A roundup of some of the North American equities making moves in both directions today
On the rise
Auto parts maker Magna International Inc. (MG-T) soared in the wake of forecasting full-year revenue above analysts’ estimates after fourth-quarter profit surged 67 per cent on a rebound in vehicle sales from pandemic lows.
Pent-up demand and customers preferring to buy vehicles seeking more safety during the health crisis have lifted auto sales and boosted demand for auto suppliers.
The Vaughan, Ont.-based company expects 2021 revenue of US$40-billion to US$41.6-billion, above analysts’ average estimate of US$38.41-billion, according to Refinitiv I/B/E/S data.
Magna’s upbeat forecast comes as an automotive chip shortage is forcing carmakers to trim production, with U.S. parts maker Visteon Corp projecting the crunch could hit global auto production by about 10 per cent to 15 per cent in the first half of 2021.
Magna estimated 2021 North American light vehicle production of 15.9 million units. In Europe, it expects full-year production to be 18.5 million units and 24 million units in China.
In the fourth quarter, light-vehicle production was up 3 per cent in North America and Europe.
Net income attributable to Magna rose to US$738-million from US$440-million a year earlier, while adjusted earnings per share of US$2.83 beat estimates of US$2.02.
Revenue rose 12.4 per cent to US$10.57-billion, also beating estimates of US$10.02-billion.
The company raised its quarterly cash dividend by 8 per cent to 43 US cents per share.
Inter Pipeline Ltd. (IPL-T) was slightly higher amid news its board of directors is adopting a new approach in response to Brookfield Infrastructure Partners L.P.’s hostile takeover bid, with independent directors launching a strategic review that may ultimately recommend a sale of the company.
To date, Inter Pipeline’s board has preferred to privately reject takeover offers. The board turned down a $30 per share offer in 2019, and also quietly refused Brookfield’s approaches last fall that were priced between $17 and $18.25 per share.
But by going public with its bid, now worth $16.50 per share, Brookfield has put the board in the hot seat and forced directors to justify to why they will not discuss a deal despite struggling operations and a sagging share price.
In response, Inter Pipeline is now saying it will weigh all options.
- Tim Kiladze
The Toronto-based miner reported an adjusted loss of 6 cents per share, a penny better than the consensus projection on the Street. Adjusted cash flow per share of 33 cents matched expectations.
Industrial Alliance Securities analyst George Topping said: “With unhedged commodity price exposure, the worst of the Peruvian COVID crisis in the past, and the NB mill coming on this year, the Company appears to have navigated the difficult pending closure of 777. The NB mill is ahead of schedule and Lalor is successfully accessing the gold zone, which is very good news given CAD gold prices are still robust at $2,200 per ounce.”
Transat A.T. Inc. (TRZ-T) was flat after saying late Thursday it has gained some financial flexibility by extending the termination date of its $250-million short-term loan facility by three months while it awaits a European regulatory ruling on the proposed takeover by Air Canada (AC-T).
Transat says the facility had been arranged on Oct. 10, with Export Development Canada and National Bank of Canada as lead arranger.
The loan facility will terminate at the earliest date between June 30 and the closing of the arrangement with Air Canada.
It may still be “drawn in tranches” at any time before May 31, subject to meeting the relevant prior conditions and applicable borrowing conditions.
Those conditions have not been amended and include certain requirements regarding freely available cash before and after drawing on the facility.
Montreal-based Transat says the extension provides it with additional room to manoeuvre to secure financing with the decision from the European Commission expected by the end of June.
The $190-million acquisition by Air Canada that was approved by the federal government remains up in the air as the acquisition was set to be completed by Feb. 15.
Deere & Co. (DE-N) jumped in response to upgrading its fiscal 2021 earnings forecast after profit more than doubled in the first quarter on improved demand for farm and construction machines and a higher adoption rate for its technology offerings.
The Moline, Illinois-based company now expects annual net income in the range of US$4.6-billion to US$5.0-billion, higher than US$3.6 billion-$4.0-billion forecast earlier.
Earnings for the first quarter came in at US$3.87 per share compared with US$1.63 per share last year. Analysts surveyed by Refinitiv, on average, expected quarterly earnings of US$2.14 per share.
2021 is turning out to be the strongest season in years for the U.S. farm economy as prices for corn, soybeans and wheat have rallied to their highest levels in more than six years on rising demand from China and government efforts worldwide to build food stocks during the COVID-19 pandemic.
High crop revenues are enabling farmers to retire debts and upgrade machinery after years of challenging market conditions.
