Carnival Shares Climb Over 4% As Revenue Tops Estimates, Bookings Recovery Helps

Carnival shares rose over 4% on Friday after the world’s largest cruise ship operator reported better than expected revenue in the third quarter and said its cumulative advanced bookings for the second half of 2022 are ahead of pre-COVID-19 pandemic levels.

The firm reported revenue of $636 million, beating the wall street consensus estimates of $535 million.

The Miami, Florida-based company said its booking volumes for all future cruises during the third quarter of 2021 were higher than booking volumes during the first quarter of 2021. The company added that as of August 31, 2021, eight of the company’s nine brands have resumed guest operations as part of its gradual return to service.

Carnival said it ended the third quarter of 2021 with $7.8 billion of liquidity, which the company believes is sufficient to return to full cruise operations. Voyages for the third quarter of 2021 were cash flow positive and the company expects this to continue.

Following this optimism, Carnival shares rose over 4% to $25.72 on Friday.

However, the company reported U.S. GAAP net loss of $2.8 billion and an adjusted net loss of $2.0 billion for the third quarter of 2021.

Analyst Comments

“The company says Q3 occupancy was 54% and built during the month, and revenue per passenger cruise day was above 2019, driven by exceptionally strong onboard and other revenue. For the Carnival brand, revenue per PCD was 20% higher than 2019, despite onboard credits from cancelled cruises, with occupancy of 70%,” noted Jamie Rollo, Equity Analyst at Morgan Stanley.

“The comment on onboard spend is encouraging, and while there is no comment on ticket prices being up, we note that revenue per passenger is unlikely to be comparable to 2019 due to a difference mix of cabins. Q3 voyages were cash flow positive, and it expects this to continue. Despite the positive operating KPIs, the results were well below expectations, suggesting higher restart/lay-up/SG&A costs.”

Carnival Stock Price Forecast

Nine analysts who offered stock ratings for Carnival in the last three months forecast the average price in 12 months of $27.91 with a high forecast of $39.00 and a low forecast of $18.00.

The average price target represents an 8.90% change from the last price of $25.63. From those eight analysts, four rated “Buy”, one rated “Hold” while four rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $18 with a high of $40 under a bull scenario and $5 under the worst-case scenario. The firm gave an “Underweight” rating on the cruise ship operator’s stock.

Several other analysts have also updated their stock outlook. JPMorgan lifted their price objective to $36 from $33 and gave the company a “neutral” rating. Citigroup raised their target price to $34 from $30 and gave the stock a “buy” rating.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Snaps Three-Day Winning Streak as Evergrande Uncertainty Supports Greenback

The Canadian dollar snapped its three-day winning streak against its U.S. counterpart on Friday as concerns about the future of beleaguered property developer Evergrande Group have rattled markets around the globe, helping the greenback rebound from its steep descent.

After its biggest drop in nearly a month overnight, the dollar enjoyed a brief pause as questions lingered about developments involving property developer China Evergrande Group.

Due to its huge debt, China Evergrande Group has run short on cash, missing a deadline for making payments of $83.5 million on Thursday, making investors anxious whether it will make the payment within the 30-day grace period.

China’s financial system would face systemic risks if the company collapses. That provided greenback’s safe-haven appeal with a further boost. However, at the time of writing the dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.10% lower at 93.370.

“Next week, Canada sees the release of July’s GDP numbers. Growth has been the missing piece in an otherwise very robust data-flow for CAD, as a surprise 2Q contraction in activity was the main reason for the Bank of Canada to pause tapering,” noted Francesco Pesole, FX Strategist at ING.

“Still, even if we see a below-consensus GDP read, the very encouraging signals coming from the jobs market and higher inflation should remain enough to convince the BoC to start tapering again in October. We think CAD may stay among the best performers within the pro-cyclical space next week, although its fate remains very much tied to developments in the Evergrande saga.”

The USD/CAD pair rose to 1.273 today, up from Thursday’s close of 1.2655. The Canadian dollar lost over 1.2% last month and further depreciated over 0.6% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher on supply concerns. U.S. West Texas Intermediate (WTI) crude futures were trading 0.59% higher at $73.71 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

Last but not the least, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of at least one rate hike next year. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

“The CAD was one of the few major currencies that gained ground against the USD over the course of the week with the backdrop of financial troubles at Evergrande, China’s second-largest property developer, and Powell’s hawkish turn at his post-announcement presser offset by a fifth consecutive rise in crude oil prices and generally higher Gov of Canada yields versus its G10 counterparts,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“Canada’s federal election on Monday came and went with limited impact on the CAD as the status quo of a Liberal minority government propped up by the NDP was maintained. The stimulative policy is set to continue for the foreseeable future while certain Liberal plans like pushing for $10/day childcare could unlock an important economic impulse—although there remains much to be done on this front legislatively.”

