Still room for more positive Q3 earnings surprises, says NBF

Earnings from Canadian companies have surprised on the upside so far during the third quarter, says National Bank Financial, and it sees more room for positive surprises.

Last quarter, Manulife’s large surprise loss represented a huge miss versus expectations. This helped push down analyst expectations for the third quarter, too, NBF says. However, it reports that the results so far in this Canadian earnings season are surprising on the upside.

“While the consensus was pointing to a modest 9.5% year-over-year change when companies started to report two weeks ago, we are now expecting a 14.0% growth rate (27% excluding financials),” it says.

“Once again, Manulife is impacting results, but with a positive tone this time around,” it says, noting that the firm’s adjusted loss of 55¢, which beat expectation of a 77¢ loss. “In fact, both Manulife and Sun Life came out with solid surprises on the earnings and revenue front, explaining a third of the resurgence in the S&P/TSX EPS over the last two weeks,” it says.

“All in all, we think there is still room for more positive surprises with half of the S&P/TSX companies yet to report. That could push the Q3 EPS growth rate further up as earnings are released,” NBF concludes.