Prime Minister Mark Carney's push to boost defence spending in Canada is creating opportunities for TSX-listed companies, with Kraken Robotics Inc. emerging as a potential winner, according to analysts. The St. John's-based marine technology firm has seen a surge in orders, logging approximately $40 million over a month and a half alongside its acquisition target Covelya Group Ltd., noted Benoit Poirier of Desjardins Capital Markets in a May 28 report.
Kraken Robotics: A Compelling Opportunity
Poirier described the opportunity as 'one of the most compelling in our coverage,' setting a price target of $14 for Kraken shares, well above the 12-month consensus of $10.80 from five analysts tracked by Bloomberg. Shares closed at $7.44 on Friday. As defence spending ramps up globally, Poirier expects 'all eyes' on Kraken when it closes its Covelya acquisition, given Covelya's growing defence exposure.
The analyst added that Kraken shares are trading at an 'unjustified' 60% discount to drone and defence peers when projecting current performance to 2028. ATB Cormark Capital Markets also highlighted Kraken, noting it may be named a 'maritime robotics champion' by Ottawa's Defence Advisory Forum, though it could face competition from Norway's Kongsberg Maritime AS. ATB set a price target of $6.50 for Kraken.
Big Bank Price Target Hikes Post-Earnings
Canada's Big Banks closed second-quarter earnings with several price target adjustments. Here's a summary:
- Royal Bank of Canada (RY:TSX): National Bank's Gabriel Dechaine maintained a $271 target; shares closed at $264.44. RBC raised its dividend 7% and repurchased 7 million shares.
- Toronto-Dominion Bank (TD:TSX): Dechaine hiked the target to $162 from $157 on improved Canadian banking performance; shares closed at $157.75.
- Bank of Montreal (BMO:TSX): RBC Capital's Darko Mihelic raised the target to $230 from $205; shares closed at $223.93. Earnings beat expectations except in Canada, with lower provisions for credit losses.
- Canadian Imperial Bank of Commerce (CM:TSX): Mihelic hiked the target to $167 from $147, citing core EPS above estimates; shares closed at $150.49.
- Bank of Nova Scotia (BNX:TSX): BMO Capital's Sohrab Mohavedi maintained a $101 target on a slight operating EPS beat; shares closed at $110.62. The bank bought back 6.4 million shares and raised its dividend 4%.
- National Bank of Canada (NA:TSX): Scotia Capital's Mike Rizvanovic maintained a $214 target, calling the quarter 'decent' but mixed; shares closed at $201.34.
Calian Group Poised for Defence Reset
ATB Cormark Capital Markets identified Calian Group Ltd. (CGY:TSX) as a key beneficiary of Canada's defence spending reset, following Prime Minister Carney's speech at CANSEC. ATB set a price target of $98.50, with shares closing at $92.13. Calian's segments, including composite materials and satellite systems, are well-positioned to leverage the defence push. The consensus 12-month target is $93.21 from seven analysts.