Nike Shares Decline Nearly 4% After Company Slashed Full-Year Revenue Outlook

Nike shares plunged nearly 4% in extended trading on Thursday after the world’s largest athletic footwear and apparel seller slashed its full-year sales forecast and warned of delays during the holiday shopping season.

According to a Reuters report, the Beaverton, Oregon, footwear retailer has revised its sales forecast, now expecting a mid-single-digit growth rate for the full year instead of the low-double-digit rate it previously projected. Nike also predicted flat to slightly down revenue growth in the second quarter due to factory closures.

The company’s revenue rose 16% to $12.2 billion in the fiscal first quarter ended August 31, missing the market expectations of $12.6 billion.

Following this, Nike shares slumped about 4% to $153.32 in extended trading on Thursday.

However, the company’s diluted earnings per share surged 22% to $1.16, above the Wall Street consensus of $1.12 per share.

Analyst Comments

Nike’s (NKE) F1Q shows ongoing brand strength, the consumer is spending and not price sensitive, China sales continue to rise, and the LT model is solid. Supply chain disruption, coupled with normalized demand creation expense, dampens flow through, but the supply chain is a temporary issue,” noted Randal J. Konik, Equity Analyst at Jefferies.

“With NKE’s l-term DTC model best-in-class among global consumer companies, we still see shares up at least 25% over the next 12 months.”

Nike Stock Price Forecast

Twenty-four analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $186.68 with a high forecast of $221.00 and a low forecast of $168.00.

The average price target represents a 16.98% change from the last price of $159.58. From those 24 analysts, 20 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $201 with a high of $362 under a bull scenario and $117 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

Nike’s (NKE) stock fell 4% AMC as management cut FY22 guidance to reflect limited inventory availability from factory closures and transit delays. We remain bullish despite the cut, as transitory headwinds should abate and underlying demand for NKE products appears robust. We stay Overweight & trim our price target to $201,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Nike (NKE) is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~20% of ‘21 sales). Its DTC business (~37% of ‘21 sales) is igniting its next phase of margin-accretive revenue growth, driving a 16% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $196 from $181. Oppenheimer upped the price target to $195 from $150. HSBC lifted the target price to $205 from $162.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Hits One-Week High on Firm Oil Prices, Better-Than-Expected Retail Sales

The Canadian dollar hit over a one-week high against its U.S. counterpart, strengthening for the third straight day on Thursday as oil prices jumped and retail sales data for July were better-than-expected.

Compared with expectations for a decline of 1.2%, retail sales in Canada dropped 0.6% to $55.8 billion in July, while advance estimates showed a 2.1% increase in August. That boosted confidence among investors.

“The Fed caused a lot of volatility in the foreign currency market yesterday. Indeed, the greenback momentarily climbed to a monthly high as Jerome Powell announced that he was considering a key rate hike next year. USD/CAD traded at 1.2796 before dropping significantly back to 1.2660 following lower volatility as well as renewed hope surrounding the situation with Chinese real estate giant Evergrande,” noted analysts at Laurentian Bank of Canada.

“Despite the decline in the barrel, the loonie is benefiting from the weaker US dollar and the fact that much of the financial community was long gamma before Powell’s speech. In technical analysis, the next support level for the USD/CAD price is at 1.2636.”

The USD/CAD pair fell to 1.2631 today, down from Wednesday’s close of 1.277. The Canadian dollar lost over 1.2% last month and further depreciated over 0.3% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher as U.S. oil inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 0.89% higher at $72.87 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.47% lower at 93.020. The greenback has largely ignored the announcement by the Federal Reserve on Wednesday that it will soon cease supporting pandemic-related stimulus.

“A potentially “hawkish” FOMC plus concerns over resolution of the US debt ceiling that creates a macro risk-off event could combine to deliver some near-term tactical gains in DXY,” noted analysts at Citi.

“Ultimately, such gains should be faded as – (1) pace of any Fed taper is likely gradual and the Fed, ECB, BoJ, PBoC support risk sentiment well into 2022; and (2) any potential government shutdown beyond September 30th is likely to be temporary. A 91.28 – 93.44 range in DXY remains the base case though FOMC/potential government shutdown could briefly take DXY above the March 2021 high at 93.44 towards 94.50.”

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of at least one rate hikes next year. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Salesforce Shares Surge After Company Lifts Revenue Guidance

Salesforce shares surged over 4% in pre-market trading on Thursday after the San Francisco, California-based software company lifted its full-year revenue outlook.

The leading provider of enterprise cloud computing solutions raised fiscal 2022 revenue guidance to a range of $26.25 billion to $26.35 billion and initiated FY23 revenue guidance of $31.65 billion to $31.80 billion.

The company initiates FY23 GAAP operating margin guidance of 3.0% to 3.5% and non-GAAP operating margin guidance of 20.0%.

Following this, Salesforce shares rose over 4% to $269.85 in pre-market trading on Thursday.

