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A look at North American equities heading in both directions

On the rise

American Express Co. (AXP-N) forecast full-year profit above Wall Street estimate on Friday, as the U.S. credit card company banked on expectations that its largely well-off customers will continue to spend despite broader economic uncertainty.

Even as decades-high inflation pressures household budgets, American Express has remained so far insulated from feeling a dent as the company’s affluent customer base refused to dial down on their spending.

Shares of American Express soared 10.6 per cent in Friday trading.

AmEx forecast 2023 net revenue growth between 15 per cent and 17 per cent and earnings per share of US$11 to US$11.40. Analysts on average had expected US$10.55 per share, according to Refinitiv IBES data.

The results came shortly after rivals Visa Inc. (V-N) and Mastercard Inc. (MA-N) warned that their revenue growth would slow through this year as the pandemic-driven pent-up travel demand begins to ebb.

Even so, American Express Chief Financial Officer Jeff Campbell told Reuters that the company continues to remain optimistic about travel recovery going forward.

“We had a very strong quarter with travel across borders and national travel and feel really good about the trends there.”

Still, the change in economic forecast and a worsening operating environment for lenders prompted the New York-based firm to stockpile more rainy-day funds.

The typically strong holiday season saw AmEx’s customers showing a scant response to inflationary pressures, and instead, splurge on gifts, travel, and entertainment, helping sustain card member spending volumes..

AmEx reported a fourth-quarter profit of US$2.07 per share for the three-month period ended Dec. 31, missing analysts estimates of US$2.22 per share.

Net income fell 9 per cent to US$1.57-billion, while the company’s total revenue increased 17 per cent to US$14.18-billion in the quarter.

Despite a further decline in revenue, shares of Real Matters Inc. (REAL-T) were higher by 13 per cent following premarket release of its first-quarter 2023 financial results, which saw better-than-expected earnings.

The Toronto-based network management services provider saw consolidated revenue fall 64.6 per cent year-over-year to $38.2-million, below the Street’s expectation of $44.6-million. Net revenue of $9.8-million was also lower the anticipated ($10.6-million), however an adjusted earnings per share loss of 3 cents was a penny better than projected.

“Real Matters reported a sequential gross revenue decline of 34.4 per cent,” said ATB Capital Markets analyst Martin Toner. “The Company’s U.S. Appraisal segment declined by 64.4 per cent year-over-year, and its U.S. Title segment decreased 85.4 per cent year-over-year. The Company launched three lenders in U.S. Appraisal, two lenders in U.S. Title, and two lenders in Canada. The Company’s results continued to deteriorate this quarter, and Real Matters continued to limit losses by rationalizing operations in line with the market. We believe investors will be satisfied with the Company’s ability to preserve its healthy balance sheet, and they should be encouraged by the recent decline in mortgage rates and uptick in mortgage activity.”

Lucid Group Inc.’s (LCID-Q) pared gains after doubling on Friday on market speculation that Saudi Arabia’s Public Investment Fund is working on plans to buy out the rest of the electric vehicle maker.

The speculation came as a result of an “uncooked” alert from deals website Betaville. The website uses the term “uncooked” to refer to market gossip. Lucid was the sixth-most traded stock on U.S. exchanges and third top mover on the Nasdaq, with shares up 42 per cent.

The PIF, the sovereign wealth fund that owns more than 65 percent of Lucid, did not immediately respond to a request for comment. Lucid declined to comment.

Back in 2018, PIF was interested in taking Tesla private, but the deal did not materialize. Tesla chief Elon Musk is under trial for allegedly misleading investors with his tweet “funding secured” for taking the company private.

Lucid has been struggling to deliver its sleek Air luxury EVs. It delivered 4,369 vehicles last year.

With Tesla’s price cuts, money-losing U.S. startups like Rivian Automotive Inc and Lucid will find it much more difficult to grab share in an industry competing for shrinking consumer wallets.

On the decline

Shares of Suncor Energy Inc. (SU-T) were flat on Friday after said it is buying a smaller stake in the Fort Hills oil sands mine in northern Alberta from Teck Resources Ltd. (TECK.B-T), after partner TotalEnergies exercised its right of first refusal and announced it will buy a slice of Teck’s share of the project.

Suncor announced in October an agreement to buy Teck’s 21.3-per-cent stake in the bitumen mine, but in December France’s TotalEnergies filed an application in the Alberta Court of King’s Bench challenging the deal.

TotalEnergies on Friday said it would buy an extra 6.65-per-cent stake in Fort Hills for $312-million.

Suncor told Reuters in an email it would still acquire the rest. The deals mean Suncor would expand its majority interest to just under 69 per cent of Fort Hills, instead of 75.4 per cent as planned.

“Fort Hills partners have a Right of First Refusal and Total is exercising their right to acquire a portion on a pro-rata basis,” Suncor spokeswoman Sneh Seetal said. “We will acquire the rest as originally planned.”

Fort Hills is a 194,000 barrel per day (bpd) open-pit truck and shovel mine, where raw oil sands bitumen is extracted and then upgraded. The project has struggled with operational challenges, delaying production and raising costs.

TotalEnergies, which also owns a 50-per-cent stake in the Surmont oil sands project, said last year it is planning to spin-off its Canadian oil sands operations as the assets do not fit within the company’s low-emissions strategy.

