Wednesday’s analyst upgrades and downgrades

National Bank raised targets for CN and CPKC on better-than-expected Q1 rail volumes, with CN RTMs up 3.0% and CPKC up 1.9%, but flagged fuel-price and USMCA-related trade risks. CPKC was reiterated at outperform with its target lifted to $125 from $119, while CN was kept at sector perform with its target raised to $164 from $147. Separately, TD Cowen cut BRP to hold from buy and slashed its target to $84 from $119 due to amended Section 232 tariffs, estimating a roughly $350 million F2027 EBITDA hit.

Analysis

The key takeaway is not the modest near-term earnings beats, but the widening dispersion in tariff and trade sensitivity across the industrial complex. Rail is being treated as a defensive growth proxy, yet the market is underpricing the fact that transborder exposure is now a policy-duration trade: the longer USMCA uncertainty persists, the more CN’s mixed Canada-U.S. book should carry a higher risk premium than CPKC’s better Mexico linkage and cleaner growth narrative. That should support continued relative outperformance for CP versus CNI, even if both print acceptable quarters.

BRP is the clearest example of an estimate-reset event where the street may still be too slow to fully incorporate the margin structure change. The tariff shock is not just a near-term EBIT headwind; it also forces a capex and inventory discipline regime that can suppress innovation cadence and share repurchases for multiple quarters. If management chooses to defend share rather than price, the earnings hit may be smaller but the medium-term operating leverage becomes worse — a classic “looks manageable, compounds badly” setup.

In heavy equipment, the market is likely to look through Q1 noise, but the relative setup is more nuanced than simple macro beta. Finning has a better convexity profile to copper and data center-led power demand, while Toromont offers lower volatility but less upside if Canada’s infrastructure spend and grid buildout accelerate; that leaves a valuation gap that should persist until backlog conversion turns into actual margin inflection. In copper, the near-term risk is that macro-driven demand softness and a stronger dollar overwhelm supply concerns, but the larger second-order effect is that higher-for-longer fuel and logistics costs improve the economics of higher-grade, lower-cost assets, which should favor balance-sheet strength over beta in the miners.

The contrarian view is that the strongest trades here are not the obvious longs in the highest beta commodity names, but the relative-value expressions where policy uncertainty is creating temporary mispricings. If trade headlines remain noisy and oil stays elevated, the market will likely keep paying up for visibility, dividend durability, and North American optionality rather than pure operating leverage. That argues for staying selective and trading the spread, not the sector outright.

Key Decisions for Investors

• Long CP / short CNI for the next 3-6 months: best way to express wider trade-policy optionality and cleaner earnings growth; target 5-8% relative outperformance if USMCA headlines stay unsettled.
• Avoid or short DOOO on rallies for 1-2 quarters: the tariff overhang is a policy problem, not a one-quarter earnings issue; downside can persist as estimates continue to reset and capital allocation gets constrained.
• Long FTT.TO vs TIH.TO into the next 2-4 months: Finning has more visible upside from copper-linked activity and data-center/power capex, while Toromont already screens as the lower-volatility, lower-upside name.
• Use copper weakness to add selectively to CS.TO and TECK via staggered entries over 4-8 weeks: these names have better leverage if supply disruptions or project ramp-ups tighten the market later in 2026, but position sizing should reflect macro volatility.
• For BRP, wait for a washout before buying; only consider long near the low-$70s with a 6-12 month horizon, where policy risk is more priced in and upside depends on any tariff relief or successful mitigation.