A roundup of some of the North American equities making moves in both directions today
On the rise
ARC Resources Ltd. (ARX-T) jumped higher after revealing it is buying Seven Generations Energy Ltd. (VII-T) for $2.7-billion in stock, the latest deal to consolidate producers in the natural gas-rich Montney region of British Columbia and Alberta.
The combined company will become Canada’s largest condensate producer and third-largest natural gas producer. It will operate as ARC Resources and remain headquartered in Calgary.
Like other takeovers in the oil patch in the past year, ARC Resources is offering scant premium for Seven Generations. Under the friendly deal, Seven Generations holders will get 1.108 of an ARC share for each Seven Generations share.
Seven Generations also has net debt of $2.1-billion, bringing the total value of the transaction to $4.8-billion.
ARC chief executive officer Terry Anderson said in an investor call on Wednesday night the deal would save about $110-million a year by 2022 via reduced operating and capital expenditures, including maintenance, fleet vehicles, head offices and by consolidating plants.
- Emma Graney and Jeffrey Jones
Sun Life Financial Inc. (SLF-T) saw gains after it beat expectations as it reported that fourth-quarter profits grew 3.5 per cent to $744-million, up from $719-million in the same quarter a year earlier.
The Toronto-based insurance provider says its profit for the three months ended Dec. 31, amounted to $1.27 per diluted share, which grew from a profit of $1.22 per diluted share.
On an adjusted basis, Sun Life Financial says it had a profit of $862-million, up 8.8 per cent from the $792-million from the same time a year earlier.
Sun Life had an adjusted profit of $1.47 per diluted share, compared with a profit of $1.34 per diluted share a year earlier.
Analysts on average had expected an adjusted profit of $1.38 per share for the quarter, according to financial data firm Refinitiv.
For the full-year, adjusted profits increased 5.1 per cent to $3.21-billion or $5.49 per diluted share. That was 10 cents per share above forecasts.
Scotia Capital analyst Meny Grauman said: “Despite a solid EPS beat we note that it was driven by unusually strong underlying earnings in the Corporate unit (appears to be impacted by COVID-19) which we don’t expect to repeat. Adjusting for this item, underlying EPS would have been $1.38. That said, there were still a number of key positives this quarter including an impressive performance in the asset management segment, but we also note disappointing results in Canada and Asia where underlying earnings were down 8 per cent year-over-year and 19 per cent year-over-year respectively – although we acknowledge some one-time items here as well.”
Manulife Financial Corp. (MFC-T) saw gains after saying it will prioritize organic growth, dividend increases and buybacks for its $29-billion of excess capital over acquisitions, its chief executive said on Thursday.
“We don’t need M&A to deliver on our medium-term goals of 10% to 12% core earnings per share growth,” Roy Gori said on an analyst call after Manulife reported fourth-quarter earnings that beat estimates. “When we do deploy capital, for any M&A, we will do that opportunistically... when we’ve got a high degree of confidence that we can execute against that agenda.”
Brookfield Asset Management Inc. (BAM.A-T) was up after it raised its dividend as it reported a fourth-quarter profit of US$1.8-billion, up from US$1.6-billion a year earlier.
The asset manager says it will now pay a quarterly dividend of 13 US cents per share, up from 12 US cents.
The increased payment to shareholders came as Brookfield said its profit for the final quarter of 2020 amounted to 40 US cents per share.
The result compared with a profit of 50 US cents per share in the fourth quarter of 2019, which was before the company did a three-for-two stock split in April 2020 that increased its number of shares outstanding.
Revenue totalled US$17.1-billion for the quarter, down from US$17.8-billion a year earlier.
Funds from operations amounted to US$2.1-billion or US$1.34 per share, up from US$1.2-billion or 75 cents per share in the fourth quarter of 2019.
“We ended the year with our best quarter ever, reflecting the continued growth of our asset management franchise and the resiliency of our underlying businesses,” Brookfield CEO Bruce Flatt said in a statement.
“Looking forward, we expect 2021 to also be strong as we enter another important phase for our business. We recently started our next round of flagship fundraising, are making progress on significant realizations from earlier vintage funds, and underlying business performance is good and getting better.”
Cineplex Inc. (CGX-T) closed higher in the wake of reporting a fourth-quarter loss of $230.4 million as restrictions to slow the spread of the pandemic were tightened and theatres closed.
The movie theatre company says the loss amounted to $3.64 per diluted share for the quarter ended Dec. 31 compared with a profit of $3.5 million or six cents per diluted share in the last three months of 2019.
Revenue totalled $52.5 million, down from $443.2 million a year earlier.
Cineplex announced earlier this week that it reached a deal with its lenders to further amend its credit agreement as it struggles through the financial impact of the COVID-19 virus on its operations.
The country’s largest theatre chain said the amendment allows for the suspension of financial covenant testing to continue until the fourth quarter of 2021 under certain conditions.
These include the completion of a minimum $200-million financing of second lien secured notes by March 31. Net proceeds must be used to repay debt, including $100 million that would be a permanent repayment.
