A roundup of some of the North American equities making moves in both directions today
On the rise
Canaccord Genuity Group Inc. (CF-T) was up 9.7 per cent on Friday in response to a Bloomberg report that the Toronto-based firm, is exploring strategic options, including a sale of all or part of its business.
Sun Life Financial Inc. (SLF-T) rose 1.9 per cent after it beat analyst estimates for second-quarter core earnings on Thursday, helped by lower claims on some health plans, particularly in the United States, and the positive impact of investing activity.
Underlying net income, excluding adjustments and market impacts, was $1.26 a share in the three months ended June 30, compared with $1.24 a year earlier, despite higher death claims and credit charges, Canada’s second-biggest life insurer said in a statement. Analysts had expected $1.13 a share.
Sun Life is the third Canadian life insurer this week to report results that comfortably beat analyst estimates, with Manulife Financial Corp and Great-West Life posting similar beats. Their shares closed near two-month highs on Thursday.
See also: Manulife records U.S. profits on falling long-term care costs during COVID-19 pandemic
“The industry globally has been experiencing mortality claims for COVID-19 that are less than expected,” Sun Life Chief Executive Dean Connor said in an interview. “The impact of credit, reserving and charges, has also been somewhat less than people expected, partly because of government support.”
Mr. Connor acknowledged uncertainties in the broader environment that could have an impact in future quarters.
“Beyond interest rates, which will stay low for a long time, it’s difficult to speculate on what will happen with all the other moving parts,” he said.
Linamar Corp. (LNR-T) was up 0.9 per cent in the wake of posting a smaller-than-expected quarterly loss after the bell on Thursday, as the Canadian auto parts maker kept a tight lid on costs to weather the demand fallout from the COVID-19 pandemic.
The company, which supplies to General Motors, also pointed to a strengthening return in volumes as automotive production in North America and Europe restarted in May.
“We are through the toughest part and now laser-focused on restarting... and recovering,” Chief Executive Linda Hasenfratz said.
Still, a resurgence in new coronavirus cases in southern and southwestern U.S. states has cast a shadow over the prospect of a quick recovery in the automotive market.
Sales in the company’s industrial unit fell 56.7 per cent to $259.2-million in the second quarter ended June 30, while they dropped 55.3 per cent in its transportation division due to shutdowns during the pandemic.
Total sales plunged 55.7 per cent to $923.6-million.
Excluding items, the company posted a loss of 34 cents per share, compared with analysts’ average estimates of a loss of 80 cents.
After announcing better-than-expected financial results on Thursday evening, Parkland Fuel Corp. (PKI-T) was higher by 3.4 per cent.
The company reported adjusted EBITDA of $191-million for its second quarter, well ahead of consensus forecast of $148-million.
Industrial Alliance Securities analyst Elias Foscolos said: “Even after adjusting for the CEWS program, the results were a beat. We attribute the above-expectation results to both a focus on reducing costs and a business model, particularly in the Canadian retail segment, that is more resilient than we thought was possible. We expect the market to react positively to the results.”
Guelph, Ont.-based Canadian Solar Inc. (CSIQ-Q) jumped over 7 per cent in the wake of reporting a surprise second-quarter profit before the bell.
The solar cell manufacturer reported adjusted earnings per share of 9 US cents, versus the Street's expectation of a 4-US-cent loss. The beat was due in part to a 17-per-cent reduction in operating expenses.
Revenue of US$695.8-million also topped the consensus forecast (US$663-million).
“Management expects the demand in 2021 to be strong, according to various research reports and Canadian Solar’s own sales feedback. At the same time, industry consolidation is set to accelerate as customer preferences become more sophisticated around quality and service, increasingly choosing top tier solar brands,” the company said.
“As a result, Canadian Solar is positioning itself more assertively for returns-accretive growth.”
Heroux-Devtek Inc. (HRX-T) rose 3.8 per cent after it swung to a net loss in its latest quarter as the landing gear manufacturer felt the impact from severe turbulence to the global aerospace industry caused by the COVID-19 pandemic.