Analyst Comments

“A shift in operating philosophy, better balancing growth and profitability, and traction on margins YTD narrow the AD focus to durability of margin expansion and org. growth potential of the expanded portfolio. Strong demand trends and solid unit economics keep us bullish on both fronts,” noted Keith Weiss, equity analyst at Morgan Stanley.

“Salesforce remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation. Following the underperformance in shares post the Slack deal announcement, we see a favorable risk/reward and an attractive valuation for a leading franchise. While we continue to see the $28 billion price tag for Slack as high, we are more constructive on the asset after two quarters of improving new customer and billings growth at Slack. Further, we see guidance for flat FY22 operating margin, despite Slack dilution, as sign of better cost efficiencies and opportunity for margin expansion once M&A headwinds fade.”

Salesforce Stock Price Forecast

Thirty-seven analysts who offered stock ratings for Salesforce in the last three months forecast the average price in 12 months of $304.94 with a high forecast of $350.00 and a low forecast of $242.00.

The average price target represents a 17.66% change from the last price of $259.17. From those 37 analysts, 30 rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $305 with a high of $390 under a bull scenario and $210 under the worst-case scenario. The firm gave an “Overweight” rating on the cloud-based software company’s stock.

Several other analysts have also updated their stock outlook. Monness Crespi & Hardt upped their price objective to $300 from $290 and gave the company a buy rating. Sanford C. Bernstein upped their price objective to $290 from $266 and gave the company a market perform rating. Canaccord Genuity increased its price target to $270 from $200 and gave the company a buy rating.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Strengthens as Oil Prices Bounce Back; FOMC Decision Eyed

The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices jumped after industry data showed U.S. crude stockpiles decreased more than expected last week following two hurricanes.

“The loonie remained a little volatile after the federal election. Despite a heated race between the Liberals and the Conservatives, the minority takeover of power by the PLC has supported the Canadian currency somewhat. At the time of this writing, the USD/CAD price is trading at 1.2782,” noted analysts at Laurentian Bank of Canada.

“In technical analysis, the next support level for the USD/CAD price is at 1.2759 while the first resistance level holds at 1.2865.”

The USD/CAD pair fell to 1.2746 today, down from Tuesday’s close of 1.2815. The Canadian dollar lost over 1.2% last month and further depreciated over 1% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher as U.S. oil inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 1.52% higher at $71.55 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

“Increasing concerns about the persistence of domestic elevated inflation and prospect of BoC’s goal of absorbing around 350k job gains insight could see the BoC start to consider signalling rate rises as early as by H1’2022. Together with Citi’s expectations for Brent crude to trade higher in Q4 (USD75-80), this could make CAD the “buy of the quarter in Q4” vs USD, EUR, JPY, CHF. USDCAD is struggling to break below strong support at 1.2555-79. A decisive break below this range is needed to open up for extended losses towards the double lows from Jul’21 at 1.2422-28,” noted analysts at Citi.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.03% lower at 93.173 ahead of the Federal Reserve monetary policy decision. The dollar reaches a one-month high on Monday, boosted by recent strong economic data and speculation regarding Fed tapering. Today, Fed policymakers could open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

FedEx Shares Slump 5% After Earnings Disappoint

FedEx shares slumped about 5% in extended trading on Tuesday after the Memphis, Tennessee-based delivery services company reported lower-than-expected earnings in the fiscal first quarter and slashed their full-year outlook.

The delivery firm reported a net income of $1.19 billion, or $4.37 per share, during the fiscal first quarter, down from $1.28 billion, or $4.87 per share, a year ago. The company’s revenue rose 14% to $22.0 billion, beating the market expectations of $21.8 billion.

FedEx lowered its earnings outlook to reflect first-quarter results, which were lower than the company’s June forecast. The company forecasts earnings per diluted share of $19.75 to $21.00 before the MTM retirement plan accounting adjustments and excluding estimated TNT Express integration expenses and costs associated with business realignment activities, compared to the prior forecast of $20.50 to $21.50 per diluted share.

Following this, FedEx shares slumped about 5% to $239.76 in an extended trading session on Tuesday.

Executive Comments

“The current labour environment is driving inefficiencies in the operation of our networks and significantly impacting our financial results. For the peak season ahead, service remains our focus and we are making investments in resources and capacity to meet our customer’s needs,” noted Raj Subramaniam, FedEx Corp. president and chief operating officer.

Analyst Comments

“We had previewed 1Q as a challenging quarter for FedEx (FDX) but the 10%+ miss came in well below feared. The FY guide was cut by roughly the magnitude of the 1Q miss but we believe the 1Q issues (tough comps/normalization + cost inflation) actually get tougher from here,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an e-commerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain sceptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

FedEx Stock Price Forecast

Twenty-one analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $350.42 with a high forecast of $381.00 and a low forecast of $270.00.

