“TSX Q3/23 EPS are slated to bounce 7.0 per cent sequentially to $351, marking the end of a downturn started in Q2/22. If Energy is the main driver of this turnaround , most sectors should also enjoy improving year-over-year trends. Sell-side anticipates a rapid rebound in subsequent quarters leading to a new all-time high in Q3/24 and double-digit EPS growth next year. Revenues should also see a recovery, but in a more modest fashion. As in the U.S.
“We have modified valuations for the pipeline and midstream companies under coverage to reflect higher interest rates, repricing our DCF models with a negative impact to valuations. The risk of an economic downturn favours those companies with low-risk business models that support strong dividend profiles and has us favouring Pipelines like ENB and PPL . We are also watching producer guidance for signs of 2024 spending levels given improving liquids prices.
“Russell 1000 Value offers the best duration hedge against rising rates via low growth expectations , higher yield / manageable payout and the fewest “infinite duration” non-earners. Russell 2000 Growth is the opposite: 1 of 3 co’s lose money … We like cyclicals where earnings should inflect higher but our short-term model favors Communications Services and Energy. Despite their distinct product profiles both have attractive valuations, momentum and EPS revisions.
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