March 19, 2019

Tuesday was an eventful day for market news. North American stock market were positive earlier in the day but ended weak. The S&P 500 was about unchanged while Toronto was down 0.4%.

AutoCanada was up 3.6%. It has, around 10 analysts covering it and based on the stock price it appears they generally remain supportive. I looked for updated reports at RBC Direct and TD Direct which are the two that I have access to and neither of these two appear to be covering the company.

CN Rail was down 2.0%. Toll Brothers was down 1.9%. CRH Medical was down 3.4%.

Couche-Tard was down 2.5%. Then, after the close it released what appears to be blow-out earnings . Adjusted earnings per share almost doubled. But apparently they were expected to slightly more than double. They raised their small dividend by 25%. This is a great company and I am inclined to add to my position especially on any decline.

FedEx released what was apparently disappointing earnings and a disappointing outlook. FedEx mentioned
“weaker global trade growth” but headlines seem to interpret this as weaker and slower global trade – which is not quite what is says – but is more newsworthy.

Statistics Canada reported sales at food services and drinking places in January. The release was confusing with mixed messages. first, it said that on a seasonally adjusted basis, January was down 1.0% with full service restaurants down 2.1%. But then they went on with a headline saying it was a strong start to the year. In fact, that include a handy table showing the year over year January change and it was UP 5.5% with full service restaurants up 5.7% and drinking places up a huge 8.3%! They call these numbers seasonally adjusted but there really should be no seasonal adjustment to compare a January to a January but I guess they are comparing last year’s adjusted number to this year’s adjusted number and so that could introduce an error. Digging into the NOT seasonally adjusted number, I was only able to find it for the Canadian total and not for full-service and drinking places. The total increase was 5.2% which is not far different from their seasonally adjusted 5.5%.

Overall, I would be suspect of the claimed decline from December to January due to the difficulty of seasonal adjustment. In terms of consumer behavior, December is vastly different than January and so I imagine a big (and error prone) seasonal adjustment is needed. What is important is that there was a big year-over-year increase in January. In part that will be due to a larger number of restaurants. But an average restaurant must have seen increased sales and that bodes well for Boston Pizza as long as they are keeping up with industry averages. 3.5% of the 5.5% year-over-year increase was simply due to price increases. But for the Boston Pizza Royalty Income Fund, that still leads to increased franchise revenue collected as long as higher prices do not lead to to fewer customers. For the industry as whole sales were up 5.5% while prices were up 3.5% suggesting that customer volumes increase (albeit counting new restaurants).

The federal budget included measures to assist first time homebuyers and gave more assistance if it is a new home. This could spur an increase in housing starts or at least stem the decline in housing starts.

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