The average price target represents a 39.02% change from the last price of $252.07. From those 21 analysts, 17 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $250 with a high of $350 under a bull scenario and $125 under the worst-case scenario. The firm gave an “Equal-weight” rating on the multi-brand restaurant operator’s stock.

Several other analysts have also updated their stock outlook. Citigroup slashed the price target to $300 from $360. Baird cut the price objective to $310 from $350.

“As for our forecasts, we’ve been modelling an 11.8% adjusted ground margin for fiscal 2022 (which was likely more conservative than what was baked into the stock price), but we no longer consider that achievable considering that management expects the aforementioned cost pressures to persist (at a similar magnitude) in the fiscal second quarter,” noted Matthew Young, Equity Analyst at Morningstar.

“It sounded to us like the firm will be able to mitigate some of these headwinds in the second half, though it cautioned that elevated wage rates are not likely to budge.”

USD/CAD: Loonie Gains After Trudeau Wins Third Term; FOMC in Focus

The Canadian dollar snapped its three-day losing streak against its U.S. counterpart on Tuesday after Trudeau was re-elected to a third term in a snap election but wasn’t able to gain a majority.

The USD/CAD pair fell to 1.2738 today, down from Monday’s close of 1.2825. The Canadian dollar lost over 1.2% last month and further depreciated over 1.7% so far this month.

Having failed to win a majority in Monday’s parliamentary elections, Justin Trudeau admitted he must work with other parties. This again leaves him dependent on opposition lawmakers to govern. Early this month, in the event of a Liberal victory in the federal election, Trudeau’s party pledged CAD78 billion in new health investments over five years.

“Increasing concerns about the persistence of domestic elevated inflation and prospect of BoC’s goal of absorbing around 350k job gains insight could see the BoC start to consider signalling rate rises as early as by H1’2022. Together with Citi’s expectations for Brent crude to trade higher in Q4 (USD75-80), this could make CAD the “buy of the quarter in Q4” vs USD, EUR, JPY, CHF. USDCAD is struggling to break below strong support at 1.2555-79. A decisive break below this range is needed to open up for extended losses towards the double lows from Jul’21 at 1.2422-28,” noted analysts at Citi.

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 0.24% lower at $70.12 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

“As we have noted over the recent past, the underlying USD trend has been tilting more bullish, despite the block on USD progress in the 1.2750/60 zone last week. The rapid USD advance over the past three days (including today) does look a little stretched in the short run and we do not exclude the risk of some USD back and filing in the near-term on account of that, the more so as the USD has already traded well off its early Monday high,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“But we think solid, bullish USD trend momentum—DMI oscillators are aligned positively for the USD across the intraday, daily and weekly charts—points to limited scope for USD counter-trend corrections (low/mid 1.27s) and ongoing upside pressure on the USD towards 1.2950; gains through the low 1.30s would point to additional scope for gains towards 1.33 in the next few weeks.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.06% lower at 93.219. The dollar reached a one-month high on Monday, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet today and tomorrow and would open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Darden’s Q1 Earnings to Rise Over 190%, Revenue to Jump 45%

Darden, which operates full-service restaurants in the United States and Canada, is expected to report its fiscal first-quarter earnings of $1.64 per share, which represents year-over-year growth of over 190%, up from $0.56 per share seen in the same period a year ago.

The Orlando-based multi-brand restaurant operator would post year-over-year revenue growth of over 45% to $2.2 billion. In the last four quarters, on average, Darden has beaten earnings estimates over 268%.

The company’s next earnings report is expected to be released on Wednesday, September 23 before the market opens.

According to ZACKS Research, several factors contributed to Darden’s strong fiscal first-quarter results, including increased vaccinations and expanded dining room capacity that likely contributed to the sequential sales increase. The fiscal first-quarter margins may, however, have been hit by increased hourly wages and marketing expenses.

“The Zacks Consensus Estimate for sales at Olive Garden, Fine Dining, and LongHorn Steakhouse is pegged at $1,120 million, $136 million and $508 million, suggesting year-over-year growth of 42.1%, 63.9% and 34.7%, respectively. The same for Other business stands at $433 million, suggesting an improvement of 55.2% from the prior-year quarter,” noted analysts at ZACKS Research.

Darden shares surged nearly 25% so far this year but the stock closed 0.49% lower at $148.69 on Monday.

Analyst Comments

“Best in class casual dining operator with strong brand portfolio. As the largest CDR operator, DRI has substantial scale advantages in shared services which can be levered in a post-Covid environment by improving margins and gaining market share. Lead brand Olive Garden (50% of sales) garners top consumer scores, its comp sales have historically outpaced the industry and recent cost savings have improved unit economics,” noted John Glass, equity analyst at Morgan Stanley.

“Acquisition of Cheddar’s has been more challenging than initially expected, though still provides longer-term growth potential. Strong position relative to peers, scale, operational leadership, unit growth and structurally higher margins drives our OW rating.”

