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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BMO Capital Markets bank analyst Sohrab Movahedi gives his final forecast for earnings and provides top picks in the sector as profit reports begin,

“Across the “Big 5″ (excl. BMO), Q2/24 cash earnings are expected to be down ~4% y/y, with positive pre-tax pre-provision earnings growth more than offset by still-elevated credit provisions (albeit stable q/q). Our estimates contemplate slow loan growth but stable margins, some firming in Capital Markets/Wealth revenue, and sticky expenses not yet showing full benefits from last year’s restructuring charges. We believe that the Canadian bank earnings trends are close to an inflection point; last year’s triple whammy of higher minimum regulatory capital requirements, credit reserve building, and negative operating leverage from double-digit non-interest expense growth should moderate starting this quarter and improve through FY25. Our Outperform-rated names are CM, RY, NA, EQB, and CWB … TD will kick off the Q2/24 reporting season Thursday morning”


Citi analyst Vikram Bagri argued that the recent rally in global renewable power stocks featured a lot of short covering. The report was entitled Unexpected Rally in Renewables ,

“We believe the rally is being driven by several factors: 1) investors looking to play the datacenter/AI theme via renewables (MSFT data centers to be 100% renewables powered by 2025), 2) short squeeze given sector positioning, 3) rally in natural gas prices shifting focus to renewables, 4) domestic content clarification from the Treasury Department late last week emphasizing domestic value chain with focus on cell manufacturing, 5) an industry forum hosted by the China Photovoltaic Industry Association (CPIA) calling for potential regulatory measures to control excessive production capacity expansion and mitigate price competitions. We recommend avoiding Sell rated SPWR and PLUG in this rally … Renewables stocks remain highly crowded shorts overall, albeit with few exceptions such as FSLR. Short crowding has increased throughout last year and peaked in 1Q and is showing signs of reversal. The rally in the last two days appears to be fueled by unwinding of short interest as highly shorted names are outperforming other names”

Mr. Bagri has “buy” ratings on Phillips 66, Altus Power, Sunrun Inc., Shoals Technologies Group, Sunnova Energy International and Valero Energy Corp.


CIBC Capital Markets analyst Paul Holden reiterated his recommendation of life insurance stocks over banks,

“Q1 results were better than expected for three of the four lifecos. The stocks, for the most part, are pushing higher. We maintain our call for insurers over banks. We upgraded IAG to Outperformer on the back of strong Q1 results and a discounted valuation. We now have two Outperformers in the group, IAG and SLF, and both have lagged group leader MFC year-to-date. We expect positioning will change, not only because of relative valuations, but also because we expect fundamental results from SLF and IAG to improve through the course of 2024 … Adjusted EPS was up 14% Y/Y, on average, and three of the four lifecos beat consensus (beats of 3%–4%). We think this will stand in stark contrast to upcoming bank results where we expect EPS to be down Y/Y, on average (-2%). Lifecos over banks remains the right call, in our opinion”


Diversion: “Taylor Swift bigger than The Beatles? No way. Here’s why” – A Journal of Musical Things

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