A look at North American equities that made moves in both directions
On the rise
Manulife Financial Corp. (MFC-T) was higher despite reporting a drop in third-quarter profit on Wednesday, as escalating worries of an economic downturn impaired earnings at its wealth and asset management unit.
Manulife’s core earnings in global wealth and asset management sank nearly 2 per cent to $345-million in the third quarter, while net inflows dropped 69 per cent to $3-billion as turbulent markets deterred investors.
A soaring inflation has ravaged the Canadian economy which despite slowing to 6.9 per cent from a peak of 8.1 per cent remains way above the 2-per-cent target.
Last month, the Bank of Canada increased its policy rate by half a percentage point to 3.75%, but warned that economic activity would stall from the fourth quarter of 2022 through the first half of 2023.
Manulife, Canada’s largest insurer, reported core earnings of $1.32 billion, or 67 cents a share, in the three months ended Sept. 30, compared with $1.52-billion, or 76 cents a share, a year earlier.
Net income attributed to shareholders was $1.35-billion, or 68 cents per share, compared with $1.59-billion, or 80 cents a share, a year earlier.
In a research note, Scotia Capital’s Meny Grauman said: “We can delve into the details of Manulife’s relatively in-line Q3 result, but despite some notable strengths including a beat on EPIF [expected profit from in-force business] and ongoing WAM [wealth and asset management] inflows, those details should all be side notes to MFC’s annual assumption review which this year includes a triennial LTC [long-term care] review. Management guided to a neutral result both overall and for the LTC business more specifically, and on the surface that is what we got. However, dig a little deeper, and you will see that the near neutral LTC charge is actually the net result of a number of large offsetting line items. Items that are likely to grab the market’s attention, and at the very least shine a light on some aspects of the LTC business that investors have not been very comfortable with for a long time including the threat to this business from lower mortality and higher benefit utilization rates. Those negatives are ultimately being offset by the expectation of some significant price increases that Manulife has a strong track record of getting, but while the net result is ultimately what matters, in our view, some of those details do have the potential to pressure the stock on earnings day.”
Canada’s Brookfield Asset Management Inc. (BAM.A-T) soared on news it is leading a consortium in a US$11.8-billion buyout offer for Origin Energy Ltd, Australia’s no.2 power producer and energy retailer.
If successful, the takeover would rank as one of the biggest private equity-backed buyouts of an Australian company, and would be the largest deal in the country this year, Refinitiv data shows.
Brookfield and its partner MidOcean Energy, backed by private equity firm EIG, both said they see big opportunities in Australia to invest in the transition to cleaner energy, and see Origin’s assets as the way to get in.
“Together, Brookfield and Origin can support Australia’s multi-decade transition journey and accelerate our progress towards its emissions-reduction targets,” Brookfield’s Asia Pacific Chief Executive Officer Stewart Upson said in a statement.
The deal requires Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approval to proceed.
Origin opened its books to the consortium after it raised its offer to A$9 per share in cash, a near 55-per-cent premium to Origin’s last close of A$5.81. The company said it would recommend shareholders vote in favor of the proposal if no higher bid emerges.
“It’s a knockout offer in terms of price, a 55-per-cent premium,” said Andy Forster, senior investment officer at Argo Investments, Origin’s sixth largest shareholder, according to Refinitiv.
“There’s a bit of uncertainty around government intervention and what that means in terms of energy markets. It’s a short term uncertainty - but they’re obviously taking a long term view.”
Cineplex Inc. (CGX-T) jumped in the wake of reporting a profit in its latest quarter compared with a loss a year earlier as theatre attendance and revenue both rose more than 30 per cent.
The movie theatre company says it earned $30.9-million or 43 cents per diluted share for the quarter ended Sept. 30.
The result compared with a loss of $33.6-million or 53 cents per diluted share a year earlier.
Revenue totalled $339.8-million, up from $250.4-million in the same quarter last year as theatre attendance in the quarter rose 34 per cent compared with a year earlier.
Cineplex said box office revenue reached 70 per cent of the level seen in the third quarter of 2019.
