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A roundup of some of the North American equities making moves in both directions

On the rise

Canadian Pacific Railway Ltd. (CP-T) rose after it topped quarterly profit estimates, boosted by a recovery from the pandemic-led slump in freight volumes.

Analysts had indicated a rebound in Canadian rail traffic through much of the second quarter, driven by a healthy recovery in the North American economy from last year’s pandemic-induced lows.

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“Despite near term headwinds - forex, fuel pricing, network fire disruptions - we continue to view both Canadian National and Canadian Pacific as well situated to further benefit from ongoing recovery tailwinds,” Raymond James analyst Steve Hansen said in a pre-earnings note.

Canadian Pacific’s operating ratio, a measure of operating expenses as a percentage of revenue, rose to 60.1% in the second quarter from 57 per cent a year earlier. A lower operating ratio signals improved profitability.

Total carloads - the volume of freight loaded into cars during a specified period - rose 14.6 per cent , boosted by higher coal, automotive, metal, minerals and intermodal shipments.

Excluding items, the company earned $1.03 per share. Analysts on average had expected a profit of $1.01 per share, according to Refinitiv data.

Revenue rose to $2.05-billion from $1.79-billion.

Cenovus Energy Inc. (CVE-T) saw gains as it raised its full-year production forecast and posted a near 2-per-cent rise in profit in the second quarter, as crude prices returned to pre-pandemic levels.

Global crude prices have averaged around $69 in the quarter, furthering a recovery that began late in 2020. Prices were trading around $75 on Thursday.

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Cenovus, one of Canada’s largest producers, said its total production fell 0.4 per cent to 765,900 barrels of oil equivalent per day (boepd) in the quarter compared with the first.

The company raised its production forecast range for the full year by about 2 per cent to between 750,000 boepd and 790,000 boepd.

The Calgary-based company’s net earnings rose to $224-million, or 11 cents per share, in the second quarter ended June 30, from $220-million, or 10 cents per share, in the first quarter.

Kinross Gold Corp. (K-T) was up despite reporting lower earnings and increased costs around production for its second-quarter report Wednesday.

The company reported net earnings attributable to common shareholders of US$119.3-million for the quarter ended June 30, compared to US$195.7-million in the same quarter last year.

The Toronto-based company said on an adjusted basis its net earnings were US$156.5-million, or 12 US cents per share, compared to US$194-million or 15 US cents per share in the same quarter last year.

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The drop in earnings came amid a slight drop in overall metal sales, and a roughly 14 per cent rise in the attributable production cost per ounce of gold sold compared to the previous year.

Kinross generated US$182.8-million in free cashflow, compared to US$218.5-million a year prior.

It also announced a share buyback program, and said operations at its Tasiast mill in West Africa are expected to resume in the fourth quarter of 2021 after recovering from a fire at the facility.

In a research note, RBC Dominion Securities analyst Josh Wolfson said: “Overall, we believe results skew slightly negatively, but with various moving parts including: (1) weaker operating results that include lower production and evidence of inflationary pressures, though higher quarterly FCF due to one-time items; (2) revised 2021 cost guidance slightly above RBC estimates and consensus; (3) neutral project updates, with Tasiast restart and expansion details encouraging and timelines reiterated, but initial Manh Choh project costs slightly increased; and (4) an approval of a 5-per-cent buyback announcement, in line with previously communicated return-of-capital intentions.”

Propelled by higher lumber prices and increased shipment volumes, West Fraser Timber Co. Ltd. (WFG-T) saw gains on the release of better-than-anticipated quarterly results on Wednesday after the bell.

The Vancouver-based company reported adjusted EBITDA of US$2.23-billion after adjusting for US$73-million in duties, exceeding the consensus forecast on the Street of US$2.14-billion

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“The first of what we expect to be a series of blow out earnings reports, West Fraser delivered extremely strong 2Q21 results of US$2.23-billion nearly double the record established in the prior quarter while handily beating consensus of US$2.14-billion,” said Raymond James analyst Daryl Swetlishoff. “Looking at it another way, earnings are exceeding the combined full year 2020 Norbord and West Fraser record annual numbers and represent roughly 22 per cent of the company’s current market cap! We highlight this provides a positive read through for building materials peers with Canfor posting results yesterday after market. As a result net debt levels took another hit coming in at negative US$1.7-billion (down $16.50/sh!) leaving the company with an extremely strong balance sheet boasting over US$3.4-billion in liquidity. While lumber markets have seen steady pressure since hitting a record US$1,630/mfbm, we note that WSPF benchmark pricing bottomed last week which we expect to be a catalyst for share pricing. What’s more, with OSB prices holding up better than expected we recently increased our forecast which more than offsets the drop in lumber prices.

