A roundup of some of the North American equities making moves in both directions
On the rise
Tim Hortons and Burger King parent Restaurant Brands International Inc. (QSR-T) was higher after it beat estimates for quarterly revenue on Friday, as more customers ate out after COVID-19 restrictions in Canada and the United States were eased.
Several restaurant chains, including KFC owner Yum Brands and McDonald’s, have been investing in their loyalty programs and launching new menu items to boost sales at a time when dining in at restaurants is bouncing back.
For Restaurant Brands, same-store sales at Tim Hortons — its biggest revenue maker — jumped 27.6 per cent in the second quarter, while those at Burger King rose 18.2 per cent.
Net income attributable to common shareholders rose to US$259-million, or 84 US cents per share, from US$106-million, or 35 US cents per share, a year earlier.
The company’s total revenue increased to US$1.44-billion in the second quarter ended June 30, compared with US$1.05-billion a year earlier. IBES data from Refinitiv had estimated revenue of US$1.37-billion.
The Vancouver-based company and owner of one of Canada’s three national wireless networks says its net income attributable to common shareholders climbed 15.5 per cent to $335 million in the second quarter from $290 million a year earlier.
That equalled 25 cents per share for the three months ended June 30, two cents per share better than the second quarter of 2020.
Adjusted profits were $348-million or 26 cents per share, compared with $316-million or 25 cents per share in the prior year quarter.
Revenues increased 10.3 per cent to $4.1-billion, from $3.7-billion, driven by an increase in customer, mobile phone and fixed customer net additions.
Telus was expected to report 26 cents per share in adjusted profits on $4.08-billion of revenues, according to financial data firm Refinitiv.
“TELUS’ continued execution excellence, realized against the backdrop of the ongoing global pandemic, was characterized by the consistent combination of industry-leading and profitable customer growth, yielding strong financial results across our business as evidenced by 10 per cent consolidated revenue and EBITDA growth,” said CEO Darren Entwistle.
SNC-Lavalin Group Inc. (SNC-T) finished higher after it swung to a profit in its latest quarter on an 8-per-cent increase in revenues.
The Montreal-based engineering firm says its net income attributable to shareholders from continuing operations was $29.2 million or 17 cents per diluted share.
That’s up from a loss of $25.3-million or 14 cents per share a year earlier.
Adjusted profit from professional services and project management was $53.8-million or 31 cents per share, up from $21.7-million or 12 cents per share in the second quarter of 2020.
Revenues for the three months ended June 30 were nearly $1.8-billion, compared with $1.66-billion in the prior year quarter.
SNC-Lavalin was expected to earn 37 cents per share in adjusted profits and 15 cents per share in net profits on $1.78 billion of revenues, according to financial data firm Refinitiv.
In a research note, Desjardins Securities’ Benoit Poirier said: “Bottom line, we are pleased with the strong results posted by SNCL Engineering Services, the impressive cash flow generation and the significant progress in derisking the LSTK backlog. Accordingly, we would strongly encourage investors to buy the shares on any weakness this morning ahead of the upcoming investor day (September 28) as our long-term investment thesis on the name remains unchanged.”
Capital Power Corp. (CPX-T) rose with the premarket announcement of a 6.8-per-cent dividend increase (to $2.19 annually from $2.05) alongside raises to its 2021 financial guidance.
At the same time, Capital Power reported adjusted EBITDA for the second quarter of $241-million, up from $217-million a year ago but below the Street’s forecast of $256-million. Earnings per share of 5 cents fell from 10 cents in 2020 and well below the 43-cent consensus.
“The quarter was somewhat challenged by facility downtime, unfavourable FX movements and lower wind resource,” said ATB Capital Markets analyst Naye Heywood. “The positive guidance revision drives the Adjusted EBITDA and AFFO midpoint higher by 11.5 per cent and 13.3 per cent, respectively. We expect the Alberta Commercial segment will continue to be supported by strong Alberta pricing and a return to industrial power demand in the province, while the other contracted operating segments should continue to lend cash flow stability.”
Turquoise Hill Resources Ltd. (TRQ-T) gained as it beat estimates for second-quarter profit, bolstered by a strong output from the Oyu Tolgoi mine in Mongolia and higher prices of copper and gold.
Prices of the red metal hit a record high in May, boosted by demand from electric-vehicle makers and other clean-energy investments. Bullion prices also rose in the second quarter as a weak dollar and pandemic-related uncertainties lifted its safe-haven appeal.
Turquoise Hill’s copper production from Oyu Tolgoi stood at 36,735 tonnes in the quarter, compared with 36,495 ounces last year. Its gold output more than tripled to 113,054 ounces.
Oyu Tolgoi, one of the world’s largest copper-gold-silver mines, was at the center of a long-running funding spat between Rio Tinto and Turquoise, before the dispute was put to bed in April.
The Mongolian government holds a 34-per-cent stake in the Oyu Tolgoi project with Rio’s majority-owned Turquoise owning the rest.
Turquoise Hill’s all-in sustaining costs fell 32 per cent to US$1.48 per pound of copper produced in the quarter.
