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A survey of North American equities heading in both directions

On the rise

Shares of Canadian Western Bank (CWB-T) increased almost 3 per cent on Friday after it raised its dividend as it reported its fourth-quarter profit rose compared with a year ago.

The Edmonton-based bank says it will pay a quarterly dividend of 34 cents per share, an increase of a penny.

The higher payment to shareholders came as CWB says its common shareholders’ net income totalled $76.8-million or 80 cents per diluted share for the quarter ended Oct. 31, up from $67.7-million or 72 cents per diluted share a year earlier.

Revenue totalled $291.8-million, up from $279.8-million in the same quarter last year.

CWB reported a provision for credit losses of $9.8-million for its fourth quarter compared with $12.2 million in the same quarter a year ago.

On an adjusted basis, CWB says it earned 94 cents per share in its latest quarter, up from an adjusted profit of 88 cents per share a year earlier.

“We expect to maintain strong financial results in fiscal 2024 against continued volatility in economic and market conditions,” CWB chief executive Chris Fowler said in statement.

“Our outlook is supported by an increase in our operational efficiency from the reorganization initiatives we executed late this quarter, which will result in the redeployment of resources to priority activities consistent with our differentiated strategy.”

EQB Inc. (EQB-T) was up 0.9 per cent with the release of better-than-expected fourth-quarter release late Thursday.

The Toronto-based bank reported normalized earnings per share, excluding derivative gains, losses on investments, and acquisition related costs, of $3.80, exceeding the Street’s expectation of $3.65. The company also raised its quarterly dividend by 5 per cent sequentially and 21 per cent year-over-year to $40 cents per share.

“We have a neutral view on Q4/23 results,” said RBC Dominion Securities analyst Geoffey Kwan. “Adjusted EPS was ahead of our forecast, but was helped by higher-than-forecast gains on strategic and other investments (net interest income and PCLs were largely in line with our forecast). 2024 guidance was in line with our prior forecast. One interesting disclosure is that 80 per cent of its uninsured residential borrowers had their mortgage originated or renewed in the higher rate environment and are not expected to have a material increase in mortgage payment on renewal (EQB’s non-prime borrowers normally take 1-year mortgage terms unlike prime borrowers who typically take 5-year terms). Despite the uncertainty regarding the near-term outlook for the housing/mortgage market, we think EQB continues to execute well on its growth strategy. Within our small cap coverage, EQB remains our best idea.”

Vanouver-based Lululemon Athletica Inc. (LULU-Q) erased premarket losses and rose 5.4 per cent despite forecasting fourth-quarter results below expectations and striking a cautious tone for the holiday season.

The forecast, after a strong third-quarter show, mirrors sentiments from other U.S. retailers such as Walmart (WMT-N), Best Buy (BBY-N) and Kohl’s (KSS-N) which have hinted at a more wary consumer and a choppy start to the crucial holiday quarter.

Friday's upgrades and downgrades: Analysts on the Street react to Lululemon's quarterly report

Although Thanksgiving weekend sales showed optimism among customers, some have either largely cut back on spending or are waiting to shop closer to Christmas to get better deals.

“The company is not giving up on pricing while their competitors are...especially during this holiday centered season,” Dave Wagner, portfolio manager at Aptus Capital Advisors said.

He added, “the consumer is starting to hurt a little bit and even though they (Lululemon) focus more on the high-end consumer, they are probably seeing just a little less top line sales right now.”

Lululemon has stuck to full-price selling in an effort to drive revenues.

It beat third-quarter results and raised annual forecasts, which bring in focus the buoyant demand for the company’s comfortable clothing as well as accessories like belt bags.

“We did experience some very strong performance during our Cyber Five period,” said CFO Meghan Frank in a post earnings call and added the company was “mindful of the macroeconomic environment” heading into fourth quarter, which has led it to guide more prudently.

The company expects fourth-quarter net revenue between US$3.14-billion and US$3.17-billion, below analysts’ average estimate of US$3.18-billion, according to LSEG data.

Fourth-quarter profit forecast between US$4.85 and US$4.93 per share came in below expectations of US$4.94 per share.

Insider Intelligence analyst Rachel Wolff said “the retailer’s solid foot traffic trends during Black Friday indicate that the company is well-positioned to maintain its momentum during the holiday quarter.”

Lululemon expects full-year 2023 profit between US$12.34 and US$12.42 per share and revenue between US$9.55-billion and US$9.59-billion.

U.S. industrial firm Honeywell (HON-Q) said on Friday it would buy air conditioner maker Carrier’s (CARR-N) security unit for US$4.95-billion in cash to bulk up its building safety business where growth has slowed in recent months.

Shares of Carrier rose on the news.

The deal is Honeywell’s biggest under new CEO Vimal Kapur and will offer access to Carrier brands such as electronic lock maker Onity, used by many major hotel chains, and cloud-based lock maker Supra.

Carrier’s Access Solutions security business provides residential, commercial and industrial security systems. The company was in talks with advisors to spin off its fire and security business, Reuters reported earlier this year.

“Strategically, this is a hand-in-glove acquisition for Honeywell. It was the most logical buyer and so this is not a surprise, although the multiple is certainly much higher as already noted,” said Wolfe Research analyst Nigel Coe.

The deal will help bolster Honeywell’s building technologies business, which has been struggling with low revenue growth this year due to weak demand. Honeywell’s overall performance, however, has been supported by strong results in its aviation business.

The all-cash Carrier deal is expected to close before the end of the third quarter of 2024 and will be cash-earnings per share accretive to Honeywell in the first full year of ownership.

Carrier said it intends to use the deal’s estimated net proceeds of about US$4-billion to pay down debt. Its fire and security unit accounted for about 17% of its total sales last year.

Goldman Sachs and J.P. Morgan Securities served as financial advisors to Carrier. Evercore was Honeywell’s financial advisor.

On the decline

Canadian miner First Quantum (FM-T) dipped 1.1 per cent after its unit in Panama said the country’s trade and industry ministry has ordered it to end operations at its lucrative copper mine.

The ministry sent the unit, Cobre Panama, a formal advisory that it must “end extraction, processing, refining, transportation, export and sales activities” at the mine, Cobre Panama said in a statement.

It must also take measures to secure the facilities and avoid environmental damage at the site, the miner said.

The government order comes after Panama’s Supreme Court ruled last month that First Quantum’s contract to operate the mine was unconstitutional, following months of protests.

The mine’s closure could cause Panama to sharply cut its 2024 economic growth forecasts, a government official told Reuters last week. The Cobre Panama mine accounts for some 5 per cent of Panama’s GDP.

Because it must close the mine, Cobre Panama said it has requested government authorization to lay off more than 4,000 of its employees.

“This measure will be developed in parallel with the voluntary retirement program presented by the company on Dec. 3, with the help of the (mine’s) union,” Cobre Panama said.

Last month, it suspended the contracts of 7,000 staff at the mine.

Opinion: How to trash a country: Panama vs. Canada’s First Quantum copper miner

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 23/02/24 4:00pm EST.

SymbolName% changeLast
CDN Western Bank
Carrier Global Corp
First Quantum Minerals Ltd
Honeywell International Inc
Lululemon Athletica

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