Stock market: North American stock markets advanced at the end of the morning

MARKET REVIEW. The strength of the industrials, financials and base metals sectors allowed the Toronto Stock Exchange to advance late Tuesday morning, while the major American indices also gained ground.

The New York Stock Exchange is moving cautiously in the green on Tuesday after a decline the day before as several indicators paint a more optimistic picture of the American economy.

Stock market indices at noon
In Toronto, the S&P / TSX rose 81.55 points (+0.42%) to 19,668.87 points.

In New York, the S&P 500 rose 31.12 points (+0.72%) to 4,359.94 points.

The Nasdaq takes 140.73 points (+ 1.06%) to 13,470.14 points.

The DOW gained 141.79 points (+0.42%) to 33,856.50 points.

The loonie fell US$0.0019 (-0.2487%) to US$0.7582.

Oil lost US$1.39 (-2.00%) to US$67.98

Gold drops US$11.90 (-0.62%) to US$1,921.90

Bitcoin advanced US$74.33 (+0.24%) to US$30,477.29.

The context
Shortly before the opening, the Commerce Department published the status of durable goods orders which continued to rise beyond expectations in May, for the third consecutive month, thanks in particular to transport equipment. They rose by 1.7% and by 0.6% without the transport sector.

In Canada, inflation slowed in May, falling to 3.4% over one year against 4.4% in April against a backdrop of calm energy prices, even if food prices continued to rise sharply.

Over one month, prices increased by 0.4% in May, against 0.7% in April.

“All eyes are on the Canadian CPI index, because it tells us what the Central Bank of Canada thinks”, underlined the HFE analysts while the Canadian Central Bank is often the first of the major Western monetary institutions to initiate a movement in monetary policy.

To fight inflation, the Bank of Canada raised its main key rate by 0.25 points in early June to 4.75%, three months after being the first major central bank to pause its hikes.

For the United States, the PCE index, the Fed’s preferred measure for gauging inflation, will be released on Friday for the month of May.

As for the morale of American households, the Conference Board’s consumer confidence index for June turned out to be much better than expected at 109.7 points against 103.8 points expected and 102.5 points the month before.

Investors also have their eyes on the forum organized by the European Central Bank (ECB) in Sintra, Portugal.

Fed Chairman Jerome Powell will speak on Wednesday.

The ECB’s Christine Lagarde has already “sent a clear message that the cycle of rate hikes will continue,” commented Art Hogan of B. Riley Wealth Management.

The ECB will “continue” its rate hikes at its July monetary policy meeting because it is too early to “declare victory” in the fight against inflation in the euro zone, its president said on Tuesday.

Airlines are flying

In terms of values, the airline Delta (DAL) took off (DAL, +1.50%) after raising its forecast for the whole of its financial year thanks to an increase in demand and a drop in the cost of fuels. This also benefited other companies such as American Airlines (AAL, +2.77%) and United Airlines (UAL, +1.95%).

The travel sector followed suit, like cruise lines with a jump of almost 4% for Carnival (CCL) and 1.55% for Royal Caribbean (RCL).

Bad news from the side of the American manufacturer of electric pickups Lordstown Motors (RIDE) which finally declared bankruptcy while prosecuting the Taiwanese Foxconn which it accuses of not having kept its promises of commercial and financial partnership.

The title of the group created in 2018 collapsed by 44% and was worth only 1.53 US dollars (US$).

Pharmacy chain Walgreens (WBA) fell 9.94% after lowering its earnings forecast due to lower consumer demand for Covid tests and vaccines.

In the bond market, yields on 10-year notes were stable at 3.72%.

Stock market: what is moving in the markets before the opening on Friday

MARKET REVIEWS. Global stock markets were up on Friday, investors being reassured by the positive outcome on US debt and impatiently awaiting data on US employment to help them anticipate the next directions of central banks.

Stock indices
European markets were lower on Friday morning, hours after a robust session in Asia and on Wall Street.

London, Frankfurt and Paris yielded between 0.3% and 0.4% at the start of the session in Europe.

In New York, before the opening of the markets, the Dow Jones average of industrial values slipped by 0.2% and the broader S&P 500 index by 0.1%.

