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A look at North American equities heading in both directions

On the decline

Spin Master Corp. (TOY-T) gained 0.2 per cent following better-than-anticipated fourth-quarter results as well as 2023 guidance that landed higher than the Street expected.

The Toronto-based toymaker reported revenue of $466-million, down 25 per cent year-over-year but in line with pre-released results from early February. Adjusted EBITDA fell 84 per cent to $12.4-million, topping the consensus forecast of $5.2-million.

“Spin Master introduced a 2023 guidance which calls for stable revenues year-over-year to $2.02-billion slightly lower than our expectations of $2.151-billion,” said Stifel analyst Martin Landry in a note. “2023 adjusted EBITDA margins are expected to be stable to slightly up year-over-year, translating into an EBITDA of $390 to $400 million, slightly lower than our expectations of $413 million and mostly in-line with consensus of $403 million. While stable revenue year-over-year is not very exciting, adjusted EPS is likely to be up year-over-year on slight EBITDA margin expansion and share buybacks or acquisitions, which is better than most peers. We do not expect the shares to move materially [Thursday] based on the above.”

On the decline

WSP Global Inc. (WSP-T) surrendered large early gains and closed down 0.1 per cent following the late Wednesday release of better-than-anticipated fourth-quarter results.

The Montreal-based consultancy company reported adjusted net earnings of $1.68 per share, exceeding the Street’s forecast of $1.54 as revenue increased 18.9 per cent year-over-year.

WSP Global CEO says he sees company in same league as McKinsey as growth spree persists

It also introduced better-than-expected financial guidance, including adjusted EBITDA of $1.76-$1.84-billion (versus the consensus of $1.796-billion).

“WSP continues to see momentum in most of its global markets, with organic growth from the Americas, EMEIA, and APAC regions all above our forecasts,” said Laurentian Securities analyst Jonathan Lamers. “The backlog increased 7.6 per cent organically over the trailing twelve months through Q4.”

“WSP appears set for continued growth through acquisitions and margin expansion driven by internal operational excellence initiatives. Net debt / EBITDA leverage improved to 1.5 times at quarter-end, from 1.8 times at Q3-end, supporting future acquisitions. .... Relatively well-positioned to weather a potential economic recession. WSP is diversified across end markets and geographies, with solid and growing exposure to the public sector (52 per cent of revenue) and global mega-trends. The company also has a highly variable cost structure, having demonstrated margin expansion through COVID despite industry demand contraction.”

Maple Leaf Foods Inc. (MFI-T) plummeted 14.1 per cent despite raising its dividend as it reported a loss of $41.5-million in its latest quarter due in part to weaker pork markets and a cyberattack.

The food processing company says it will now pay a quarterly dividend of 21 cents per share, up from 20 cents per share.

The increased payment to shareholders came as Maple Leaf says its loss for the quarter ended Dec. 31 amounted to 34 cents per share compared with a profit of $1.9-million or two cents per share in the last three months of 2021.

Sales totalled $1.19-billion, up from $1.12-billion a year earlier.

The company says its most recent quarter included a $23-million hit related to what it called a cybersecurity incident in November and $25.8-million in startup expenses related to construction projects.

On an adjusted basis, Maple Leaf says it lost 28 cents per share in its fourth quarter compared with an adjusted profit of nine cents per share a year earlier.

“2022 was clearly a year of unprecedented challenges for us on many fronts, including hyperinflation, dislocation in the pork markets, supply chain dysfunction, job vacancies and a cyberattack,” Maple Leaf Foods chief executive Michael McCain said in a statement.

“Of course, our fourth-quarter results are not where we like them to be, given these unprecedented market conditions and the impacts of the cyberattack, but the underlying health of the business in normal markets is solid and in-line with where we expected to be at this point.”

Guelph, Ont.-based Linamar Corp. (LNR-T) was lower by 13.7 per cent following weaker-than-anticipated fourth-quarter results as investors expressed concern about its 2023 guidance as its growth in its Mobility segment continues to lag expectations.

After the bell on Wednesday, the manufacturer reported earnings per share of $1.61, narrowly lower than the consensus forecast on the Street by 4 cents.

“The strong performance in the Industrial Segment was entirely offset by weaker Mobility Segment results versus expectation,” said BMO analyst Peter Sklar. “Overall, we found the quarter and the surrounding disclosure to be moderately negative. Margins in the Mobility Segment are expected to be flat, and Capex is expected to increase substantially in 2023. Partially mitigating these negatives is the strong outlook for the Industrial segment with double-digit top-line growth accompanied by margin improvement.”

Transat AT Inc. (TRZ-T) dipped 0.6 per cent after its 13th straight quarter of net losses, though they were the best results since the third quarter of 2020.

