Today, in terms of earnings releases for Canadian stocks, 12 companies in the S&P/TSX composite index are scheduled to release their quarterly results.
They are: George Weston Ltd. (WN-T), Canadian Natural Resources Ltd. (CNQ-T), SNC-Lavalin Group Inc. (SNC-T), TD Bank (TD-T), Parkland Fuel Corp. (PKI-T), ShawCor. Ltd. (SCL-T), Martinrea International Inc. (MRE-T), Algonquin Power & Utilities Corp. (AQN-T), Bonavista Energy Corp. (BNP-T), Crew Energy Inc. (CR-T), Canadian Western Bank (CWB-T) and Enerflex Ltd. (EFX-T).
In terms of economic reports, Canadian December and fourth quarter GDP figures will be released. In the U.S., weekly initial jobless claims and continuing claims numbers will be announced.
Briefly recapping Wednesday's stock market returns, major North American stock markets started the month of March off with solid gains.
In the U.S., the Dow Jones Industrial Average advanced 1.46 per cent, the S&P 500 index rallied 1.37 per cent, and the Nasdaq composite index gained 1.35 per cent.
Turning to Canada, the S&P/TSX composite index increased 200 points, or 1.30 per cent with nine of the 11 sectors closing higher. There were 199 securities in the TSX Index that advanced, just 45 securities declined in value, and five stocks closed the day unchanged.
The TSX Index is up 2.04 per cent year to date.
On today's TSX Breakouts report, there are 38 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).
Discussed below is security that appears on the positive breakout list and has had significant insider buying activity. The security is Canfor Corp. (CFP-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Vancouver-based Canfor is an integrated forest products company focused on lumber production with operations in B.C., Alberta, Ontario and the U.S. In addition, the company has a 53.6 per cent stake in Canfor Pulp Products Inc. (CFX-T).
In the fourth quarter earnings release, management's outlook for 2017 was positive stating, "Looking ahead, the US housing market is forecast to continue its gradual recovery through 2017. North American lumber consumption is projected to improve, reflecting steady demand in the residential construction market and continued strength from the repair and remodeling sector. There remains a risk of material antidumping and countervailing duties being imposed on Canadian lumber shipments destined to the US, absent a new Softwood Lumber Agreement. The Company anticipates marketplace volatility as investigations progress and determinations are made. For the Company's key offshore lumber markets, demand is anticipated to show a modest increase."
Two potential risks that could create significant share price volatility are price swings in lumber prices, which have spiked to a multi-year high making them vulnerable to a potential pullback, as well as the risk of high anti-dumping and countervailing duties levied on Canadian lumber producers.
Distribution policy
The company does not pay its shareholders a dividend.
Valuation
Shares of Canfor is trading at an enterprise value-to-EBITDA multiple of 5 times the consensus 2018 estimate, relatively in-line with the five-year historical average multiple.
The consensus one-year target price is $20.50, implying the stock price may appreciate 13 per cent over the next 12 months. Target prices range from a low of $17 (at RBC Capital Markets) to a high of $25.00 (at BMO Capital Markets). Individual price targets provided by six firms are as follows in numerical order: $17, $18, $19, $20, $24, and $26.
Analysts' fecommendations
According to Bloomberg, eight analysts have recently issued research reports, seven analysts have 'buy' recommendations, and one analyst has a 'hold' recommendation.
The eight firms providing research coverage are as follows in alphabetical order: BMO Capital Markets, CIBC World Markets, EVA Dimensions, Morningstar, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
Revised target prices
Several analysts have recently raised their target prices higher. This week, Daryl Swetlishoff, the analyst at Raymond James, lifted his target price to $24 from $19.50. Last month, Paul Quinn, from RBC Capital Markets, increased his target price by $1 to $17, and Benoit Laprade, the analyst from Scotia Capital, raised his target price by 50 cents to $19.
Financial forecasts
The consensus EBITDA estimates are $531-million in 2017 and $592-million in 2018.
Earnings revisions
Over the past month, the 2017 consensus EBITDA estimate has climbed to $592-million from $569-million. The 2016 consensus EBITDA estimate has remained unchanged.
Insider transaction activity
Jim Pattison, who sits on the board of directors, bought 2,114,200 shares at a price of $16.5507 per share on Feb. 13.
Chart watch
Forest product stocks are in an uptrend following the strength in the commodity price. Canfor's stock price is up18.5 per cent so far this year. Other stocks in the sector are also on the move, surging higher. For instance, year-to-date, shares of West Fraser Timber Co. Ltd. (WFT-T) are up 21 per cent and shares of Interfor Corp. (IFP-T) are up 24 per cent.
On Wednesday, the share price soared 5.5 per cent on high volume. Over 1.1-million shares traded, well above the two-month historical daily average trading volume of approximately 680,000 shares.
Should Canfor's share price break above the $18.25 level roughly, the stock price could rally to between $20 and $21 before incurring overhead resistance.
Should the share price retreat, there is initial downside support between $15 and $16, close to its 50-day moving average (at $15.51) and near its 200-day moving average (at $14.82).
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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.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
Below is a list of securities in the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.