In Asia, the Nikkei 225 soared 2.0% in Tokyo. The Shanghai Stock Exchange rose 0.6% and the Hang Seng 0.5% in Hong Kong. Sydney added 0.3% and Seoul a solid 1.2%.

On the New York Commodities Exchange, the price of oil rose 2 US cents to US$71.31 a barrel.

The context
Upcoming central bank meetings are in the sights of investors. That of the American Federal Reserve (Fed) will be held on June 13 and 14, followed by those of the European Central Bank (ECB) on Thursday and the Bank of Japan on Friday.

In this context, the weekly jobless claims in the United States have been carefully scrutinized by analysts. In detail, registrations climbed in early June and are at their highest since October 2021, a sign that layoffs have multiplied.

“We need the US job market to lose some steam so the Fed can stop raising rates, otherwise major central banks will keep raising theirs,” said Ipek Ozkardeskaya, analyst at Swissquote Bank. .

“American companies laid off more workers in the first five months of this year than in all of last year,” the analyst added.

After ten consecutive hikes, analysts increasingly expect the powerful US monetary institution to take a break from raising its key interest rates in June, before another hike in July.

On the eurozone side, “the ECB may have to wait until September or even later before it has solid evidence that underlying inflation is slowing enough to put a pause or even stop the cycle of rate hike.”

Elsewhere in the economic news, inflation in China was near zero in May as ex-factory prices continued to plunge, signs of sluggish demand and a complicated environment for businesses, official figures showed on Friday.

The consumer price index (CPI), the main gauge of inflation in China, rose in May by 0.2% year on year, against 0.1% a month earlier, according to the National Bureau of Statistics (BNS), exactly what analysts interviewed by Bloomberg expected.

The bond is a little tense
Bond debt rates twitched slightly on Friday. The interest on the French 10-year loan was at 2.97%, against 2.94% the day before at the close. The interest of the German 10-year loan was displayed at 2.42%, against 2.40% the day before.

Croda falls in London
In London, the chemical group Croda fell by 12.52%, after announcing on Friday that a significant drop in sales at the start of the year would weigh on its annual result.

Commodities and Currencies
The price of a barrel of Brent from the North Sea for delivery in August fell 0.68% to US$75.44. Its American equivalent, the West Texas Intermediate (WTI), maturing in July, lost 0.71% to US$70.78.

The euro dropped 0.10% against the dollar, at US$1.0771.

Bitcoin fell 0.64% to $26,472.

Watch: Couche-Tard, Empire/IGA, and Walmart

What to do with Couche-Tard, Empire/IGA, and Walmart titles? Here are some analyst recommendations that could move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

Couche-Tard (ATD, $67.27): the formal addition of 2,200 TotalÉnergies businesses adds $2 to RBC’s target
As Alimentation Couche-Tard prepares to unveil its annual results during the week of June 26, Irene Nattel of RBC Capital Markets formally adds to its forecasts the acquisition of the 2,200 businesses in four European countries from TotalÉnergies announced in March .

In his eyes, the $4.5 billion transaction represents the quintessence of the group’s acquisitions with its strategically complementary assets. The attractive price paid will also produce a financially profitable transaction for shareholders, adds the enthusiastic analyst.

Irene Nattel predicts that the largest purchase in seven years will add 5-7% to profits in the first year thanks to the sharing of best practices, the geographical complementarity of the network and the realization of revenue synergies.

In the current environment of high rates and economic uncertainty, the analyst reiterates that Couche-Tard remains a favorite stock for the second half, as the company can generate free cash flow throughout economic cycles. In addition, the still healthy balance sheet gives it the financial flexibility to consider various options to add to its value, she argues.

Even after the European purchase and those of Mapco Express and Red Stores, the debt represents only 2.25 times the operating profit which provides a transactional capacity of still 10 billion US dollars, estimates the analyst.

Irene Nattel expects the TotalÉnergies transaction to add 5-7% to annual profits between 2025 and 2027, 2-4% more than her earlier forecast which instead incorporated the potential buyback of 15% of shares during this period. period.