The Quebec-based company says it lost $13-million or 4 cents per share in its fiscal first quarter, down from a net profit of $6.4-million or 18 cents per share a year earlier.
Adjusted profits were cut in half, reaching $3.38-million or 9 cents per share, compared with $6.96-million or 19 cents per share in the prior year.
Revenues for the three months ended June 30 decreased 10.5 per cent to $128.3-million, from $143.4-million in the first quarter of 2019.
Heroux-Devtek was expected to earn 5 cents per share in net income and 7 cents per share in adjusted profits on $129.8-million of revenues, according to financial markets data firm Refinitiv.
Laurentian Bank Securities analyst Mona Nazir said: “With HRX’s 50-per-cent exposure to the Civil Aviation end market, we were expecting a material softness in results and going forward some uncertainty remains as to the timing and magnitude of potential declines. Q1/F21 results reflected slower demand within the commercial segment, which declined by 27 per cent year-over-year; however, Defence exhibited 3-per-cent growth. We view positively management’s ability to rein in costs and take necessary action in light of the related COVID had on the Aviation industry. Swift action to reduce headcount, and reduce costs in light of a drastic demand drop-off proved successful, as margin declined 70 basis points year-over-year. While we are cognizant of continued headwinds for HRX, we believe the stock price sell-off (down 55 per cent in 6 month period) is overdone and believe that HRX offers an attractive value proposition given the positive FCF (more than $10-million for Q1/F21) and healthy financial position ($205-million availability).”
Western Forest Products Inc. (WEF-T) finished flat after it beat expectations as the company earned $8.5-million in its latest quarter on a 17-per-cent drop in revenues over uncertainty related to COVID-19.
The Vancouver-based company says it earned two cents per share in the second quarter, compared with zero cents per share or a loss of $700,000 a year earlier.
Revenues for the three months ended June 30 were $256.3-million, down from $310.3-million in the prior year.
Western Forest Products was expected to report no profits on $153.5-million of revenues, according to financial markets data firm Refinitiv.
In a research note, Raymond James analyst Daryl Swetlishoff said: “Following a lengthy strike, along with demand and operational uncertainty associated with theCOVID-19 pandemic, Western successfully transitioned to more normal operations during 2Q20. Highlights of the quarter included rebuilding depleted log inventories along with restarting the’Cow Bay’ sawmill - all while maintaining operating/employment levels. Last quarter in response to COVID-19 related demand uncertainty, Western restricted capital spending, suspended the quarterly dividend and announced a partial sale of select assets boosting financial liquidity to $95.1-million (exceeding ongoing operating capital requirements). Though appreciating 17 per cent during the past month (versus the TSX at 6 per cent), Western shares have lagged lumber peers with a heavier commodity weighting and earnings uncertainty associated with the B.C. Government’s Manufactured Forest Products Regulation. Nonetheless, with further operational progress and buoyant markets we see attractive value in Western shares and recommend investors continue to add to positions.”
Auto parts maker Magna International Inc. (MG-T) gained 0.8 per cent despite reporting better-than-expected quarterly revenue and forecast full-year sales above estimates before the bell, as vehicle production in North America showed signs of a recovery from the COVID-19 pandemic.
The company said it lost about $5.5-billion in sales during the second quarter, as its customers shut production amid government-enforced lockdowns. Light-vehicle production in North America, Magna’s biggest market, tumbled 70 per cent in the period.
But as economies reopen following easing of the lockdowns, North America auto sales have gradually recovered since hitting a bottom in April, resulting in major automakers scrambling to ramp up production and boost weak inventories at dealerships.
That has lifted sales at several auto suppliers including Canada’s Magna, which makes parts such as body structures, chassis and powertrain for customers including Ford Motor and Volkswagen.
