A roundup of some of the North American equities making moves in both directions today
On the rise
Raymond James analyst Brenna Phelan said: “While 4Q18 results did not yet show meaningful profitability improvement, revenue growth was solid and we think that the detailed supplemental disclosure and commentary provided will go a long way in instilling greater confidence in the earnings outlook.”
Detour Gold Corp. (DGC-T) sat 0.6 per cent higher after reporting fourth-quarter revenue of $212.8-million, exceeding the Street’s estimate of $195.2-million. Adjusted earnings per share of 10 cents fell 2 cents shy of the consensus expectation.
Canadian Natural Resources Ltd. (CNQ-T) erased early losses and was up 2.6 per cent in the wake of its release of its fourth-quarter results early Thursday, which saw the energy company reported a surprise loss.
Pointing to Canadian crude differential weakness, the Calgary-based company reported a net loss $776-million, or 64 cents per share, in the fourth quarter ended Dec. 31, compared to a profit of $396-million, or 32 cents, a year earlier. Cash flow for the quarter of $1.23-billion exceeded the Street’s projection of $1.13-billion.
"We had a strong operational year in 2018 despite the volatility in commodity prices, as the Company was able to react quickly and strategically to changing market conditions,” said president Tim McKay in a release. “The Company achieved record annual production of approximately 1,079,000 BOE/d [barrels of oil equivalent per day], delivering 12-per-cent production growth and 14-per-cent production per share growth over 2017 levels.”
Raymond James’ Chris Cox said: “ We suspect the Street will likely look through the headline beat vs. consensus as primarily being driven by cash tax recoveries. The story however remains unchanged, with the cash return to shareholders highly visible - dividends increased for the 19th year in a row and share buybacks continue to represent a meaningful part of the total return story. Operational performance was largely as expected, with operating costs in the Mining operations exceeding our expectations. Finally, while it would normally be encouraging to see the 40 Mbbl/d Kirby North SAGD project proceeding ahead of expectations, we suspect the Street will question the need to bring this project online in the current environment, and in the midst of recently announced delays to Line 3.”
Painted Pony Energy Ltd. (PONY-T) rose 20.3 per cent after it reported adjusted funds flow increased by 65 per cent in the fourth quarter to $59-million or 36 cents per share compared to $36-million or 22 cents per share during the fourth quarter of 2017.
In a research note released Thursday, AltaCorp Capital analyst Patrick O’Rourke said: “Overall, we view the event as a strong positive, given the material cash flow beat and strong reserve report, leading to lower debt than previously forecasted. We have adjusted our Q1 pricing to reflect continued Sumas pricing strength in Q1 (tempered by hedging), and lower interest costs – both of which are tailwinds for our cash flow estimate which rises 25 per cent for 2019. That being said, we remain cautious on the medium term outlook for Canadian gas.”
On the decline
Descartes Systems Group Inc. (DSG-T) rose 1.7 per cent as investors react to Wednesday’s release of better-than-anticipated quarterly results.
Despite the earnings beat, an equity analyst at Laurentian Bank Securities downgraded its stock, citing its current valuation.
“Overall, we continue to like the macro drivers and tailwinds behind DSG as well as its competitive positioning and strong forward visibility,” said Nick Agostino.
After market close on Wednesday, the Toronto-based toymaker reported adjusted earnings per share of 6 cents, well below the consensus estimate on the Street of 18 cents. Revenue of $414.3-million also missed the analysts’ projection ($437.8-million) and represented a fall of 8 per cent year-over-year.
Raymond James analyst Kenric Tyghe said: “The preliminary 2019 guidance, of low single digit organic gross product sales growth in 2019 with roughly 33 per cent of sales weighted to the first half of the year(and a very tough expected 1Q19 largely on the Easter timing shift) and adjusted EBITDA margin in-line with 2018, is a little tough to reconcile given the 2018 challenges and 2019 portfolio. Despite the miss, we continue to believe Spin Master is well positioned given the strength of its relative positioning, evergreen properties, and 2019 portfolio (we further believe that Gund will provide a more material than widely expected lift in 2019).”
Crescent Point Energy (CPG-T) was down 3.4 per cent despite reporting fourth-quarter results that largely topped the expectations on the Street amid concern over the state of its reserves.
The Calgary-based company logged cash flow per share for the period of 61 cents, exceeding the consensus by 2 cents. Daily production of 178,200 barrels of oil equivalent also beat estimates (175,000 boe/d).