Shareholders will vote on the spin-off plan at TotalEnergies’ annual general meeting in May.

Buying an additional stake in Fort Hills takes the company’s total share of the project to 31.23 per cent.

“By seizing this opportunity to grow its business under attractive conditions, TotalEnergies EP Canada will deliver value to the future shareholders of the spin-off entity”, Jean-Pierre Sbraire, CFO of TotalEnergies, said in a statement.

Chevron Corp. (CVX-N) pulled back 4.5 per cent on Friday after it posted a record US$36.5-billion profit for 2022 that was more than double year-earlier earnings but fell shy of Wall Street estimates, undercut by an asset writedowns and a retreat in oil and gas prices.

The second largest U.S. oil producer’s adjusted net profit for 2022 beat by about US$10-billion its previous record set in 2011. But US$1.1-billion in writedowns in its international oil and gas operations in the fourth quarter left earnings short of forecasts for adjusted net profit of US$37.2-billion.

Chevron’s numbers kick off what promises to be nosebleed level earnings for global energy suppliers. High prices from strong demand and shortages since Russia’s invasion of Ukraine position Western energy firms to show a combined $200 billion profit for the year, according to analysts.

Industry earnings already have put energy stocks at the top of market returns as companies lift their payouts to shareholders. The latest figures could stir fresh calls for windfall taxes.

The White House on Wednesday protested against Chevron’s decision to triple the budget to buy back its own stock from future earnings - now at US$75-billion over an undisclosed period. Biden’s administration say companies should invest more in ways to lower prices for consumers.

Investors reacted by boosting Chevron shares by almost 5 per cent on Thursday, to US$187.79, up 44 per cent in the last 52-weeks.

Chevron last year paid US$26-billion in dividends and buybacks to shareholders and invested US$15.7-billion. Chevron says it is raising capital expenditure to US$17-billion in 2023, two thirds of it in the United States, where output is up 4%.

For 2022, Chevron’s free cash flow, a closely watched measure of operating efficiency, was up by US$15-billion from the previous year.

A more than 20 per cent return on capital employed, or how much the company makes for every dollar invested in the business, “shows that our focus on capital efficiency is delivering results,” said Chief Executive Michael Wirth in a statement.

In the final quarter, Chevron posted adjusted earnings of US$7.9-billion, or US$4.09 per share, up 61 per cent from a year ago.

The earnings surge over the full year came despite weaker overall production, led by a 7-per-cent decline in international output due to the end of concessions in Thailand and Indonesia.

Intel Corp. (INTC-Q) fell 6.5 per cent after the U.S. chipmaker stumped Wall Street with dismal earnings projections, fanning fears around a slump in the personal-computer market.

The company predicted a surprise loss for the first quarter and its revenue forecast was US$3-billion below estimates as it also struggled with slowing growth in the data center business.

Intel shares fell more than 7 per cent, while rival Advanced Micro Devices (AMD-Q) and Nvidia (NVDA-Q) recovered from steep premarket losses to trade flat. Intel supplier KLA Corp. (KLAC-Q) fell 5 per cent after its dismal forecast.

“No words can portray or explain the historic collapse of Intel,” said Rosenblatt Securities’ Hans Mosesmann, who was among the 21 analysts who cut their price targets on the stock.

The poor outlook underscored the challenges facing Chief Executive Pat Gelsinger as he tries to reestablish Intel’s dominance of the sector by expanding contract manufacturing and building new factories in the United States and Europe.

The company has been steadily losing market share to rivals like AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel’s technology.

“AMD’s Genoa and Bergamo (data center) chips have a strong price-performance advantage compared to Intel’s Sapphire Rapids processors, which should drive further AMD share gains,” said Matt Wegner, analyst at YipitData.

Analysts said that puts Intel at a disadvantage even when the data center market bottoms out, expected in the second half of 2022, as the company would have lost even more share by then.

“It is now clear why Intel needs to cut so much cost as the company’s original plans prove to be fantasy,” brokerage Bernstein said.

“The magnitude of the deterioration is stunning, and brings potential concern to the company’s cash position over time.”

Intel, which plans to cut US$3-billion in costs this year, generated US$7.7-billion in cash from operations in the fourth quarter and paid dividends of US$1.5-billion.

With capital expenditure estimated to be around US$20-billion in 2023, analysts said the company should consider cutting its dividend.

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 19/04/24 4:00pm EDT.

SymbolName% changeLast
AXP-N
American Express Company
+6.23%231.04
AMD-Q
Adv Micro Devices
-5.44%146.64
AMAT-Q
Applied Materials
-2.34%189.77
CVX-N
Chevron Corp
+1.54%160
INTC-Q
Intel Corp
-2.4%34.2
KLAC-Q
K L A-Tencor Corp
-2.49%628.16
LCID-Q
Lucid Group Inc
+0.41%2.45
NVDA-Q
Nvidia Corp
-10%762
REAL-T
Real Matters Inc
-0.92%5.4
SU-T
Suncor Energy Inc
+1.15%52.99
TECK-B-T
Teck Resources Ltd Cl B
-1.41%64.81
QCOM-Q
Qualcomm Inc
-2.36%157.63

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