A survey of North American equities heading in both directions
On the rise
Shares of Thomson Reuters Corp. (TRI-T) were higher by 6.9 per cent on Thursday after it beat first-quarter revenue expectations, lifted its annual financial forecast and raised its annual dividend by 10 per cent to US$2.16 as it continued to invest heavily in artificial intelligence.
The Toronto-based news and information provider reported an 8-per-cent rise in first quarter revenue to US$1.88-billion, from US$1.74-billion a year earlier. Wall Street expected US$1.85-billion in the quarter, LSEG data showed.
Operating profit, which Thomson Reuters said rose 10 per cent to US$557-million, fell just short of expectations of US$559-million.
Adjusted earnings per share, excluding one-time items were US$1.11 per share. Wall Street expected 95 US cents per share.
“We remain committed to investing in content-driven technology that helps professionals make complex decisions with confidence,” Thomson Reuters CEO Steve Hasker said.
“With an exciting AI product roadmap and strategic acquisitions shaping our core operations, we are confident we will continue to lead the way in transforming professional work,” Hasker added in a statement.
Thomson Reuters, which has earmarked about US$10-billion to acquire AI companies, has closed two deals in the quarter - Sweden-based business automation company Pagero and World Business Media Unit, an insurance industry media company.
The company raised its annual total revenue forecast as a result of its first quarter performance and now expects it to rise by between 6.5 per cent and 7 per cent, up from 6.5 per cent.
It forecast total revenue from its big three business segments of legal, tax and accounting and corporates, to rise by between 8 per cent and 8.5 per cent, up from 8 per cent.
Calgary’s Paramount Resources Ltd. (POU-T) surged 5 per cent after it raised its dividend by 20 per cent as it reported a first-quarter profit of $68.1-million.
The oil and gas producer says it will now pay a monthly dividend of 15 cents per share, up from 12.5 cents per share.
The increase came as Paramount says its first-quarter profit amounted to 46 cents per diluted share for the quarter ended March 31 down from a profit of $197.0-million or $1.33 per diluted share a year earlier.
Petroleum and natural gas sales totalled $452.3-million, down from $489.7-million in the first quarter of 2023.
Sales volumes in the quarter totalled 100,977 barrels of oil equivalent per day, up from 97,269 in the same quarter last year.
On an adjusted basis, Paramount says its funds flow amounted to $1.52 per diluted share in its latest quarter, down from $1.81 per diluted share a year earlier.
Qualcomm (QCOM-Q) shares rose 9.7 per cent on Thursday after the smartphone-focused chipmaker signaled an AI-fueled rebound in demand, especially in China, after a two-year slump. Sales to Chinese smartphone makers jumped 40 per cent in the first half of its fiscal year, the company said on Wednesday, as buyers there gravitate toward higher-priced devices that can accommodate AI chatbots.
“Chinese vendors who traditionally relied more on MediaTek, are going to start leveraging Qualcomm’s high-end chips more as they push hard into the AI Agenda,” said IDC analyst Nabila Popal.
“They further represent an upside for Qualcomm because majority of the recovery is also going to be driven by Chinese OEMs this year, coming from a tough last two years.”
Qualcomm on Wednesday projected third-quarter sales that were above estimates as it also benefits from its IoT (Internet of things) and auto segments.
The company, the biggest supplier of smartphone chips, was on course to add more than US$8-billion to its market value based on premarket movements. Other semiconductor firms such as Arm (ARM-Q) and Broadcom (AVGO-Q) were also higher.
According to preliminary data from research firm IDC, in the high-end segment, the AI buzz and the foldable products allowed the Android smartphone vendors to further differentiate themselves from Apple and garnered increased interest from Chinese consumers in the first quarter of 2024.
“We’re optimistic that numbers can be driven higher, given last year’s muted Android cycle and the likelihood of IoT(internet of things) improvement as inventory normalizes,” analysts at Wolfe Research said.
Moderna (MRNA-Q) jumped almost 13 per cent on Thursday after it reported quarterly revenue that beat Wall Street estimates but came in dramatically lower than the previous year when demand for COVID-19 vaccines was higher.
Sales of Moderna’s COVID-19 shot Spikevax, its only marketed product, dropped 91 per cent from the previous year to US$167-million for the quarter but surpassed analysts’ expectations of US$97.5-million.