AltaCorp Capital analyst Thomas Matthews called the results “positive,” adding: “We believe that Crescent Point is currently trading at a level where it can create value by buying its own reserves (via the NCIB) for cheaper than it could drilling new wells." Calling the reserve report “disappointing,”
Raymond James’ Chris Cox said: “While 4Q18 results came in slightly ahead of expectations, we suspect the Street will struggle to gain confidence that the company has meaningfully turned the corner with respect to improvements in capital efficiency, given the increase in reserve acquisition costs that were delivered during 2018. To this we would note that many of the improvements employed under the new leadership were not fully implemented until later in the year; while we believe there is headroom for the company to improve performance, the mature nature of the legacy asset base and the disappointing F&D costs reported during 2018 do support our position that investors should await more tangible data indicating that capital efficiency metrics have meaningfully turned the corner, before the go-forward FCF profile can be fully appreciated in the mark.”
Ballard Power Systems Inc. (BLDP-T) was down 5.9 per cent after reporting a larger-than-expected fourth-quarter loss on Thursday after market close.
The Vancouver-based fuel cell manufacturer posted a loss of 6 US cents, topping the consensus projection of a 3 US cent loss. Revenue of US$28.5-million was a drop of 29 per cent from the same period a year ago.
“2018 was an important year for Ballard and the hydrogen and fuel cell industry," said president and chief executive officer Randy MacEwen. "There is mounting evidence that the shift to zero-emission transportation is accelerating and that fuel cell electric vehicles, or FCEVs, will play an integral role. The macro drivers of climate change, air quality and electrification are global and converging. Governments across the planet are considering decarbonisation of energy, transportation and industry. As a result, certain market segments are now bracing for a shift away from diesel vehicles into alternative powertrain systems and we view these markets as ripe for disruption.”
“Here we have a contractor that traditionally pursues construction management (CM) assignments, which are cost reimbursable, that is going to compete for large, DB contracts, which are fixed price,” said Yuri Lynk. “Doing DB work is very different from CM in terms of how it is pursued, how risk is managed, and how one deals with the client during the length of the contract.”
Paramount Resources Ltd. (POU-T) was down 10.1 per cent after reporting sales in the fourth quarter of $207.4-million, down from $258.9-million a year ago and below the expectation on the Street of $251.8-million.
Its net loss was $170.5-million or $1.31 per share, up from $103.2-million or 76 cents per share a year earlier. Analysts were projecting a loss of 51 cents per share.
AltaCorp Capital’s Patrick O’Rourke said: “Overall, we view the event as modestly negative. While a strong Q4 production wise (including excellent results at Karr), we believe 2019 production guidance below current consensus and a reserve report that at first blush trails some peers may create headline pressures and weakness in the stock today.”
McEwen Mining Inc. (MUX-T) dipped 3.1 per cent after announcing the suspension of its dividend.
“We have experienced operating issues at our Black Fox Mine and with the startup of our Gold Bar Mine. While viewed as temporary, these issues have resulted in much lower revenue this quarter than planned. As a result, we decided the prudent and responsible course of action was to conserve our cash and suspend the distribution,” said chairman and CEO Rob McEwen.
U.S. supermarket operator Kroger Co. (KR-N) plummeted 10 per cent after its 2019 earnings forecast and fourth-quarter results fell short of Wall Street’s expectations.
For the final quarter of fiscal 2018, the company reported revenue and earnings per share of US$28.09-billion and 48 US cents, missing the consensus projections of US$28.38-billion and 52 US cents.
The company is now projecting full-year earnings between US$2.15 and US2.25 per share, while the Street was expecting US$2.26 per share.
Moody’s Vice President Mickey Chadha said: “Kroger’s fourth quarter earnings and 2019 guidance demonstrate that the company continues to execute its Restock Kroger plan, which will continue to pressure margins in the near to medium term as it makes the necessary investments for future growth.
"While we are disappointed in the margin erosion for the quarter, the digital growth of 58 per cent and ex-fuel same store sales growth of 1.9 per cent for the quarter are encouraging considering the intense competition for market share throughout the industry. Also impressive is Kroger’s private label penetration with unit sales of Kroger’s own brands now over 30 per cent. These brands not only have a much higher margin but also build loyalty with customers as they cannot find them elsewhere.”
Xerox Corp. (XRX-N) was down 2 per cent after announcing Thursday it will adopt a structure in which the printer maker will become a wholly-owned unit of a new holding company. The reorganization is expected to be implemented in mid-2019 and the new holding company’s shares will trade on the New York Stock Exchange under its current ticker “XRX.”