A survey of North American equities heading in both directions
On the rise
Shares of Parkland Corp. (PKI-T) gained 0.5 per cent on news another prominent shareholder is urging the Calgary-based fuel retailer to put itself up for sale.
New York-based hedge fund Engine Capital LP sent a letter to the company’s board of directors on Wednesday “to express our support for Simpson Oil Limited’s recent public request for a strategic review at Parkland.” Simpson Oil, which is Parkland’s largest shareholder with a 19.7-per-cent ownership stake, called last week for the company to consider “new ownership” in what represents the latest salvo in a months-long governance dispute between the company and its most prominent investor.
Parkland rejected Simpson’s call for a potential sale in a statement earlier this week that said a strategic review was unnecessary. Engine, which owns roughly 2.5 per cent of Parkland and had previously led an activist campaign to convince the company to cut costs and sell assets, said “Parkland has failed as a public company.”
“We believe a sale of the company (in one or multiple transactions) is likely to result in a transaction at a price that is superior to the present value of the current strategic plan,” Engine said. “Parkland has simply not been able to achieve a proper valuation in the public markets.”
- Jameson Berkow
United Airlines (UAL-Q) shares jumped 17.5 per cent on Wednesday, driven by an upbeat profit forecast for the second quarter and strong first-quarter results despite a US$200-million hit over planemaker Boeing’s (BA-N) safety crisis.
The carrier’s forecast signaled strength in travel demand as corporate spending improved, lifting shares of rival Delta Air Lines (DAL-N) and American Airlines (AAL-Q).
“United delivered Q1 results that cleared dramatically lowered expectations in the wake of the Boeing 737 MAX-9 grounding in January,” Third Bridge analyst Peter McNally said in a note.
United, a prominent customer of Boeing, cut its annual delivery estimate for new aircraft by 25 per cent as the planemaker has been grappling with production and certification delays.
The Jan. 5 incident, where a cabin panel blew out on an Alaska Airlines jet mid-air, has fueled uncertainty over certification of Boeing’s larger variant, MAX 10, which was due for deliveries this year and was expected to be a centerpiece of United’s fleet.
Operationally, the rest of the United fleet performed well and pricing held up, partially due to reduced industry capacity, Mr. McNally said.
Aircraft shortages have constrained capacity for major airlines, hindering their efforts to cash-in on booming demand.
In the current quarter, United expects an adjusted profit of US$3.75 to US$4.25 per share, compared with analysts’ average expectations of US$3.76, according to LSEG data.
Mobileye (MBLY-Q) advanced after it said on Wednesday it had secured orders to ship 46 million of its EyeQ6 Lite assisted-driving chips over the next few years as automakers race to make cars safer and easier to drive.
Mobileye is selling the EyeQ6 Lite in all major markets around the world, and cars with the technology will be launched in the middle of this year, according to Mobileye’s Nimrod Nehushtan, executive vice president of business strategy and development.
“The 46 million represents the amount of EyeQ6 Lite (business) that we have won to date,” Mr. Nehushtan said in an interview with Reuters. “So it will grow, and it will be rolled out over the course of the next few years.”
Mobileye did not disclose the names of the customers for EyeQ6 because it was bound by non-disclosure agreements. The company counts Volkswagen and Porsche among its customers.
The EyeQ6 Lite system is Mobileye’s mass-market product for vehicles with some assisted driving features, such as automated cruise control and lane-changing, but not designed to power ones with higher levels of automation that allow drivers to take their hands off the wheel and eyes off the road.
Launching fully self-driving vehicles, such as robotaxis, or ones that require minimal human intervention, has been tougher than expected with steep investments, high safety risks and strict regulations.
Eli Lilly (LLY-N) said on Wednesday its weight-loss drug helped reduce episodes of irregular breathing in patients with obstructive sleep apnea across two late-stage trials.
The trial results add to a growing body of clinical evidence that suggests GLP-1 drugs, which include popular treatments such as Lilly’s Mounjaro and Novo Nordisk’s Wegovy, have medical benefits beyond diabetes and weight loss.
The data could also boost Lilly’s chances of U.S. government insurance coverage, Wall Street analysts said ahead of results, and pave the way to expand use of its GLP-1 drugs, sold as Zepbound for obesity and Mounjaro for type 2 diabetes, in a new set of patients.
Shares of the drugmaker rose in Wednesday trading and have risen 28 per cent this year.
In the first Lilly study, patients received only tirzepatide, the active ingredient in Zepbound and Mounjaro, and showed a 55-per-cent improvement in symptoms of obstructive sleep apnea, compared with a 5-per-cent improvement in those who received a placebo.
The second study tested the drug in combination with continuous positive airway pressure (PAP) therapy and patients showed an average 62.8-per-cent drop in events of irregular breathing.
Shares of Nike Inc. (NKE-N) rose while Under Armour Inc. (UAA-N) dipped after rival Adidas reported quarterly results above expectations and hiked its 2024 guidance on strong demand for its sneakers.
