A roundup of some of the North American equities making moves in both directions today
On the rise
Shares of Aecon Group Inc. (ARE-T) jumped higher on Friday after it beat expectations as its net profit surged to $73.6-million in the third quarter as it was helped by the federal wage subsidy program.
The Toronto-based construction firm said it earned 99 cents per diluted share for the three months ended Sept. 30, compared with 60 cents per share or $42.1-million a year earlier.
Revenues increased about one per cent to $1.04-billion, from $1.02-billion.
Aecon was expected to earn 41 cents per share on $1-billion of revenues, according to financial markets data firm Refinitiv.
In a research note, Laurentian Bank Securities analyst Mona Nazir said: “In spite of significant challenges stemming from COVID that are plaguing the construction sector, ARE’s performance was stronger than expected from a revenue, EBITDA and bottom line perspective. As expected Concessions segment performance was hindered by depressed airline traffic (Bermuda Airport performance), albeit the Construction arm drove the beat, after posting 6.9-per-cent year-over-year growth. We continue like Aecon for its attractive valuation metrics and current risk/reward profile. We also highlight the company is best positioned in our E&C coverage universe to benefit from Infrastructure stimulus plans in Canada and offers the highest dividend yield (4.7 per cent).”
Imperial Oil Ltd. (IMO-T) rose in the wake of reporting a third-quarter profit on Friday, after two straight quarters of losses, as demand started to recover after collapsing earlier in the year due to the COVID-19 pandemic.
The company, which is majority owned by Exxon Mobil Corp., said its refinery throughput averaged 341,000 barrels per day (bpd) for the quarter ended Sept. 30, down 6 per cent year over year, but 22.7 per cent higher sequentially, with overall utilization at 81 per cent for the quarter.
The coronavirus outbreak led to the grounding of flights and brought economies to a standstill, hurting demand for fuel but with the easing of the pandemic-induced curbs, demand has begun to pick up and crude prices have rebounded from their historic lows.
However, the nascent recovery has since been threatened by new cases and fresh lockdowns.
The Calgary-based company posted a net income of $3-million for the quarter, compared with a profit of $424-million a year earlier.
Raymond James analyst Chris Cox said: “A solid quarter for the company, especially considering the headwinds faced during the quarter. Investors will be encouraged by the strong performance at Kearl coming out of the downtime after the Polaris incident, with strong performance on costs providing another tailwind for sentiment. In particular, the potential for upward revisions to Street expectations on Kearl production alongside lower cost assumptions could provide for a meaningful uplift in 2021 Street estimates for cash flow and free cash flow.”
Google parent Alphabet Inc. (GOOGL-Q, GOOG-Q) soared after it powered back to sales growth, beating analysts' estimates for the third quarter as businesses initially hobbled by the coronavirus pandemic resumed advertising with the internet’s biggest supplier of ads.
Google’s billions of users are spending more time online transacting and entertaining themselves this year as they try to avoid the virus.
Ad sales surged across all regions and industries, Alphabet Chief Financial Officer Ruth Porat said. For instance, U.S. revenue grew 15 per cent in the third quarter compared with 1 per cent in the second quarter.
Ms. Porat declined to say whether the trend was sustainable in the fourth quarter, with Europe and other areas once again locking down because of significant increases in infections.
Alphabet’s bounce-back followed its first sales decline compared with a year-earlier period in the second quarter, since going public in 2004.
Third quarter sales were US$46.2-billion, up 15 per cent from a year ago, compared with the average estimate of US$42.9-billion, or 5.9-per-cent growth, among analysts tracked by Refinitiv.
Alphabet’s profit was US$11.2-billion, or US$16.40 per share, compared with the average estimate of US$7.698-billion, or US$11.18 per share. Earnings benefited from cutbacks in marketing and travel and in particular a 20-per-cent drop in spending on equipment and workspace construction.
Chevron Corp. (CVX-N) was up narrowly after posting a surprise third-quarter profit as oil prices recovered from spring lows and spending cuts benefited operating results.
Chevron and its peers have slashed spending budgets this year on plummeting demand and crude oil prices that remain about 40 per cent below where they began the year. Royal Dutch Shell Plc and BP Plc also posted higher-than-expected quarterly results after deep expense cuts this year.
The second-largest U.S. oil producer reported earnings of US$201-million, or 11 US cents per share, excluding one-time items. That compared with a profit of US$2.9-billion, or US$1.55 per share, a year earlier.
Wall Street analysts had expected a loss of 27 US cents for the quarter, according to Refinitiv IBES data.
Chief Financial Officer Pierre Breber said it was too soon to say the worst of the pandemic-related decline in oil demand was over.
The outlook for energy consumption “depends on when the world - this country and other countries - get control of the pandemic and those activities resume. We don’t know when that’s going to be,” Mr. Breber said.
