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A look at North American equities heading in both directions

On the rise

Shares of Meta Platforms Inc. (META-Q) soared over 23 per cent on Thursday as the Facebook parent wooed investors with plans to rein on costs and a new US$40-billion share buyback.

Meta plans to cut costs in 2023 by US$5-billion to between US$89-billion and US$95-billion compared with its earlier outlook of US$94-billion to US$100-billion, with CEO Mark Zuckerberg calling 2023 the “Year of Efficiency.”

The company further boosted investor confidence by forecasting first-quarter sales ahead of Wall Street estimates.

The stock slumped about 64 per cent in 2022.

“Promising that 2023 will be a year of efficiency was always likely to go down well with investors concerned about the largesse in spending directed towards the unproven potential of the metaverse,” said AJ Bell, investment director at Russ Mould.

Meta results also sparked a rally in shares of other mega-cap firms that are set to report quarterly results later in the day. Inc. (AMZN-Q), Google owner Alphabet Inc. (GOOGL-Q) and Apple Inc. (AAPL-Q) all firmed.

Shares of social media firm Pinterest Inc. (PINS-N) gained after a report that the online pinboards firm was cutting staff by 150, nearly 5 per cent of its workforce, while Snap Inc. (SNAP-N) rebounded after ending nearly 10 per cent lower after the company forecast a decline on current-quarter revenue.

Rate-sensitive tech and growth stocks also got a boost as U.S. Treasury yields retreated after Federal Reserve chair Jerome Powell acknowledged on Wednesday that inflation was starting to ease.

Verticalscope Holdings Inc. (FORA-T) was higher after becoming the latest Canadian technology company to slash its staff amid an ongoing slump in the sector.

The Toronto digital media company, one of a slew of Canadian entities to go public on the Toronto Stock Exchange during the tech bubble of 2020-2021, said after the close of markets Wednesday that it would cut 60 jobs, or 22 per cent of its employee base. Like other companies, Verticalscope had grown its staff size aggressively in recent years, and “with the economic uncertainty that lies ahead, we must prioritize our biggest opportunities and make sure we have the proper cost structure in place to purse them,” Verticalscope CEO and founder Rob Laidlaw said in a statement.

Verticalscope joins several Canadian and global tech companies in enacting sweeping layoffs since the start of this year, including CFT Clear Finance Technology Corp., Thinkific Labs Inc., Lightspeed Commerce Inc., Clutch Technologies Inc. and Benevity Inc. According to technology job loss-tracking site, January’s 84,000-plus layoffs across the sector globally was the worst monthly tally since the start of the pandemic three years ago.

Verticalscope, 37 percent-owned by the group that purchased Torstar Corp. in 2020 and whose partners Paul Rivett and Jordan Bitove recently agreed to a corporate divorce, also released preliminary results Wednesday showing its business rapidly deteriorated in the fourth quarter. Verticalscope said it expected revenue for the quarter ended Dec. 31 to slump by 10.9 per cent, to $19.1-million, compared to the same period a year earlier, dragged down by a 23.5-per-cent drop in e-commerce revenue and a 5.5-per-cent fall in digital advertising revenue. It forecast its adjusted operating earnings would come in at $7.2-million in the quarter, down 22.9 per cent year-over-year.

- Sean Silcoff

Coinbase Global Inc. (COIN-Q) soared 24.1 per cent after a U.S. judge on Wednesday dismissed a proposed class action lawsuit by customers who accused the cryptocurrency exchange of selling unregistered securities and failing to register as a broker-dealer.

U.S. District Judge Paul Engelmayer in Manhattan said customers who transacted on the Coinbase and Coinbase Pro trading platforms could not show that the company sold or held title to the 79 tokens, a form of digital asset, they traded.

Customers said that unlike platforms that match buyers and sellers, Coinbase acted as an “intermediary,” making it the “actual seller” of the tokens.

They said the setup allowed Coinbase to collect transaction fees, while bypassing disclosure rules meant to protect investors in traditional securities.

The judge said Coinbase had no direct role in the transactions, despite having allegedly promoted tokens by describing their “purported value proposition” and participating in “airdrops” of free tokens to boost trading volume.