Its income attributable to the owners of the company was US$96.9-million, or 48 US cents per share, for the three months ended June 30, compared with US$72.6-million, or 36 US cents per share, a year earlier.
Analysts on average were expecting a profit of 34 US cents per share, according to Refinitiv IBES.
On the decline
Imperial Oil Ltd. (IMO-T) was lower in the wake of reporting a near 7-per-cent fall in second-quarter profit on Friday on a sequential basis, impacted by planned turnaround activity and weaker realized margins in the downstream.
Although global oil demand has seen an uptick this year, fresh lockdowns and restrictions in some parts of the world to deal with rising cases from the delta variant of the coronavirus have dented hopes.
Downstream recorded net income of $60-million in the second quarter, compared with net income of $292-million in the first quarter, the company said.
Calgary-based Imperial, which is majority-owned by Exxon Mobil Corp, said its production averaged 401,000 barrels of oil equivalent per day (boepd) in the quarter ended June 30, down about 7 per cent from the first.
Imperial’s net income fell to $366-million, or 50 cents per share, in the second quarter ended June 30, from $392-million, or 53 cents per share, in the previous quarter.
Pipeline operator Enbridge Inc. (ENB-T) slipped despite beating market estimates for second-quarter profit, as the volumes transported on its Mainline system rose from a year-ago due to a rebound in fuel demand.
The beat reflects a steady recovery in Canada’s oil and gas industry as it benefited from rising oil prices that encourages companies to bring back shut production and complete wells not hooked up to pipelines.
However, on a sequential basis Enbridge posted a drop in the volumes of fuel transported across Canada and the United States on its Mainline pipeline at 2.6 million barrels per day (bpd) of crude, from 2.75 million bpd in the first quarter.
But, the volumes in the second quarter were 7.5% higher than the year-ago quarter, when Enbridge transported 2.44 million bpd.
The company had earlier warned that scheduled maintenance for several oil sands upgraders and downstream refineries would be more concentrated between April and June than previously anticipated.
“In Liquids Pipelines, nominations for July were robust, which highlights the strength of the markets we serve and the demand for our system capacity,” said Chief Executive Officer Al Monaco.
Enbridge expects full-year outlook of 2.8 million bpd on average for 2021 for its liquids pipeline.
Enbridge continues to expect full-year 2021 EBITDA and discounted cash flow to remain within its previously provided outlook of between $13.9-billion and $14.3-billion and $4.70 to $5.00 per share, respectively.
The Calgary-based company reported adjusted earnings of $1.36-billion, or 67 cents per share, in the second quarter ended June 30. This beat average analysts’ estimate of 57 cents, according to Refinitiv IBES..
Exxon Mobil (XOM-N) dipped after it posted its biggest quarterly profit in more than a year that also topped analysts’ estimates as demand for oil, gas and chemicals rebounded, quelling some investor concerns over its recent weak performance.
The company’s first results following a contested board fight over its direction highlighted how oil producers are taking advantage of a recovery in oil prices to cut debt and boost shareholder payouts rather than spending more to raise production.
Exxon said its 2021 capital spending is expected to be at the lower end of the previously forecast range of US$16-billion to US$19-billion.
“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products,” Chief Executive Officer Darren Woods said in a statement.
The results follow rival Chevron cutting its 2021 budget earlier on Friday, although both the top U.S. producers expect higher spending in the second half of the year as they resume investments on key projects, including the prolific Permian basin.
Analysts at Tudor Pickering Holt & Co characterized Exxon’s results as “solid” and said they were looking for more detail on the company’s plans to return cash to shareholders.
Some of the deep cost cuts undertaken last year as the COVID-19 pandemic slashed demand have remained, allowing price gains to bolster profits.
The company said it had cut over US$1-billion in costs in the first half of 2021, on top of reductions of US$3-billion in 2020, adding it was on pace to achieve total cost savings of US$6-billion through 2023 relative to 2019.
Exxon earned US$1.10 per share in the second quarter, beating analysts’ average estimate of 99 US cents per share, according to Refinitiv IBES data. The company foreshadowed the results in late June, prompting several analysts to reduce their earning projections.
The company’s net income for the second quarter came in at US$4.69-billion, compared with a loss of US$1.08-billion a year ago, which included a gain related to reversing an inventory writedown. Absent the inventory change, the loss would have been US$3-billion.
Chevron Corp. (CVX-N) was down in response to reporting its highest profit in six quarters and joined an oil industry stampede to reward investors with share buybacks, as rebounding crude oil prices carried earnings and cash flow to pre-pandemic levels.
Oil and gas are trading near multi-year highs as fuel consumption has thrown off pandemic losses and natural gas has soared on weather demand. OPEC’s decision to carry production curbs into next year has kept oil trading above $70 per barrel.
The company cut its annual capital spending forecast. At about US$13-billion, it is now below what it had spent last year. It had earlier budgeted US$14-billion to US$16-billion a year in annual capital spending through 2025.
Chevron last year cut expenses to allow profits to flow at above $50 a barrel. Lower costs and higher prices generated the highest cash flow in two years, enabling the company to pare debt and resume share repurchases, officials said. Share buybacks will resume this quarter at an annual rate of between US$2-billion and US$3 -billion, said Chief Executive Michael Wirth, about half the annual rate it had planned.
