Canadian Imperial Bank of Commerce isn’t just the first of the Big Six to reveal whether they’ve beaten analyst expectations. They’re also the best at it.
CIBC, which kicks off second-quarter earnings season for the country’s banking industry, has the best track record in the past eight quarters, as well as in the past four quarters, of exceeding the consensus of analysts who forecast Canadian bank earnings, according to a review of data in Thomson Reuters Eikon.
Over the past two years, CIBC’s smallest earnings-per-share “beat,” in percentage terms, is 2.7 per cent, and the bank has posted three quarterly numbers that exceeded 10 per cent or more. It hasn’t missed in any of the eight quarters. On average, the beats equaled 7.7 per cent over the past eight quarters and 7 per cent over the past four.
What’s expected Wednesday? Well, on average, analysts forecast earnings per share of $2.81 on just over $4.32 billion in revenue.
It sounds trivial, this game of meeting or beating Bay Street expectations, versus actually showing profit growth. But it actually makes stocks move. And, it’s worth realizing that a dazzling display by CIBC may not translate into similar outperformance across the sector.
Certainly, the Canadian banks delight more than disappoint. Across two years of reports from the Big Six — 48 quarterly results in all — there have been only six misses, none more than 2 per cent, according to Eikon. (Here’s looking at you, Toronto Dominion, which missed EPS by 2 per cent in last year’s fourth quarter.)
CIBC didn’t post the single-biggest surprise of the period — that honour goes to National Bank’s 31 per cent surprise in the second quarter of 2016 — but even that bonanza couldn’t pull National Bank’s track record ahead of CIBC’s.
What does this actually mean for the share price, however? While earnings hits and misses can drive investor reaction, companies can also revise guidance or offer other forward-looking commentary that overwhelms the quarterly results, even sending the shares in the opposite direction than one might expect.
So we regret to inform you that CIBC isn’t the biggest post-earnings mover among banks. In fact, the Canadian bank stocks are, on average, turgid performers in the days after their quarterly report, per Eikon’s tracking of their 7-day, post-earnings performance.
National Bank, which rose 5.1 per cent after that stunning 2016 report, has the best average post-earnings performance for the last eight quarters: 2.4 per cent. The remaining five banks averaged gains between zero and 1 per cent.
Another reminder to not get too excited Wednesday morning.
Of course, U.S. retailers might give investors something to talk about. Their earnings season continues with numbers from two biggies: Target Corp. and home-improvement monster Lowe’s Cos. Inc.
Target is expected to post a rise in first-quarter sales and profit, driven by increased consumer spending in the backdrop of a strong U.S. economy with low unemployment rates and lower taxes. Analysts expect, on average, EPS of US$1.39 on revenue of just over US$16.56 billion. Target has been beating expectations more often than missing, but its shares have stumbled several times, post-earnings, in the past eight quarters.
Lowe’s is expected to post a rise in first-quarter revenue and comparable store sales, benefiting from the optimism surrounding the U.S. homebuilding market. Analysts expect, on average, EPS of US$1.22 on just under US$17.46-billion in revenue.
It’s also a day for a little luxury: Tiffany & Co. is expected to post a rise in first-quarter sales as its efforts to adapt the business to include cheaper silver jewelry to price-conscious millennials pays off. Ralph Lauren Corp, the luxury apparel maker, is expected to report a fall in quarterly sales as it continues to pull inventory off department store shelves and sell more at full price to beef up margins, while unusually cold weather in April may have put off some customers from shopping at its stores.
Note: The earnings-per-share numbers expected by analysts and reported by the companies are typically adjusted for items they consider special, unusual or non-recurring. The EPS figures in this story may not match the companies’ net income per share as calculated by generally accepted accounting principles.
With files from Reuters