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A survey of North American equities making moves in both directions

On the rise

Shopify Inc. (SHOP-T) beat Wall Street estimates for quarterly revenue on Thursday, as businesses stuck to the Ottawa-based online services provider’s tools and payment options to scale up.

The company’s shares rose following the premarket release. The stock has already lost more than three-quarters of its value so far this year.

Shopify has a growing problem with customer retention, Globe data study shows

Best known as the one-stop-shop platform for online businesses, Shopify is slowly moving into offline payments and adding more tools for businesses to connect with their shoppers online and build on the growth of influencers on social media.

The new tools, such as the offline payments devices, it provides retailers could help Shopify cope with a post-pandemic slowdown in e-commerce.

The company’s gross merchandise volume (GMV) grew 11 per cent to US$46.2-billion in the third quarter.

For the fourth quarter, Shopify expects GMV growth to outperform the broader U.S. retail market.

The company’s third-quarter revenue rose 22 per cent to US$1.4-billion. Analysts had expected US$1.34-billion, according to Refinitiv IBES data.

Canadian Pacific Railway Ltd. (CP-T) was higher after saying its revenue and earnings for the third quarter were up from last year as it saw strong demand for potash shipping and other services.

The Calgary-based railway says revenues of $2.31-billion for the quarter ending Sept. 30 were up 19 per cent compared with $1.94-billion in the same quarter last year.

The company says foreign-exchanged adjusted potash revenue was up 48 per cent, intermodal up 44 per cent, automotive up 31 per cent, while energy, chemical and plastics were down 10 per cent.

Net income of $891-million or 96 cents per share for the quarter was up from $472-million or 71 cents per share for the same quarter last year.

Core adjusted diluted earnings per share, which exclude significant items and accounting related to its purchase of Kansas City Southern, came in at $1.01, a 15-per-cent increase from a year earlier.

The company says its reportable train accident frequency was down 76 per cent to a record-low of 0.37 per million train-miles from 1.54 in the third quarter of 2021, while its personal injury rate was down 12 per cent to 0.86 injuries per 200,000 employee-hours.

The results led several analysts on the Street to raise their target prices for CP shares.

In a research note released before the bell, Citi’s Christian Wetherbee said: “Coming off our call back with CP we are slightly tweaking our estimates higher on the ramp in RTMs and better yields. Overall, the quarter was in line and not particularly exciting, but the acceleration in RTMs [revenue ton miles] and the momentum heading into the expected integration with KCS in 2023 provides a unique growth and margin story, which likely outpaces a decelerating freight environment. So in that context, and coupled with 4Q estimates which are going up (unique to Canadian rails), we think the case for continued outperformance is still very much in focus. We would expect shares to react favorably, particularly as a 55-per-cent near-term (4Q) OR seems achievable along with double-digit RTM growth.”

TMX Group Inc. (X-T) gained as it saw revenue and earnings go up in the third quarter of 2022 compared to the same period last year and announced a dividend of 83 cents per common share post-market on Wednesday.

The company, which operates the Toronto Stock Exchange, says its net income attributable to shareholders for the quarter ended Sept. 30 was $81-million or $1.45 per diluted share, up from $76.9-million or $1.36 per share in the third quarter last year.

Revenue was also up year over year at $269.3-million, up 16 per cent compared to $231.3-million.

Toronto-based TMX says a contributor to the increase in net income was Box Holdings Group LLC, an all-electronic equity options market of which TMX Group obtained voting control in January.

In a note, RBC Dominion Securities analyst Geoffrey Kwan said: “Despite the challenging capital markets environment, we think the TMX reported solid Q3/22 results with EPS ahead of our forecast and consensus. Although equity trading and financing volumes declined materially year-over-year, the TMX was still able to deliver 11 per cent year-over-year EPS growth, helping demonstrate the greater diversification of the business over time. The TMX is our #3 best idea within our coverage universe reflecting solid fundamentals, potential catalysts (e.g., M&A given the healthy balance sheet), defensive attributes and attractive valuation (17 times P/E).”

Aecon Group Inc. (ARE-T) was higher after saying its revenue increased year-over-year while profits dipped slightly in the third quarter of 2022.

