A roundup of some of the North American equities making moves in both directions today
On the rise
After sustaining early losses, Bombardier Inc. (BBD.B-T) rallied late on Thursday and closed up 6.4 per cent after it announced it is pulling out of its joint venture with Airbus SE in a bid to save cash, closing the book on its failed big-league commercial aerospace ambitions as it reported a US$1.7-billion net loss for its latest quarter.
The Montreal-based multinational, which is working to sell one of its two big business units to fix an over-extended balance sheet, said Thursday it will exit a venture known as Airbus Canada Limited Partnership that builds the European plane maker’s A220 single-aisle jet.
The plane is the former C Series airliner developed by Bombardier at a cost of more than US$6-billion.
Analyst Benoit Poirier at Desjardins Securities said: “Overall, we believe the weakness seen in the stock this morning was related to some investors’ disappointment with respect to the lack of details around a potential divestiture of BT. On our side, we are pleased with the FCF guidance and the favourable development with the A220 program.”
Canadian Tire Corp Ltd. (CTC.A-T) rose 1 per cent after it beat quarterly profit estimates on Thursday, buoyed by strength in the diversified retailer’s credit card business and strong demand at its retail stores.
The company has been investing heavily to expand its portfolio by acquiring new companies and to boost its digital capabilities as it looks to fend off competition from e-commerce giants Amazon and Walmart.
Income before income taxes from its financial services unit, which accounts for about a third of the company’s total income and houses the credit card business, rose to $109.5-million from $92.1 million a year earlier.
Revenue from its over 600 Canadian Tire stores, its core business, rose to $2.23-billion in the fourth quarter ended Dec. 28, from $2.12-billion a year earlier.
Net income rose to $365.9-million, or $5.42 per share, from $278.2-million, or $3.99 per share.
The Edmonton-based business says net revenue for the three months ended Dec. 31 was $56-million, up from $54.2-million a year earlier but down from roughly $75-million in the prior quarter ended Sept. 30.
The company’s net income and earnings per share weren’t included in its press release.
Aurora’s earnings report comes a week after chief executive Terry Booth stepped down, the company undertook $1-billion in goodwill writedowns and announced a 500-employee layoff as part of a restructuring of its spending plans.
Kinross Gold Corp. (K-T) increased 2.6 per cent on the heels of reporting a better-than-expected quarterly profit on Wednesday after the bell, helped by record output at its third biggest mine, Tasiast, and higher gold prices.
Gold prices rose 18 per cent in 2019, as investors sought safety in safe-havens due to political uncertainty, U.S.-China trade war and concerns on slowing global growth.
The company’s average realized gold price rose 21 per cent to $1,485 per ounce from $1,226 an year earlier, while total production rose 5.8 per cent to 645,344 gold equivalent ounces (Au eq. oz.).
The miner forecast production of about 2.4 million Au eq. oz. for 2020, a decrease compared with its 2019 production of 2.5 million Au eq. oz., due to care and maintenance at its Maricunga mine in Chile and expected lower output at its largest mine Paracatu, which posted record production in 2019.
RBC Dominion Securities analyst Josh Wolfson said: “Kinross realized an improvement in quarter-over-quarter operating and financial results, outlined stable 3-year guidance, and reported incrementally favourable project updates. We view 4Q19 FCF generation and greater interim operating outlook visibility as constructive updates.”
Brookfield Asset Management Inc. (BAM.A-T) gained 3.2 per cent saying its net income for the fourth quarter was less than half the level a year earlier, in part because of asset sales in the previous year.
The company reported it had a net income of US$1.64-billion, or 74 US cents per diluted share, for the quarter ending Dec. 31, compared with US$3.03-billion or US$1.87 for the same quarter a year earlier. Revenue was US$17.82-billion, up from US$16-billion for the same quarter last year.
Analysts had expected revenue of US$14.6-billion and earnings of 26 US cents per share, according to financial markets data firm Refinitiv.
