**February 27th Issue of The JMRD Market Observer**
In This Week’s Market Observer
- RRSP Contribution Deadline Reminder – Monday March 2!
- Bank of Canada’s Stephen Poloz in London
- NBF Economic Monitor
- Retirement Corner
- Week at a Glance
- Reads of the week
- Economic Calendar
- Earnings Reports
RRSP Contribution Deadline Reminder
A quick reminder that the RRSP contribution deadline for the 2014 taxation year is Monday, March 2nd. Let us know if you are planning to contribute and you have not done so already!
Now that RSP season is coming to a close, we are set to embark on a new one – tax season. We’ve attached a handy reference pamphlet that highlights the mailing deadlines for the various slips you may be receiving over the next few weeks. For those with non-RSP accounts (CASH or MARGIN Accounts, as the industry refers to them) that hold ETFs and/or mutual funds and/or limited partnerships, we suggest you wait until the end of April to complete your taxes. The T3 slip mailing deadline is the end of March, which means you may not receive all your slips until the middle of April. We realize this can be frustrating but it’s the companies who issue these T3s that determine when NBF receives this information, which in turn, determines when we can pass it on to you.
Your realized capital gains/losses report, not addressed in the pamphlet, will be sent to you directly from our office in the coming weeks.
Do not hesitate to call us if you have any tax-related questions.
Bank of Canada’s Stephen Poloz in London
JMRD Team member Reg Jackson, a Western University grad, attended a speech by Stephen Poloz, the Governor of the Bank of Canada, at his Alma Mater this week. Mr. Poloz spoke about his recent decision to cut interest rates in Canada and the potential effects of continued lower oil prices on the Canadian economy. See the attached Financial Post link for more commentary.
NBF Monthly Economic Monitor – March 2015
- Growth in the OECD is becoming more widespread, with output on the rise not just in the U.S. and the U.K., but also in Japan and the Eurozone. Emerging economies are also on the upswing, boosted by cheap energy and mild inflation which is allowing central banks, such as those in India and China, to lower interest rates. The ingredients are in place for global growth to pick up to 3.5% this year.
- The U.S. economy slowed a bit in Q4 last year, although that should not be surprising after two very strong quarters. The softness seems to be extending to early 2015 partly due to bad weather. Rising inventories in the prior quarter may also be partly responsible for the slow start to Q1. But as was the case last year, we expect the world’s largest economy to put behind it the winter blues and bounce back with the help of consumer strength and business investment spending. We continue to expect U.S. GDP growth of 3.3% this year.
- The energy price slump is already taking its toll on the Canadian economy as evidenced by the deceleration in GDP and employment growth in the last quarter of 2014. The economy seems destined for sub-2% growth in the first half this year as investment in the oil patch dries up, fiscal policy is tightened particularly in provinces, housing softens, and weak employment restrains consumption. Fortunately, exports will provide some offset thanks to strengthening U.S. demand and a much more competitive currency. Considering how growth, and hence employment, will be dependent on trade, the Bank of Canada will maintain its loose stance on monetary policy as to keep the loonie grounded.
(see attached for the full report)
JMRD Basket Corner
Canadian Tire (CTC.a) – Severe weather typically drives immediate demand and that helped boost sales at CTC.A. The Canadian retailer–which sells everything from tires to sporting goods to household items–reported better-than-expected 4Q EBITDA and higher same-store sales for all its chains. Canadian Tire traded at an all-time high of $133.08 this week
DH Corp (DH) – DH reported Q4/14 adjusted revenue of $299M (vs. $281M estimated & $272M Q4/13), adj. EBITDA of $88M (vs. $86M est. & $81M Q4/13) and full capex expensed DCPS of $0.64 reflecting a 50% payout (vs. $0.54 / 59% est. & $0.43/74% Q$/13. Results were similarly ahead of the Street’s $286 mln revenue and $87.6 mln EBITDA
TD Bank (TD) – TD reported Q1 f2015 core cash EPS of $1.12, in-line with consensus. From NBF Canadian Bank Analyst Peter Routledge “The Wealth & Insurance and Wholesale Banking segments reported less-than-stellar performances this quarter. Meanwhile, Canadian P&C managed through revenue headwinds, having an acceptable, but not exceptional quarter. TD’s U.S Retail platform, which underpins our Outperform thesis, performed reasonably well, and comparatively better than BMO’s U.S. P&C platform in our view. However, while U.S. Retail exceeded our estimate this quarter and maintains its positive gearing to a rising U.S. interest rate environment, revenue growth has yet to accelerate and y/y operating leverage remains negative. Thus, TD has yet to be able to realize upon our expectations. As a result, we would describe the quarter as good, not great.” (Full research note attached)
All Cap Growth Basket
Constellation Software (CSU) – CSU reported Q4 revenue in line of $440M which met consensus of $435M (NBF $440M). Organic growth slowed to 0.5% in Q4 y/y due to FX headwind of 3.6%. EBITDA margins of 24.6% were well way ahead of consensus which topped consensus expectations of 22.4%. Q4 is seasonally strong from the year-end revenue push and some tax credits applied against R&D. EBITDA margin is running at a higher run-rate after some restructuring benefits applied at TSS (was in process when Constellation acquired). In addition, EPS of $4.09 beat consensus of $3.54. Cash flow from operations was $97 mln or $4.57 per share vs. $101 mln or $4.77 per share last quarter.
