Analyst Stock Upgrades and Downgrades for Friday
On Friday, several Canadian banks and companies received notable upgrades and downgrades from financial analysts, impacting stock expectations. RBC Capital Markets analyst Darko Mihelic revisited Canadian banks and life insurance companies, adjusting expectations on stock buybacks and return on equity targets.
Key Upgrades and Downgrades
Toronto-Dominion Bank and Bank of Montreal
- Toronto-Dominion Bank (TD): Upgraded to “outperform” from “sector perform.” Price target raised to $120 from $93.
- Bank of Montreal (BMO): Downgraded to “sector perform” from “outperform.” Price target lowered to $163 from $168.
Mihelic’s analysis highlighted the strong capital levels within these institutions, noting the average Common Equity Tier 1 (CET1) ratio rose by 60 basis points year over year to 13.8% in Q3 2023. The analyst expects this trend to continue, predicting an average CET1 ratio of 13.9% for the major banks by Q4 2027, despite prior expectations of 14.5%.
Outlook on Share Buybacks
The presence of active Normal Course Issuer Bids (NCIBs) allows banks to repurchase shares. Mihelic expressed that share buybacks might persist beyond current programs, contingent on maintaining solid capital levels. He reiterated that BMO faces the lowest core return on equity (ROE) estimate of 12.9% compared to its medium-term target of 15%.
Canadian Railways
Meanwhile, Scotia analyst Konark Gupta adjusted his price targets for major Canadian railways:
- Canadian National Railway Co. (CNR): Price target cut to C$150 from C$153.
- Canadian Pacific Kansas City Ltd (CP): Price target reduced to C$119 from C$122.
Despite the cuts, Gupta maintained a “sector outperform” rating, citing that both rail companies continue to show strong growth potential, especially as they are strategically positioned within Canada’s resource-rich economy.
Real Matters and CGI Inc.
In other market moves, Canaccord Genuity analyst Robert Young increased his price target on Real Matters Inc. to C$10 from C$7, maintaining a “buy” rating. Positive management meetings indicated a rise in market share and higher transaction volumes in the mortgage sector.
On the other hand, TD Cowen resumed coverage on CGI Inc. with a “buy” rating but adjusted the price target to C$145 from C$190. Analyst Daniel Chan noted that macroeconomic uncertainties have affected CGI’s growth, but he views this as an opportunity for investors to buy into a resilient company.
These analyst movements on stocks represent an ongoing reassessment in the Canadian financial landscape as institutions navigate current economic challenges and future growth trajectories.
