WHAT ARE WE LOOKING FOR?
In the midst of first-quarter earnings season, let's look for continued earnings momentum among major sectors. After looking at North American sectors yesterday, let's focus today on Canada.
MORE ABOUT TODAY'S SCREEN
We'll use StarMine, a Thomson Reuters service that gathers earnings estimate data from analysts. StarMine can help us find earnings-revision momentum, which we'll define here as how much earnings estimates have risen or fallen in the past 30 and 60 days for all 10 main sectors. We're looking at earnings estimate revisions for the current quarter and the next 12 months. The thinking here is that sectors with the strongest earnings-revision momentum should continue to do well.
We'll sort by sectors with the strongest earnings revisions over the past two months for the next quarter. We'll accept only mid- and large-capitalization companies in the screen.
WHAT DID WE FIND OUT?
While the financials stood out yesterday when we looked at North America, it's the materials sector that stands out for Canada. Over the past two months, analysts have revised their earnings estimates higher by 1.9 per cent for the next quarter and 1.7 per cent for the next 12 months.
Also take a look at the second-to-last column, which shows the "SmartEstimate" for the next 12 months. As described yesterday, StarMine believes this is a better earnings estimate indicator than the mean consensus forecast. The SmartEstimate takes into account only those analysts with the most timely and accurate earnings estimate history. In other words, the SmartEstimate puts the most weight on the most accurate analysts.
The SmartEstimate for the Canadian materials sector shows 67-per-cent earnings growth for the next 12 months, which is much higher than for any other sector.
If you want to do more research on individual materials stocks, some that stand out for strong expected SmartEstimate growth next year include Western Coal Corp., Lake Shore Gold Corp., Methanex Corp., Taseko Mines Ltd., Equinox Minerals Ltd. and Golden Star Resources Ltd.
Scott Adams