This morning, North American equity markets look to open on a negative note with concerns of a September rate hike by the U.S. Federal Reserve resurfacing.
On Thursday, North American equity markets were mixed. U.S. equity markets drifted lower, while in Canada, the TSX Index closed higher with support from the energy sector.
In the U.S., the Dow Jones Industrial Average fell 0.25 per cent, the S&P 500 Index declined 022 per cent, and Nasdaq composite retreated 0.46 per cent.
In Canada, the S&P/TSX composite index gained 7 points, or 0.04 per cent to close at 14,803. The price of crude oil spiked 4.7 per cent after the weekly oil inventory report released from the U.S. Energy Information Administration showed the sharpest one-week decline since 1999. This morning, the price of crude is under pressure and looks set to give back some of yesterday's gains.
There were 119 securities in the TSX Index that advanced, 115 securities declined in value, and six stocks closed the day unchanged. Amongst the top stock performers on Thursday were Kelt Exploration Ltd. (KEL-T), which was highlighted in yesterday's Breakout report. The share price soared 9.4 per cent, and the market capitalization crossed over the $1-billion mark. Secure Energy Services Inc. (SES-T), MEG Energy Corp. (MEG-T), and Whitecap Resources Inc. (WCP-T) rose 8.06 per cent, 8.05 per cent, and 7.64 per cent, respectively. Leading laggards in the Index were North West Co Inc. (NWC-T), Detour Gold Corp. (DGC-T), New Gold Inc. (NGD-T), and Semafo Inc. (SMF-T), declining 6.95 per cent, 6.36 per cent, 4.90 per cent and 4.49 per cent, respectively.
The S&P/TSX composite index is up 1.41 per cent month-to-date, up 5.25 per cent quarter-to-date, and has a gain of 13.78 per cent year-to-date.
On today's TSX Breakouts report, there are 47 securities on the positive breakouts list (stocks with positive price momentum), nearly half of which are energy stocks, and just four securities appear on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that is nearing a technical oversold condition that investors may want to put on their radar screens. The security highlighted today is Canadian Tire Corp. (CTC.A-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Canadian Tire has approximately 1,700 (1,698 stores as of July 2) retail stores and gas stations across the country under banners such as Canadian Tire, Mark's, Sport Chek and Sports Experts. Canadian Tire's retail segment offers investors a diversified platform with exposure to a variety of consumer markets such as automotive, home living, home repair, sporting goods and clothing. In addition to the retail segment, Canadian Tire operates a Financial Services segment, which offers products such as credit cards and in-store warranties. Canadian Tire also has a significant stake in CT Real Estate Investment Trust, providing further diversification to the company's revenues.
Before the market opened on August 4, the company reported better-than-expected second quarter financial result that sent the stock price soaring 4.4 per cent on high volume that day. The company reported earnings per share (EPS) of $2.46, up 14.5 per cent year-over-year, and above the consensus forecast of $2.35. Same-store sales growth was impressive across its key banners with gains of 7.2 per cent year-over-year at Sport Chek, 4.6 per cent at Mark's, and 2.9 per cent growth at Canadian Tire Retail.
Returning capital to shareholders
Management has remained committed to returning capital to its shareholders, increasing its dividend frequently over the years. Last November, the company announced a 9.5-per-cent increase to its dividend, raising its quarterly dividend to 57.5 cents per share from 52.5 cents per share. This equates to a yearly dividend of $2.30 per share, or an annualized dividend yield of 1.7 per cent.
The company has also been active with its share buyback program. The company has repurchased $330-million of its shares from November 13, 2015 through to July 2, 2016 with the intention of repurchasing $550-million of its Class A shares by the end of the year.
Valuation
The stock is valued on sum-of-the-parts calculation. Analysts' target prices range from a low of $133 to a high of $180. The average one-year price target is $158.77, suggesting the stock price could appreciate 19.5 per cent. Individual target prices provided by 13 firms are as follows: $133, $148, two at $150, $156, $159, $160, $162, $165, $166, $169, $172, and $180.
Analysts' recommendations
According to Bloomberg, there are currently 10 'buy' recommendations, five 'hold' recommendations, and one 'sell' recommendation.
Analysts have been revising their forecasts higher since the start of the year. The current consensus EPS estimate is $9.08 in 2016, and forecast to rise 9 per cent to $9.89 in 2017. In January, the Street was forecasting EPS of $8.63 for 2016, and $9.46 for 2017.
