A survey of North American equities heading in both directions
On the rise
Valcourt, Que.-based BRP Inc. (DOO-T) gained 5.4 per cent on Thursday despite reporting its fourth-quarter profit and revenue fell compared with a year earlier and said its results for its 2025 financial year are expected to be down compared with the year it just completed.
The Ski-Doo and Sea-Doo maker says it will now pay a quarterly dividend of 21 cents per share, up from 18 cents per share.
BRP says it earned $188.2-million or $2.46 per diluted share for the quarter ended Jan. 31, down from $365.1-million or $4.54 per diluted share a year earlier.
Revenue for the quarter totalled $2.69-billion, down from $3.08-billion.
On an normalized basis, BRP says it earned $2.46 per diluted share in its latest quarter compared with a normalized profit of $3.85 per diluted share a year earlier.
In its outlook for its 2025 financial year, BRP says it expects revenue in a range of $9.1-billion to $9.5-billion, down from $10.37-billion it recorded for its 2024 financial year. Normalized diluted earnings per share for 2025 are expected in a range of $7.25 to $8.25, down from $11.11 in 2024.
In a research note, Stifel analyst Martin Landry said: “BRP reported worse-than-expected Q4FY24 results with EPS of $2.46, down 36 per cent year-over-year, and lower than our estimate of $2.56 and consensus of $2.60. The $0.10 EPS difference vs. our expectation comes from lower sales explaining most of the difference vs. our expectations. BRP introduced its FY25 guidance, which came-in lower than our expectations calling for EPS to range between $7.25 to $8.25, down 30 per cent year-over-year, and lower than our expectation of $8.50 and consensus of $8.96. The EPS decline in FY25 is due to weak industry demand, high snowmobile inventory and management reducing inventory levels at dealerships, which will result in revenue declines in the range of 10 per cent year-over-year and 110bps of pressure on EBITDA margin. In our view, the FY25 guidance could represent trough earnings, providing visibility for investors to better assess downside risks. We believe BRP’s shares will react negatively to the FY25 guidance.”
Karora Resources Inc. (KRR-T) increased 5 per cent after Australian gold miner Ramelius Resources Ltd said on Thursday it has ended discussions on a potential acquisition of the Toronto-based mine operator.
“Following its usual disciplined due diligence process, Ramelius advises that no final agreement, including on value, was reached,” the company said.
Earlier this month, Ramelius confirmed that it was in talks with Karora, but did not disclose any deal value.
However, a local report estimated the transaction value to be between A$700 million ($456.40 million) and A$1 billion.
Karora Resources, which is focused on increasing gold production at its Beta Hunt gold mine and Higginsville gold operations in Western Australia, confirmed in a separate statement that it had ended discussions with Ramelius.
Walgreens Boots Alliance (WBA-Q) rose 3.2 per cent after it recorded a US$5.8-billion impairment charge on its investment in VillageMD on Thursday, at a time when the pharmacy operator was aiming to save costs.
The impairment follows years of investment in the cash-burning operator of doctors’ clinics during Rosalind Brewer’s tenure as Walgreens CEO. Ms. Brewer wanted to expand the company’s reach as a healthcare provider.
Walgreens had invested over US$6-billion to hold a majority stake in VillageMD over the last few years. It also supported its acquisition of urgent care provider Summit Health with another US$3.5-billion investment in 2022.
But the strategy shifted under new CEO Timothy Wentworth, who is focused on improving profitability and announced a US$1-billion cost-cutting plan in October.
The company reported a net loss of US$5.9-billion for the quarter ended Feb. 29, mainly due to the impairment.
It also cut the higher end of its profit forecast for fiscal-year 2024, citing economic challenges for its retail operations.
The cut in forecast now means there is a lower base for financial-year 2025 earnings to grow from. It “only heightens scrutiny on what WBA’s core earnings power actually is,” Leerink Partners analyst Michael Cherny said in a note.
Walgreens has also been grappling with decreased spending on personal care and beauty products by inflation-weary consumers, exacerbating the hit from waning demand for its COVID-19 vaccines and testing kits.
