A survey of North American equities heading in both directions
On the rise
Shares of retailer Loblaw Companies Ltd. (L-T) rose 3.5 per cent on Thursday after it topped Wall Street expectations for fourth-quarter profit on Thursday, helped by sustained demand for daily essentials and easing input costs.
Retailers in Canada have been benefiting from sales of essential items like groceries and pharmaceuticals, and a customer shift to affordable private labels as rising prices had steered them away from big-name brands.
Loblaw posted a 3.4-per-cent rise in its retail segment sales, riding on demand for its beauty products and medicines.
Canada’s annual inflation rate slowed more than expected to 2.9 per cent in January, while core price measures have also eased.
The Brampton, Ont.-based company expects its full-year 2024 adjusted earnings per common share to grow in the high single-digits.
Easing supply chain snags and decelerating inflation in Canada are likely to bring down costs for retailers, boosting their margins.
With food prices coming down in Canada, analysts expect consumer spending power to grow and boost sales across products, including discretionary items like apparel.
Fourth quarter adjusted earnings per share came in at $2.00, compared with analysts’ average estimate of $1.90, according to LSEG data.
The company’s revenue was $14.53-billion in the quarter ended Dec. 30, compared with analysts’ expectations of $14.52-billion.
In a research note, Desjardins Securities analyst Chris Li said: “[Loblaw] reported another solid quarter with adjusted EPS of $2.00 vs our $1.93 and consensus of $1.90. Outperformance mainly came from stronger Retail gross margins and higher-than-expected earnings contribution from Financial Services, with the latter accounting for $0.05 of the EPS outperformance. Management’s 2024 outlook is largely in line with expectations. L expects adjusted EPS to grow in the high single digits vs our estimate and consensus of 9–10 per cent. Based on management’s solid track record, we believe there is likely some conservatism built into its outlook.”
Saskatoon-based Nutrien Ltd. (NTR-T), the world’s biggest fertilizer producer, rose 7.2 per cent despite reporting a big drop in fourth-quarter profit on Wednesday, hit by lower potash prices.
The company reported net earnings of US$176-million, or 35 US cents per share, for the three months ended Dec. 31, compared with US$1.12-billion, or US$2.15 per share, a year-ago.
Fertilizer companies have grappled with slow demand throughout 2023, as farmers held back on purchases to see if fertilizer prices settle any lower.
Prices had soared in 2022, after sanctions on top exporters Russia and Belarus had tightened supplies of fertilizers.
Potash prices averaged US$235 per ton during the reported quarter, the company said, compared with $526 per tonne a year earlier.
Nutrien, the top U.S. agricultural retailer, also forecast potash sales volume of 13.0 to 13.8 million tons assuming demand to grow in offshore markets and a return to more normal Canpotex port operations in 2024.
It also said it sees Nitrogen sales volume of 10.6 to 11.2 million tons, assuming higher operating rates at its US and Trinidad plants compared to 2023.
The company had said in November that it expected a Canpotex facility in Portland, Oregon, to be back online by the end of 2023 after suffering an outage.
For the quarter, the company reported an adjusted profit of 37 US cents, missing analyst estimates of 65 US cents, as per LSEG data.
The company declared a quarterly dividend of 54 US cents per share payable, a near 2-per-cent increase from its prior dividend declared in November last year.
The company also approved the purchase of up to 5 per cent of Nutrien’s issued and outstanding common shares over a 12-month period through a normal course issuer bid.
First Quantum Minerals Ltd. (FM-T) jumped 5 per cent after it announced a series of capital restructuring measures that would strengthen its balance sheet and cut debt, a move that will help the Canadian miner deliver on its “operational objectives.”
The company has lost over half its market value after Panama’s surprise order in November to shut the Cobre Panama copper mine, one of the world’s largest and First Quantum’s flagship mine that accounted for about 40 per cent of its revenue.
As part of the capital restructuring, First Quantum has extended its US$2.2-billion corporate bank loan and extended its maturity to April 2027. It also announced a US$1-billion common share offering to under writers led by RBC Capital Markets, BMO Capital Markets, and Goldman Sachs, and launched a private offering of senior notes worth US$1.6-billion due in 2029.
“Today’s actions result in a capital structure that will enable us to deliver the S3 Expansion (mine in Zambia), which will return the company to a position of strong free cash flow generation,” First Quantum CEO Tristan Pascall said in a statement.
The company also said it is seeking US$20-billion through international arbitration after Panama’s top court ruled First Quantum’s contract was unconstitutional following nationwide protests against its operation.
Miner Teck Resources Ltd. (TECK.B-T) saw gains of 1.3 per cent after it beat fourth-quarter profit estimates on Thursday, helped by an increase in steelmaking coal sales and record copper production.
