3 Stocks to Watch This Week

As results season kicks off, these three companies might make a move.

| More on:
The Motley Fool

The Q4 2013 results season kicks off this week. As usual, there will be a mix of both positive and negative surprises but, given a rapidly declining Canadian dollar, volatile equity markets and a slowing economy, we could see investors react more strongly than usual to weaker than expected results or negative outlook statements.

Analysts expect profits from companies in Canada’s benchmark S&P/TSX Composite Index (TSX:^OSPTX) to decline by 3% in the fourth quarter from a year earlier, according to Thomson Reuters. The main declines are expected in the materials group, which includes miners, and is expected to record a profit drop of 31% based on declining commodity prices in 2013. The financial sector is expected to have a mixed earnings season with the insurance companies doing somewhat better than the banks.

Here are three companies to watch:

Canadian Pacific Railway Ltd (TSX:CP) should see a strong increase in quarterly earnings per share to $1.94 from $1.28 a year earlier. This is a recovery story, with improvements in most major metrics since industry veteran Hunter Harrison became CEO in June 2012. The improvements included a considerable increase in the operating profit margin and a doubling of the net profit margin.

The share price also reflected these improvements and has now more than doubled since Mr Hunter took over. As admirable as this performance was, the shares are priced for the good news to continue and any indication otherwise may be met with disappointment. However, this is a company with a strong franchise and a much improved operating performance that we would like to own for the long run – price weakness should be used to accumulate this stock.

Potash Corp (TSX:POT) will report results on Thursday. The company had a difficult year with price declines in all its main products, including potash, nitrogen and phosphate, as well as market uncertainty created by the break up of the Uralkali/Belaruskali marketing cartel.

In early December, the company announced a major internal restructuring with the retrenchment of 18% of the workforce and the mothballing of a number of production plants. A $70 million charge for severance costs will be included in the fourth-quarter results and a write-down of the carrying value of the affected assets may be required. Quarterly earnings per share of $0.31 are expected, which will constitute a 40% year-over-year decline.

In my view, this bad news is already mostly factored into the share price, which has declined by 12% since the start of 2013 and by 42% over the past three years. However, this is a high quality, low cost producer of a considerable portion of the global supply of important food production nutrients, with a strong balance sheet and excellent cash-flow generating capabilities, reasonable valuations and an attractive dividend yield. I would use any price weakness to buy the stock below $32 with a long-term perspective.

An interesting result may come from AGF Management Ltd (TSX:AGF.B), where earnings per share of $0.12 are expected for the quarter (-25% year over year). The company struggled in 2013 with declining assets under management and the results announcement may provide guidance on whether a possible turnaround in business profits is in the making. This turnaround is absolutely required to support the sustained payment of the very high dividend level — the yield on the stock is over 8% on the current price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

stock analysis
Investing

Buy the Dip: 2 Stocks to Buy Today and Hold for the Next 5 Years

These Canadian stocks are trading at discounted valuations, providing an opportunity for buying the dip.

Read more »

bulb idea thinking
Investing

Safety in Size? 2 of the Bluest Blue-Chip Stocks I’d Buy Now

TC Energy (TSX:TRP) and another cash cow have huge dividend yields for safe investors.

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

Brookfield Infrastructure Partners (TSX:BIP.UN) kicked off 2024 with a bang. Where will it be in five years?

Read more »

TFSA and coins
Investing

TFSA Investors: 3 Incredible Stocks for 2024

Are you looking for stocks to buy and hold for years for your TFSA? These three stocks could deliver exceptional…

Read more »

A person looks at data on a screen
Stocks for Beginners

3 Warren Buffett Stocks to Hold Forever

Warren Buffett sold some shares in Apple (NASDAQ:AAPL), and the market had questions.

Read more »

Retirement
Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »