A roundup of some of the North American equities making moves in both directions today
On the rise
Fortis Inc. (FTS-T) was narrowly higher on Friday after reporting it earned $295-million in its third quarter, up from $292-million in the same quarter last year.
Revenue in the quarter totalled nearly $2.2-billion, up from $2.1-billion.
On an adjusted basis, Fortis says it earned 64 cents per share, matching the Street’s expectations but a penny lower than a year ago.
Fortis CEO David Hutchens says the performance reflects underlying growth at the company’s utilities, offset by headwinds due to unfavourable foreign exchange and cooler weather in Arizona.
Exxon Mobil (XOM-N) rose after it pledged to revive a share repurchase program next year as its earnings outlook improved on quarterly results that topped analysts’ estimates.
The largest U.S. oil producer posted an adjusted profit of US$1.58 a share, beating the Refinitiv estimate by two cents, with results lifted by oil and gas prices that have more than doubled in the past year.
Third-quarter results reflected soaring natural gas prices, improving refining margins and supply shortages that pushed oil to a three-year high during the quarter. Crude prices have continued to climb to a near seven-year high.
All the company’s three business delivered higher returns within the backdrop of a recovering global economy, Chief Executive Darren Woods said in prepared remarks.
“These factors contributed to significant free cash flow during the quarter, which enabled us to further reduce debt and more than cover the dividend,” Mr. Woods said.
Its strong cash flow outlook will allow the company next year to resume share buybacks under a plan to spend up to US$10-billion on repurchases through 2023, Exxon said.
Exxon in 2016 cut its share repurchases amid weak results, saying it would buy back shares only to offset dilution from executive pay plans as opposed to returning cash to shareholders.
The oil major reported net income of US$6.75-billion, or US$1.57 per share, in the third quarter, compared with a loss of US$680-million, or 15 US cents per share, in the same period last year.
On Tuesday, the company raised its quarterly dividend a penny, to 88 US cents, the first increase since April 2019.
Exxon shares are up than 50 per cent this year as earnings bounced back from last year’s historic loss but remain below where they traded in early 2020. This year’s profit has allowed the company to repay about US$11-billion in debt taken on last year to pay for its dividend.
Chevron Corp. (CVE-N) saw gains after it posted its highest quarterly profit in eight years on surging oil and gas prices, higher output and a recovery in motor fuel demand that boosted refining margins.
The strong results came a day after U.S. lawmakers grilled top executives of major oil companies over the industry’s past dismissals of climate warming and for funding groups that oppose a shift from fossil fuels.
Chevron’s earnings reflect, in part, gains from higher demand after the industry’s deep production cuts last year during the pandemic and production increases.
The company posted net income of US$6.11-billion, compared with a loss of US$207-million a year ago, on sales of oil that fetched nearly twice as much as a year ago and U.S.-produced gas that sold for three times as much.
Adjusted earnings per share of US$2.96 handily exceeded Wall Street’s estimate of US$2.21, according to Refinitiv IBES data.
Cash flow from operations, a closely watched measure, was US$8.5-billion in the quarter, “the best ever reported by the company,” Chief Executive Michael Wirth said in a statement.
Overall production rose on the firm’s acquisition of Noble Energy and more production from OPEC partners, Wirth said. It would have been stronger if not for maintenance shut-ins at Kazakhstan’s giant Tengiz field.
Chevron, the No. 2 U.S. oil producer, plans to increase oil and gas output through 2025 by up to 3 per cent annually.
On the decline
Imperial Oil Ltd. (IMO-T) dropped despite saying its third-quarter profit more than doubled from the prior quarter on Friday, boosted by a rally in global crude prices, higher output and increased demand for motor fuels.
Oil prices have rallied nearly 63 per cent so far this year, with benchmark Brent crude near multi-year highs, fueled by a strong rebound in consumption as economies gradually open up post the pandemic, amid an ongoing global energy squeeze.
The company’s production stood at 435,000 barrels of oil equivalent per day, up about 8 per cent from the second quarter.
Imperial said throughput at its refineries averaged 404,000 barrels per day, compared with 332,000 bpd in the second quarter.
Capacity utilization was 94 per cent, the highest quarterly number in nearly three years.
Calgary-based Imperial, which is majority-owned by Exxon Mobil Corp, said its net income rose to $908-million , or $1.29 per share, in the quarter ended Sept. 30, from $366-million, or 50 cents per share, in the second quarter.
SNC-Lavalin Group Inc. (SNC-T) was lower as it reported a profit in its third quarter, boosted by the sale of its oil and gas business.
The engineering firm says its net income attributable to shareholders totaled $600.7-million, compared with a loss of $85.1-million in the same quarter last year.
The results in the quarter this year included a gain of $577.8-million on the sale of the company’s oil and gas business.
SNC-Lavalin says its profit from continuing operations attributable to shareholders was $18.6-million or 11 cents per diluted share for the quarter ended Sept. 30, compared with a loss of $8.8-million or five cents per diluted share a year ago.