The company also benefited from higher copper prices due to supply shortages, which Teck said have accelerated into next quarter.
Teck said its realized copper prices rose 2 per cent and it reported a 58-per-cent surge in copper production to 103,400 tonnes in the fourth quarter from a year earlier.
Higher production was reported at its Quebrada Blanca mine in Chile and Highland Valley Copper and Antamina mines in Canada and Peru.
Total adjusted profit came in at $1.40 per share for the three months ended Dec. 31, compared with analysts’ estimate of $1.33 per share, according to LSEG data.
For the full-year, Teck expects copper production between 465,000 and 540,000 tons, above 296,500 tons produced in 2023.
Steelmaking coal sales surged 42 per cent to 6.1 million tons in the October-December quarter. Production in the unit is expected between 24.0 and 26.0 million tons in 2024, compared with 23.7 million tons a year earlier.
The miner said on Thursday the steelmaking coal market would remain in deficit in the first quarter amid strong demand from Southeast Asia and India.
In November, a Glencore-led group agreed to buy Teck’s steelmaking coal unit for $9-billion and the deal is expected to close in the third quarter.
From bad blood and public bashing to an $8.9-billion deal: How Teck made nice with Glencore
Enerplus Corp. (ERF-T) gained 8.6 per cent after announcing an agreement to be acquired by U.S. energy firm Chord Energy Corp. (CHRD-Q), creating a combined entity with an enterprise value of US$11-billion.
Under the terms of the agreement, Enerplus shareholders will receive 0.10125 shares of Chord common stock and US$1.84 in cash for each common share of Enerplus owned at closing.
Chord said it would issue about 20.7 million shares of its common stock.
The combined company is expected to be a premier operator in the Williston Basin, with approximately 1.3 million net acres.
Enerplus operates mainly in the Bakken Basin in North Dakota and also has a footprint in the Marcellus shale region in Pennsylvania.
“The announced transaction represents US$11-billion cash and stock deal that implies a value of US$18.85/sh, or CAD$25.44/sh for Enerplus shareholders; this is near the top end of the range (CAD$22-$26/sh.) we had suggested when the Devon bid was being rumored,” said Stifel analyst Cody Kwong in a research note. “Based on the attractive valuation for ERF shareholders and the pro forma entity looking attractive at first blush, we are supportive of the transaction at this level.”
Nvidia (NVDA-Q) galloped to US$2-trillion market value on Thursday after the bellwether for AI chip demand once again exceeded Wall Street’s sky-high expectations, re-igniting a global rally in tech stocks.
The chipmaker returned as the third most valuable U.S. company as its shares jumped 15 per cent to a record high of US$780.85. If the gains hold, Nvidia will add about US$260-billion to its market capitalization.
The rally in the top performing S&P 500 stock also lifted its counterparts in the chip sector, sending the benchmark index , Europe’s STOXX 600 and Japan’s Nikkei share average to record highs.
The stock that has jumped nearly 57 per cent this year has emerged as the centerpiece of Wall Street’s gain as it accounted for more than a quarter of the S&P 500′s gains in 2024, making its quarterly results crucial for equity investors.
AI-darling Nvidia’s earnings could boost its sway over U.S. stock market
“The people who made the most money in the gold rush of the mid-1800s were the ones providing the tools to get the job done, not those hunting for the precious metal,” said Russ Mould, investment director at AJ Bell.
“Nvidia is effectively playing the same role today in this tech revolution.”
Soaring demand for Nvidia’s chips used by companies rushing to upgrade their AI offerings helped the Silicon Valley firm forecast a whopping 233-per-cent growth in first-quarter revenue, above market expectations of a 208-per-cent rise.
Gains in Nvidia lifted aspiring AI competitor Advanced Micro Devices (AMD-Q) as well as Super Micro Computer (SMCI-Q) and Arm Holdings (ARM-Q).
Moderna (MRNA-Q) on Thursday reported a surprise fourth-quarter profit, helped by cost cutting and some deferred payments, and the vaccine maker set out a commercial roadmap for its experimental respiratory syncytial virus (RSV) shot.
Shares of the company jumped, however they are well below the record high of US$497.49 hit during the peak of the COVID pandemic in 2021.
Moderna posted a profit of US$217-million, or 55 US cents a share, for the quarter. Analysts had expected a loss of 97 IUS cents a share, according to LSEG data.
Moderna Chief Financial Officer James Mock in an interview said the company beat its own forecast because of unexpected deferred revenue of US$600-million and cost savings of around US$300-million created by the company’s effort to adjust its manufacturing output last year.
“Our resizing was mostly completed at the end of the third quarter, but there is still plenty of work to do to drive additional productivity,” he said.