“Only appreciating 9 per cent year-to-date (vs the TSX at 15 per cent), WFG shares have lagged strong fundamentals on the back of Brookfield (BAM) selling pressure which now holds less than 1 per cent of outstanding shares. Conversely, OSB competitor Louisiana Pacific (LPX) gained 48 per cent year-to-date, supporting our conviction that the market is heavily discounting West Fraser’s Norbord acquisition which closed in the prior quarter. Lastly, we expect recent announcements to double the NCIB and launch a $1-billion Substantial Issuer Bid (SIB) that will translate into demand for up to 18 per cent of the free float putting a bid under the shares. With the stock trading at just 1.2 times 2021 and 2.7 times 2022 EV/EBITDA, we feature West Fraser on the Raymond James’ Analyst Current Favorites list and encourage investors to take advantage of this buying opportunity.”

Agnico Eagle Mines Ltd. (AEM-T) soared after saying its profit rose in its latest quarter as it benefited from an increase in sales volumes and higher realized metal prices.

The Canadian gold mining company reported a second-quarter net income of US$189.6-million, or 78 US cents per basic share, compared with a net income of US$105.3-million, or 44 US cents per basic share, in the same period of 2020.

The company says revenue from mining operations was US$966.3-million for the three months ended June 30, compared with US$557.2-million the year before.

Agnico Eagle says its higher net income in the quarter is primarily due to higher mine operating margins compared to 2020, when gold production and sales were negatively affected by pandemic-related reductions in mining activities.

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Sean Boyd, Agnico Eagle’s chief executive officer, says the company remains on track to hit its production and cost guidance for 2021 and expects to see growing gold output in the second half of the year.

CLOSE

Shares of AltaGas Ltd. (ALA-T) reversed early losses after the release of better-than-expected second-quarter results.

Before the bell, the Calgary-based utilities company reported normalized EBITDA of $230-million, rising from $206-million during the same period in 2020 and topping the Street’s forecast of $222-million. Normalized earnings per share increased to 8 cents, also topping the consensus projection (1 cent).

“Overall, core segment results impressed with the Utilities and Midstream segments posting beats to our estimates of 16 per cent and 7 per cent, respectively; however, this was partially offset by higher Corporate costs given LTIP expenses and FX headwinds,” said ATB Capital Markets analyst Nate Heywood. “In line with our thesis, ALA continues to benefit from recovering commodity markets and the integration of Petrogas. After significant growth spending on the Midstream segment in recent years, we anticipate growth efforts will continue to focus on the Utilities business, which offers near-immediate capital returns. With this update ALA has reiterated its 2021 Adjusted EBITDA guidance, 2021 EPS guidance, and long-term leverage target of sub 5.0 times.”

After the bell on Wednesday, Ford Motor Co. (F-N) boosted its 2021 profit forecast after reporting better-than-expected quarterly results, lifting the No. 2 U.S. automaker’s shares.

While an ongoing global chip shortage cost Ford market share in North America, Europe and China, higher prices on more profitable models such as large pickups and SUVs helped increase revenue and operating profit in North America, its largest market.

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Ford Chief Executive Jim Farley said the automaker was intent on shifting away from making vehicles that wind up stockpiled on dealer lots, to building them to customer orders, reducing discounts required to make a sale.

“We are really committed to going to an order-based system and keeping inventories at 50 to 60 days’ supply,” Mr. Farley said.

Detroit automakers have aspired in the past to building vehicles to order and cutting inventories, only to allow inventories to build, requiring more incentives to move them out.

“I know we are wasting money on incentives,” Mr. Farley said. “I don’t know where.”

Tight vehicle supplies caused by the chip shortage prompted Ford, like other manufacturers, to focus on higher-margin products. That enabled it to boost revenue by nearly US$5,000 per vehicle in the quarter, adding US$1.5-billion to its operating profit.

Mr. Farley told analysts the company was “seeing signs of improvement in the flow of chips now in the third quarter, but the situation remains fluid.”

Ford raised its full-year operating profit estimate by about US$3.5-billion, to between US$9-billion and US$10-billion.

Net income dropped to US$561-million from US$1.1-billion in the year-ago quarter. Revenue climbed to US$26.8-billion from US$19.4-billion over the same period.

On the decline

Suncor Energy Inc. (SU-T) dipped after saying that work needed to stabilise a slope at its Fort Hills mine in northern Alberta will delay a ramp up in production and add to cash operating costs.

However the work will not impact Suncor’s long-term forecast for cash costs, which is $20 a barrel by 2040, Chief Executive Mark Little told an earnings call.

Suncor said in its earnings release that Fort Hills operating costs are now estimated to be $37-$42 in 2021, up from a previous estimate of $25-$29 a barrel.

Suncor posted a second-quarter profit compared to a year ago loss after the bell on Wednesday, as crude prices rebounded from pandemic-driven lows.

Like many of its peers, Suncor has been generating bumper free cash flow this year thanks to higher oil prices.

The bulk of the company’s operations are in northern Alberta’s oil sands, and it is aiming to cut carbon emissions by one-third while also boosting production.

