Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
I missed this at first when it came out last week, but CIBC Capital Markets analyst Stephanie Price posited some big asset sales at the major domestic telcos,
“In a low-growth environment, we believe that the Canadian telecom providers in our coverage universe are taking a renewed look at non-core asset sales. We highlight towers, data centers, sports assets, and regional business units as possible divestiture targets and review precedent global asset sales. In a lower-growth environment, we see an opportunity for the Canadian telecom companies under coverage to deleverage and optimize operations by pursuing one or more divestiture opportunities … We estimate that Rogers (7.7K), BCE (4.9K) and TELUS (3.4K) own the majority of towers in Canada. Based on historical global tower divestitures, we estimate the value of the towers in the range of $2.3B-$7.1B at Rogers, $1.5B-$4.5B at BCE, and $1.0B-$3.1B at TELUS. While Canadian telecom providers have viewed towers as a strategic asset, we believe that they are assessing their options in the current environment … Over the last several years, BCE, Cogeco, Quebecor, and Shaw have divested data center assets. Rogers continues to own 20 data centers and TELUS owns seven”
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Morgan Stanley economists made an observation that applies more to Canada than anywhere else in the developed world,
“Our Global Economists note that the recent migration acceleration across many DM [developed market] economies has generally seen a less-than-proportionate increase in economic activity, with some softening in GDP per capita and labour productivity. A lagged capex response to the strong rise in the labour force looks to be the main culprit. Going forward, our team believes slower migration flows in 2024 and 2025 are likely to weigh on economic growth, although they expect this would be partially offset by a catch-up in capex — consistent with research suggesting that immigration brings outsized long-run benefits to growth, including countering the demographic headwinds that they expect advanced economies to face over the next decade”
“MS: “A surge in population (including immigration) over the past few years has generally seen a less-than-proportionate increase in economic activity...” – (chart) X
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Goldman Sachs chief U.S. equity strategist David Kostin believes the market is under-estimating the strength of S&P 500 earnings,
“The macro backdrop has distracted many investors from fully appreciating the strength of the 2Q earnings season. 56% of S&P 500 firms beat consensus EPS forecasts by more than a standard deviation of estimates, above the long-term average of 46%. We maintain our 2025 EPS estimate of $256 (+6% growth), which is below top-down ($269, +12%) and bottom-up ($279, +15%) consensus. Our 2025 sales growth estimate of +4% is slightly below the bottom-up consensus (+5%), but our forecast for margins to expand by 24 bp to 11.7% is well below consensus (+128 bp to 12.8%) Micro dynamics, including one-time charges and the Semis cycle, imply upside risk to our margin forecast, but downside macro risks are also present”
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Diversion: “What we know about doctor who called Matthew Perry a ‘moron,’ and others charged in his death” – CBC