“At the time of the announcement of the transaction, we had left our guidance unchanged, but we had raised the valuation multiple (to 18.5 times the expected earnings) to reflect the potential earnings of the acquisition”, puts- her in context.

For the fourth quarter, RBC analyst forecasts operating profit of US$1.1 billion (up 1.4%) and earnings of US$0.55 per share (unchanged), more than the respective consensus of US$1.06B and US$0.50, despite the lower margins expected on gasoline at the pump compared to last year.

These estimates are based on a 4.7% decline in revenue to US$15.6 billion, but a 43 percentage point improvement in consolidated operating margin to 7.1%. The analyst points out that the 10% depreciation of the euro against the US dollar and 6.5% against the loonie are two headwinds for the results.

In the end, Irene Nattel raises her target from $85 to $87, i.e. 18.5 times the profit expected in mid-2025 and renews her buy recommendation. She notes that the stock’s current valuation remains within the historical average seen since 2014 despite robust financial performance.

Watch: CAE, Coveo and Alithya

What to do with titles from CAE, Coveo and Alithya? Here are some analyst recommendations that could move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

CAE (CAE, $28.40): the civil sector continues its solid performance

CAE’s civil segment continued its strong performance in the fourth quarter with a 53% increase in revenue compared to the same quarter in 2022.

Revenues from this market segment stopped at $661 million, slightly above National Bank Capital Markets expectations ($650 million), said analyst Cameron Doerksen. The operating margin of 24.6% was also higher than the financial institution’s forecast (24%).

Cameron Doerksen also points out that CAE’s simulation center was used at 78% of its capacity, an increase compared to the third quarter (+5%), which allowed the company to return to a use similar to that of before the pandemic. There is still additional demand for the training of airplane pilots, particularly in the Asia-Pacific, which still gives room for manoeuvre.

CAE also reported backlog of $5.7 billion at the end of the fourth quarter compared to $5.6 billion at the end of the third. The company also received 62 flight simulator orders for fiscal 2023, the second highest total in its history after the 78 ordered in 2019.

On the side of the defense sector, the margins are still a little thin, advance Cameron Doerksen. Revenues were $526 million in the fourth quarter (+14%), still ahead of National Bank forecasts ($507 million), but margins came in at 5.7%, slightly less than what than expected by the financial institution (6%). The backlog remains healthy ($5.1 billion) and CAE has announced that new contracts won over the past year should offer higher margins. The analyst predicts better visibility on profitability in the coming quarters, with margins expected to reach 10%.

The analyst believes that CAE should continue to benefit from growth in its civil sector, which will be supported by the upcoming recovery in pilot training as well as an increase in flight simulator deliveries.

National Bank maintains its forecast of outperformance of CAE shares against its sector of activity as well as its target price of $37.

Watch: Bombardier, Exchange Income Corporation and Dollarama

What to do with the securities of Bombardier, Exchange Income Corporation and Dollarama? Here are some analyst recommendations that could move prices soon. Note: the author may have a completely different opinion than that expressed by the analysts.

Bombardier (BBD.B, $56.08): the company wants to improve its profitability, regardless of economic cycles
BMO Capital Markets hosted Bombardier executives for meetings with investors between May 23 and May 25, including a tour of the company’s premises in Biggin Hill, UK.

Analyst Fadi Chamoun came out more convinced in his investment thesis, which is based on an “outperformance” recommendation and a one-year target price of $85.

“Bombardier continues to put in place a few initiatives that we believe will support improved profitability and cash flow regardless of economic cycles for a year or two,” he said.

The analyst is of the opinion that the business jet sales cycle is not overheating. “Bombardier management clarified that demand for business jets remains strong, with an expected book-to-delivery ratio of 1 for fiscal 2023 despite the current macroeconomic weaknesses,” he said.

Fadi Chamoun maintains that the after-sales service division is on track to reach the upper end of the $1.6 billion to $1.7 billion revenue range this year. “Bombardier is increasing its market share, its aircraft fleet is expanding and the high level of aircraft utilization continues to generate robust organic growth in this division with high profit margins,” he said. In his opinion, Bombardier will have no trouble reaching its annual revenue target of $2 billion in 2025.

