Inside the Market’s roundup of some of today’s key analyst actions
In response to Thursday’s second-quarter earningsMORE
* RBC’s Darko Mihelic to $89 from $87 with an “outperform” rating.
“We believe results were solid, and even though credit quality was virtually unchanged quarter-over-quarter, TD built reserves, and we were not expecting new information on its AML problems,” said Mr. Mihekic. “We slightly increase our price target to $89 from $87 (on a lower multiple but higher EPS estimates) and maintain our Outperform rating. TD’s AML issues continue to weigh on the stock, and we will revisit its valuation multiple once we have more clarity on the outcome.”
* Desjardins Securities’ Doug Young to $91 from $93 with a “buy” rating.
“Adjusted pre-tax, pre-provision (PTPP) earnings were 6 per cent above our estimate; relative to our estimates, all divisions (with the exception of corporate) beat; however, the focus on the call was its U.S. AML issues (not surprising), and there wasn’t materially more it could provide on this topic. We lowered our target price to C$91 (from C$93), adjusted our estimates and maintained our Buy rating; however, we acknowledge that patience is required.”
“We like TD’s excess capital and Canadian/US P&C banking franchises. That said, U.S. regulatory matters will remain a near-term overhang.”
* Scotia’s Meny Grauman to $87 from $90 with a “sector outperform” rating.
“Even a 10-per-cent core EPS beat in Q2 was not enough to get TD bank shares going after months of underperformance,” said Mr. Grauman. “That is not all that surprising given that we headed into reporting season with the view that the quarter itself was largely irrelevant in the face of ongoing AML issues that are yet to be resolved. The big risk that U.S. segment results would miss Street expectations did not come to pass, and in fact results there actually beat. But despite a solid quarter the shares underperformed, albeit modestly, as management acknowledged that branch growth in the U.S. would take a back seat to remediation efforts. Management reiterated expense guidance for this year, but in the absence of explicit guidance for F2025 it is reasonable to assume that expense growth accelerates into F2025 tied to direct and indirect spending related to the bank’s AML issues. We continue to believe that the sell-off in the shares has gone too far and that a worst-case scenario for the U.S. business is already being priced in. That said, the quarter clearly illustrates that whatever happens to EPS estimates, TD’s discount to the group is unlikely to materially narrow until the bank announces a full resolution with U.S. regulators.”
* Jefferies’ John Aiken to $76 from $74 with a “hold” rating.
TORONTO-DOMINION BANK
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