Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC analyst Darko Mihelic sees the potential for a ‘hockey stick’ jump in Canadian bank earnings,
“We expect and have modelled a strong improvement in earnings through to fiscal 2022 but we believe there is a high probability that Canadian bank earnings could jump “hockey stick” like in EPS in 2022 to be materially better than our forecast … We believe gross impaired loans (GILs) will rise materially in 2021 - however, we also believe net credit losses next year will be lower than 2020… In addition to a possible PCL [lower provisions for credit losses] boost to EPS, we expect loan growth to improve in 2021 and possibly surprise to the upside. Our models assume a gradual improvement in loan growth (up 4.8% in 2021 for the large Canadian banks in aggregate); however, credit card debt, auto loans and possibly commercial loans could jump very quickly in a strong economy if vaccinations are successful and some form of “normalcy” returns … We are also upgrading BNS to Outperform (from Sector Perform) partly because of higher assumed EPS estimates but mostly because we believe its valuation multiple can improve and move more towards the “middle of the pack”. Our new target price for BNS suggests ample upside of ~20%”
“@SBarlow_ROB RBC sees ‘hockey stick jump’ in Canadian bank earnings” – (research excerpt) Twitter
“Tuesday’s analyst upgrades and downgrades” - Globe Investor
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Scotiabank energy analyst Cameron Bean provided his top picks for 2021,
“The pandemic and related crises (including a brief oil price war) hit oil prices hard in 2020, with the 12-month forward WTI strip declining 21% since the beginning of the year. The 12-month forward Henry Hub strip has fared better, increasing 12% since the beginning of 2020 (despite the recent pullback). Looking ahead to 2021, we see the natural gas versus oil question as an either/or situation. If the real economy and oil demand remain sluggish and oil prices are range bound, we expect natural gas prices to increase from their current level. If COVID-19 vaccines spur an economic recovery and oil demand and drilling increases, we expect the increase to associated gas volumes to cap natural gas prices … TOU continues to be our top pick overall and VII is our best idea for oil exposure. We like BIR and AAV for higher torque natural gas exposure and TPZ for yield and downside resiliency in the face of downside commodity price risks.”
“@SBarlow_ROB BNS: Oil/nat gas is an either/or proposition for 2021” – (research excerpt) Twitter
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Claims that “the robots are taking over” have been frequent in recent years, but I’ve always looked at the profit growth at Japan’s Fanuc Corp. - one of the world’s leading robotics firms - as the gauge and it’s growth has been stable but unspectacular.
Citi analyst Graeme Macdonald, however, is upgrading Fanuc on the potential for strong robotics growth in the auto sector,
“What makes us more bullish on Fanuc now is potential for earnings and margins to rebound from very depressed levels; a high gearing to a recovery in machine tool demand; scope for a rise in robot demand from both general users and the auto industry; a cash-rich balance sheet; and the fact that the shares have lagged other FA names over the past five years. We revise our forecasts and raise our target price to ¥32,000 from ¥24,000 [current ¥25,295] .”
“@SBarlow_ROB Citi: maybe the robots *are* taking over this time” – (research excerpt) Twitter
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Newsletter: “Wall Street’s dangerous consensus” – Globe Investor
Diversion: “Awesome, Now Police Are Using Automated Drones” – Gizmodo
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Scott Barlow