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A look at North American equities heading in both directions

On the rise

Capital Power Corp. (CPX-T) gained 2.2 per cent following the pre-market release of better-than-anticipated first-quarter and revised confidence in its full-year guidance.

The Edmonton-based utility reported adjusted EBITDA of $401-million, exceeding the Street’s expectation by 3 per cent ($389-million). Performance from its Alberta commercial segment helped drive the beat.

Management said its guidance of full-year EBITDA of $1.455-billion to $1.515-million and adjusted funds from operations of $805-million to $865-million are both “trending to the upper end.”

On April 19, Capital Power also announced the appointment of Avik Dey as President and Chief Executive Officer, replacing Brian Vaasjo, who is retiring.

Air cargo company Cargojet Inc. (CJT-T) reserved early losses and finished 3.9 per cent higher after it reported a first-quarter profit of $30.5-million as its revenue edged lower to start the year.

Cargojet chief executive Ajay Virmani says the company is not immune to softening industry trends as well as the macro factors of slower economic growth, higher interest rates and persistent inflation.

The company says its profit amounted to $1.67 per diluted share for the quarter ended March 31 compared with a loss of $56.4-million or $3.26 per diluted share a year earlier.

Revenue totalled $231.9-million, down from $233.6-million in the first three months of 2022.

On an adjusted basis, Cargojet says it earned 97 cents per share in its latest quarter, down from an adjusted profit of $1.56 per share a year earlier.

Analysts on average had expected an adjusted profit of $1.03 per share and $236.4-million in revenue, according to estimates compiled by financial markets data firm Refinitiv.

JPMorgan Chase & Co. (JPM-N) rose 2.1 per cent after it said on Monday it will buy most of First Republic Bank’s (FRC-N) assets after regulators seized the troubled lender at the weekend, marking the third failure of a major U.S. bank in two months.

Under the deal, which came after an auction, JPMorgan will pay US$10.6-billion to the U.S. Federal Deposit Insurance Corp (FDIC) for most of the assets of the San Francisco-based bank, whose failure is the largest since Washington Mutual in 2008.

JPMorgan, already the biggest bank in the United States, has also entered into a loss-share agreement with the FDIC on single family, residential and commercial loans it bought, but will not take First Republic Bank’s corporate debt or preferred stock.

The deal allows for an orderly failure of First Republic and avoids regulators having to insure all the bank’s deposits, as they had to do when two others collapsed in March.

First Republic disclosed last week that it had suffered more than US$100-billion in outflows in the first quarter and was exploring options, increasing stress in the banking sector.

Global banking has been rocked by the closure of Silicon Valley Bank and Signature Bank in March, while Switzerland’s Credit Suisse had to be rescued by rival UBS.

First Republic shares tumbled 43.3 per cent in premarket trading on Monday before they were halted. The bank’s stock has lost 97 per cent of its value this year.

“When it was just SVB, it was easy to blame management. However, now that we see the pattern it is evident that the Fed has moved too far, too fast and is breaking things,” said Thomas J. Hayes, Chairman and Managing Member, Great Hill Capital.

The U.S. Federal Reserve has been persistently raising its benchmark interest rate since last year, despite calls for a pause after the banking turmoil in March.

Investors have priced in a 90-per-cent chance of another 25 basis point rate hike after the central bank’s two-day policy meeting on Wednesday, according to CME Group’s FedWatch tool.

JPMorgan was one of several interested buyers including PNC Financial Services Group (PNC-N), and Citizens Financial Group Inc. (CFG-N), which submitted final bids on Sunday in an auction by U.S. regulators, sources familiar with the matter said.

Norwegian Cruise Line Holdings Ltd. (NCLH-N) jumped 8.8 per cent after it raised its annual profit forecast and sailed past first-quarter estimates on Monday, betting on higher ticket pricing, pent-up demand and robust on-board spending from wealthy customers.

Easing of COVID-19 protocols on ships after long periods of restrictions has encouraged people, especially from the higher income group, to go on leisure travel while also boosting spending on various on-board facilities from casinos to spas.

Norwegian, which mostly caters to the affluent, has also been raising prices of its tickets to offset the impact from higher costs of fuel and food due to supply chain snags worsened by the Russia-Ukraine crisis.

In February, the company said it expected costs to decrease towards the end of the year which would boost margins and help it turn profitable for the first time in three years on resilient leisure travel demand.

M Science analyst Michael Erstad said he expects Norwegian to keep trimming operating costs “where it can and where it does not impact the guest experience.”