The Toronto-based construction firm reported a $34.5-million profit for the three months ended Sept. 30, or diluted earnings per share of 45 cents, compared to $38.4-million during the same period in 2021, before adjusting for the impact of the Canada Emergency Wage Subsidy program in 2021.

The company posted revenue of $1.32-billion, compared to $1.16-billion in the same period last year.

New contract awards worth $991-million were booked in the third quarter of 2022 compared to $682-million in the same period in 2021.

In a news release, Aecon Group’s chief executive Jean-Louis Servranckx said the company continues to see strong demand for its services across Canada.

Revenue in the construction segment was up 14 per cent year-over-year, while revenue in civil operations, utilities operations and nuclear operations also rose.

ATB Capital Markets analyst Chris Murray said: “Overall, Aecon delivered reasonable results in a seasonally strong quarter and did not include any additional writedowns related to the projects identified in Q2/22. Booking activity was lower in the quarter, though the Company’s mix of recurring revenue projects increased sequentially, and management issued positive commentary around its expectations for near-term booking activity.”

Merck & Co. (MRK-N) on Thursday posted better-than-expected sales and profit in the third quarter on a strong performance by its blockbuster cancer immunotherapy drug Keytruda and human papillomavirus vaccine Gardasil.

Shares rose as the drugmaker also raised its annual forecasts for sales and profit despite headwinds created by weak euro and pound.

Keytruda sales jumped around 20 per cent to US$5.4-billion, in line with analysts’ estimates. Gardasil sales rose 15 per cent to US$2.3-billion, topping expectations by more than US$200-million.

The company reported profit of US$4.7-billion, or US$1.85 a share, excluding certain items. That compares with US$4.5-billion, or US$1.78 per share, a year earlier. Analysts had been expecting earnings of around US$1.71 per share.

Wells Fargo analyst Mohit Bansal said in a note Gardasil’s better-than-expected growth “reflects growing international demand and potentially a normalization from COVID trends in the U.S..”

The company also posted slightly better-than-expected sales of its COVID-19 antiviral drug Lagevrio (molnupiravir). It developed the drug and shares profit with partner Ridgeback Biotherapeutics.

Merck’s animal health business, however, missed analysts’ estimates, which BMO Capital Markets analyst Evan Seigerman said was “the only point of concern,” but added it followed significant growth earlier in the pandemic.

Merck now expects full-year sales between US$58.5-billion and US$59-billion, up from its previous range of US$57.5-billion to US$58.5-billion. It expects full-year profit in the range of US$7.32 to US$7.37 per share.

Heavy-equipment maker Caterpillar Inc. (CAT-N) on Thursday topped Wall Street estimates for profit and revenue as the industrial bellwether continued to benefit from equipment price increases and elevated energy prices.

Shares of the world’s largest construction and mining equipment manufacturer rose in New York.

Deerfield, Illinois-based Caterpillar increased prices to help mitigate supply chain constraints and rising raw material and freight costs, cushioning profits.

“We are actually wrapping some price increases that we saw in the third quarter - fourth quarter of last year,” Chief Financial Officer Andrew Bonfield said on a call with analysts. “We will see slight moderation of price in the fourth quarter, still very strong.”

Executives said labour costs and manufacturing inefficiencies remain challenges.

“They’ve gotten a bit worse as opposed to getting better in the last quarter,” Chief Executive Jim Umpleby said.

Mr. Umpleby said despite parts and semiconductor shortages, the company continues to see healthy demand and hit margin targets.

Net income for the company rose to US$2.04-billion, beating analysts’ estimates for US$1.68-billion. Revenue increased to US$15-billion, topping predictions of US$14.3-billion, according to Refinitiv.

“The increase in sales volume was driven by dealer inventory changes, higher sales to end users, and higher services,” Cowen analyst Matt Elkott said in a note.

Operating margins were up across the company’s three core divisions with construction leading the way with a 19.4-per-cent increase from the year prior.

In the previous quarter, the company had flagged a bigger drop in demand for its excavators in China, a growth market.

