A survey of North American equities heading in both directions
On the rise
Shares of Canadian National Railway Co. (CNR-T) rose 0.5 per cent with the late Wednesday announcement of the acquisition of Iowa Northern Railway, pending regulatory review.
In a press release, CN says it has signed and closed an agreement to acquire the railway, which serves upper Midwest agricultural and industrial markets.
The Iowa railway operates approximately 275 track miles in Iowa connecting to CN’s U.S. rail network.
CN says the transaction “represents a meaningful opportunity to support the growth of local business by creating single-line service to North American destinations.”
Terms of the transaction were not disclosed.
CN says a decision from the U.S. Surface Transportation Board regarding the decision is expected in the new year.
Guelph, Ont.-based Canadian Solar (CSIQ-Q) gained 1.2 per cent after it secured a contract to supply battery storage technology to Danish green investment company Copenhagen Infrastructure Partners for use in the UK’s largest battery storage project.
The technology will be supplied by a Canadian Solar majority-owned unit for the Coalburn 1 project in Scotland and it will be used to support and stabilize the National Grid transmission network during peak consumption hours, the company said on Thursday.
It did not provide financial details of the contract.
Battery storage, used to back up intermittent renewable power supply to stabilize the grid, is an evolving technology, and there are very few large-scale operational projects in the world.
Installation of the project is scheduled for the first quarter of 2025, Canadian Solar said.
Coalburn 1 is the first project to be developed by the partnership between Copenhagen Infrastructure Partners and UK-based Alcemi.
Timbercreek Financial Corp. (TF-T) finished narrowly higher with the premarket announcement of the sale of a portfolio of five Groupe Huot income-producing, multi-family projects to Groupe Mach.
It said the the transaction will result in the Toronto-based company receiving repayment of all principal and interest in arrears on the associated loans, representing a total of $146.1-million.
“We’re very pleased with the resolution on this portfolio of loans, which represented a sizable portion of the Stage 3 loans at quarter end,” said CEO Blair Tamblyn in a release. “I appreciate the continued effort and focus of our team in actively managing these situations. As we continue to navigate through the end of the ‘one-two’ punch of the pandemic and interest rate shock, we remain focused on actively driving similar outcomes in select situations, as required.”
Alphabet (GOOGL-Q) surged 5.3 per cent on Thursday as Wall Street cheered the launch of Gemini, saying the new artificial intelligence model could help narrow the gap in a race with Microsoft-backed OpenAI.
Long considered a leader in AI research, Alphabet lost the spotlight when OpenAI’s ChatGPT swept the tech landscape upon its launch in November last year and allowed investor Microsoft to aggressively roll out AI-powered software to businesses.
Now, Gemini looks poised to boost Alphabet’s AI heft again.
The Google parent said the much-awaited AI system was faster than OpenAI’s latest model and can process different forms of media such as video, audio and text. It comes in three versions, each designed to use a different amount of processing power.
“Google is beginning to address investor concerns around generative AI innovation and the high cost of running GenAI models through the combination of Gemini’s different model sizes,” J.P. Morgan analysts said.
The company was on track to add nearly US$80-billion to its market value, if gains hold. The warm reception contrasted with the nearly US$100-billion selloff in Alphabet in February after its Bard chatbot shared inaccurate information in a promotional video and a company event failed to impress.
“Gemini’s release comes at an interesting point in time when OpenAI/ChatGPT users have been complaining about how updates to the GPT model family have potentially impacted the quality of its output,” Macquarie analysts wrote in a note.
“If Google is shipping a GPT-4-beating model, this could help gather user and developer momentum behind Google.”
In the September quarter, growth at Alphabet’s cloud unit slowed to a near three-year low, paling in comparison to the rebound seen at Microsoft Azure, which benefited from spending by businesses preparing to roll out AI features.
Microsoft currently trades at 30.68 times its 12-month forward earnings estimates, compared with the Google parent’s 19.59.
JetBlue Airways (JBLU-Q) on Thursday narrowed its annual adjusted loss forecast, riding on strong demand for travel during the holiday period and sending its shares higher by 15.2 per cent.
U.S. airlines have reiterated the resilience in travel demand, even as concerns linger about the potential impact of rising interest rates on customers’ disposable income.
“Since late October, close-in bookings have outperformed expectations for both holiday peak and non-holiday travel periods,” JetBlue said in a regulatory filing on Thursday.
The company now expects 2023 per-share adjusted loss to be in the range of 50 US cents to 40 US cents, compared with its previous forecast of 65 US cents to 45 US cents.
JetBlue, which is the middle of a legal battle over its acquisition of Spirit Airlines (SAVE-N), also tightened its annual revenue growth forecast to 4 per cent to 5 per cent, compared with an increase of 3 per cent to 5 per cent estimated earlier.
