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A look at North American equities heading in both directions

At the open

Shares of Imperial Oil Ltd. (IMO-T) rose 3.3 per cent after saying before the bell on Thursday that it would invest $720-million to construct a renewable diesel facility near Edmonton.

The facility will use low-carbon hydrogen produced with carbon capture, storage technology and locally sourced feedstock, the Canadian oil major said.

Imperial said the project, first announced in August 2021, would produce 20,000 barrels of renewable diesel daily, while the production is expected to start in 2025.

The company, which has a deal with Air Products and Chemicals Inc for low-carbon hydrogen supply, said it is looking for third parties for bio-feedstock supply.

Canfor Corp. (CFP-T) surged almost 9 per cent in the wake of saying it is “restructuring” its operations in British Columbia, permanently closing one sawmill and shuttering another for an extended period amid plans to build a new wood manufacturing facility.

Canadian softwood producers positioned to reap big refunds on U.S. lumber tariffs

A statement Wednesday from the Vancouver-based company says the sawmill and pellet plant in Chetwynd, B.C., north of Prince George, is expected to close early in the second quarter of 2023.

Meanwhile, it says the sawmill in Houston, B.C., west of Prince George, will close temporarily for an unspecified period as Canfor plans to build a “new, modern, globally competitive manufacturing facility” to produce “high-value products.”

Canfor says preliminary engineering and budgeting for that project are underway, and the company will conduct a “comprehensive evaluation” of the availability of fibre to support the facility, making a final investment decision by the end of June.

Forests Minister Bruce Ralston issued a statement in response to Canfor’s announcement, saying the B.C. government is “committed to supporting forestry workers impacted by closures,” and community support teams have been activated.

Canfor president Don Kayne says the company is making these “difficult but necessary decisions to create a more sustainable operating footprint” in B.C.

“Our goal is to match our mill capacity with the economically available fibre for harvest,” his statement said. “This is what will ultimately create greater stability for our employees and communities.”

While the near-term outlook in B.C. is “challenging” given the supply of fibre, he said, the province “remains an important part” of the company’s operations.

“The changes we are announcing will help make us smaller but stronger in B.C. and help ensure we can continue to contribute to the economy and quality of life here in the province for decades to come.”

The announcement comes just two weeks after Canfor announced it will permanently close the pulp line at its Prince George pulp and paper mill later this spring, affecting an estimated 300 jobs by the end of the year.

Chevron Corp (CVX-N) jumped 4.8 per cent after it said it would triple its budget for share buybacks to US$75-billion, the oil industry’s most ambitious shareholder payouts to date, as high oil and gas prices pad profits.

The oil industry has been facing calls from investors and the White House to put last year’s record earnings from sky high energy prices into more drilling, acquisitions, or to reduce prices for consumers.

Chevron on Friday is expected to report profits for 2022 doubled to US$37.2-billion, according to estimates by Refinitiv. It has budgeted US$17-billion on new oil and gas projects this year, up US$2-billion from last year.

Chevron’s disclosure of the share buyback and a 6-per-cent increase in its quarterly shareholder dividend signaled it will allocate a big chunk of its profits to reward shareholders. It did not set a timetable for the buybacks.

Chevron and Exxon Mobil (XOM-N) are poised to post record annual profits for 2022 of nearly US$100-billion combined, analysts forecast.

Those unprecedented earnings led analysts at Citi on Wednesday to ask if one of the two might buy BP, Shell or TotalEnergies.

U.S. oil producers overall are increasing their budgets for new energy projects this year, but the expenditures will be dwarfed by the amounts paid to shareholders.

The White House criticized the move in a statement. Last year the administration of President Joe Biden called for oil producers to instead invest in production to reduce energy prices for consumers and raise investments in renewable energy.

“For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it,” said White House spokesperson Abdullah Hasan.

The U.S. oil majors’ valuations are about 40 per cent above European rivals, Citi said. BP’s market value is about US$108-billion, compared to Chevron’s US$346-billion and Exxon’s $US466-billion.

Exxon Mobil, which led shareholder returns among oil majors last year, last month increased its buyback plan to US$50-billion through 2024.

Tesla Inc. (TSLA-Q) finished up 10.9 per cent after Elon Musk outlined a playbook for the EV maker heading into what he believes will be a “serious” recession: cut costs on everything from parts to logistics, while keeping the pressure on competitors with discounted sticker prices.

In a conference call to discuss Tesla’s fourth-quarter results, Mr. Musk and other executives outlined plans to reshape the electric vehicle (EV) maker’s cost base after slashing prices up to 20 per cent, a move some analysts see as the first shot in a price war.

