Futures cheer rate cuts, industrials wobble, regional banks report, GoodFood & bitcoin
I’m on cloud 9 this morning. In the Money with Amber Kanwar is currently ranking the second most popular business podcast in Canada at Apple. Thank you to everyone for the support and to my team for helping to make this happen. This is only the beginning! And for those worried that worry I will let this early success go to my head, never fear. The kids will keep me grounded. Nothing humbles a person more than hearing, “Mom, I’m done!” and assuming your primary role as chief bum wiper.
Rate expectations: Futures are rebounding this morning after a weaker session yesterday in the US as a sell-off in tech stocks offset strength in dividend paying sectors. The yielders saved the day on the TSX, which managed to eke out a modest gain. The positive tone today is being driven by central bank commentary that embraced the idea of 3-4 rate cuts this year. Fed Governor Christopher Waller (who is a voting member) said rate cuts could come as early as March. The markets are now pricing in a more than 50% chance of a cut in May. Futures are higher, bond yields are cooling, and the ultimate measure of risk (bitcoin) is rallying to $102,000 – a one month high.
Industrialist: Shares of Fastenal are falling after earnings missed expectations and sales growth came in weaker than expected. Margins eroded as management called sales growth “frustrating”. They called out weak demand and some factory shutdowns as the main culprits. I watch this one because Fastenal is a true “nuts & bolts” stock. Not only do they literally sell nuts and bolts, they sell tools that are used for nearly every industrial activity. So when sales slow, I pay attention. It confirms continued softness in the manufacturing sector which according to a key ready (ISM Manufacturing) has been in contraction for most of the last two years. This comes as another pulse of the economy is struggling this morning. JB Hunt is down 7.5% in the pre-market after the trucking and logistics company missed profit expectations. It also warned that profit would be significantly lower than street expectations (-20-25% vs the street at -6% in Q1). However, Evercore’s Jonathan Chappell says this is seasonality that the street mispriced. “Bigger picture, the company is moving record volumes with headcount that is down nearly 12% from the peak…” he said about JBH. He recommends investors buy the stock.
Going to regionals: We have several regional banks reporting quarterly results including Citizens, Regions Financial and Truist. All of them beat profit expectations. Only Regions Financial and Truist are higher in the pre-market as they demonstrated cost discipline, while Citizens is under pressure on worse than expected expenses. Citi’s Keith Horowitz says he would buy any weakness in Citizens this morning. “…We are buyers on any weakness today and believe this has highest upside of all regionals in our universe,” he wrote in a note to clients. This is because it is trading at a large discount to peers and has strong prospects into 2026. Regional banks in general have lagged the big money-centre banks and so far this morning we aren’t seeing the same huge reaction to earnings beats like we saw for the large banks earlier in the week. Part of that is because the big guys set the bar higher for these stocks, but they also have less exposure to capital markets.
Notable calls: Natural gas is trading around a 2-year high as cold winter weather hits North America. Scotia is upgrading Birchcliff in a note titled “The Bull Market is Here.” Birchcliff has had a “rough ride” over the last two years with the stock down 37%, wrote Cameron Bean of Scotia. However, he thinks the stock will outperform given the rally in nat gas. Interestingly he calls on the company to cut its dividend by 50-66% and hedge prices (Birchcliff is famously married to being unhedged, so the call raised my eyebrows!) BCE is getting fresh examination at by Scotia analyst, Maher Yaghi this morning. He notes that BCE is now trading as undervalued as it was back in 2007 when private equity and Telus tried to buy it. “The disconnect between what private or an operator would likely be willing to pay for BCE vs public markets is significant,” Yaghi wrote in a note to clients. “While it is hard to call a bottom in the short term, for patient, long term investors, we think this could be an interesting opportunity.” On next week’s episode of In the Money with Amber Kanwar I speak with John Zechner of J.Zechner Associates and Frances Horodelski (fmr BNN anchor and my finance idol) who both say they like the stock here. The episode will come out Thursday. Bank of America is shuffling its ratings on airline stocks: upgrading American Airlines to neutral and downgrading Southwest Airlines and JetBlue to underperform saying earnings power for both will remain depressed. They’ve kept their buy on Delta Airlines and Air Canada.
With a side of bitcoin: I missed this one from yesterday: GoodFood is buying bitcoin as part of its treasury management strategy. The announcement says they are “joining a group of forward-thinking companies leveraging digital currencies.” I don’t know why a meal delivery company needs to leverage digital currencies, but I do know that the stock is down 97% since the pandemic peak when meal delivery was our only option for a creative dinner. The company used $1 million of its $24 million cash pile to buy bitcoin exposure. The stock popped nearly 9% yesterday on the news and could be an option for those looking for a turnaround play with a side of bitcoin.
