A roundup of some of the North American equities making moves in both directions today
On the rise
Royal Bank of Canada (RY-T) rose 1.1 per cent on Friday after reporting an 11-per-cent rise in quarterly profit and raising its dividend, driven by a bounce-back quarter from its capital markets arm and strong results from retail banking.
The country's largest bank is the first major lender to report results for the fiscal first quarter, which ended Jan. 31, and RBC's results set a standard for its peers to meet. Analysts expected a strong quarter from markets-sensitive business lines, such as trading, but predicted more modest growth from personal and commercial banking in Canada.
RBC earned $3.51-billion, or $2.40 per share, compared with $3.17-billion, or $2.15 a share, a year ago. On average, analysts expected earnings per share of $2.26, or adjusted EPS of $2.30, according to data from Refinitiv.
- James Bradshaw
Net earnings were $91.2-million or 57 cents per share versus a loss of $218.2-million or $1.38 per share.
Its adjusted earnings were $20.3-million or 13 cents per share versus a loss of $18.9-million or 11 cents per share. Analysts were expected adjusted EPS of 14 cents.
Altus Group Limited (AIF-T) rose 7.1 per cent after it reported revenue of $148.8-million in the fourth quarter, up 13.7 per cent from the year-ago period. Its profit was $272,000 or a penny per share versus a loss was $14.7-million or 38 cents per share a year earlier. Adjusted EPS was 43 cents versus 20 cents a year earlier.
Analysts were expecting revenue of $143.4-million and adjusted EPS of 36 cents.
Canaccord Genuity analyst Yuri Lynk said: “In our view, Altus Analytics’ (AA) growth profile is compelling due to its proprietary cash flow-derived data, industry standard software, and first-mover advantage. The Tax segment enjoys its own data advantages with multi-year tax cycles in Canada, the US, and the UK affording investors EBITDA visibility through 2021 and beyond.”
Deere & Co. (DE-N) jumped 7 per cent on the heels of reporting an unexpected increase in first-quarter profit and retaining its full-year earnings forecast as signs of stabilization in the U.S. farm sector offset weak demand for construction machines.
The world’s largest farm equipment maker’s earnings in the past quarters were buffeted by a nearly two-year-long U.S.-China trade war that hit U.S. agricultural exports, leaving farmers struggling to turn a profit.
But President Donald Trump’s interim trade deal with China has raised hopes of a recovery in farm machinery demand.
“Farmer confidence, though still subdued, has improved due in part to hopes for a relaxation of trade tensions and higher agricultural exports,” Chief Executive John May said in a statement.
Sales at its farm and turf business, which accounts for nearly 60 per cent of Deere’s revenue, declined 4 per cent during the quarter from a year ago. Improved pricing power along with lower production costs and warranty expenses, however, led to a 7-per-cent annual increase in the segment’s operating
Dropbox Inc. (DBX-Q) soared 19.9 per cent on reporting a better-than-expected quarterly profit, raising its outlook for operating margin and announcing a US$600-million share buyback after the bell on Thursday.
The company raised its operating margin target between 28 per cent and 30 per cent, which it expects to achieve by 2024, up from its initial range of 20 per cent to 22 per cent.
“The big story is the $600 million buyback, which is a clear indication that Dropbox views their stock as undervalued and that management is bullish on the future of the company,” said Rishi Jaluria, an analyst from brokerage D.A. Davidson & Co.
He added that the move was “pretty unusual” given that the company went public less than two years ago.
The company, which counts National Geographic and Spotify Technology SA among its customers, said it had 14.3 million paid subscribers at the end of the fourth quarter.
Analysts had expected 14.2 million subscribers, according to research firm FactSet.
Under the revised deal, T- Mobile’s parent Deutsche Telekom will hold about 43 per cent of the combined entity, up from the 42 per cent that the German group would have held. SoftBank will hold about 24 per cent and the rest by public shareholders.
SoftBank has agreed to surrender about 48.8 million T-Mobile shares acquired in the merger to the ‘new company’ after the deal closes, changing the exchange ratio to 11 Sprint shares for each T-Mobile share, higher than the originally agreed 9.75 shares.
Sprint shareholders other than SoftBank will continue to receive the original fixed exchange ratio.
Shares of T-Mobile were down 1 per cent.
HP Inc. (HPQ-N) was 0.2 per cent higher after saying on Thursday it would implement a poison pill plan, a move that comes after Xerox Holdings Corp. (XRX-N) pushed ahead with its efforts to acquire the PC maker.
Xerox recently raised its offer earlier this month by US$2 to US$24 per share, following several rejections of its previous buyout offers by the PC maker. HP shares closed up 0.9 per cent at US$22.64 on Thursday.
The implementation of the stockholder rights plan, which has a one-year expiration period, aims to stop investors from amassing more than 20-per-cent stake in the company.
Among other terms, if any group acquires 20 per cent, all shareholders outside the group will be able to buy additional discounted shares, diluting the ownership of the group.
“The rights will not prevent a combination of HP with another business, but should encourage Xerox (or anyone else seeking to acquire the Company) to negotiate with the Board prior to attempting to impose some combination that is not in the best interests of the HP shareholders,” HP said in its statement.
Shares of Xerox were 1.2 per cent lower.
On the decline
Teck Resources Ltd. (TECK-B-T) fell 15.5 per cent after saying it would be forced to take a write down of $1.1-billion on the Frontier oil sands project if the federal government doesn’t approve it.
The Liberals are expected to make a decision by the end of the month on whether Vancouver-based Teck is allowed to proceed with Frontier.