Darden Restaurants Stock Price Forecast

Seventeen analysts who offered stock ratings for Darden Restaurants in the last three months forecast the average price in 12 months of $161.79 with a high forecast of $175.00 and a low forecast of $150.00.

The average price target represents an 8.81% change from the last price of $148.69. From those 17 analysts, 11 rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $167 with a high of $208 under a bull scenario and $105 under the worst-case scenario. The firm gave an “Overweight” rating on the multi-brand restaurant operator’s stock.

Several other analysts have also updated their stock outlook. Deutsche Bank raised the target price to $152 from $145. Oppenheimer lifted the price target to $175 from $165. Truist Securities slashed the target price to $167 from $170.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Hits Over One-Month Low on Subdued Oil Prices, Election Uncertainties

The Canadian dollar hit over a one-month low against its U.S. counterpart, sliding for the third straight day on Monday as falling energy prices and snap election uncertainties weighed on the commodity currency.

The USD/CAD pair rose to 1.2895 today, up from Friday’s close of 1.2766. The Canadian dollar lost over 1.2% last month and further depreciated over 1.5% so far this month.

Today’s federal reserve decision and the election in Canada will be closely watched by investors. There is no sign of a majority in the Canadian election on Monday, a second time in a row, leaving either Justin Trudeau or Erin O’Toole trying to govern with a minority.

Investors are concerned that elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

“What we think will matter the most from a market perspective is whether there will eventually be a workable majority. Up until some majority emerges, the Canadian dollar may continue to discount political uncertainty,” noted Francesco Pesole, FX Strategist at ING.

“At the same time, barring the worst-case scenario of a hung parliament and new elections, we still expect a gradual dissipation of political risk in the coming weeks to help CAD close its mis-valuation gap (USD/CAD is 2% overvalued, according to our short-term fair value model) as the loonie may start to benefit more freely from its good fundamentals – and above all, the prospect of more BoC policy normalisation. We still expect USD/CAD to trade below 1.25 in 4Q21.”

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 1.38% lower at $70.99 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

“We don’t think the federal election is weighing on the CAD in any significant way.  In fact, while the CAD has fallen against the USD this week, it has lost less ground than most of its G10 currency peers.  Short-term CAD vols have firmed but remain within this year’s range (1w vol peaked at 9% in February),” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“The election race remains tight, and another minority government remains the most likely outcome.  Research by our Scotia Economics colleagues suggests that there is ultimately very little difference in the fiscal outcomes through 2025 between either the Liberal or Conservative parties’ platforms.  Either way, a minority will limit the next government’s room for significant manoeuvre.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.01% higher at 93.204. The dollar reaches a one-month high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet this week and open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Preview: What to Expect From Nike’s Q1 Earnings on Thursday

The world’s largest athletic footwear and apparel seller Nike is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion. In the last four quarters, on average, Nike has beaten earnings estimates over 55%.

According to ZACKS Research, for fiscal 2022, the company expects to grow revenues in the low-double digits, surpassing $50 billion because of strong customer demand across its segments.

The company expects revenue growth in the first half of fiscal 2022 to be higher than in the second half. The foreign exchange rate is expected to be a tailwind in fiscal 2022, generating 70 basis points of gains, ZACKS Research added.

Nike shares surged over 10% so far this year but the stock closed 0.75% lower at $156.42 on Friday.

Analyst Comments

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt. guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

Nike Stock Price Forecast

Twenty-five analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $187.26 with a high forecast of $221.00 and a low forecast of $168.00.

The average price target represents a 19.72% change from the last price of $156.42. From those 25 analysts, 21 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $221 with a high of $410 under a bull scenario and $127 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $196 from $181. Oppenheimer upped the price target to $195 from $150. HSBC lifted the target price to $205 from $162.

“Disruption from COVID-19, supply chain pressure and China continue to escalate. Our contacts across the global supply chain suggest Vietnam could reopen by October. Port congestion and freight headwinds could ease into 2H 2022 and the sector’s 10% valuation correction has improved risk/reward,” noted John Kernan, equity analyst at Cowen.

“We are cutting our FY22 Nike sales estimate by 300bps to 9% growth with a robust recovery into FY23.”

Check out FX Empire’s earnings calendar

Earnings Week Ahead: Lennar, Autozone, FedEx, Nike and Costco Wholesale in Focus

Earnings Calendar For The Week Of September 20

Monday (September 20)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 20

Ticker Company EPS Forecast
LEN Lennar $3.27
HRB H&R Block -$0.34

 

Tuesday (September 21)

IN THE SPOTLIGHT: AUTOZONE, FEDEX

AUTOZONE: The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal fourth-quarter earnings of $29.71 per share, which represents a year-over-year decline of about 4% from $30.93 per share seen in the same period a year ago.

