Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high net worth clients. michael@wickhaminvestments.com
What are we looking for?
My colleague Allan Meyer and I researched companies that announced earnings greater than analysts’ estimates to see whether they outperformed the market averages.
The screen
We started with companies greater than $200-million in market capitalization. Since oil and gas companies, and real estate investment trusts are valued more on cash flow than on earnings, we deleted them from the screen.
The accompanying table shows those companies that reported the largest earnings surprises on the S&P/TSX over the last three months. The EPS surprise is the percentage increase of reported earnings compared to analysts’ consensus estimates, sorted accordingly.
The percentage change in earnings estimates is based on the next 12-month period following the latest earnings release. Monitoring these estimates could be a clue as to which companies might continue to surprise to the upside.
The last column is the share price performance of the past 90 days.
What did we find?
The share price of the largest company on the screen, Magna International, increased the most at over 47 per cent, with a 44-per-cent earnings surprise.
Toy manufacturer Mega Brands came in with earnings that were a whopping 400 per cent above estimates.
The largest dividend payer is mutual fund company AGF Management, with a sizable yield of 9.6 per cent.
Denison Mines reported an earnings surprise of 29 per cent, and analysts are forecasting a 100-per-cent increase in earnings for the next 12 months. Denison’s share price has remained relatively flat.
K-Bro Linen has been a solid performer. The company went public as an income trust in 2004 and is an operator of laundry and linen facilities for the health care and hospitality industries.
Conclusion
The 20 stocks in this screen have increased, on average, 13.5 per cent in the past 90 days. The TSX has gained 3.9 per cent in that same time frame. We can see, in this instance, that companies with earnings surprises to the upside have outperformed the market averages. While this may not be indicative of the future, investors should keep a close watch on such Street surprises in managing their portfolios.
S&P/TSX firms with largest earnings surprises over last 3 months
| Company | Ticker |
Recent Price $ |
Market Cap ($-mil) |
|---|---|---|---|
| Mega Brands Inc. | MB-T | 13.39 | 222.3 |
| Absolute Software | ABT-T | 5.57 | 230.0 |
| Resolute Forest | RFP-T | 15.18 | 1,438.4 |
| Imperial Metals | III-T | 14.00 | 1,041.0 |
| Air Canada | AC.A-T | 2.73 | 758.0 |
| Guyana Goldfields | GUY-T | 2.90 | 361.0 |
| Sirius XM Canada | XSR-T | 6.50 | 884.3 |
| Magna Int'l | MG-T | 57.61 | 13,442.9 |
| Imax Corp. | IMX-T | 27.25 | 1,814.6 |
| Cogeco Inc. | CGO-T | 41.88 | 704.9 |
Source: Bloomberg, Wickham Investment Counsel
| Company | Ticker |
Recent Price $ |
Market Cap ($-mil) |
EPS Surprise % |
% Change in Estimates |
Dvidend Yield |
3 Month Price Momentum % |
||
|---|---|---|---|---|---|---|---|---|---|
| Mega Brands Inc. | MB-T | 13.39 | 222.3 | 400 | 60 | 0.00 | 9.62 | ||
| Absolute Software | ABT-T | 5.57 | 230.0 | 150 | 60 | 0.00 | 3.92 | ||
| Resolute Forest | RFP-T | 15.18 | 1,438.4 | 100 | 20 | 0.00 | 11.96 | ||
| Imperial Metals | III-T | 14.00 | 1,041.0 | 92 | 100 | 0.00 | 12.04 | ||
| Air Canada | AC.A-T | 2.73 | 758.0 | 91 | 11 | 0.00 | 0.96 | ||
| Guyana Goldfields | GUY-T | 2.90 | 361.0 | 67 | 33 | 0.00 | 2.22 | ||
| Sirius XM Canada | XSR-T | 6.50 | 884.3 | 50 | 100 | 5.11 | 4.56 | ||
| Magna Int'l | MG-T | 57.61 | 13,442.9 | 44 | 71 | 1.99 | 47.81 | ||
| Imax Corp. | IMX-T | 27.25 | 1,814.6 | 43 | 25 | 0.00 | 21.82 | ||
| Cogeco Inc. | CGO-T | 41.88 | 704.9 | 42 | 100 | 1.77 | 34.76 | ||
| GMP Capital Inc. | GMP-T | 6.50 | 455.1 | 38 | 50 | 4.69 | 4.94 | ||
| Nfld. Capital | NCC.A-T | 9.46 | 275.0 | 33 | 100 | 1.01 | 7.61 | ||
| Enerflex Ltd. | EFX-T | 13.48 | 1,047.5 | 32 | 14 | 1.85 | 11.00 | ||
| AGF Management | AGF.B-T | 11.23 | 1,002.3 | 30 | 20 | 9.60 | 9.43 | ||
| Toromont Industries | TIH-T | 23.19 | 1,772.8 | 30 | 100 | 2.01 | 20.27 | ||
| Northland Power | NPI-T | 18.29 | 1,576.6 | 29 | 60 | 5.95 | 17.89 | ||
| Denison Mines | DML-T | 1.42 | 563.4 | 29 | 100 | 0.00 | 0.30 | ||
| K-Bro Linen Inc. | KBL-T | 32.55 | 229.6 | 28 | 33 | 3.52 | 28.47 | ||
| Aimia Inc. | AIM-T | 15.33 | 2,641.9 | 26 | 43 | 4.11 | 14.24 | ||
| Rogers Sugar Inc. | RSI-T | 6.58 | 619.1 | 26 | 33 | 5.41 | 5.23 |
S&P/TSX firms with largest earnings surprises over last 3 months
- MB-T
- ABT-T
- RFP-T
- III-T
- AC.A-T
- GUY-T
- XSR-T
- MG-T
- IMX-T
- CGO-T
- GMP-T
- NCC.A-T
- EFX-T
- AGF.B-T
- TIH-T
- NPI-T
- DML-T
- KBL-T
- AIM-T
- RSI-T