The Cambridge, Massachusetts-based company reaffirmed that it expects to receive approval from regulators for its respiratory syncytial virus (RSV) vaccine in time for it to be included in this fall’s U.S. vaccine campaign.
The vaccine maker is set to enter a market for RSV shots where Pfizer and GSK are already battling it out for share. GSK’s Arexvy currently holds two-thirds of the new RSV vaccine market.
Moderna also posted a smaller-than-expected loss of US$3.07 per share. Analysts had expected a quarterly loss of US$3.58 a share, according to LSEG data.
“We’re encouraged by the performance but recognize it’s a small percentage of our overall year because 90 per cent of our revenue will come in the second half of the year,” said Moderna Chief Financial Officer James Mock.
Moderna reaffirmed its 2024 sales forecast of US$4-billion, the lowest figure for annual revenue since its COVID vaccine got U.S. emergency authorization in late 2020.
Analysts on average expect Moderna’s COVID shot to bring in US$3.73-billion in 2024 and for its RSV vaccine to make US$166.67-million. They estimate that the company will generate US$4.18-billion in 2024 sales.
First-quarter revenue included US$100-million in U.S. sales and $67 million from the rest of the world, which was mostly driven by markets in Latin America, Mock said.
The company has been banking on its experimental shots including for RSV, influenza and cancer to make up for declining COVID revenue.
On the decline
Air Canada (AC-T) dropped 8.4 per cent after it slumped to a loss in the first quarter as the country’s largest airline faced higher expenses as it added seat capacity.
For the three months ending on March 31, Montreal-based Air Canada lost $81-million or 22 cents a share, compared with profit of $4-million in the same quarter a year earlier.
Operating revenues rose 7 per cent to $5.2-billion from a year ago, and capacity increased 11 per cent, Air Canada said in an earnings release on Thursday morning.
Operating expenses climbed by 6 per cent or $311-million, compared to the same quarter of 2023. “The increase was due to higher costs in nearly all line items reflecting higher operated capacity and traffic year over year, in addition to higher labour, maintenance and information technology expense. Lower fuel expense partially offset the increase,” Air Canada said in a statement, released before markets opened.
Before the earnings results, Air Canada shares had risen by 10 per cent on the Toronto Stock Exchange, outperforming the 4-per-cent increase of the S&P/TSX Composite Index.
Air Canada said on Thursday it plans to increase its capacity, measured as available seat miles by 7 per cent in the second quarter, compared to last year’s quarter. The airline is also adding leased Boeing 737 Max jets that are expected to be flying next year.
Royal Bank of Canada analyst James McGarragle said Air Canada’s results missed expectations. In a note to clients, he said higher labour costs and maintenance expenses weighed on profit margins. Margins for the quarter were 8.7 per cent; analysts expected 9.9 per cent.
Bank of Montreal analyst Fadi Chamoun said sales in most regional markets topped his outlook, with the exception of Atlantic Canada. Advance ticket sales point to a strong summer, Mr. Chamoun said in a research note. All things considered, Mr. Chamoun described Air Canada’s quarter as “largely in line” with expectations.
- Eric Atkins
BCE Inc. (BCE-T) was lower by 1.4 per cent after reporting its first-quarter profit fell compared with a year ago as it faced higher severance, acquisition and other costs related mainly to job cuts.
The company also said it faced increased net mark-to-market losses on derivatives, higher interest costs and increased depreciation and amortization expenses.
However, the company reaffirmed its 2024 guidance, which includes revenue growth of 0-4 per cent (versus 2.1 per cent in 2023) and adjusted EBITDA gains of 1.5-4.5 per cent (versus 2.1 per cent).
“Directly as a result of federal government policies, we plan a significant reduction in 2024 capital expenditures that will lead to a slowdown in our pure fibre build and lower spending in highly-regulated businesses,” it said. “We expect increased interest expense, higher depreciation and amortization expense, and lower gains on sale of real estate to drive lower adjusted EPS in 2024. For 2024, we also expect higher severance payments related to workforce restructuring initiatives, higher interest paid and lower cash from working capital to drive lower free cash flow.”
BCE says it earned a profit attributable to common shareholders of $402 million or 44 cents per share for the quarter ended March 31. The result compared with a profit of $725-million or 79 cents per share in the same quarter last year.
