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A roundup of some of the North American equities making moves in both directions

On the rise

Canadian Pacific Railway Ltd. (CP-T) was up after its chief executive officer said he has no plans to engage in a bidding war with Canadian National Railway Co. (CNR-T), stating he believes his lower offer for Kansas City Southern (KSU-N) has a better shot at winning regulatory approval.

CP and Kansas City Southern’s board agreed in March on a takeover worth US$25.2-billion or US$266 a share, a deal that would form the first true North American railway, reaching Canada, the United States and Mexico. But Montreal-based rival Canadian National on Tuesday trumped CP’s bid with a surprise offer for KCS worth US$29.9-billion, or US$318 a share.

Before CN’s unsolicited offer, KCS’s board had recommended shareholders support CP’s bid. KCS has said it will review CN’s offer.

In a conference call with analysts on Wednesday after the bell, Keith Creel, chief executive of CP, criticized CN’s offer as “fool’s gold,” because it is unlikely to receive regulatory approval, and is anticompetitive. For these reasons, he said, CP has no need to take on more debt in an attempt to outbid the rival offer.

“I just don’t believe that’s the right value proposition for our shareholders,” Mr. Creel said. CN’s offer is “not a real deal as far as I’m concerned. It’s kind of fantasyland. It’s nothing that we are considering at all.”

- Eric Atkins

See also: The wrinkle in CN’s takeover battle with CP: voting trusts that hold unusual sway

Meanwhile, Canadian National Railway Co. (CNR-T) erased early gains and saw down after it sent a letter to Kansas City Southern’s (KSU-N) board, saying the company is confident of winning regulatory approvals for its takeover offer.

Canadian National submitted its bid for the U.S. company on Tuesday, rivaling an agreement Kansas City already had in place to be taken over by CP Rail.

Blackstone Group Inc. (BX-N), the world’s largest manager of alternative assets such as private equity and real estate, was higher after it said on Thursday that its distributable earnings more than doubled in the first quarter to US$1.2-billion as it cashed out on holdings.

Dealmaking activity surged in the quarter as a booming stock market and low borrowing costs emboldened private equity firms to sell some of their assets for top dollar.

Blackstone reported distributable earnings per share of 96 US cents, surpassing the average Wall Street analyst estimate of 76 US cents, according to financial data provider Refinitiv. In its push to cash out on assets in the quarter, Blackstone floated app Bumble Inc in the stock market in a US$2.2-billion initial public offering. Blackstone had paid US$3-billion for a majority stake in Bumble in 2019.

Blackstone said its private equity portfolio appreciated 15.3 per cent in the quarter, compared with an 5.8-per-cent rise in the benchmark S&P 500 stock index over the same period. Opportunistic and core real estate funds rose 5.3 per cent and 3.2 per cent, respectively.

Total assets under management rose to US$648.8-billion, from US$618.6-billion in the previous quarter, driven by strong fundraising. It ended the quarter with US$148.2-billion of unspent capital.

AT&T Inc. (T-N) soared after beating Wall Street revenue targets as the reopening of the U.S. economy following pandemic-linked restrictions boosted smartphone sales and the media business

The company said on Thursday it added 595,000 net wireless phone subscribers in the first quarter, more than double what analysts had expected.

The company has been investing heavily in its 5G wireless network and bundling free streaming service for HBO Max with certain phone plans to attract customers.

AT&T’s controversial move to make its entire 2021 theatrical movies slate available to its streaming customers at the same time helped the company attract 2.7 million new subscribers for HBO and HBO Max.

The services now have a total of 44.2 million U.S. subscribers, AT&T said.

Revenue for AT&T was up nearly 3 per cent at US$43.9-billion, beating analysts’ average estimate of US$42.69-billion, according to IBES data from Refinitiv.

Excluding items, AT&T earned 86 US cents per share, above analyst estimates of 78 US cents.