“After a period of investment and expansion to increase its presence across the world in aftermarket services, the company is turning its attention to efficiencies, which will further improve its profitability. Bombardier wants to achieve a 50% market share in this niche by 2025, but there will still be opportunities for the company to seize thereafter,” believes the analyst.

The latter notes the weakness of orders in the first quarter (19-20 devices), while the company hopes to obtain 140 in 2023. However, he expects a rebound in the second quarter.

“Aircraft availability remains very low by historical standards and the increase in users in recent quarters has driven the number of flights up,” he said, adding that one of the company’s largest customers Bombardier, VistaJet, reported a 55% year-over-year increase in hours sold in the first quarter.

Watch: Stella-Jones, Transat A.T. and Canadian Western Bank

What to do with the shares of Stella-Jones, Transat and Canadian Western Bank? Here are some analyst recommendations that could move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

Stella-Jones (SJ, $60.53): the first day of investors gives confidence
Stella-Jones had given a taste of its outlook through 2025 when it released its first-quarter results, which explains why the stock of the maker of telephone poles and railway sleepers reacted little on the rise. financial objectives during the first Investor Day, held on May 25.

It must be said that the action of Stella-Jones had soared 28% for six months on the stock market following record results in 2022.

Hamir Patel, of CIBC Capital Markets, still came out more confident than before from the meeting that quantified the growth path by 2025.

Stella-Jones confirmed that the growth in revenues and margins will be mainly based on the performance of telephone poles, whose momentum will moderate after 2024. Indeed, poles will provide half of the revenues within three years.

Growth will be strongest in 2023 and 2024 based on the projected compound annual increase of 20% in pole sales in 2023 and 2024. In 2025, this growth will increase to a rate of 5 to 7%.

About 40% of the increase will come from the increase in the number of units sold and the rest from higher prices.

Moreover, the producer even increases its capacity by 20% to meet demand and automates certain tasks, including the stacking of poles.

“Stella-Jones does not assume any significant pole price increases after 2023,” says Hamir Pattel.

By 2025, the manufacturer is therefore aiming for a compound annual growth of 6% in revenue and 9% in operating profit, without taking into account potential acquisitions. “In 2025, total revenues will reach $3.6 billion while the operating margin is expected to be 16% for the three years, 140 percentage points higher than the 14.6% achieved in 2022. », Specifies the analyst.

While strong demand for poles is providing the lion’s share of the expected growth, Hamir Patel also appreciates the non-cyclical nature of power and telecom and railroad maintenance and the escalation of contract prices.

In particular, the company should benefit from the investments required to strengthen infrastructure for automotive electrification, 5G communications and optical fiber to the home.

The producer also plans to distribute $500 million to its shareholders between 2023 and 2025, in the form of dividends and share buybacks, while remaining on the lookout for small additional acquisitions.

Hamir Patel recommends buying the stock, but maintains his target price of $69, or 9.25 times expected operating profit in 2024, less debt. This multiple is lower than the 10 times average of the last five years because the growth prospects of the residential wood division are more uncertain than before.

Closing Paris: the CAC40 rebounds after 4 sessions of decline

The CAC40 regained 1.24% to 7,319 pts at the close, ending four sessions of decline… Operators remain attentive to the situation in the United States where an agreement on the debt ceiling is still being made wait, even if, according to the latest news, some progress has taken place… In the wake of very favorable sales forecasts from Nvidia, European “tech” has also stood out. Casino, on the other hand, fell after the announcement of the opening of a conciliation procedure with its creditors.

On the oil market, crude is up slightly with a barrel of Brent trading at $76.55 in London. On the currency market, the dollar index fluctuated around 104 pts, while the euro fell to $1.07 between banks.


Waga Energy soars nearly 19%. The company started its first renewable natural gas (biomethane) production unit in Canada in partnership with Énercycle and Énergir. Waga Energy and Énercycle have begun injecting renewable natural gas (RNG), also called biomethane, into Énergir’s network by starting up the WAGABOX(R) unit installed at the waste landfill site in Saint-Étienne-des -Grés (Quebec, Canada). This unit has the capacity to inject up to 130 GWh of RNG per year, i.e. 12.4 million cubic meters each year, into the gas network, thus contributing to the objectives set by the “Plan for a green economy” of the Government of Quebec. .