European shares of the German sportswear giant jumped more than 8 per cent on Wednesday, hitting their highest level in over two years.
Growth is being driven by strong demand momentum in “terrace” retro styles, such as Samba, Gazelle and Campus, as well as strength in performance categories, analysts at Wedbush said.
Analyst Cedric Lecasble at Stifel also highlighted that the raise in 2024 guidance “had little to do with Yeezy mechanics, but was much more driven by Adidas brand building materializing at full speed.”
In a turnaround led by CEO Bjorn Gulden, Adidas has resumed the sales of its Yeezy line after a bruising break-up with rapper West, who goes by Ye, to clear remaining stock while seeking to boost its popular retro styles.
Mr. Lecasble described revenue performance in the first quarter as “impressive”, with analysts at Telsey Advisory Group adding that growth excluding sales of Yeezy products also speaks to higher full price selling with lower promotional activity year-on-year.
On the decline
TC Energy Corp. (TRP-T) fell 3.5 per cent after saying a section of its NGTL gas pipeline system in Alberta ruptured and caught fire on Tuesday, sparking a wildfire in a remote area.
“An initial ignition of natural gas at the rupture site is now extinguished. We are working to support Alberta Wildfire in their response to contain a secondary fire,” the company said in a statement on its website.
TC said there were no injuries and it was working closely with first responders in the region.
The fire broke out about 40 km (25 miles) northwest of Edson, Alberta, in Yellowhead County. Canadian broadcaster Global News said there was a plume of flames and smoke visible from many kilometers away.
The Canada Energy Regulator (CER) said initial investigations indicated a rupture in a gas pipeline caused the fire, which was under control.
TC Energy said it has isolated and shut down the affected section of the NGTL system, and the remainder of the system is operating normally with no commercial impact.
The CER said it is sending inspectors to the area to monitor and oversee the company’s response and determine the impact of the incident.
NGTL is TC Energy’s natural gas gathering and transportation system that transports gas produced in Western Canadian Sedimentary Basin (WCSB) to markets in Canada and United States.
Western Forest Products Inc. (WEF-T) fell after saying it’s indefinitely curtailing operations at its Alberni Pacific Division facility.
The Vancouver-based company says the facility has been temporarily curtailed since the fall of 2022.
In January 2023, Western Forest Products confirmed the mill would not restart “in its current configuration.”
It started a working group to explore viable solutions for the site.
However, it says it was unable to achieve an outcome that would allow the site to keep operating.
The company says it’s offering voluntary severance for the facility’s remaining 60 employees.
U.S. Bancorp (USB-N) cut its forecast for full-year interest income and reported a 22-per-cent fall in first-quarter profit on Wednesday, as higher deposit costs and a larger corpus of rainy-day funds to cover potential defaults continue to weigh on the sector.
Shares of U.S. Bancorp were down. It was among the top losers on the broader regional banking index .
Lenders in the U.S. have been offering higher interest rates in recent months to retain deposits as customers are increasingly seeking better returns by placing their money in higher-yielding alternatives.
U.S. Bancorp now expects net interest income (NII), the difference between what banks pay customers on deposits and earn as interest on loans, between US$16.1-billion and US$16.4-billion for the full year compared to the over US$16.6-billion it had expected earlier.
“The reduction in guidance is disappointing,” analysts at HSBC said in a note, adding the bank had recently reiterated the forecast at investor conferences.
NII declined 14 per cent to US$3.99-billion in the first quarter, while net interest margin contracted to 2.70 per cent, versus 3.10 per cent a year ago.
The outlook for potential rate cuts in 2024 has changed meaningfully over the past few weeks, executives said in a call with analysts.
Net income attributable to U.S. Bancorp fell to US$1.32-billion or 78 US cents per share in the first quarter compared to US$1.7-billion or US$1.04 per share reported a year earlier.
JB Hunt Transport Services (JBHT-Q) dipped after it missed Wall Street estimates for first-quarter results on Tuesday, hurt by a decline in revenue in its biggest segment and pricing pressures at its brokerage business.
JB Hunt’s biggest segment, intermodal, which involves shipping goods via two or more modes of transportation, saw a 9-per-cent decline in revenue in the quarter ended March 31, while the segment’s volume was flat versus the same period in 2023.
Freight companies in the United States have been seeing weaker transport volumes as sticky inflation keeps the consumer spending low on new goods.
“Overall demand for our domestic intermodal service offering in the quarter was weaker than expected, partially attributable to competition from over-the-road truck options in the eastern network,” the company said.
JB Hunt’s integrated capacity solutions (ICS) unit, which provides freight brokerage services, posted an operating loss of US$17.5-million in the first quarter, compared with a loss of US$5.4-million a year earlier, owing to lower contractual and transactional rates and changes in customer freight mix.