WarnerMedia, which includes HBO, began to recover from the ravages of the pandemic when sports events and movie productions were paused. Revenue for WarnerMedia rose 9.8 per cent to US$8.5-billion.

AT&T added 235,000 new fiber internet customers, as Americans continued to work from home during the pandemic, driving up demand for home Wi-Fi.

The company’s net debt rose to $169 billion at the end of the first quarter, due to its purchase of more wireless spectrum, or airwaves that carry data.

On the decline

Precision Drilling Corp. (PD-T) lost ground despite reporting first-quarter results that fell in line with the Street’s forecast.

Before the bell, the Calgary-based company reported earnings per share of a loss of $2.70, 3 cents better than the consensus projection.

ATB Capital Markets analyst Waqar Syed said: “Although comparison to consensus is not apples-to-apples, PD’s results appear to be in-line to slightly lower versus expectations. With PD up 59 per cent year-to-date, some profit taking may occur today. However, in our view, PD is one of the best positioned Canadian service companies, is well positioned in its key markets and should continue generate FCF and pay down debt. We view the stock to be undervalued versus its U.S. peers. We remain buyers of the stock on any weakness.”

Superior Plus Corp. (SPB-T) finished narrowly lower with the premarket announcement of the US$170-million acquisition of South Carolina-based Freeman Gas and Electric Co. Inc.

“Overall, the acquisition should be viewed positively as the Company continues to execute on its growth through tuck-in acquisition strategy, focused on fragmented U.S. markets within proximity of current operations,” said Nate Heywood, an equity analyst at ATB Capital Markets. “Freeman Gas ... is expected to provide annual adjusted EBITDA of $28-million following 25-per-cent synergy realization, implying an EV/EBITDA multiple of 7.6 times, which is accretive to Superiors current trading multiple of 8.3 times and in line with historical transactions around 7-8 times for larger tuck-ins.”

Mullen Group Ltd. (MTL-T) was lower on the release of first-quarter results after the bell on Wednesday that fell short of expectations on the Street.

The Alberta-based company reported consolidated revenue of $291-million, missing the consensus forecast of $298-million due to year-over-year declines from its Logistics & Warehousing (L&W) and Specialized & Industrial Services (S&IS).

In a research note, iA Capital Markets analyst Elias Foscolos said: “MTL’s headline Q1/21 OIBDA of $47-million matched our forecast, but after adjusting for CEWS, we would consider the Company’s organic results to be modestly below expectations stemming from weakness in the S&IS segment. The results should be viewed in the context of the macro backdrop in the quarter of a delayed economic recovery and a new wave of tight economic restrictions in several provinces amidst a third wave of COVID-19. We expect the market to react in a range-bound manner with the potential for downward pressure on the stock ahead of the Company’s commentary on [Thursday’s] call.”

American Airlines Group Inc. (AAL-Q) lost ground despite reporting a smaller quarterly loss on Thursday as rising vaccination rates prompted more people to opt for air travel.

Shares of the airline rose as it said it reduced its cash burn rate to about US$27-million a day in the first quarter, compared with US$30-million in the previous quarter.

Demand for air travel is expected to pick up as more people receive vaccines, leading to a drop in COVID-19 infection rates and hospitalizations.

“Looking forward, with the momentum underway from the first quarter, we see signs of continued recovery in demand,” Chief Executive Officer Dough Parker said in a statement.

The company posted a net loss of US$1.25-billion, or US$1.97 per share, for the quarter ended March 31, compared with a loss of US$2.24-billion, or US$5.26 per share, a year earlier.

On an adjusted basis, the company lost US$4.32 per share.

Total operating revenue fell 52.9 per cent to US$4.01-billion.

American Airlines ended the quarter with about US$17.3-billion in available liquidity.

Freeport-McMoRan Inc. (FCX-N) fell in the wake of reporting a first-quarter profit, compared with a year-ago loss, as the world’s largest publicly traded copper producer benefited from higher prices for the red metal from improving global economic recovery prospects.

