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A survey of North American equities heading in both directions

On the rise

Bank of Montreal (BMO-T) rose 2.1 per cent on Friday after it reported lower fourth-quarter profit that missed analysts’ estimates as the lender booked higher expenses and loan loss provisions.

BMO earned $1.6-billion, or $2.06 per share, in the three months that ended Oct. 31. That compared with $4.5-billion, or $6.51 per share, in the same quarter last year.

Adjusted to exclude certain items, including costs related to BMO’s acquisition of Bank of the West and legal expenses, the bank reported profit of $2.81 per share. That fell below the $2.86 per share analysts expected, according to Refinitiv.

Banks cut jobs, trim expenses as economic fears weigh on earnings

“Driven by record revenue and ongoing momentum in Canadian personal and commercial banking and the contribution of Bank of the West, we delivered strong performance in a challenging economic backdrop,” BMO chief executive officer Darryl White said in a statement.

The bank raised its quarterly dividend to $1.51 per share.

BMO is the fifth major Canadian bank to report earnings for the fiscal fourth quarter. National Bank (NA-T) also reported earnings on Friday. Earlier this week, Bank of Nova Scotia (BNS-T) and Toronto-Dominion Bank (TD-T) missed analyst expectations, while Royal Bank of Canada (RY-T) and Canadian Imperial Bank of Commerce (CM-T) beat estimates.

A breakdown of the big banks’ fourth-quarter earnings

- Stefanie Marotta

Shares of National Bank of Canada (NA-T) were higher by almost 5 per cent on Friday after it reported higher fourth-quarter profit that beat analysts’ estimates as capital markets revenue surged and the lender posted lower-than-expected loan loss provisions.

National Bank earned $768-million, or $2.14 per share, in the three months that ended Oct. 31. That compared with $738-billion, or $2.08 per share, in the same quarter last year.

David Berman: Lagging bank stocks are winners. But is Bank of Nova Scotia rebound-proof?

Adjusted to exclude certain items, the bank said it earned $2.44 per share. That edged out the $2.25 per share analysts expected, according to Refinitiv.

“Through strong execution, organic growth, and tight expense management, we delivered solid financial results, generated an excellent return on equity, and maintained robust capital levels in 2023,” National chief executive officer Laurent Ferreira said in a statement.

The bank raised its quarterly dividend to $1.06 per share.

- Stefanie Marotta

Brookfield Asset Management (BAM-T) increased 2.4 per cent after it said on Friday its Brookfield Infrastructure Partners (BIP.UN-T) arm had raised $28-billion for its largest-ever fund, wagering on infrastructure assets the company believes would benefit from a shift to “deglobalization,” given recent geopolitical tensions.

Infrastructure investments typically offer better protection from market volatility and economic turbulence. Since last year, a dearth of opportunities for dealmaking in other sectors has further boosted the appeal of such investments.

Brookfield said the fund has already deployed 40 per cent of its capital in six investments including renewable, transport, data center and telecom tower assets.

The company, which manages over $850-billion in assets, said it had also raised $2-billion for related co-investment vehicles.

Opportunities arising out of “deglobalization” would be one of the themes the fund would focus on, Brookfield said.

Over the past year, geopolitical tensions such as Russia’s war on Ukraine and the recent conflict in the Middle East have prompted fierce debate on the fate of globalization. Worried about the economic fallout of geopolitical instability, businesses and governments are looking at ways to diversify their supply chains.

First Quantum Minerals Ltd. (FM-T) was up 0.7 per cent after saying Friday it will suspend its current-year production outlook for the Cobre mine in Panama and has initiated international arbitration over a contested contract with the country’s government.

The lucrative Cobre Panama copper mine has sparked public anger in the country, starting as small, environmental protests that have morphed into bigger demonstrations against the government on charges that the contract was too generous.

The contract, agreed between the company and the Panama government in October, provided First Quantum a 20-year mining right with an option to extend for another 20 years, in return for $375 million in annual revenue to Panama.

On Tuesday, Panama President Laurentino Cortizo said the Cobre Panama mine would be shut down, hours after the country’s Supreme Court declared its contract unconstitutional.

First Quantum said on Friday its unit had started arbitration before the International Court of Arbitration to protect its rights under the 2023 concession agreement that the government of Panama agreed to earlier this year.

Paramount Global (PARA-Q) gained 9.8 per cent after the Wall Street Journal reported on Friday it has discussed with Apple Inc. (AAPL-Q) bundling streaming services at a discount.

The companies have talked about rolling out a combined Paramount+ and Apple TV+ offering that would cost less than subscribing to both services separately, the report said, citing people familiar with the discussions.

A pairing between the two rival streaming giants could likely help attract cost-conscious customers who have been grappling with higher costs for everything from food to electronics.

Verizon (VZ-N) is also planning to offer the ad-supported versions of Netflix (NFLX-Q) and Warner Bros Discovery’s (WBD-Q) Max streaming services for about US$10 a month combined instead of about US$17, a source familiar with the matter told Reuters last month.

