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

On the rise

U.S. pipeline operator Kinder Morgan Inc. (KMI-N) rose 3.9 per cent Thursday after reporting a 26-per-cent rise in quarterly profit on Wednesday after the bell, benefiting from higher gas takeaway from Permian Basin through its Gulf Coast Express pipeline.

The pipeline, which can transport 2 billion cubic feet per day (bcfd), came into service in September last year when drillers were burning off natural gas at record rates due to lack of transportation capacity from the shale-rich Permian Basin.

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Earnings from natural gas transport volumes rose 14 per cent and from NGL transport volumes jumped 23 per cent from a year earlier.

The pipeline operator generated US$1.35-billion, or 59 US cents per share, in distributable cash flow (DCF) in the fourth quarter, higher than US$1.14-billion, or 50 US cents per share, in the prior quarter. On a year-over-year basis, DCF rose 6 per cent.

Excluding one-time items, Kinder Morgan earned 26 US cents, missing the Street’s view by a cent, according to Refinitiv IBES data.

In a research note, Credit Suisse analyst Spiro Dounis said: “We expect a positive reaction to the results. Some investors may reserve reaction until the Analyst Day where mgmt. will provide more detail. That said, KMI’s event is not typically a forum to make large strategic announcements or change guidance that was just reiterated.”

Union Pacific Corp. (UNP-N) shares rose 3.4 per cent after executives at the railroad operator said the U.S.-China trade pact should help reverse slumping volumes.

“It turns a headwind into a tailwind,” Union Pacific Chief Executive Lance Fritz said of the partial cease fire that will cut some U.S. tariffs on Chinese goods in exchange for Chinese pledges to buy more American farm, energy and manufactured goods.

President Trump’s tariff tiffs with China and other nations dented everything from soybean to steel shipments at a time when railroads were already grappling with competition from long-haul truckers and falling coal shipments.

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American Airlines Group Inc. (AAL-Q) increased 5.4 per cent after it edged past Wall Street estimates for quarterly profit on Thursday, as strong travel demand and lower fuel costs cushioned the U.S. carrier from flight cancellations due to the 737 MAX grounding.

Revenue passenger miles flown, a closely watched industry measurement, rose 6 per cent in the fourth quarter.

American, like its peer Southwest Airlines, has been under pressure from the worldwide grounding of Boeing’s 737 MAX planes since March last year. American, which has 24 MAX jets in its fleet, has indicated that it would keep the jet out of its schedule till early June.

The airline said on Thursday that it had canceled 10,000 flights in the quarter due to the grounding.

It said it expects 2020 full-year adjusted earnings between US$4 and US$6 per share, compared with the average analyst estimate of US$5.10 per share, according to Refinitiv data.

Excluding items, American earned US$1.15 per share, above the average analyst estimate of US$1.14 per share, according to IBES data from Refinitiv.

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See also: American Airlines extends Boeing 737 Max flight cancellations into June

Southwest Airlines Co. (LUV-N) increased 3.6 per cent after it said on Thursday that the Boeing 737 MAX grounding will continue weighing on its profits in the first quarter and warned that it will likely extend flight cancellations beyond June as the jets look set to remain parked longer than expected.

Southwest, the world’s largest 737 MAX operator, is among the airlines hardest hit by the global grounding of Boeing Co’s once fast-selling jet in March following two fatal crashes, forcing thousands of monthly flight cancellations.

Dallas-based Southwest said unit costs excluding fuel and profit-sharing expenses are seen spiking between 6 per cent and 8 per cent in the current quarter as the company manages an operation built around more flights than it is now able to operate due to fleet constraints.

“The outlook continues to be negatively impacted by the grounding of the MAX,” Cowen analyst Helane Becker said.

JetBlue Airways Corp. (JBLU-Q) increased 6.5 per cent after announcing on Thursday it had shaved US$314-million off its cost base over the past three years, delivering on a cost-cutting drive designed to enable budget-friendly airfares over the next decade.

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A JetBlue spokesman confirmed the savings, which he said would be announced on the company’s earnings call later in the day.

Still, JetBlue expects costs to rise 1.5 per cent to 3.5 per cent in the first quarter, partly due to scheduled aircraft maintenance, before coming under control in 2020 with an estimated decline of up to 2 per cent.

Earnings per share rose to 56 US cents in the quarter ended Dec. 31 from 55 US cents a year earlier, just above a Wall Street consensus forecast for 55 US cents, on a 3.2-per-cent rise in total operating revenues to US$2-billion.

Texas Instruments Inc. (TXN-Q) was up 0.7 per cent on the heels of forecasting first-quarter revenue above market expectations on Wednesday on signs of stable demand for microchips, indicating that a prolonged slowdown in the semiconductor industry was bottoming out.

The Dallas-based company, the first big chipmaker to report in this earnings cycle, is expected to benefit from an uptick in demand for its chips used in 5G infrastructure building and autonomous vehicles.

The stabilization in business comes following five straight quarters of revenue declines.

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“This is quite typical as a cyclical downturn in the semiconductor industry normally lasts between 4-8 quarters, depending on how severe the macro decline is,” said Tore Svanberg, analyst at Stifel.

Texas, whose broad lineup of products makes it a proxy for the chip industry, said it expects first-quarter revenue between US$3.12-billion and US$3.38- billion, above analysts’ expectations of US$3.21-billion, according to IBES data from Refinitiv.

