Magna International Leads TSX with 25% Surge After Earnings Beat
Magna International Inc. (MG:TSX) emerged as the top gainer on the S&P/TSX composite index this week, with shares skyrocketing 24.5% following a surprise earnings report that exceeded analyst expectations. The Aurora, Ontario-based auto parts manufacturer released its financial results on Friday, showcasing performance that significantly outpaced forecasts.
TD Cowen Analyst Raises Price Target on Strong Performance
TD Cowen analyst Brian Morrison responded to the positive earnings by substantially increasing his price target for Magna International from $79.30 to $102.03. The company's shares closed at $93.52 on Friday, reflecting strong investor confidence. Morrison attributed the earnings beat to operating margins that surpassed expectations, along with benefits from tariff recoveries and favorable currency exchange rates.
"This should support upward financial revisions," Morrison stated, highlighting Magna's forecast for 2026 performance that exceeds current consensus outlooks. The company anticipates strong quarterly free cash flow, with Morrison predicting "material" share buybacks throughout the year.
According to Bloomberg data, the average 12-month price target for Magna International, based on estimates from 16 analysts, currently stands at $77.11.
TD Cowen's Cautious Outlook on Big Six Banks Ahead of Earnings
As Canada's Big Six banks prepare to report fourth-quarter results later this month, TD Cowen analysts led by Mario Mendonca have expressed caution regarding current valuations. In a note dated February 9, the analysts argued that "stock valuations appear stretched on virtually every metric we look at."
The TD team found that the banking group is trading at an 18% premium and "approaching full value territory." Specifically, the stocks are trading at 14.3 times forward earnings per share based on 2026 consensus estimates, well above the 25-year trend of 10 to 12 times. The equity risk premium (ERP) has reached levels last seen during the great financial crisis.
Price Target Adjustments and Top Picks
Despite these valuation concerns, TD Cowen analysts believe strong fundamentals should support the banking sector in the near term, including:
- Net interest income
- Improving U.S. loan growth
- Strong trading revenue
The firm adjusted price targets for four of the Big Six banks (excluding its own shares):
- Bank of Montreal (BMO:TSX): Target increased from $219 to $209
- Bank of Nova Scotia (BNS:TSX): Target raised to $112 from $104
- Canadian Imperial Bank of Commerce (CM:TSX): Target increased from $134 to $142
- National Bank of Canada: Target reduced to $175 from $181
- Royal Bank of Canada (RY:TSX): Target raised to $260 from $246
TD's top bank picks are Bank of Montreal and Royal Bank of Canada, primarily due to their extensive U.S. capital markets operations.
Veritas Investment Research Identifies Dividend Growth Opportunities
Amid ongoing macroeconomic uncertainty in 2026, Veritas Investment Research has updated its semi-annual report highlighting companies with potential for reliable dividend growth. The research firm favors organizations with reasonable balance sheets, manageable payout ratios, and solid capital deployment strategies that can withstand economic shocks.
To qualify for Veritas's list, stocks must generally be rated as buys and yield dividends of at least 3%, with some exceptions. The firm particularly favors companies with long histories of dividend growth or those emphasizing total shareholder returns through dividends and buybacks.
Sector-Specific Dividend Growth Picks
Veritas highlighted several preferred dividend stocks across different sectors:
- Communication Services: Quebecor Inc. (QBR/B:TSX) with a current yield of 2.9%, expected to increase dividends by 5-10% this year
- Banks: Royal Bank of Canada (RY:TSX) offering "the highest potential of high single-digit to low double-digit dividend growth"
- Pipelines: Enbridge Inc. (EN:TSX) with a 5.9% yield and 4% dividend growth outlook, supported by risk-reducing regulation
- Utilities: Fortis Inc. (FTS:TSX) with a reliable 3.5% yield and approximately 5% dividend growth outlook
The report also identified Telus Corp. (T:TSX) as a company to approach with caution due to its elevated payout ratio relative to its 8.9% yield.
As earnings season continues, investors are closely monitoring these developments across the Canadian financial landscape, balancing opportunities for growth with careful consideration of valuation metrics and economic uncertainties.
