Post by
retiredcf on Apr 14, 2022 9:11am
CIBC
Have a $236.00 target. GLTA
EQUITY RESEARCH
April 13, 2022 Earnings Revision
Transportation/Industrial Q1/22 Earnings
Preview: Growing Concerns Of A Recession
Our Conclusion
In this report, we provide our Q1 preview for the transportation/industrial
sector and key themes we expect to be discussed during reporting season.
We believe much of the discussion will focus on recessionary concerns (our
base case though continues to assume economic expansion), supply chain
headwinds and inflation/pricing. Names we like heading into earnings season
are the Canadian rails, CAE, CJT, GFL, TFII and WCN. We are cautious on
NFI and for BBD we are currently 26% below consensus Q1 EBITDA.
Concurrent with this report we transfer coverage of EIF to Krista Friesen.
Key Points
Growing Concerns Over A Freight Recession – Canadian Rails Well-
positioned: While we remain confident in the earnings growth trajectory for
the Canadian transport sector, historically rail earnings have proven to be
more resilient during a downturn. Canadian bulk commodities are also well-
positioned to benefit from reduced demand for Russian commodities (i.e.,
improved outlook for its more non-cyclical commodities). Our preference
remains CP.
TFII And CJT – Tactically Like Them Heading Into Q1 Earnings: TFII’s
and CJT’s shares have sold off on recession concerns, but we tactically like
both names heading into earning season. 1) CJT and TFII are trading at
trough levels looking back the last five years. 2) CJT and TFII have
idiosyncratic earnings stories (expect good Q1 earnings and outlooks
maintained). 3) Expect TFII to get aggressive on its NCIB. We see both
these names as being oversold on recession concerns.
CAE – A More Defensive Aerospace Name: We like CAE heading into its
FQ4 earnings as a lower-risk name to gain exposure to the recovery in
commercial aviation, with Civil earnings exhibiting a lower amplitude through
the cycle. As well, the improving outlook for Defence adds a non-cyclical
earning stream. With the stock in the low $30s, this has been a good floor
value looking back to November 2020.
Waste – GFL Mean-reversion Trade: We expect another solid quarter from
the waste sector. While expectations are high, fundamentally the waste
names continue to provide investors with “defensive growth” attributes. We
continue to like GFL here as a mean-reversion trade. Its relative share price
discount to the Big 3 (RSG, WCN, WM) is now at two standard deviations
looking back the last year.
Supply Chain Issues And Inflation A Headwind For OEMs: Supply chain
issues and inflation continue to weigh on the earnings recovery of the OEMs
we cover. We remain cautious on NFI.