Excessive capacity in the market forces spot rates to inch downwards, hurting profit for businesses such as ICS, which connects shippers to truckers.
The Arkansas-based company’s net earnings fell 35 per cent to US$1.22 per share in the quarter. Analysts on average estimated earnings per share of US$1.52 per share, according to LSEG data.
Its total operating revenue fell 9 per cent to US$2.94-billion, also missing analysts’ estimate of US$3.12-billion.
Take-Two Interactive Software (TTWO-Q) was flat after the publisher of the Grand Theft Auto franchise said it will lay off about 5 per cent of its workforce, or around 600 employees,as the video-gaming industry extends its more than two-year long job cuts.
The company will also scrap several projects in development as part of a cost-reduction plan, which is expected to result in total charges of up to US$200-million. It declined to name the projects that have been canceled .
Take-Two said the move is expected to drive more than US$165-million of annual cost savings.
The move aligns Take-Two with Tencent-owned Riot Games, Electronic Arts (EA-Q) and Japan’s Sony Corp. (SONY-N) in trimming workforce this year due to uncertain spending from consumers after the pandemic-era boom.
PC and console gaming revenue growth is expected to remain below pre-pandemic levels through 2026 as gamers record fewer hours of playtime, according to research firm Newzoo.
Canceled projects will account for as much as US$140-million of the total charges, while severance and employee-related costs are expected to be up to US$35-million, it said. Take-Two will also reduce some office space as part of the move.
Coach parent Tapestry (TPR-N) turned lower after the New York Times reported the U.S. Federal Trade Commission (FTC) is preparing to sue to block its US$8.-billion deal to buy Michael Kors owner Capri Holdings (CPRI-N).
The deal, which would bring together top luxury labels such as Tapestry’s Kate Spade, Stuart Weitzman and Capri’s Jimmy Choo and Versace, received regulatory clearance from the European Union and Japan on Monday.
The FTC’s five commissioners are expected to meet this week to discuss the case, a move that could precede a formal vote on whether to file a lawsuit, according to the report.
The merger proposed in August last year aimed to create a U.S. fashion powerhouse amid a gradual slowdown in demand for luxury goods in the U.S. as sticky inflation forces customers to cut back on discretionary spending.
“The most significant incoming questions (on the deal) have focused on deal break valuation as well as long-term Capri shareholder interest,” TD Cowen analyst Oliver Chen said.
In its latest quarterly earnings in February, Tapestry raised its annual profit forecast, betting on full-price sales of its premium handbags, while Capri missed third-quarter revenue and adjusted profit estimates.
Tesla (TSLA-Q) was down on Wednesday after it asked its shareholders to once again approve CEO Elon Musk’s record-breaking US$56-billion pay that was set in 2018, but was rejected by a Delaware judge in January.
The compensation includes no salary or cash bonus, but sets rewards based on Tesla’s market value rising to as much as US$650-billion over the next 10 years. Tesla is now valued at US$500.36-billion, according to LSEG data.
Mr. Musk’s pay was rejected by Kathaleen McCormick of Delaware’s Court of Chancery, who termed the compensation granted by the board as “an unfathomable sum” that was unfair to shareholders.
The January ruling, which can be appealed, had nullified the largest pay package in corporate America.
“We do not agree with what the Delaware Court decided, and we do not think that what the Delaware Court said is how corporate law should or does work,” board chairperson Robyn Denholm wrote in a letter included in the regulatory filing.
Judge McCormick also oversaw Twitter’s July 2022 lawsuit against the entrepreneur when he tried to break his us$44-billion contract to buy the social media platform.
Mr. Musk’s compensation for 2023 was $0, the filing showed. The billionaire does not take a salary from the company and is compensated through stock options.
“If it is legally advisable, we suggest simply subjecting the original 2018 package to a new shareholder vote,” Tesla said in its filing.
ASML (ASML-Q), the largest supplier of equipment to computer chip makers, reported weaker than expected first-quarter new bookings on Wednesday, although sales to China held up despite U.S.-led restrictions.
The Dutch group, which is currently Europe’s biggest tech firm, is seeing a lull in demand for its most advanced machines, but gearing up for a strong 2025 due to demand for AI and memory chips, including from top customer TSMC of Taiwan, which makes chips for Nvidia and Apple.
ASML dominates the market for lithography systems, machines that can cost hundreds millions of euros each and use light beams to help create microscopic circuitry. It is set to benefit from new chip plants planned with support from governments in Taiwan, South Korea, Japan, and the United States.
New bookings in the first quarter were 3.6 billion euros (US$3.8-billion), well below the 5.4 billion euros seen by analysts polled by Reuters.
Analysts and investors took that in their stride, noting that the many plants being built globally would need ASML equipment, while adding it would be a problem if new orders didn’t come through in the rest of this year.
“Although disappointing we would not read too much into it as order intake is notoriously lumpy,” said ING analyst Marc Hesselink.
With files from staff and wires
David Leeder