Good Friday morning to you. Markets looks to open higher.
The number one economic report investors will be looking at is the U.S. January nonfarm payrolls report that was released earlier this morning. The report showed that 227,000 jobs were created last month, well above expectations of 180,000 jobs according to Bloomberg.
U.S. December durable goods orders will be another important figure to watch for due out later today.
Today, there are no key Canadian economic releases. There are two companies in the S&P/TSX composite index scheduled to report quarterly financial results today, they are Brookfield Property Partners L.P. (BPY.UN-T) and Norbord Inc. (OSB-T).
Major commodities prices are mixed. The price of natural gas futures remains under pressure, falling by over 3 per cent. Meanwhile, the price of oil is firmer, and the price of gold is slightly lower.
Briefly recapping Thursday's performances, major North American equity markets closed in neutral territory.
In the U.S., the Dow Jones Industrial Average declined 0.03 per cent, the S&P 500 index inching up by 0.06 per cent, and Nasdaq composite index lost 0.11 per cent.
Turning to Canada, the S&P/TSX composite index lost 3 points, or 0.02 per cent. There were 132 securities in the TSX Index that advanced, 114 securities declined in value, and three stocks closed the day unchanged.
The TSX Index is up 0.73 per cent year to date.
On today's TSX Breakouts report, there are 33 stocks on the positive breakouts list (stocks with positive price momentum), and 13 stocks on the negative breakouts list (stocks with negative price momentum).
The security highlighted today is a stock offering an attractive dividend yield of 4.2 per cent, which appears sustainable with room to grow. While the share price remains under pressure, the stock's valuation is becoming increasingly interesting. As a result, this is a stock that income investors may want to monitor – Keyera Corp. (KEY-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based Keyera is a midstream energy company, providing natural gas gathering and processing, fractionation, transportation, storage and marketing services to natural gas and oil sand producers.
On Nov. 8, the company reported weaker-than-expected third-quarter financial results. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $148-million, below the Street's forecast of $155-million. Management's capital spending program for 2017 is between $500-million and $600-million.
In the earnings release, management stated, "With a long-term view, we have used this industry slowdown to strengthen Keyera's competitive position. We have successfully reduced our operating costs in a meaningful manner, strengthened our balance sheet and focused on operational excellence."
The company is scheduled to report its fourth-quarter financial results after the market closes on Feb. 14.
Dividend policy
The company pays its shareholders a monthly dividend of 13.25 cents per share, or $1.59 on a yearly basis. This equates to an attractive annualized dividend yield of 4.2 per cent.
The dividend appears sustainable with room to grow given the conservative payout ratio of 57 per cent for the first nine months of 2016. The dividend has increased at a compound annual growth rate of 8 per cent from July 2003 to December 30, 2016.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 12 times the 2017 consensus estimate. This is below the five-year historical average of 13.7 times and in-line with the 10-year historical average.
Analysts' target prices range from a low of $40 to a high of $49, implying there is between 5 per cent and 28 per cent upside in its share price. Individual target prices provided by 15 firms are as follows in numerical order: three at $40, $42, two at $43, $43.50, $45, $45.50, two at $46, two at $47, $47.25, and $49. The consensus one-year target price is $44.95, suggesting the share price has 18 per cent upside potential over the next 12 months.
Analysts' recommendations
According to Bloomberg, 17 analysts cover the company, 10 analysts have 'buy' recommendations, six have 'hold' recommendations, and one analyst (from EVA Dimensions) has a 'sell' recommendation.
The firms providing research coverage are as follows in alphabetical order: Alta Corp. Capital, BMO Capital Markets, Canaccord Genuity, CIBC Wold Markets, Cormark Securities, Credit Suisse, Desjardins Securities, EVA Dimensions, GMP, Macquarie, Morningstar, National Bank Financial, Peters & Co., Raymond James, RBC Capital Markets, Scotia Capital and TD Securities.
Revised recommendations
There have been minor target price revisions. Last month, several analysts revised their target prices slightly higher. Chris Cox, the analyst from Raymond James, raised his target price to $47 from $46. Patrick Kenny, the analyst from National Bank Financial, increased his target price to $49 from $48, and David Noseworthy, from Macquarie, increased his target price by 25 cents to $47.25.
Financial forecasts
The Street is forecasting solid growth for the company. The consensus EBITDA estimate is $603-million for 2016, expanding 17 per cent to $708-million for 2017.
However, forecasts have fallen in recent months. For instance, six months ago, the consensus EBITDA estimates were $640-million for 2016 and $725-million for 2017.
Insider transaction activities
There has been no activity since August 2016.
Chart Watch
The share price is under pressure.
Year to date, the energy sector is the worst performing sector in the S&P/TSX composite index, falling 5.1 per cent. Keyera's share price has closely matched this decline, dropping 5.6 per cent.
Looking back over the past three years, the share price has traded in a band, largely between $36 and $43, with the share price currently approaching the lower end of this trading range.
In terms of key resistance and support levels, the share price has initial overhead resistance around $40, and after that, between $42 and $43. There is initial downside support around $38. Failing that, there is support between $36 and $36.50, and after that around $35.
The relative strength index is at 37, suggesting the shares are not yet oversold. Generally, a reading at or below 30 indicates 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.