Today, it is a very active day in terms of earnings reports with 22 companies in the S&P/TSX composite index announcing their quarterly financial results.
Among the companies reporting are: TransCanada Corp. (TRP-T), Canadian Tire Corp. Ltd. (CTC.A-T), Bombardier Inc. (BBD.B-T), Fortis Inc. (FTS-T), Cenovus Energy Inc. (CVE-T), Encana Corp. (ECA-T), RioCan REIT (REI.un-T), First Quantum Minerals Ltd. (FM-T), West Fraser Timber Co. Ltd. (WFT-T), Inter Pipeline Ltd. (IPL-T), Superior Plus Corp. (SPB-T), CI Financial Corp. (CIX-T), and Fairfax Financial Holdings Ltd. (FFH-T).
In terms of economic releases, in Canada, there are no scheduled announcements today. In the U.S., key economic reports include January housing starts and building permits data. In addition, weekly initial jobless claims and continuing claims figures will be released.
On the commodity front, major commodity prices are relatively unchanged for now. The prices of oil and gold are slightly higher this morning. Meanwhile, the price of natural gas futures is relatively flat ahead of the weekly gas storage report released by the U.S. Energy Information Administration.
Briefly recapping Wednesday's stock market returns, the positive momentum continued for major North American equity markets with stock markets, once again, closing at record levels.
In the U.S., the Dow Jones Industrial Average rallied 0.52 per cent, the S&P 500 index advanced 0.50 per cent, and the Nasdaq composite index gained 0.64 per cent.
Turning to Canada, the S&P/TSX composite index increased 59 points, or 0.37 per cent. There were 154 securities in the TSX Index that advanced, 89 securities declined in value, and six stocks closed the day unchanged. The only sector closing in negative territory was the materials sector with the share prices of gold and silver stocks declining.
The TSX Index is up 3.65 per cent year-to-date.
On today's TSX Breakouts report, there are 65 stocks on the positive breakouts list (stocks with positive price momentum), and just eight stocks are on the negative breakouts list (stocks with negative price momentum).
The security highlighted today is a stock that is on the cusp of appearing on the positive breakouts list. The company is Waste Connections Inc. (WCN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Waste Connections' core business offers solid waste collection, solid waste disposal and transfer, and solid waste recycling services with operations across North America. Solid waste collection is the company's largest business segment, representing 57 per cent of the company's total revenue in the third quarter. In the U.S., the company operates in 40 states and the District of Columbia, and in Canada, it provides services in six provinces.
After the market closes on Feb. 21, the company will be releasing its fourth quarter financial results. Management has guided to reporting adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $315-million (U.S.), the consensus estimate is $316.75-million.
Growth is one of management's key objectives. Worthing Jackman, the chief financial officer, stated on the third-quarter conference call that, "We think properly priced, strategically consistent acquisitions are our highest and best use of excess capital." Management will be providing its outlook for 2017 when the company reports its fourth quarter earnings results.
The stock is dual-listed, trading on both the Toronto Stock Exchange and the New York Stocks Exchange under the same ticker.
Dividend policy
The company pays its shareholders a quarterly dividend in U.S. dollars of 18 cents per share, or 72 cents per share yearly. This equates to an annualized dividend yield of approximately 1 per cent.
In October, the company announced a 24 per cent dividend increase, lifting the quarterly dividend to its present level of 18 cents per share from 14.5 cents.
Financial forecasts
The company reports its financial results in U.S. dollars. The Street is forecasting attractive growth for Waste Connections. The Street is forecasting EBITDA of $1.056-billion in 2016, rising over 32 per cent to $1.399-billion in 2017, and climbing 8 per cent to $1.515-billion in 2018.
Over the past six months, there have been minor positive earnings revisions. In August 2016, the consensus EBITDA forecasts were $1.036-billion for 2016 and $1.373-billion for 2017.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 12.9 times the 2017 consensus estimate, slightly above its three-year historical average multiple of 11.2 times.
The consensus one-year target price is $88.79 (U.S.), suggesting a modest single-digit potential price return over the next 12 months. Individual target prices range from a low of $80 U.S. (at Veritas Investment Research) to a high of $96 U.S. (at Goldman Sachs).
Analysts' recommendations
Since October, 19 analysts have issued research reports on the company, 15 analysts have "buy" recommendations, three analysts have "hold" recommendations, and one analyst has a "sell" recommendation (from EVA Dimensions).
Revised target prices
Analysts have been revising their target prices higher. For instance, last month, Brian Maguire, the analyst at Goldman Sachs, increased his target price to $96 (U.S.) from $90. Joe Box, the analyst at KeyBanc Capital Markets, increased his target price to $90 (U.S.) from $85, and Al Kaschalk, the analyst at Wedbush, lifted his target price by $5 to $85 (U.S.).
Insider transaction activity
In 2017, we have not seen any insider trading activity. Back in November, James Little, the senior vice president of engineering and disposal, sold 2,000 shares.
Chart watch
The stock price has been trending sideways, pausing after rallying 56 per cent in 2016.
Year-to-date, the share price is up 2.5 per cent, marginally below the S&P/TSX composite index industrials sector return of 3.4 per cent.
In terms of key resistance and support levels, there is strong downside support at $105, which is near its 50-day moving average (at $104.95). Failing that, there is support around $100, which is close to its 200-day moving average (at $98.76). Initial upside resistance appears to be around $110.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.