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On Friday, BMO Capital analysts adjusted their outlook on Transcontinental Inc (TSX:TCLa). (TSE:TCL/A) (OTC:TCLAF), raising the stock’s price target to Cdn$23.00 from Cdn$20.00 while maintaining a Market Perform rating. This change comes as the company reported second-quarter 2025 adjusted EBITDA that aligned with expectations, despite a slight year-over-year decline.
The analysts noted a decrease in the Packaging (NYSE:PKG) segment, which fell short of forecasts. However, this was partially balanced by growth in Retail Services and Printing, which exceeded expectations. The firm’s 2025 outlook for adjusted EBITDA growth in Packaging remains unchanged, with an anticipated increase in volumes during the second half of the year. Meanwhile, adjusted EBITDA for Retail Services and Printing is expected to remain flat due to tougher comparisons in the latter half of the year.
BMO Capital highlighted the potential for a valuation re-rating over time. This could occur if declines in Retail Services and Printing become less pronounced and improvements in Return on Invested Capital (ROIC) are sustained. The analysts emphasized that while underlying growth is modest, the company’s low leverage provides opportunities for mergers and acquisitions, as well as continued shareholder return activities.
Transcontinental’s performance and strategic outlook were central to the analysts’ decision to raise the price target. The combination of modest growth and financial flexibility may offer potential benefits to shareholders in the long term.
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