Insider transaction activity
Board member, Claude L'Heureux, sold 2,110 shares on June 21 at a price just below $139 per share. Insider transaction activity information can be found on the website www.sedi.ca.
Chart watch
Year to date, the stock price has increased 12.4 per cent, performing near the middle of the pack relative to the other 22 members in the S&P/TSX composite index consumer discretionary sector. However, over the past month, the share price has been under pressure, falling 7.2 per cent, while consumer discretionary sector of the TSX index has been relatively flat, declining just 0.3 per cent.
The shares are nearing oversold territory with the relative strength index at 32. Generally, a reading at or below 30 indicates an oversold condition.
There is initial downside support for the share price around the $130 to $131 level, the 200-day moving average is at $131.16. Failing that, there is support between $118 and $120.
There is initial upside resistance between $139 and $140, the 50-day moving average is at $139.10. After that, there is resistance around $145.
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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 principally from 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.
Positive Breakouts | Sept. 8 close | |
---|---|---|
ATA-T | ATS Automation Tooling Systems Inc | $10.92 |
BAD-T | Badger Daylighting Ltd | $28.04 |
BNP-T | Bonavista Energy Corp | $4.57 |
DOO-T | BRP Inc | $25.36 |
CEU-T | Canadian Energy Services & Technology Corp. | $5.06 |
CCL/B-T | CCL Industries Inc | $252.58 |
CR-T | Crew Energy Inc | $7.17 |
ENB-T | Enbridge Inc | $59.10 |
ECA-T | Encana Corp | $13.71 |
ESI-T | Ensign Energy Services Inc | $7.90 |
EQB-T | Equitable Group Inc | $61.70 |
GSY-T | goeasy Ltd | $21.36 |
GC-T | Great Canadian Gaming Corp | $22.55 |
HLF-T | High Liner Foods Inc | $25.46 |
IGM-T | IGM Financial Inc | $37.26 |
IRG-T | Imvescor Restaurant Group Inc. | $3.14 |
KEL-T | Kelt Exploration Ltd | $5.81 |
KEY-T | Keyera Corp | $42.50 |
KXS-T | Kinaxis Inc | $64.29 |
LIQ-T | Liquor Stores N.A. Ltd | $10.41 |
LMP-T | Lumenpulse Inc | $18.09 |
MDF-T | Mediagrif Interactive Technologies Inc. | $19.00 |
NWH.UN-T | NorthWest Healthcare Properties REIT | $10.80 |
NVA-T | NuVista Energy Ltd | $7.57 |
POU-T | Paramount Resources Ltd | $14.85 |
PXT-T | Parex Resources Inc | $17.08 |
PKI-T | Parkland Fuel Corp | $31.07 |
PWT-T | Penn West Petroleum Ltd | $2.30 |
PHX-T | PHX Energy Services Corp | $3.60 |
PIF-T | Polaris Infrastructure Inc. | $16.13 |
AAR.UN-T | Pure Industrial Real Estate Trust | $5.76 |
RME-T | Rocky Mountain Dealerships Inc | $9.29 |
VII-T | Seven Generations Energy Ltd | $31.06 |
SH-T | Shopify Inc. | $55.86 |
SUM-T | Solium Capital Inc | $7.10 |
SPE-T | Spartan Energy Corp | $3.56 |
STB-T | Student Transportation Inc | $7.41 |
SMU.UN-T | Summit Industrial Income REIT | $6.53 |
SGY-T | Surge Energy Inc | $2.58 |
TOU-T | Tourmaline Oil Corp | $37.67 |
RNW-T | TransAlta Renewables Inc | $14.69 |
TFI-T | TransForce Inc | $27.59 |
TNT.UN-T | True North Commercial REIT | $6.54 |
VSN-T | Veresen Inc | $13.43 |
VET-T | Vermilion Energy Inc | $50.17 |
WCP-T | Whitecap Resources Inc | $10.85 |
Y-T | Yellow Pages Ltd | $20.63 |
Negative Breakouts | ||
CTC.A-T | Canadian Tire Corp Ltd | $132.84 |
CXR-T | Concordia Healthcare Corp | $9.96 |
NXE-T | NexGen Energy Ltd. | $2.22 |
NWC-T | North West Co Inc | $28.00 |