“While our second quarter results were impacted by a precipitous decline in global vehicle production ... I am pleased we have been able to successfully restart operations at our plants around the world,” Chief Executive Officer Don Walker said in a statement.
Ontario-based Magna had pulled its full-year financial outlook in March, and now expects 2020 sales between $30-billion and $32-billion, above analysts’ estimate of $30.2-billion, according to IBES data from Refinitiv.
However, the sales target is still down between 19 per cent and 24 per cent compared with a year earlier.
On an adjusted basis, Magna lost $1.71 per share in the quarter ended June 30, bigger than estimates of a loss of $1.57 per share.
Enerplus Corp. (ERF-T) was up 2.3 per cent after releasing second-quarter results before the bell that exceeded the Street’s expectations and reinstating its 2020 guidance.
Desjardins Securities analyst Scott Van Bolhuis said: “We view the quarter positively and commend management’s ability to manage the oil price crisis. We reiterate our positive outlook on the shares while remaining cognizant of the potential risk associated with DAPL and the ongoing court proceedings.”
Interfor Corp. (IFP-T) gained 2.6 per cent in the wake of reporting after the bell on Thursday it earned $3.2-million in profits in its latest quarter despite lower revenues.
The Vancouver-based forest products producer says its net income equalled five cents per share in the second quarter, compared with a net loss of 17 cents per share or $11.2-million a year earlier.
Adjusted profits came in at $10.6-million or 16 cents per share, versus a loss of $16.2-million or 24 cents per share in the second quarter of 2019.
Revenues for the three months ended June 30 decreased 17.5 per cent to $396.8-million from $481.3-million a year earlier.
Interfor was expected to report four cents per share in adjusted profits on $351-million of revenues, according to financial markets data firm Refinitiv.
Raymond James analyst Daryl Swetlishoff said: “A pure play lumber producer with attractive regional diversity (boasting 7 per cent of overall capacity in the high margin US South region) Interfor is a top building materials pick. In keeping with other building materials producers, Interfor posted solid 2Q20 results with increasing operating rates and higher benchmark lumber pricing. Reduced net debt prompts us to increase our target to $20.50 from $18.50 previously. North American composite lumber prices are hitting record levels as end users have been caught short as initial COVID19 demand concerns spurred widespread production curtailments which gave way to a robust repair & renovation market and much better than expected U.S. Housing demand. With extended order files and a lack of lumber inventory throughout the supply chain we expect excess demand conditions to extend well into the fall.”
Indigo Books & Music Ltd. (IDG-T) soared 20 per cent after it reported wider first-quarter losses and declining revenue as the retailer continues to cope with the impacts of the COVID-19 pandemic.
On Thursday after the bell, the Toronto-based company reported a net loss of $31.6-million or $1.15 per share in the 13 weeks ended June 27, compared to a net loss of $19.1-million or 69 cents per share in the same period last year.
Like many retailers, Indigo temporary closed all of its stores on March 17 as part of public health measures designed to curb the spread of the virus. The company also temporarily laid off 5,200 retail staff, the majority of its roughly 6,000 employees. Its stores across the country remained closed for the majority of the quarter. By late June it had reopened all but one of its 182 locations and re-hired 3,030 employees.
The store closures boosted Indigo’s e-commerce revenue, which more than tripled in the 13-week period. Online order volumes surged in the first quarter to levels comparable to its biggest sales period in the holiday season.
While e-commerce sales were extremely healthy, they did not entirely make up for losses at the store level. Indigo’s revenue fell by 35 per cent in the quarter, to $135.1-million.
Indigo also announced on Thursday that it has secured a $25-million interest-free credit line from its controlling shareholder in order to secure its “financial flexibility.” The company closed its new revolving credit facility, provided by a company controlled by Onex Corp. chairman and CEO Gerald Schwartz, who is married to Indigo chief executive officer Heather Reisman.