The company and its rivals had halted purchases early last year as the pandemic cut oil demand. Chevron now joins Royal Dutch Shell, TotalEnergies and Equinor in resuming buybacks.
“We’ve always said we would begin buybacks when we were confident that we could sustain it, and our breakeven is $50 per barrel and we are now well above it,” Chief Financial Officer Pierre Breber told Reuters.
“We’re trying to win back investors...demand for our products has fully recovered, demand for our stock is recovering.”
The second-largest U.S. producer’s oil and gas production earned US$3.18-billion in the quarter ended June 30, compared with a loss of US$6.09-billion a year ago.
Total oil and gas production rose 5 per cent over a year ago to 3.13 million barrels of oil equivalent per day (boepd), while Chevron sold its U.S. oil for $54 a barrel last quarter, compared with $19 a year earlier.
The company’s adjusted profit of US$1.71 per share beat Wall Street estimates of US$1.59, according to Refinitiv IBES data.
Amazon (AMZN-Q) plummeted after saying late Thursday sales growth would slow in the next few quarters as customers venture more outside the home, a tepid start to CEO Andy Jassy’s reign after 27 years with Jeff Bezos at the retailer’s helm.
Spending growth by Prime members, Amazon’s most valuable customers, has eased as well, the company said.
More than a year into the COVID-19 pandemic, Amazon’s financial luster is fading slightly. When brick-and-mortar stores closed, Amazon posted record profits, drew more than 200 million Prime loyalty subscribers, and recruited over 500,000 workers to keep up with surging demand.
Now, the company is facing the tough task of climbing higher still. While revenue surged 44 per cent in the first quarter of this year, that figure dropped to 27 per cent for the period ended June 30. Sales may only rise as much as 16 per cent in the third quarter, Amazon said.
Brian Olsavsky, Amazon’s chief financial officer, attributed this to a difficult comparison to last year, when consumers stayed more indoors and relied on e-commerce for their everyday needs. In the United States and Europe, customers are now out and about.
They are “doing other things besides shopping,” he said.
Revenue was US$113-billion for the second quarter, shy of analysts’ average estimate of US$115-billion, according to IBES data from Refinitiv. Profit rose 48 per cent to US$7.8-billion, the second-largest Amazon ever announced.
Caterpillar Inc. (CAT-N) slid as it reported higher quarterly earnings as a recovery in global economic activity from pandemic lows drove up sales across all regions and businesses.
The company, an industrial bellwether and proxy for global economic activity, has been benefiting from higher infrastructure spending around the globe.
The global economy is expected to expand at 6.0 per cent this year and 4.5 per cent in 2022, according to Reuters polls but a majority of the economists flagged the latest coronavirus variants as the biggest risk to the outlook.
A run-up in commodity prices is also encouraging miners to invest in new machines.
The Illinois-based manufacturer of heavy machinery expects demand to remain strong in the current quarter. However, operating profit is forecast to moderate, hurt by supply chain challenges.
Adjusted profit for the second quarter came in at US$2.60 per share, up from US$1.27 per share a year earlier. Analysts surveyed by Refinitiv, on average, expected earnings of US$2.40 per share.
Equipment sales rose 31 per cent year-on-year in the quarter to US$12.2-billion, helped by stronger demand in North and Latin America.
Shares of Pinterest Inc. (PINS-N) fell and were trading at more than a three-month low, after the company warned of slowing user growth in the United States, its largest market.
At least eight brokerages cut their price target on the stock.
J.P.Morgan made the most aggressive cut and slashed its target by US$27 to US$68, pushing it well below the current median price target of US$77, citing lower-than-expected user additions in the latest reported quarter and disappointing third-quarter outlook.
The brokerage also cut its rating on the stock to “neutral” from “overweight”.
Overall monthly active users (MAUs), a widely watched metric, rose by only 9 per cent and missed analysts’ expectations in the second quarter. It had risen 30 per cent in the prior quarter.
The company also said that user growth in the United States was decelerating as people who used the platform for crafts and DIY projects during the height of the pandemic step out more as curbs ease.
Procter & Gamble Co. (PG-N) declined after it reported fourth-quarter sales on Friday that beat analysts’ estimates, but warned that rising commodity and freight costs would take a US$1.9-billion bite out of its earnings this year.
The vaccine-aided easing of COVID-19 restrictions in the United States and parts of Europe helped the company post an 11-per-cent increase in sales at its beauty segment in the reported quarter, as consumers returning to social events, spent more on personal care products.
Procter & Gamble said net sales rose 7 per cent to US$18.95-billion in the quarter ended June 30, compared with estimates of US$18.41-billion, according to IBES data from Refinitiv.
The company forecast fiscal 2022 core earnings per share to rise between 3 per cent and 6 per cent, and sales to increase in the 2-4-per-cent range.
Late on Thursday, the Tide detergent maker named Chief Operating Officer Jon Moeller as its new CEO, replacing David Taylor, who will become executive chairman on Nov. 1.
With files from staff and wires