A roundup of some of the North American equities making moves in both directions today
On the rise
U.S. aerospace manufacturer Spirit AeroSystems Holdings Inc. (SPR-N) rose 1.8 per cent in mid-afternoon trading after signing a partnership with Virgin Hyperloop, a key step in making billionaire Richard Branson’s futuristic vision of super high-speed travel a reality.
Los Angeles-based Hyperloop aims to whisk floating pods packed with passengers and cargo through vacuum tubes at 600 miles (966 kilometres) an hour or faster.
In a hyperloop system, substantially free of air resistance, a trip between New York and Washington would take just 30 minutes - twice as fast as a commercial jet flight and four times faster than a high-speed train.
An announcement on the deal, signed earlier this month, is expected as soon as Thursday.
The design partnership is emblematic of Spirit’s push to diversify away from Boeing Co., from which it draws more than 50 per cent of its annual revenue by supplying the 737 MAX fuselage and other parts. That strategy has taken on greater urgency in recent months as Boeing cuts demand for parts as the year-old 737 MAX ban and COVID-19 pandemic slashes jet demand.
Overall, the parent company of Olive Garden and LongHorn Steakhouse restaurants said adjusted losses per share were US$1.24, exceeding the Street's expectation of a US$1.63 loss.
The Orlando-based company expects to break even or post a profit from continuing operations in the first quarter with total sales of approximately 70 per cent of the prior year’s result.
Calfrac Well Services Ltd. (CFW-T) sat flat in early trading on Thursday after releasing weaker-than-expected first-quarter financial results before the bell.
The Calgary-based company reported revenue of $305.5-million, below the Street's $338-million expectation. Earnings per share of an 85-cent loss also missed the consensus projection (a 36-cent loss).
"During the first quarter of 2020, the global economy slowed significantly in response to the worldwide coronavirus pandemic while the oil industry was further impacted by the response of the OPEC+ group to demand changes," it said. "These events resulted in a material slowdown in oilfield activity globally, and required swift and decisive actions on the part of Calfrac's management team."
These actions included a significant reduction in its operating footprint in North America as well as compensation and headcount reductions across all areas of the Company. Calfrac’s capital budget was also reduced materially in light of the reduced operating footprint. In total, Calfrac has removed over $150 million from its operating spending and $45 million from its capital budget in response to volatile market conditions.”
AltaCorp Capital analyst Waqar Syed said: “The outlook for pressure pumping – although improving – is still very weak compared to the prior year, which is clearly a negative for CFW, and even more so considering that the Company has hired advisors to examine alternatives for its balance sheet, recently deferred making an interest payment on its 8.50-per-cent senior unsecured notes, and gave a going concern warning in today’s release. Overall, we continue to view developments as negative for CFW equity holders.”
On the decline
Blackberry Ltd. (BB-T) fell 1.4 per cent after it posted more than a half-billion-dollar loss in its most recent quarter as it slashed US$594-million from the value of its Spark device-management platform after integrating it with Cylance, the cybersecurity company it bought in late 2018.
The company’s first-quarter fiscal 2021 loss totalled US$636-million or US$1.14 a share, including the one-time goodwill impairment charge. That’s compared with a loss of US$41-million or 7 US cents a year earlier.
But BlackBerry’s overall quarter was mixed, as revenue fell nearly 17 per cent but its profit, excluding the impairment charge and other items, beat analyst expectations.
Canaccord Genuity analyst T. Michael Walkley said: “BlackBerry reported solid Q1/F2021 results with strong licensing and solid enterprise sales helping offset the sharp decline in QNX revenue generated from the challenged auto market. While management has created a cogent long-term strategy and the shares are potentially compelling for longer-term-oriented investors, we await more proof in execution on the new product roadmap, evidence cross-selling opportunities emerge, stabilizing to growing ESS sales, recovering QNX sales, and the potential for upside to our estimates before becoming more constructive on the shares.”
- With files from Josh O’Kane
Aphria Inc. (APHA-T) lost 2.4 per cent after it reached a deal worth $29.1-million to settle a dispute with Emblem Cannabis Corp. and Aleafia Health Inc.
The settlement ends a disagreement the companies had over Aleafia’s decision in 2019 to cancel a supply agreement it had with Aphria.
Aphria CEO Irwin Simon says the deal allows the companies to avoid the distraction and the potential expense of prolonged litigation.
Under the agreement, Emblem, which was acquired by Aleafia in 2019, will receive $15-million in cash, $10-million in Aphria shares and a waiver of claimed receivables.
The companies also agreed to a mutual release of all existing and potential claims and the dismissal of arbitration proceedings that had begun.
Aleafia Health CEO Geoff Benic called the agreement fair to both sides and says it allows his company to move forward with a significantly strengthened balance sheet.
Canopy Growth Corp. (WEED-T) declined 1.2 per cent after it signed a deal to amend the terms of its agreement to acquire U.S. company Acreage Holdings Inc. that it signed last year.