Citi analyst Christopher Danely said: “[Wednesday] after the close, TI reported results and guidance above expectations due to a broad-based recovery in most end markets. As a result, we are raising our estimates and price target from $135.00 to $150.00. We reiterate our Buy rating on TI as we believe in its operational excellence will continue to drive superior earnings growth compared to its peers."

On the decline

Birchcliff Energy Ltd. (BIR-T) plummeted almost 13 per cent after it announced late Wednesday its board of directors has approved a capital budget of $340-million to $360-million, which targets an annual average production rate of 80,000 to 82,000 barrels of oil equivalent per day (boe/d), “which is expected to generate approximately $370-million of adjusted funds flow based on the mid-point of our 2020 annual average production guidance,” the company stated.

In 2019, the company said it achieved annual average production of approximately 78,000 boe/d (based on field estimates), “which was well within our guidance of 77,000 to 79,000 boe/d.”

Analyst Dave Popowich of CIBC World Markets said: “We would characterize this as an in-line budget release from Birchcliff today, with mixed impact on our estimates. Our 2020 production and cash flow estimates fall 2 per cent apiece, while our 2021 numbers increase by 5 per cent and 10 per cent, respectively, supported by stronger-than-expected year-end 2020 growth targets. Birchcliff has been very consistent about its desire to maximize throughput at its facilities, which comes at the expense of its near-term free cash flow metrics, but supports its longer-term supply cost objectives. The company retains ample flexibility to manage capital spending lower in the event that commodity prices retreat further, while offering impressive free cash flow visibility at higher prices. As a result, we remain Outperformer rated on the name.”

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Alacer Gold Corp. (ASR-T) fell 6.8 per cent after announcing it expects production to be lower in the first half of the year due to the continued ramp up of its sulfide plant and timing of scheduled shutdowns for the autoclaves.

Freeport-McMoRan Inc. (FCX-N) dropped 2.8 per cent despite beating analysts’ estimates for fourth-quarter profit on Thursday, as higher copper output from the Americas cushioned lower production at its Grasberg mine.

Investors looked past the profit beat to focus on the drop in Indonesia production.

The Grasberg mine in Indonesia is in the final stage of its transition from open-pit to underground operations, and Freeport expects to achieve low-cost, long-life production from the underground ore. Production at the world’s second-biggest copper mine fell 14 per cent in the last three months of 2019.

The world’s largest publicly traded copper producer expects capital expenditure for 2020 to be about US$2.8-billion, higher than 2019, including US$1.8-billion for major projects such as Grasberg and completion of the Lone Star copper leach project in Arizona.

Excluding one-time items, Freeport earned 2 US cents per share, while analysts had expected break-even, according to IBES data from Refinitiv.

Comcast Corp. (CMCSA-Q) slid 3.8 per cent despite beating Wall Street’s revenue and profit estimates.

The Philadelphia-based cable company reported fourth-quarter revenue of US$28.4-billion, beating the Wall Street consensus estimate of US$28.17-billion, according to IBES data from Refinitiv.

Revenue growth was aided by British pay-TV group Sky, which the company acquired for US$39-billion in 2018. The business generated fourth-quarter revenue of US$5.04-billion, beating the average estimate of US$4.82-billion.

Comcast continued to lose cable TV subscribers as viewers flocked to streaming services, but those losses happened at a greater rate than Wall Street expected. Even so, it beat the Wall Street consensus estimate for revenue from video subscribers.

Procter & Gamble Co. (PG-N) was 0.5 per cent lower after it reported quarterly sales that fell short of analysts’ estimates for the first time in over a year, hurt by weakness in its baby and feminine care business, which sells everything from Tampax tampons to Pampers diapers.

The company has been investing heavily to develop new products, improve packaging and marketing as it tries to appeal to younger consumers and fights competition from Unilever, Reckitt-Benckiser and local upstarts.

Sales of P&G’s fabric and home care products, its biggest business, rose 4 per cent to US$5.79-billion, while baby and feminine products rose just 1 per cent to US$4.58-billion, both falling short of estimates.

The company said part of the weakness was due to a fall in inventory levels in Japan following a build up before the nation’s sales tax hike in October.

Jefferies analyst Kevin Grundy said Wall Street expectations were built on the company’s momentum in the past five quarters, but the modest second-quarter results are likely to be met with disappointment.

“Good quarter, but high bar,” he wrote in a note to clients.

Shares of VF Corp. (VFC-N) fell almost 10 per cent after it trimmed its full-year forecasts on Thursday, as the apparel maker struggles with waning demand for its Timberland outerwear and slowing growth at Vans.

The Denver-based company also fell short of quarterly sales estimates.

Vans, the company’s biggest brand, posted its slowest revenue growth in two years at 12 per cent in the third quarter, amid new launches that included a sneaker line inspired by skater Anthony van Engelen.

The outdoor segment, which includes Timberland and The North Face brands, reported revenue of US$1.66-billion, missing the average analyst estimate of US$1.7-billion.

“This morning’s results suggest the greater need to pare back the underperforming aspect of the (outdoor) portfolio,” RBC Capital Markets analyst Kate Fitzsimons said.

With files from Brenda Bouw, staff and wires

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