Today, Canadian September retail sales data will be released, and in the U.S., October existing home sales is the key economic report to watch.
In terms of earnings announcements, two companies in the S&P/TSX composite index are scheduled to report their quarterly results this morning, Alimentation Couche-Tard Inc. (ATD.B-T) and George Weston Ltd. (WN-T).
Briefly recapping Monday's performance, all three major U.S. averages, the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq composite index, closed at all-time highs. In Canada, the S&P/TSX composite index soared 176 points, or 1.18 per cent. There were 193 securities in the TSX Index that advanced, 51 securities declined in value, and three stocks closed the day unchanged. In terms of sectors, 10 of the 11 sectors closed in positive territory. The only sector in decline was the telecom sector, which declined slightly, 0.33 per cent. The two leading sectors were energy and materials, advancing 2.53 per cent and 1.69 per cent, respectively.
The S&P/TSX composite index is up 1.71 per cent month-to-date, up 2.13 per cent quarter-to-date, and has a year-to-date gain of 15.60 per cent.
On today's TSX Breakouts report, there are 62 stocks on the positive breakouts list (stocks with positive price momentum), and just nine securities on the negative breakouts list (stocks with negative price momentum).
Discussed today is a bank stock that closed at a record high on Monday, but may have room to rally further. In recent weeks, several analysts have increased their target prices. The security highlighted is Royal Bank of Canada (RY-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Royal Bank is a diversified financial services company, offering services such as personal and commercial banking, wealth management, insurance, and capital markets operations.
Before the market opened on August 24, the company reported better-than-expected third-quarter fiscal 2016 financial results. The company reported earnings per share of $1.76, ahead of the consensus estimate of $1.71. The share price failed to move dramatically that day, declining less than a half a percent to $81.86 from $82.23 the previous day.
The company's fiscal year is October 31. The company will be reporting its fourth quarter fiscal 2016 financial results before the market opens on November 30. The consensus earnings per share estimate is $1.72.
Dividend policy
The company pays shareholders a quarterly dividend of 83 cents per share or $3.32 on a yearly basis. This equates to an annualized yield of 3.7 per cent.
Valuation
According to Bloomberg, the shares are trading at a price-to-earnings multiple of 11.7 times the fiscal 2017 consensus estimate, just above its three-year historical average of 11.2 times, and above its 10-year historical average of 11.1 times. Over the past five years, the stock has traded in a range principally between 9.5 times and 12.5 times forward earnings.
In comparison, the other major banks are trading at forward P/E multiples as follows: shares of Bank of Montreal (BMO-T) are trading at 11.1 times the fiscal 2017 consensus estimate, shares of Bank of Nova Scotia (BNS-T) are trading at 10.6 times, shares of CIBC are trading at 9.9 times, shares of National Bank of Canada are trading at 9.5 times, and TD bank shares are trading at a multiple of 11.6 times.
Analysts' recommendations
There are 10 analysts with 'buy' recommendations, seven analysts have 'hold' recommendations, and there are four 'sell' recommendations.
Since the beginning of November, seven analysts have increased their target prices. A few of the largest revisions were from analysts at Credit Suisse and TD Securities. Nick Stogdill from Credit Suisse raised his target price to $100 from $77, and Mario Mendonca from TD Securities lifted his target price to $96 from $86.
The average one-year target price is $87.18, implying the share price is fully valued. Target prices range from a low of $74 to a high of $100. Individual target prices provided by 17 firms in numerical order are as follows: $74, two at $77, $82, $84, $85, $86, $87, $88.39, two at $89, $91.81, $92, two at $95, $96, and $100.
The Street is forecasting steady growth for the company. The consensus earnings per share estimate is $6.82 for fiscal 2016, rising over 4 per cent to $7.13 in fiscal 2017, and increasing 6 per cent to $7.58 in fiscal 2018.
Earnings forecasts inched higher after the company reported its third-quarter fiscal 2016 financial results on August 24. Prior to reporting, the consensus earnings per share estimates were $6.75 for fiscal 2016 and $7.05 for fiscal 2017.
In comparison, analysts are forecasting 7 per cent earnings growth for the Bank of Nova Scotia, with the consensus earnings per share forecast of $5.90 for fiscal 2016 and $6.32 for fiscal 2017. Analysts are forecasting 7 per cent growth for the National Bank of Canada, with the consensus earnings per share forecast of $4.19 for fiscal 2016 and $4.94 for fiscal 2017. Analysts are forecasting over 5 per cent growth for TD Bank, with the consensus earnings per share forecast of $4.85 for fiscal 2016 and $5.12 for fiscal 2017. Analysts are forecasting 3 per cent growth for the Bank of Montreal, with the consensus earnings per share forecast of $7.28 for fiscal 2016 and $7.52 for fiscal 2017. Lastly, there is virtually no earnings growth anticipated for CIBC, with the consensus earnings per share forecast of $10.01 for fiscal 2016 and $10.03 for fiscal 2017.
Chart watch
The shares are in an uptrend that appears to be intact. Year-to-date, the stock price is up 20 per cent, only the Bank of Nova Scotia and National Bank of Canada have outperformed Royal with gains of 30 per cent and 23 per cent, respectively.
There is initial overhead resistance around $90.
There is initial downside support around $83, near its 50-day moving average (at $82.97). Failing that, there is support at $80, and then at $78, close to its 200-day moving average (at $78.33).
The relative strength index is at 79, suggesting the shares are in overbought territory. Generally, a reading of 70 or above indicates an overbought condition.
==
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
(Note to readers: Due to a typo, an earlier version of this article contained incorrect data on RBC's 3-year price-to-earnings)