Over the past few months, Frontier has become a political flashpoint in Canada. Its proponents, such as Alberta Premier Jason Kenney, argue that approving the project would boost the ailing provincial economy, but its detractors point out that Frontier would significantly set back Canada’s attempts to reduce its carbon footprint and meet international emissions benchmarks.
An early stage study predicted that the project could produce 260,000 barrels of oil a day, which would make it one of the biggest operations in the oil sands.
But Teck hasn’t proven whether the project which it previously said would cost more than $20-billion to construct, would be commercially viable.
- Niall McGee
Canadian Imperial Bank of Commerce (CM-T) was narrowly lower after The Globe and Mail reported it is expected to make major changes to its senior executive ranks and announce about 2,000 jobs cuts when it reports fiscal first-quarter earnings next week, according to sources familiar with the plan.
The shakeup at the top of Canada’s fifth-largest bank will usher in new leadership for its underperforming retail banking division, and in key functions such as risk and technology. CIBC is under mounting pressure from investors to get a tighter grip on rising expenses, and to jump-start growth in mortgage lending, a key source of revenue for the bank that has stalled over the past year.
- James Bradshaw
Lululemon Athletica Inc. (LULU-Q) was 2.9 per cent lower after saying Friday the majority of its 38 stores in China have been closed for a period of time since Feb. 3 with some now operating on a reduced schedule following guidance from local authorities as a result of the spread of the coronavirus.
The company said it will monitor the situation and provide and update on the financial and operational impact on its fourth-quarter earnings call next month.
Superior Plus Corp. (SPB-T) lost 9.3 per cent after reported net earnings of $74.6-million or 43 cents per share in the fourth quarter, compared to a net loss of $48.3-million or 28 cents in the prior-year quarter “primarily due to the unrealized loss on derivative financial instruments in the fourth quarter of 2018 compared to a gain in 2019,” the company stated.
Revenue was $821-million down from $889.2-million in the year-ago period. Analysts were expecting revenue of $853.8-million and earnings of 40 cents per share.
Industrial Alliance Securities analyst Elias Foscolos said: “SPB announced its Q4/19 results which were above expectations. SPB’s $524.5-million in 2019 Adj. EBITDA is on the top end of its guidance range. The beat was derived from above-average unit margins in both Canada and the US. In conjunction with the results, SPB unveiled its 2020 guidance range of $475-515-million. The year-over-year decrease and tempered expectations are mainly a result of less-than-optimistic expectations of wholesale propane market fundamentals.”
The company last year closed some underperforming plants in North America, as production fell due to lower demand.
Magna also warned that coronavirus outbreak in China, which generates about 5 per cent of its annual sales, could further hit its 2020 sales, as the full impact of the epidemic is yet to be ascertained.
“We have not included any adjustment to our outlook related to coronavirus, as it is difficult to forecast when our customers’ facilities in China will be fully operational,” Magna said in a statement.
The alternative mortgage lender says the profit amounted to 65 cents per share for the quarter ended Dec. 31 compared with a profit of 46 cents per share for the fourth quarter of 2018.
On an adjusted basis, Home Capital says it earned 72 cents per share in its latest quarter, up from an adjusted profit of 46 cents per share a year earlier.
Shares of Brazilian iron ore miner Vale SA (VALE-N) were down 3.6 per cent in New York after it severely missed quarterly profit and margin estimates on Thursday, largely due to impairments related to its base metal and coal operations and the lingering effects of a deadly dam burst in January 2019.
Excluding one-time factors, the company would have largely met expectations.
As a whole, the results showed a company still reeling from the Brumadinho disaster and struggling to realize the potential of certain deposits, but which has also managed to limit the apparent effects of the dam burst on output, pleasing some analysts.
In a securities filing, the company reported a US$1.56-billion net loss in the fourth quarter. A Refinitiv poll of analysts had predicted a net profit of US$2.61 -billion.
That miss was largely due to a US$2.51-billion impairment at its nickel mine in New Caledonia, where Vale has revised down expected production levels due to “challenging issues” related to “production and processing.”
Adjusted net income was $34.4-million or 15 cents per share down from $102.2-million a year earlier. Analysts were expecting adjusted EPS of 25 cents per share, according to S&P Capital IQ.
The company reported adjusted funds flow $178.9-million in the quarter, down from $214.3-million a year earlier.
Desjardins Securities analyst Scott Van Bolhuis said: “Overall, results were in line, with the company posting strong production volumes and liquids growth. ERF also released reserves and formally established ESG targets. In our view, the quarter was another data point highlighting the company’s high-quality asset base and management team.”
Hudbay Minerals Inc. (HBM-T) slid 12.8 per cent after its fourth-quarter results, released Thursday after the bell, fell narrowly below expectations on the Street.
The results and 2020 guidance led an equity analyst to downgrade the Toronto-based miner’s shares.
Elsewhere, Industrial Alliance Securities analyst George Topping said: “The Street had expected a weaker quarter, making up for outperformance earlier in H1/2019. With the Pampacancha surface rights in hand it may quash some investor concern over growth in the Company. The New Britannia gold mill refurbishment will start in Q2/20 which will propel Lalor gold production to 140Koz by 2022.”
CCL Industries Inc. (CCL.B-T) plummeted 17.1 per cent after its fourth-quarter results and 2020 outlook disappointed the Street.
Raymond James analyst Michael Glen said: “In general, we have a positive view on CCL management and the company’s positioning in their core business lines. Additionally, we were also working with an assumption that the 4Q result was going to see some challenges and we were below consensus for the quarter . ... That said, it would appear that some of the pressure points are more significant than we anticipated, and we will need to take this into consideration as we assess our forecast for 2020.”
With files from Terry Weber, staff and wires