This morning, the price of crude oil is tumbling, once again, breaking below $50 (U.S.). The slide in the price of crude oil is pulling the Canadian dollar down, which is now below 74 cents relative to the U.S. dollar.
Today, in terms of earnings releases for Canadian stocks, 10 companies in the S&P/TSX composite index are scheduled to release their quarterly results. They are: Canadian Energy Services & Technology Corp. (CEU-T), Cominar REIT (CUF.UN-T), Detour Gold Corp. (DGC-T), Dorel Industries Inc. (DII.B-T), Element Fleet Management Corp. (EFN-T), Enghouse Systems Ltd. (ENGH-T), Intertape Polymer Group Inc. (ITP-T), Northview Apartment REIT (NVU.UN-T), Pretium Resources Inc. (PVG-T), and Tahoe Resources Inc. (THO-T).
In terms of economic reports, in Canada, January new housing price index data will be released. In the U.S., weekly continuing and initial jobless claims figures will be announced. However, the key economic news release is Friday's February nonfarm payrolls report. A strong number would seal the deal of a rate hike announcement by the U.S. Federal Reserve next week, and more importantly, increase speculation of many more rate increases to come in 2017.
In commodity news, watch for the weekly natural gas storage report released by the U.S. Energy Information Administration.
Briefly recapping Wednesday's stock market returns, in the U.S., the Dow Jones Industrial Average declined 0.33 per cent, the S&P 500 index fell 0.23 per cent, and the Nasdaq composite index gained 0.06 per cent.
Turning to Canada, the S&P/TSX composite index fell 112 points, or 0.72 per cent, led by a 2.5 per cent loss in the energy sector with the price of oil falling over 5 per cent. There were just 69 securities in the TSX Index that advanced, 177 securities declined in value, and three stocks closed the day unchanged.
The TSX Index is up 1.37 per cent year to date.
On today's TSX Breakouts report, there are just 16 stocks on the positive breakouts list (stocks with positive price momentum), and 70 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a company that appears on the negative breakouts list. Long-term investors may want to put this stock on their radar given the recent price weakness. There are 15 "buy" calls on the stock with the Street forecasting a potential gain of 86 per cent over the next year . The company highlighted today is Birchcliff Energy Ltd. (BIR-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Ccmpany
Calgary-based Birchcliff Energy is a gas-weighted, intermediate oil and natural gas company with operations focused in the prolific Peace River Arch region in Alberta, which is located adjacent to the border with British Columbia.
Forecasted production growth is robust. Management targets 2017 annual average production of between 70,000 barrels of oil equivalent per day (boe/d) and 74,000 boe/d, exiting the year with production of between 78,000 boe/d and 82,000 boe/d. In 2016, the company reported record annual average production of 49,236 boe/d. Looking ahead to the end of 2018, management targets production surpassing 100,000 boe/d.
The company has hedged approximately 50 per cent of its 2017 natural gas production, and roughly 20 per cent of its 2017 crude oil production.
Dividend policy
The company will be paying shareholders its first dividend later this month. Last November, the board of directors approved the initiation of a quarterly dividend. The inaugural dividend is 2.5 cents per share, or 10 cents per share on a yearly basis. This equates to an annualized dividend yield of 1.5 per cent.
Financial forecasts
The Street is forecasting solid growth for the company. The consensus cash flow per share (CFPS) estimate is $1.47 in 2017 and $1.93 in 2018.
Financial forecasts have been relatively steady. For instance, six months ago, the consensus CFPS estimate was $1.50 for 2017, and three months ago, the consensus CFPS estimate was $1.41 for 2017.
Valuation
Analysts commonly value the stock on an enterprise value-to-debt adjusted cash flow basis. The consensus one-year target price is $12.61, suggesting a potential price return of 86 per cent over the next 12 months. Target prices range from a low of $9 (at Peters & Co. Ltd.) to a high of $14.25 (at GMP). Individual target prices are as follows in numerical order: $9, $10, $11.45, $11.75, $12, eight at $13, three at $14, and $14.25.
Analysts' recommendations
Since the start of the year, 17 analysts have issued research reports on the company, 15 analysts have "buy" recommendations and two analysts have 'hold' recommendations.
The 17 firms providing research coverage are as follows in alphabetical order: AltaCorp Capital, Beacon Securities, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Cormark Securities, Credit Suisse, GMP, Haywood Securities, Industrial Alliance Securities, Macquarie, National Bank Financial, Peters & Co. Ltd, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
Analysts' recommendation revisions
Several analysts have made relatively minor revisions to their target prices since the beginning of the year. All but one analyst increased their target prices.
In February, Dan Grager, the analyst from Peters & Co. Ltd., decreased his target price by $2 to $9, while analyst David Phung, from Credit Suisse, raised his target price to $10 from $9.75, and Juan Jarrah, from TD Securities, bumped his target price to $14 from $13.50.
