The TSX has been resilient in 2024 despite a bumpy road. As of August 12, 2024, the index is up 6.9% year-to-date, or slightly better than the same period last year (+5.3%). However, some analysts see a vast improvement in the investment landscape as the Bank of Canada continues with its rate-cutting cycle.
Because of elevated market volatility, some stocks still underperform. Companies like Air Canada (TSX: AC), Doman Building Materials (TSX: DBM), and Wajax (TSX: WJX) are beaten down but could take off if a bull market comes.
Increased capacity
Market analysts covering Air Canada recommend a buy rating. Their 12-month average price target is $22.17, a 47.5% upside. At the current share price of $15.03, the airline stock is down 19.6% year-to-date. In Q2 2024, the operating revenue of Canada’s flag carrier increased by 2% to $5.5 billion versus Q2 2023.
Unfortunately, operating expenses increased 9% to $5 billion, while net income dropped 51.1% year-over-year to $410 million. Nevertheless, Air Canada’s President and CEO, Michael Rousseau, said the quarterly results were solid but were short of internal expectations.
Cargo revenues rose 1% year-over-year due to higher volume and freighter revenues in the Americas. For 2024, Air Canada expects capacity to increase between 5.5% and 6.5% and Adjusted EBITDA to be $3.1 billion up to $3.4 billion.
Challenging period
Amar S. Doman, Board Chairman of Doman Building Materials, said, “We continued to tightly manage inventory levels and maintain a fairly robust gross margin level during what I would consider a challenging period in the industry.” At $6.33 per share, the construction stock is down 17.2% year-to-date. DBM paid a $0.14 per share quarterly dividend (2.2% yield) in Q2 2024.
In Q2 2024 and the first half of 2024, net earnings fell 41.8% and 28.9% year-over-year to $17 million and $31.4 million, respectively. Also, in the three months ending June 30, 2024, Doman experienced lower average pricing and a slowdown in the construction materials market.
Mr. Doman added, “I am pleased with our financial performance during a period when we continue to operate in a market with significant volatility in general activity and lower average pricing when compared to the comparative period last year.” Market analysts recommend a buy rating and see a 35.3% average upside to $8.96 in one year.
Solid fundamentals
Wajax has delivered an overall return of 109.8% in five years, but its performance could be better in 2024. At $24.03 per share, current investors are down 18.7% year-to-date but partake in the 5.8% dividend. The $522.2 million operator of an integrated distribution system provides sales, parts, and services to customers in various sectors.
In the first half of 2024, revenue and net earnings declined 4.7% and 24% year-over-year to $1 billion and $35.4 million, respectively. Management is confident the business will overcome the headwinds because of solid fundamentals in certain markets like energy and mining. Based on market analysts’ price target, the potential upside is 29%.
Wait for the bull market
Air Canada, Doman Building Materials, and Wajax have business strengths that could propel their stocks to soar in the next bull market.
