A roundup of some of the North American equities making moves in both directions today
On the rise
Shares of Tesla Inc. (TSLA-Q) rose 10.2 per cent and established a record high in early afternoon trading on Thursday as Wall Street analysts cheered the company’s better-than-expected quarterly results and delivery targets for the year.
Tesla shares have been on a tear for the last six months and the company’s market value now is more than Ford Motor Co and General Motors Co combined and second to only Japan’s Toyota Motor Corp.
At least nine analysts raised their price targets on the stock, with Canaccord Genuity’s analyst Jed Dorsheimer raising his price target to US$750 from US$515.
In a research note, Credit Suisse’s Dan Levy said: “We believe long-term expectations embedded in the stock are rather lofty, and the stock is somewhat disconnected vs. fundamentals. However, we also acknowledge that at the moment, valuation is not a deterrent in owning the stock, there is no short thesis, there may be incremental short covering, and retail interest is elevated. Simply, we believe Tesla checks a number of boxes for investors – growth, thematic, catalysts.”
Coca-Cola Co. (KO-N) shares increased 3.3 per cent after its quarterly revenue beat market expectations on Thursday, driven by demand for the beverage maker’s signature soda, flavored Cokes and Fuze teas.
The Atlanta-based company said fourth-quarter revenue growth was led by its trademark Coca-Cola, that included products such as caffeinated beverage Plus Coffee and Zero Sugar soda.
Citi analyst Wendy Nicholson said: “We believe the long-term growth story at The Coca-Cola Company is a good one, as the company expands its market shares around the world in an increasingly broad range of non-alcoholic beverage categories. We also laud the company’s focus on a wide range of productivity initiatives, which should enable KO to continue to reinvest in its business at a high level. However, given headwinds that the company currently faces, including higher commodity costs, foreign exchange, and higher tax rates, we believe EPS growth will be muted in the near term, and as such, we consider the stock’s current valuation full."
Raymond James analyst Farooq Hamed said: “GC provided 4Q19 and full year operating results characterized by a strong uptick in production quarter-over-quarter from Haile and Macraes. Overall, OGC’s 4Q operating results were slightly better than our expectations. Importantly, given the challenging year at Haile, we are encouraged by the operating improvements at the asset in 4Q which exited the year at a throughput run rate of 3.5 million tonnes per annum (vs. 3.2 Mt in 2019) and recoveries of 80 per cent (vs. 78.6 per cent in 2019). As per OGC guidance, we expect year-over-year production and cost improvement at Haile in 2020 as it is expected to benefit from higher throughput and recovery rates.”
Real Matters Inc. (REAL-T) rose 3.4 per cent after it announced first-quarter consolidated revenue of US$103.8-million versus US$60.5-million a year earlier and ahead of expectations of $97.2-million.
Net income was US$5.1-million or 6 US cents per share versus net income of US$4.5-million or 5 US cents a year ago. Adjusted EPS came in at 10 US cents versus 2 US cents a year ago and ahead of expectations of 9 US cents.
Microsoft Corp. (MSFT-Q) rose 2.8 per cent after it reported fiscal second-quarter revenue and profit that beat Wall Street expectations, a sign that its Azure cloud computing services continues to grow amid a pitched battle with Amazon’s cloud unit.
Citi analyst Walter Prichard said: “Once again, all businesses performed well and while some of the impacts don’t look sustainable, underlying strength in hybrid cloud drove upside to numbers that is likely sustainable through FY20. While MSFT will be entering a period of tougher year-over-year comps, it will likely experience less of a deceleration than we had previously modeled.”
Mondelez International Inc. (MDLZ-Q), the maker of Oreos and Chips Ahoy cookies, jumped 7.8 per cent after it reported quarterly revenue that beat estimates after the bell on Wednesday, helped by higher demand for its snacks in developing markets.
The company said it did not know how it would be affected by the coronavirus outbreak in China, which Mondelez said accounts for nearly 4.5 per cent of its sales.