Deere said industry sales of agricultural equipment in the United States and Canada - Deere’s biggest combined market - are now expected to grow by 15 per cent to 20 per cent this year, compared with a 5-per-cent to 10-per-cent growth estimated earlier.
Deere’s shares have outperformed the broader market with a gain of 17 per cent since the last earnings report.
On the decline
Capital Power Corp. (CPX-T) slid following the release of weaker-than-anticipated quarterly results before the bell.
The Edmonton-based independent power generation company reported adjusted EBITDA of $220-million, down from $352-million during the same period a year ago and below the Street’s projection of $241-million. Earnings per share of 12 cents fell from 29 cents during the fourth-quarter of 2019 and also missed expectations (43 cents).
ATB Capital Markets analyst Nate Heywood said: “Overall, we view the print as modestly negative given a miss to EBITDA expectations, though partially offset with the reiterated 2021 guidance. The Company continues to make progress on its off-coal strategy and commitment to less carbon intensive generation as it continues to proceed with the repowering of the Genesee 1 & 2 facilities and further grow its renewable asset portfolio. Additionally, CPX has announced its Chair of the Board, Mr. Donald Lowry, will retire in April 2021, with Ms. Jill Gardiner appointed his successor.”
Chorus Aviation Inc. (CHR-T) was down after saying an acquisition proposal from an unnamed bidder that it received last fall is no longer being considered, but that it remains in talks regarding a potential investment.
The aviation company said in October that it had received a preliminary, non-binding acquisition proposal that was subject to a number of significant conditions.
The comments came as Chorus reported a fourth-quarter profit of $9.2-million, down from $36.6-million a year earlier, as travel restrictions due to the pandemic hurt demand.
The profit amounted to six cents per diluted share for the quarter, down from 23 cents per diluted share a year earlier.
Operating revenue totalled $218.2-million, down from $338.6-million.
On an adjusted basis, Chorus says it earned five cents per share for the quarter, down from 15 cents per share a year earlier.
CGI Inc. (GIB.A-T) lost ground after announcing it has signed a deal to buy back and cancel 4.2 million of its class-A subordinate voting shares from the Caisse de depot et placement du Quebec for $400-million.
The technology consulting company says it will pay $95.13 per share, a slight discount to where the shares closed on the Toronto Stock Exchange on Thursday at $98.07.
CGI says the transaction will be made in connection with a periodic portfolio rebalancing by CDPQ.
The Quebec pension fund manager will continue to hold 27.2 million class-A shares, representing a 10.9-per-cent stake in the company.
The share repurchase will be made under CGI’s normal course issuer bid.
By buying back its shares, a company reduces its equity base, spreading profits over fewer shares. That increases its earnings per share, a key ratio used to determine a company’s financial health.
The company said the process is a prerequisite to supply vaccines to the COVAX vaccine program co-led by WHO, which aims to deliver doses to poor and middle-income countries.
J&J entered into an agreement in December in support of the COVAX program.
The company and Gavi, which also co-leads the COVAX program, expect to enter into an advance purchase agreement that would provide up to 500 million doses of the single-dose vaccine to COVAX through 2022, J&J said.
See also: Medtech stocks look set to bounce back
Uber Technologies Inc. (UBER-N) fell after the U.K. Supreme Court ruled Friday its drivers in Britain should be classed as “workers” and not self-employed in a decision that threatens the company’s business model and holds broader implications for the so-called gig economy.
The ruling paves the way for Uber drivers to get benefits such as paid holidays and the minimum wage, handing defeat to the ride-hailing giant in the culmination of a long-running legal battle.
The Supreme Court’s seven judges unanimously rejected Uber’s appeal against an employment tribunal ruling, which had found that two Uber drivers were “workers” under British law.
Yaseen Aslam and James Farrar, the two drivers, cheered the outcome.
“This ruling will fundamentally re-order the gig economy and bring an end to rife exploitation of workers by means of algorithmic and contract trickery,” Mr. Farrar said by email. The pair took Uber to the tribunal in 2016, which ruled in their favour. That decision was upheld in two rounds of appeals before it arrived at the Supreme Court.
Uber, which has 65,000 active drivers in the U.K., had argued that Aslam and Farrar were independent contractors. The company said it respected the court’s decision, which it argued focused on a small number of drivers who used the Uber app in 2016.
“Since then we have made some significant changes to our business, guided by drivers every step of the way,” Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, said in a statement. “These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury.”
With files from staff and wires