Canadian third-quarter earnings expected to grow, but just barely

Tue Oct 22, 2013 11:59am EDT
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By Leah Schnurr

TORONTO (Reuters) - Canadian companies will likely see profit increase by only a slim amount this earnings season as the lackluster global economy holds back growth, but stronger gains in revenue could mean a better 2014 is in store.

Materials companies - one of the largest sectors on the country's main stock index - are expected to perform the worst as the third quarter earnings season gets under way, with miners and other resource companies likely to be hit by weak commodity prices.

More broadly, companies are forecast to feel the effect of the less-than-stellar economic growth in the United States, Canada's largest trading partner, as well as slower growth in China, a major consumer of commodities.

What that means for equities investors is that without stronger company results to drive shares higher, the Toronto stock market has likely already seen the bulk of its gains for 2013.

"It's a weak earnings growth environment, period," said Paul Taylor, investment strategist for BMO Harris Private Banking in Toronto.

The Canadian corporate reporting season, which typically lags its U.S. counterpart, will heat up this week. Releases from some big names in the resource sector include Goldcorp Inc (G.TO: Quote), Husky Energy Inc (HSE.TO: Quote) and Potash Corp (POT.TO: Quote).

Companies due to report on Tuesday include Canadian National Railway Co (CNR.TO: Quote), the country's largest rail carrier, and contract electronics manufacturer Celestica Inc. (CLS.TO: Quote)

Analysts expect earnings from companies belonging to the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE to rise just 2.3 percent in the third quarter from a year earlier, according to Thomson Reuters StarMine SmartEstimates.   Continued...