Operating revenue totalled $6.01-billion, down from $6.05-billion in the first quarter of 2023.
Adjusted earnings per share came in at 72 cents, down 15.3 per cent year-over-year (from 85 cents) but above the Street’s expectation by 3 cents.
Canada’s largest oil and gas producer Canadian Natural Resources Ltd. (CNQ-T) finished 0.6 per cent lower after missing analysts’ estimates for first-quarter profit on Thursday, hurt by lower-than-expected production, along with a decrease in sales and realized pricing.
The firm posted an adjusted profit of $1.37 per share, below analysts’ average estimates of $1.48 per share, according to LSEG data.
The company in its outlook for 2024 in December said that it expects to drill more wells in the second half and exit the year with higher production to better align with market fundamentals and improved commodity pricing.
Net earnings were $987-million compared with $1.8-billion for the first quarter of 2023 due to lower realized synthetic crude oil (SCO) and natural gas pricing.
The realized natural gas price fell 40 per cent to $2.55 per thousand cubic feet (/mcf) on average for the quarter from a year earlier, while in oil sands mining, SCO prices decreased nearly 8 per cent to an average $88.84 per barrel.
Natural gas prices fell about 30 per cent in the first quarter on ample supply, as output rose to record levels and demand for heating fell due to a mild winter.
Product sales came in at $9.42-billion, slightly below the year-ago quarter, with a nearly 39-per-cent drop in natural gas sales.
However, the company expects oil prices to strengthen for the remainder of 2024 after the first quarter, “driving significant targeted free cash flow generation going forward,” said the president of the company Scott Stauth.
Overall production came in at 1.33 million barrels of oil equivalent per day (boepd), lower than analysts’ expectations of 1.35 million boepd.
CNQ also saw a drop in its oil sands mines, coming in at 445,209 barrels a day, a decrease of 3 per cent from year-ago levels, on planned and unplanned maintenance.
It also said it would benefit from the starting up of the Trans Mountain Oil pipeline, in which it can move 94,000 barrels a day. The pipeline overall could nearly triple the flow of oil to Canada’s west coast and reduce the discount on Canadian benchmark crude.
AutoCanada Inc. (ACQ-T) plummeted 15.7 per cent on the premarket release of weaker-than-anticipated first-quarter results.
The Edmonton-based company reported revenue of $1.421-billion, down 8 per cent year-over-year and below the Street’s expectation of $1.51-billion. Adjusted EBITDA dropped 51 per cent to $22-million, missing the consensus estimate of $46.7-million.
“High prices, elevated financing costs, and pressures on consumers’ discretionary incomes – factors that we’ve mentioned for the last number of quarters – remain significant stressors to ACQ’s results. Combined with abnormally cold weather in the quarter, though likely a secondary factor, led to a disappointing print,” said National Bank analyst Maxim Sytchev. “The normalization of the vehicle supply dynamic following record post-quarter profits underlines the importance of prudent cost control and an efficient operating structure, something that management continues to target through it’s Project Elevate initiative (US ops have now been restructured). With new vehicle pricing now negative on a y/y basis and expensive inventory still rolling through the P&L, we expect margins to remain under pressure in the near term. Interestingly, the company resumed buyback activity after an extended pause, repurchasing 79k shares (0.3 per cent of shares outstanding) for $1.9-million at an average price of $24.67 (followed by an additional 78k share/$1.9-milllion buyback through May 1st). While the resulting shareholder returns were modest, we believe investors may question the allocation of capital given the increasingly difficult operating environment.”
Mr. Sytchev thinks the tough backdrop is “likely to persist,” adding: “Consumers are under pressure as vehicle affordability remains a key problem. The excess profitability that the entire industry enjoyed during covid is now fully normalizing, bringing down gross profit per vehicle to pre-pandemic levels while the U.S. drag and much higher financing costs are pressuring the net income line. Overall, we believe that the credit/consumer cycle needs to stabilize before anyone can objectively contemplate this name. We are not there.”
Maple Leaf Foods Inc. (MFI-T) decreased 3.9 per cent after it reported a profit in its latest quarter compared with a loss a year ago as its sales edged lower.
