), raised his target for its shares to $48 from $47 with an “outperform” rating.

“Overall, we characterize Q3 as constructive, with results coming in ahead of our estimates and management raising guidance on both throughput and loading rate. We also flag timing changes related to the Berth 2 outage and first potash shipments, with no material impact to our positive thesis. Key for us is that the quarter reinforces Westshore’s operational flexibility to handle thermal coal, met coal, or potash, which we see as a key valuation driver,” said Mr. Spracklin.