Autozone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 21

Ticker Company EPS Forecast
AZO AutoZone $29.71
FDX FedEx $4.94
ADBE Adobe Systems $3.01
KGF Kingfisher £12.20
CBRL Cracker Barrel Old Country Store $2.33
NEOG Neogen $0.16

 

Wednesday (September 22)

Ticker Company EPS Forecast
KBH Kb Home $1.61
FUL HB Fuller $0.79
BBBY Bed Bath & Beyond Inc. $0.52
UNFI United Natural Foods $0.80
GIS General Mills $0.89

 

Thursday (September 23)

IN THE SPOTLIGHT: NIKE, COSTCO WHOLESALE

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion.

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal fourth-quarter earnings of $3.56 per share, which represents year-over-year growth of over 1.4% from $3.51 per share seen in the same period a year ago. The Fridley, Minnesota-based medical company would post revenue growth of about 18% to around $63 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 23

Ticker Company EPS Forecast
ACN Accenture $2.18
DRI Darden Restaurants $1.64
NKE Nike $1.12
COST Costco Wholesale $3.56
MTN Vail Resorts -$3.46
PRGS Progress Software $0.82

 

Friday (September 24)

Ticker Company EPS Forecast
CCL Carnival -$1.43
CUK Carnival -$1.45
CCL Carnival -£1.45

 

USD/CAD: Loonie Hits Nearly One-Month Low Ahead of Snap Election

The Canadian dollar hit a near one-month low against its U.S. counterpart on Friday as falling energy prices and September 20 election uncertainties weighed on the commodity currency.

Next week’s federal reserve decision and the election in Canada will be closely watched by investors. Investors are concerned that Monday’s elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

The USD/CAD pair rose to 1.2762 today, up from Thursday’s close of 1.2681. The Canadian dollar lost over 1.2% last month and has depreciated about 1% so far this month.

“Barring the scenario of a hung parliament, political uncertainty in Canada should ultimately dissipate, helping CAD realign with its short-term fair value. The latest data (labour market and inflation) have all but confirmed the view that the Bank of Canada will have to step in with another round of tapering in October, which should leave it on track to fully unwind QE by year-end, or by early-2022,” noted Francesco Pesole, FX Strategist at ING.

“Ultimately, markets will be left with some room to speculate that the first hike will be delivered before mid-2022 (which is currently in the BoC rate-path projections). The set of good fundamentals should, in our view, provide some sustained support to CAD into year-end, and we expect USD/CAD to trade consistently below 1.25 in 4Q21.”

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 1.29% lower at $71.66 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

On Thursday, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.25% higher at 93.164. The dollar reaches a three-week high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet next week and open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Preview: What to Expect From FedEx’s Q1 Earnings on Tuesday

The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

The company’s next earnings report is expected to be released on Tuesday, Sep 21 after market close.

Analyst Comments

“After 18 months of topline focus, attention turns to costs in F1Q22 as FedEx (like most other companies) grapples with labour and general inflation. With revenues running into tougher comps + normalizing trends as well (particularly in Ground), results could be challenging for the 2nd successive quarter,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

FedEx Stock Price Forecast

Twenty-one analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $351.32 with a high forecast of $397 and a low forecast of $270.

The average price target represents a 35.97% change from the last price of $258.38. From those 21 analysts, 17 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $270 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the health care company’s stock.

Several other analysts have also updated their stock outlook. Evercore ISI lowered the target price to $350 from $360. Citigroup slashed the price target to $360 from $365. JPMorgan cut the target price to $346 from $366.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Weakens as Oil Prices Slip, Election in Focus

The Canadian dollar weakened against its U.S. counterpart on Thursday as the firm greenback and falling energy prices weighed on the commodity currency ahead of the September 20 election.

The USD/CAD pair rose to 1.2688 today, up from Wednesday’s close of 1.2633. The Canadian dollar lost over 1.2% last month and has depreciated about 0.6% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge lower as the U.S. storm threat fades. U.S. West Texas Intermediate (WTI) crude futures were trading 0.92% lower at $71.96 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

Moreover, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

“In the near term, CAD faces a number of headwinds. Economic data momentum has turned negative. Softening incoming data combined with an impending election (20 September) means that BoC messaging is likely neutral in the near term,” noted analysts at Citi.

“However, for our medium-term view, given Canada’s high vaccination rate, more lockdowns seem very unlikely, and the economic data should come in more strongly as we shift away from 2Q prints. Canada will also likely see more fiscal post-election.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.37% higher at 92.892. On Thursday, retail sales data showed an unexpected increase in August, easing some concerns about slowing economic growth, which supported the greenback.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

USD/CAD: Loonie Gains as Inflation Hits Highest Since 2003, Firm Oil Lends Support

The Canadian dollar strengthened against its U.S. counterpart on Wednesday after the annual inflation rate increased to an 18-year high in August; firmness in oil prices also lent support.

