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I am usually one to “bright-side” many situations, but it is hard to do that with weather like this. As orange haze hangs heavy, let’s not get used to this. Let’s not let our children think this is normal.
Here are five things to know:
Break back: Stocks are lower this morning on a confluence of factors including Middle East escalation and lukewarm response to Taiwan Semiconductor results. Despite better than expected results out TSMC and a boosted forecast, the stock is down dragging the semis lower. This has been the dominant trend as earnings season kicked off this week: stocks beat, and raise, but the stock trades down anyway. Meanwhile, US strikes on Iran intensified and oil prices are up for a fourth session in a row to $80/bl – although I will note this hasn’t been a boon to the energy producers on the TSX. Energy producers have lagged the move in oil, with crude up 5% in the last month and TSX oil producers flat. Having said that, the TSX quietly hit another record high yesterday while US markets have been lagging. Financials have been the star of the show – even as multiples scream higher. But it is single handedly keeping the index in the green with energy and materials down over the past month. Tonight we get Netflix results and a US President Donald Trump speech from the Oval Office.
We are so back: UnitedHealth is popping after profit was 30% higher than expected and the embattled health insurer raised its forecasts beyond consensus as medical costs eased allowing for profit recovery. UnitedHealth was plunged into disrepair following a spate of issues catalyzed by the assisination of a division CEO in 2024. This prompted an investigation into their billing practices at the same time medical costs were surging. Today’s results suggests those headwinds are fading with the CFO saying they are getting back to growing their profit at their usual cadence of 13-16% per year. Profit is still below 2023 levels. “This is the print we were looking for,” wrote Evercore’s Elizabeth Anderson, “UNH’s 2Q shows the improvement in both the underlying environment as well as the improved operational discipline over the past year…Overall, we see today’s print as confirmatory of the bull-case thesis that improved trend and management of the business are beginning to drive a multi-year acceleration in earnings growth.” I own UnitedHealth. Shares have recovered nicely from the lows, but still off about 33% from the 2024 peak.
Tough crowd: GE Aeropsace delivered a beat and raise quarter but the stock is falling 3% in the pre-market. The company now expects sales to grow in “high teens” compared to 10-12% growth previously which is much better than consensus expectations. But the stock has been on a terrific run and is part of a trend this week of companies reporting stellar earnings but getting sold off on the view it was already priced in. “Guidance Hike May Not Be Good Enough,” wrote TD’s Gautam Khanna, “Results are strong, but stock’s follow-through is dependent on earnings call color regarding (aftermarket) visibility.” The stock trades at 47x forward earnings and that could be enough to limit the rally in the shares despite better than expected results.
Good enough: Cogeco Communications will be one to watch after sales missed expectations on a weaker US business, while the bottom lined topped and Canada was better. The latter may prove to be good enough for the stock, argues TD’s Vince Valentini who said the market was bracing for worse than expected results and a potential forecast cut. “We were relieved to see consolidat,, ed EBITDA over 1% above our estimate, and no change to guidance. Bears like to exaggerate the importance of U.S. financials, so CCA shares might dip slightly on this print,” wrote Valentini, “We believe a proper focus on where the value resides (nearly 100% of equity value is in Canadian cable plus spectrum) should justify the stock being up 5-10% near-term.”
Notable calls: Nutrien has been cut to hold at Jefferies saying risks skew negative for the stock. The fertilizer stock got a bump after the war in Iran on potential supply disruption, but that has basically come out of the stock. With the Iran premium out of the stock, Jefferies warns that demand is at risk because of weak farmer margins and supply pressure in potash. Raymond James has started covering the Canadian telcos ranking only Rogers as a buy and coming out with a hold on BCE, Quebecor, and Telus. “We believe it is going to be difficult to grow (revenues, EBITDA) organically in our forecast horizon,” wrote Steven Li of Raymond James. “Looming in the background is the longer-term emergence of SpaceX’s Starlink as a potential broadband and mobility disruptor, although we believe meaningful competitive impact is at minimum two to three years away.” Canaccord says the best could be yet to come for the Canadian banks in a new note looking at the read-through from US bank earnings. “While Canadian banks have benefitted from directionally similar tailwinds over the past year, we believe the magnitude has not yet reached US levels,” wrote Canaccord’s Matthew Lee, “Strong Capital Markets activity provides a positive readthrough for the group, while resilient consumer credit and accelerating commercial loan growth are supportive for TD, BMO and RY.”
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