This TSX stock could be a winner as Mark Carney beefs up defence spending strategy, analyst says

Prime Minister Mark Carney speaks at the Economic Club Of New York luncheon on May 28 in New York City. Photo by Michael M. Santiago/Getty Images

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The Big Bank stocks that saw price target hikes after reporting earnings, the company one analyst sees as trading at an ‘unjustified’ discount and more from The Week in Stocks.

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Stock of the week: Kraken Robotics Inc.

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Since the United States Navy started clearing mines in the Strait of Hormuz , St. John’s-based Kraken Robotics Inc. (PNG:TSX) and Covelya Group Ltd., which Kraken announced in March it was buying — have logged orders worth approximately $40 million over a month and a half, Benoit Poirier, an analyst at Desjardins Capital Markets, said in a note on May 28. “We view the opportunity as one of the most compelling in our coverage,” Poirier said of the prospects for shares of the marine technology company. He has a price target of $14 for Kraken, well above the 12-month price target of $10.80 based on the calls of five analysts, according to Bloomberg. Shares closed Friday at $7.44. As defence spending ramps up in Canada and around the world, Poirier said “all eyes” will be on Kraken when it closes its deal to purchase subsea tech company Covelya, especially as the latter’s exposure to the defence sector is expected to grow. The shares, if projecting today’s performance to 2028, are trading at an “unjustified” 60 per cent discount to drone and defence peers, Poirier said. ATB Cormark Capital Markets also has Kraken on its radar and said in a note that the company is likely in contention to be named “as a maritime robotics champion” by Ottawa’s Defence Advisory Forum, though it could face competition for business from Kongsberg Maritime AS (KMAR:NO) of Norway, which manufactures an underwater autonomous vehicle, parts of which could be built in British Columbia. ATB has a price target on Kraken of $6.50.

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Keeping score

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A look at Big Bank price targets post-earnings

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Canada’s Big Banks closed out second quarter earnings this week with analysts at different outlets maintaining or hiking price targets. Here’s a look at what some of them see for the shares of the Big Six financial players. Royal Bank of Canada (RY:TSX): Analyst Gabriel Dechaine at National Bank of Canada Capital Markets maintained his price target of $271 for the shares of Canada’s largest publicly traded company. Shares closed Friday at $264.44. RBC increased its dividend by seven per cent in the quarter and repurchased seven million shares. Toronto-Dominion Bank (TD:TSX): Dechaine hiked his price target for TD to $162 from $157 on improved financial performance in Canadian banking — “an important stock driver.” Shares closed Friday at $157.75. Bank of Montreal (BMO:TSX): Analyst Darko Mihelic, at RBC Capital Markets hiked his price target for shares of BMO to $230 from $205. Shares closed Friday at $223.93. Earning results came in stronger than expected except in Canada, while total provisions for credit losses fell quarter over quarter. Canadian Imperial Bank of Commerce (CM:TSX): Mihelic said RBC has a “positive view” of CIBC’s results given that core earnings per share (EPS) came in above estimates, while net interest income also beat estimates and PCLs came in below  estimates. “Our sense is that the stock run was building bigger expectations (possibly out of capital markets) but we see this as another solid quarter of execution,” Mihelic said. He hiked his price target for CIBC to $167 from of $147. Shares closed Friday at $150.49. Bank of Nova Scotia (BNX:TSX): Analyst Sohrab Mohavedi at BMO Capital Markets maintained his price target of $101 for shares of Scotiabank on a “slight beat” on operating EPS. Shares closed Friday at $110.62. The company bought back 6.4 million shares in the quarter and hiked its dividend by approximately four per cent. National Bank of Canada (NA:TSX): Analyst Mike Rizvanovic at Scotia Capital Markets said NBC posted a “decent” quarter, boosted by the financial markets, though “segment performance was a bit mixed.” Rizvanovic maintained his price target of $214. Shares closed Friday at $201.34.

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Analyst sees Calian Group as a potential winner in Canada’s defence reset

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Prime Minister Mark Carney was at CANSEC, Canada’s leading defence conference, this week to promote changes to how Ottawa does business when it comes to defence spending. “This was the largest event in its history with 300 exhibitions and over 100 delegations,” according to ATB Cormark Capital Markets, whose analysts attended the event in Ottawa. Calian Group Ltd. (CGY:TSX) is one of ATB’s main picks to benefit from a notable shift in defence spending, priorities and timetables.  ATB has a price target on Calian of $98.50. Shares closed Friday at $92.13. ATB thinks Calian can leverage the defence push to its benefit through its several segments, including its composite materials unit, its global navigation satellite systems and a new application for the Canadian Air Forces (CAF) that provides a bridge between communication networks, sensors and data flows. “Our read on this product is that it was very much CGY proactively leveraging its position as a leading Canadian vendor to the CAF to add value where it’s needed,” ATB said. Calian has a 12-month price target of $93.21 based on the calls of seven analysts, according to Bloomberg.