Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank REIT analyst Mario Saric is bullish on apartment REITs,
“We think Apartment REITs can stand out in 2023. CAD Apartment REITs are up 10 per cent year-to-date vs. CAD Apartment REITs. 7 per cent for CAD REITs and 3 per cent for US Apartment REITs, recovering some 2022 weaknesses (down 22 per cent vs. down 16 per cent vs. down 34 per cent). We think one driver = accelerating market rent growth vs. decelerating US growth. Our 2023 EAFOPU [adjusted funds from operations per unit] = 116 per cent of 2019 (ie pre-COVID), the 3rd-best in Canada, while 8-per-cent multiple erosion matches sector avg.. Occupancy and rent exceed pre-COVID for BEI, CAR, and KMP, with IIP and Minto close on occupancy. While cost pressure is topical (sentiment was split; some felt it peaked; others less sure) strong SSREV [same store revenue] could drive the highest rate of change in SSNOI [same store net operating income] growthex. Office”
“Scotiabank likes apartment REITs” – (research excerpt) Twitter
For aggressive investors, Morgan Stanley has collected 10 trade ideas for the current earnings season. The names for bullish results are Bath and Body Works Inc., CNH Industrial NV, Constellation Energy Corp., EnLink Midstream LLC, Marriott International Inc. and NOV Inv. The short ideas are Bright Horizons Family Solutions Inc., Freshworks Inc., Palantir Technologies Inc. and Snap Inc.
Familiarity is likely to lead Canadian traders to Bath and Body Works…,
We see as much as 11 per cent upside to 4Q consensus EPS reports (February 22). Further, while specialty retail stocks have risen 2.0 per cent since the ICR conference, BBWI is down 1.0 per cent, indicating that this potential beat has not been priced in.”
“We expect Snap to miss 4Q revenue and guide 1Q below the street (earnings on January 31). We forecast 4Q revenue fell [approximately] 2.0 per cent year over year, with December declining [approximately] 10.0 per cent year over year.”
“MS: 10 trades for earnings season” – (table) Twitter
Corporate profit and revenue guidance amidst a global economy slowed by central bank monetary tightening is arguably the most important trend for investors to follow in the coming weeks.
BofA Securities global quantitative strategist Nigel Tupper is following the data closely,
Globally, sales forecasts are now falling in tandem with earnings forecasts. The Global Earnings Revision Ratio [number of companies raising guidance versus lowering guidance] It had improved in December in response to China reopening optimism but fell in January from 0.82 to 0.64 as earnings optimism faded. This month, the Global Sales Revision Ratio fell below 1.00 (from 1.02 to 0.86) as top-line estimates started falling in tandem with earnings estimates. The Global Sales Revision Ratio was dragged down by large falls in Energy, Materials, and Software and this Ratio is now below 1.00 in eleven of sixteen global sectors in a signal of top-line fragility. The equity market rally this year has not been driven by strength in earnings or sales… As central banks continue to hike to address inflation, the Earnings Revision Ratio remains below 1.00 in all regions, all global styles, and almost all global sectors… Currently, the Earnings Revision ratio is meaningfully above global averages for Aerospace IT Services (3.50), Petroleum Water Transport (2.66), Oil/Gas Well Drilling (2.24) and Health Plan Providers (2.00)”
Diversion: “McKinsey contracts top $100M under Justin Trudeau” – CBC
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