AltaCorp Capital analyst Waqar Syed said: “We deem the Company’s results to be positive. (1) The Company reported better than expected EPS and EBITDA. (2) The key driver of PD will be progress in paying down debt, and PD continues to exceed its debt repayment targets. (3) As the Company continues to pay down debt (goal of $700mm from 2018-2022), there should be transfer of value from debt holders to equity holders. (4) Management’s guidance for Q1/20 would be the key for stock performance today. PD-T’s Canadian business continues to perform better than prior expectations, but there is some risk around its U.S. business, given its higher exposure to the gas basins. However, take-or-pay contracts on some gas rigs may limit downside in the U.S.. (5) Overall, we consider the results to be positive.”
Tesla Inc. (TSLA-Q) reversed early losses and jumped higher by 4.8 per cent after announcing on Thursday plans to raise US$2-billion in a stock offering, tapping into an astronomical jump in its share price over the past few months and reversing the electric-car maker’s often-stated policy of avoiding sales of new stock.
Tesla said it would offer 2.65 million shares, of which Chief Executive Officer Elon Musk will buy up to US$10-million in shares, while board member and Oracle co-founder Larry Ellison will purchase up to US$1-million worth of Tesla shares.
Mr. Musk has repeatedly assured investors that Tesla will not need to raise more money for costly initiatives including production of a new vehicle model, the ramp-up of its China production and the construction of its first European factory.
PepsiCo Inc. (PEP-Q) rose 0.3 per cent after it reported quarterly revenue and profit ahead of analysts’ estimates on Thursday as the beverages and snacks maker benefited from demand for its healthy snacks, trademark sodas and Gatorade energy drinks.
Still, the soft drink and snack maker offered a more conservative earnings forecast for 2020 than Wall Street had expected and predicted slower organic revenue growth than last year.
Chief Executive Officer Ramon Laguarta has been largely focusing on new launches, which include healthy snacks and beverages, to drive sales as consumers demand more healthy on-the-go products.
The company said fourth-quarter revenue was driven by snacks including Lays and Doritos as well as double-digit net revenue growth in premium brands such as Bare and Off the Eaten Path.
Sales at its North American beverage unit rose 4 per cent, while snacks sales, under its Frito-Lay North America segment, gained 3 per cent.
Organic revenue, which excludes the effects of currency fluctuations and acquisitions, grew 4.3 per cent, its fastest rate of growth since 2015, the soda maker said.
Keystone pipeline operator TC Energy Corp. (TRP-T) was up 0.1 per cent after it fell short of quarterly profit estimates on Thursday, hit by lower contribution from its Canadian natural gas pipelines and a decline in Keystone pipeline volumes.
The hit to Keystone volumes comes after a leak in North Dakota in late October temporarily shut down the pipeline that runs from Alberta to Nebraska.
The company’s earnings from its oil pipelines, of which Keystone is the biggest contributor, plunged 33.3 per cent to $355-million in the fourth quarter, while profit from its Canadian natural gas pipelines fell 28.7 per cent to $321-million.
The Calgar-based company’s comparable earnings rose to $970-million in the three months ended Dec. 31, from $946 million a year earlier.
Excluding items, TC Energy earned $1.03 per share, below analysts’ average estimate of $1.04, according to IBES data from Refinitiv.
Mullen Group Ltd. (MTL-T) was up 1.4 per cent after its fourth-quarter results fell just short of the company’s guidance.
The Alberta-based company reported revenue of $314.6-million for the fourth quarter, down from $333.3-million for the same time a year earlier.
Raymond James analyst Andrew Bradford said: “While the headline figure was right in-line with our estimates, on a segmented level, T/L [trucking and logistics] beat our estimate and OFS [oilfield services] missed. OFS revenue was lower than we had expected, down 12 per cent sequentially despite the pick up in drilling, and margins were lower than expected. In T/L, Mullen generated considerably higher EBITDA margins than we were forecasting on inline revenue as company-owned assets generated a higher proportion of that revenue. Companyowned assets generated 75% of T/L revenue in 4Q, the highest proportion in at least a decade. Without having to pay other asset owners, revenue from company assets has generated EBITDA margins that are 300 basis points than contractor revenue in recent quarters.”