Grocery delivery app Instacart (CART-Q) said earlier this week that it had partnered with NBCUniversal’s Peacock to provide the streaming service at no extra cost to all of its paying U.S. subscribers.

The talks between Apple and Paramount are in early stages, and it is unclear what shape the bundle could take, the WSJ report said.

Ulta Beauty (ULTA-Q) jumped 10.8 per cent after it raised the lower end of its full-year profit and sales forecasts helped by buoyant demand for luxury skincare and fragrances and also said its longtime CFO Scott Settersten will retire in April next year.

Mr. Settersten who has been with the company for nearly 20 years will be succeeded by Paula Oyibo, the company’s senior vice president of finance who joined in 2019.

Despite rising borrowing costs leading to tightened household budgets, wealthy shoppers have prioritized indulging in beauty and skincare goods even as they cut back on bigger discretionary purchases like televisions and apparel.

Ulta has also seen a boost from consumer interest steering toward dermatologist recommended brands like La Roche-Posay and CeraVe while also seeing robust demand from social media promotions of brands like Good Molecules, Hero Cosmetics and Peach Slices.

The third quarter saw a slew of new launches notably – ‘Half Magic’, a vegan and cruelty-free makeup line by Euphoria makeup artist Donni Davy exclusive to Ulta Beauty, hair styling tools from Shark Beauty, dermatologist recommended PanOxyl, a popular Gen Z brand and Sniff, an emerging unisex fragrance.

The cosmetics retailer raised the lower end of its annual profit forecast to US$25.20 and US$25.60 per share, from its previous view of US$25.10 to US$25.60 per share.

The company also raised the lower end of its annual net sales forecast. It now expects it between US$11.10-billion and US$11.15-billion, versus its prior forecast of US$11.05-billion to US$11.15-billion.

The retailer’s quarterly net sales rose 6.4 per cent to US$2.49-billion. Analysts on average expected revenue of US$2.47-billion, as per LSEG data.

Excluding items, the company earned US$5.07 per share topping Wall Street’s expectations of a profit of US$4.95.

Electric-vehicle maker Fisker Inc. (FSR-N) said on Friday it will scale down production this month, and produce lesser cars this year than its previous guidance, to prioritize cash for working capital needs.

Shares of the EV maker, which has been struggling with a cash crunch, rose 9.8 per cent.

“Fisker has made a strategic decision to reduce December production to prioritize liquidity to unlock over $300 million of working capital,” the company said.

Fisker cut its production target for the year - at least a second time - to just over 10,000 units, compared with its earlier forecast of 13,000 to 17,000.

The company said it delivered 123 vehicles on Thursday, adding it plans to accelerates sale and deliveries despite the tough market conditions for EVs.

Some EV firms are facing dwindling cash reserves, pressured by high costs related to production ramp-ups and inflation and price cuts by rivals such Tesla.

In its most recent financial results, which were filed after a delay due to the departure of its former accounting chief, Fisker reported a loss of US$91-million and revenue of US$71.8-million for the third quarter, both missing expectations.

On the decline

Tesla Inc. (TSLA-Q) dipped 0.5 per cent after it announced its long-delayed Cybertruck will be priced starting at US$60,990, over 50 per cent more than what CEO Elon Musk had touted in 2019 and a cost analysts have said will draw select, affluent buyers.

The truck, made of shiny stainless steel and shaped into flat planes, is partly inspired by a car-turned-submarine in the 1977 James Bond movie The Spy Who Loved Me, Mr. Musk has said.

Its new body material and unconventional, futuristic styling has added complexity and costs to production, and threatens to alienate traditional pickup truck buyers who focus on utility, experts say.

But Mr. Musk, who has priced the vehicle’s three variants between US$60,990 and US$99,990, said on Thursday the Cybertruck has “more utility than a truck” and is “faster than a sports car.”

He drove a Cybertruck onto a stage to cheers from the crowd and later handed over vehicles to about a dozen customers at an event in Austin, Texas.

“Finally, the future will look like the future,” he said about the truck’s design, showing a video of the Cybertruck towing a Porsche 911 and beating another gasoline-powered 911 in a short race.

Pfizer Inc. (PFE-N) fell over 5 per cent after it said on Friday it would not advance a twice-daily version of oral weight-loss drug danuglipron into late-stage studies after most patients in a mid-stage trial dropped out with high rates of side effects such as nausea and vomiting.

The decision marks a blow to Pfizer’s ambitions to become an early contender in the lucrative market for weight-loss drugs.

Danuglipron belongs to the same class of diabetes and obesity treatments as Novo Nordisk’s (NVO-N) Wegovy and Ozempic, and Eli Lilly’s (LLY-N) Mounjaro and Zepbound.

Pfizer said it would instead focus on a once-daily, modified release version of danuglipron and “gathering the data to understand its potential profile.” Data on how this version interacts with the human body is expected sometime next year.

In the current study of the twice-daily version, Pfizer said the drug, however, met the main goal of reducing weight in adults with obesity and without type 2 diabetes.

