A roundup of some of the North American equities that made moves in both directions
On the rise
Martinrea International Inc. (MRE-T) rose 1.3 per cent in the wake of reporting after the bell Wednesday total sales of $872.7-million in the first quarter, down 14.7 per cent from a year earlier.
Net income was $29-million or 36 cents per share down from $55.3-million or 66 cents a year ago.
Raymond James analyst Michael Glen said: “Martinrea remains an extremely inexpensive stock, and despite being in a tremendously cyclical business (auto parts), we believe MRE’s current valuation is already very reflective of the current downturn. From that perspective, we will continue to monitor developments with respect to the pending restart of North American auto production and the ongoing restart in Europe. While we believe that these restarts will be extremely gradual in nature, we are optimistic that momentum will build, with results in 2021 providing a more normalized operating environment. That said, from an MRE perspective we were quite interested to hear management describe the COVID-19 downturn as an opportunity to pull forward the implementation of plant-level operational improvements that were originally scheduled at later points in time. Investors should very much keep this in mind as we start to gain visibility on rebounding production as we believe it could very much provide an element of potential upside surprise to earnings forecasts.”
First Majestic Silver Corp. (FR-T) increased 2.2 per cent after it said late Wednesday it served notice to the Mexican government under North American Free Trade Agreement provisions to begin negotiations to resolve disputes over how the silver producer is taxed in the country.
The company said it initiated the NAFTA arbitration process against Mexico after its unsuccessful attempts to resolve the matter through local bodies.
The notice initiates a 90-day process for Mexico to enter into negotiations with the company, First Majestic said in a statement.
The company alleges that the Mexican tax authority has “exhibited a total disregard for the applicable provisions of three separate double taxation treaties” that are relevant to the company and its Mexican units, including the Primero Mining business bought two years ago.
Trican Well Service Ltd. (TCW-T) was up 2.9 per cent after reporting better-than-anticipated first-quarter results before the bell.
The Calgary-based company said: “The impact of Market Events has caused an oversupply of crude oil. This has resulted in a significant decline in crude oil prices and, therefore, significant uncertainty for our customers’ activity plans. Our customers have already reduced capital expenditure plans and we anticipate they will continue to adjust their programs downward if oil prices remain weak. Despite this uncertainty, AECO natural gas prices have shown some resiliency as a result of enhancements to certain natural gas transmission lines and supply agreements, combined with expected declines in natural gas production resulting from oil shut-ins. Although the relative stability in natural gas prices is cushioning some of the oil related activity drop, we are anticipating that industry activity will drop by approximately 60 per cent in the second half of the year. Consequently, we have reduced our Hydraulic Fracturing crew count from eight to three crews and will reduce our Cement and Coiled Tubing businesses by similar amounts. We will continue to monitor our clients’ plans going forward and will adjust our active and staffed fleet to accommodate future changes.”
In a research note, AltaCorp Capital analyst Waqar Syed said: “The Company’s net debt position did improve during the quarter, although macro conditions are weak and TCW is in a challenging market segment. However, it is the best positioned company of the Canadian pumpers. We deem today’s release to be neutral to positive, owing primarily to improvement in net debt position.”
Cisco Systems Inc. (CSCO-Q) rose 4.5 per cent after it beat quarterly revenue and profit estimates on Wednesday as COVID-19 lockdowns globally boosted demand for its remote-work tools and networking equipment,.
The health crisis has forced many businesses to go completely online, increasing the use of video conferencing and virtual private network software, including Cisco’s Webex and AnyConnect.
Revenue for the unit offering Webex declined, but Cisco executives said that was because it also provides older software whose sales have declined as Webex grew strongly. Cisco does not break out sales for Webex, which competes with Microsoft Corp’s Teams software and Zoom Video Communications Inc .
“We are larger than Zoom, but they focus on the small and commercial and are trying to go into some enterprises. We have a strong footprint in the enterprise,” Chief Financial Officer Kelly Kramer said in an interview.
But Cisco executives gave a wider revenue forecast than usual and said that big one-time customer projects, like installing the latest generation of Wifi on corporate campuses, have in some cases been put on hold, especially in hard-hit industries such as retail.
Norwegian Cruise Line Holdings Ltd. (NCLH-N) increased 4.7 per cent in the wake of swinging to a quarterly loss on a US$1.6-billion impairment charge as the COVID-19 pandemic brought the global cruise industry to a virtual standstill.
Cruise operators have been hammered by the curbs to contain the spread of the virus, with extended port quarantines in Japan and California due to deadly outbreaks on some cruise ships adding to the worries.
The company said on Thursday it posted a net loss of US$1.88-billion, or US$8.80 per share, for the three months ended March 31, compared with a profit of US$118.2-million, or 54 US cents per share, a year earlier.
Excluding one-time items, the company reported a loss of 99 US cents per share, while analysts on average had expected a loss of 50 US cents, according to IBES data from Refinitiv.
