-- CIBC Capital Markets maintained its neutral rating on the shares of Stella-Jones (SJ.TO) and lowered its price target to C$87.00 from C$96.00 on modestly lower estimates and a 0.5x decrease in the bank's EV/EBITDA valuation multiple due to increased concerns around medium- to long-term rail tie demand, it said after the company reported first quarter results on Wednesday.
The company's expansion into steel utility structures in Spring 2025 continues to progress well, and its vision of becoming a multi-material supplier to the utility and railway sectors provides additional growth vectors, the bank added.
"That being said, we moved to the sidelines on the name six months ago on concerns of increased competition in SJ's core markets amid elevated wood pole prices (SJ's price/mix has risen 55% since 2021), and ongoing rail sector M&A and tie capex tightening initiatives among Class 1s," said analyst Hamir Patel.
CIBC reduced its Q2 EBITDA estimate by $3 million to $191 million primarily on slightly softer pole pricing assumptions and more cautious Residential Lumber and Industrial Products assumptions. Its 2026 EBITDA is now expected to be flat at $623 million, and 2027 EBITDA up 4% to $647 million.
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Price: $76.10, Change: $-0.91, Percent Change: -1.18%