“These activities of an exchange are of a piece with the marketing efforts, materials and services that courts ... have held insufficient” to qualify defendants as sellers, Engelmayer wrote. customers who accused the cryptocurrency exchange of selling unregistered securities and failing to register as a broker-dealer.

U.S. District Judge Paul Engelmayer in Manhattan said customers who transacted on the Coinbase and Coinbase Pro trading platforms could not show that the company sold or held title to the 79 tokens, a form of digital asset, they traded.

Customers said that unlike platforms that match buyers and sellers, Coinbase acted as an “intermediary,” making it the “actual seller” of the tokens.

They said the setup allowed Coinbase to collect transaction fees, while bypassing disclosure rules meant to protect investors in traditional securities.

The judge said Coinbase had no direct role in the transactions, despite having allegedly promoted tokens by describing their “purported value proposition” and participating in “airdrops” of free tokens to boost trading volume.

Industrial conglomerate Honeywell International Inc. (HON-Q) forecast first-quarter adjusted profit below estimates, signaling strong demand in its high-margin aerospace unit was not enough to beat the impact of supply chain disruptions and labor shortages.

Shares of the industrial conglomerate, which counts Boeing Co and Airbus SE as customers, finished 0.4 per cent higher on Thursday.

Honeywell’s aerospace peers General Electric Co and Raytheon Technologies Corp have also flagged labour shortages and higher costs.

“The supply chain for mechanical components remains constrained due to skilled labor shortages among Tier 3 and 4 suppliers,” Honeywell’s chief financial officer Gregory Lewis said on post earnings call with analysts.

A shortage of crucial semiconductor chips and higher prices of raw materials have also hit aerospace and defense companies’ ability to manufacture products over the past year, leading to delays in output.

Charlotte, North Carolina-based Honeywell expects adjusted earnings in the first quarter to be between US$1.86 per share and US$1.96, below analysts’ average estimate of US$2.03 per share, according to Refinitiv data.

It, however, forecast full-year sales between US$36-billion and US$37-billion, in line with analyst’s average estimate, amid strong demand for air travel and oil.

Sustained demand for air travel has prompted more orders from airlines and planemakers for parts and service, benefiting aerospace companies such as Honeywell.

Quarterly sales in Honeywell’s aerospace unit, which makes aircraft engines and radars, rose to US$3.20-billion from US$2.9-billion a year ago.

The company’s overall quarterly net sales rose about 6 per cent to US$9.19-billion, but missed analysts’ average estimate of US$9.25-billion.

On the decline

Shares of Rogers Communications Inc. (RCI-B-T) closed narrowly lower on Thursday after it boosted its fourth-quarter profit by 25 per cent to $508-million as it generated more revenue from its wireless division and trimmed costs in its cable business.

The Toronto-based telecom and media giant earned $4.17-billion in revenue during the three-month period ended Dec. 31, up 6 per cent from a year ago when it had $3.92-billion in revenue.

The growth was driven primarily by its wireless division, which benefited from higher roaming revenues associated with increased travel, as well as its media division which earned more revenue from its sports business as well as from advertising.

Industry Minister seeks commitments on wireless affordability before any approval of deals between Rogers, Shaw and Quebecor

The fourth-quarter earnings amounted to $1.00 per diluted share, up from 80 cents per diluted share. After adjusting for various items, Rogers had $1.09 of earnings per diluted share, up 14 per cent from a year ago when it had 96 cents of earnings.

Analysts were expecting adjusted earnings of 99 cents per share and revenue of $4.16-billion, according to the consensus estimate from S&P Capital IQ.

The company also added 193,000 postpaid wireless subscribers during the quarter, compared to 141,000 during the same quarter the previous year.

- Alexandra Posadzki

BCE Inc. (BCE-T) declined 2.9 per cent after saying it is starting to wind down a surge of infrastructure spending as it readies to flex both its improved network and increased capital room to attract more customers.

“We have the room to compete on price if anyone wants to take us there,” said chief executive Mirko Bibic on an analyst call Thursday, after reporting earnings were down for the fourth quarter compared with a year earlier.

The company has spent the past few years spending heavily to expand its fibre optic network and to install higher speeds generally, with more than 80 per cent of its target broadband expansion complete.