Coface jumped 10%. The title had not recorded such a daily increase for more than a year! The credit insurer had a very good start to the year with net income (group share) of €61.2 million, up 17%, for consolidated revenue of €475.1 million, up +11.4% at constant scope and exchange rates. Insurance premiums increased by 10.9% like-for-like and the combined ratio net of reinsurance stood at 66.2%, an improvement of 1.8 ppt over one year and 7.2 ppt compared to the previous quarter. Following this good publication of results, Oddo BHF raised its forecast for NR 2023 by 7% to 226 ME. To ‘outperform’ on the value, the analyst notes that Coface continues to benefit from favorable operating dynamics, with a good combined ratio and growth that remains sustained (even if it should logically slow down by the end of the year) . Based on the current price, the stock offers an attractive 2023 yield, estimated at 9.9%.

Aramis climbed another 9% with Forvia (+7%) and Valeo (+5%), supported by more favorable broker ratings. Jefferies has, in particular, awakened automotive suppliers listed in Paris by moving from ‘underperforming’ to ‘buying’ on the two French supplier groups. The broker explains that OEMs are beginning to benefit from a more favorable operating environment as the post-pandemic earnings decline cycle comes to an end. Suppliers have significantly underperformed automakers over the past three years and their margins are “depressed”. The broker raised its price target on Faurecia from 16 to 24 euros and from 15 to 22 euros on Valeo.

Atos wins 5%. On May 25, the United States Court of Appeals overturned a lower court ruling for the Southern District of New York in the ongoing litigation between Syntel and Cognizant subsidiary TriZetto. It found Syntel, now part of Atos, liable for $570 million in damages due to misappropriation of trade secrets and alleged copyright infringement. The case started in 2015, before Syntel was acquired by Atos in 2018. Atos maintains its assessment, as previously communicated, that the maximum amount of damages legally available to TriZetto is approximately 8.5 million of dollars. This favorable decision raises considerable uncertainty for Atos and its stakeholders, underlines the digital services company.

Gaussin (+5%) signed a partnership contract with Plastic Omnium (+4%) aimed at accelerating the development of Gaussin’s hydrogen range with the integration of complete Plastic Omnium H2 systems within APM vehicles. This partnership should make it possible to increase the performance of Gaussin vehicles and accelerate their marketing. For Plastic Omnium, the agreement increases the field of application of its technology and places its know-how at the service of pioneers in zero-emission mobility. The contract signed by Gaussin and Plastic Omnium provides for the cooperation of the two players with a view to integrating Plastic Omnium’s complete hydrogen systems into Gaussin’s APM vehicles. Innovation is at the center of this partnership and thus opens up promising prospects, with a hydrogen solution for applications.

Apple, Bank of Montreal and Canadian Pacific Kansas City

What to do with the stocks of Apple, Bank of Montreal and Canadian Pacific Kansas City? Here are some analyst recommendations that could move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

APPLE (APPL, US$171.56): On the lookout for the mixed reality headset
The next WWDC conference will highlight the latest technologies developed by Apple, including a mixed reality headset that could well propel a good part of the company’s revenue in a few years, estimates Bank of America.

In addition to updates rolling out to iOS, iPadOS, macOS, watchOS and tvOS, analyst Wamsi Mohan also expects the unveiling of a mixed reality headset, a product that could prove transformative for the company with the weather.

Despite slow public acceptance of virtual and augmented reality headsets, added to lukewarm enthusiasm surrounding the Metaverse, the analyst suggests not to underestimate Apple, which has a history of inventing new categories products that have the potential to destabilize the market (such as AirPods) or create an entirely new market.

Keep in mind, he continues, that the headset will be cheaper, more efficient and will have more applications (gaming, entertainment, productivity, fitness, education, training, shopping, social media, etc.) than the which will be presented this year.