The Cambridge, Massachusetts-based drugmaker reported fourth quarter sales of US$2.8-billion from its COVID-19 vaccine, its only commercial product, which was down 43 per cent from 2022 but in line with analysts’ expectations.
Moderna recorded US$6.8-billion in sales from its COVID vaccine in 2023, down from US$18.4-billion in 2022 but slightly above Wall Street estimates of US$6.7-billion.
The company has been banking on the success of its experimental shots including for RSV, influenza and cancer to make up for declining COVID revenue.
Moderna said it expects a U.S. approval decision for its RSV shot by May 12, in time for the U.S. Centers for Disease Control and Prevention to consider usage recommendations at a vaccine meeting in late June.
The company said it also planned to launch its RSV shot, called mRNA-1345, in Germany and Australia this year.
The company reaffirmed its 2024 forecast of US$4-billion in sales, the lowest figure for annual revenue since its COVID vaccine got U.S. emergency authorization in late 2020.
Analysts on average estimate the company will bring in US$4.48-billion in 2024 revenue, down 33 per cent from 2023.
On the decline
Suncor Energy Inc. (SU-T) closed narrowly lower after it beat Wall Street estimates for fourth-quarter profit, as the oil and gas producer was helped by higher production.
The company posted adjusted operating earnings of $1.26 per share for the three months ended Dec. 31, compared with analysts’ average estimate of $1.05 per share, according to LSEG data.
Suncor reported fourth-quarter total upstream production of 808,100 barrels of oil equivalent, compared with 763,100 barrels of oil equivalent in Q4 2022.
“Upstream reliability across our operations was at or near record highs, achieving the second highest quarterly total production in the company’s history and the highest quarterly Oil Sands production,” said CEO Rich Kruger.
The company had said in January its upstream production was 808,000 barrels per day (bpd) in the fourth quarter, driven by strong output at its Firebag and Fort Hills assets.
Suncor also restarted production at the Terra Nova offshore vessel in November.
Canadian oil sands production has been on the rise with companies raising output keeping in mind the Trans Mountain pipeline expansion, expected to start this year.
Newmont Corp. (NGT-T) intends to divest eight non-core assets and trim its workforce to cut debt following its US$17.14-billion purchase of Newcrest, the world’s largest gold miner said on Thursday, as the company beat quarterly profit estimates.
Still, shares fell with analysts highlighting a big impairment charge of US$1.2-billion related to its Penasquito mine in Mexico as well as 2024 gold production forecast that fell short of some market expectations.
Newmont aims to realize over $2 billion in cash from portfolio optimization with Newcrest and will focus on growing its tier-1 assets as part of its transformation strategy.
“A key part of our tier-1 definition is the jurisdictions in which we choose to mine,” Newmont CEO Tom Palmer told Reuters.
“A big part of our commitment is to deliver $100 million of free cash flow by bringing Newmont and Newcrest together...there is a reduction in headcount in order to achieve those synergies.” The company is eyeing near-term debt reduction of US$1-billion and the divestment will partly help meet that target. Newmont had a total debt of US$8.8-billion at the end of last year.
Newmont shares were trading at their lowest since June 2019.
The drop in the yearly dividend, from an average $1.60/share to a fixed dividend of $1.00/share, along with lower production outlook for 2024 was driving shares lower, said Anita Soni, managing director of equity research at CIBC.
Newmont said it expects to produce 6.93 million ounces of gold in 2024, compared with 5.5 million ounces last year.
The company reported adjusted net income of 50 US cents per share for the three months ended Dec. 31, beating estimates of 46 US cents, per LSEG data.
Chief Operating Officer Rob Atkinson will step down on May 2 and will be succeeded by former Anglo American Platinum top boss Natascha Viljoen as previously announced.
Quebecor Inc. (QBR.B-T) slid 2.4 per cent after it raised its quarterly dividend as it reported its fourth-quarter profit and revenue rose compared with a year ago but fell short of the Street’s expectations.
The company says it will pay a quarterly dividend of 32.5 cents per share, up from 30 cents.
The increased payment came as Quebecor says it earned net income attributable to shareholders of $146.2-million or 63 cents per share for the quarter ended Dec. 31, up from $142.5-million or 62 cents per share in the last three months of 2022.
Revenue totalled $1.50-billion for the quarter, up from $1.19-billion a year earlier and in line with the consensus forecast of $1.48-billion. However, adjusted EBITDA of $565-million was lower than the Street’s expectation of $589-million.
The company says the increase in revenue was due to its acquisition of Freedom Mobile, as well as strength in its sports and entertainment group.
Adjusted earnings per share of 73 cents matched analysts’ projection, but free cash flow of $184-million was below the $238-million estimate due to an unfavourable net change in working capital, an increase in the cash portion of financial expenses and higher restructuring costs.
