A roundup of some of the North American equities making moves in both directions today
Martinrea International Inc. (MRE-T) jumped 12.6 per cent in afternoon trading on Friday after reporting record fourth-quarter earnings on Thursday after market close and announcing “significant” new contracts.
The Vaughan, Ont.-based auto parts supplier posted sales of $926.1-million, up 5.4 per cent year-over-year ahead of the $889.1-million consensus projection on the Street.
“The fourth quarter was our seventeenth consecutive quarter with record year-over-year adjusted earnings, and we expect the progress to continue in 2019,” said president and chief executive officer Pat D’Eramo in a statement.
“I am pleased to announce some significant new business wins in the past few months totalling $230-million in annualized sales at peak volumes, including $19-million in lightweight structures with FCA, BMW and Toyota starting in 2021 and 2022, and $40-million in propulsion systems, including fluid management and engine products, for Volvo, Ford, Geely, Scania and JLR starting mainly in 2020. These awards are from a variety of customers, and really demonstrate that we are in the right product space. Our lightweighting solutions in particular are attracting great interest. 2018 was our best year ever for winning new product mandates, with approximately $800-million in new organic business announcements in the past 12 months, giving us a solid pipeline of new business for the future."
Transcanada Corp. (TRP-T) shares rose 1 per cent after the U.S. Federal Energy Regulatory Commission approved full service of its Mountaineer XPress (MXP) project, which allows for an increase in the flow of gas on MXP and for the company to begin operating its Gulf XPress (GXP) project.
“Mountaineer XPress and Gulf XPress are extremely important to TransCanada as they provide much-needed takeaway capacity for our customers, while also growing our extensive footprint in the Appalachian Basin,” said TransCanada president and chief executive officer Russ Girling in a release. “Both projects will also deliver attractive long-term returns and stable cash flow for our shareholders.”
Shares of Gap Inc. (GPS-N) jumped 16.3 per cent on Friday as the Street applauded the retailer’s decision to separate its better-performing Old Navy brand while closing almost 230 stores of its struggling namesake apparel business.
The announcement came Thursday after market close with the release of weaker-than-anticipated fourth-quarter results.
“It’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time,” chairman Robert Fisher said in a statement.
In a research note released this morning, Citi analyst Paul Lejuez said: "For several years Old Navy has been the standout performer in the GPS portfolio. Performance versus the rest of the chain has been so divergent that the question has often been raised about whether spinning off Old Navy would unlock value. After all, Old Navy is a good business in a company that was trading at a P/E of 10 times.
“Despite what looked like an opportunity (on paper) to unlock value, we didn’t think they would do it. CEO Art Peck had made comments in the past about the whole being worth more than the sum of the parts because each brand benefited from being part of the GPS portfolio. This would argue against spinning anything off. But they pulled the trigger on the split."
U.S. retailer L Brands Inc. (LB-N) sat 5.2 per cent higher a day after unveiling a plan to close 53 Victoria’s Secret stores, including three in Canada, in a cost-cutting measure. The announcement was made on a conference call Thursday following the release of its fourth-quarter results.
Executive vice president and chief financial officer Stuart Burgdoerfer said the need to close stores was "based on the overall performance of the Victoria's Secret business, not meeting our expectations or having year-on-year declines."
On the decline
Maxar Technologies Inc. (MAXR-N, MAXR-T) plummeted 20.3 per cent after the company announced an organizational restructuring “to create a leaner and more agile business” and slashed its dividend while also reporting lower-than-expected fourth-quarter revenues.
Cutting its dividend to a penny per share, from 37 cents in the previous quarter, Maxar CEO Dan Jablonsky said the reduction “follows the recent sale of a facility in Palo Alto and an amended credit agreement with our lenders.”
It also announced it would continue operating its GEO Comsat business, following a strategic review.
Maxar reported consolidated revenue for the fourth quarter of US$496-million, which was below expectations of $517.7-million and compared to US$545-million for the same period of last year.
“The decrease was primarily driven by a decline in the Space Systems segment, in part offset by growth in Imagery and Services,” the company stated.
Its net loss was US$950-million or $16.10 per share versus a profit of US$55-million or 99 cents a year earlier.
On Friday, an equity analyst at CIBC World Markets downgraded Maxr shares.
"Maxar remains in transition, with a new management team attempting to navigate a weak GEO industry, a failed satellite and a significant WorldView Legion capex program," said Stephanie Price.
- Brenda Bouw
Shares of U.S. grocery stores fell in afternoon trading after the Wall Street Journal reported Amazon.com Inc. (AMZN-Q) is planning to open dozens of grocery stores across the United States as it looks to expand in the food business.
Amazon was up 2 per cent.
Shares of Tesla Inc. (TSLA-Q) dropped 7.9 per cent a day after the electric carmaker warned it would not be profitable in the first quarter, launched a US$35,000 version of its Model 3 sedan and said its global sales would now be online-only. All are seen as moves to raise demand and cut costs.
“We do not think this was the original plan envisaged by Tesla management and bullish investors,” JPMorgan analysts wrote in a research note released Friday.
“The Model 3 would prove more difficult and more expensive to manufacture than was originally projected, such that the firm would struggle to earn its targeted above industry average 25 percent gross margin as it transitions toward industry average pricing,” they said.
Kinaxis Inc. (KXS-T) fell 7.8 per cent in the wake of weaker-than-anticipated fourth-quarter results.
The Ottawa-based provider of cloud-based subscription software for supply chain operations reported revenue of $39.5-million, up 15 per cent year-over-year but below the Street’s projection of $40-million. Adjusted EBITDA of $8.7-million also missed expectations ($9.5-million) and was a drop from $11.2-million during the same period a year ago.
“We continued to deliver high revenue growth and strong profitability in 2018, reflecting the sustained strength of our business. Throughout the year, we executed on a number of strategic investments including the expansion of our global sales team and key product innovations. These investments helped drive our strong financial performance and will position Kinaxis for continued growth in 2019 and beyond,” said CEO John Sicard in a release.
With files from wires and staff