“It’s too early to tell what the effect of the coronavirus is going to be on our business. ... We’re still in the middle of Chinese New Year,” Mondelez Chief Executive Dirk Van de Put said in an interview. Wuhan, China, is the epicenter of the virus, which has killed more than 100 people.
Emerging markets like China - where incomes and demand for e-commerce are rising - have become increasingly important to Mondelez as the consumer goods industry grapples with slowing demand in developed countries.
Eli Lilly and Co. (LLY-N) rose 2 per cent after it reported a higher-than-expected quarterly profit on Thursday, helped by strong demand for its diabetes drug Trulicity and psoriasis treatment Taltz.
The company also reiterated its full-year adjusted profit forecast.
The drugmaker has been relying on its newer drugs such as Trulicity and Taltz to spur revenue growth as older medicines including erectile dysfunction treatment Cialis lose market share to cheaper generic versions.
Trulicity sales rose 31 per cent to US$1.21-billion, accounting for nearly a fifth of total sales in the fourth quarter.
The company said the drug’s sales were slightly crimped by higher rebates that drugmakers offer to middlemen such as pharmacy benefit managers to make sure patients have access to their products.
Sales of Taltz rose 37 per cent to US$420.1-million.
On the decline
Facebook Inc. (FB-Q) plummeted 6.3 per cent after it said on Wednesday that growth would continue to slow as its business matured and it reported a surge in quarterly expenses, disappointing Wall Street expectations that the costs of improving privacy would level off.
Total costs and expenses surged 34 per cent to US$12.22-billion in the fourth quarter, more than double the 14 per cent that analysts had forecast and dragging down operating margins to 42 per cent from 46 per cent a year earlier.
Resolute Forest Products Inc. (RFP-T) slid 12 per cent after it reported a loss of US$71-million in its latest quarter compared with a profit of US$36-million a year earlier as its sales fell.
Resolute chief executive Yves Laflamme says the fourth-quarter results reflect bottom-of-the-cycle conditions in market pulp, ongoing pricing pressures in paper grades and the slow pricing recovery in lumber.
United Parcel Service Inc. (UPS-N) dropped 6.8 per cent on Thursday after it forecast full-year earnings below estimates and said accelerated spending on weekend deliveries and speedier service would take a bite out of 2020 earnings.
The Atlanta-based company forecast adjusted earnings of US$7.76 to US$8.06 per share - a penny below analysts’ average estimate, according to IBES data from Refinitiv.
Citi analyst Christian Wetherbee said: “Coming off UPS’s 4Q conference call, there was a lot to digest, and we understand the pressure on the stock. First, guidance was weaker than expected, and for those who thought expectations were low, we don’t disagree but point out that another year of high single-digit volumes and low single-digit to mid single-digit EPS growth seems to be the new reality of ecommerce and is not all that exciting, particularly at 15 times EPS. Second, management set 1Q20 EPS guidance at flat year-over-year, which falls 20 cents below consensus and will lead investors to the low end of the full-year range. Finally, UPS disclosed that Amazon contributed $8.6-billion to revenues in 2019, which includes only half of the FedEx air business, suggesting a run rate closer to $9-billion. While we suspected a number close to 12 per cent and we applaud UPS for transparency, the disclosure will likely lead investors to value the rev/profit at a lower multiple. So collectively, while 4Q was good in the context of peak season, there were negatives that will weigh on shares..”
Altria Inc. (MO-N) was down 4.3 per cent after announcing before the bell it took another US$4-billion charge on its investment in Juul Labs Inc and said it had reworked its deal terms with the embattled e-cigarette maker, which is facing increased regulatory scrutiny amid a backlash against vaping.
The Marlboro maker said on Thursday the fourth-quarter charge was mainly due to the increased number of legal cases pending against Juul and the expectation that the number would continue to grow.
Overall, Altria has recorded US$8.6-billion in impairment charges after it took a 35-per-cent stake in Juul for US$12.8-billion in December 2018. Those charges brought down the value of its investment to US$4.2-billion as of the end of 2019, Altria said.
“I’m highly disappointed in the financial performance of the Juul investment,” Altria Chief Executive Officer Howard Willard said on a post-earnings call.