Inflation ticked above the Bank of Canada’s 1%-3% control range for the fifth consecutive month in August, according to Statistics Canada. Last month, the consumer price index grew by 4.1%, the fastest rate since March 2003.

The USD/CAD pair fell to 1.263 today, down from Tuesday’s close of 1.2693. The Canadian dollar lost over 1.2% last month and has depreciated about 0.3% so far this month.

“The Canadian dollar has shown some tentative signs of recovery at the start of this week, but yesterday’s risk-off turn in global markets sent USD/CAD back to the 1.2700 level. We think political uncertainty is currently taking a toll on CAD and partly explaining the divergence with the other oil-sensitive G10 currency, Norway’s krone, which has instead found more solid support of late,” noted Francesco Pesole, FX Strategist at ING.

“We think CAD will struggle to stage a sustained rally before Monday’s Federal election, when the emergence of a potential coalition may ease the negative drag of political noise on the currency.”

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S crude inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 3.63% higher at $73.02 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.13% lower at 92.502. The greenback broadly fell on Tuesday after inflation slowed in August after reaching its highest level in 13 years in July. That raised the question of when the Fed will taper stimulus and hike rates from the current record low.

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Lennar On Track To Beat Earnings Estimates Again; Stock Has Over 20% Upside Potential

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

The company will release earnings for the third quarter ended August 31, 2021 after the market closes on September 20, 2021.

According to Zacks research, Lennar expects to deliver 15,800-16,100 homes in the third-quarter fiscal 2021 with a gross margin of 27-27.5%. The company reaffirms a delivery range of 62,000-64,000 homes for fiscal 2021 but raises the ASP expectation to $420,000 from $400,000.

Lennar shares surged over about 30% so far this year. The stock closed 0.8% lower at $98.59 on Monday.

Analyst Comments

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

Lennar Stock Price Forecast

Ten analysts who offered stock ratings for Lennar in the last three months forecast the average price in 12 months of $123.50 with a high forecast of $160.00 and a low forecast of $100.00.

The average price target represents a 25.27% change from the last price of $98.59. From those 10 analysts, six rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

CFRA raised the target price by $15 to $130. Royal Bank of Canada lifted their price objective to $100 from $97 and gave the company a “sector perform” rating. JPMorgan boosted their target price to $141 from $115. Barclays boosted their target price to $110 from $105 and gave the company an “equal weight” rating.

We think it is good to buy at the current level and target $123 in the long-term as the 200-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Strengthens as U.S. Inflation Weighs on the Greenback

The Canadian dollar strengthened against its U.S. counterpart on Tuesday as weaker U.S. inflation data weighed on the U.S. dollar.

The USD/CAD pair fell to 1.2596 today, down from Monday’s close of 1.2651. The Canadian dollar lost over 1.2% last month and has depreciated about 0.3% so far this month.

USDCAD strengthened a bit more than we expected last week, peaking nearer the mid-1.27s whereas we had anticipated better resistance a big figure lower.  There is still a lot of chop in this market – witness the sharp rally in the USD last Friday and the lack of follow-through interest (so far) today.  We note that the sideways trading range shows signs of persisting on the face of it, although the undertone remains more USD-bullish, based on the positive alignment of trend strength signals on the daily and weekly DMI oscillators,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“The session started with the intraday DMI also in USD-bullish territory but the signal has faded to neutral at writing.  Broadly, we are leaning bullish on the outlook for USDCAD—the trend higher since the early June low is intact and supported by positive DMI signals—but conviction here is suitably low.  Support remains 1.2595 (40-day MA at 1.2593 today).  Resistance is 1.2760 ahead of a retest of 1.28+ levels.”

Inflation slowed in August after reaching its highest level in 13 years in July. The Bureau of Labor Statistics reported Tuesday that consumer prices rose 5.3% in the year ending in August, a slight drop from the 5.4% increase in June and July. This suggests inflation had topped out.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.14% lower at 92.599.

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S. output after Hurricane Ida. U.S. West Texas Intermediate (WTI) crude futures were trading 0.53% higher at $70.81 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

“The electoral campaign in Canada is set to remain in focus with only 10 days to go before the vote, and we think that CAD is currently discounting some political risk as opinion polls show neither of the two major parties (Liberals and Conservatives) as likely to secure a full majority in the House,” noted Francesco Pesole, FX Strategist at ING.

“Next week, CPI data will be the main highlight and another above-consensus read may further support hawkish expectations on the BoC, but once again, political risk may cap CAD gains for now. Once political uncertainty dissipates, a short-term undervaluation vs USD (2.1%, according to our fair value model) and solid fundamentals all point to a rebound in the loonie, in our view.”