The Smiths Falls, Ont.-based company struck an agreement in April 2019 to buy Acreage if cannabis production and sale became federally legal in the United States.
Under that deal, Canopy had agreed to pay 0.5818 of a Canopy share for each Acreage share.
As part of the changes, which include an up-front payment for Acreage shareholders and certain convertible security holders totalling US$37.5-million or about 30 US cents per share, Acreage shareholders will receive 0.7 of a fixed share and 0.3 of a floating share for each Acreage share they hold.
Martinrea International Inc. (MRE-T) slid 1.8 per cent after announced that it had amended its lending agreements with its banking syndicate “to provide enhanced financial covenant flexibility on a present and go-forward basis.” It also maintained its quarterly dividend, increased in March, of 5 cents per share.
“The declaration of our dividend underscores our confidence in the future of the company, the restart of our operations and our long-term view of the industry,” stated executive chairman Rob Wildeboer.
Mr. Wildeboer also said the company's second-quarter was "as we believe is the case for most participants in our industry, quite frankly, brutal — the worst quarter from a financial point of view in our history."
The company also expects quarterly sales will be down by about 55 per cent year-over-year and there may be some restructuring costs and non-cash asset write-downs “in light of the significant reduction in volumes and current industry production projections,” he said.
In a research note, Raymond James analyst Michael Glen said: “Overall we believe this business update is quite supportive for the stock, particularly given the valuation continues to be more reflective of that seen during the 08-09 financial crisis.”
Gilead Sciences Inc. (GILD-Q) was lower by 1.6 per cent after the European healthcare regulator said on Thursday it had recommended conditionally approving its antiviral treatment, remdesivir, for use in COVID-19 patients across the continent, just weeks after a speedy review.
The European Medicines Agency said its human medicines committee (CHMP) recommended the drug’s use in adults and adolescents from 12 years of age with pneumonia who require supplemental oxygen.
This approval means physicians can prescribe the Gilead drug, to be branded Veklury, in Europe once approved by the European Commission, which usually follows CHMP recommendations.
Remdesivir has already been approved for emergency use in severely-ill patients in the United States, India and South Korea, and has received full approval in Japan.
Boeing Co. (BA-N) fell 2.4 per cent after rival Airbus reached a crucial jetliner production target and smoothed recent industrial problems as it embarks on a new phase in its response to the coronavirus crisis, the planemaker’s chief operating officer said.
Airbus recently announced output cuts of 33-42 per cent to limit damage as the pandemic grounded airlines around the world. First, however, it had to overcome the difficulty of producing planes at all as lockdowns spread across Europe.
“We have recovered from that phase and we are now dialled in at the new rates,” COO Michael Schoellhorn told Reuters.
The monthly rates - 40 A320/A321, 6 A350 and 2 A330, down from 60, 9.5 and 3.5 respectively before the crisis - are a “sweet spot that is not too disruptive to the whole supply chain...and puts us relatively close to where we feel the market will trend to,” he said.
As well, Berenberg reduced its rating to “sell”, noting the planemaker’s near-term risks are elevated due to the COVID-19 pandemic, the pace of recovery in air travel and uncertainty related to production rates.
“The market’s recent exuberance for re-opening economies and an early resumption in air traffic has driven a strong rebound in aerospace shares with Boeing up 30 per cent in a month,” said Andrew Gollan. “The reality is that the demand outlook has not improved; in fact, we think it has deteriorated since Q1 results, as airlines face prolonged business uncertainty and financial stress and COVID-19 remains prevalent across the globe.”
Walt Disney Co. (DIS-N) was lower by 1.7 per cent after the media company delayed the reopening of theme parks and resort hotels in California, following a surge in fresh COVID-19 cases in the state.
The reopening of Disneyland Park and Disney California Adventure Park that was earlier scheduled for July 17 will be delayed until Disneyland receives an approval from state officials, the company said.
In late January, the pandemic started battering businesses across Disney’s global portfolio when the company shuttered Shanghai Disney Resort and Hong Kong Disneyland.
Last month, the company estimated that global lockdown measures aimed at tamping down the spread of the contagion slashed its profit by US$1.4-billion, mostly from its shuttered theme parks.
CEO John Peller will takeover his responsibilities on an interim basis, the company stated.
Macy’s Inc. (M-N) slipped 4.7 per cent said on Thursday it would lay off about 3,900 employees in corporate and management positions to help lessen some of the financial strain of dwindling sales due to the COVID-19 pandemic.
The department store chain, which had about 123,000 employees at the end of January, said it expects to save about US$365-million in fiscal 2020 and about US$630-million on an annual basis as a result of these layoffs.
Macy’s in May estimated nearly US$1-billion in operating losses in its first quarter and said it would turn into a “smaller company” after the brick-and-mortar retail sector was brought to a virtual standstill by coronavirus-led lockdowns.
The company said on Thursday it had reduced staffing at its stores, supply chains and customer support network, and would adjust levels as sales recover. Macy’s said it would bring back most of its remaining furloughed employees in the first week of July.
With files from Brenda Bouw, staff and wires