Rival Carnival Corp posted a smaller-than-expected quarterly loss and beat estimates for revenue in March, shaking off worries of a slowdown in travel demand amid looming concerns of a potential recession in the United States.

Cruise liners saw strong booking volumes and occupancy rates by Americans for the wave season, an important period between January and March where the operators offer special deals and discounts for the year.

Norwegian said occupancy in the first quarter was 101.5 per cent, up from 86.6 per cent reported in the previous quarter.

The company expects 2023 adjusted profit of 75 US cents per share, compared with its earlier forecast of about 70 US cents per share.

On-board and other revenue during the quarter came in at US$613.1-million and made up 33.6 per cent of the total revenue.

Meta Platforms Inc. (META-Q) rose 1.2 per cent after Bloomberg News reported it is planning to raise US$7-billion in a second bond offering.

The five-part bond issue’s longest 40-year security could yield 215 basis points over Treasuries, according to the report.

The Facebook parent plans to use the funds to help finance capital expenditures, repurchase outstanding shares of its common stock, and for acquisitions or investments, according to the report.

Meta raised US$10-billion in its first corporate bond issue last year.

The company beat expectations for first-quarter profit and revenue on Wednesday, and its shares gained about 13 per cent last week.

On the decline

Enbridge Inc. (ENB-T) was lower by 0.5 per cent with the premarket announcement it has signed a deal to buy a large underground natural gas storage facility in B.C. for $400-million.

Under the agreement with FortisBC Holdings Inc., a subsidiary of Fortis Inc. (FTS-T), Enbridge will acquire the company’s interest in FortisBC Midstream Inc., which holds a 93.8 per cent interest in the Aitken Creek Gas Storage facility and a 100 per cent interest in the Aitken Creek North Gas Storage facility.

The underground reservoir is 120 kilometres northeast of Fort St. John, B.C., in the Montney production region.

Enbridge says it has 77-billion cubic feet of working gas capacity.

The company says Aitken Creek Storage connects to all three major long-haul natural gas transportation lines in Western Canada, including Enbridge’s Westcoast and Alliance pipelines.

The deal is expected to close later this year, subject to receipt of customary regulatory approvals and closing conditions.

Vancouver-based NexGen Energy Ltd. (NXE-T) slid 1.7 per cent after announcing “significant initial interest” from financial institutions for providing project financing for the Rook I Project in Saskatchewan.

The uranium producer said it has received non-binding expressions of interest totaling over US$1-Billion in available debt for the project.

“Strong interest from lenders and other financing parties for the development of Rook I demonstrates NexGen’s delivery of a sustainable, clean energy legacy that will benefit our valued stakeholders and all of Canada. The receipt of these expressions of interest are a clear de-risking step demonstrating lender confidence in the economics of the Rook I Project, the uranium market fundamentals incorporating the Project and the elite ESG manner NexGen is delivering in the development of the Project,” said CEO Leigh Curyer.

Check Point Software Technologies (CHKP-Q) fell 7 per cent after it reported on Monday higher than expected profit for the first quarter of 2023, overcoming a weaker economy on growth in its consolidated cyber security platform that prevents attacks across networks, mobile and the cloud.

The Israeli-based company said it earned US$1.80 per diluted share excluding one-off items in the January-March period, up 15 per cent from US$1.57 a year earlier. Revenue grew 4 percent to US$566-million.

It was forecast to earn US$1.74 a share on revenue of US$569-million, according to I/B/E/S data from Refinitiv.

“We are facing a pretty challenging market. Customers are not rushing to refresh products and start new projects in this climate,” chief executive Gil Shwed told reporters. “Despite that we managed to win many other projects.

“We’ve been able to grow our cloud operation, we’ve been able to grow subscriptions and we’ve been able to keep our customers renewing their contracts with us, so we delivered in light of the circumstances, healthy growth in revenues,” he said, noting the tough environment began in November.

Check Point’s security subscription revenue rose 13 per cent to US$228-million. Its consolidated Infinity platform grew 140 per cent.

Mr. Shwed noted that with US$3.6-billion in cash, the company was poised to take advantage of the industry’s consolidation.

“The good companies are still highly valued and they don’t necessarily want to be acquired. But ... I think in the future, we’ll have more opportunities to consolidate technologies and companies,” he said.

Check Point said it bought back 2.6 million shares in the quarter, worth US$325-million, as part of its ongoing US$2-billion share repurchase programme.

With files from staff and wires

Follow David Leeder on Twitter: @daveleederOpens in a new window

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