Chevron is near the end of a year-long restructuring of its operations to reflect a prolonged period of low prices, Mr. Breber said. The effort will reduce its workforce by up to 15 per cent of its 45,000 person staff.
The company continues to give priority to its shareholder dividend even as cash flow from operations fell 57 per cent from a year ago and turned negative in the third quarter.
“Chevron generated enough cash flow to cover its capital spending and had only a modest deficit after funding its dividend,” Edward Jones analyst Jennifer Rowland said.
“The company’s strong balance sheet and liquidity position supports its dividend during this difficult period. We view the company as a defensive holding in a challenging industry.”
On the decline
SNC-Lavalin Group Inc. (SNC-T) dropped after it reported a loss of $85.1-million in its latest quarter compared with profit of $2.76-billion a year ago when its results were boosted by the sale of a 10.01 per cent stake in Highway 407 ETR.
The company says the loss amounted to 48 cents per diluted share for the quarter ended Sept. 30 compared with a profit of of $15.70 per diluted share a year ago.
The results last year included a net gain of $2.59 billion or $14.74 per diluted share from the sale of the stake in Highway 407 ETR.
On an adjusted basis, SNC says it lost 19 cents per diluted share for the quarter compared with an adjusted profit of $1.24 per diluted share a year ago.
Revenue for the quarter totalled $2.01-billion, down from $2.43-billion in the same quarter last year.
In its outlook, SNC says it expects — assuming no significant deviation from the current COVID-19 situation — that engineering services revenue for the fourth quarter will be down by a low- to mid-single digit percentage compared with the fourth quarter of last year.
Desjardins Securities analyst Benoit Poirier said: “Overall, we expect investors to be disappointed by the continued LSTK losses and expect the stock to trade lower this morning. Nevertheless, our investment thesis on SNC is focused on the long-term value creation which should arise from the new strategic focus on engineering services; this has not changed with 3Q results as SNCL Engineering Services performed above expectations.”
That’s up from $166-million during the same period last year. The earnings amounted to 34 cents per share, up from 32 cents per share a year ago.
Revenue for the three-month period ended Aug. 31 was flat at $1.35-billion, above the consensus analyst estimate of $1.33-billion from S&P Capital IQ.
Shaw also added approximately 60,000 net new wireless subscribers as it reopened its Freedom Mobile stores and launched its new Shaw Mobile wireless service in Alberta and B.C.
- Alexandra Posadzki
In a research note, ATB Capital Markets analyst Nate Heywood said: “We view the announcement as neutral given the Company reported Adjusted EBITDA in line with expectations due to the heavily contracted nature of the cash flows. The business continues to be supported by strong performance from its Canadian Wind and US Wind & Solar assets, as higher production and incremental cash flows from new projects drive results year-over-year. RNW continues to target Comparable EBITDA within its previously announced guidance range of $445-$475-million (ATB estimate: $455-million).”
Cannabis company Hexo Corp. (HEXO-T) plummeted after it announced a plan to consolidate its shares in an effort to regain compliance with the US$1 minimum share price continued listing standard of the New York Stock Exchange.
Shares in the company closed at 72 US cents on the New York Stock Exchange on Thursday.
Hexo says avoiding a delisting of its shares from the NYSE is in the best interests of the company and its shareholders.
Under the proposal, shareholders will receive one post-consolidation share for every eight shares they hold.
Hexo says it will not issue fractional post-consolidation shares and that the number of post-consolidation shares issued to shareholders will be rounded up or down to the nearest whole number of shares.
The proposal needs shareholder approval at a meeting set for Dec. 11.
The late launch of new 5G phones caused Apple Inc.’s (APPL-Q) customers to put off buying new devices, leading the company on Thursday to report the steepest quarterly drop in iPhone sales in two years and sending its shares lower.
Since 2013, Apple has delivered new iPhones each September like clockwork. But pandemic-induced delays pushed the announcement back a month, with some devices still yet to ship.
Even as booming sales of Macs and AirPods boosted overall revenue and profit above what analysts had expected, iPhone sales dropped 20.7 per cent to US$26.4-billion.
Investors anticipated lower sales from the Cupertino, California company’s bestselling product, but the hold-back was worse than expected, especially in China, where more consumers have access to 5G than in the United States or Europe.
Apple has mostly beaten sales expectations this year and released a slew of new products and services that its customers have embraced while largely homebound during the pandemic.
Apple said revenue and profits for the fiscal fourth quarter ended on Sept. 26 was US$64.7-billion and 73 US cents per share, compared with analyst estimates of US$63.7-billion and 70 US cents per share, according to IBES data from Refinitiv.
But the flagship iPhone 12′s announcement was delayed until Oct. 13, several weeks later than usual, meaning no opening-weekend iPhone sales are included in the fourth-quarter results.
