Barlow’s Research Roundup: BMO results best in the sector so far

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

National, BNS results mixed

RBC analyst Darko Mihelic titled his summary of Bank of Nova Scotia’s results, “Though it’s a mixed quarter we see improvements” and for National Bank, “We view results as solid, updated guidance less so”. The BMO title was much more direct and positive - We lift estimates,

“BMO’s Q2/26 results were stronger than expected across most segments, except for Canada. We see solid U.S. results and model for better revenue/PPPT [pre-tax, pre-provision for credit losses] growth in that segment. BMO maintained its stage 3 (impaired) provision for credit loss (PCL) ratio guidance of mid-40s bps for the next few quarters and expects its impaired PCL ratio to improve to mid-30s bps by the end of 2027. We decrease our impaired PCL ratio estimates in 2027 to get closer to this guide as BMO’s PCL was better than expected this quarter. We increase our PT to $230 (was $205). SP [sector perform] rated”.

Defence strategy takes shape

Scotiabank analyst Konark Gupta described the importance of recent domestic military and defence news for selected industrials,

“We view Canada’s selection of Saab for airborne early warning & control (AEW&C) program and decision to establish Canadian AEW&C assembly as a big positive for BBD.B and CAE, as well as directionally positive for MDA and EIF. The key here is that Canada is not just intending to acquire Saab GlobalEye but also aiming to build aircraft for allies. This is a strong evidence of Canada’s execution on Defence Industrial Strategy that aims to grow defence industry revenues by more than 240 per cent and exports by 50 per cent over the next decade. Our covered defence names, particularly BBD.B, CAE, EIF, and MDA, are strongly positioned to benefit from secular growth with their industry-leading offerings. We re-iterate our SO ratings on all four stocks while raising our targets on BBD.B to $330 (was $305) and MDA to $70 (was $53). We expanded our multiple for BBD.B to reflect its unique position on the Saab deal and for MDA on potential upside risk to long-term growth outlook from solid defence prospects, on top of space renaissance. In addition, space valuations have significantly expanded (Exhibit 1) due to accelerating activity in the sector. CAE remains our overall top pick, supported by its attractive valuation and defence acceleration”.

Med tech confusion

Citi analyst Joanne Wuensch admits befuddlement at medical technology stock performance but provides top picks amidst sector volatility,

“With the 1Q26 Preview we were hopeful that the reporting cycle would shed some light on the sector, yet nearing the end of it we are as befuddled as when we started. On the surface, the basic MedTech fundamentals remain solid: patient volumes, hospital capex, and reimbursement. Yet, 1Q26 was littered with company-specific idiosyncratic pressures, frequently resulting in back-half loaded guidance, and investing for the 2027 recovery/easy comps/product cycles seems far away. This said, valuations are at historical lows and while the traditional “sell in May and go away” doesn’t bode well near term, we suspect when investors return it will be to higher quality names. We reiterate EW and ISRG as Top Picks and add SYK, with increasing investor interest in DXCM, and lowering BSX estimates (again). Downgrading BAX to Sell/H from Neutral/H (recovery is moving slowly)”.

I own Stryker Corp. (SYK-N) personally, by the way, and have for almost a decade. Health care equipment remains one of my favourite sectors long term thanks to demographics and the need for efficiency to limit costs.

Bluesky post of the day

Diversion

“More Than This Many Hours of Sleep Is Linked to Early Death, Scientists Find” - Futurism