On the decline
The company expects full-year revenue between $15.54-billion and $15.83-billion. Analysts on average were expecting revenue of $15.49- billion, according to IBES data from Refinitiv.
Operating revenue in the fourth quarter ended Dec. 31 rose to $3.86-billion from $3.76-billion a year earlier, slightly below estimates of $3.87-billion.
The Vancouver-based company’s net income rose to $379-million, or 61 cents per share, from $368-million, or 60 cents per share a year earlier.
Underlying net income, which excludes one-time items, rose to $792-million, or $1.34 per share, in the fourth quarter ended Dec. 31, from $718-million, or $1.19 per share, a year earlier.
RBC Dominion Securities analyst Darko Mihelic said: “Overall, we have a relatively neutral view on Q4/19 results. Underlying EPS was a penny below our forecast but ahead of consensus including some tax help. Asset Management and SLF U.S. results were solid. However, MFS reported sizable institutional net outflows and Asia results were softer than expected and future earnings could be at risk due to coronavirus and Hong Kong unrest.”
China’s Alibaba Group Holding Ltd. (BABA-N) was 1.8 per cent lower after it warned of a drop in revenues at its key e-commerce businesses this quarter as the coronavirus sweeping China hits supply chains and deliveries.
The warning from executives came during an earnings call for the quarter ending in December 2019, during which the company beat analyst estimates and brought in record transactions for its annual Singles’ Day shopping event.
CEO Daniel Zhang said the delayed return to work following the Lunar New Year, due to the virus outbreak which has killed more than 1,350 people in China and infected thousands more, had caused problems for merchants and delays in fulfilling orders.
He said food delivery orders had dropped year-on-year due to the number of restaurants that had closed as a result of the outbreak. And while the company has seen a surge in demand for goods from its Hema supermarkets, it has been held back by limited delivery capacity.
Finance chief Maggie Wu said most of Alibaba’s businesses that rely on the sale of physical goods would likely see a decline in revenues this quarter.
Manulife Financial Corp. (MFC-T), Canada’s biggest insurer, lost 1.8 per cent after it fell short of analysts’ estimates for quarterly profit on Wednesday as declining sales in Asia offset growth elsewhere.
On Thursday, Chief Financial Officer Phil Witherington said on an analyst call that Manulife has reduced its leverage ratio to under 25 per cent, giving it flexibility to deploy capital, primarily into organic investments,
The company has also seen 1,900 employee departures through as part of its restructuring initiatives, and has delivered $700-million of its $1-billion target of expense efficiencies, Chief Executive Roy Gori said on the call.
In a research note, Canaccord Genuity analyst Scott Chan said: “With large exposure to Asia (earnings slowed), MFC’s conference call will certainly focus on this segment and potential coronavirus implications. We believe near-term sentiment on the stock has been impacted with MFC shares trailing peers and benchmark indices year-to-date.”
WildBrain Ltd. (WILD-T), formerly known as DHX Media Ltd., dropped 3.3 per cent after warning that its revenue will be negatively affected this year by YouTube’s recently introduced new rules for advertising aimed at children under age 13.
In the first few weeks of the company’s fiscal third quarter, its WildBrain Spark operation experienced a 40 per cent decline in revenue compared with the same period last year as YouTube’s new rules went into effect in January.
Prior to the change, WildBrain Spark’s revenue for the second quarter ended Dec. 31 had been up 21 per cent year-over-year, rising to $24.2-million, while views were up 36 per cent to more than 9.9-billion.
WildBrain’s overall second-quarter revenue was $122.1-million, up four per cent from $117.0-million a year earlier.
Alimentation Couche-Tard Inc. (ATD-B-T) lost 0.9 per cent after takeover target Caltex Australia said on Thursday that the Canadian retailer had sweetened its offer to $5.93-billion for the convenience store operator.