Revenue totaled $1.81-billion, up from $1.78-billion in the same quarter last year.
SNC says its adjusted profit from professional services and project management amounted to 23 cents per diluted share for the quarter, compared with a loss of a penny per diluted share a year ago.
National Bank Financial analyst Maxim Sytchev said: “More predictable performance should be good enough at this juncture. 4-per-cent ‘miss’ on SNCL Engineering services business would be a much bigger deal for the double-digit consulting entities while in SNC’s case we believe the transitional investment thesis provides more leniency. Note that a greater amount of corporate and restructuring charges (the latter amounting to $19-million) in addition to revaluation of long-term employee incentives explain the $40 mln vs. our projections. Organic growth, backlog additions and margins (both realized and forecast) are moving in the right direction for the ‘good’ parts of the business. Infra EPC registered a higher loss but in absolute quantum, we know that this backlog is being phased down (in fact LSTK backlog metric is down 17 pe cent vs. June). Overall, we qualify the print as ‘in the ballpark’, we no material negative surprises. At 8.4 times 2022 estimated EV/EBITDA, this should be good enough (vs. pure consulting peers in 15 times range).”
Shaw Communications Inc. (SJR.B-T) dipped after saying it remains committed to its deal to be bought by Rogers Communications Inc. (RCI.B-T) as it reported its fourth-quarter profit rose more than 40 per cent compared with a year ago.
Shaw CEO Brad Shaw reiterated his commitment to work to close the transaction, adding that it was not appropriate to comment on a boardroom fight between members of the Rogers family over control of the company.
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Edward Rogers, the son of late Rogers founder Ted Rogers, is fighting with his sisters and mother for control of the board of directors at Rogers.
He has asked a B.C. court to declare legitimate the newly constituted board he formed after being ousted as board chair earlier this month after media reports made public a failed plan to replace CEO Joe Natale with the company’s chief financial officer.
Meanwhile, Shaw reported a profit of $252-million or 50 cents per diluted share for the quarter ended Aug. 31, up from a profit of $175-million or 34 cents per diluted share in the same quarter last year.
Revenue totaled $1.38-billion, up from $1.35-billion.
Heroux-Devtek Inc. (HRX-T) finished lower after saying late Thursday it has entered into an agreement with aircraft manufacturer Lockheed Martin to develop landing gear for its next generation of defence aircraft.
The contract will focus on the development of a completely new generation of landing gear, which the Quebec-based company says recognizes the expertise of its engineering and manufacturing teams.
The world’s third-largest landing gear manufacturer has had a relationship with the U.S. defence company since the 1990s.
It has manufactured landing gear for C-130 cargo aircraft, and designed and built landing gear for the CH-53K helicopter and flight opening door uplock system for the F-35 multi-role aircraft.
No financial details were provided.
Heroux-Devtek supplies landing gear for commercial and defence aircraft, with about 90 per cent of sales coming from outside Canada, including 53 per cent in the United States.
“Winning this very promising contract will help strengthen our business relationship with this important client and bring about new opportunities,” stated CEO Martin Brassard.
Dorel Industries Inc. (DII.B-T) fell after saying the Luxembourg Administrative Court has confirmed a tribunal ruling that one of its subsidiaries owes US$64.2-million in tax.
As a result, the company says it must pay a one-time remaining cash balance of US$45.4-million to Luxembourg tax authorities.
The tax charge is related to an internal corporate reorganization that took place in 2015.
Dorel CEO Martin Schwartz says the company is disappointed by the decision, but will abide by the ruling.
The company says the judgment will reduce its third-quarter earnings per share by US$1.90.
Dorel is expected to release its full third-quarter results on Nov. 5.
Hexo Corp. (HEXO-T) slid after its auditor raised serious concerns about the company’s future as it reported a $67.9-million net loss in its latest quarter.
PricewaterhouseCoopers LLP said its recent review of the Ottawa-based cannabis business showed that Hexo “did not maintain, in all material respects, effective internal control over financial reporting” and several factors “raise substantial doubt about its ability to continue as a going concern.”
“The company has suffered recurring losses from operations, has had cash outflows from operating activities, and has financial liabilities that may require significant cash outflows over the next twelve months,” the auditor wrote in a six-page report filed along with Hexo’s fourth-quarter earnings.
It also noted that Hexo’s existing funds and operational cash flow are “not sufficient” enough to fund debt repayments, capex budgets, and potential cash requirements under a senior convertible note.
The auditor’s report come as Hexo is trying to quell the upheaval stemming from a recent strategic reorganization that involved the departure of co-founder and chief executive Sebastien St-Louis and chief operating officer Donald Courtney last week.
St-Louis was replaced with Scott Cooper, who ran Truss Beverage Co., a joint venture between Molson-Coors Canada and Hexo that produces the Little Victory, Mollo and Veryvell beverages.
TransAlta Renewables Inc. (RNW-T) dropped with it lowering its financial guidance for this year as it said it has found cracks in several foundations of the turbines at a wind farm in New Brunswick where a tower collapsed earlier this month.
