COVID-19: Change in Bay Street sentiment

How have stock analysts changed their outlooks because of the virus?

Ian Tam, CFA 20 March, 2020 | 1:17AM

 

Man staring at 2 screens

Editor's note: Read the latest on how the coronavirus is rattling the markets and what you can do to navigate it.

Although only a few weeks have passed since February 20th (the day the S&P/TSX Composite Index hit its peak value), the firehose of market-related news is likely making it difficult to cut through the noise and understand what’s important to your equity investments. 

Sell-side institutional research analysts are experts employed by major banks to provide estimates and insights on a company’s future performance primarily to institutional asset managers (the buy side). These estimates can often change based on updated guidance from the company, or other market news that may affect the analysts’ outlook (for example the impact of COVID-19 on supply chains). Of course, an individual analyst’s opinion is her own and can be subjective, but on aggregate the changes in estimates are a very useful tool to understand sentiment from these experts as a group.

To measure this sentiment, my colleagues at Morningstar® CPMS™ favour a measure known as a three-month estimate revision, which measures the latest median consensus estimate from the street on a company’s full year fiscal earnings and compares it to what it was 90 days ago. If the number appears negative, this means that analysts that cover the stock as a group have revised their estimates downwards.

This table outlines what the market float weighted 90-day EPS estimate revisions were on February 20th and again as of March 16th:

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

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About Author

Ian Tam, CFA  Iam Tam, CFA, is Director of Investment Research at Morningstar Canada.