Box office revenue per patron amounted to $11.25 in the quarter, down from $11.38 a year ago, while concession revenue per patron was $8.35, down from $8.58 in the same quarter last year.
Canada’s Triple Flag Precious Metals Corp. (TFPM-T) closed higher on news it is gobbling up Maverix Metals Inc. (MMX-T) for US$600-million, in a deal that will see it become the 4th largest streaming and royalty company in the world, and bring it much better trading liquidity.
Toronto-based Triple Flag is offering Maverix shareholders either US$3.92 in cash, or 0.360 of its share for each Maverix share held. The offer is a relatively small premium, only 10 per cent higher than Vancouver-based Maverix’s closing price on Wednesday.
The transaction is welcomed by both the board of Maverix, and several of its largest shareholders, including Newmont Corporation, Pan American Silver Corp. and Kinross Gold Corporation.
Fahad Tariq, an analyst with Credit Suisse said the takeover will improve Triple Flag’s trading liquidity, which he says has been an historical overhang on the stock.
Triple Flag has a small public float, owing to the 83 per cent of its shares that are closely held by New York-based hedge fund Elliott Investment Management L.P.
By buying Maverix, Triple Flag will have streams and royalties on 29 operating mines and 228 assets in total, many of which are in the development stage. More of Maverix’s portfolio is skewed towards non-producing assets compared with Triple Flag. The projected cost savings from the deal are small, only US$7-million a year.
- Niall McGee
Montreal-based CAE Inc. (CAE-T) rose almost 20 per cent on Thursday after the Canadian company posted quarterly revenue and profit above analyst estimates, as demand for flight simulators at its civil aviation and defense units surged.
In midday trading, shares of the world’s largest civil aviation training company were trading at $28.34 on the Toronto Stock Exchange, amid a rise in broader markets on hopes that the Federal Reserve might scale down the size of its future interest rate hikes.
Sales at CAE’s civil aviation unit, which serves airplane makers including Canada’s Bombardier Inc, jumped 40 per cent on strong demand from airplane makers and carriers, which ramped up their training spending in the quarter to capitalize on a rebound in travel demand.
“Our outlook for Civil (Aviation)remains highly positive, with its industry-leading positioning expected to enable us to grow significantly through the market recovery and beyond.” CAE Chief Executive Officer Marc Parent said.
Montreal-based CAE now expects to deliver 45 full flight simulators during its fiscal year, up from a previous forecast of 40.
“We are pleased with the results in the quarter given the market had priced in further supply chain issues,” Desjardins analyst Benoit Poirier said in a note.
CAE posted revenue of $993.2-million for the second quarter of its 2023 fiscal year, which ended Sept. 30, ahead of Refinitiv IBES estimates of about $949-million.
On an adjusted basis, it earned 19 cents per share, compared to analyst expectations of 17 cents.
Docebo Inc. (DCBO-T) jumped after turning profitable for the first time, reporting positive EBITDA for its third quarter before the bell.
The Toronto-based provider of cloud-based learning management systems announced consolidated revenue of $37-million, up 36.7 per cent year-over-year but narrowly lower than the Street’s expectation of $37.1-million. Adjusted EBITDA of $0.6-million was higher than anticipated ($0-million).
Calling it a “watershed” quarter, ATB Capital Markets analyst Martin Toner said: “While Q3/22 marked a second consecutive revenue miss, currency headwinds impacted revenue and ARR by five percent, and despite macroeconomic headwinds, Docebo continues to increase its recurring revenue, and it turned EBITDA positive for the quarter. The Company has emphasized cost discipline and margin inflection driven by gross profit growth overwhelming operating expenses. Currency had a material impact on incremental ARR of $6.4-million, and we estimate constant currency incremental ARR was $9.5-million, a strong result but below Q3/21. According to the Company, enterprise caution, given the uncertain macro environment, is elongating sales cycles and is responsible for slowing growth on a constant currency basis.”