Norwegian Cruise Line said it was well positioned to withstand over 18 months of voyage suspensions, and saw demand for cruise vacations beginning in the fourth quarter of the year and accelerating through 2021.
On the decline
Brookfield Asset Management Inc. (BAM.A-T) was down 1.3 per cent after it reported a first-quarter loss of US$157 million, compared with a profit of nearly US$1.26 billion in the same quarter last year.
The loss came as Brookfieid was hit by non-cash, unrealized adjustments during the last month of the quarter, which included the COVID-19 pandemic and plunging stock markets.
However, the alternative asset manager says that it expects many of these changes to reverse as markets recover.
The company, which keeps its books in U.S. dollars, says the loss amounted to 20 cents per share for the quarter ended March 31 compared with a profit of 39 cents per share a year ago.
Brookfield says its funds from operations amounted to US$884 million or 55 cents per share for the quarter, down from US$1.05 billion or 69 cents per share in the same quarter last year.
Brookfield CEO Bruce Flatt said the business performed well in the first quarter despite global issues, demonstrating its ability to withstand periods of disruption.
CCL Industries Inc. (CCL.B-T) was lower by 0.5 per cent despite reporting better-than-expected first-quarter results before the bell.
However, the Toronto-based company warned "it is impossible to predict the impact of the coronavirus pandemic on the global economy and the Company's full year 2020 financial results with any accuracy.
Raymond James analyst Michael Glen said: “CCL provided fairly detailed outlook commentary on a segmented basis. In general, we would say that this outlook is fairly consistent with previous adjustments we had made to our forecast, but we will need to review our assumptions with respect to Avery (where there are some incremental headwinds to take into consideration on printable media which was described as down 40 per cent), Checkpoint (we currently have Checkpoint down 50 per cent in 2Q but management referenced a decline of 60-70 per cent in apparel on the call), and the core Label business (we have 0 per cent currently for Label 2Q with management discussing a number of puts and takes that may imply something modestly more conservative). All-in-all, the company estimated 2Q sales will be down 15-20 per cent versus our current forecast of down 7.5 per cent (which includes a forex tailwind of 1.8 per cent). As we think about our own forecast relative to management commentary, the biggest differentials appear to be in the sales lines of Avery and Checkpoint.”
Canadian auto parts maker Linamar Corp. (LNR-T) was down 0.1 per cent after it beat quarterly profit estimates on Wednesday, helped by a cut in capital expenditure, while also boosting its liquidity despite the COVID-19 pandemic that forced automakers to halt production.
The company said it cut capital asset expenditure by 25 per cent to $90.7-million in the first quarter and was conserving cash by implementing cost reductions.
Linamar said operations in Europe have been back for a week and that it expects North American operations to resume on May 18.
Ford Motor Co, General Motors Co and Fiat Chrysler Automobiles NV, all plan to reopen North American factories on May 18 as well.
The reopening of the U.S. auto sector will be a closely watched test of whether workers across a range of industries can return to factories in large numbers without a resurgence of COVID-19 infections.
Linamar forecast significant double-digit declines in 2020 sales and earnings due to plant shutdowns and demand slump related to the pandemic.
Despite the impact, the company said on a post-earnings call with analysts that it expects full-year result to be profitable with positive free cash flow.
Québecor Inc. (QBR.B-T) slipped 0.6 per cent after releasing quarterly results early Thursday that largely fell in-line with expectations.
It reported a $131.6-million profit reported for the first quarter and a 2.7-per-cent increase in revenue compared with the same time last year. Its net income attributable to shareholders amounted to 52 cents per share for the quarter, down from $189.0 million or 74 cents from last year, which included a $97.2-million gain from selling a business unit.
With the results, it warned of the “significant adverse impacts” in some of its business segments due to the COVID-19 pandemic, however it said its telecommunications business “remains very solid” and is generating the majority of its cash flows. It added: “This important revenue stream, combined with our prudent management of operating costs and our strong balance sheet, with available liquidity of $1.8 billion, puts us in a strong position and enables us to support our hardest hit business units and our employees during this difficult period.”
In a research note, Desjardins Securities analyst Maher Yaghi said: “We expect the impact of COVID-19 on QBR’s financial results to be slightly lower vs its peers. The company has a smaller exposure to overage and roaming in its wireless business. Moreover, we estimate that its exposure to enterprise (the segment we expect will be most affected within wireline) is relatively low. However, the company’s media exposure is larger than average.”
Delta Air Lines (DAL-N) was 0.2 per cent lower after it said on Thursday it would retire Boeing Co.’s (BA-N) wide-body 777 aircraft from its fleet and remove them from service by the end of 2020.
The move to retire the 18 jets along with the MD-90 planes, would result in second-quarter non-cash impairment charges of US$1.4-billion to US$1.7-billion, before tax, the airline said.
Shares of Boeing were lower by 0.3 per cent
With files from staff and wires
David Leeder