Part of the plan is expanding production at Tesla’s newest plants in Berlin and Austin, Texas and increasing the company’s in-house production of batteries, since scale yields savings, executives said.

But Chief Financial Officer Zachary Kirkhorn said the company would also be “attacking every other area of cost and unwinding cost increases created for multiple years of COVID-related instability.”

That would mean running Tesla factories leaner with fewer materials in inventory, cutting shipping and logistics costs and negotiating lower prices for components, he said - putting Tesla’s suppliers on notice.

Tesla is also cutting costs by redesigning elements of battery and electric motor systems, removing features that owners are not using, based on data collected from Model 3 sedans and Model Y SUVs on the road, the company said.

Tesla said on Tuesday it would invest more than $3.6 billion to expand its Nevada factory complex and to increase the output of battery cells so that it could produce enough there to power 2 million vehicles annually.

Tesla forecast it would sell 1.8 million EVs this year, which would mean sales growth of about 37 per cent. That annual number could be as high as 2 million vehicles barring an external shock, Mr. Musk said.

Tesla made an average profit of almost US$9,100 per vehicle sold in the fourth quarter, down 6 per cent from a quarter earlier but still far more than established competitors. Tesla’s third-quarter profit per car sold was more than seven times higher than Toyota Motor Corp, for example.

Tesla slashed prices by as much as 20 per cent earlier this month, a move that broadened the range of its line-up that qualifies for tax credits of US$7,500 per vehicle in the United States.

It is also planning to roll out a revamped version of the Model 3 sedan later this year code-named “Highland” with a focus in part on reduced production cost, Reuters has reported.

The company’s average cost per vehicle, including all categories of its spending, was almost US$44,000 in the fourth quarter.

“Price really matters. I think there’s just a vast number of people that want to buy a Tesla but can’t afford it,” Mr. Musk said.

Las Vegas Sands Corp. (LVS-N) increased 6 per cent after reporting quarterly results that fell short of Wall Street estimates, but the casino operator expects a broad recovery, including at its property in Macau.

The Las Vegas-based casino said it saw a return of traffic to locations following the Lunar New Year as well as an increase in spending per customer compared to 2019 levels. Macau saw 71,000 visitors on Monday, the highest single day since the pandemic.

Retail was a bright spot, with a 26-per-cent increase in tenant sales per square foot versus 2019.

“They’re spending in retail, they’re spending in gambling,” said Las Vegas Sands Chief Executive Robert Goldstein on an investor call. “The most aggressive gamers and retail spenders show up first and we’re seeing that strongly in Macau,” he added.

The casino operator is looking to return to the U.S. market after closing its Las Vegas properties in 2021 to focus on its Asian operations. It announced plans to pursue a casino project on Long Island, New York this month, but some are skeptical.

“They wanted to focus on Asia and we agreed with that,” said Morning Star Senior Equity Analyst, Dan Wasiolek, adding that a U.S. operation may be less profitable for the company.

“I’m interested to hear if it meets their 15-20-per-cent historic return on investment hurdle,” he added.

“For the winning bidders, it’s going to be an amazing opportunity,” said Goldstein, adding that they plan to invest US$4-$5-billion dollars in the project.

Las Vegas Sands posted an adjusted fourth-quarter loss of 19 US cents per share missing analysts’ expectations for a loss of 9 US cents a share, according to Refinitiv data.

The casino operator’s revenue rose to US$1.12-billion in the fourth quarter from US$1.01-billion a year earlier, but missed analysts’ average estimate of US$1.18-billion.

Blackstone Inc. (BX-N) was higher by 5.5 per cent after it said on Thursday its fourth quarter distributable earnings fell 41 per cent year-on-year as the world’s largest manager of alternative assets cashed out fewer investments across its key portfolios.

Distributable earnings, which represents the cash used to pay dividends to shareholders, fell to US$1.3-billion from US$2.3-billion a year earlier. That translated to distributable earnings per share of US$1.07, which surpassed the average analyst estimate of 95 US cents, according to financial data provider Refinitiv.

Higher interest rates, inflation, recession worries, and geopolitical tensions from the Russia-Ukraine conflict have prevented private equity firms like Blackstone from selling assets for top dollar.

Blackstone said its net profit from asset sales fell sharply by 55 per cent to US$366.9-million during the fourth quarter to December, down from US$817.5-million a year earlier. Blackstone’s closely watched fee-related earnings fell 39 per cent to US$1.1- billion.

American Airlines (AAL-Q) on Thursday forecast sharply higher profit for the full year and beat estimates for quarterly earnings on buoyant demand for air travel.

Shares of the airline closed up 2.2 per cent after the company said it was expecting an adjusted profit of US$2.50 and US$3.50 per share for 2023, up from 50 cents per share a year earlier.