Observed mean weight loss in the trial, across doses, ranged between 6.9 per cent and 11.7 per cent in patients on the drug at 32 weeks, versus weight gain of 1.4 per cent for placebo.

That compared to a nearly 15-per-cent drop observed with the highest dose of Eli Lilly’s once-daily experimental orforglipron pill after 36 weeks of treatment in a trial of obese or overweight patients.

“We believe an improved once-daily formulation of danuglipron could play an important role in the obesity treatment paradigm,” Pfizer’s Chief Scientific Officer Mikael Dolsten said in a statement.

Pfizer said while the common side effects in the twice-daily version study were mild, it saw high rates of those events in the trial. High discontinuation rates, greater than 50 per cent, were seen across all doses compared to about 40 per cent with placebo.

Chipmaker Marvell Technology (MRVL-Q) said on Thursday it expects its data center business to continue to grow next year even as roughly half its revenue will decline in the first quarter as its customers face tough conditions.

Its shares fell 5.3 per cent in Friday trading.

CEO Matthew Murphy attributed the anticipated drop in revenue from its segments including wireless carrier infrastructure and enterprise to a tough macroeconomic environment and longer-than-expected inventory corrections by its customers.

“You’ve seen it in announcements from the big enterprise companies and you’ve also seen it from the carrier companies,” Mr. Murphy said in an interview with Reuters. “It’s a very weak environment.”

The data center segment, which includes its custom AI chip business and networking equipment, beat market expectations for revenue in the third quarter of 2024. Mr. Murphy said he expects the segment to continue to grow but that it’s difficult to predict how that will fare next year largely because of AI.

“The real swing is the AI portion - in terms of how it’s going to grow, what’s the magnitude of it,” Mr. Murphy said. “It’s gone up so much this year.”

Marvell helps companies such as Amazon’s cloud computing unit build custom chips.

For the company’s enterprise and carrier business, inventory clearing has dampened prospects of new orders for chip makers like Marvell.

Mr. Murphy said on an earnings call that while Marvell does expect year-on-year growth going forward, he could not comment on concerns surrounding inventory build hindering growth projections for the first quarter.

The company’s fourth-quarter forecast came in below Wall Street estimates.

For the current quarter, Marvell expects revenue of US$1.42-billion plus or minus 5 per cent, compared with estimates of US$1.46-billion.

On an adjusted basis, the company expects income of 46 US cents per share, plus or minus 5 US cents for the fourth quarter. This compares to estimates of 49 US cents profit per share.

However, Marvell beat Wall Street estimates for third-quarter revenue and profit, as the rapid adoption of artificial intelligence (AI) buoyed demand for its chips.

Marvell posted net revenue of US$1.42-billion for the quarter ended Oct. 28, compared with analysts’ estimates of US$1.40-billion, according to LSEG data.

Excluding items, the company posted a profit of 41 US cents per share, marginally beating estimates of 40 US cents per share.

U.S.-listed shares of Alibaba Group Holding (BABA-N) dipped 1.2 per cent on Friday following a Morgan Stanley downgrade on concerns over slower turnaround in its key businesses, just hours after rival PDD Holdings Inc. (PDD-Q) raced past to become the most valuable Chinese e-commerce firm.

Alibaba’s U.S. shares slipped, tracking a fresh one-year low. They are down 14 per cent since the company posted in line second-quarter revenue and scrapped plans to spin off its cloud business.

Meanwhile, shares of PDD Holdings have surged following stellar quarterly results from the Temu parent this week. The company closed with a market capitalization of nearly US$196-billion on Thursday, surpassing Alibaba’s market value of US$190.45-billion.

Morgan Stanley analysts downgraded Alibaba to “equal-weight” from “overweight,” flagging concerns over softness in its customer management revenue and cloud business due to sagging economic recovery in China.

They also noted uncertainties from the decision to scrap the spin-off of its cloud business.

The brokerage cut its price target on the stock to US$90 from US$110, the second lowest on Wall Street, as per LSEG data.

Alibaba’s U.S. shares, down about 15 per cent so far this year, are set for their third consecutive year of losses.

On the other hand, Morgan Stanley named PDD as its top pick in the sector, saying the company is best placed to navigate the current economic environment with its heavy discounting steps.

“We expect PDD to continue to gain share in the domestic market thanks to its favorable business model amid consumers’ behavior shift,” Morgan Stanley’s Eddy Wang noted, adding that its cross-border e-commerce business, Temu, is not fully valued by the market.

PDD shares were also down, but have surged more than 80 per cent in 2023, handily outperforming its peers.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/02/24 3:15pm EST.

SymbolName% changeLast
Apple Inc
Alibaba Group Holding ADR
Bank of Montreal
Brookfield Asset Management Ltd
Brookfield Infra Partners LP Units
Fisker Inc
First Quantum Minerals Ltd
Marvell Technology Inc
National Bank of Canada
Paramount Global Cl B
Pdd Holdings Inc
Pfizer Inc
Tesla Inc
Ulta Beauty Inc

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