Caterpillar’s adjusted profit rose to US$3.95 per share, outpacing estimates of US$3.16 per share.

McDonald’s Corp. (MCD-N) rose after it beat quarterly comparable sales and profit estimates on Thursday, helped by higher menu prices and an increase in restaurant traffic from inflation-weary customers looking for value meals.

Like other fast-food chains, McDonald’s raised prices of its burgers and fries to keep up with surging commodity and labor costs. Its U.S. menu prices rose over 10 per cent in the third quarter ended Sept. 30 versus the prior year.

Even so, consumers are still flocking to the chain from more expensive restaurants in Europe and the United States.

“We’re gaining share right now among low-income consumers” in the United States, Chief Financial Officer Ian Borden said during a call with investors. “That goes back to the fact that we are positioned as the leading brand in terms of value for money and affordability.”

Visits to the Chicago-based chain’s U.S. restaurants increased 6.2 per cent in September, outpacing traffic to the broader quick-service restaurant space which rose just 0.8 per cent, according to data from, a location analytics firm.

McDonald’s global same-store sales increased 9.5 per cent in the quarter, compared with estimates for a 5.8-per-cent rise, according to IBES data from Refinitiv.

Chief Executive Officer Chris Kempczinski said during the call that he expects a mild to moderate U.S. recession and one that is “a little deeper and longer in Europe.”

Unlike the last recession when McDonald’s relied on its dollar menu to retain low-income consumers, the chain plans to ride out the expected economic downturn using digital orders and delivery, Borden said.

Comparable sales in the United States, the company’s biggest market, rose 6.1% in the quarter, helped by higher prices.

However, McDonald’s total revenue fell 5 per cent to US$5.87-billion, due to the impact of a stronger U.S. dollar, but still beat estimates of US$5.69-billion.

McDonald’s net income fell 8 per cent to US$1.98-billion, or US$2.68 per share.

McDonald’s reported profit of US$2.68 per share, beating estimates of US$2.58 but still 6 per cent lower than the same quarter last year.

Ford Motor Co. (F-N) turned positive after it reported a third-quarter net loss driven by its decision to shift spending from the Argo AI self-driving business after the bell on Wednesday.

Ford’s move, a sharp contrast with rival General Motors Co’s (GM-N) decision to double down on investments in its Cruise robotaxi unit, highlights the pressure on automakers to make hard choices as the financial demands of shifting to electric vehicles continue to rise.

Both U.S. automakers continue to post heavy losses on automated-vehicle development.

Ford posted a net loss in the quarter of US$827-million, after taking a US$2.7-billion noncash pretax impairment on its investment in Argo AI.

The automaker said Argo will be “wound down” and that “talented engineers” will be offered positions with Ford.

The other key investor in Pittsburgh-based Argo, Volkswagen AG, said it, too, expects to hire some personnel from Argo.

Chief Executive Jim Farley on Wednesday said Ford will shift its development focus away from fully self-driving systems developed by Argo to advanced driver assistance systems (ADAS) created internally at Ford. Such systems are partially automated but still require humans to stay engaged when a vehicle is moving.

“Profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” Farley said in a statement.

The U.S. automaker said third-quarter revenue jumped to US$39.4-billion, up 10 per cent from a year ago. Adjusted operating profit fell to US$1.8-billion from US$3.0-billion last year, but beat analysts’ consensus estimate of US$1.7-billion.

Adjusted operating earnings per share of 30 US cents beat analysts’ estimate of 27 US cents.

Ford warned in mid-September that inflation-related supplier costs were running about US$1-billion higher than expected.

While GM executives were generally upbeat on the company’s earnings call, Ford was more cautious.

Ford Chief Financial Officer John Lawler, in a briefing Wednesday, said: “We see the probability that we could move into a mild (or) moderate recession in the U.S. next year. We could potentially have a more substantial decline in Europe.”

Ford said it expects full-year adjusted earnings before interest and taxes to rise to about US$11.5-billion, up around 15 per cent from a year ago, but at the low end of its previous guidance of US$11.5-billion to US$12.5-billion.

