A roundup of some of the North American equities making moves in both directions
On the rise
Shares of CI Financial Corp. (CIX-T) saw gains on Thursday in the wake of announcing a deal to buy U.S. wealth management firm McCutchen Group LLC.
Financial terms of the agreement were not immediately available.
Seattle-based McCutchen Group has US$3.4-billion in assets under management.
Founded in 2007, the firm is focused on ultra-high-net-worth clients.
It provides financial advisory services ranging from investment management to tax, charitable and estate planning, as well as family office services.
CI has been growing its U.S. wealth management business and says the deal will increase its U.S. wealth management assets to about US$83-billion, with its total assets globally totalling about US$260-billion.
Stantec Inc. (STN-T) soared on the premarket announcement of a deal to acquire the North America and Asia Pacific engineering and consulting groups of Australia’s Cardno Ltd. for aggregate cash consideration of US$500-million.
The Edmonton-based firm said the deal, which adds almost 2,7500 engineers and increases its presence both in the United States and Australia, will be bring immediate double-digit accretion to adjusted earnings per share and expects US$10-million in annual cost synergies within two years.
National Bank Financial analyst Maxim Sytchev: “The transaction is highly accretive on EV/EBITDA and EPS basis, keeps leverage in the fairway of 1.5 times net debt / EBITDA (pro-forma; vs. 0.7 times as of Q2/21), bolsters company’s US/Australia platforms – key growth geographies with infrastructure-friendly spending backdrop while also further increasing STN’s environmental exposure to 20 per cent of net revenue (from 15 per cent). It also assuages investors’ concerns that STN would be too reluctant to deploy capital in a relatively material manner as we are seeing this morning (while also building on the previously completed tuck-in deals in Australia). We believe the market will like the transaction for the above-mentioned parameters”
After sustaining losses in premarket trading, Tesla Inc. (TSLA-Q) reversed course in the wake of saying late Wednesday its upcoming factories and supply-chain headwinds would put pressure on its margins after it beat Wall Street expectations for third-quarter revenue on the back of record deliveries.
The world’s most valuable automaker has weathered the pandemic and the global supply-chain crisis better than rivals, posting record revenue for the fifth consecutive quarter in the July-to-September period, fueled by a production build-up at its Chinese factory.
But the company led by billionaire Elon Musk faces challenges growing earnings in coming quarters due to supply chain disruptions and the time required to ramp up production at new factories in Berlin and Texas.
“There’s quite an execution journey ahead of us,” Chief Financial Officer Zachary Kirkhorn said, referring to the new factories.
Price fluctuations of raw materials such as nickel and aluminum had created an “uncertain environment with respect to cost structure”, he added.
Even so, he said Tesla was “quite a bit ahead” of its plan to increase deliveries by 50 per cent this year.
“Q4 production will depend heavily on availability of parts, but we are driving for continued growth,” he said.
Third-quarter revenue rose to US$13.76-billion from US$8.77-billion a year earlier, slightly beating analyst expectations according to IBES data from Refinitiv.
Tesla’s automotive gross margin, excluding environmental credits, rose to 28.8 per cent, from 25.8 per cent the previous quarter.
Tesla’s overall average price fell as it sold more lower-priced Model 3 and Model Y cars, but it raised prices in the United States.
The company posted robust sales in China, where its low-cost Shanghai factory has surpassed the Tesla factory in Fremont, California, in terms of production.
American Airlines Group Inc. (AAL-Q) gained after it reported a quarterly profit compared to a year-ago loss on Thursday, as easing COVID-19 curbs strengthened travel demand ahead of the peak holiday season.
As the United States opens its borders to vaccinated foreign travelers on Nov. 8, U.S. carriers are expecting a strong holiday season after the health crisis sent travel demand plummeting in 2020.
“While the rise of the COVID-19 delta variant delayed some of our revenue recovery, it has not stopped our progress,” Chief Executive Officer Doug Parker said.
The No.1 U.S. airline reported a net income of US$169-million, or 25 US cents per share, in the third quarter ended Sept. 30, compared with a loss of US$2.40-billion, or US$4.71 per share, a year earlier.
Excluding items, the company posted a third-quarter net loss of US$641-million, or 99 US cents per share.
Total operating revenue jumped 183 per cent to US$8.97-billion.
The airline ended the quarter with about US$18-billion of total available liquidity.
Union Pacific Corp. (UNP-N) was higher after it reported a 23-per-cent rise in quarterly profit as the railroad operator shipped more chemicals, metals, minerals, paper and plastics to meet U.S. industrial demand.
A rise in U.S. industrial production during the first two months of the quarter and a jump in crude prices has benefited Union Pacific’s industrial shipments, which made up for 34 per cent of its third-quarter revenue.
Revenue carloads, or business volumes, were flat during the quarter at 2.04 million, as supply chain disruptions and a bridge outage in California took a toll.
