Why strong U.S. bank earnings pave the way for Canadian counterparts, which four themes could drive real estate stocks higher and more from The Week in Stocks.

Stock of the week: Vermilion Energy Inc.

Vermilion Energy Inc. was the top gain on the S&P/TSX composite index this week, rising 15 per cent after TD Cowen analyst Menno Hulshof upgraded the shares to a buy while maintaining his price target of $18. Shares closed Friday at $15.89. Vermilion is tracking toward the high end of 2026 production guidance, he said in a note. He believes investors have a better grasp of the “near-term operational headwinds” including second quarter hedging losses and cyclone impacts at its Wandoo Australian operations. Vermilion has had a rocky 2026 and is off 20 per cent from its high in mid-March. Looking ahead to 2028, Hulshof said he sees the potential for share buybacks to improve and for momentum in Germany, where Vermilion has operations. At $24, ATB Cormark Capital Markets analyst Amir Arif has among the highest price targets for Vermilion and said in note from May 7, when the company last reported earnings, that “the name provides good exposure to European gas, an improved domestic portfolio of Deep Basin and Montney formations, and longer-term growth in Germany.” National Bank of Canada analyst Travis Wood has the highest price target at $27, implying a possible upside of nearly 70 per cent. Vermilion has a 12-month price target of $20 based on the calls of 11 analysts, according to Bloomberg.

Keeping score

Why strong U.S. bank earnings pave the way for Canadian counterparts

U.S. banks reported strong earnings for the second quarter and analysts at Scotia Capital Markets think that’s a good news for their Canadian counterparts, which release third quarter earnings at the end of August. “We believe the U.S. banks’ results should give investors a bit more confidence in the near-term earnings outlook for the large Canadian banks, particularly in light of current elevated valuation multiples,” Mike Rizvanovic, a Scotia Capital analyst, said in a note on July 22. Rizvanovic looked at four big U.S. money centre banks and eight large regional banks and found that they beat earnings per share (EPS) consensus on average by nine per cent. Meanwhile banking fees jumped 16 per cent from the first quarter at U.S. giants Goldman Sachs Inc. and Morgan Stanley. Trading revenue driven by equities surged to record levels at JPMorgan Chase and Co., Bank of America Co., Morgan Stanley and Goldman Sachs. Total loans grew, with commercial posting stronger performance than personal. Toronto-Dominion Bank (TD:TSX) and Bank of Montreal (BMO:TSX) are best placed to benefit from rising U.S. personal and commercial lending, Rizvanovic said, with BMO positioned to gain the most given it has a larger commercial lending presence in the U.S. at 78 per cent of personal and commercial banking, versus 48 per cent at TD. Scotia Capital has 12-month price targets of $239 and $169 for BMO and TD. Shares closed Friday at $250.77 and $169, respectively. CIBC Capital Markets analyst Paul Holden said U.S. capital markets results bode well for BMO, Royal Bank of Canada (RY:TSX) and National Bank of Canada (NA:TSX) due to their exposure to U.S. investment banking franchises and equity trading desks. National Bank could also benefit. However, Holden warned investors capital markets could switch from a “tailwind” to a “headwind if market conditions shift.”

These four themes could drive real estate stocks higher

These four investing themes serve as guideposts for Canada’s real real estate investment trust players: the Atlantic opportunity; the West is underrated; the office recovery and consolidation underway, ATB Cormark Capital Markets analysts said in a note on July 22. And certain stocks are poised to potentially benefit from them. Here’s a look at some of the names tied to each theme. On the Atlantic front, ATB analyst Sairam Srinivas said increased defence spending slated for Halifax could boost the rental market to the benefit of Killam Apartment REIT (KMP/U:TSX). ATB has a 12-month price target of $20 on Killam. Shares closed Friday at $18.86. Meanwhile in the West, while “broader market sentiment has been pessimistic toward the outlook for purpose-built rentals,” Srinivas disagreed, saying that interprovincial demand should support rent growth and vacancy rates for Boardwalk Real Estate Investment Trust (BEI/U:TSX) and Mainstreet Equity Corp. (MEQ:TSX). ATB has price targets of $80 and $225, respectively. Shares closed Friday at $65.49 and $177.72. The analyst said the recovery in office occupancy rates continues in Toronto and Montreal with Dream Office REIT (D/U:TSX) and Allied Properties REIT (AP/U:TSX) viewed as beneficiaries. ATB has price targets of $25 and $11 for the shares. They closed Friday at $19.05. and $10.45. Finally, Srinivas thinks consolidation and mergers and acquisitions will drive shares of Automotive Properties REIT (APR/U:TSX). He has a price target of $13.75. Shares closed Friday at $12.19.

Price target hikes, starts and cuts

  • RBC Capital Markets analyst Nelson Ng initiated coverage of 5N Plus Inc. (VNP:TSX) with a rating of outperform and a price target of $41 as the recent pullback offers an “attractive entry point” for investors, he said. Shares closed Friday at $33.50.
  • UBS Global Research analyst Stephen Ju cut his price target for Alphabet Inc. (GOOG:Nasdaq) to US$379 from US$400 on worries regarding rising capital expenditures. Shares closed Friday at US$319.09.
  • TD Cowen analyst Tim James hiked his price target for Mullen Group Ltd. (MTL:TSX) to $32 from $24 on better than expected results that “support further upside for the share price.” Shares closed Friday at $28.73.
  • BMO Capital Markets analyst Ben Pham hiked his price target for Emera Inc. (EMA:TSX) to $80 from $76 with the balance sheet and payout ratio (dividend as a per cent of profit) on track to further reduce risk. Shares closed Friday at $77.52.
  • CIBC Capital Markets analyst Hamir Patel hiked his price target for Adentra Inc. (ADEN:TSX) to $46 from $44 on its mergers and acquisitions strategy “which can still work in a flatish” housing market. Shares closed Friday at $36.52.
  • This TSX stock soared 34% and several analysts think it has plenty more room to run
  • This TSX stock could be looking at up to 35% upside, analyst says, as price target hikes flood in

The Week in Stocks is taking a break next week. Look out for it the following Friday.

• Email: gmvsuhanic@postmedia.com