On the decline

Shares of Suncor Energy Inc. (SU-T) turned lower on Thursday following the announcement of its $1-billion acquisition of Teck Resources Ltd.’s (TECK.B-T) stake in the Fort Hills oil sands project.

In the largest oil-sands transaction in years, Suncor will acquire Vancouver-based Teck’s 21.3-per-cent interest, boosting its share to 75.4 per cent and further consolidating oil sands holdings in the region at a time of high oil prices. France’s TotalEnergies owns the remaining interest in Fort Hills, and has said it also plans to part with its oil sands holdings.

Teck had long signaled that it intended to sell its oil sands holding to focus on mining metals including copper and zinc – crucial for electrifying the economy - and to lower its carbon footprint. When he retired last summer, longtime chief executive officer Don Lindsay said environmentally conscious investors had avoided the Teck’s shares because of the oil sands interest. The company also mines metallurgical coal.

Suncor, Canada’s largest oil sands producer and the operator of Fort Hills, was widely viewed as the most logical buyer of the Teck interest.

Late Wednesday, Teck reported that it swung to a third-quarter loss, hurt by higher diesel costs.

The company’s loss attributable to shareholders was $195-million, or 37 cents per share, in the three months ended Sept. 30.

It posted a profit of $816-million, or $1.53 per share, in the year-ago quarter.

- With files from Jeffrey Jones

Vancouver-based Telus International Inc. (TIXT-T) was down on the premarket announcement it is acquiring full-service digital product provider WillowTree for US$1.225-billion, including debt, as it looks to continue growing.

The digital consulting business says the assumed debt amounts to US$210-million, of which US$125-million will be settled in Telus International’s subordinate voting shares, approximately US$160-million will be reinvested by certain eligible management team members and the remainder will be paid in cash when the deal closes.

Telus International says as part of the transaction, majority stakeholder Insignia Capital Group will sell its stake in WillowTree after initially investing in the company in 2018.

Headquartered in Charlottesville, Va., WillowTree operates in the United States, Canada, Brazil, Portugal, Spain, Poland and Romania, and works with clients such as CBC, PepsiCo, Anheuser-Busch InBev, Manulife and Marriott.

Telus International says WillowTree will help it expand its global footprint to Brazil and Portugal, and support product development across its business, particularly within health and agriculture and consumer goods.

The deal is expected to close in January 2023, and is subject to customary closing conditions and regulatory approvals.

West Fraser Timber Co. (WFG-T) slipped in the wake of reporting its earnings declined to $216-million in the third quarter of 2022, as inflationary cost pressures and slowing demand for the company’s products took a bite out of its financial results.

The Vancouver-based company says it earned $2.50 per diluted share for the period ended Sept. 30, 2022, compared to $460-million, or $4.20 per diluted share in the same period of 2021.

The company reported total revenue from sales of $2.09-billion, compared to $2.36-billion in the prior year’s quarter.

West Fraser says it is experiencing inflationary cost pressures across much of its supply chain, as well as availability constraints for labour and raw materials such as resins and chemicals, transportation and energy.

The company also announced Wednesday plans to redevelop its facility in Henderson, Texas by constructing a new mill next to the existing mill.

Capital investment for the new mill is an estimated $255 million with the start of construction expected to take place in the fourth quarter of this year.

Raymond James analyst Daryl Swetlishoff said: “While we have implemented further downward revisions to our financial estimates in the face of stubborn cash cost inflation across operating platforms we continue to see a favorable FCF outlook for the company with net debt poised to fall an additional $700-million through 2023. We recognize challenged affordability metrics and a difficult macro have heightened concerns in the U.S. housing market. However, seasonal and below B.C. cash cost trades along with a compelling valuation backstop our constructive view, particularly as end user inventory depletion has approached record low levels.”

Precision Drilling Corp. (PD-T) reversed large early gains and fell in the wake of reporting a third-quarter profit of $30.7-million compared with a loss of $38-million a year ago as its revenue gained 69 per cent.

The company says the profit amounted to $2.03 per diluted share for the quarter ended Sept. 30, compared with a loss of $2.86 per diluted share in the same quarter last year.

Revenue totalled $429.3-million, up from $253.8-million a year ago.

