TD Citing its “low valuation, revenue resilience, capital prudence, 5.6-per-cent dividend yield, and other factors,” TD Cowen analyst Tim James named Mullen Group Ltd. his top pick among Canadian cargo transportation companies for the year ahead.
“Strongest EBITDA growth forecast for CJT [Cargojet Inc.] (12 per cent) and MTL (9 per cent acquisition-driven),” he adde. “We believe Canadian port strike could benefit CJT and immaterial impact for MTL/AND [Andlauer Healthcare Group Inc.].”
“We believe recent CJT share price weakness and flat 2025/26 EBITDA forecast despite heightened pilot cost pressure presents an attractive entry point for investors. AND’s low valuation, healthcare related earnings resiliency and increasing excess capital is expected to provide attractive upside over 12-months.”
In a note released late Tuesday, Mr. James updated his underlying economic, currency and fuel price assumptions, along with certain company specific factors, however he said the”the net impact of which is immaterial to our targets/recommendations.”
For Mullen, he’s now forecasting 6.1-per-cent year-over-year revenue growth to $529-million, exceeding the consensus on the Street of $516-million. He sees EBITDA rising 8.8 per cent to $86.2-million, also topping the consensus of $85.1-million, with 40 basis points of margin expansion versus 30 bps in the third quarter of 2024.
He reiterate a “buy” rating and $21 target for shares of the Okotoks, Alta.-based company. The average on the Street is $19.10.
“MTL target ($21) based on slightly lower multiples offset by updated earnings and debt forecasts. Our previous approach to multiples was based on view that pre-pandemic valuation range (5-yr average EV/EBITDA 9 times, P/E 20 times) would return,” said Mr. James. “Forward P/E has ranged from 9.5-12.5 times and forward EBITDA 6-8x for 3-yrs now despite demonstrating business resiliency through freight downturn. We think market will take the view that our previous multiple may be too optimistic based on modest 2025 EBITDA growth (3.4 per cent) and D&A and interest driven EPS pressure, and are therefore basing our target on more modest multiple expansion (current 6.3 times forward EBITDA to 7.5 times target, current 12.2 times forward P/E to 15 times target). Share price sentiment can be impacted by U.S. trends despite MTL’s revenue being dominated by Canadian trend.”
The analyst also kept “buy” recommendations for Cargojet and Andlauer with targets of $165 and $53 target. The averages are $161.18 and $47.50, respectively.