The company says its profit amounted to $51.6-million or 42 cents per share for the quarter ended March 31 compared with a loss of $57.7-million or 48 cents per share a year earlier.
Sales totalled $1.15-billion, down from $1.17-billion in the same quarter last year.
The company says sales in its prepared foods operating unit fell 0.4 per cent compared with a year ago, with prepared meat sales up 2.9 per cent offset by a 5.7-per-cent drop in plant protein and a 7.1-per-cent decline in poultry sales compared with last year.
Pork operating unit sales fell 4.5 per cent compared with the first quarter of 2023.
On an adjusted basis, Maple Leaf Foods says it earned four cents per share in its latest quarter compared with an adjusted loss of 12 cents per share a year earlier.
As its executives continued to argue with its top shareholders over who should lead the company, which is open to a sale, shares of Gildan Activewear Inc. (GIL-T) dipped 3.6 per cent after reporting its earnings fell almost 20 per cent in its first quarter.
The fight has seen some of the Montreal-based company’s shareholders urge Gildan to return former chief executive Glenn Chamandy to the helm of the business, a position one-time Fruit of the Loom leader Vince Tyra landed in January.
Mr. Tyra and other Gildan executives attributed the lower results in its first quarter not to the leadership battle but expected softness that materialized in its hosiery and underwear segment.
Former Gildan CEO seeks payout, rejects probe into conduct, company says
Sales across the category totalled US$103.7-million, down 10 per cent from a year earlier. They reflected “broader market weakness” and a March end to the licensing agreement the company had with sportswear giant Under Armour.
Retailers wanting to hold less inventory than they did before the COVID-19 pandemic also affected the company.
“We’re not seeing the historical replenishment at this point that you would typically see,” Chuck Ward, Gildan’s president of sales, marketing and distribution, told analysts on a Wednesday call.
“We and the retailers are remaining cautious around that, but we do expect that to return as we go through the year.”
These developments weighed on Gildan, which is known for manufacturing clothing that brands and consumers customize with their logos.
Its net earnings hit US$78.7-million in its first quarter compared with from US$97.6-million a year earlier.
Net sales for the period ended March 31 reached US$695.8-million, edging down about one per cent from US$702.9-million a year prior.
Gildan executives told analysts they had expected such patterns and baked them into their previous guidance.
Mr. Tyra saw the quarter as showing the company’s “resilience” and he and other Gildan leaders who joined him on the call highlighted the performance of the business’s activewear division, which saw its sales rise just shy of one per cent from a year ago to US$592.1 million.
Moving forward, Mr. Tyra said he would be “laser focused” on the company’s supply chains and retail partners with a goal of “becoming the supplier of choice.”
“We will apply a focused local approach from product to pricing to supply chain to regain and gain share in targeted international markets,” Mr. Tyra said.
The boardroom strife was barely mentioned on Wednesday’s Gildan financial results call, but an analyst asked about whether recent developments at the company would result in operational or governance changes.
Mr. Tyra responded saying he had interviewed some of the candidates who are slated to join the board, but the decision of who was offered a seat was not his.
“We respect and rely on the professionalism and the experience of who’s joined us,” he said.
Gildan also said Wednesday that its diluted earnings per share were 47 US cents for the quarter, which compared with 54 US cents a year earlier. Analysts had expected the company to report a gain of about 52 cents US per share, according to financial markets data firm Refinitiv.
On an adjusted basis, the company reported net earnings of US$99.2-million compared with US$81.6-million a year earlier.
U.S. oil and gas producer ConocoPhillips (COP-N) was lower by 1.7 per cent after missing Wall Street estimates for first-quarter profit on Thursday, as demand concerns led to a sharp fall in natural gas prices.
A milder-than-expected winter hurt demand for the heating fuel in the quarter and pulled down natural gas prices to a three-and-a-half-year low in February.
U.S. oil majors Exxon Mobil (XOM-N) and Chevron (CVX-N) have also reported weaker first-quarter results due to lower natural gas prices.
The Houston, Texas-based company’s net profit dropped 10 per cent from a year ago to US$2.6-billion in the quarter. Adjusted earnings fell to US$2.4-billion, or US$2.03 per share, from US$2.38 per share a year earlier, missing analysts’ average estimate of US$2.04 per share, according to LSEG data.