Precision Drilling says North American drilling activity was up by 27 per cent compared with the third quarter of 2021, while average day rates in Canada and the U.S. also rose.

At current commodity levels, the company says it anticipates higher demand for its services and improved fleet utilization as customers seek to maintain production levels and replenish inventories.

However, Precision Drilling noted in its outlook that broad economic concerns exist with respect to recession risk, rising interest rates and geopolitical instability.

Cameco Corp. (CCO-T) gave back early gains in the wake of reporting a third-quarter loss of $20-million compared with a loss of $72-million in the same quarter last year as its revenue rose eight per cent.

The uranium miner says the loss amounted to five cents per diluted share for the quarter ended Sept. 30 compared with a loss of 18 cents per diluted share a year earlier.

Revenue totalled $389-million, up from $361-million in the third quarter of 2021.

On an adjusted basis, Cameco says it earned $10-million or three cents per share for its latest quarter compared with an adjusted loss of $54-million or 14 cents per share a year earlier.

Earlier this month, Cameco announced it has teamed up with Brookfield Renewable Partners to buy Westinghouse Electric Co., one of the world’s largest nuclear services businesses, for US$4.5-billion plus assumed debt.

See also: Saskatchewan fills resource gaps caused by war in Ukraine

Canopy Growth Corp. (WEED-T) was down after warning late Wednesday a U.S. holding company it wants to set up could be delisted from the Nasdaq stock exchange, which is objecting to some of its plans.

The Smiths Falls, Ont. cannabis company says in a proxy filing that the Nasdaq has objected to Canopy consolidating its U.S. financial results should it close on the acquisitions of U.S. companies Wana, Jetty or the fixed shares of Acreage.

Canopy announced Tuesday that it will create holding company Canopy USA to hold its cannabis investments south of the border.

Canopy, which is also listed on the TSX, says it disagrees with the Nasdaq’s objection and thus has no assurance that it will remain listed on any stock exchange it is currently on. It says there is also no assurance it will be able to satisfy the conditions to list on an alternative exchange, if it incurs a delisting.

Its proxy filing says its Nasdaq and TSX listings prohibit it from investing in businesses in the U.S. pot market until U.S. laws change or until it lists on an alternative exchange that allows investments in such businesses.

Wall Street is losing patience over Meta boss Mark Zuckerberg’s enormous and experimental bets on his metaverse project that helped drive up the company’s overall costs by a fifth in the third quarter.

Investors rushed to dump Meta Platforms Inc’s (META-Q) stock after the company posted its fourth straight decline in quarterly profit.

The Facebook-parent said its overall expenses could rise as much as 16 per cent next year and anticipates that operating losses at Reality Labs - the unit responsible for bringing the metaverse to life - “will grow significantly” next year.

One Meta shareholder had recently voiced concerns calling the company’s investments “super-sized and terrifying”. Analysts on Wednesday called them “confusing and confounding” and Meta’s inability to cut costs “extremely disturbing”.

On a post-earnings conference call, Jefferies analyst Brent Thill asked executives: “I think kind of summing up how investors are feeling right now is that there are just too many experimental bets versus proven bets on the core ... I think everyone would love to hear why you think this pays off.”

Apple Inc. (AAPL-Q) shares also slid in the Meta-driven tech sector rout ahead of the post-market release of its quarterly earnings.

Its report on Thursday may show the best quarterly sales growth for iPhones this year but it could still foreshadow a difficult holiday period as China demand slows and inflation hits multi-decade highs.

Analysts expect iPhone sales to rise 11 per cent in the fiscal fourth quarter ended September, according to Refinitiv, thanks to consumers upgrading to the company’s premium-priced Pro phones. However, growth is estimated to slow to just 2 per cent in the crucial holiday quarter.

The early days of the iPhone 14 product cycle have indicated lackluster demand for base models and strong appetite for the high-end variants, Synovus Trust’s Dan Morgan said.

Mr. Morgan added that he expected “the weaker consumer spending environment to impact the earnings trajectory”.

Other notable companies reporting after the bell include: Amazon (AMZN-Q) and Intel Corp. (INTC-Q).

With files from staff and wires

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