A roundup of some of the North American equities making moves in both directions today
On the rise
Marijuana producers rose in early afternoon trading on Thursday with Cannabis 2.0, which sees the legalization of marijuana derivatives including edibles, beverages, extracts and vape pens, taking effect.
At the same time, Hexo Corp. (HEXO-T) was up 17.2 per cent after its joint venture with beer giant Molson Coors said its portfolio of pot-based drinks set to hit the market later this year includes a CBD-infused spring water as well as beverages containing THC.
The announcement by Truss Beverage Co. comes one week after its competitor Fluent Beverage Co. — a joint venture between the world’s largest brewer Anheuser-Busch InBev and Tilray — said it was launching CBD drinks as early as December, but it was not yet able to develop a formulation for THC.
In a research report, Raymond James’ Rahul Sarugaser said: “The new legislation brings forth a make-or-break opportunity for today’s suite of Canadian producers, which, we expect, will serve to exaggerate the (important) differences between companies with high-quality operations, research, and management teams, from those with substandard versions of any or all of these traits. Companies with well-established manufacturing and formulation expertise, such as Organigram (OGI), along with groups that have been deploying resources toward new product development from their big balance sheets, are the LPs we believe will start Canada’s Cannabis 2.0 era strongest.”
First Quantum Minerals Ltd. (FM-T) jumped 11.3 per cent on news Pangaea Investment Management Ltd, an investment firm backed by Chinese state-owned Jiangxi Copper Corp. Ltd., has amassed a 10.8-per-cent stake in the Canadian copper company.
Pangaea Investment said in a press release on Thursday it has also entered a forward contract that may see it take its total ownership in First Quantum to 16.6 per cent.
Netflix Inc. (NFLX-Q) rose 2.5 per cent as Wall Street cheered a rebound in its subscribers in the third quarter, even as analysts warned conservative estimates for the next three months may be a hint of less certain times ahead.
The video-streaming pioneer is bracing for the launch this month of Walt Disney Co’s Disney+ and Apple Inc’s Apple TV+ after years when it has been left largely to develop and garner content from Hollywood studios unthreatened.
That has stirred the first outright concerns among financial investors about the company’s ability to fight deep-pocketed rivals, a feeling that was exacerbated by a shock slide in subscribers last quarter - the first in eight years.
RBC Dominion Securities analyst Mark Mahaney said: “NFLX shares rose 10% in after market due to much better than feared International Subs. At the margin, we come away less bullish on Global Subs Adds, slightly more confident on the margin outlook, and slightly less positive on NFLX’s pricing power. We note that NFLX no longer expects FY19 to be a year of Global Sub Add acceleration, which is in part due to minor elevated churn due to price increases, less precision in forecasting the impact of a content slate consisting of newer IP launches, and forthcoming competition. We, however, remain bulls, both medium-term and long-term. Medium-term, because FY19 Streaming Revenue growth (ex-FX) likely to come in around 33 per cent year-over-year – close to FY18 levels. And Op Margins are ramping rapidly .... We would caution around a Q4 trading headwind re: Disney+ and Apple TV+ launch.”
CSX Corp. (CSX-Q) sat 1.1 per cent higher after reporting a quarterly profit that topped Wall Street estimates after the bell on Wednesday, as cost cuts helped the U.S. railroad offset lower volumes of shipment in its coal and intermodal units.
Citi analyst Christian Wetherbee said: "Coming off CSX’s 3Q19 earnings call we are encouraged by its ability to increase efficiency, even in a weak volume environment. While CSX has been an operational leader, 3Q was evidence of what PSR [precision scheduled railroading] is capable of, as revenue dropped 5 per cent while costs were down 8 per cent. Coal remains a question mark for 4Q and 2020 due to weakness in export markets, but it seems clear that the company is capable of operating its business at very profitable levels. As we noted ahead of results, the rails are positioning themselves very well with cost efficiencies to leverage any volume stabilization/improvement. Assuming that happens in 1H20, we would expect a solid acceleration in earnings power. Realistically, expectations were fairly neutral for CSX into results given its accomplishments to-date, so incremental evidence of a further step forward in margin improvement through PSR is a positive that should drive shares higher.
“We delivered strong quarterly earnings despite the typical summer slowdown and volatile markets,” Chief Executive Officer James Gorman said in a statement.
Net income attributable to the company rose marginally to US$2.17-billion, or US$1.27 per share, in the third quarter ended Sept. 30, from US$2.11 billion, or US$1.17 per share, a year ago.
