Despite the rising COVID-19 cases threatening economic recovery, the Canadian equity markets have remained resilient. The S&P/TSX Composite Index is up 15.8% for this year and trades close to its all-time high. Meanwhile, here are the three Canadian stocks that reported their second-quarter performance last week. Let’s assess whether buying opportunities exist in any of these three stocks.
On July 21, Rogers Communications (TSX:RCI.B)(NYSE:RCI) had reported its second-quarter performance, with its total sales and adjusted EPS growing at 14% and 27%, respectively. Supported by new subscribers, higher roaming revenue, promotional activities, and increased advertising revenue amid the resumption of live sports activities, the company reported year-over-year growth in all its three segments.
Meanwhile, the company’s adjusted EBITDA margin declined by 2.6% due to increased expenses from the media segment. However, its adjusted EBITDA grew 6% due to higher revenue. Apart from its solid second-quarter performance, the company’s outlook also looks healthy. The company currently provides 5G service to 50% of the Canadian population, with plans to expand the service to 70% by the end of this year. Also, it launched Ignite Internet Gigabit 1.5 in select areas, offering its customers access to faster internet service.
The company is also working on acquiring Shaw Communications, which could significantly strengthen its position in Western Canada. So, Rogers Communications is well equipped to benefit from the growing demand for higher and reliable internet services amid increased digitization. The company also pays quarterly dividends, with its forward yield standing at 3.1%. So, I believe Rogers Communications would be an excellent buy right now.
Canadian National Railway
Second on my list is Canadian National Railway (TSX:CNR)(NYSE:CNI), which had reported its second-quarter performance on July 20. Its revenue grew 12% to $3.60 billion amid higher freight rates and volume growth due to the continued economic recovery. Further, the company’s adjusted EPS grew 16% year over year to $1.49 amid solid operating performance. During the quarter, the company’s fuel efficiency, dwell rate, and car velocity increased by 2%, 8%, and 4%, respectively.
Meanwhile, the improvement in economic activities due to the easing of restrictions could drive the demand for the company’s services in the coming quarters. The company’s management expects its volume to grow at high single digits this year, while its adjusted EPS could increase in double digits. The company is also working on closing the acquisition of Kansas City Southern. So, given its healthy growth prospects, I am bullish on Canadian National Railway.
Air Canada (TSX:AC) reported its second-quarter performance on Thursday, which indicated a strong recovery. Its top line grew 59%, while its operating losses contracted by 27.1%. Further, the company’s cash burn was at $8 million a day compared to its earlier projected $13-$15 million. After witnessing a decline of 86% in its ASM capacity in last year’s quarter, Air Canada reported 78% growth during this year.
Meanwhile, the recovery could continue amid the widespread vaccination and easing travel restrictions by the Canadian government. Meanwhile, Air Canada has announced to resume its trans-border flights between the U.S. and Canada from August 9, which includes 55 routes and 34 destinations in the United States. Further, the company has also planned to resume its operations to 11 key destinations worldwide from next month. It is also planning to add new cargo aircraft amid rising demand. With its liquidity standing at $9.8 billion, Air Canada is well positioned to deliver strong returns over the next two years.
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.
The Motley Fool recommends Canadian National Railway and ROGERS COMMUNICATIONS INC. CL B NV. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.