On Friday, BMO Capital adjusted its outlook on shares of Transcontinental Inc. (TCL/A:CN) (OTC: TCLAF), raising the price target to C$18.00 from the previous C$16.50. The firm maintained a Market Perform rating on the stock. This adjustment follows Transcontinental's announcement of its third-quarter 2024 adjusted EBITDA, which saw increases in both its Packaging (NYSE:PKG) division and Retail Services & Printing segment. The latter's growth exceeded forecasts, thanks to cost savings.
The company's reiterated outlook for 2024 expects a year-over-year increase in adjusted EBITDA, with the Packaging division anticipated to perform better and the Retail Services & Printing segment to remain steady. BMO Capital's revised estimates reflect a modest uptick in forecasted earnings growth for Transcontinental.
Transcontinental is currently in the midst of a two-year cost savings initiative, which is progressing as planned. Despite this, the underlying growth of the company is characterized as modest. The analyst from BMO Capital noted the potential for a re-evaluation of the company's valuation over time.
For a significant re-rating in valuation to occur, the analyst suggests that Transcontinental's shift towards growth should be paired with a consistent improvement in return on invested capital (ROIC). The company's financial performance and strategic initiatives are being closely monitored by market analysts to gauge the potential for future valuation adjustments.
Investors are keeping an eye on Transcontinental's stock as market conditions evolve and the company continues to implement its growth and efficiency strategies. The raised price target reflects a cautiously optimistic view of the company's financial trajectory based on current and projected performance metrics.
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