In August, Canada added 90,200 jobs, and the unemployment rate fell to 7.1%, its lowest level since the Coronavirus pandemic began. The data might support the Bank of Canada’s next taper in October. The Governor of the Bank of Canada, Tiff Macklem, said on Thursday that Canada is on its way to no longer needing quantitative easing to stimulate the economy.

Last week, the Bank of Canada held its key interest rate, citing fears that the pandemic and supply bottlenecks might stall the economic recovery. The central bank has maintained its overnight rate target at 0.25% and said it will continue buying bonds at a rate of $2 billion a week as part of its quantitative easing program.

Boeing Upgrades Outlook for Jet Demand on Pandemic Recovery Hopes

The world’s largest aerospace company Boeing has upgraded its long-term forecasts for the commercial, defence and space aerospace market, reflecting signs of the industry’s recovery following the impacts of COVID-19.

According to 2021 Boeing Market Outlook (BMO), the aerospace products and services segment will grow to $9 trillion over the next decade. Forecasts have increased from $8.5 trillion a year ago, and from $8.7 trillion in the pre-pandemic forecast for 2019, reflecting the market’s continued recovery.

According to the Commercial Market Outlook (CMO), the company said the global aerospace market is recovering largely. Within the next two years, long-haul travel is expected to return to pre-pandemic levels, followed by domestic demand for air travel and intra-regional travel, which will ease health and travel restrictions.

The Boeing Market Outlook projects global demand for 19,000 commercial airplanes valued at $3.2 trillion over the next decade. During the next 20 years, Boeing projects the demand for more than 43,500 new airplanes worth $7.2 trillion, up about 500 planes over last year’s forecast.

Boeing Stock Price Forecast

Fifteen analysts who offered stock ratings for Boeing in the last three months forecast the average price in 12 months of $275.87 with a high forecast of $307.00 and a low forecast of $224.00.

The average price target represents a 28.62% change from the last price of $214.48. From those 15 analysts, eight rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $274 with a high of $373 under a bull scenario and $146 under the worst-case scenario. The firm gave an “Overweight” rating on the company’s stock.

Several other analysts have also updated their stock outlook. UBS cut the target price to $290 from $310. Wells Fargo raised the price target to $254 from $244. Bernstein lifted the target price to $252 from $242. Vertical Research upped the target price to $250 from $242.

Analyst Comments

“We expect the market to value the company based on 2025 normalized post-COVID-19 earnings instead of a partial recovery in 2023. Broader COVID-19 vaccine rollout through 2021, eventual easing of international borders, and improved airline booking trends are positive catalysts that could force bears and sideliners to re-evaluate,” noted Kristine Liwag, Equity Analyst at Morgan Stanley.

“Prior headwinds have abated, including: 1) lower production rates are now aligned to weaker demand; 2) implied aircraft cancellations have been recorded in the backlog de-risking the order book; and 3) current liquidity defers a potential equity raise to at least 2022, removing sentiment overhang.”

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Strengthens as Oil Prices Rise on U.S. Supply Concerns

The Canadian dollar strengthened against its U.S. counterpart on Monday after oil prices climbed over $70 a barrel as U.S. supplies have been restricted following Hurricane Ida, which hit almost half of crude production in key producing regions.

The USD/CAD pair fell to 1.2643 today, down from Friday’s close of 1.2689. The Canadian dollar lost over 1.2% last month and has depreciated about 0.3% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S. output after Hurricane Ida. U.S. West Texas Intermediate (WTI) crude futures were trading 1.05% higher at $70.46 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

“The electoral campaign in Canada is set to remain in focus with only 10 days to go before the vote, and we think that CAD is currently discounting some political risk as opinion polls show neither of the two major parties (Liberals and Conservatives) as likely to secure a full majority in the House,” noted Francesco Pesole, FX Strategist at ING.

“Next week, CPI data will be the main highlight and another above-consensus read may further support hawkish expectations on the BoC, but once again, political risk may cap CAD gains for now. Once political uncertainty dissipates, a short-term undervaluation vs USD (2.1%, according to our fair value model) and solid fundamentals all point to a rebound in the loonie, in our view.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.02% higher at 92.599. On Tuesday, September 14, the consumer price index is scheduled to be released. Global trends and inflation data will drive equity markets next week, which after a run of record-breaking trades have taken a breather. If the data continues to be hot, Treasury yields could rise, which would be negative for the market.

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

In August, Canada added 90,200 jobs, and the unemployment rate fell to 7.1%, its lowest level since the Coronavirus pandemic began. The data might support the Bank of Canada’s next taper in October. The Governor of the Bank of Canada, Tiff Macklem, said on Thursday that Canada is on its way to no longer needing quantitative easing to stimulate the economy.

Last week, the Bank of Canada held its key interest rate, citing fears that the pandemic and supply bottlenecks might stall the economic recovery. The central bank has maintained its overnight rate target at 0.25% and said it will continue buying bonds at a rate of $2 billion a week as part of its quantitative easing program.