What’s In Store For Canada's Industrials Sector In 2021? - Kalkine Media

May 24, 2021 12:56 AM EDT | By Team Kalkine Media
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Canada’s industrials sector has massively suffered in the wake of the COVID-19 outbreak. While the vaccine rollout and phased reopening of the economy have benefited other such impacted sectors, most companies in the industrials market continue to incur losses.

Now, with the third wave of COVID-19 hitting the country, the uncertainty in the sector looms large.

The impact on the sector can be studied from the growth rates of the S&P TSX Capped Industrials Index, which primarily includes companies involved in the business of aviation, transportation, heavy equipment, construction, etc.

The index sank about 1.7 per cent quarter-to-date (QTD) and grew about 4.7 per cent this year, as against the S&P TSX Capped Composite Index, which rose about 3.8 per cent QTD and 11.4 per cent year-to-date (YTD).

In terms of returns, the top 10 performers in the industrials sector also clocked much smaller gains as against those in other sectors.

What Lies Ahead For Canada’s Industrial Sector?

The performance of aviation players, which constitute a major chunk of the industrials sector in Canada, has been weak amid widespread travel bans and quarantine rules. However, market experts expect improvement for some key companies, like Air Canada (TSX:AC),  in the long run as economies open up further.

Air Canada’s stock has registered a growth recently, as against its pandemic lows, climbing nearly 54 per cent over the last year. But its operations continue to face difficulties as the Canadian government views that it may be too soon to lift travel restrictions.

This continuing travel ban may add to the weakness in the stock as well as the industry at large.

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Rising debt amid halted operations also continue to dampen the airlines industry. However, industrials companies involved in better environmental practices, such as waste management companies, are likely to see healthy growth going forward because of policy support in this direction.

For instance, stocks of waste services company Waste Connections Inc (TSX:WCN) recorded a one-year growth of 14 per cent. Meanwhile, one of top industrials players on the Toronto Stock Exchange, BQE Water Inc (TSXV:BQE) rose about 12 per cent in the last 30 days.

Another key constituent of this sector is the construction industry. While its growth has not been as bleak as the transportation stocks amid the pandemic, it still hinges on the speed of vaccine rollout and the spread of the different coronavirus variants of the coronavirus that continue to hamper production and constructions.

Some construction stocks were also among the highest gainers of this sector in the last one month. These included stocks like WSP Global Inc (TSX:WSP) and SNC-Lavalin Group Inc (TSX:SNC), which grew about eight per cent and six percent in the last 30 days, respectively.

For the industrials sector, like most other, growth depends on what shape the coronavirus pandemic takes going forward and how the government handles its policy decisions for the economy’s revival.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.


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