Canadian Stocks Decline After Bank's Earnings Trail Analyst Forecasts

Canadian stocks fell for a second day as financial stocks retreated after Bank of Montreal’s third-quarter earnings missed the average analyst estimate.

BMO, Canada’s fourth-biggest bank, lost 6 percent after reporting profit excluding certain items 5.6 percent lower than the average projection. Suncor Energy Inc., the country’s largest oil and gas producer, declined 1.4 percent as crude futures slumped for a fifth day. Alimentation Couche-Tard Inc., the owner of Mac’s and Circle K convenience stores, surged 8.2 percent after beating analysts’ profit estimates.

The Standard & Poor’s/TSX Composite Index decreased 161.28 points, or 1.4 percent, to 11,557.35.

“People have considered the banks as the solid center of the market,” said David Cockfield, who helps oversee C$300 million ($283 million) as a money manager at MacNicol & Associates Asset Management Inc. in Toronto. “To see the first bank reporting miss estimates has got people on the sell side.”

The S&P/TSX has gained 0.1 percent this year with dividends, compared with a total return of minus 4.5 percent for the S&P 500. An index of Canadian banks returned 2.9 percent through yesterday. A 35 percent jump in Potash Corp. shares since BHP Billiton Ltd.’s $39 billion unsolicited bid for the company became public Aug. 17 has added to the divergence.

Bank of Montreal missed 11 of 13 analysts’ estimates in a Bloomberg survey after trading and investment banking revenue declined from last year. It was the first time in two years the Toronto-based lender had quarterly earnings that failed to meet the average forecast. BMO tumbled 6 percent, the most since 2008, to C$55.50.

Retail Sales

Canada’s other seven publicly traded banks, which all report third-quarter earnings by Sept. 2, declined. Also weighing on the group was a report from Statistics Canada that retail sales in June increased 0.1 percent, less than all 16 economist forecasts in a Bloomberg survey. Excluding car and parts dealers, sales dropped 0.5 percent.

Royal Bank of Canada, the country’s largest lender by assets, dropped 3.1 percent to a one-year low of C$50.09. Bank of Nova Scotia, the third-biggest bank, declined 2.8 percent to C$49.61. Canadian Imperial Bank of Commerce, which releases financial results tomorrow, lost 2 percent to C$66.81.

Manulife Financial Corp., North America’s third-largest insurer, decreased 5.4 percent to a 17-month low of $11.71. Bank of America Corp. analyst Steve Theriault yesterday increased his third-quarter loss estimate for the company to 94 cents a share from 37 cents a share, excluding certain items. Sun Life Financial Inc., Canada’s third-biggest insurance company, dropped 4.3 percent to C$24.17.

Oil Declines

Crude oil slumped to an 11-week low of $71.63 a barrel after sales of previously owned U.S. homes fell more than forecast, stoking concern that the economic recovery is faltering. Olli Rehn, the European Union commissioner for economic and monetary affairs, said slower growth in Asia would have a “serious negative impact” on Europe’s growth.

Suncor slipped for a fifth day, retreating 1.4 percent to C$32.11. Canadian Natural Resources Ltd., the country’s second- biggest energy company by market value, fell 2.6 percent to C$32.91. EnCana Corp., Canada’s largest natural gas producer, dropped 3.2 percent to a 13-month low of C$28.18.

Copper sank 1.5 percent, the most since July 16. Teck Resources Ltd., Canada’s largest base-metals and coal producer, declined 3 percent to C$32.95. Copper-mining company Taseko Mines Ltd. lost 7.3 percent to C$4.35 for the biggest drop in the S&P/TSX.

Bid for Casey’s

Couche-Tard, which in April launched an unsolicited takeover bid for Ankeny, Iowa-based chain Casey’s General Stores Inc., soared 8.2 percent, the most since 2008, to C$22.69. The Laval, Quebec-based company said it earned 69 cents a share in the first quarter, topping the average analyst estimate by 25 percent, excluding certain items.

Celestica Inc., which makes electronics for Research In Motion Ltd., Microsoft Corp. and other companies, decreased 5 percent to a 13-month low of C$8.06 after Ticonderoga Securities LLC analyst Brian J. White cut his rating on the stock to “neutral” from “buy.” In a note to clients, White cited the risk of “greater fiscal conservatism” among corporate customers and threats to RIM’s market share.

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

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