Major airlines are trying to cash in on a travel boom since the pandemic eased its grip on the world, making the industry one of the few bright spots against the backdrop of runaway inflation, rising interest rates and a looming recession.

Industry executives have said that they do not see any signs of slowing demand in the face of a potential slowdown.

“As we turn our attention to 2023, we will continue to prioritize reliability, profitability and debt reduction,” Chief Executive Robert Isom said.

The carrier, which along with its regional partners handled more than 475,000 flights in the quarter through December, said it expects to break even on a per-share basis in the current three-month period.

The Fort Worth, Texas-based carrier reported an adjusted profit of US$827-million, or US$1.17 per share, for the quarter ended Dec. 31, above analysts’ estimate of US$1.14 per share, according to Refinitiv IBES data.

Operating revenue rose about 40 per cent to $13.19-billion, slightly below the estimate of US$13.20-billion.

U.S. chemicals giant Dow Inc. (DOW-N) forecast current-quarter revenue below estimates and said it would cut about 2,000 jobs as the chemical giant navigates challenges including inflation and supply chain disruptions.

Production costs have risen in recent quarters following Russia’s invasion of Ukraine, while China’s COVID-led lockdowns and signs of a global economic slowdown have squeezed demand for Dow’s chemicals used in industries ranging from automobiles, food packaging to electronic items.

Dow Chief Financial Officer Howard Ungerleider said while the pace of inflation has moderated, the overall cost levels remain elevated.

Shares of the company gained 0.4 per cent. They fell 11.2 per cent last year.

The company expects the recent shifts in China’s COVID policy to stimulate demand, but that would take some time to take effect.

“Chemical prices are likely to go up in the first quarter (2023) and we will see better demand in the second quarter,” said Aleksey Yefremov, analyst at KeyBanc Capital Markets.

Dow plans to save US$1-billion in 2023. It said it would exit certain assets, and further evaluate its global asset base, particularly in Europe. Its announcement of job cuts will hit 5 per cent of its workforce.

Chief Executive James Fitterling said the headcount reduction was not all specific to Europe, “although Europe is a big part of the earnings decline that’s driving us to take these actions”.

The company would record a charge of US$550-million to US$725-million in the first quarter of 2023 for costs associated with these activities.

The Midland, Michigan-based firm expects first-quarter revenue to be between US$11-billion and US$11.5-billion compared with average analysts’ expectations of US13.02-billion, according to Refinitiv data.

It expects 2023 capital expenditure be US$2.2-billion, about 21 per cent higher than last year.

Dow also missed Wall Street estimates for fourth-quarter profit and revenue.

On the decline

Celestica Inc. (CLS-T) gave back large early gains and finished flat following the late Wednesday release of stronger-than-anticipated fourth-quarter results.

The Toronto-based multinational electronics manufacturing services company reported revenue of US$2.04-billion, up 35 per cent from the same period in fiscal 2021 (US$1.51-billion) and topping the Street’s expectation of US$1.72-billion. Adjusted earnings per share of 56 US cents also exceeded the consensus estimate (54 US cents).

For its first quarter, Celestica sees revenue of US$1.73-billion to US$1.88-billion and EPS of 41 US cents to 47 US cents, higher than analysts’ projections of US$$1.72-billion and 39 US cents.

In a research note, Canaccord Genuity’s Robert Young said: “Celestica built upon its strong recent record of quarterly performance with a solid Q4 top and bottom-line beat. Q1/23 guidance was also ahead of Street and CG estimates. Despite the beat, management left 2023 guidance unaltered, which now appears conservative. ... On balance, Celestica continues to exceed our and Street expectations, supporting our positive view. Celestica shares continue to trade at a discount at 6.7 times 2023 estimated P/E [price-to-earnings] despite strong EPS growth of 46 per cent in 2022.”

IBM Corp. (IBM-N) on Wednesday announced 3,900 layoffs as part of some asset divestments and missed its annual cash target, dampening cheer around beating revenue expectations in the fourth quarter.

Chief Financial Officer James Kavanaugh told Reuters that the company was still “committed to hiring for client-facing research and development.”

The layoffs - related to the spinoff of its Kyndryl business and a part of AI unit Watson Health - will cause a US$300-million charge in the January-March period, IBM said.

Shares of the company fell 4.5 per cent, erasing earlier gains on the largely upbeat results. Analysts said news of the job cuts and free cash flow miss was behind the drop.

“It seems as if the market is disappointed by the size of its announced job cuts, which only amounted to 1.5% of its workforce,” said Jesse Cohen, senior analyst at

“Investors were hoping for deeper cost-cutting measures.”

From Big Tech to Wall Street banking majors, U.S. companies have been downsizing in earnest and slashing costs to better cope with the global economic downturn.