Spending is set to decline through to 2025 to more historic norms as it winds down the fibre build, with about $300-million shaved off its spending plans for 2023. The improved speeds, plus the lower operating costs, puts the company in a strong position, said Bibic.

“We’ve invested billions and billions to build North American leading networks. We are going to load those networks.”

The company is gaining market share on the fibre side despite “promotional intensity,” while maintaining margins thanks to the lower cost structure of the networks, he said.

Competition on pricing, including highly competitive Black Friday offers, did however weigh on results from last quarter, as did inflation, weather costs and media advertising softness.

Net earnings linked to common shareholders amounted to $528-million or 58 cents per diluted share in its fourth quarter, down from $625-million or 69 cents per diluted share a year earlier.

On an adjusted basis, BCE said it earned 71 cents per share in its latest quarter, down from 76 cents per share a year earlier.

The adjustments exclude $26-million in inflation and weather costs for the fourth quarter, while for the year those costs rang in at $87-million.

Chief financial officer Glen LeBlanc said that weather-related costs used to run around $5-million a year, while closer to $10-million in recent history before last year’s jump.

“$43 million is extraordinary, and I knock on wood, something we don’t repeat.”

Total operating revenue for the quarter was $6.44-billion, up from $6.21-billion in the fourth quarter of 2021.

For the year ahead, the company expects higher interest expenses, along with lower tax adjustments and higher depreciation, to lead to lower adjusted earnings per share compared with 2022, down between three and seven per cent.

The company however expects adjusted earnings before various deductions to see between two and five per cent growth, despite economic concerns.

“We expect there to be a recession, albeit I personally believe it will be short and shallow,” said LeBlanc.

“The guidance we provided here takes into consideration that recession. We haven’t seen any changes at this time to consumer demand.”

Revenue for the year ahead is expected to grow between one and five per cent.

The company also expects to pay out $3.87 per share in dividends, up from $3.68 last year, after it raised its quarterly dividend to 96.75 cents per share from 92 cents per share.

Results were largely in line with expectations as slightly lower-than-forecast pre-deduction earnings were offset by strong additions to the network, said RBC Capital Markets analyst Drew McReynolds in a note. The forecast for the year ahead, and the dividend increase, also came as no surprise, he said.

Canada Goose Holdings Inc. (GOOS-T) cut annual forecasts on Thursday after a spike in COVID-19 infections in China dulled store traffic and inflation bit into spending power in North America.

Toronto-listed shares of the luxury parka maker dropped 23.7 per cent after it also missed third-quarter revenue and profit estimates.

Businesses of luxury goods companies in China have suffered for the last three years from intermittent lockdowns, but Canada Goose said Beijing’s decision to dismantle its zero-COVID policy late last year only added to the company’s headaches.

“We did not anticipate the sudden reopening in early December,” said Chief Executive Dani Reiss on an earnings call.

“This led to a surge in infections, which had a significant impact on our business during what is typically our most productive trading month. Consumer traffic decreased dramatically and staffing levels were impacted due to illness,” Reiss added.

Still, Reiss said he was confident business would bounce back in the country, with January already showing a 30-per-cent rise in same-store traffic on the year.

High-end cosmetics maker Estee Lauder Cos Inc also cut its profit outlook on Thursday citing uncertainty around recovery in China, but said it expected a return to growth in the second half of the year.

Canada Goose cut its fiscal 2023 sales forecast to between $1.18-billion and $1.20-billion, from $1.2-billion to $1.3-billion previously, and said demand in North America was also slowing.

“Canada Goose’s slowing North America trends suggest macro headwinds are increasingly impacting luxury demand,” said UBS analyst Jay Sole.

The company expects full-year adjusted profit of 92 cents to $1.03 per share, down from a prior outlook of $1.31 to $1.62.

Its revenue fell to $576.7-million in the quarter ended Jan. 1, below the estimate of $623.6-million in Refinitiv data.

Montreal-based Lightspeed Commerce Inc. (LSPD-T) lost 6.1 per cent after saying it will double down on its quest for profitability and larger clients after reporting a loss of US$814.8-million in its latest quarter.