Desjardins Securities analyst Jerome Dubreuil said: “QBR finished the year that made it the fourth national wireless provider with an EBITDA miss, but with decent telecom KPIs and a higher dividend increase than we had expected. Although the miss is disappointing, we do not believe the Freedom story changes much given the decent net additions. We continue to believe the benefits of the Freedom acquisition are not fully reflected in QBR’s share price.”
Quebec-based Cascades Inc. (CAS-T) plummeted over 20 per cent after it reported a loss of $57-million in its latest quarter compared with a loss of $27-million a year earlier.
The paper and packaging company says its fourth-quarter loss amounted to 57 cents per share compared with a loss of 27 cents per share in the fourth quarter of 2022.
Sales for the quarter totalled $1.14-billion, about the same as a year earlier.
On an adjusted basis, Cascades says it earned five cents per share in its fourth quarter compared with an adjusted profit of 22 cents per share in the fourth quarter of 2022.
Cascades announced earlier this month that will close three plants as part of changes to its containerboard operations that will affect 310 employees.
The company said its corrugated medium mill in Trenton, Ont., that is currently idled will not restart operations, while converting plants in Belleville, Ont., and Newtown, Conn., will close by May 31.
Maple Leaf Foods Inc. (MFI-T) fell 7.4 per cent on news it plans to combine its meat and plant protein businesses into one as it seeks to focus the company and drive growth.
As part of the shift, the company announced an organizational shuffle that sees Adam Grogan promoted to the role of chief operating officer, while Casey Richards has been posted to the newly created job of president, Maple Leaf Foods USA.
RBC Dominion Securities analyst Irene Nattel said the change should streamline the company.
It’s a “more accurate reflection of how plant and meat are currently operating, and of the anticipated growth of the segment,” she said in a note.
The reorganization came as Maple Leaf reported Thursday a fourth-quarter loss of $9.3-million or 8 cents per share for the quarter ended Dec. 31 compared with a loss of $41.5-million or 34 cents per share a year earlier.
The company said the improvement for the quarter was driven by pricing to mitigate inflation, stronger pork markets, and other factors.
Sales totalled $1.19-billion for the quarter, about the same as a year earlier.
Sales for the company’s meat protein business amounted to $1.16-billion, up from $1.15-billion in the fourth quarter of 2022, while plant protein sales totalled $36.5-million, down from $40.0-million a year earlier.
Maple Leaf CEO Curtis Frank said results for the meat protein business fell below expectations due to continuing challenges in the global pork market as well as “a challenging consumer demand environment.”
Rivian (RIVN-Q) and Lucid (LCID-Q) tumbled on Thursday after their earnings reports pointed to the impact of slowing electric-vehicle demand on their costly ramp-up plans.
Rivian fell after it forecast flat growth in annual production, also hurt by a shutdown of its assembly line for upgrades. Lucid sank as its production forecast also came below estimates.
The companies said an uncertain economic outlook and high-interest rates were hitting demand for EVs, echoing remarks from market leader Tesla and legacy automakers like Ford.
“Despite having built a highly rated and desirable EV, Rivian appears to have hit a near-term air-pocket and caught the recent EV bug,” said Canaccord Genuity analyst George Gianarikas, who cut his price target on the stock by US$10 to US$20.
EV startups have been burning billions of dollars in cash in their efforts to develop, source and ramp up manufacturing of vehicles, hoping to be the next Tesla.
Rivian was set to lose more than US$2-billion in market capitalization if the premarket losses hold, while Lucid’s valuation was set to fall by nearly US$1-billion.
Their stocks have had a weak start to the year, with Rivian down 34 per cent and Lucid down 12 per cent, after a tumultuous 2023 when Tesla’s price war roiled the industry.
Rivian said on Wednesday it expected to post its first gross profit in the fourth quarter, after it reported a loss of about $43,000 per vehicle in the October-December period.
In comparison, Ford’s Model E electric vehicle division lost an average of more than US$47,000 per vehicle in the same period.
Rivian is betting on the R2 sport utility vehicle set to be unveiled next month to compete with Tesla’s best-selling Model Y crossover and attract customers with a smaller and cheaper EV.
But the R2 SUV, which is expected to be priced around US$50,000, is set to be launched only in 2026.
CEO RJ Scaringe said much of the upgrades to the R1 assembly line in the second quarter were made to enable the R2 vehicles.
Lucid, meanwhile, plans to start production of the Gravity SUV, with more than 400 miles of range and expected to be priced at US$80,000 later this year, with larger volumes expected in 2025 onwards.
Lucid also discussed a third model in the midsize category, slated for production in late 2026, but did not provide further details on the model.
With files from staff and wires
David Leeder