GameStop Corp. (GME-N) reversed course and gained 10.2 per cent on Thursday as cost cuts at the brick-and-mortar videogame retailer offered some relief to investors worried about its slowing pivot to e-commerce.
The stock had dropped as much as 8 per cent in early trading as the company’s third-quarter revenue missed market expectations on Wednesday, underscoring the turnaround challenge faced by top investor Ryan Cohen, who became CEO and chairman in September.
But a 24-per-cent decline in expenses helped GameStop’s adjusted earnings per share to break even, compared with expectations of 9-US-cents loss.
“Costs remain a bright spot for GME,” Jefferies analysts said, pointing to a 156 basis point rise in gross margins that was driven by lower freight expenses.
The company has in recent months slowed its aggressive shift to e-commerce and instead relied more on brick-and-mortar stores where customers can also pick up online orders.
Once a mainstay of American malls, GameStop’s business has declined in recent years as more people purchase games online and it faces competition from e-commerce players.
“Fundamentally the business needs a radical rethink,” said Russ Mould, investment director at AJ Bell.
“GameStop faces intense competition from the likes of Amazon and Ebay, and it needs to make its large store estate more appealing, which could cost a significant amount of money.”
Shares of the company have lost nearly a fifth of their value this year after shedding 50 per cent in 2022 compared with the multifold growth seen during the pandemic.
The current average recommendation for GameStop is “sell,” according to five analysts polled by LSEG. The median target price is at US$10.50, down from US$13 a month ago.
On the decline
Montreal-based Laurentian Bank of Canada (LB-T) was lower by 4.1 per cent after its profit plummeted as it booked major fourth-quarter charges tied to its September system outage that led to the ousting of its chief executive officer, and restructuring costs ahead of unveiling its updated turnaround plan.
The Montreal-based bank’s net income slid 45 per cent to $30.6-million for the quarter ended Oct. 31 after it reimbursed customers that were unable to access their accounts during a multi-day systems crash, and adjusted its strategy after years of underperformance. Following the outage in September, the bank removed chief executive officer Rania Llewellyn in mid-October, the first woman to run a major Canadian-based bank.
Newly installed CEO Éric Provost, previously the head of personal and commercial banking, said Laurentian will launch a new plan in the spring of 2024 and will switch focus from evolving the bank to improving its performance. The updated strategy would target becoming more customer-focused, cutting costs by simplifying its operations, and improving technology platforms that could also boost revenue.
“Laurentian Bank has talked about simplification and efficiency for many years without results,” Mr. Provost said during a conference call with analysts. “Notwithstanding the investments we have to make to close foundational gaps for our customers, we have failed to reduce expenses at an appropriate pace. We must now focus on running the bank versus transforming the bank, and we are already taking action.”
Laurentian reported adjusted profit of $1 per share for the quarter ended Oct. 31, missing the $1.16 that analysts expected. A pre-tax charge of $5.3-million linked to the system outage reduced its earnings by $0.09 per share as the bank reimbursed customers for service fees in September and October in a bid to make amends for the technical issues.
- Stefanie Marotta
Insurance company Intact Financial Corp. (IFC-T) slid 1 per cent after saying its Royal & Sun Alliance Insurance Ltd. subsidiary has signed a deal to sell its U.K. home and pet insurance business to Admiral Group.
The company says the sale includes an initial cash payment of 82.5 million pounds, with a potential additional payment of up to 32.5 million pounds, subject to certain retention thresholds.
The proceeds from the sale and the release over time of capital backing the U.K. personal lines business are expected to total about 350 million pounds, including the benefit of earnout provisions, Intact says.
The deal will result in the transfer of renewal rights, brands and employees. Around 300 RSA employees are expected to move to Admiral.
Intact says it will also work to exit its home and pet partner and broker contracts in the U.K.
The sale has been approved by the boards of directors of Intact and Admiral. It is expected to close at the end of the first quarter of 2024.
Merck (MRK-N) declined 1.7 per cent after it said on Thursday its experimental therapy in combination with Keytruda to treat a type of lung cancer in previously treated patients did not meet the main goal in a mid-stage study.
The results mark another setback in the field of an emerging class of therapies called anti-TIGIT that have triggered a flurry of research and deal activity.
Merck’s experimental anti-TIGIT drug vibostolimab in combination with its blockbuster drug Keytruda failed to meaningfully slow disease progression and improve overall survival in study patients with non-small-cell lung cancer that spreads to other organs of the body.
This is yet another failure for Merck’s drug combination, after data released in March showed that it was less effective than a generic medicine called docetaxel in a non-blinded arm of the trial testing it in patients with the disease.
Gilead Sciences (GILD-Q), Roche and GSK (GSK-N) are among the half a dozen drugmakers looking to grab a share of the lucrative cancer market focused on the TIGIT receptor protein believed to help cancer cells thwart immune system detection.
