TD commentCommunications - Canadian small-cap model portfolio
We are removing Cineplex Inc. (CGX-T, portfolio weight 2.5%).
Our addition of Cineplex late last year was on its potential earnings turnaround. Although we did see an initial positive turn in Cineplex's earnings momentum, forward earnings were considerably reduced on Q2/F22 results last month (2022: -$0.11 to -$0.40; 2023: $1.23 to $1.01, Exhibit 4). This led to a breakdown in share price below its near-term support level. With high year-over-year earnings growth expectations (potential for further negative revisions, in our view), combined with Cineplex's relatively high price and earnings variability, we are removing Cineplex at this time.