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A look at North American equities heading in both directions

On the rise

Shares of Air Canada (AC-T) were higher by 0.5 per cent after it posted its second consecutive profitable quarter on Friday, signalling Canada’s largest airline is slowly leaving behind the financial ruin of the pandemic as travellers return to the skies.

Air Canada’s profit in the first three months of 2023 reached $4-million, compared to a loss of $974-million in the same period of 2022. Operating revenue almost doubled to $4.9-billion from the year-ago quarter due to higher demand for air travel.

When compared with the pre-pandemic quarter of 2019, sales are up by 10 per cent, Air Canada said in the earnings report, released before markets opened on Friday morning.

“Our first-quarter financial results exceeded both internal and external expectations and we expect demand to persist, supported by strong advance bookings for the remainder of the year,” Michael Rousseau, Air Canada’s chief executive officer, said in a statement accompanying the earnings release.

Air Canada reported an adjusted loss of 53 cents per share for its first quarter ended March 31, compared with analysts’ average estimate of 74-cent loss per share. Cash flow for the first quarter rose by $1-billion to $1.4-billion, compared with a the same quarter of 2022.

Walter Spracklin, a stock analyst at Royal Bank of Canada, said in a note to clients the results are better than he expected. He pointed to Air Canada’s strong seat bookings in the short term, but said it will be important to watch how demand holds up amid a weakening global economy and competition from discount airlines.

“Demand and pricing is expected to weaken post-summer, [but] we are mindful of a potential structural shift in the nature of airline demand that may see travel hold up despite a weakening economy,” Mr. Spracklin wrote.

- Eric Atkins

Canada’s second-biggest life insurer Sun Life Financial Inc. (SLF-T) saw gains after it beat analysts’ estimates for first-quarter profit, powered by strong insurance sales at home and in the United States.

Chief Executive Officer Kevin Strain said the insurer generated “strong growth in both health and protection sales,” as consumers prioritized health and financial security.

Sun Life has focused on expanding overseas as it faces limited growth at home, acquiring Denta Quest in the U.S. last year and inking a partnership with Dah Sing Bank in the first quarter.

At the same time, Sun Life has added digital tools and new products to its offerings at home to boost growth.

Underlying net income in the United States and Canada, which together account for over 60 per cent of the company’s profits, rose 121 per cent and 53 per cent respectively. In Asia, it rose 6 per cent.

Sun Life’s results come amid volatility in global markets that has pushed investors towards safe-haven assets, while rising interest rates have caused more uncertainty.

Bigger rival Manulife Financial Corp. (MFC-T) reported weaker-than-expected earnings for its first quarter, largely due to weakness in its wealth and asset management business.

Earnings from Sun Life’s asset management unit fell 12 per cent, hurt by lower fees and broader declines in equity markets.

Underlying net income rose 24 per cent to $895-million. On a per share basis, it earned $1.52 per share, a cent over analysts’ expectations, according to Refinitiv data.

A day after its shares dropped 14.2 per cent on news it will refile three of its past quarterly financial statements after uncovering “material misstatements” linked to its BioSteel business, shares of Canopy Growth Corp. (WEED-T) rebounded on Friday.

The Smiths Falls, Ont. cannabis company says in a regulatory filing that its sports beverage business’s first-, second- and third-quarter sales information from 2022 “should no longer be relied upon.”

The company discovered the misstatements when it was preparing its financial results for the financial year ended March 31.

Canopy determined on May 4 that there were errors in its filings after a review of BioSteel results with independent external counsel and forensic accountants.

The company says its review is ongoing and thus, it cannot quantify the impact the changes might have on its prior financial statements.

Canopy says it also cannot predict how soon its review will be complete, but it promised to file new statements “as soon as practicable.”

On the decline

Onex Corp. (ONEX-T) fell 2.7 per cent after it swung to a first-quarter loss as it wrote down the value of its private wealth business, and also paused fundraising for its largest private equity fund after struggling to attract new money in a tough market.

The Toronto-based private equity investor reported quarterly earnings one day after appointing Bobby Le Blanc as its new CEO, as founder Gerry Schwartz steps back to be the company’s chair and set a three-year sunset date on his voting control of the company.

Onex lost US$232-million, or US$2.87 per share, in the quarter that ended March 31. That compared with a profit of US$164-million, or US$1.89 per share, in the same quarter last year.

Profit from Onex’s investing segment was US$44-million, while asset management lost US$69-million.

The company’s quarterly earnings were dragged down by a US$171-million impairment charge stemming from the decision to wind down operations at Gluskin Sheff and Associated Inc. Onex also took a US$20-million restructuring charge.

In late March, Onex announced a deal with RBC Wealth Management Canada to distribute its alternative investment products and take over parts of Gluskin Sheff’s private wealth business after four key managing directors from Gluskin’s client wealth management group planned to leave to join RBC.

Onex acquired Gluskin Sheff in 2019 for US$330-million as part of a plan to expand sales of its credit and private wealth products, which generate stead streams of fees. But that strategy did not pan out.

- James Bradshaw

Toronto-based Dentalcorp Holdings Ltd. (DNTL-T) dropped 6.3 per cent after announcing its strategic review process failed to find a buyer that “reflected the fair value of the company.”

It said the Special Committee formed in November of 2022 “recommended that it would be in the best interests of the Company, giving due regard to the interests of the Company’s shareholders and other stakeholders, to continue to pursue its existing business strategy, which contemplates the achievement of balanced growth through organic, acquisitive and balance sheet deleveraging initiatives under the leadership of the Company’s existing senior management team.”