Apple did not provide a revenue growth forecast, but Chief Financial Officer Luca Maestri said revenue from services and non-iPhone products would grow by double-digit percentages in the fiscal first quarter, in line with analyst expectations. He said iPhone revenue would also grow, implying the rate would be in the single digits. Analysts expect iPhone revenue to rise 6.45 per cent to US$59.56-billion in the first quarter, according to Refinitiv data.
Apple’s shares have soared in the past two years as it has diversified its revenue streams to lessen its dependence on the iPhone. The share tumble on Thursday raises the question of whether Apple is still more dependent on iPhone sales than some investors had hoped.
“Apple needs to be able to keep the upgrade cycle going or the share price will wobble because there’s no real room for forgiveness in the current valuation,” said Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.
Amazon.com Inc. (AMZN-Q) slid lower on Thursday forecast a jump in holiday sales - and costs related to COVID-19 - as consumers continued to shop more online during the pandemic.
A company executive added that heightened spending on delivery infrastructure would likely continue over years.
Since the start of the virus outbreak in the United States eight months ago, consumers have turned increasingly to Amazon for delivery of groceries, home goods and medical supplies. Brick-and-mortar shops closed their doors; Amazon by contrast moved to recruit over 400,000 workers and earned US$6.- billion in the just-ended quarter, its second consecutive record profit.
That has kept the world’s largest online retailer at the center of workplace and political tumult. Democratic politicians this month accused Amazon of holding “monopoly power” over merchants on its platform, which the company disputes. Meanwhile, more than 19,000 of Amazon’s U.S. employees contracted COVID-19, and some staff protested for site closures.
Amazon’s response now includes an estimated US$4-billion in costs related to COVID-19 this holiday, up from US$2.5-billion last quarter. It is testing employees for the virus and getting protective gear for new hires. It also is working less productively because of social distancing at its warehouses, which accounts for a big part of its pandemic expense, Chief Financial Officer Brian Olsavsky said on a call with reporters.
Amazon forecast operating profit to be between US$1.0-billion and US$4.5-billion, short of US$5.8-billion analysts were looking for, according to research firm FactSet.
For the fourth quarter, Amazon said it expects net sales of US$112-billion to US$121-billion. That would mark the company’s first over US$100-billion and follows a third-quarter revenue beat that analysts such as eMarketer’s Andrew Lipsman did not expect.
“While it was clear that the pandemic-driven shift to e-commerce would keep Amazon’s topline elevated, it surprised by easily surpassing an already high bar,” Mr. Lipsman said.
Facebook Inc. (FB-Q) declined after warning of a tougher 2021 despite beating analysts' estimates for quarterly revenue as businesses adjusting to the global coronavirus pandemic continued to rely on the company’s digital ad tools.
The world’s biggest social media company said in its outlook that it faced “a significant amount of uncertainty,” citing impending privacy changes by Apple and a possible reversal in the pandemic-prompted shift to online commerce.
“Considering that online commerce is our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth,” it said.
Facebook’s total revenue, which primarily consists of ad sales, rose 22 per cent to US$21.47-billion from US$17.65-billion in the third quarter ended Sept. 30, beating analysts' estimates of a 12-per-cent rise, according to IBES data from Refinitiv.
A July ad boycott over Facebook’s handling of hate speech, which saw some of the social media giant’s biggest individual spenders press pause, barely made a dent in its sales, which mostly come from small businesses.
Revenue growth at Facebook, the world’s second-biggest seller of online ads after Google, has been cooling steadily as its business matures, although it came in at more than 20 per cent throughout 2019.
Still, compared to expectations, the company has had a bumper year due to surging use of its platforms by users stuck at home amid virus-related lockdowns, which cushioned online ad sales even as broader economic activity suffered.
Net income came in at US$7.85-billion, or US$2.71 per share, compared with US$6.09-billion, or US$2.12 per share, a year earlier. Analysts had expected a profit of US$1.90 per share, according to IBES data from Refinitiv.
The San Francisco-based social media company said it expected expenses to increase by close to 20 per cent in the fourth quarter compared with a year ago due to an increase in investments.
The company also cautioned that it was hard to predict how advertisers would react as the U.S. presidential election nears on Nov. 3.
Twitter said many companies paused ad spending during the second quarter due to widespread protests after the death of George Floyd in May and said there could be a similar dynamic with the U.S. election.
Twitter said it had 187 million monetizable daily active users (mDAU) during the third quarter, missing consensus analyst expectations of 195.2 million users, according to IBES data from Refinitiv. The figure stood at 186 million in the previous quarter.
Still, total revenue grew 14 per cent year-over-year to US$936-million during the quarter ended Sept. 30, beating analyst estimates of US$777.15-million.
