Here are five things you need to know this morning:
Not pessimistic enough: Over the last three months, analysts brought their fourth-quarter profit expectations for Bank of Nova Scotia down by 10 per cent. That proved to be not pessimistic enough. Bank of Nova Scotia missed earnings expectations by a wide margin, delivering adjusted earnings per share of $1.26 versus the $1.65 expected. The main source was much higher provisions for credit losses (PCLs) than expected. While most of the money Scotia set aside for this purpose was for loans that are currently performing, it was still a surprise to the street and a hit to the bottom line. Expenses continue to grow and funding costs are still rising while loan growth was tepid at home and abroad. Profit fell in both capital markets and wealth management. If you wanted to be glass half-full, you could make the argument that PCLs can drop back to the bottom line if there is no meaningful uptick in delinquencies. Glass half-empty would point out that PCLs are just back to pre-COVID levels and if the economy worsens from here, they will likely move higher. We will discuss all this on BNN Bloomberg today and consider whether this means other Canadian banks will take similar moves and increase their PCLs.
Clearer skies: We will watch shares of TC Energy after the company said it now expects profit to grow eight per cent this year, up from its previous forecast for five to seven per cent growth. At its investor day this morning, the pipeline operator attributed the rosier outlook to a strong October and the strength of the U.S. dollar. Its capital spending program looks to be a little higher than expected, but an analyst at Scotia says this is largely to do with timing on Mexican projects which are expected to put in a strong showing in 2024. Shares have been under pressure this year, but since the October lows, TC has rallied more than 10 per cent and still sports a dividend yield of about 7.5 per cent. The company touted $3 billion in expected asset sales next year and commitments to bring down debt levels.
Hey big spender: We will watch shares of Meg Energy after the company laid out its capital spending plans for next year. Its capital spending will be about $100 million higher for next year and at least one analyst considers this is a negative surprise. Scotia is downgrading Meg energy on the back of this higher spending outlook, saying that the stock has outperformed and the new plans limit its appeal given its valuation.
Priced for perfection: Shopify says its Black Friday-Cyber Monday sales topped a record $9 billion and grew 24 per cent from last year. Yet the shares are under pressure in the pre-market as Piper Sandler is taking the stock down a peg. The analysts are downgrading the stock following this year’s rally. They note growth assumptions are too aggressive and the valuation is now “untenable.”
Look out below: We will watch shares of First Quantum after Panama’s Supreme Court has ruled that First Quantum’s mining contract in the country is unconstitutional. Panama’s government had already announced its intention to cancel the Canadian company's permit to operate its flagship copper mine. First Quantum has been forced to suspend production because it can’t access supplies due to anti-mining protests.