“We are going after the more sophisticated segment, we are going after the more established we will not be going after the entire market,” said JP Chauvet, the Montreal e-commerce technology company’s chief executive, in a Thursday call with analysts.

While Lightspeed would have cast a “broader fishing net” two years ago when marketing itself to clients, Mr. Chauvet said he wants to target businesses that deliver high gross merchandise value — a metric measuring a company’s total value of sales over a certain period of time.

“Quick serve is not what we are going to be focusing on,” he said.

“We are going to be focusing on fine dining, table service and Michelin stars.”

The increased focus on this segment stems from Lightspeed’s goal of reaching profitability based on adjusted earnings before interest, taxes, depreciation and amortization by the end of 2024.

But the profitability outlook is becoming much more gloomy for tech companies, which have watched investor exuberance fade, valuations be slashed and even the most prominent businesses in the sector complete layoffs.

Lightspeed joined the pack with a 300-worker cut last month. About 50 per cent of those who departed were in management positions.

The decision has unlocked “considerable” savings and helped the company streamline the organization to use “leaner” working models and focus on key projects and customers, Chauvet said.

“Deciding to reduce head count is never an easy decision...but it was a necessary decision that strengthens our foundations for future growth.”

His comments came as Lightspeed said its most recent quarter saw a loss of US$5.39 per diluted share compared with a net loss of US$65.5-million or 44 US cents per diluted share a year earlier.

Weighing on what was the third quarter was a non-cash goodwill impairment charge of US$748.7-million that Lightspeed took.

The charge stemmed from accounting rules, which require annual testing of goodwill. When Lightspeed ran this testing in late December, it said certain assumptions in the test were impacted by the tech downturn and Lightspeed’s lower share price.

Revenue for the quarter ended Dec. 31 totalled US$188.7-million, up from US$152.7-million in the same quarter a year earlier.

Lightspeed’s adjusted diluted earnings per share broke even for the quarter compared with an adjusted loss of seven cents per share a year earlier.

The company now expects an adjusted earnings before interest, taxes, depreciation and amortization loss of about US$37-million compared with its earlier forecast for a loss of about US$40 million.

It also foresees its annual revenue to come in at the low end of its forecast for between US$730-million and US$740-million.

In a research note, ATB Capital Markets analyst Martin Toner said: “Given the pre-announcement on January 17, today’s results are largely in line. The Company is growing well with larger merchants, and as those merchants become the majority of the customer base, we believe ARPU growth will accelerate. We believe the stock remains undervalued relative to organic revenue and gross profit growth.”

ConocoPhillips (COP-N) reported a 23-per-cent jump in fourth-quarter profit on Thursday, as the U.S. shale producer benefited from higher prices for its crude oil on tight supplies and robust demand.

Shares of the company, which declared a variable dividend of 60 US cents, were down 5.4 per cent.

Crude prices remained elevated during 2022 from strong demand and shortages since Russia’s invasion of Ukraine, and analysts expect Western energy firms to show a combined US$200-billion profit for the year.

Production was 1.758 million barrels of oil equivalent per day (boed) for the last three months of 2022, an increase of 150,000 boed from the same period a year ago.

ConocoPhillips said it plans to return US$11-billion to shareholders in 2023, while full-year production is expected to be between 1.76 million and 1.80 million boed.

The company expects capital expenditure to be between US$10.7-billion and US$11.3-billion this year, higher than 2022′s US$10.2-billion.

ConocoPhillips expects current-quarter production to be between 1.72 million and 1.76 million boepd, which includes 35,000 boed of turnaround and stabilizer expansion in Eagle Ford basin.

Total average realized price was $71.05 per barrel of oil equivalent in the fourth quarter, ConocoPhillips said, 8 per cent higher from a year earlier.

On an adjusted basis, the company posted a profit of US$2.71 per share, missing the average analyst expectation of US$2.81, according to Refinitv data, hurt by lower earnings from Canada.

Eli Lilly and Co. (LLY-N) missed Wall Street estimates for sales of its keenly-watched drug Mounjaro as well as older diabetes treatment, overshadowing a better-than-expected 2023 profit forecast.

