Following last week’s optimistic forecast from Export Development Canada, the Organisation for Economic Co-operation and Development (OECD) offered a similarly upbeat take on Canada’s growth prospects. In fact, the OECD has a rosier outlook for Canada’s economy than many of the country’s own policymakers and private-sector analysts.

As part of a semiannual update of its global forecasts, the Paris-based group, which helps foster greater economic ties among its 34 developed-world member countries, projected that the Canadian economy will grow 2.5 percent this year and 2.75 percent in 2015.

That’s an improvement from its November forecasts of 2.3 percent and 2.6 percent, respectively. It’s also higher than the Bank of Canada’s (BoC) own forecasts, which call for the economy to expand this year by 2.3 percent, down from a previous estimate of 2.5 percent, and grow 2.5 percent next year. The consensus among private-sector economists matches the BoC’s projections.

Also of note, the OECD expects Canada’s economy will outpace the average growth among the group’s member nations by a substantial three-tenths of a percentage point this year, though next year its performance will essentially be in line with the average.

In the short term, however, the OECD forecasts growth of just 0.5 percent for the first quarter, largely due to harsh winter weather, though the second quarter should reaccelerate to 2.4 percent.

“The United States and Canada are both also expected to experience an uneven pattern of growth in the near term, owing in part to the disruptive effect of repeated episodes of severe winter weather,” the OECD observed.

Despite the “two steps forward, one step back” that’s characterized the country’s growth in recent quarters, the OECD sees Canada’s economy experiencing a “desirable rebalancing” to exports and business investment, which is the same transition the BoC has long been touting.

The OECD believes exports will gain momentum due to several factors, including stronger foreign demand, the recent decline in the Canadian dollar, and continued growth in the energy sector. And business investment should strengthen as uncertainty about the global economy diminishes.

“Business investment should accelerate, boosting capacity and cost competitiveness. Consumption growth is likely to strengthen, while housing investment should decline toward a more sustainable level,” the group’s economists noted.

Growth in Canada, the US and the rest of the developed world should be boosted by “accommodative monetary policies, supportive financial conditions and a fading drag from fiscal consolidation.”

Continuing the aforementioned theme of “two steps forward, one step back,” after February’s blockbuster performance, Canada’s international merchandise trade for March fell short of expectations.

Merchandise exports declined 1.4 percent in March, to CAD42.7 billion, while imports edged up 0.4 percent, to CAD42.6 billion. As a result, Canada’s trade surplus narrowed substantially to CAD79 million from CAD847 million in February. The good news is that February’s surplus was revised sharply higher, as it had been initially reported as CAD290 million.

Lower prices, particularly among energy products, were the main culprit for exports’ lackluster showing, as prices fell 2 percent on a 0.7 percent increase in volume. This also reduced the dollar value of exports to the US, which declined 2.5 percent, to CAD32.2 billion.

As a result, Canada’s trade surplus with the US, which absorbs roughly three-quarters of the country’s exports, narrowed to CAD3.8 billion from CAD4.9 billion in February. Nevertheless, exports to the US are still up 10.2 percent on a year-over-year basis.

Exports of energy products fell 7.9 percent, to CAD11.2 billion, following three consecutive months of significant increases. The dollar value of crude oil and crude bitumen exports fell 7.3 percent, while natural gas dropped 17.5 percent. Overall, prices for energy products declined by 4.8 percent, while volumes decreased 3.2 percent.

Fortunately, the bigger picture for the energy sector still looks bright. Despite the aforementioned performance, the value of energy product exports is still up 21 percent year over year.

And according to economists with CIBC World Markets, the pace of overall trade for the first quarter suggests that this could be the first time in a long while that export activity actually makes a positive contribution toward gross domestic product (GDP). Although this long-awaited transition is progressing slowly, it appears to finally be underway.

Portfolio Update

Davis + Henderson Corp (TSX: DH, OTC: DHIFF), which as of May 5 is now known as DH Corp, reported overall revenue of CAD266.3 million, up 55.1 percent from a year ago thanks to growth in its US segment following the integration of last year’s acquisition of HFS. Profits more than doubled to CAD12 million from CAD5.7 million, while margins improved by 1.2 percentage points.

D+H is a leading provider of technology solutions to domestic and global financial institutions, including approximately 7,000 banks, specialty lenders, community banks and credit unions. The company’s services encompass three broad areas: Banking Technology Solutions, Lending Processing Solutions, and Payments Solutions. D+H’s products helps its clients drive growth, improve customer convenience, streamline operations, reduce infrastructure costs and fulfill compliance requirements.

With the acquisition of HFS, D+H has moved well beyond its roots in the Payments business. The company’s Banking Technology Solutions segment generated CAD125.4 million in sales, and now accounts for 39.3 percent of the company’s revenue. Contributions from the company’s two other divisions held steady, with revenue from Payment Solutions up 1.4 percent, to CAD74.7 million, while sales from Lending Processing Solutions increased 1.8 percent, to CAD66.3 million. The two segments now account for 31.5 percent and 29.2 percent of revenue, respectively.

The aforementioned acquisition was also transformative in terms of geographic diversification. Revenue from D+H’s US operations came in at CAD116.2 million, and now account for 43.6 percent of revenue. A year ago, prior to the acquisition, the firm derived just 13.4 percent of revenue from the US.

In the year ahead, the firm plans to integrate its US sales team, tighten product and technology integration, and roll out a unified brand strategy, the latter of which is what drove the recent name change. Thereafter, the firms plans to maximize cross-selling opportunities across its expanded customer base, while continuing to grow organically as well as via tuck-in acquisitions.

Additionally, management notes that D+H is poised to benefit from a ramp up in information technology spending in the financial sector, which has been spurred in part by increasing regulatory complexity.

Although Davis + Henderson’s first-quarter performance narrowly missed expectations for earnings per share, by 0.8 percent, it managed to beat sales estimates by 5.4 percent. That was the first time the firm missed on earnings in four quarters, though each of the three prior beats had been getting progressively narrower. But this was the first time in three quarters that revenue came out ahead of expectations.

On Bay Street, the mix of analyst sentiment remained neutral with a bullish tilt, at three “buys,” five “holds,” and one “sell.” The consensus 12-month target price now stands at CAD33.29, which suggests potential appreciation of 3.2 percent above the current share price.

Following the company’s earnings release, Industrial Alliance Securities boosted its rating to “buy” from “hold,” while it also upped its 12-month target price to CAD33.00 from CAD30.00. At the same time, Raymond James lowered its rating to “market perform,” which is equivalent to a “hold,” from “outperform,” or “buy.”

For full-year 2014, analysts forecast adjusted earnings per share (EPS) will climb 7 percent, to CAD2.17, a noteworthy improvement from last year’s performance, which was essentially flat. Adjusted EPS are projected to climb another 10 percent in 2015, to CAD2.38.

Meanwhile, sales are expected to jump 34 percent this year, to CAD1.13 billion, though revenue growth the following year is forecast to decelerate to 5 percent.

D+H pays a CAD0.32 dividend on a quarterly basis (CAD1.28 annualized), for a current yield of nearly 4 percent. Since the firm converted from an income trust to a corporation in early 2011, dividend growth has been minimal, with the last bump of CAD0.01 coming toward the end of 2012.

Over the past year, the stock has gained more than 38.3 percent on a price basis in local currency terms. In US dollar terms, the shares have risen 27.5 percent. On May 5, the shares closed at an all-time high.

Davis + Henderson is a buy below USD22 in the Conservative Portfolio.