Benchmark prices for copper, widely used in power and construction, hit a 9-1/2 year high of US$9,617 a ton on the London Metal Exchange on Feb. 25, within striking distance of the all-time peak of US$10,190 set in 2011.

The average price Freeport received for per pound of the metal rose 62 per cent in the quarter, while production increased about 24 per cent to 910 million pounds.

Gold output also jumped over 90 per cent to 297,000 ounces.

The company posted a net income attributable of US$718-million, or 48 US cents per share, for the three months ended March 31, compared with a loss of US$491-million, or 34 US cents per share, a year earlier.

After soaring in aftermarket trading on Wednesday, Chipotle Mexican Grill Inc. (CMG-N) was down in the wake of saying its comparable sales this quarter could grow by as much as 30 per cent as rapid COVID-19 vaccinations encourage consumers to return to its restaurants that offer quick service in a casual dining space.

The burrito chain reported comparable sales rose 17.2 per cent in the first quarter, helped by new menu items like quesadillas and consumers’ using federal pandemic relief funds to order tacos and salads online.

Digital sales surged nearly 134 per cent in the first quarter and accounted for half of overall sales, the company said on Wednesday.

The company’s digital sales have grown rapidly during the pandemic, encouraging it to expand order-ahead lanes called “Chipotlanes” to a majority of its restaurants in the United States.

Revenue rose 23.4 per cent to US$1.74-billion, matching analyst estimates, according to IBES data from Refinitiv.

While the company reiterated that it expects to open about 200 new restaurants in 2021, it continued to shy away from issuing full-year revenue and sales forecasts.

Southwest Airlines Co. (LUV-N) reversed course and fell after it posted a smaller-than-expected quarterly adjusted loss and forecast lower cash burn in the second quarter as rising vaccination rates and pent-up demand for leisure travel signal an “optimistic summer”.

U.S. airlines are preparing for a rebound in summer bookings after nearly a year in the doldrums due to the COVID-19 pandemic and accompanying travel restrictions.

“Vaccinations are on the rise, and COVID-19 hospitalizations in the United States are down significantly from their peak in January 2021,” said Chief Executive Officer Gary Kelly.

“As a result, we are experiencing steady weekly improvements in domestic leisure bookings.”

The company said it was adding flights and expects second-quarter capacity to rise about 90 per cent from a year earlier, but about 15 per cent below 2019 levels, when air travel was not hit by the COVID-19 crisis.

Second-quarter average core cash burn is expected to be between US$2-million and US$4-million per day, Southwest said, compared with about US$13-million per day in the previous three months. Southwest said it expects to achieve break-even average core cash flow or better by June.

Excluding items, the Dallas-based company reported a net loss of US$1.02-billion, or US$1.72 per share, in the first quarter ended March 31, compared with a net loss of US$77-million, or 15 US cents per share, a year earlier.

Dow Inc. (DOW-N) fell as its current-quarter revenue forecast was more than US$1-billion above expectations after the company crushed first-quarter estimates on surging prices for its chemicals from tighter supply following a winter freeze in Texas.

Prices jumped 14 per cent in the first quarter from the fourth, helped by gains in consumer packaging and polyurethanes, or flexible foam, commonly used in furniture and bedding, as the supply squeeze came amid demand recovery in some of the company’s end-markets.

The company forecast second-quarter sales between US$12.4-billion and US$12.9-billion, compared with analysts’ average estimate of US$11.25-billion, citing a recovery from winter storm Uri and robust demand.

“Despite supply constraints, we saw demand growth as the economic recovery continued to broaden, most notably in packaging, construction, mobility, electronics and consumer durables end-markets,” Chief Executive Officer Jim Fitterling said in a statement.

A deep freeze in Texas in mid-February hit supplies of raw materials and forced several chemical plants along the U.S. Gulf Coast, including those owned by Dow, to halt their operations, hitting production.

Volumes in some of Dow’s units were impacted by supply constraints related to the storm.

With files from staff and wires

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