The Omaha, Nebraska-based company’s total operating revenue rose 13 per cent to US$5.57-billion.
Union Pacific’s net income rose to US$1.67-billion, or US$2.57 per share, for the quarter ended Sept. 30, from US$1.36-billion, or US$2.01 per share, a year ago.
On the decline
Shares of Rogers Communications Inc. (RCI.B-T) fell on Thursday after reporting third-quarter revenue on Thursday that missed analysts’ estimates as the pandemic continues to dampen growth at its ads and wireless businesses.
Pandemic-related restrictions in July kept most people indoors, hurting the company given its reliance on professional sports and wireless roaming as key revenue streams.
Rogers also faces additional pressure to grow its subscriber base amid stiff competition from other telecom players looking to add more customers on their new 5G networks.
During the quarter Rogers added 175,000 subscribers who pay a monthly bill.
The company’s total revenue was $3.67-billion in the quarter ended Sept. 30, compared with estimates of $3.68-billion, according to Refinitiv Data.
Rogers is also in the middle of a rare boardroom tussle in the Canadian corporate landscape, as it tries to boost its position in the country’s crowded telecoms market with a $20-billion takeover bid for smaller rival Shaw Communications Inc.
The deal is attracting scrutiny from multiple government regulators over whether it will decrease competition.
Precision Drilling Corp. (PD-T) dropped after announcing it lost $38-million in its latest quarter as drilling ramped up and revenue rose more than 50 per cent compared with a year ago.
The Calgary-based company says the loss amounted to $2.86 per diluted share for the year ended Sept. 30, compared with a loss of $28.5-million or $2.08 per diluted share in the same quarter last year.
Revenue totalled $253.8-million in the company’s third quarter, up from $164.8-million a year earlier.
Precision, which is the largest drilling rig contractor in the country, says on average it had 51 active drilling rigs in Canada in the quarter, up from 18 in the same quarter last year.
In the U.S., the company had on average 41 active drilling rigs in the quarter, up from 21 a year earlier, while its international drilling business averaged six rigs, the same as a year ago.
In its outlook, Precision says that at current commodity prices it expects higher demand for its services and improved fleet utilization as customers look to maintain and replenish production levels.
“We believe current industry fundamentals are providing the most promising backdrop for our business that we have experienced in almost a decade,” Precision CEO Kevin Neveu said in a statement.
“Strong oil and natural gas prices, a significantly improved Canadian market structure and rapidly declining drilled but uncompleted well inventories all point to higher drilling activity in our core markets. Although we are likely in the early innings, our firm bookings and current customer inquiries indicate substantially stronger demand for our services and improved fleet utilization as this rebound continues.”
In a research note, ATB Capital Markets analyst Waqar Syed said: “D’s Q3/21 results are below our forecast though it is hard to say how they compare to consensus. Nonetheless, we believe that PD is very well positioned in the right markets with the right rigs as this next drilling upcycle unfolds globally. The Company continues to generate FCF, which it is using to pay down debt, shifting value from debt holders to equity holders.”
AT&T Inc. (T-N) slid after the telecom operator’s quarterly revenue and monthly phone bill paying subscriber additions beat market expectations.
Total revenue fell 5.7 per cent to US$39.9-billion in the third quarter compared to a year earlier due to the divestment of satellite TV provider DirectTV. But it exceeded analysts’ average estimate of US$39.14-billion.
Telecom operators, including AT&T and Verizon Communications Inc, have been unwinding their expensive media businesses to direct their investment on phone and internet services.
While streaming services have been grappling with slowing subscriptions, AT&T added 12.5 million subscribers globally for its premium TV channel HBO and streaming service HBO Max as viewers flocked to titles like White Lotus, and The Suicide Squad.
Net income attributable to the company’s common stock rose to US$5.9-billion, or 82 US cents per share, in the quarter, from US$2.8-billion, or 39 US cents per share, a year earlier.
Excluding items, AT&T earned 87 US cents per share.
IBM (IBM-N) fell as it missed market estimates for quarterly revenue as its managed infrastructure business suffered from a decline in orders ahead of a spinoff next month.
The lower-margin, legacy unit provides technical support to IBM’s clients and has shrunk in recent years as companies moved to the cloud, becoming a drag on Big Blue’s earnings.
“As we issued the effective date for the spin-off of our managed infrastructure business, our clients paused all new project activities at the end of September and that impacted us here,” Chief Financial Officer James Kavanaugh said in an interview.
Revenue at the global technology services unit, which houses the business set to be called Kyndryl after the spinoff, fell 4.8 per cent to US$6.15-billion in the third quarter ended Sept. 30.
Mr. Kavanaugh also said demand dropped at the systems business, home to IBM’s mainframe computers, as the end of the product cycle neared, driving a 12-per-cent fall in the unit’s revenue.
