Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief investment strategist Brian Belski added four companies to his Canadian dividend growth list of picks. The criteria to make the list are a dividend greater than zero, free cash flow yield greater than the dividend yield and a dividend payout ratio less than the index average.
The new companies are Cameco Corp., Colliers International Group Inc., Dollarama Inc. and IA Financial Corp. Inc. Elsewhere in the list, the outperform rated names are ARC Resources, Alimentation Couche-Tard, Boardwalk REIT, Birchcliff Energy Inc., Boyd Group Services, CCL Industries, Canadian Pacific Kansas City, Constellation Software, Cenovus Energy, BRP Inc., Enerplus Corp., Intact Financial, Imperial Oil, Linamar Corp., Methanex Corp., Nutrien Ltd., Pason Systems, Parex Resources, Secure Energy Services, Stantec Inc., Suncor Energy, Tricon Residential, Waste Connections Inc., Whitecap Resources, West Fraser Timber Co. Ltd. and Sleep Country Canada Holdings Inc.
***
Citi strategist Nathan Sheets discussed the biggest, most important dilemma in global economics.
“Our Global Indicators Chartbook shows an ongoing divergence between resilient services and languishing goods sectors. While the global services PMI fell some in June, it is still historically elevated, and all major economies (with the exception of a recent decline in France) have readings in expansionary territory. The global manufacturing PMI meanwhile has been in contractionary territory since September 2022. Our measure of global supply chain pressures—tightly tied to activity in goods sectors—is also now hovering near pre-Covid lows. Softness in goods sectors is also reflected in a range of other data including retail sales, trade, and industrial production, as well as cooling goods inflation. The strength in labour-intensive services sectors is driving tight labour markets, high wage growth, and persistently high services inflation, which will be hard to bring down. Global central banks as a result have continued to raise rates or maintain tight policy”
In usual circumstances, manufacturing activity is a leading indicator for both corporate earnings and goods industries but so far, services industries have held up well. This divergence is unlikely to remain.
***
Goldman Sachs chief U.S. equity strategist David Kostin outlined the top themes for the upcoming earnings season,
“2Q 2023 earnings season will begin [this] week and consensus expects a 9% year/year decline in S&P 500 EPS driven by flat sales growth and margin compression. We expect companies will be able to meet the low bar set by consensus. Negative EPS revisions for 2023 and 2024 appear to have bottomed and revision sentiment has improved. Our estimates for 2023 EPS remain above consensus ($224 vs. $220) but we continue to view consensus 2024 EPS growth of 11% (to $244) as too optimistic vs. our 5% estimate ($237). Key areas of interest this quarter include: (1) ability of firms to maintain margins as inflation recedes, (2) impact of bank stress on credit and lending, (3) potential uses of AI, (4) status of the US consumer”
“GS: Major themes for earnings season” – (research excerpt) Twitter
***
Diversion: “These are the oldest stone tools ever found in the United States” – Ars Technica
Tweet of the Day: “500 years of interest rates, visualized” – Twitter