Wamsi Mohan adds that he expects the adoption of the mixed reality headset to substantially boost the software side (high-margin services). He estimates sales of around 200,000 units in 2023. Assuming the mixed reality headset’s software and services are more immersive in nature, he sees a hardware-to-software revenue ratio of two. In a scenario where Apple succeeds in gaining significant buy-in, it believes the headset could provide one-third of app-generated revenue by 2026.

Bank of America maintains its target price for Apple shares at US$176.

Watch: BRP, Stella-Jones and CAE

What to do with securities from BRP, Stella-Jones and CAE? Here are some analyst recommendations that could move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

BRP (DOO, $100.67): its depressed valuation offers a good margin of safety
Martin Landry of Stifel GMP predicts another strong quarter for the recreational vehicle maker despite the uncertain economic environment. BRP will release first quarter results on June 1.

The analyst expects earnings per share to grow 44% to $2.38 per share, slightly above the consensus of $2.32.

Its confidence is partly based on the encouraging results and outlook provided on April 25 by rival Polaris Industries (PII, US$106.51).

Earnings of US$2.05 per share, up 55%, beat consensus of US$1.71 as the US manufacturer claws back market share. Polaris also maintained its annual guidance, which suggests consumers are sticking with it, he says.

Certain factors favor BRP in 2024, including the launch of the new Manitou pontoon boat and the momentum provided by market share gains in 2023.

BRP has already warned that the return of promotions will shave 200 percentage points from its margin in 2024. Thankfully, adjusting prices to higher inflation and improving the supply chain will stave off the impact. of these promotions, explains Martin Landry who still keeps an eye on the rivals’ strategy.

The Manitou pontoon should give the marine division a good boost in 2024, although problems with a parts supplier will still delay some deliveries until the end of the summer. BRP predicts a 45-50% jump in marine sales in 2024.

Now that working capital needs are decreasing, BRP could also proceed with a substantial buyback of its shares in the coming months thanks to the free cash flow of one billion dollars expected in 2024. Martin Landry recalls that the manufacturer bought back $250M of shares at $103 each in May 2022 and $350M at $103.50 each in July 2021.

Above all, at the current price, BRP offers a good risk-return ratio. The stock is trading at a multiple of 7 times earnings, or 45% below the historical average valuation, which provides a good cushion if the industry were to slow down, the analyst said.

This margin of safety, the potential buyback of shares and the multiple levers of growth for this quality company hoist the title among its favorites.

Martin Landry renews his buy recommendation and his target price of $150.

Brussels and Washington ready to set interim standards on AI, says Vestager

The European Union (EU) and the United States are ready to strengthen their cooperation on artificial intelligence (AI) in order to establish minimum standards before the implementation of legislation in this area, Margrethe Vestager said on Tuesday. , European Commissioner for Competition and responsible for technology issues within the EU.

The draft EU law on artificial intelligence could become the first piece of legislation in the world to set out a comprehensive framework for this technology, with new rules on facial recognition and biometric surveillance. EU governments and MEPs have yet to agree on a common text.

Margrethe Vestager, vice-president of the European Commission, told a briefing on Tuesday that this process could be completed by the end of the year.

Entry into force would then take “one or even two years”, she said, “which means we need something to bridge that period of time”.

The former Danish minister indicated that AI will be one of the focus areas of the fourth ministerial meeting of the Trade and Technology Council (TCC), which will be held in Sweden on May 30-31.

“We share the same sense of urgency. To get the most out of this technology, safeguards are necessary,” she said, wishing to discuss the establishment of “minimum” requirements for companies before the rest of the legislative process.

Margrethe Vestager is due to discuss AI on Wednesday with Sundar Pichai, CEO of Alphabet, Google’s parent company.

For his part, French President Emmanuel Macron receives Sam Altman, general manager of the company OpenAI, which developed ChatGPT, this Tuesday at the Élysée.

The conversation will revolve around the role of France and Europe in the race for artificial intelligence, according to the services of the presidency.

Meeting at a summit in Japan, the leaders of the G7 countries on Saturday called for the development of technical standards to keep AI “trustworthy” and instructed their relevant ministers to set up a working group by the end of the day. end of the year.