Merck’s vibostolimab works by selectively binding itself to TIGIT, a receptor on immune system cells that normally serves to prevent a misguided immune attack against healthy cells.
Some cancers have developed a mechanism that exploits TIGIT to continue to grow unnoticed by cell-killing immune cells, prompting intense research into using anti-TIGITs in combination with other cancer drugs.
Separately, Merck on Thursday said it will discontinue a late-stage study of its combination therapy using already approved cancer drugs Keytruda and Lynparza to treat patients with a type of lung cancer, as the data from interim analysis was disappointing.
C3.ai (AI-N) shares slumped 10.8 per cent on Thursday, after the company forecast a bigger fiscal 2024 operating loss as it ramps up investments in its generative artificial intelligence solutions.
Weaker spending by enterprises grappling with high interest rates has hurt the broader software industry but AI has remained a bright spot.
The AI application software firm said on Wednesday it was seeing sales cycles prolonging as customers created new governance functions to approve AI applications before use, effectively delaying clients’ decision making process.
Coupled with the growing spending on pilot programs with potential customers, it has added pressure on the company’s profitability outlook.
Brokerage D.A. Davidson & Co cut its price target on the stock to US$28 from US$30 “given the deterioration of profitability.”
The average rating of 14 analysts covering the stock is “hold,” and their median price target is US$28, according to LSEG.
C3.ai also has a short interest of 29.71 per cent of its outstanding shares as of November 15, Lynx Insights data showed.
However, the software company has seen its shares gain over 160 per cent so far this year, driven by a surge in interest in AI-linked stocks after chatbot ChatGPT’s successful launch late last year.
The stock is a popular name among retail traders, and was among the top ten trending stocks on Thursday on amateur investor-focused website Stocktwits.
On Wednesday, C3.ai said it expects annual adjusted operating loss to be between US$115-million and US$135-million, compared with its prior forecast of US$70-million-US$100-million.
Revenue of US$73.2-million in the second quarter ended Oct. 31 missed LSEG estimates of US$74.3-million, as the company saw sales decline in Europe, Middle East and Africa.
Chewy Inc. (CHWY-N), which recently expanded into Canada, on Wednesday cut its annual sales forecast on weakening demand for pet products, and named David Reeder as its new chief financial officer.
Shares of Chewy were down 0.6 per cent after the company also forecast fourth-quarter sales below expectations and posted a wider-than-expected third-quarter loss.
Pet products retailers such as Chewy, which was co-founded by billionaire Ryan Cohen, has been grappling with inflation that has pushed customers to look for cheaper options and trade down from wet food to more cost-effective dry options.
The company now expects annual net sales between US$11.08-billion and US$11.10-billion, down from US$11.15-billion to US$11.35-billion it forecast previously.
Chewy forecast fourth-quarter sales between US$2.78-billion and US$2.80-billion, compared with expectations of $2.93 billion, according to LSEG data.
The company posted a wider-than-expected loss of 8 US cents per share in the third quarter, compared to analysts estimates of a loss of 6 US cents.
Mr. Reeder, 48, will join Chewy next year February and replace interim CFO Stacy Bowman who will continue to serve as chief accounting officer.
He has most recently served as CFO at GlobalFoundries and was Tower Hill Insurance Group’s CEO prior to that.
Dollar General Corp. (DG-N) posted a smaller-than-expected drop in quarterly sales and beat profit estimates on Thursday, as more shoppers turned to its stores for cheaper groceries and other essentials amid sticky inflation pinching household budgets.
Shares of the Goodlettsville, Tennessee-based company, down 45 per cent so far this year, gave back early gains in Thursday trading after the company also reaffirmed its full-year sales and profit forecasts.
Dollar General, which in October re-appointed former CEO Todd Vasos for a second stint, in a move to stabilize its struggling business, had trimmed its annual sales and profit forecasts for a third time.
Discount store operators in recent quarters have been struggling with a shift in shopper preferences for essentials over general merchandise, including home goods and apparel, as well as stiff competition from larger retailers such as Walmart .
To counter this, Dollar General has been taking measures to keep prices low on its everyday staples, while offering discounts and promotions as it tries to clear excess stock.
Last week, rival Dollar Tree (DLTR-Q) trimmed its annual sales forecast on weaker spending from lower-income households.
Dollar General saw total merchandise inventories in the third quarter decline 1.8 per cent year-on-year.
The company, however, saw its gross profit as a percentage of net sales fall 147 basis points for the quarter, as it grapples with a rise in retail shrink, where inventory is either lost, damaged or stolen.
The discount retailer’s same-store sales fell 1.3 per cent for the third quarter, compared with analysts’ average estimate of a 2.08-per-cent drop, according to LSEG data.
It posted a per-share profit of US$1.26 for the quarter, compared with LSEG estimates of US$1.19.
With files from staff and wires