Magna (MG) – Magna reported a better-than-expected fourth-quarter profit and raised its dividend as it benefited from higher vehicle production in North America and Europe, but warned that the stronger U.S. dollar will hurt results this year. Following the Q4 update, MG traded higher by 7% on Wednesday
Apple (AAPL) – Apple announced a ‘special event’ for March 9 where they expected to announce new features of their Apple Watch. This will be the company’s first all-new product since it introduced the iPad in 2010.
HCA Holdings (HCA) – “HCA Has a Healthy Outlook, Obamacare or Not” (Barron’s) An Affordable Care Act challenge before the Supreme Court has hurt HCA’s share. They may jump 20%.
HanesBrands (HBI) – Apparel company HanesBrands Inc. agreed to buy Knights Apparel for about $200M from private-equity firm Merit Capital Partners, continuing its recent acquisition push. Knights Apparel sells college-branded items including T-shirts and sweatshirts. The deal price is an enterprise value that likely includes the assumption of some debt. HanesBrands, which announced a plan in January to split its stock, said the deal is expected to add about 10 cents a share to presplit earnings excluding items in 2015, and about 30 cents a share annually in two to three years. HanesBrands products include Hanes, Champion and Playtex. It is already active in college clothing with its Gear for Sports business. Hanes traded higher by 8% on the week.
1. Turn the clock ahead and get serious about your financial plan (Globe and Mail)
2. Lower loonie threatens to slow retirement homes purchases in U.S. (Globe and Mail)
Week at a Glance
(See attached Week at a Glance report)
Reads of the Week
- “Trouble in Paradise: Inside Canadian banks’ billion-dollar Caribbean struggle” (Globe and Mail)
- “Five reasons retail investors should act like institutions” (Financial Post) Here are five differences we have noted between retail and institutional investors and why the former should act like the latter
- “Last-minute ETF picks for RRSP portfolios” (The Globe and Mail) NBF ETF Analyst Daniel Straus highlights a couple of ETF ideas
- “10 reasons the housing market could go ballistic this spring” (Fortune)
- “On the Extremes” (Pragmatic Capitalism)
- “Saudis’ Oil Price War Is Paying Off” (Bloomberg)
- Mohamed El-Erian: “10 Things to Know About Negative Bond Yields” (Bloomberg)
- “When Will The U.S. Have Its Next Recession?” (A Wealth of Common Sense)
- “Who Killed Tony the Tiger” (Bloomberg) How Kellogg lost breakfast
Monday March 2nd – Canadian Current Account Balance, U.S. Personal Income, U.S. Personal Spending, U.S. ISM Manufacturing
Tuesday March 3rd – Canadian Quarterly GDP Annualized, U.S. Wards Total Vehicle Sales
Wednesday March 4th – Bank of Canada Rate Decision, U.S. ADP Employment Change, U.S. ISM Non-Manufacturing Composite, U.S. Federal Reserve releases Beige Book
Thursday March 5th – Canadian Ivey Purchasing Managers Index, U.S. Initial Jobless Claims, U.S. Factory Orders, U.S. Nonfarm Productivity
Friday March 6th – Canadian Building Permits, U.S. Unemployment Rate, U.S. Change in Nonfarm Payrolls, U.S. Trade Balance
Monday March 2nd – Vermillion Energy
Tuesday March 3rd – The Bank of Nova Scotia, EnerCare, Gibson Energy
Wednesday March 4th – Aecon Group, Parkland Fuel
Thursday March 5th – Canadian Natural Resources, Canyon Services, Costco, George Weston, SNC- Lavalin
Friday March 6th – None
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