Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA U.S. quantitative strategist Savita Subramanian details a U.S. earnings season where markets are unfazed by lower profit guidance,
“250 S&P 500 companies representing 71% of earnings have reported so far. 4Q EPS is tracking a 1% miss at $53.14, representing a 2% decline year-over-year or -6% based on current constituents. Net margins (ex-Fins) missed and track 11.3% vs. 12.7% peak in mid-2021. Tight labor and waning pricing power are likely to pressure margins further. 47% beat on both sales and EPS so far, but guidance is in focus for investors. Guidance in 2023 has pushed consensus EPS down further – now at $224 (+2% YoY) but still above our $200 forecast (-9% YoY). The 2% cut YTD in 2023E represents nearly 3x the typical cut over the same period”
“BofA: guidance not great” – (research excerpt) Twitter
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Morgan Stanley global strategist Andrew Sheets likes Asian and European stock over the U.S. equities,
“If positioning is the story, can it persist? The equity momentum factor has already reversed all of its gains since January 2022 in both the US and Europe. Our sentiment indicators suggest that conditions have moved from fearful to complacent. And cash has so far largely stayed on the sidelines, with weak flows into US equity ETFs, perhaps because those ‘sidelines’ pay pretty well given high money market yields. 2023 so far has seen a broad-based rally driven by distinctly different stories. We feel most confident that this story can continue in Asia, least confident about the US, and would put Europe in between. We like selling upside in US stocks to buy upside in global markets, positioning for a so far universal rally to become more dispersed.”
“MS: “But if positioning is the story, can it persist?”” – (research excerpt) Twitter
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RBC Capital Markets strategist Bish Koziol is removing Canadian Tire Co. Ltd. from the firm’s “QuaDS Score Top 40 List” of domestic stocks because of declining momentum and lack of transparency on earnings. He is adding CI Financial Corp..
The stocks are chosen based on a multi-factor model measuring value, momentum, growth and earnings predictability.
The resulting list includes: Pason Systems, CES Energy Solutions, Imperial Oil Ltd., Keyera Corp., Prairiesky Royalty, Stella-Jones, CCL Industries, Labrador Iron Ore Royalty, Richelieu Hardware, Ritchie Bros. Engineers, Stantec, TFI International, Thomson Reuters, Toromont Industries, Canadian National Railway, Waste Connections Inc., WSP Global Inc., Dollarama Inc., Restaurant Brands International, Metro Inc., Loblaw Companies, North West Company, Empire Co., Great-West Lifeco, TMX Group, National Bank, Bank of Montreal, Intact Financial, Bank of Nova Scotia, TD Bank, Open Text Co., Celestica Inc., Descartes Systems Group, CGI inc., Rogers Communications, Quebecor Inc., Northland Power Inc., and Firstservice Corp.
“RBC top 40 domestic stock picks” – (table) Twitter
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Diversion: “Turning empty offices into housing is a popular idea. Experts say it’s easier said than done” – CBC
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