Canadian GDP declined 0.3% in August, according to a data recently released by Statistics Canada. The manufacturing sector was a notable drag on GDP, contracting 1% in the month of August. Durable and non-durable manufacturing experienced a drop, falling 0.1% and 2%, respectively. Mining also declined 0.8% for the month.
With the Canadian economy slowing, and NAFTA negotiations still proving a headache for North American manufacturing, let’s look at three stocks that could be affected heading into the final months of 2017.
Winpak Ltd.
Winpak Ltd. (TSX: WPK) is a manufacturer and distributor of packaging materials and machines. The stock has climbed 10% in 2017 as of close on November 2 and 8.6% year over year. Winpak released its third-quarter results on October 26. Revenue increased to $218.3 million compared to $204.7 million in Q3 2016. The company posted net income of $26.3 million in comparison to $25.1 million in the previous year.
Winpak leadership expects sales volumes to continue at the same clip it saw in the third quarter, and after passing through a tumultuous period, there is reason to be confident in this forecast. The ongoing NAFTA negotiations are also a concern for Winpak. I discussed the possible impact of the end of NAFTA for manufacturing stocks here. However, as Bank of Canada governor Stephen Poloz recently pointed out, any predictions on the fallout from a scuttling of NAFTA is speculation.
Yamana Gold Inc.
Shares of Yamana Gold Inc. (TSX: YRI)(NYSE: AUY) have declined 11.6% in 2017 and 27% year over year. The stock continues to show weakness, even during periods of strength for the spot gold price this year. The Toronto-based gold producer released its third-quarter results on October 26.
The company increased its silver production by 8% and copper production by 27%; the latter metal has been in an impressive bull run in 2017. Revenue increased to $494.4 million from $464.3 million in the third quarter of 2016. It posted net income of $38.3 million compared to a $2.1 million loss in the previous year.
Gold and silver have been in a steady decline since mid-September, as the U.S. dollar has shown renewed strength. In an October article, I discussed the drop in precious metals prices and whether or not investors should duck out in the final months of 2017.
Domtar Corporation
Domtar Corporation (TSX: UFS)(NYSE:UFS) is a Montreal-based designer, manufacturer, marketer, and distributor of paper products. The stock has climbed 15.9% in 2017 and 25% year over year. The company released preliminary third-quarter results on October 27. It reported net earnings of $70 million, or $1.11 per share, compared to $38 million, or $0.61 per share, in Q3 2016.
The company has continued to post strong EBITDA and cash flow in 2017. The stock also offers a dividend of $0.53 per share with a 3.5% dividend yield. Domtar has been subject to some environmental criticism in the past, but moving forward, this is a solid add with a wide economic moat.