The announcement came with the release of first-quarter results, including a 28-per-cent year-over-year rise in revenue to $358.3-million, above the Street’s expectation of $345.3-million. However, second-quarter revenue is expected to increase by 9.5 per cent to 10 per cent to $358-million to $361-million, which is lower the analysts’ projection of $370.7-million.

Crescent Point Energy Corp. (CPG-T) was flat after it reported its first-quarter profit was down from a year ago as energy prices were also lower.

The company says it earned $216.7-million or 39 cents per diluted share for the quarter ended March 31, down from $1.18-billion or $2.03 per diluted share in the same quarter last year.

Oil and gas sales in the quarter totalled $913.6-million, down from $1.09-billion in the first three months of 2022.

On an adjusted basis, Crescent Point says its earnings from operations totalled 40 cents per share, down from 41 cents per share a year ago.

Average daily production in the quarter was 139,280 barrels of oil equivalent per day, up from 132,788 in the same quarter last year.

Crescent Point says its average selling price in the quarter was $72.88 per barrel of oil equivalent, down from $91.43 a year earlier.

In a note, ATB Capital Markets analyst Amir Arif said: “CPG announced its Q1/2023 financial results, which were marked by production that was slightly better than expected and CFPS that was in line with expectations. Operationally, the Company provided positive initial production rates for a new Kaybob Duvernay pad in the volatile oil window (IP30 more than 1,000 boe/d [barrels of oil equivalent per day], 73-per-cent condensate, 8-per-cent NGLs) and a positive Gold Creek West well on the recently acquired Montney asset (IP30 1,900 boe/d, 87-per-cent oil, 2-per-cent NGL). As previously disclosed, CPG will be adding a second rig in the Duvernay play in Q4/23. We expect the results to be slightly positive for the stock [Friday]. The Company previously announced the closing of the Montney acquisition on May 10, 2023. Q1/23 average production was 139.3 mboe/d, slightly above ATBe of 138.0 mboe/d and consensus of 138.1 mboe/d. Q1/23 CFPS was $0.95, in line with ATBe of $0.94 and consensus of $0.95.”

Cineplex Inc. (CGX-T) was lower by 1.1 per cent after seeing its first-quarter loss narrow compared with a year ago as its revenue increased nearly 50 per cent.

The movie theatre company says it lost $30.2-million or 48 cents per diluted share for the quarter ended March 31.

The result compared with a loss of $42.2-million or 67 cents per diluted share a year ago.

Revenue totalled $341.0-million, up from $228.7-million in the first three months of 2022.

The increase in revenue came as theatre attendance totalled nearly 9.8 million, up from nearly 6.7 million in the same quarter last year.

Cineplex says box office revenue per patron was $12.63, up from $12.00 a year earlier, while concession revenue per patron also rose to $8.85, up from $8.82 a year ago.

Fairfax Financial Holdings Ltd. (FFH-T) closed 0.3 per cent lower after saying it earned US$1.3-billion in the first quarter of 2023, more than double earnings of US$588.7-million a year earlier.

The Toronto-based company says net earnings per diluted share were US$49.38, compared with US$22.67 the same quarter a year earlier.

Net gains on investments were US$771.2-million, compared with a loss of US$195.2-million a year ago.

Fairfax says gross premiums written totalled US$7.1-billion in the quarter ended March 31, up from US$6.7-billion a year earlier.

Net insurance revenues were US$5.2-billion, up from US$4.7-billion.

Chairman and CEO Prem Watsa said in a press release that significantly higher operating income from Fairfax’s property and casualty insurance and reinsurance operations reflected increased interest and dividends, among other positive trends.

Elon Musk’s selection of a new CEO for Twitter may remove a big distraction for the billionaire and allow him to focus more on Tesla Inc. (TSLA-Q), which has been struggling with a drop in demand for its electric vehicles, analysts said.

Shares of the world’s most valuable electric vehicle maker, which have gained 40 per cent this year, slipped in trading on Friday. The stock had its worst year in 2022, losing 65 per cent, amid Mr. Musk’s on-again, off-again offer for Twitter.

Mr. Musk bamed former NBCUniversal advertising chief Linda Yaccarino as Twitter’s new CEO, as the company tries to reverse a plunge in ad revenue.

Ms. Yaccarino will take over a social media platform beset with challenges and a heavy debt load, after she spent several years modernizing the advertising business at NBCUniversal, which is owned by Comcast Corp.

“I am excited to welcome Linda Yaccarino as the new CEO of Twitter!” Musk said in a tweet on Friday. “@LindaYacc will focus primarily on business operations, while I focus on product design & new technology.”

Since Mr. Musk acquired Twitter in October, advertisers have fled the social media platform, worried that their ads could appear next to inappropriate content after the company lost nearly 80 per cent of staff. Mr. Musk earlier this year acknowledged that Twitter suffered a massive decline in ad revenue.

Twitter’s “trajectory will immediately take a 180-degree turn” under her leadership, said Lou Paskalis, a longtime ad industry executive and CEO of AJL Advisory, a marketing consultancy.

“I think (Yaccarino) has climbed every mountain she could at NBCU and did it impeccably well. And there’s no greater challenge than restoring order at Twitter,” he said.

While Mr. Musk said Ms. Yaccarino would help build an “everything app,” which he has previously said could offer a variety of services such as peer-to-peer payments, his selection of an advertising veteran signaled that digital ads would continue to be a core focus of the business.

Mr. Musk has axed thousands of Twitter employees, rushed the launch of a subscription product that allowed scammers to impersonate major brands and suspended users with whom he disagreed, all of which have spooked brands from spending on the platform.

With files from staff and wires

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