The Chicago-based company has been trying to streamline its portfolio and focus on more accretive brands, having faced criticism for years about the number of categories it is a part of. In September, Kraft Heinz said it would sell its natural cheese business to French dairy company Groupe Lactalis for US$3.2-billion.
“It will enable us to sharpen our focus on areas with greater growth prospects and competitive advantage for our powerhouse brands,” Chief Executive Miguel Patricio said in a statement.
Kraft Heinz’s nuts business contributed about US$1.1-billion to net sales in fiscal 2020.
The deal, which is expected to close in the first half of 2021, includes global intellectual property rights to the brands, subject to existing third-party licenses.
On the decline
Shares in North American cannabis firms began to slid on Thursday after Reddit-inspired retail investors bett they could beat the short-sellers and benefit from lighter regulation of the sector under U.S. President Joe Biden.
U.S.-listed Tilray Inc. (TLRY-Q), which surged more than 50 per cent in the previous session, was down despite European retail investors piling in to the rally.
Participants on the WallStreetBets forum on Reddit, which inspired a price spike in GameStop earlier this year that squeezed out Wall Street short-sellers who had bet on a price fall, have turned attention to U.S. and Canadian cannabis firms.
Restaurant Brands International Inc. (QSR-T) declined after it missed profit estimates and posted a drop in comparable sales at its Burger King and Popeyes units as the COVID-19 pandemic disrupted consumers’ normal routines and slowed traffic to cafés.
A resurgence in COVID-19 cases dented sales of Tim Hortons and Burger King, hurt by temporary dining room closures and curfews in many parts of the world that kept people from venturing out to get their morning coffee or late-night burgers.
Comparable sales at the Canadian coffee chain, which typically accounts for more than half of Restaurant Brands’ revenue, sank 11 per cent while Burger King posted a surprise 7.9-per-cent fall as analysts had expected a 0.1-per-cent rise.
“Breakfast remains significantly impacted at Tims Canada and Burger King U.S., especially in core urban areas. Late night continues to struggle as well, especially where restrictions and limitations on nightlife are more prevalent,” Chief Executive Officer Jose Cil said.
Its shares were down as comparable sales at Popeyes fell 5.8 per cent, its first decline in at least eight quarters, compared with analysts’ estimates of a 3.3-per-cent drop.
The company’s famous Popeyes chicken sandwich, which created a fried-chicken frenzy when introduced in 2019, is also under threat by rivals such as KFC and McDonald’s Corp , which is rolling out three versions of the sandwich.
The Burger King parent has been heavily investing into revamping its brands, buying fresh coffee brewers, new water filters and pumping money into its drive-thru business to help pull in customers still hesitant to enter restaurants.
“Heading into 2021, we are picking up where we left off, and expect to deliver unit growth generally in line with 2018 and 2019 levels,” Mr. Cil said.
Canadian miner Kinross Gold Corp. (K-T) was down after it beat analysts’ estimates for quarterly profit on Wednesday as a surge in gold prices cushioned the blow from lower output.
Prices of the yellow metal surged 25 per cent in 2020 as investors sought the safety of gold after the COVID-19 pandemic hammered the global economy.
The company’s average realized gold price rose 26 per cent to US$1,875 per ounce, helping offset a 3.3-per-cent decline in total output to 624,032 gold equivalent ounces.
Kinross Gold said it expects production to stay flat in 2021 at US$2.4-million ounces of gold equivalent production.
The miner also said its spending budget for this year would be unchanged from 2020 at US$900-million, while annual all-in sustaining cost was forecast to rise to US$1,025 per gold equivalent ounces from US$970 per gold equivalent ounces in 2020.
Net earnings attributable to common shareholders rose to US$783.3-million, or 62 US cents per share, in the fourth quarter ended Dec. 31, from US$521.5-million, or 41 US cents per share, a year earlier
Excluding items, the miner earned 27 US cents per share, beating analysts’ estimate of 22 US cents, according to IBES data from Refinitiv.
Bombardier Inc. (BBD.B-T) slid after confirming it is ceasing production of its Learjet luxury aircraft later this year and slashing another 1,600 jobs as the Canadian manufacturer tries to stabilize its business amid a global health crisis.
The moves are part of an overall effort to shave US$400-million in annual costs by 2023 and come in addition to a plan announced in June to cut 2,500 jobs, the Montreal-based company said in its fourth-quarter earnings release Thursday. Restructuring will also hit its Canadian facilities as Bombardier looks for ways to consolidate production of its Global aircraft completion work and look at options for underused hangar and industrial space.
About 700 workers in Quebec and 100 in Ontario are among those who will lose their jobs with the new round of cuts, a Bombardier spokesman confirmed. The balance of the cuts affect employees in the United States as well as contract workers. By the end of the year, Bombardier forecasts it will employ 13,000 people. At the end of 2019 it employed 60,400 people, including 24,350 in aviation and 36,050 in rail.