IBM’s 2022 cash flow was US$9.3-billion, below its target of US$10-billion, due to higher-than-expected working capital needs.

The company also forecast annual revenue growth in the mid-single digits on constant currency terms, weaker than the 12 per cent it reported last year, as pandemic-led demand for digitizing businesses has given way to cautious spending by clients amid rising recession fears.

Total revenue was flat at US$16.69-billion in the period, compared with analysts’ estimates of US$16.40-billion, according to Refinitiv.

For 2022, IBM recorded revenue growth of 5.5 per cent, its highest in a decade.

Southwest Airlines Co. (LUV-N) dipped 3.2 per cent after it warned of a loss in the current quarter as passengers shunned the carrier in the immediate aftermath of a tech meltdown that forced it to scrap thousands of flights between Christmas and New Year’s Eve.

The forecast heaps more pain on the largest U.S. domestic carrier, which is facing regulatory scrutiny over its flight scheduling and handling of more than 16,700 cancellations that disrupted holiday plans for tens of thousands of passengers.

Analysts on average had expected the company to post a profit of 19 US cents a share in the first quarter, Refinitiv IBES data shows.

Southwest, which also reported a loss in the fourth quarter, said it expects a revenue hit of between US$300-million and US$350-million in the first quarter.

The Dallas-based carrier also expects non-fuel operating costs in the March quarter to be higher than its previous estimate, in part due to extra pay it has offered to workers for dealing with the December meltdown.

“Thus far in January 2023, the company has experienced an increase in flight cancellations and a deceleration in bookings, primarily for January and February 2023,” Southwest said. But current booking trends for March were encouraging, it added.

Operating revenue for the first quarter, when travel demand tends to slow after the holiday season, is expected to rise 20 per cent to 24 per cent against a period last year which was hit by the pandemic.

The company’s under-fire chief executive, Bob Jordan, on Thursday again apologized for the mass cancellations, which were attributed to Southwest’s outdated crew scheduling software.

The software buckled under the weight of reassignments that had to be done after severe winter weather left the carrier’s crew stranded all over the country.

Jordan, who took the airline’s helm last February, told Reuters this month that the company was looking at all options to prevent a repeat.

Southwest expects to spend about US$1.3-billion this year on technology investments, upgrades, and system maintenance.

The meltdown led to an adjusted loss of US$226-million, or 38 US cents a share, in the quarter through December, robbing it of the gains from booming holiday travel demand.

Rival carriers United Airlines (UAL-Q), Delta Air Lines (DAL-N) and American Airlines (AAL-Q) have all reported higher-than-expected earnings for the quarter.

Mastercard Inc. (MA-N) was lower as current-quarter revenue growth forecast falling short of Wall Street estimates, fanning fears that the card company was heading into a much tougher environment in 2023 as the economy loses steam.

After the Federal Reserve’s rate hikes for most of last year, the economy has begun to show some signs of slowing down, with wide-ranging layoffs and fears of a recession spooking consumers.

The company said it expects first-quarter revenue to grow at the “high-end of high-single digits range.” Analysts were expecting a growth of 10.7 per cent, according to Refinitiv IBES data.

However, Mastercard, which has a bigger exposure to Asia Pacific than peer Visa Inc. (V-N), benefited in the fourth quarter from the reopening of borders and pent-up demand for travel in the region, which helped it offset the hit from 10% higher costs in the quarter.

Excluding one-time items, the New York-based card company earned US$2.65 per share for the three months ended Dec. 31, compared with analysts’ average estimate of US$2.58 per share, according to Refinitiv IBES data.

Net revenue climbed 12 per cent to US$5.8-billion.

Bed Bath & Beyond Inc. (BBBY-Q) plummeted after a regulatory filing showed on Thursday it has received a notice of acceleration and default interest from JPMorgan Chase Bank, N.A .

The bank has determined to exercise rights such that all outstanding loans under credit facilities and other obligations of Bed Bath & Beyond under its amended credit agreement are due and payable immediately.

The struggling home goods retailer said it does not have sufficient resources to repay the amount at this time, adding that it will consider all strategic alternatives, including restructuring its debt under the U.S. Bankruptcy Code.

Bed Bath & Beyond earlier this month said it was exploring a range of options to address its plunging sales that included declaring bankruptcy.

The company was also considering skipping debt payments due on Feb. 1, a source had told Reuters.

All of the outstanding loans and obligations under the credit facilities would bear interest at an additional default rate of 2% per annum, starting Jan. 25, as a result of continuing defaults, Bed Bath & Beyond said.

The company has also been in talks with prospective buyers and lenders to keep its business afloat, CNBC reported earlier in January.

With files from staff and wires