CIBC Capital Markets maintained its outperformer rating on the shares of NFI Group (NFI.TO) and raised its price target to C$27.00 from C$22.00 after the bus and coach manufacturer reported its first-quarter results on May 7.
Q1 results were "a bit noisy, but underlying trends are encouraging," said CIBC.
"Most importantly, North American production is on track, the balance sheet is improving, and profitability is better than expected as NFI continues to convert its higher-margin backlog," said CIBC. "The U.K. market is a sore spot, and if underperformance cannot be addressed through restructuring, we expect that broader strategic options will eventually be considered."
Lower-than-expected Q1 deliveries were primarily isolated to the U.K. business, which is less profitable, stated CIBC and added that lighter North America transit deliveries were due to seasonal slowness and production planning decisions that should support higher deliveries through the balance of 2026, with April performance noted as strong.
"Meanwhile, Q1 deliveries were higher Y/Y in MCI and ARBOC," CIBC added. "The company noted no new issues in the supply chain and continued progress on seating, which is largely normalized at this point."
Absent unforeseen production issues, CIBC believes NFI is "well on track" to meet or exceed its 2026 EBITDA guidance. CIBC's 2026E revenue estimate moves 3% lower and EBITDA moves 2% higher as CIBC actualizes Q1 results and factor in stronger margins, said CIBC.
"We roll out our valuation year to include partial 2027 and raise our EBITDA multiple by half a turn to 8x reflecting strong execution, bringing our price target to $27 from $22 (NFI currently trades at 7.4x 2026E vs. its historical range of ~6x - 10x)," said CIBC. "We stay Outperformer-rated."
Price: $20.17, Change: $-0.35, Percent Change: -1.71%