Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank analyst Meny Grauman provided a roundup of Canadian bank earnings and updated his “pecking order” of favourites,
“Management guidance remains very constructive despite tragic geopolitical developments. The most recent US bank earnings season was weighed down by elevated expense guidance, but not in Canada, where banks continued to guide to modest year-over-year expense growth and positive operating leverage … Despite the impressive domestic growth that we are now seeing across the group, most of the banks we cover continue to bet that future growth will increasingly be found outside of Canada … Given that all the banks we cover delivered core EPS beats this earnings season, our ranking of the Q1 results focuses on relative performance. We do not cover BNS given our affiliation, and so we exclude it from our analysis. BMO once again delivered the strongest set of results this quarter, including a 19% core EPS beat and peer-leading PTPP earnings growth of 18% Y/Y. In our view TD reported the weakest set of results this quarter … We leave Q1 reporting season with BMO back on top of our pecking order followed by CIBC, RY, and then NA among the large Canadian banks.”
“Scotia’s new ‘pecking order’ for Canadian bank stocks” – (research excerpt) Twitter
The Wells Fargo research team attempted to assess the effects of the Russian invasion of the Ukraine on inflation,
“The invasion and sanctions on Russia are likely to raise inflation via higher costs to produce food and many manufactured goods. Russia is at or near the top of global exports in in oil, several industrial metals and fertilizer. Ukraine is a large grain exporter and produces 90 per cent of the neon gas used to produce semiconductors … Large price increases for aluminum, palladium, lithium, and nickel are likely to pass through to higher prices for products such as electric vehicle batteries and stainless steel … The unknown impact on financial linkages (from sanctions) creates potential spillovers … into the global economy. … Keep in mind that the August 1998 Russian default led to the unraveling of Long-Term Capital Management. "
“WF on inflationary and financial contagion possibilities” – (research excerpt) Twitter
Previously-bullish Citi U.S. equity strategist Scott Chronert reduced his target for the S&P 500,
“Our year-end 2022 S&P 500 price target is lowered to 4700 from a previous 5100. We expect that a higher geopolitical risk premium will negatively impact broader market expected valuations. There is no change to our index-level earnings expectations. Implicitly, we see upside to U.S. equities from here as the market narrative moves past the current perfect storm of headwinds, but to a level implying a flattish, to slightly down full-year return… Aggregate S&P 500 net revisions have peaked, but remain positive … Here is no change to our tactical call favoring Value at this time. We have indicated that quality metrics are the natural evolution past that. Sector preferences include Overweights in Consumer Discretionary, Financials, Health Care, Industrials and Materials. Underweights include Communication Services, Consumer Staples, and Information Technology.”
Mr. Chronert raised his S&P 500 target in January.
“Citi cuts S&P 500 target” – (research excerpt) Twitter
Newsletter: “Top picks in a ‘recession resistant, durable growing’ sector” – Globe Investor
Diversion: “The Five Biggest Takeaways From ‘The Batman’” – The Ringer
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