National Bank downgrade 11:19 AM EDT, 08/05/2022 (MT Newswires) -- National Bank of Canada downgraded Cascades Inc. (CAS.TO) and cut the price target after the company lowered its guidance for the tissue paper segment and increased its capex forecast.
Cascades, which was down more than 7% at last look on Friday, yesterday reported Q2 revenue of $1,119 million, up 17% year on year. This was above the bank's call for $1,067 million and the Street's $1,102 million.
The bank noted that adjusted EBITDA was $91 million on 8.1% margins, just above its call for $87 million on 8.2% margins and versus Street's forecast of $92 million, 8.3% margins. Adjusted EPS came in at $0.10, beating the bank's $0.03 forecast and the Street's $0.08 estimate.
However, the quarter was marred as the company cut its tissue paper operating income guidance for the year to $25-40 million from $60-80 million and increased its capex estimate from $415 million to $450-470 million, the bank said.
It noted that the tissue paper segment generated adjusted EBITDA loss of $8 million versus the bank's forecast of a $10 million loss. The bank forecasts $8 million in segment adjusted EBITDA in 2022, below management's guidance.
The bank changed its rating on Cascades to Sector Perform from Outperform and slashed the target to $10.00 from $14.00 on an updated sum-of-parts valuation as its reduced its Containerboard multiple to 5x from 5.5x.