A roundup of some of the North American equities making moves in both directions today
On the rise
Shares of Manulife Financial Corp. (MFC-T) rose 3.1 per cent on Monday after a Saskatchewan court ruled in favor of the company in the Mosten Investment LP case
Mosten had argued that the terms of a universal life insurance policy originally held by a doctor but purchased by hedge fund allowed it to deposit an unlimited amount of money with Manulife and receive an annualized guaranteed return of at least 4 per cent.
In October, prominent U.S. short-seller Muddy Waters revealed a short position in Manulife, believing a loss in the previously little-known lawsuit could bring a drop in share price.
“In his decision, Judge Scherman of the Saskatchewan Court of Queen’s Bench stated that the policy in question ‘does not provide for unlimited stand-alone investment opportunities within the Carrier Fund,’” the company said in a release. “Specifically, the Court held that payments to the Contract are ‘limited to funds paid or invested to pay current and future costs of insurance, related premium taxes, specified administration fees, and the permitted accrual tax-exempt investments’.”
"This is consistent with our position that this case was legally unfounded and commercially absurd, and that consumers purchasing universal life policies, and the insurers issuing these policies, never intended to have the policies function as deposit or securities contracts.”
TransAlta Corp. (TA-T) was up 7.1 per cent after Cove Key Bluescape Holdings, a U.S. investment partnership, revealed it has acquired a 10-per-cent stake and will be demanding board representation.
Dallas-based Cove Key announced late Friday it had bought 50,000 TransAlta shares to take its total ownership to 8.1 million, about 2.86 per cent of the outstanding stock.
“TransAlta values constructive input from all of our shareholders, including Mangrove and Bluescape,” said ambassador Gordon D. Giffin, Chair of the Board of TransAlta, in a release. “We have spoken to Mangrove and Bluescape and will continue to engage in discussions with them as we carefully consider their views. We will update shareholders in due course.”
Precision Drilling Corp. (PD-T) increased 6 per cent after announcing Monday it has divested its five drilling rigs and water treatment business branded Terra Water Systems in Mexico. The company sold the five idle rigs and ancillary equipment for US$48 million, while the price of Terra was not disclosed.
“From an investors’ point of view, this is found money,” said Raymond James analyst Andrew Bradford in a research note. “We’ve argued for some time that the market is effectively assigning a low value to Precision’s active rigs. This transaction shows that well-appointed rigs can have material marketable value even if they aren’t working.”
As well, the Calgary-based company announced its has signed three-year contract renewals for two rigs in Saudi Arabia.
It also said it has initiated the redemption of US$30-million senior notes due 2021 on a pro rata basis with available cash on hand.
“While not explicitly stated, it’s reasonable to conclude that Precision’s targeted debt reduction range has shifted upward from its original $100-million to $150-million range - perhaps by as much as $40-million (the Canadian equivalent of the announced redemption),” said Mr. Bradford. "This would bring Precision’s debt repayment plans to between 16 per cent and 21 per cent of it current market capital.
“We’ve also argued that debt repayment may not be the most exciting path to equity returns, but it is among the most reliable.”
In a research note, Acumen Capital analyst Brian Pow said: “The Q4/18 results provided additional evidence that CERV has successfully introduced discipline business. Growth in the agriculture segment could temper as Canadian farmer had lower net cash farm income and are dealing with a weaker Canadian dollar to buy more expensive equipment. Strong demand for class 8 trucks is expected to help CERV’s transportation dealerships.”
Hexo Corp. (HEXO-T) jumped 10 per cent after receiving an upgrade from a Cormark Securities equity analyst, who thinks its Newstrike Brands deal is its first meaningful acquisition and helps expand cultivation platform and incremental distribution in five provinces.
Curaleaf Holdings Inc. (CURA-CN) increasing 7.2 per cent in the wake of announcing the US$70-million acquisition of Acres Cannabis, which operates Nevada’s largest cultivation facility.
“The acquisition of Acres is a major step in expanding our vertical platform in Nevada. Acres operates a flagship dispensary in the heart of Las Vegas, complementing our existing assets in the state extremely well, and importantly, we can control the consistency, quality and production cost of our own cannabis products,” said Curaleaf chief executive Joseph Lusardi in a statement. “We have built the most accessible, trusted and reliable cannabis brand and are extremely excited about the prospects in Nevada both for retail and wholesale activity.”