Diversified manufacturer Honeywell International Inc. (HON-N) increased 2.4 per cent despite missing Wall Street estimates for quarterly revenue on Thursday and cut its full-year sales forecast, as its customers rein in spending amid a slowing global economy.
Honeywell’s diverse set of businesses, which range from warehouse automation equipment to catalysts used in gasoline production, are closely linked with the health of the global economy.
The prolonged trade war between the United States and China and the possibility of Britain exiting the European Union without a new agreement in place have weighed heavily on business confidence and resulted in sluggish capital spending.
Barrick Gold Corp. (ABX-T) was up 0.5 per cent after revealing on Thursday third-quarter gold production would be lower than the previous quarter, hit by operational restrictions on its North Mara mine in Tanzania.
Gold production totaled 1.31 million ounces, lower than the second quarter’s 1.35 million ounces, while copper output rose 14.4 per cent to 111 million pounds, the company said.
The curbs on the North Mara mine were lifted only toward the end of the quarter after the company addressed concerns about seepage at the project’s tailings storage facility.
Barrick said the estimates included its Nevada Gold Mines joint venture with Newmont Goldcorp Corp. The venture was set up after Barrick abandoned its $18-billion hostile bid for Newmont. The miners then agreed to combine their assets in the U.S. state of Nevada.
TC Energy Corp. (TRP-T) increased 0.1 per cent after declaring force majeure on shipments on its 590,000-barrel-per-day (bpd) Keystone oil pipeline after a snow storm hit Manitoba over the weekend, disrupting operations, the company confirmed on Wednesday.
Force majeure is a declaration that unforeseeable circumstances prevented a party from fulfilling a contract.
The storm knocked out power to about 3-4 pump stations in Manitoba, affecting pipeline flows, three sources said.
U.S. railroad operator Union Pacific Corp. (UNP-N) rose 0.2 per cent after reporting a lower-than-expected quarterly profit before the bell, hit by lower crude shipments.
The company’s results come at a time when American railroads are seeing a slowdown in freight activity amid a U.S.–China trade war that has hurt global economic growth.
Union Pacific’s operating ratio, a measure of operating expenses as a percentage of revenue and a key metric for Wall Street, fell 2.2 points to 59.5 per cent from a year ago.
A lower ratio means more efficiency and higher profitability.
On the decline
Mr. Donovan stepped down as executive chair of the board in August and was the board’s founding chair. He is also a former CEO at DHX.
Shares of International Business Machines Corp. (IBM-N) were down 5.5 per cent after the company’s quarterly revenue fell short of forecasts.
Total revenue fell 3.9 per cent to US$18.03-billion, missing analysts’ average estimate of US$18.22-billion, according to IBES data from Refinitiv. Excluding the impact from currency and business divestitures, revenue dropped 0.6 per cent.
In a research note, Citi analyst Jim Suva said: “IBM reported Q3 results Wednesday night which provided something for everyone. With the stock up 29 per cent year to date compared to the S&P 500 up 19 per cent and NASDAQ up 22 per cent many were hoping for the newly acquired Red Hat business to provide upside but the details reveal lots of moving parts which may cause the stock to pause until a better assessment of Red Hat integration is known and consensus estimates are unlikely to increase.”
Vancouver-based Surge Exploration Inc. (SUR-X) dropped 20 per cent after announcing before the bell the acquisition of a 100-per-cent interest in three mineral claims known as the Caledonia, Cascade and Bluebell
The claims are located in the Nanaimo Mining District of northern Vancouver Island, adjacent to the joint venture partnership between Freeport-McMoRan and Northisle Copper and Gold Inc.
“Northern Vancouver Island has had a strong history of mineral exploration and mining, but it remains relatively underexplored, meaning there is plenty of blue-sky potential for today’s mining companies," said Surge president Tim Fernback. "The most recent evidence of this potential and it’s ability to attract investment is the joint venture partnership between Freeport-McMoRan and Northisle Copper and Gold Inc.. Apart from the previously mined BHP deposit, there are a number of large copper porphyry occurrences which, taken together, (see Northisle website) have a reported Life of Mine metal production of 1.8 billion pounds of Copper, 1.7 million ounces of Gold and 55 million pounds of molybdenum. Surge management sees strong potential for the exploration and discovery of an attractive mineral deposit in this environment. I believe we can greatly expand on the known mineral resource at the Caledonia property. The potential of the area is exciting for me personally and we believe for our investors as well.”
With files from staff and wires