The company says the discovery of the sub-surface cracks means the foundations will likely need repairs, and if replacement is required, costs are estimated at $1.5-million to $2.0-million per foundation
TransAlta Renewables suspended operations and began an investigation after a tower collapsed earlier this month at its Kent Hill wind farm. The suspended operation includes 50 wind turbines at Kent Hills 1 and Kent Hills 2 where the tower collapsed. Five turbines at Kent Hills 3 continue to operate.
The company says the foundation issues at the Kent Hills 1 and 2 sites are unique to the design of those sites and there is no indication of any foundation issues at the Kent Hills 3 site or the company’s other locations.
It estimates the outage is expected to result in foregone revenue of about $3.7 million per month for as long as all 50 turbines are off-line, based on average historical wind production.
As a result, TransAlta Renewables lowered its guidance range for its comparable EBITDA, adjusted funds from operations, and cash available for distribution.
Apple Inc. (AAPL-Q) was down as supply chain woes cost it US$6-billion in sales during the company’s fiscal fourth quarter, which missed Wall Street expectations, and Chief Executive Tim Cook said that the impact will be even worse during the current holiday sales quarter.
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Mr. Cook told Reuters on Thursday the quarter ended Sept. 25 had “larger than expected supply constraints” as well as pandemic-related manufacturing disruptions in Southeast Asia. While Apple had seen “significant improvement” by late October in those Southeast Asian facilities, the chip shortage has persisted and is now affecting “most of our products,” Cook said.
“We’re doing everything we can do to get more (chips) and also everything we can do operationally to make sure we’re moving just as fast as possible,” Mr. Cook said.
Mr. Cook said the company expects year-over-growth for its quarter ending in December. Analysts expect growth of 7.4 per cent to US$119.7-billion.
“We’re projecting very solid demand growth year over year. But we are also predicting that we’re going to be short of demand by larger than $6 billion,” Mr. Cook said.
Apple’s results were mixed in a fiscal fourth quarter seen as a lull before the high-sales holiday end of year.
Apple said revenues and profits for the fiscal fourth quarter were US$83.4-billion and US$1.24 per share, compared with analyst estimates of US$84.8-billion and US$1.24 per share, according to IBES data from Refinitiv.
The results were a rocky end to a fiscal year of above-expectations sales led by its iPhone 12 models and strong sales of Mac computers and iPads for working and learning from home during the COVID-19 pandemic.
Amazon (AMZN-Q) fell after it reported a slump in profit that it expects will continue through the holiday quarter, as higher pay to attract workers and other operational disruptions diminish the company’s windfall from online shopping.
After a year of blockbuster results, the world’s largest online retailer is facing a tougher outlook. In a tight labour market, it has boosted average U.S. warehouse pay to $18 per hour and marketed ever bigger signing bonuses to attract blue-collar staff it needs to keep its high-turnover operation humming.
The company meanwhile is contending with global supply chain challenges. It has doubled its container processing ability, expanded its delivery partner program and has ramped up its warehouse investments - all at a noteworthy cost.
The company said it expects operating profit for the current quarter to be between $0 and US$3.0-billion, short of US$6.9-billion Amazon posted the year prior. In the just-ended third quarter, net income fell by about 50 per cent to US$3.16-billion, a first since the start of the coronavirus pandemic in the United States.
Andy Jassy, who became CEO in July, in a statement said Amazon was confronting higher shipping costs, increased wages and worker shortages. These labour challenges, plus lost productivity and cost inflation, added US$2-billion to Amazon’s expenses in the quarter, an amount that’s expected to double in the holiday period.
Amazon is “doing whatever it takes to minimize the impact on customers and selling partners this holiday season,” he said. “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”
Starbucks Corp. (SBUX-Q) lost ground after it missed market estimates for quarterly same-store sales on Thursday, as a COVID-19 resurgence in China closed stores in several major cities and overshadowed a strong performance by its U.S. business.
Fresh lockdowns to curb the spread of the Delta variant in Starbucks’ largest growth market of China have also hit businesses of several other restaurant chain operators, including Yum China Holdings Inc. The coffee chain posted a 7-per-cent decline in China comparable sales in the fourth quarter, missing its forecast of roughly flat growth and offsetting a 22-per-cent jump in the United States.
Analysts say the pressure in China should be temporary as restrictions ease and Seattle-based Starbucks opens more stores in the world’s second-largest economy to boost growth.
Global comparable sales rose 17 per cent in the quarter ended Oct. 3, compared with analysts’ average estimate of 18.5-per-cent growth, according to Refinitiv IBES data.
Revenue came in at US$8.15-billion to miss Wall Street expectations of US$8.21-billion. Starbucks earned US$1 per share on an adjusted basis - narrowly beating estimates of 99 US cents - compared with 51 US cents a year earlier.
The company said on Wednesday it would give pay raises to workers in the United States with at least two years of employment and offer $200 referral bonuses, as it grapples with a labour crunch in the country.
With files from staff and wires
David Leeder