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

Scotiabank analyst Mario Saric provided a summary of the content from the firm’s recent conference for retail REIT executives,

“While market sentiment on the ‘Uncontrollable’ (Fed Policy, U.S. Banking System, Credit concerns) is not great, the discussed fundamental outlook was quite strong, in our view (no hint of tenant weakness yet) … CAD Retail REITs were the #2 asset class last year, down only 6 per cent vs. down 16 per cent for sector … Our 7-per-cent NTM NAVPU [next 12 months net asset value per unit] growth forecast is a bit below 9 per cent sector avg., while the Retail REIT P/NAV [price to net asset value] discount matches sector avg. That said, there is less downside risk in the Retail REITs, in our view. Our top picks = CRR, CRT, and REI.”

“Scotiabank top picks in retail REITs” – (research excerpt) Twitter


RBC Capital Markets analyst Darko Mihelic has cut his profit estimates for the domestic banks,

“Our U.S. colleagues reduced EPS estimates last week and with this note we also make some initial modest tweaks to our estimates. We are lowering some NIM [net interest margin] and loan growth estimates to better match what our U.S. colleagues are expecting … We have not altered our capital markets estimates, wealth estimates and/or our PCL [provisions for credit losses] estimates for any of the banks under our coverage. The Canadian banks’ second quarter ends April and hence we believe we will be in a better position to properly vet capital markets, wealth, and PCL estimates closer to quarter end. Shorter term, we continue to expect heightened volatility as the aftershocks of these events become clearer. We acknowledge, however, that for investors with a longer-term horizon and with a higher risk tolerance, valuations appear attractive… Our Q2/23 core EPS estimates decrease approximately 3 per cent on average mainly due to slower loan growth and lower NIM assumptions compared to our previous forecasts, and lower FHN and SCHW estimates in our TD model. Our 2023 and 2024 core EPS estimates both decline by 2 per cent on average after making these changes to our models. As a result, our price targets are slightly revised downward by 2 per cent on average to reflect lower 2024 EPS estimates, as our price targets are based on forward P/E multiples of our 2024 core cash EPS estimates.”

These are not huge changes to estimates, but it is still important in that it forecasts a loss of momentum for profit margins and earnings.


Morgan Stanley oil analyst Devin McDermott has selected Suncor Energy Inc. and Cenovus Energy Inc. among his top picks in the sector,

“E&Ps have fallen 17 per cent since the start of the year, outpacing a 14-per-cent decline in crude prices … While buying similar dips over the past two years has generally been the right strategy, rising recession odds increase the risks over the coming quarters … much of the oil market demand growth in 2023hinges on China’s reopening and rising mobility across Asia — trends which are still on track. Furthermore, low inventories, limited OPEC+ spare capacity, slowing shale growth, and constrained global oil & gas investment make this cycle look different than others in recent history. We retain our ‘selective’ positioning bias and see the recent pullback as an opportunity to add exposure to high quality producers & integrated energy companies… expectations are now more reasonable for 2023capex & production … In a more uncertain macro environment, we retain our defensive bias and prefer names with scale, strong balance sheets and differentiated rate of change (HES, EOG, XOM) and/or outsized buyback capacity (MRO, FANG in the US and SU & CVE in Canada). Within gas E&Ps, EQT remains our preferred stock.”

“2 Canadian names among MS’s top picks in oil and gas” – (research excerpt) Twitter


Diversion: “Flesh-Eating Bacteria Could Be Coming to a City Near You” – Gizmodo

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