The slowdown in the legacy business has prompted 110-year-old IBM to shift focus to hybrid-cloud, an area where it sees a US$1-trillion market opportunity, to boost growth and better compete with Amazon.com Inc and Microsoft Corp .
Revenue at the cloud and cognitive software unit was up 2.5 per cent at US$5.69-billion but missed analysts’ estimates of US$5.77-billion, according to Refinitiv data.
The weakness at IBM’s “supposedly high-growth areas is more problematic” than the revenue miss, said Wedbush analyst Moshe Katri.
Total revenue rose slightly to US$17.62-billion, missing expectations of US$17.77-billion.
IBM earned US$2.52 per share on an adjusted basis, compared with estimates of US$2.50.
Southwest Airlines Co. (LUV-N) declined in the wake of posting a smaller-than-expected loss for the third quarter on Thursday, and saiying profit would remain elusive in the current quarter as mounting costs are expected to offset improved travel bookings.
The Texas-based carrier has had to cancel flights en masse partly due to staff shortages, having earlier added more flights to its schedule to capitalize on a hoped recovery in air travel as pandemic restrictions eased.
Such cancellations earlier this month are expected to result in a US$75-million hit to October revenue.
“Third quarter 2021 was a challenge for us, operationally,” Chief Executive Gary Kelly said in a statement.
“We have reined in our capacity plans to adjust to the current staffing environment.”
Southwest expects its capacity to be down about 6 per cent in the first quarter of 2022 compared with the same period in 2019, before the pandemic.
The company said it was aggressively hiring, with the aim of having about 5,000 new employees by the end of this year.
It expects four to five points of the unit cost increases in the current quarter due to efforts to bolster staffing, cost inflation related to lower productivity, and vaccination incentive pay. Southwest is also facing higher airport costs.
As a result, overall costs are estimated to rise between 8 per cent to 12 per cent in the quarter through December compared with the same period in 2019.
Excluding items, the Dallas-based airline’s net loss narrowed to US$135-million, or 23 US cents per share, in the quarter ended Sept. 30, from US$1.17-billion, or US$1.99 per share, a year earlier.
Analysts on average expected Southwest to report a loss of 27 US cents per share on revenue of US$4.58-billion in the third quarter, according to Refinitiv data
Miner Freeport-McMoRan Inc. (FCX-N) slid despite reporting a quarterly profit on Thursday that beat analysts’ estimates, helped by higher copper prices and an increase in demand for the metal.
Copper prices have been rising this year, with analysts optimistic that demand for the metal will increase with the recovery of the global economy and due to its use in the renewable energy sector.
“The outlook for the copper market is extraordinarily positive”, Freeport Chief Executive Officer Richard Adkerson said.
The company’s average realized price for a pound of copper rose about 40 per cent, while production of the metal increased about 17 per cent to 987 million recoverable pounds.
Freeport earlier this month broke ground in construction of one of the world’s biggest copper smelters near its existing refining operations in Indonesia.
The US$3-billion facility in Gresik, East Java, will have a capacity of 1.7 million tons of copper concentrate and is expected to start operations in late 2023 or early 2024.
Freeport’s adjusted net income attributable to common stock was US$1.3-billion, or 89 US cents per share, in the third quarter ended Sept. 30, compared with US$430-million, or 29 US cents per share, a year earlier.
Analysts on average had estimated a profit of 81 US cents per share, according to Refinitiv IBES data.
Chemicals maker Dow Inc. (DOW-N) fell as it forecast better-than-expected revenue for the fourth quarter after beating estimates on higher prices across its business following a rebound in economic activity and tight supplies after Hurricane Ida.
Demand for the company’s chemicals, used in everything from plastic and food packaging to textiles, electronics and paints, has bounced back as industrial and automotive activity recovers from pandemic lows.
Meanwhile, Hurricane Ida, which lashed the U.S. Gulf Coast in August, forced Dow and other chemical makers to shut some operations, tightening already low supplies and boosting prices.
“We continue to see robust end-market demand that is expected to extend into 2022, coupled with near-term logistics constraints and low inventory levels,” Chief Executive Officer Jim Fitterling said in a statement.
Dow forecast fourth-quarter net sales of between US$14-billion and US$14.5-billion, above estimates of US$13.53-billion, according to Refinitiv IBES data.
Still, the company warned net sales in its packaging and specialty plastics, coatings, as well as industrials unit, to be flat to down 3 per cent, from the third quarter, due to higher raw materials and energy costs, as well as logistics constraints.
Overall prices climbed 50 per cent in the third quarter from a year earlier, while volume rose 2 per cent, Dow said on Thursday
Net operating income, which excludes certain items, rose to US$2.07-billion, or US$2.75 per share, in the three months ended Sept. 30, from US$376-million, or 50 US cents per share, a year earlier. Analysts had estimated earnings of US$2.55 per share.
Net sales of US$14.84-billion was above estimates of US$14.28-billion.
With files from staff and wires