National Bank Heading into first-quarter earnings season for his Industrial Products coverage universe, National Bank Financial analyst Maxim Sytchev says both sentiment and technical indicators are “uniformly bullish.”
“Our space continues to attract investor dollars as government spending remains robust while projected earnings are expected to outpace those of S&P 500 by 500 basis points in 2024 and 2025 amid positive earnings revision dynamic (on an annual basis),” he said.
“No changes to recommendations, but we have marginally compressed numbers for NOA (seasonality), AFN (seasonality), RUS (steel pricing) and STLC (steel pricing); ARE’s projections upped slightly as we are still trying to figure out the accounting adjustments (vs. economic reality) for divestitures, etc.”
In a research report released Wednesday, Mr. Sytchev said full-year earnings per share estimates for companies he covers have risen by an average of 5 per cent over the last six months, however he cautioned of “significant dispersion.”
“While many names in our universe are no doubt nominally more ‘expensive’ than before, the multiple expansion is at least partially justified with both nominal expected earnings growth and continued upwards earnings revision,” he said.
“Best ideas when it comes to making incremental $ at this point in order of preference (and market-cap agnostic) are FTT (stock has started to work post our Q4/23 upgrade as copper careened higher), RBA (structural undervaluation vs. own history as market gets more comfortable with IAA not losing customers), AFN (nothing seems to be working in ag year-to-date but operational improvements and international revenue skew vs. history are bearing fruit) and WSP (post the short report drop that we deem as disingenuous and inaccurate).”
Mr. Sytchev made one target change, lowering his Stelco Holdings Inc. projection by $1 to $54 with an “outperform” rating after modest reductions to his forecast. The average on the Street is $53.14.
For his “best ideas” list, his targets are:
- Finning International Inc. (“outperform”) $46 (versus a $47 average on the Street)
- RB Global Inc. ( “outperform”) US$85 (versus US$80.33).
- Ag Growth International Inc. ( “outperform”) $82 (versus $82.44)
- WSP Global Inc. ( “outperform”) $234 (versus $238.50)