Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank bank analyst Meny Grauman admitted he was too pessimistic about the sector last year but still sees minimal profit growth in the coming years,
“the impact of mortgage renewals and the state of the economy more generally, the key focus of this note, is also looking better. However, here we feel that the market has perhaps become too optimistic even as we acknowledge that the outlook is better than we thought for much of last year. Despite this better tone, the bottom line for us is that we still see a tough few years for EPS growth across the group as a whole even in a soft landing scenario as higher mortgage payments do weigh on demand for credit in particular and also drive a further normalization in PCL ratios. As a result, we continue to forecast sluggish earnings growth for the group even if the economy continues to hold in, and favour more defensive names such as BMO and RY that will see material upside from deal-related expense synergies”
***
RBC Capital Markets head of global energy Greg Pardy made three additions to the Global Energy Best Ideas list – Cenovus Energy Inc., Enerflex Ltd. and Spain’s Repsol SA.
The remainder of the extended list is BP, Suncor, Obsidian Energy, Topaz Energy, Diamondback Energy, Permian Resources, ARC Resources, Tourmaline Oil, Canadian Natural Resources, MEG Energy, Santos Limited, Pason Systems Inc., SLB, Aker Solutions, AltaGas Ltd, Pembina Pipeline Corp., Archrock Inc., Energy Transfer LP, Neste Oyj, Northland Power, Superior Plus and PG&E Corp. AS for performance,
“In January, the RBC Global Energy Best Ideas List was flat compared to the iShares S&P Global Energy Sector ETF (IXC) which was down 0.8 per cent and a hybrid benchmark (75 per cent IXC, 25 per cent JXI – iShares Global Utilities ETF) that was down 1.6 per cent on a sequential basis. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 157.4 per cent compared to the S&P Global Energy Sector ETF up 29.2 per cent”
“Thursday’s analyst upgrades an downgrades” - Globe Investor
***
In a separate RBC Capital Markets report, real estate analyst Pammi Bir likes seniors housing and multi-residential REITs to outperform,
“Seniors housing and Canadian multi-family should lead the pack on growth. We expect Q4/23 YoY FFOPU [year-over-year funds from operations per unit] growth of 3 per cent, modestly below last quarter’s 4 per cent. The range is wide, with anticipated leadership from seniors housing (up 17 per cent YoY) as fundamentals continue to recover. Self storage should see a double-digit advance from easier comps, while multi-family should also post solid growth (up 8 per cent YoY). Industrial (+2%) is next, followed by retail (down 1 per cent), diversified (down 5 per cent), and office (down 9 per cent). Our 2024E reflect sector average FFOPU growth of 3 per cent, with our preferred subsectors of seniors housing, self-storage, industrial, and multi-family maintaining leadership. Our estimates are intact heading into reporting season, although the drop in bond yields since Oct-2023 could yield modest upside”
Mr. Bir has outperform ratings on Allied Properties REIT, Smartcentres REIT, Chartwell Retirement REIT, Granite REIT, Dream Industrial REIT, Riocan REIT, and First Capital REIT.
***
Diversion: “A Few Thoughts on Spending Money” – Collaborative Fund