“(The valuation) is substantially below what we had expected.”
Biogen Inc. (BIIB-Q) slid 1.8 per cent despite its top-selling multiple sclerosis drug helping the company’s quarterly profit beat market expectations on Thursday.
Sales of Tecfidera rose 4.5 per cent to US$1.16-billion, beating estimates of US$1.12- billion and despite the threat of patent challenges and increasing competition from newer treatments like Roche Holding AG’s Ocrevus.
JP Morgan analyst Cory Kasimov called the quarterly performance “a good enough result”, and said investor focus this year may not be on the company’s commercial performance.
Investors expect Biogen to be the first drugmaker to bring a treatment for Alzheimer’s to market as it revived plans to apply for approval of experimental treatment aducanumab in October based on a detailed analysis of data, months after ending two trials.
U.S. weapons maker Raytheon Co. (RTN-N) slid 0.6 per cent despite topping Wall Street estimates for quarterly profit on Thursday as strong international demand spurred sales in its defence systems unit, which makes the Patriot missile-defense system and surveillance radars.
CFO Toby O’Brien told Reuters in an interview on Thursday that for 2020 “we see strong sales growth for the year 6 to 8 per cent.” He said “international and domestic are both expected to grow again in 2020 as they did in 2019.”
Defence contractors are expected to benefit from tensions between the United States and Iran after a top Iranian military commander was killed in a U.S. drone strike in Baghdad on Jan. 3, prompting Iran to retaliate with a missile attack against a U.S. base in Iraq days later.
Sales in Raytheon’s integrated defence systems unit, which also makes naval navigation systems and torpedoes, rose 17.6 per cent to US$1.98-billion in the fourth quarter ended Dec. 31. Margins in the unit rose to 15.5 per cent from 14.7 per cent.
Verizon Communications Inc. (VZ-N) lost 0.3 per cent on Thursday as quarterly profits missed estimates even though the company added more monthly mobile phone subscribers than expected as adding the Disney+ streaming service helped some of its plans.
The largest U.S. wireless carrier by subscribers has cut prices and made its offerings more attractive by bundling services such as Apple Music to battle intense competition in the industry.
The company said that in the fourth quarter, it added 790,000 phone customers who pay a monthly bill, well above the average analysts’ estimate of 525,000 subscribers, according to research firm FactSet.
Verizon’s reported post-paid phone churn of 1.13 per cent for the fourth quarter, the seventh consecutive quarterly increase. Analysts at New Street Research said lowering churn would be more difficult with shift in the wireless market.
Blackstone Group Inc. (BX-N), the world’s largest alternative asset manager, dipped 2.5 per cent on Thursday after its fourth-quarter distributable earnings rose 27 per cent year-on-year, as strong growth in its real estate and hedge funds businesses offset declines in private equity and credit divisions.
Distributable earnings - the cash available for paying dividends to shareholders - came in at $914 million in the quarter, translating to 72 US cents per share, higher than the 67 US cents per share that analysts forecast on average, according to data compiled by Refinitiv.
During the quarter, Blackstone sold off its remaining 10.8-per-cent stake in Invitation Homes Inc, the largest single-family rental home operator in the United States, raking in more than US$1.7-billion.
The buyout firm also completed the sale of its 61-per-cent stake in Swedish property firm Hembla AB to German real estate company Vonovia SE for about US$1.3-billion.
Blackstone said its private equity portfolio was up 1.5 per cent in the quarter, even as the benchmark S&P 500 stock index rose 8.5 per cent over the same period. Opportunistic funds and core real estate funds rose 4.7 per cent and 2.9 per cent in the quarter, respectively.
Spirit AeroSystems Holdings (SPR-N) lost 3.9 per cent on Thursday on news its chief financial officer has resigned after the company identified some accounting irregularities, adding to the woes of the aero-parts maker as it grapples with the 737 Max crisis.
The company said its accounts did not comply with standard protocol related to certain potential contingent liabilities in the third quarter last year.
With files from staff and wires