“With more than 3,000 aircraft delivered since its entry-into-service in 1963, the iconic Learjet aircraft has had a remarkable and lasting impact on business aviation,” Bombardier Chief Executive Eric Martel said in a statement. “However, given the increasingly challenging market dynamics, we have made this difficult decision to end Learjet production.”
- Nicolas Van Praet
Brookfield Infrastructure Partners LP (BIP.UN-T) was down after it launched a hostile takeover bid for Inter Pipeline Ltd. (IPL-T), pitting the company’s largest shareholder against its board of directors, who refuse to sell at a depressed price.
On Thursday, Inter Pipeline said the unsolicited offer of up to $18.25 per share from its largest shareholder Brookfield did not reflect the true value of the company.
Brookfield, which acquires and manages infrastructure assets, offered $16.50 per share on Wednesday, a 23-per-cent premium to the stock’s prior closing price, and said it was willing to raise it to as much as $18.25 if the pipeline operator gave it access to due diligence.
At the top price, the offer would value Calgary-based Inter at $7.8-billion. Inter said that was not sufficient for it to enter into exclusive talks with the infrastructure firm.
The pipeline operator said Brookfield has not made a formal offer and if it does, the company’s board will review it with advisors.
Brookfield said it had first approached Inter in September with offers at premiums as high as 50 per cent to the company’s trading price.
The company attributed the lower profit to higher depreciation and amortization related to acquisitions, declines in legacy voice and data services, higher restructuring costs and multiple impacts stemming from the COVID-19 pandemic.
The Vancouver-based telecom had $4.06-billion in revenue during the three-month period ended Dec. 31, up 5.2 per cent from a year ago when it had $3.86-billion in revenue.
The earnings amounted to 20 cents per share, down from 30 per cents per share during the same quarter last year.
After adjusting for one-time items such as restructuring and other costs, as well as Income tax-related adjustments, Telus had 22 cents per share in fourth-quarter earnings, down from 32 cents per share a year ago.
Analysts had been expecting $4.03-billion in revenue and 25 cents of adjusted earnings per share, according to the consensus estimates from S&P Capital IQ.
- Alexandra Posadzki
Breakfast cereal maker Kellogg Co. (K-N) was down after it missed fourth-quarter profit and sales estimates on Thursday, hurt by higher spending on advertising and promotions, as well as pandemic-related costs.
Selling, general and administrative expenses rose nearly 10 per cent in the quarter to US$800-million.
Kellogg, which also makes Pringles, Cheez-Its and Pop-Tarts, forecast organic net sales to fall by about 1 per cent in 2021, compared with a growth of 6% in 2020.
Many consumers, who resorted to eating at home during the height of the pandemic, have also cut purchases of frozen foods and ready-to-eat snacks and returned to ordering in.
While demand for packaged foods has stayed elevated into the current quarter, they are below the levels seen during the panic-buying stage.
Net sales rose to US$3.46-billion in the three months ended Jan. 2, from US$3.22-billion a year earlier. Analysts were expecting sales of US$3.50-billion, according to IBES Refinitiv.
Excluding items, Kellogg earned 86 US cents per share, beating analysts’ average estimate of 89 US cents.
Uber Technologies Inc. (UBER-N) on Wednesday said revenue at its ride-hail and delivery businesses increased on a quarterly basis and said it was well on track to reach its goal of achieving an adjusted profit by year-end.
Its shares fell a day after gaining around 6 per cent on in reaction to smaller ride-hail rival Lyft Inc. (LYFT-Q) saying on Tuesday it might become profitable during the third quarter, three months ahead of a previous goal.
Uber reported a loss on an adjusted basis before interest, taxes, depreciation and amortization of US$454-million, significantly narrower than analysts’ average expectations for a US$514-million loss, according to Refinitiv data.
The narrower-than-expected adjusted EBITDA loss was helped by significant cost cuts the company instituted throughout 2020, including reducing staff by nearly 30 per cent from the beginning of the year. A focus on its core rides and food delivery business and divestments of ancillary units will allow Uber to emerge from the pandemic a slimmer company.
Adjusted EBITDA, which excludes the cost of the company’s extensive stock-based compensation and other potentially significant items, is the profitability metric Uber uses.
PepsiCo Inc. (PEP-Q) was down after it joined rival Coca-Cola (KO-N) in predicting revenue growth in 2021, saying on Thursday it expects pre-pandemic lifestyles to resume as economies reopen and COVID-19 vaccines are rolled out.
The company has navigated the health crisis better than Coca-Cola as it relies more on grocery and retail channels from where consumers stockpiled snacks and beverages.
Pepsi said its fourth-quarter revenue rose 8.8 per cent to US$22.46-billion, topping Wall Street estimates, as people munched Tostitos and Cheetos and gulped down Gatorade while stuck at home during a second wave of coronavirus lockdowns.
The increase in demand had last year led the company to launch a direct-to-consumer website that offered special flavors and specialized bundles of its top selling products.
Still, revenue from the foodservice channel, which includes restaurants, cinemas and vending machines, continued to decline at a double-digit rate, the company said.
With files from staff and wires