On the decline
Canadian Tire Corp. Ltd. (CTC.A-T) slipped after it raised its dividend as it reported its third-quarter profit fell compared with a year ago.
The retailer says it will now pay a quarterly dividend of $1.725 per share, up from $1.625 per share.
The increased payment to shareholders came as Canadian Tire says its net income attributable to shareholders amounted to $184.9-million or $3.14 per diluted share for the quarter ended Oct. 1, down from a profit of $243.7-million or $3.97 per diluted share in the same quarter a year earlier.
Revenue totalled $4.23-billion, up from $3.91-billion in its third quarter last year.
Canadian Tire says on a normalized basis it earned $3.34 per diluted share in its latest quarter, down from a normalized profit of $4.20 per diluted share a year earlier.
Analysts on average had expected a profit of $3.92 per share and $4.23 billion in revenue, according to estimates compiled by financial markets data firm Refinitiv.
WSP Global Inc. (WSP-T) gave back early gains after it raised its financial outlook as it said it’s looking to grow its business across its core markets.
WSP chief executive Alexandre L’Heureux told a conference call with financial analysts to discuss the company’s latest results that the firm continues to build on the momentum from the first half of the year in addition to closing “significant transactions.”
“We achieved solid organic net revenue growth across all our segments,” said Mr. L’Heureux.
Since June, the engineering firm has closed six acquisitions including the environment and infrastructure business of John Wood Group.
That’s despite walking away from the acquisition of British consulting firm RPS Group in October due to a rival offer by Tetra Tech Inc.
“These acquisitions support our regional and global ambitions by reinforcing our service offerings in key sectors and strengthening our presence in key geographies,” says Mr. L’Heureux.
The company says it now expects its net revenue to be between $8.80-billion and $8.90-billion, up from earlier expectations for between $8.25-billion and $8.75-billion. Its adjusted earnings before interest, taxes, depreciation and amortization are now expected to be between $1.51-billion and $1.53-billion, up from between $1.43-billion and $1.49-billion.
In its latest quarter, WSP reported net earnings attributable to shareholders of $127.5-million or $1.05 per share on $2.89-million in revenue compared with a profit of $139.0-million or $1.18 per share on $2.65 billion in revenue a year earlier.
On an adjusted basis, WSP says it earned $193.4-million or $1.59 per share in its latest quarter, up from an adjusted profit of $179.7-million or $1.53 per share in the same quarter last year.
RBC Dominion Securities analyst Sabahat Khan says the company is well positioned to deliver on its 2024 targets given its well-diversified geographic and end-market exposure.
Cascades Inc. (CAS-T) slid after it reported a loss in its latest quarter compared with a profit a year ago as its sales rose.
The company says it net loss attributable to shareholders amounted to $2-million or two cents per diluted share for the quarter ended Sept. 30.
The result compared with a profit of $32-million or 32 cents per diluted share a year earlier.
Sales totalled $1.17-billion, up from $1.03-billion in the same quarter last year.
On an adjusted basis, Cascades says it earned 20 cents per share in its latest quarter compared with an adjusted loss of a penny per share in the same quarter last year.
Cascades CEO Mario Plourde says the company’s third-quarter performance was in line with expectations notwithstanding the fact that its tissue segment continued to face unprecedented cost inflation and reduced productivity due to labour scarcity and inefficiencies.
ECN Capital Corp. (ECN-T) was lower on weaker-than-anticipated quarterly results and a reduction to its 2023 guidance.
For its third quarter, the Toronto-based firm reported adjusted earnings per share of 5 cents, missing the Street’s estimate by 3 cents. It now expects EPS in the next fiscal year of 25-30 cents, down from 36-42 cents previously.
The report led an equity analyst at BMO to downgrade its shares.
Tom MacKinnon said: ““Macro headwinds remain elevated, namely the impact of higher interest rates/ mortgage costs as it impacts the marginal buyer of manufactured homes, an uncertain outlook for recreational marine/vehicles in a tougher economic environment, and a potentially tougher market to do M&A given volatile interest rates.”
With files from staff and wires