Couche-Tard raised the cash offer by 2 per cent to A$35.25 per share from A$34.5, which is little over 10 per cent from its first offer in October last year.
Caltex has rejected Couche-Tard’s previous offers, saying they undervalued the company, while offering to provide some non-public information to elicit a better offer.
Couche-Tard has raised its offer, as there’s building interest for the Australian refiner and convenience store operator from the UK’s EG Group.
Bloomberg reported on Tuesday that EG Group was in talks with Macquarie Group to partner with it on a takeover deal.
Desjardins Securities analyst Chris Lo said: “Since ATD has made it clear that it sees CTX as a springboard to grow its presence in Asia Pacific, we believe there is long-term valuation support if ATD is able to articulate a clear strategy on how it plans to leverage CTX to achieve this.”
Kraft Heinz Co. (KHC-Q) plummeted 7.5 per cent on Thursday missed quarterly sales estimates due to lower demand for products like bacon and cheese, and wrote down the value of some businesses - including coffee brand Maxwell House - by US$666-million.
Kraft Heinz’s sales have been muted for fourteen straight quarters as consumers turn to cheaper private label brands, online shopping and fashionable, non-processed and organic food. Thursday’s results mark the one-year anniversary of Kraft Heinz reporting a surprise loss and taking a US$15.4-billion writedown of key brands - a move that rocked the consumer goods industry and led to the ousting of former Chief Executive Bernardo Hees and several other executives.
“Our turnaround will take time, but we expect to make significant progress in 2020,” CEO Miguel Patricio said. The industry veteran was recruited last year to stabilize the struggling company.
Cisco Systems Inc. (CSCO-Q) slid 5.2 per cent after it gave a lackluster forecast for third-quarter revenue and profit on Wednesday after the bell and said it continued to expect a pause in customer spending given the current macroeconomic environment.
The company forecast adjusted profit of 79 US cents to 81 US cents per share, the midpoint of which was in line with analysts’ estimate.
Revenue in the current quarter is expected to drop 1.5 per cent to 3.5 per cent, which translates to US$12.51-billion to US$12.77-billion, according to Reuters’ calculations. Analysts are expecting revenue of US$12.62-billion.
“We are seeing longer decision-making cycles across our customer segments for a variety of reasons, including macro uncertainty as well as unique geographical issues,” Chief Executive Officer Chuck Robbins said on a post-earnings call.
Citi analyst Jim Suva said: “We expected the 1H of 2020 to be difficult comps for Cisco and the January results and April outlook supported this view. While both the results and outlook were inline, we note the product orders were down 6 per cent (Enterprise down 7 per cent, Service Provider down 11 per cent, Commercial down 4 per cent, and Public Sector flat) which is worse than the down 4 per cent three months ago. This will create questions and concerns for investors and we respond by noting the comparisons are very difficult and don’t get easier until the 2H.”
MGM Resorts International (MGM-N) slid almost 6 per cent in the wake of withdrawing its forecast for 2020 on Wednesday, as it assesses the fallout of the coronavirus epidemic on its business.
The company, whose Chief Executive Officer Jim Murren is stepping down, said it had suspended its Macau operations as the virus continues to spread.
Citi analyst George Choi said: “Management is of the view that it is appropriate to remove its 2020 financial targets because of the coronavirus outbreak, the challenging VIP market in Macau and the persistent Far East baccarat weakness in LV. That said, management stressed that the group achieved a US$130-million EBITDA uplift in 2019 via the implementation of MGM 2020 Plan (vs. their guidance of US$70-million). Reflecting these trends, we reduce our MGM Resorts FY20E/21E EBITDA forecasts by 6 per cent/7 per cent and net profit forecast by 57 per cent/47 [ercemt. We accordingly cut our target price from US$42 to US$39 .... We maintain our Buy rating on the stock after we reset our expectations, as we remain optimistic about growth in the Las Vegas market with the opening of Allegiant Stadium this year and the LV Convention Center Phase II expansion by end-2020.”
With files from Nicolas Van Praet, staff and wires