A roundup of some of the North American equities making moves in both directions today
On the rise
Mullen Group Ltd. (MTL-T) rose 6.3 per cent in mid-afternoon trading on Friday after it said it expects second-quarter revenues to be in the range of $240-million to $260-million, in line with expectations of $247.3-million.
CEO Murray Mullen said consolidated revenues for the last two months “are trending down by 22 per cent year over year, which appears to be consistent with the vast majority of our competitors and the railways.”
Industrial Alliance Securities analyst Elias Foscolos said: “MTL’s Q2/20 mid-quarter update will most likely be viewed as positive by investors. Results for the quarter are trending above expectations based on April/May, and the Company has indicated that certain business units have improved margins and market share. Sentiment from MTL is that the worst is behind as regional economies enter various phases of re-opening, and the Company has hired back 20 per cent of its furloughed workforce to date. Although most analysts are no longer including Q2/20 figures in valuation, the solid projected results would be positive for debt covenant calculations, lowering risk. The Company has also increased its cash balance by $30-million since the end of Q1/20.”
The Toronto-based retailer reported on Friday that its sales fell to $29.9-million in the thirteen weeks ended May 2, compared to $54.4-million in the same period last year.
Like many retailers, the company closed its North American stores in mid-March, and temporarily laid off staff. In China, where Roots has 37 stores operated by a partner, locations had closed earlier and began to reopen during the first quarter. Its 115 partner-operated stores in Taiwan and two in Hong Kong operated at reduced hours. Traffic to the stores in Asia continues to be lower than pre-pandemic levels.
- Susan Krashinsky Robertson
American Airlines Group Inc. (AAL-Q) soared 14.6 per cent after it joined Delta Air Lines (DAL-N) in forecasting a 90-per-cent slump in second-quarter revenue, but said it expects to cut its cash burn rate to about zero by the end of 2020 as travel demand returns.
The U.S. airlines have said that a modest recovery in demand was helping slow their daily cash burn rates in June, after the COVID-19 pandemic led to hundreds of flight cancellations.
Many airlines are now adding back flights in July as demand modestly rebounds.
American Airlines expects its daily cash burn rate to slow to about US$40-million in June, and said it plans to fly 55 per cent of its domestic schedule and nearly 20 per cent of its international schedule in July.
“The company has recently experienced improving demand conditions and has passed the peak in cash refund activity,” American Airlines said in a statement.
Guyana Goldfields Inc. (GUY-T) was up 1.7 per cent after agreeing to be acquired by China’s Zijin China’s Zijin Mining for $323-million, bringing an end to a protracted takeover battle for the Canada-listed gold miner.
Toronto-based Guyana Goldfields announced on June 3 that it had received a binding proposal from an unnamed overseas-based miner to acquire the company, valuing it around 35 per cent higher than a previously accepted offer from Silvercorp Metals.
On Friday, Zijin, one of China’s biggest gold producers, was confirmed as the mystery bidder behind the higher all-cash offer to buy Guyana Goldfields, whose flagship asset is the Aurora gold mine in Guyana, for $1.85 per share.
Zijin has been on an acquisition spree, wrapping up its purchase of Continental Gold for $1.3-billion in March and earlier this week taking 50.1-per-cent in a copper miner in Tibet for $548-million.
“The all-cash offer from Zijin represents a significant premium to the amended Silvercorp offer price and is an excellent outcome for Guyana Goldfield’s shareholders,” Guyana Goldfields CEO Alan Pangbourne said in a statement.
Adobe Inc. (ADBE-Q) rose 3.2 per cent after posting better-than-expected quarterly profit, driven by strong demand for its Creative Cloud and Document Cloud software.
RBC Dominion Securities analyst Alex Zukin said: “ADBE reported a strong F2Q20 earnings report despite low expectations heading into the print which should support a positive reaction to shares. With ADBE’s digital media business arguably benefiting from COVID and digital experience performing in-line with non-WFH beneficiaries (i.e. poorly), we think relatively speaking ADBE is a net winner today.”
Centene Corp. (CNC-N) raised its full-year adjusted profit forecast on Friday, one-and-a-half month after warning that medical costs would rise later in the year, sending the health insurer’s shares up nearly 1.5 per cent.
The company maintained its 2020 profit target in April, but warned of higher costs in the second half of the year on expectations of members resuming their non-urgent medical procedures postponed due to the COVID-19 pandemic.
Analysts in the past have pointed to a boost in membership for government-sponsored health insurance plans as people lose jobs amid a global recession.
The company said it now expects a profit of US$4.76 to US$4.96 per share, compared with its earlier forecast of between US$4.56 and US$4.76 per share.
Car rental firm Hertz Global Holdings Inc. (HTZ-N) jumped 57 per cent after it said it would sell up to US$1-billion in shares, cashing in on a huge speculative rise in its share price since filing for bankruptcy late last month.
Since filing for bankruptcy on May 22, Hertz’s shares have risen more than threefold in value. The stock jumped 157 per cent in the week ended June 5, their biggest weekly percentage gain on record.
Hertz is now seeking approval from a bankruptcy court to potentially sell 246.78 million unissued shares to Jefferies LLC.
“The recent market prices of and the trading volumes in Hertz’s common stock could potentially present a unique opportunity for the debtors to raise capital on terms that are far superior to any debtor-in-possession financing,” the company said in a regulatory filing on Thursday.
Hertz said the net proceeds would be used for general working capital purposes.
On the decline
Lululemon Athletica Inc. (LULU-Q) missed Wall Street estimates for quarterly revenue and profit for the first time in about three years due to coronavirus-led store closures, sending the yoga apparel maker’s shares down about 4.5 per cent.
Athletic wear makers like Lululemon and rival Nike have flagged higher demand for apparel and merchandise as consumers turned to home workouts during lockdowns, but that failed to offset the hit from store closures.
Lululemon’s yoga classes, popular among its target millennial shoppers, were also put on hold due to the pandemic, leading to a 17-per-cent decline in revenue.
Net revenue came in at US$652-million in the first quarter ended May 3, below expectations of US$688.4-million, according to Refinitiv IBES data.
Still, sales from its app and website surged 70 per cent in the quarter, with a 170-per-cent rise reported in Europe and 150 per cent in Australia, as consumers bought more yoga and training products.
In a research note, RBC Dominon Securities analyst Kate Fitzsimons said: “With the shares up 120 per cent from March lows (SPX up 26 per cent), expectations were not low headed into LULU’s print. While comments on the shape of the store recovery on top of inventory up 41 per cent are likely to be near-term overhangs, we are buyers of LULU shares given category tailwinds, market share opportunities, strong digital infrastructure, and strong balance sheet.”
Goldman Sachs and Morgan Stanley see the electric carmaker’s shares were overpriced, two days after the high-flying stock crossed US$1,000 per share.
In a research note released before the bell, Joel Tiss said: “We believe any near-term recovery for its end markets will be somewhat challenged by customers’ budgetary constraints and government finances being stretched.”
With files from Brenda Bouw, staff and wires