Net income in the third quarter was US$28.66-million, or 4 US cents per share, down from US$36.5-million, or 5 cents per share in the year-ago quarter.
Exxon Mobil Corp. (XOM-N) lost ground after it posted its third straight quarterly loss on Friday and detailed deeper spending cuts to come, as the oil major reels from the COVID-19 impact on energy demand and prices.
The largest U.S. oil producer by volume said it will cut its capital spending for 2021 to between US$16-billion to US$19-billion from a planned US$23-billion this year. It has spent about US$16.5-billion this year on new projects.
It also said it was reassessing its natural gas holdings in North America and could take impairments on assets with a book value of as much as US$25-billion to US$30-billion - but only if it changes its long-term development plans. It is evaluating those assets this quarter, which include properties it added with its 2010 purchase of XTO Energy, a deal worth roughly US$30-billion at the time.
Exxon beat expectations with an adjusted loss of 18 US cents per share. Analysts had expected a loss of 25 US cents per share, Refinitiv Eikon data showed.
Oil companies last quarter continued to suffer from weak prices for their products, but rivals Chevron, Royal Dutch Shell and BP Plc also posted higher-than-expected results after deep cost cuts this year.
“We remain confident in our long-term strategy and the fundamentals of our business,” said Chief Executive Darren Woods, adding that Exxon would continue to protect its shareholder dividend, which is now yielding more than 10 per cent.
Its third-quarter net loss was US$680-million, or 15 US cents per share, compared with a profit of US$3.1-billion, or 75 US cents per share, a year earlier.
“Exxon isn’t getting the same benefit from strong marketing as seen by some peers” and the its exploration business “continues to be weak,” said Anish Kapadia, director at London-based Palissy Advisors, adding that it is significant that the company is “now aggressively cutting” 2021 spending as it fights to preserve the dividend.
Even with reduced spending plans, the company is likely to see negative free cash flow through 2021, said Jennifer Rowland, an analyst with Edward Jones. “This calls into question how long the company can continue to use debt to fund its dividend,” she said, adding that it is at risk of being cut late next year.
Starbucks Corp. (SBUX-Q) slipped despite forecasting 2021 earnings largely above estimates on Thursday, helped by strong online orders and a recovery in demand following the initial hit from the COVID-19 pandemic.
The coffee chain was forced to close many stores and limit operations to takeout and delivery at the height of the COVID-19 pandemic, but sales have since improved as consumers used the company’s app to order and collect at stores.
For the fourth quarter, comparable sales fell 9 per cent, against Wall Street estimates of a 12.1-per-cent decline, as consumers gradually returned to their morning routines or shifted habits to other times of day.
Chief Executive Officer Kevin Johnson said Starbucks' recovery in the United States and China, its biggest growth markets, was faster-than-expected.
The coffee chain now expects adjusted profit for fiscal 2021 between US$2.70 per share and US$2.90 per share. Analysts had forecast US$2.74, according to IBES data from Refinitiv.
It believes 2021 global comparable sales will rise 18 per cent to 23 per cent, including growth in China of 27 per cent to 32 per cent.
Starbucks' recovery could be seen as lagging other restaurant chains, including Chipotle Mexican Grill Inc and large pizza companies, whose sales either remained elevated during the pandemic or have turned positive in recent weeks.
“Most of Wall Street figured that would trail other restaurant companies until things return to normal and people started going back to work at the office,” Edward Jones analyst Brian Yarbrough said.
Excluding one-time time items, Starbucks reported 51 US cents per share, 20 US cents more than expectations.
Activision Blizzard Inc. (ATVI-Q) fell even though it raised its annual adjusted sales forecast on Thursday, betting on strong sales for its upcoming videogame in the blockbuster Call of Duty franchise as demand from stay-at-home gamers continues to rise.
The company raised its full-year adjusted revenue forecast to US$8.10-billion from US$7.63-billion. Analysts had expected adjusted sales of US$7.94-billion, according to IBES data from Refinitiv.
Shares of the company fell as some analysts viewed the improved forecast as conservative, pared most of the losses and were down marginally after the bell.
“Activision has been typically conservative going into the next quarter. Many stocks are seeing automatic ‘sell the news’ on earnings reports good or bad ahead of elections. Activision caught in that too,” Elazar Advisors analyst Chaim Siegel said.
Big-budget videogame makers are preparing to tap the demand surge from stay-at-home players as next-generation consoles enter the market this holiday season. Activision is releasing Call of Duty: Black Ops Cold War on Nov. 13, closely following the launch of Sony Corp’s PlayStation 5 and Microsoft’s Xbox Series X.
The company also topped third-quarter adjusted sales estimates on strong sales of Call of Duty: Modern Warfare” and forecast holiday-quarter adjusted revenue of US$2.73-billion, above Wall Street estimates of US$2.63-billion.
With files from staff and wires