It reported a $56.6-million loss in the quarter ended Jan. 31 compared with a loss of $114.3-million a year earlier as its revenue more than tripled.

The loss amounted to $1.49 per diluted share for the quarter ended Jan. 31. compared with a loss of $3.03 per diluted share a year earlier.

First-quarter revenue totalled $667.5 -million, up from $202.4-million a year earlier when the company had to scrub nearly 30 per cent of its scheduled flights as a result of booking cancellations following the emergence of the Omicron variant.

On an adjusted basis, Transat says it lost $1.62 per share in the quarter compared with an adjusted loss of $2.53 per share in its first quarter last year.

Those results came in 20 per cent above analysts’ expectations, which had predicted an adjusted loss of $2.02 per share and $662.5 million in revenue, according to estimates compiled by financial markets firm Refinitiv.

The head of Transat AT Inc. says travel demand reached heights comparable to 2019 in its first quarter, even as higher airfares and the threat of recession risked dampening customers’ enthusiasm.

“Transat is on an upswing and is headed for a return to profitability,” CEO Annick Guerard said in a statement alongside the travel company’s earnings release Thursday.

“Resilient demand for travel is supporting prices and helps us deal with the pressure on operating costs.”

Transat said the pace of bookings is similar to 2019 and strong demand is fuelling price hikes, helping the carrier cover higher costs.

“Despite concerns of a recession, the North American airline sector is benefiting from a counter-cyclical recovery with pent-up demand for travel,” the company said as part of an investor presentation.

“While it is too early to have a complete picture for the summer, the winter trends seem to be continuing into summer 2023.”

It projected an adjusted operating income margin of between four and six per cent.

Shares of crypto-focused companies fell on Thursday after Silvergate Capital Corp. (SI-N) disclosed plans to wind down operations and voluntarily liquidate, as the aftermath of FTX’s implosion last year reverberates through the industry.

The crypto lender’s shares slumped 43.4 per cent a day after hitting a record low and losing 64 per cent since the company flagged a going concern risk on March 1. Shares of Signature Bank (SBNY-Q), which uses blockchain technology, also fell.

Crypto exchange Coinbase Global, which severed ties with the bank last week, as well as miners Riot Blockchain and Marathon Digital also slid.

Bitcoin steadied near at $21,647, its lowest since mid-February, with analysts and investors saying the market impact of the news was limited as it had been widely expected.

Silvergate’s announcement also adds to a list of high-profile collapses of crypto market players since last year.

With Silvergate shares down 95 per cent over the past 12 months, and 72 per cent so far this year, shorting has been a profitable trade for bearish investors.

Nearly 85 per cent of the company’s free float is under short position with short sellers making US$241-million in year-to-date mark-to-market profits, an 81.9-per-cent increase on an average short interest of US$294-million, analytics firm S3 Partners said on Monday.

U.S.-listed shares of Credit Suisse (CS-N) declined 4.8 per cent in the wake of postponing publication of its annual report after a last-minute call from the United States Securities and Exchange Commission (SEC), which raised questions about its earlier financial statements.

The unusual intervention by the U.S regulator is the latest blow for Credit Suisse as the lender reels from a series of scandals and setbacks that have sent its share price plunging and led clients to withdraw billions.

Credit Suisse shares were down around 6% and close to their all-time low in early afternoon trading in Zurich on Thursday.

The bank said the SEC had called it late on Wednesday regarding “certain open SEC comments about the technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”

The bank had revised how it booked a series of cash flows, including share-based compensation and foreign exchange hedges.

Credit Suisse said that following the call it decided to postpone publication of the annual report.

“Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received,” it said, adding that the 2022 financial results “are not impacted.”

Shares of SVB Financial Group (SIVB-Q), the California-based parent of Silicon Valley Bank, slumped 60.6 per cent as the startup-focused lender slashed its 2023 outlook and announced a US$1.75-billion share sale to shore up its balance sheet.

SVB’s troubles are the latest example of strain in rates-sensitive parts of the U.S. economy - coming just hours after crypto-lender Silvergate said it was winding down operations late on Wednesday.

SVB loans money to early-stage businesses and says it banked nearly half of U.S. venture-backed technology and life-sciences companies with stock market listings in 2022.

Its customers’ “cash burn” rose in February and is driving deposits lower than forecast, CEO Greg Becker said in a letter to investors. Combined with higher costs of capital, that is pressuring margins and income, he said.

In response, SVB said it is seeking to raise more than US$2-billion, made up of US$500-million from private equity firm General Atlantic and US$1.75-billion via a public equity offering.

The company also liquidated most of its securities portfolio, raising US$21-billion, which it plans to re-invest in shorter-term debt while doubling its term borrowing to US$30-billion.

“We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients,” Mr. Becker said.

With files from staff and wires

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