- Susan Krashinsky Robertson
Pfizer Inc. (PFE-N) rose 0.5 per cent as it said on Friday it signed a multi-year agreement to manufacture Gilead Sciences Inc’s antiviral drug remdesivir for COVID-19 patients in a bid to ramp up its supply.
The company would use its Kansas plant to manufacture the drug, it said.
The drug is one of only two that have demonstrated an ability to help hospitalized COVID-19 patients in formal clinical trials.
On Thursday, Gilead said its manufacturing network for the drug had grown to more than 40 companies in North America, Europe and Asia to add capacity.
Britain’s Hikma Pharmaceuticals has started manufacturing remdesivir at its Portugal plant, the British company’s chief executive officer said on Friday.
General Motors Co. (GM-N) rose 0.4 per cent after it unveiled the first in a series of Cadillac electric vehicles, part of a bid to revitalize the flagging luxury brand and make inroads in a market so far dominated by electric carmaker Tesla Inc.
The Cadillac LYRIQ, an all-electric mid-size SUV, is due to start U.S. production in late 2022. Shortly before that, production will begin in China, the luxury brand’s largest market.
All versions of the LYRIQ will have a range of more than 300 miles and include features such as a 33-inch (83.82 cm) LED touchscreen.
In the last decade Cadillac invested heavily on producing new luxury sedans at a time when American consumers were abandoning passenger cars in favor of SUVs and pickup trucks.
On the decline
Pembina Pipeline Corp. (PPL-T) slipped 2.7 per cent in the wake of reporting better-than-anticipated quarterly results late Thursday.
The Calgary-based company announced adjusted EBITDA of $789-million exceeding the consensus projection on the Street of $774-million, due largely to the performance of its Marketing and Facilities segments.
Raymond James analyst Chris Cox said: “A solid quarter for the company, especially relative to the acute headwinds facing the sector during the quarter. With better than expected results for the quarter, and Management signaling a rebound in volumes and expectations that the quarter will mark the low-point for the year, we believe this should provide added comfort in the ability of the company to reach the low-end of the $3.25-3.55-billion EBITDA guidance for the year. However, this maybe partially offset by the modest cost pressures and some other minor asset-level headwinds disclosed with the quarter.”
Inter Pipeline Ltd. (IPL-T) lost 4.5 per cent with the release of in-line second-quarter results on Thursday after the bell.
Raymond James analyst Chris Cox said: “An eventful quarter in terms of impacts to the business, though uneventful in terms of the magnitude of these impacts relative to expectations. Weakness in NGL Processing is not a new headwind for the company, though one that was certainly accentuated by the COVID-19 downturn, and we suspect could face lingering pressure into 2021, given our bullish outlook on gas prices (and AECO in particular). Encouragingly, volume declines in Conventional Oil Pipelines appear to be subsiding; we suspect this will be led by the Bow River system, given the demand-pull downstream, with Mid-Sask and Central Alberta likely to take longer to recover. Ultimately though, the story continues to center on the outlook for HPC, where investors still await a material update with respect to the search for a JV partner and the contracting profile of the project.”
Homebound customers of Uber Technologies Inc. (UBER-N) more than doubled their orders from the company’s food-delivery service in the second quarter but demand for ride-hailing trips only marginally recovered from pandemic rock-bottom.
The company said that despite those larger challenges it is sticking to its goal of being profitable on an adjusted basis before the end of 2021 thanks to stringent cost-cutting measures and a strong balance sheet. Uber recorded an adjusted loss in earnings before interest, taxes, depreciation and amortization of US$837-million in the second quarter.
Shares were down 5.2 per cent on Friday.
Ride-hailing trips, in the past responsible for nearly two-thirds of Uber’s revenue, increased 5 percentage points from their low in April, but gross bookings remained down 75 per cent from last year.
Uber’s chief executive officer, Dara Khosrowshahi, told analysts on a conference call on Thursday that rides recovery depended on the ability of different countries to contain the virus, with the recovery so far led by Asia, excluding India.
With files from staff and wires
David Leeder