Bleak Canada first-quarter earnings outlook may mask market upside

Fri Apr 19, 2013 10:58am EDT
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By John Tilak

TORONTO (Reuters) - Corporate Canada looks set to post lackluster first-quarter results, but lowered expectations and a sharp selloff earlier this week may set the stage for near-term share price gains.

Earnings beats and any optimistic outlooks are now more likely to provide a boost when some of the biggest companies start reporting next week.

"It's the magic of low expectations," said CIBC World Markets senior economist Peter Buchanan. "Commodity markets aren't that great, and developments in the domestic economy haven't been wonderful, but the bar (for earnings) is not set very high."

Telecommunications company Rogers Communications Inc (RCIb.TO: Quote) and Canadian National Railway (CNR.TO: Quote), the country's largest rail carrier, will be among the first to kick off the season, reporting their first-quarter reports on Monday. <CA/CORP>

Analysts expect earnings from companies in the Toronto Stock Exchange's benchmark S&P/TSX composite index .GSPTSE to show only a 0.2 percent rise from a year earlier, according to Thomson Reuters StarMine SmartEstimates.

"The forecasts seem to be more dire than the reality," said Serge Pepin, vice president of investment strategy at BMO Asset Management Canada. "We're going into the earnings season with this thought that things won't be as good."


Results that top the very modest expectations could prove to be a much-needed catalyst for languishing Canadian stocks, market strategists said. The TSX composite is down more than 3 percent so far this year, compared with a gain of more than 8 percent in the Standard & Poor's 500 Index .SPX.   Continued...

Traders are shown working at the Canadian Imperial Bank of Commerce (CIBC) trading floor during 'Miracle Day' in Toronto December 2, 2009. . REUTERS/Mike Cassese