On an adjusted basis, Walgreens reported earnings of US$1.20 per share for the quarter, compared with analysts’ average estimate of 82 US cents per share, according to LSEG data.
It now expects an adjusted profit of US$3.20 to US$3.35 per share for its financial year ending Aug. 31, retaining the lower end of the US$3.20 to US$3.50 per share range it gave last January.
Shares of RH Inc. (RH-N) were up over 17 per cent after the U.S. furniture retailer predicted stronger demand for its products despite weaker-than-expected quarterly results.
The California-based parent of Restoration Hardware reported fourth-quarter adjusted earnings per share of 72 US cents and revenue of US$738.26-million, missing the Street’s estimates of US$1.67 and US$777.48-billion, according to LSEG data.
However, RH said it expected “demand trends to accelerate throughout fiscal 2024″ following the release of its flagship sales catalog.
“We expect the launch of RH Modern will further accelerate our demand trends in the second quarter and throughout the second half of 2024,” it said.
Take-Two Interactive Software (TTWO-Q) closed 1.1 per cent higher after the video game publisher said it would buy Gearbox Entertainment, best known for the first-person shooter game Borderlands, from Sweden’s Embracer for US$460-million.
The Swedish group is selling the game developer for a steep discount, having bought it in a deal that valued the business at up to US$1.4-billion in 2021.
In a separate statement, Embracer said the deal with Take-Two would cut its net debt by about 3.2 billion crowns (US$301.23-million) to 3.5 billion crowns and that it expected the transaction to be immediately accretive to its free cash flow generation.
Embracer, the owner of the Tomb Raider video game franchise, has been carrying out a restructuring program since last year, aiming to cut debt. It said last month that it may fall short of its March net debt target of 8 billion crowns.
Embracer CEO Lars Wingefors said that Gearbox’s acquisition “marks the result of the final structured divestment process and is an important step in transforming Embracer into the future with notably lower net debt and improved free cash flow.”
Gearbox will operate as a studio within 2K, a publishing label owned by Take-Two, and will be led by founder and CEO Randy Pitchford, Take-Two said. The acquisition is set to be completed during the first quarter of Take-Two’s fiscal year 2025.
Guelph, Ont.-based solar technology firm Canadian Solar Inc. (CSIQ-Q) turned higher and gained 1.9 per cent on Thursday after it denied allegations of patent infringement by Singapore-based Maxeon Solar related to TOPCon solar cell technology.
Earlier this week, Maxeon filed a lawsuit against Canadian Solar in the Eastern District of Texas, alleging infringement of Maxeon’s patents.
Canadian Solar said its “preliminary assessment is that the claims in the complaint are entirely without merit.” It added that it intended to defend itself against Maxeon’s claims.
Maxeon, which designs and manufactures solar panels, had filed two lawsuits against Aiko Energy last year for infringement of two separate design patents.
On the decline
Top U.S. home improvement chain Home Depot (HD-N) dipped 0.6 per cent on news it will buy building materials supplier SRS Distribution in an US$18.25-billion deal, beefing up its business to professional customers as the industry tackles tepid demand.
The company and rival Lowe’s Cos (LOW-N) have projected a slower recovery this year as U.S. consumers pause big home remodeling and renovation projects due to sticky inflation.
This has put pressure on the Do-It-Yourself (DIY) segment, which makes up about half of Home Depot’s business, and the company has sharpened its focus on “Pro-customers” such as professional builders, contractors, handymen to drive sales.
Thursday’s acquisition of SRS, Home Depot’s biggest deal, will expand its total potential market by about US$50-billion to roughly US$1-trillion, the company said.
SRS, a portfolio company of private equity firms Leonard Green & Partners and Berkshire Partners, serves Pro-customers including roofers, landscapers and pool contractors. It said it would operate as an independent unit within Home Depot and its leadership team will remain with the company.
“SRS has built a robust and successful platform that will accelerate our growth with the residential professional customer,” Home Depot CEO Ted Decker said in a statement.
The acquisition will add SRS’ network of more than 2,500 professional sales force in more than 760 locations to Home Depot’s footprint of more than 2,000 U.S. stores and distribution centres.
With files from staff and wires
David Leeder