The drugmaker has been leaning on Mounjaro - its newer diabetes treatment - to soften the hit to sales from price cuts for insulin, competition for cancer therapy Alimta and stalled sales of its COVID-19 drug.

Shares of the U.S. drugmaker dropped 3.5 per cent on the weaker sales of Mounjaro, which Lilly hopes will become a growth driver this decade, and as the drugmaker marginally missed estimates for quarterly sales.

The company sought to allay investor concerns over falling sales of its older drugs, with Chief Executive Officer David Ricks calling 2023 the “year of investment in future growth.”

“But at the same time, we’re not stepping back or rebuilding, we’re growing. I don’t know what other l large cap pharma companies are growing 15 per cent in their core business, but that’s pretty strong number,” Mr. Ricks added.

Mounjaro sales were US$279.2-million for the quarter, below estimates of US$319-million, according to an average of five analysts polled by Refinitiv.

Sales of its COVID-19 drug bebtelovimab were all but wiped out, coming in about 96 per cent lower than a year earlier at US$38-million for the quarter, after the U.S. health regulator pulled authorization on concerns the antibody would not neutralize the BQ.1 and BQ.1.1 Omicron subvariants.

Sales of its blockbuster diabetes drug Trulicity were US$1.94-billion, falling short of analysts’ expectations of US$2.16-billion.

Total quarterly revenue was US$7.30-billion, below estimates of US$7.33-billion.

The company forecast 2023 adjusted profit between US$8.35 and US$8.55 per share, above analysts’ expectations of US$8.28 per share, on the back of uncertainty around whether certain tax regulations would be deferred this year.

Merck & Co Inc. (MRK-N) was down 3.3 per cent in the wake of forecasting a sharp decline in sales of its COVID-19 antiviral pill as the pandemic eases globally.

The company estimated sales of molnupiravir, which is sold under the brand Lagevrio, to fall to about US$1-billion this year from US$5.68-billion in 2022.

The lower forecast for the COVID drug is the latest signal that a boost to global drugmakers from the pandemic is fading.

Roche also warned on Thursday that profits will decline in 2023 due to falling demand for its COVID-19 therapy and diagnostics kits.

Merck also forecast 2023 earnings below analysts’ estimates on a tax hit from a recent acquisition.

The company said it expects adjusted earnings of US$6.80 to US$6.95 per share, lower than analysts’ average estimate of US$7.36.

Revenue is projected to be US$57.2-billion to US$58.7-billion, compared with expectations of US$58.1-billion.

The earnings forecast was hit by taxes that Merck will have to pay on the US$1.35-billion acquisition of cancer drug developer Imago BioSciences, the company said.

Excluding items, Merck earned US$1.62 per share, exceeding Wall Street expectations of US$1.54, according to Refinitiv.

Estee Lauder Cos Inc. (EL-N) forecast a bigger drop in full-year profit than it had initially estimated, citing uncertainity around recovery in major market China.

Analysts, meanwhile, expect China’s recent move to relax its toughest COVID-related curbs and lift travel restrictions to improve sales for U.S. luxury and beauty companies, such as Estee, that took a beating from the country’s strict zero-COVID policy.

Shares of the New York-based company were down 4.4 per centafter the company also forecast third-quarter sales and profit below analysts’ expectations.

Estee said it expects a return to sales growth in Mainland China and Asia travel retail in the second half of the year.

“Outside of China, the travel retail looks strong” said Evercore ISI analyst Robert Ottenstein, adding that segment recovery in the country, however, remained an important question.

Lower sales at Asia travel retailers and fewer inventory orders from the United States on worries of a slowdown in demand, hurt the MAC lipstick maker’s sales in the second quarter.

“A concern on the quarter was apparent weakness in the U.S. and it looks like they may be losing market share on the skin care side,” Mr. Ottenstein added, highlighting a 5-per-cent decline in sales in the Americas.

Estee expects annual adjusted profit per share to fall between 27 per cent and 29 per cent, compared with its prior forecast of a decrease between 19 per cent and 21 per cent, and net sales to fall about 5 per cent to 7 per cent, compared with a 6-per-cent and 8-per-cent drop it forecast earlier.

With files from staff and wires