ConocoPhillips’ total average realized price fell 7 per cent to US$56.60 per barrel of oil equivalent (boe) in the first quarter, from US$60.86 per boe a year earlier.
Most of the hit came from a 46-per-cent drop in realized natural gas prices in the first quarter. Almost half of the company’s production volumes are of natural gas or natural gas liquids.
ConocoPhillips said it expects continued volatility in the second quarter coming from its operations in the Permian Basin, the main U.S. shale basin, due to pipeline maintenance and third-party offtake constraints.
Meanwhile, U.S. oil production is on the rise with advancements in fracking technology in the United States offsetting declining well productivity.
Production at ConocoPhillips rose to 1.9 million barrels of oil equivalent per day (boepd) from 1.79 million boepd in the year-ago quarter.
Its second-quarter production is expected to rise even more to 1.91 to 1.95 million boepd, the company said.
Meanwhile, rival Exxon Mobil (XOM-N) was narrowly higher as the U.S. Federal Trade Commission signaled on Thursday it was prepared to green light its US$60-billion purchase of Pioneer Natural Resources (PXD-N) on the condition Pioneer’s former CEO will not be allowed to join Exxon’s board.
The FTC’s consent order prevents former Pioneer Natural Resources CEO Scott Sheffield from taking an offered seat on Exxon Mobil’s board of directors to resolve antitrust concerns about Exxon’s bid to buy the top shale oil producer.
“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom,” said Kyle Mach, Deputy Director of the FTC’s Bureau of Competition.
Shares of DoorDash Inc. (DASH-Q) sank over 10 per cent after it projected second-quarter core profit below estimates, signaling that higher costs were offsetting some gains from rising groceries and food orders.
The San Francisco-based online food delivery firm has been forced to increase minimum pay for its delivery workers after New York City and Seattle came up with new regulations.
“When I look at the business from Q4 to Q1, costs did go up,” said CFO Ravi Inukonda in an interview with Reuters, adding that the company passed on some fees to consumers.
DoorDash expects adjusted earnings before tax, interest, depreciation, and amortization between US$325-million and US$425-million, the mid-point of which is below an estimate of about US$393.8-million, according to LSEG data.
The company said the new regulation made its platform “less accessible and less flexible” for the people who used to generate income in those cities and reduced total orders by less than 1% in the quarter.
“DoorDash will need to demonstrate growth strategies that can make up for the risk of declining volumes from restaurants in the U.S., as well as pressures from labor expenses,” Northcoast Research analyst Jim Sanderson said.
The firm’s gross order value - a key industry metric showing total value of all app orders and subscription fees - was up by 21 per cent, to US$19.24-billion in the first quarter.
It expects second-quarter GOV to be between US$19-billion and US$19.4-billion.
Its first-quarter revenue rose over 23 per cent, to US$2.51-billion, compared to an expectation of about US$2.45-billion.
Net loss narrowed to US$23-million, or 6 US cents per share, compared to US$161-million, or 41 US cents, a year earlier.
Peloton (PTON-Q) CEO Barry McCarthy is stepping down, the company said on Thursday as it announced a 15-per-cent cut to its global workforce due to a post-pandemic slump in demand for its connected fitness equipment.
Shares of the beleaguered New York-based company fell 2.5 per cent as it also aims to pare its retail presence, potentially forcing Peloton to again push back its goal of returning to positive cash flow.
A former Netflix and Spotify executive, Mr. McCarthy took the helm in 2022 from founder John Foley and has taken several steps to cut costs.
He also led Peloton’s rebranding push to a software-focused company, leaning on its exclusive content to drive subscriber growth to offset lower equipment sales.
The company has so far taken several cost-cut measures such as changing bike prices, offering its products through third-party retailers, focusing on digital subscription plans and cutting jobs in an effort to return to profitability.
Still, demand for its equipment has remained weak as customers cut back spending due to elevated inflation and rising borrowing costs.
Peloton said on Thursday it expects connected fitness members for the full year to be between 2.96 million and 2.98 million, lower by 30,000 members from prior forecast.
“Peloton has discovered that fitness trends come and go and staying ahead of the curve is incredibly difficult,” Zak Stambor, senior analyst, retail and ecommerce at research firm Insider Intelligence said.
With files from staff and wires
David Leeder