The company said its total upstream production rose to 699,700 barrels of oil equivalent per day (boepd) during the second quarter from 655,500 boepd a year earlier.

The company, Canada’s second-largest oil producer, posted net earnings of $868-million, or 58 cents per share, in the three months ended June 30, compared with a loss of $614-million, or 40 cents per share, year earlier.

TC Energy Corp. (TRP-T) declined after it reported lower net profits in its latest quarter as it continued to feel some effects from a large impairment charge that will be shared with the Alberta government on its cancelled Keystone XL export oil pipeline.

The Calgary-based energy producer says its net income attributable to shareholders was $982-million or $1 per diluted share in the second quarter, down from $1.28-billion or $1.36 per share a year earlier.

The results included a $2-million impairment charge for Keystone while it recorded a $408-million gain in the prior year’s quarter from the partial sale of Coastal GasLink LP.

Excluding one-time items, comparable earnings increased 21 per cent to $1.05-billion or $1.07 per share, from $863-million or 92 cents per share in the second quarter of 2020.

Revenues in the three months ended June 30 increased three per cent to $3.18-billion from $3.09-billion.

TC Energy was expected to post 96 cents per share in comparable earnings or $3.39-billion of revenues, according to financial data firm Refinitiv.

The company says the net financial impact on it from the Keystone XL termination was $1.1-billion as of the end of the quarter. It took an after-tax charge of $2.2-billion last quarter.

The Keystone XL expansion to an existing pipeline network would have increased Canadian oil export capacity by up to 830,000 barrels a day. It was suspended after newly elected U.S. President Joe Biden fulfilled a campaign promise to cancel its presidential permit.

TC Energy decided to start construction of Keystone XL in March 2020 after the Alberta government agreed to take a $1.5-billion equity stake and provide a $6 billion loan guarantee to ensure work started immediately.

Facebook Inc. (FB-Q) said on Wednesday it expects revenue growth to “decelerate significantly,” sending the social media giant’s shares down even as it reported strong ad sales.

The warning overshadowed the company’s beat on Wall Street estimates for quarterly revenue, bolstered by increased advertising spending as businesses build their digital presence to cater to consumers spending more time and money online.

Facebook said it expects Apple’s recent update to its iOS operating system to impact its ability to target ads and therefore ad revenue in the third quarter. The iPhone maker’s privacy changes make it harder for apps to track users and restrict advertisers from accessing valuable data for targeting ads.

The company also announced on Wednesday that it would require anyone working at its U.S. offices to be vaccinated against COVID-19, joining Alphabet Inc and Netflix .

Monthly active users came in at 2.90 billion, up 7 per cent from the same period last year but missing analyst expectations of 2.92 billion and marking the slowest growth rate in at least three years, according to IBES data from Refinitiv.

“The user growth slowdown is notable and highlights the engagement challenges as the world opens up. But importantly, Facebook is the most exposed to Apple’s privacy changes, and it looks like it is starting to have an impact to the outlook beginning in 3Q,” said Ygal Arounian, an analyst at Wedbush Securities.

Facebook’s total revenue, which primarily consists of ad sales, rose about 56 per cent to US$29.08-billion in the second quarter from US$18.69-billion a year earlier, beating analysts’ estimates, according to IBES data from Refinitiv.

Its revenue from advertising rose 56 per cent to US$28.58-billion in the second quarter ended June 30, Facebook said. It pointed to a 47-per-cent increase in price per ad.

“In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth,” Chief Financial Officer Dave Wehner said in the earnings release.

Shares of PayPal Holdings Inc. (PYPL-Q) fell on the payment company’s downbeat current-quarter profit outlook that outweighed a better-than-expected profit in the second quarter from a pandemic-driven shift to digital spending.

EBay Inc’s (EBAY-Q) continued transition to its own managed payments platform instead of using PayPal for its e-commerce platform served a blow to the latter’s performance view for the remainder of 2021.

PayPal has been among the big winners of the COVID-19 pandemic as more people used its services to shop online and pay bills to avoid stepping out. Businesses, forced to move their stores online, also flocked to PayPal.

This helped the company process a total of US$311-billion in payments in the second quarter ended June 30, up 40% from a year earlier, and added 11.4 million net new active accounts.

Total revenue in the second quarter rose 19 per cent to US$6.24-billion, but missed estimates of US$6.27-billion, according to Refinitiv data, further hurting shares.

PayPal said it expects third-quarter net revenue to be in the range of about US$6.15-billion to US$6.25-billion, representing growth of about 13-14 per cent at current spot rates, but missing analysts’ average estimate of US$6.45-billion.

San Jose, California-based PayPal also said it expects adjusted profit of US$1.07 per share, in-line with a year earlier, but lower than estimates of US$1.14.

On an adjusted basis, PayPal earned a profit of US$1.15 per share in the second quarter, compared with analysts’ expectations of US$1.12 per share, according to Refinitiv data.

With files from staff and wires

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