Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO Capital Markets analyst Ben Pham previewed earnings for the dividend-heavy energy infrastructure sector,
“Q4/23 earnings season kicks off on February 2 with BEP [Brookfield Renewable Partners] first out of the gate. Following our analysis of public data sources, proprietary models, and detailed discussions with our coverage, we point to notable potential Q4/23 beats from TRP [TC Energy Corp], BLX [Boralex Inc.], and H [Hydro One Ltd.] and potential quarterly misses from TA [Transalta Corp.], BEP, and EMA [Emera Inc.] and would position ahead accordingly. Looking to our 2024 set-up in Canadian Energy Infrastructure, our preference remains utilities over pipelines and our recently updated Top 5 Best Idea roster is unchanged (NPI [Northland Power Inc], ALA [AltaGas Ltd.], PPL [Pembina Pipeline], AQN [Algonquin Power] , and ACO.X[Atco Ltd])”
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Scotiabank strategist Hugo Ste Marie details the stridently mediocre recent past for TSX profit growth,
“No progress in two years. TSX earnings will end a tough year on a weak note. Bottom-up forecasts peg TSX Q4/23 EPS at $359, which is down 0.8 per cent sequentially and 1.1 per cent below last year’s level. Overall, weaker Canadian economic growth and softer commodity prices are to blame for deteriorating profitability. TSX quarterly EPS have averaged $359 since Q4/21, which is exactly where they’re expected to land in Q4/23. For FY 2023, TSX EPS should reach $1,379 (down 7.2 per cent). Sector breakdown: Profitability breadth deteriorating. Top earnings growers in Q4 should be Health Care (up 208 per cent year-over-year), Technology (up 48 per cent), and Industrials (up 17 per cent). Looking forward, consensus is calling for a rapid turn-around in TSX’s profitability, with quarterly EPS starting to rise more aggressively in Q2/24 and embarking on a string of new all-time highs starting in Q4/24. To reach consensus forecasts, not only is firmer top-line growth needed, but more importantly, profit margins have to recover sharply from here, which could prove difficult given weak economic growth and anemic productivity”
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A Financial Times report outlines the lack of success endured by investors in electric vehicle batteries,
“To convert the world’s entire fossil fuel vehicle fleet would require the equivalent of 250 terawatt-hours worth of battery capacity. That is a long way from the 0.5 TWh that was sold last yearany hoped-for boost for the miners has seemingly gone flat. Metal prices have performed poorly in the past year, falling by as much as half. Shares in the miners of battery-related metals such as London-listed Glencore and Brazil’s Vale have fallen towards one-year lows. Australia’s lithium miner Liontown fell a quarter on Monday as it rethinks expansion plans … Investors fret about the weakening Chinese economy … EV demand across China has been high. Penetration within the world’s largest auto market swelled to 38 per cent last year — more than double the global figure. Roughly six out of 10 EVs are sold in China. Other auto markets must catch up to justify bullish metals forecasts … Recent announcements from rental car group Hertz and carmaker Ford will temper hopes of that. Hertz, previously an enthusiastic EV supporter, plans to sell a third of its EV fleet to buy more fossil fuel cars. Ford will cut output of the electric version of its popular F-150 pick-up”
“Electric vehicle batteries will not deliver new supercycle for miners” – (paywall) Financial Times
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Diversion: “Top Harvard cancer researchers accused of scientific fraud: 37 studies affected” – Ars Technica