In January, Kurt Molnar from Raymond James, increased his target price to $13 from $12. Darrell Bishop, from Haywood Securities, lifted his target price to $14 from $13, and Patrick O'Rourke, from AltaCorp Capital, raised his target price to $13 from $12.50.
Insider transaction activity
At the start of 2017, on Jan. 6, Jeff Tonken, the president and chief executive officer, purchased 2,760 shares at a price of $9.055 per share.
Chart watch
So far in 2017, of the 50 stocks in the S&P/TSX composite energy sector index, Birchcliff Energy is the third worst performing stock in the sector. Only Crew Energy Inc. (CR-T) and Baytex Energy Corp. (BTE-T) have realized lower price returns year-to-date.
Year-to-date, Birchcliff's share price is down nearly 28 per cent, closely tracking the downdraft in the price of natural gas, which has fallen 22 per cent. Natural gas prices have been under pressure due to a mild winter that sent natural gas storage levels climbing.
However, this relationship between Birchcliff's stock price with the price of natural gas has recently diverged. Over the past few weeks, natural gas prices have steadily recovered, rising 12 per cent over the past two weeks, while Birchcliff's stock price has dropped over 7 per cent.
The stock price remains in a downtrend but is nearing strong technical support around $6.
On a recovery, there is major overhead resistance around $8, close to its 50-day moving average (at $8.08) as well as its 200-day moving average (at $8.30).
The relative strength index reading is at 34, suggesting the shares are nearing oversold territory. Generally, a reading at or below 30 reflects an oversold condition.
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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.
Dividend policy
The company will be paying shareholders its first dividend later this month. Last November, the board of directors approved the initiation of a quarterly dividend. The inaugural dividend is 2.5 cents per share, or 10 cents per share on a yearly basis. This equates to an annualized dividend yield of 1.5 per cent.
Financial forecasts
The Street is forecasting solid growth for the company. The consensus cash flow per share (CFPS) estimate is $1.47 in 2017 and $1.93 in 2018.
Financial forecasts have been relatively steady. For instance, six months ago, the consensus CFPS estimate was $1.50 for 2017, and three months ago, the consensus CFPS estimate was $1.41 for 2017.
Valuation
Analysts commonly value the stock on an enterprise value-to-debt adjusted cash flow basis. The consensus one-year target price is $12.61, suggesting a potential price return of 86 per cent over the next 12 months. Target prices range from a low of $9 (at Peters & Co. Ltd.) to a high of $14.25 (at GMP). Individual target prices are as follows in numerical order: $9, $10, $11.45, $11.75, $12, eight at $13, three at $14, and $14.25.
Analysts' recommendations
Since the start of the year, 17 analysts have issued research reports on the company, 15 analysts have "buy" recommendations and two analysts have 'hold' recommendations.
The 17 firms providing research coverage are as follows in alphabetical order: AltaCorp Capital, Beacon Securities, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Cormark Securities, Credit Suisse, GMP, Haywood Securities, Industrial Alliance Securities, Macquarie, National Bank Financial, Peters & Co. Ltd, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
Analysts' recommendation revisions
Several analysts have made relatively minor revisions to their target prices since the beginning of the year. All but one analyst increased their target prices.
In February, Dan Grager, the analyst from Peters & Co. Ltd., decreased his target price by $2 to $9, while analyst David Phung, from Credit Suisse, raised his target price to $10 from $9.75, and Juan Jarrah, from TD Securities, bumped his target price to $14 from $13.50.
In January, Kurt Molnar from Raymond James, increased his target price to $13 from $12. Darrell Bishop, from Haywood Securities, lifted his target price to $14 from $13, and Patrick O'Rourke, from AltaCorp Capital, raised his target price to $13 from $12.50.
Insider transaction activity
At the start of 2017, on Jan. 6, Jeff Tonken, the president and chief executive officer, purchased 2,760 shares at a price of $9.055 per share.
Chart watch
So far in 2017, of the 50 stocks in the S&P/TSX composite energy sector index, Birchcliff Energy is the third worst performing stock in the sector. Only Crew Energy Inc. (CR-T) and Baytex Energy Corp. (BTE-T) have realized lower price returns year-to-date.
Year-to-date, Birchcliff's share price is down nearly 28 per cent, closely tracking the downdraft in the price of natural gas, which has fallen 22 per cent. Natural gas prices have been under pressure due to a mild winter that sent natural gas storage levels climbing.
However, this relationship between Birchcliff's stock price with the price of natural gas has recently diverged. Over the past few weeks, natural gas prices have steadily recovered, rising 12 per cent over the past two weeks, while Birchcliff's stock price has dropped over 7 per cent.
The stock price remains in a downtrend but is nearing strong technical support around $6.
On a recovery, there is major overhead resistance around $8, close to its 50-day moving average (at $8.08) as well as its 200-day moving average (at $8.30).
The relative strength index reading is at 34, suggesting the shares are nearing oversold territory. Generally, a reading at or below 30 reflects an oversold condition.
===
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.