Harvest One Cannabis Inc. (HVT-X) rose 25.3 per cent after announcing it has entered into an agreement to become a medical cannabis supplier to Shopppers Drug Mart.
The Vancouver-based company will supply the retail chain with its Satipharm branded products.
"We are incredibly proud to be working with Shoppers Drug Mart to supply them with our premium, indoor grown cannabis under the Satipharm health and wellness brand" said CEO Grant Froese in a release. "We see this supply agreement as a further step towards fulfilling our vision of being a vertically integrated house of brands in the cannabis health, wellness, and self-care sector. We continue to expand our capacity to support our growing brand portfolio which includes our recently announced transaction with Delivra as well as our existing brands Dream Water, Satipharm, Royal High , and Captain's Choice.”
Apple Inc. (AAPL-Q) finished 1 per cent higher following the surprise launch of a new 10.5-inch iPad Air and an update to its 7.9-inch iPad Mini ahead of its March 25 event, where it is expected to launch a television and video service, its next-generation AirPods and an AirPower wireless charging mat.
Shares of Nike Inc. (NKE-N) rose 1.2 per cent after several equity analysts raised their target price for its stock ahead of the release of its third-quarter financial results on Thursday
Credit Suisse’s Michael Binetti said: “Nike share gains are accelerating. In the U.S., Nike’s improved innovation drove Foot Locker (FL) to one of the best holiday 2019 SSS [same-store sales] results across our entire coverage (FL SSS was up 9.7 per cent in F4Q). Nike manufacturers’ revs are accelerating. In our F3Q conversations, Nike suggested its reduction of undifferentiated retail to 20 per cent of U.S. sales from 60 per cent was running ahead of plan-including a faster DTC [direct-to-consumer] shift, which should support premium ASPs & GM upside. We believe Nike is in the early innings of a durable global share acceleration that should continue into FY20.”
Canaccord Genuity’s Camilo Lyon said: “We believe the company is well positioned to beat Q3 consensus EPS of 64 cents. As such, we are raising our 2H19 sales and EPS projections to reflect stronger apparel growth in NA after Adidas’ supply shortage was revealed. We are now projecting Q3 sales growth/EPS of 7.3 per cent/65 cents vs. 6.5 per cent/60 cents previously. We expect North America (11.5 per cent estimate) will show a sequential acceleration from Q2 with balanced growth in both w/s and DTC. Our channel checks coupled with solid results from FL indicate increasing scale and robust sell-thrus in several key footwear platforms (Vapor Max, Air Max 270, React). In addition, having returned to growth in FQ2, we expect Jordan to accelerate sequentially in FQ3 as we believe sell-thrus continued to strengthen on the back of a sharper launch calendar. Lastly, we believe apparel continued its accelerated growth in FQ3, driven by strength in fleece, jackets, and NBA apparel (led by Lakers).
Marriott International Inc. (MAR-Q) was 2.1 per cent higher on Monday revealing a three-year plan to open more than 1,700 hotels around the world, return up to US$11-billion to shareholders and make a full-year profit of as much as US$8.50 per share by 2021.
On the decline
Boeing Co. (BA-N) dropped 1.8 per cent in the wake of a pair of weekend newspaper reports that raised further questions about the certification process for its 737 MAX jets prior to two recent deadly crashes.
On Sunday, the Wall Street Journal reported the U.S. Transportation Department was probing the Federal Aviation Administration’s approval of the 737 MAX and its anti-stall (MCAS) system.
The Seattle Times reported that Boeing’s safety analysis of the 737 MAX’s flight control system had significant crucial flaws.
WestJet Airlines Ltd. (WJA-T) was down 0.3 per cent after suspending its 2019 financial outlook following the groundings of Boeing 737 MAX aircraft worldwide.
“The financial guidance provided with respect to earnings per share (EPS), return on invested capital (ROIC) and cumulative free-cash flow over the period of 2020-2022 remains in place until further information is known,” the company said in a release.
With files from staff and wires