Scotia Capital Scotia Capital analyst Konark Gupta thinks “uncertainty” continues to grow in Canada’s aviation sector as the potential for U.S. tariffs lingers.
“We have been relatively cautious on the aviation sector for this year, owing to normalization in airline yields after post-pandemic revenge air travel and ongoing OEM supply chain challenges,” he said. “While our concerns are taking time to resolve, we are growing incrementally more cautious due to direct or indirect effects of U.S. President Trump’s pro-America policies.
:As we have written recently, we see Canadian aerospace companies at a greater risk of potential tariffs or trade barriers, while Canadian airlines could suffer collateral damage due to potential headwinds related to consumers and fuel/FX. Against this backdrop, we are generally reducing estimates, valuation multiples, and target prices for our coverage, assuming some tightening of U.S.-led international trade policies. There could be further downside risk to our estimates or valuations if the U.S. actually implements full-on tariffs against Canada, China, and the EU and these regions retaliate. Relatively speaking, we would expect CAE and EIF to be far less impacted by a large-scale trade war vs. AC, BBD, MDA, and TRZ. Thus, we are reducing our targets for the latter. Our individual stock ratings remain intact, pending clarity on the trade situation.”
Mr. Gupta made these target adjustments:
* Air Canada (“sector outperform”) to $23 from $29. The average is $27.02.
* Bombardier Inc. (“sector perform”) to $109 from $120. Average: $119.40.
* MDA Space Ltd. (“sector outperform”) to $28.50 from $33. Average: $32.56.
* Transat AT Inc. (“sector underperform”) to $1.25 from $1.50. Average: $1.81.