Seeing stability for Canadian REITs, a CIBC analyst previews earnings season and reveals top picks

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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

“Q2 results saw almost all REITs maintain their outlooks, reflecting consistent operational performance. Retail REIT fundamentals were the most intact with high-90% occupancy and sustained large leasing spreads. CHP units notably lead the sector on valuation and are within 5% of NAV, reflecting the market’s preference for defense. In retail we like CRR for its defensive positioning and potential for valuation to catch up to concentrated-tenant peers.

Mr. Syed has outperform ratings on H&R REIT, Nexus Industrial REIT, Automotive Properties REIT, Granite REIT, Crombie REIT, PRO REIT and Primaris REIT.BofA Securities analyst Ebrahim Poonawala previewed Canadian bank earnings and provided top picks, “3Q24 results are likely to reflect a challenged Canadian economy, with banks expected to report sluggish loan growth, while credit costs creep higher. The key question for investors is whether the ~100bp recent decline in bond yields is enough to brighten the EPS outlook for the sector? … Our revised EPS estimates imply EPS growth +3.3% YoY for 3Q24 or the same as what banks reported for 2Q24. Key drivers of our 3Q24 forecast include: rising impaired PCLs 48bp or +4bp QoQ, tepid loan growth 2.

“Even as the S&P/TSX hits a new all-time high, sentiment and general tone from most of the Canadian centric investors we speak with remains decidedly skeptical, at best. However, when we combine predominantly negative sentiment with elevated levels of cash on the sidelines and steadily improving foreign flows, we believe there remains a lot of room for Canadian stocks to run to continued new price highs.

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