Earnings season continues this week, with a surge in reports coming down the pipeline. It’s created a crazy scenario on the TSX, as investors try to weigh earnings coming in while waiting on rate decisions from the United States.
However, earnings season is also a prime opportunity for savvy investors to capitalize on stock price movements driven by newly released financial data. Volatility around earnings reports can create temporary price drops in fundamentally strong TSX stocks, presenting excellent buying opportunities. Which is why today we’re going to look at three that should certainly be on the radar of Canadian investors this August.
Thomson Reuters
Thomson Reuters (TSX:TRI) has consistently shown solid revenue and profit growth, making it a reliable investment for Canadian investors. And this can be seen during its most recent earnings reports. In Q1 2024, the company reported an 8% year-over-year increase in revenues, driven by robust performances across its core segments.
Furthermore, the company’s net profit margin stands at an impressive 27%, well above the industry average, reflecting efficient management and strong profitability. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 19%, with the adjusted EBITDA margin increasing to 42.7% from 38.8% the previous year. This shows improved operational efficiency and cost management.
Thomson Reuters has also demonstrated significant earnings per share (EPS) growth. The most recent EPS was 7.1, marking a 116.3% increase over the previous year. This growth highlights the company’s ability to generate higher profits per share, making it an attractive investment. Additionally, the company has been proactive in returning value to shareholders through dividends and share buybacks.
TRI raised its annual common dividend by 10% to $2.16 per share, marking the 31st consecutive year of dividend increases. Finally, in Q1 2024, TRI repurchased over $350 million of its common shares, underscoring management’s confidence in the company’s future performance. So with shares up 26% in the last year, a 1.3% dividend yield, and earnings due, it’s a great time to consider the TSX stock.
Loblaw Companies
Loblaw Companies (TSX:L) has shown consistent revenue growth, even in challenging economic environments. This was demonstrated during Q2 2024, when Loblaw reported revenue of $14 billion, up by $209 million or 1.5% from the previous year. This growth reflects the company’s ability to maintain and increase sales.
The retail segment’s gross profit percentage rose by 90 basis points to 32%, driven by improvements in gross margins, indicating efficient cost management and effective pricing strategies. Adjusted EBITDA increased by 4.5% to $1.7 billion, showing strong operational performance and higher earnings from its revenue base.
Loblaw’s commitment to returning value to shareholders is evident through its dividend growth and share repurchase program. The company increased its dividends by 10.3% in 2023 and repurchased 3.2 million common shares at a cost of $482 million.
Now it has to be said, there was a financial impact of settling bread price-fixing class actions, which negatively affected net earnings by $121 million. Even so, Loblaw has maintained strong financial health. The company’s price-to-earnings (P/E) ratio of 25.5 times, though above the industry average, indicates investor confidence in its growth prospects. Loblaw’s return on equity (ROE) stands at 19.2%, one of the highest in the retail (grocery) industry. And this reflects efficient use of equity to generate profits
Boralex
Finally, Boralex (TSX:BLX) is a prominent player in the renewable energy sector, with operations in wind, solar, and hydroelectric power. The company operates facilities with a total installed capacity of 3,051 megawatts (MW) and is developing a portfolio of over 6.2 GW in wind, solar, and storage projects. This diversification helps stabilize revenue and mitigate risks associated with dependence on a single energy source.
Boralex has shown significant EPS growth, with an increase of 160% in 2023. Despite a relatively high P/E ratio of 34, this indicates strong future growth expectations from the market. The company offers a dividend yield of 2%, providing a steady income stream for investors, supported by consistent revenue and profit growth. What’s more, Boralex’s total debt is manageable, allowing it to leverage debt effectively to finance growth while maintaining financial stability.
The company’s market position is further strengthened by strategic acquisitions and expansions. This includes a 50% interest in five wind farms in the United States. The global shift towards renewable energy sources positions Boralex favourably, with increasing demand for clean energy expected to support future growth. Altogether, it’s a strong TSX stock that should only get stronger.
Bottom line
Investing in TSX stocks like Thomson Reuters, Loblaw, and Boralex amidst earnings reports in August could be a smart move. This comes down to their strong fundamentals, consistent performance, and positive earnings momentum. By leveraging metrics such as beta, P/E ratio, and P/B ratio, investors can identify undervalued TSX stocks poised for growth, ensuring well-informed investment decisions. These companies have shown resilience and growth potential. And that makes them attractive options for investors looking to capitalize on market opportunities during the earnings season.
