A roundup of some of the North American equities making moves in both directions today
On the rise
Shares of Air Canada (AC-T) were up 3.9 per cent on Thursday after it said it has an agreement to buy Montreal-based airline and tour operator Transat AT (TRZ-T) for $13 a share in a transaction worth $520-million.
Air Canada, the country’s largest airline, said the deal offers a “made-in-Quebec” path to better job security for employees of both companies and offer travelers a greater array of routes and holiday packages.
In a research note, AltaCorp Capital analyst Chris Murray said: “We believe integration should be relatively seamless, with the majority of the Transat fleet, which consists of 737NG and A321 narrow bodies, being added to Air Canada’s Rouge fleet and Transat’s A330 aircraft moving to either Rouge or mainline. We expect the Companies to realize a number of synergies from the transaction and see Air Canada gaining a strong group of pilots and other employees.”
“We view the transaction positively on its merits and note that it strategically prevents another bidder, including Onex (ONEX-T, Not rated), Sunwing (Private, not rated) or another private equity player, from being disruptive in the market.”
Shares of Transat jumped 13.4 per cent on the news.
Amazon.com Inc. (AMZN-Q) shares were 1.9 per cent higher after Warren Buffett’s Berkshire Hathaway Inc. (BRK-A-N, BRK-B-N) revealed in a regulatory filing that it owned US$860.6-million of the online retailer’s shares at the end of March.
Earlier this month, Mr. Buffett said he had been “an idiot” for not investing in Amazon himself.
Turquoise Hill Resources Ltd. (TRQ-T) was 2.3 per cent higher after releasing better-than-anticipated quarter results on Wednesday after market close.
RBC Dominion Securities analyst Sam Crittenden: “We could see a positive reaction from TRQ shares to Q1 results which were better than our forecast on higher production and sales and there were no changes to 2019 guidance. Although the focus remains on the mine plan review and TRQ reiterated that the definitive review of estimates being performed by Rio Tinto is expected to be complete by the end of 2019. TRQ also noted that it is engaged with mine manager Rio Tinto on incorporating new geotechnical data into the mine design and expects to provide an update with mid-year results.”
The Cambridge, Ont.-based company said revenues increased 17 per cent to $348.6-million in the quarter from $298.4-million a year ago. Net income was $18.2-million, or 20 cents per share, versus net income of $15-million, or 16 cents per share, during the same period in 2018.
Analysts were expecting earnings to come in at 18 cents per share and revenue of $308-million in the latest quarter.
National Bank Financial’s Maxim Sytchev said: “While we continue to like the automation space in general and we applaud company’s prudent repositioning towards less cyclical healthcare vertical, we view the shares as being appropriately valued. High-multiple M&A is also a risk that should not be under-estimated. We also believe that backlog growth will be facing tougher comps on a going-forward basis vs. this year’s stellar performance.”
Sales at U.S. stores open at least a year rose 3.4 per cent, excluding fuel, in the quarter, exceeding the consensus analyst forecast of 3.1 per cent.
Adjusted earnings per share increased to US$1.13 per share, which also beat expectations of US$1.02 per share.
Chief Financial Officer Brett Biggs told Reuters that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and by working with suppliers’ “costs structures to manage higher tariffs.”
Cisco Systems Inc. (CSCO-Q) shares jumped 6.6 per cent after reporting better-than-expected quarterly earnings on Wednesday after the bell and providing an upbeat sales forecast for the current period.
The California-based tech giant announced income rose to US$3.04-billion, or 69 US cents per share, for the third quarter, rising from US$2.69-billion, or 56 US cents per share, during the same period a year ago.
On an adjusted basis, the company earned 78 US cents per share, which exceeded the forecast on the Street by a penny.
RBC Dominion Securities’ analyst Mitch Steves: “Cisco reported a solid quarter across the board and guidance was also better than expected after concerns of a spending slowdown. We were most impressed by the following: 1) 5-per-cent growth in infrastructure platforms and Data Center was up year-over-year, 2) gross margins expanded 50 basis points quarter-over-quarter, 3) security growth came in at 21-per-cent suggesting share gains, 4) the Catalyst series is continuing to grow (we estimate double digits) and 5) WiFi-6 appears to be gaining positive customer traction. Putting these items together, along with limited inorganic revenue contribution to growth (just 0.4 per cent), we think
organic trends are solid and defuse bear beliefs surrounding a near-term revenue decline. Finally, the one item we viewed as a negative was the service provider side which appears to be seeing a notable spending pause.”
The Supreme Cannabis Company Inc. (FIRE-T) was 0.5 per cent higher after it announced it is buying Blissco Cannabis Corp. (BLIS-C) shares it doesn’t already own in an all-stock transaction valued at about $48-million.
Under the terms of the agreement, each Blissco share will be exchanged for 0.24 of a common share of Supreme Cannabis.
“Shareholders of both companies will benefit from the combined companies’ expanded product offerings, infrastructure and consumer reach,” the companies stated. “Through the acquisition, Blissco will join Supreme Cannabis’ exclusive portfolio of premium brands and operate as Supreme Cannabis’ health and wellness business.”
On the decline
Nutrien Ltd. (NTR-T) rose 0.6 per cent after CEO Chuck Magro, speaking at BMO’s Farm to Market conference in New York, said African swine fever is likely to hurt demand for grains and oilseeds in the next couple of years
Mr. Magro said agriculture markets will eventually correct themselves from the impact of the disease, which has killed much of China’s hog herd.
A&W Revenue Royalties Income Fund (AW.UN-T) dropped 5.9 per cent after announcing on Thursday morning it has increased a secondary offering announced after the bell on Wednesday “due to strong demand.”
The offering is now 1,125,000 trust units at a price of $44.55 each for proceeds of just over $65-million.
The fund said it will not receive any proceeds from the offering and Food Services will distribute the net proceeds of the offering to its "long-standing shareholders."
With files from Brenda Bouw, staff and wires