Ryan Lewenza: Calling on Canadian Telecoms
The Canadian telecom sector faced a number of challenges in 2013 and
2014, as earnings slowed and concerns of a new entrant weighed on the
sector. However, these headwinds have abated more recently which in part
explains the sector’s solid performance year-to-date (YTD).
• Given the improving fundamental and technical backdrop we have
had the sector on upgrade watch and today are officially upgrading the
sector to overweight.Our bullish view of the sector is predicated on: 1) improving earnings (sector is forecasted to grow earnings at 6.4% in 2016); 2) solid dividend growth; 3) improving technicals; 4) diminished risk of a new entrant; and 5) historically the sector has outperformed in the first year after the US Federal Reserve (Fed) hike rates (see Chart of the Week).
• Our preferred name in the sector is Telus Corp. (T-T). The shares have recently pulled back to good technical support around the $40 level. We would use this weakness to establish or add to positions given our bullish outlook on the sector and company.
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Weekly Trends November 27, 2015
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