A look at North American equities heading in both directions
On the rise
CI Financial Corp. (CIX-T) soared 23.2 per cent after saying it will sell a 20-per-cent stake in its U.S. wealth management arm to Bain Capital LP and other investors for $1.34-billion, pausing efforts to take the business public.
Investors also include a unit of the Abu Dhabi Investment Authority, Flexpoint Ford, Ares Management funds and the U.S. state of Wisconsin, the company said in a statement.
Proceeds from the sale of CI US will be used to reduce net leverage to 2.7 from 4.
In December, the company started the initial public offering process for CI US, attracting strong interest from large institutional investors, it said.
“We capitalized on an opportunity to accomplish in the private markets the objectives we sought in the IPO,” CI Chief Executive Kurt MacAlpine said, citing value creation for shareholders, capital infusion, and building relationships with leading long-term investors.
The sale is expected to close in late May. A six-person board of directors will oversee CI U.S., with five members nominated by CI and one member nominated by the investor group.
CI on Thursday also reported first-quarter adjusted earnings of 74 cents per share, compared with the mean expectation of eight analysts of 78 cents. Revenue rose 0.6 per cent to $637.82-million from a year ago, above analysts’ estimate of $626.36-million.
Vancouver’s Absolute Software Corp. (ABST-T) surged 33.7 per cent after it said on Thursday it had agreed to be taken private by Crosspoint Capital Partners for US$657-million, extending a recent trend of private equity firms snapping up cybersecurity providers.
Shareholders of Absolute Software will receive US$11.5 per share in cash, representing a premium of 34 per cent to the U.S.-listed stock’s last close, the company said.
Shareholders are set to vote on the acquisition, valued at US$870-million including debt, at a special meeting expected to be held in late June.
Crosspoint Capital, which has invested in McAfee and Forescout, focuses on cybersecurity, privacy and infrastructure software sectors.
Peer Thoma Bravo has agreed to acquire Magnet Forensics , ForgeRock over the past few months, taking advantage of a drop in valuations.
Onex Corp. (ONEX-T) was up 3.6 per cent on news shareholders have approved a sunset clause that will see founder Gerry Schwartz step down as CEO and hand over control of the company after three years.
Preliminary voting results showed shareholders gave overwhelming approval to the plan, Mr. Schwartz said, paving the way for current president Bobby Le Blanc to take over as Onex’s CEO.
Mr. Schwartz, 80, will stay on as chair. But the dual-class share structure through which he has controlled the company will expire in three years, converting to a more typical single class of voting shares.
When Onex first proposed the transition plan, Mr. Schwartz intended to keep control his multiple voting shares for another five years. But under pressure from investors, the company proposed to shorten the length of the sunset clause.
“I am therefore delighted to confirm that Bobby Le Blanc will assume the role of CEO,” Mr. Schwarz said at a virtual meeting of shareholders on Thursday. “I know that Onex remains in very good hands.”
Had Thursday’s vote not passed, Mr. Schwartz had said he would stay on as CEO.
Mr. Le Blanc’s promotion and the approval of a sunset for the dual-class shares “represent an important step forward on Onex’s transformation from a founder-centric investment company.
- James Bradshaw
Maple Leaf Foods Inc. (MFI-T) jumped 9.8 as it reported a loss in its first quarter compared with a profit a year ago as it faced a difficult pork market, cost inflation and higher startup expenses.
The company said Thursday it lost $57.7-million or 48 cents per share for the quarter ended March 31 compared with a profit of $13.7-million or 11 cents per share in the same quarter last year.
Sales in the quarter totalled $1.17-billion, up from $1.13-billion in the first three months of 2022.
The company said the increase came as sales in its meat protein group rose to $1.14-billion compared with $1.09-billion in the same quarter last year. Plant protein sales fell to $37.4-million compared with $44.9-million a year earlier.
Executive chair and CEO Michael McCain said in a news release that the company’s supply chain has made “exceptional progress back to full normalization,” and the company has been raising prices to mitigate inflation.
Maple Leaf is also taking advantage of renewed access to Chinese markets, he said.
Mr. McCain also said that the company hopes to achieve neutral adjusted earnings before interest, taxes, depreciation and amortization on its plant protein business this year.
On an adjusted basis, Maple Leaf says it lost 12 cents per share compared with an adjusted profit of three cents per share in its first quarter last year.
Analysts on average had expected an adjusted loss of 10 cents per share and $1.16-billion in revenue, according to estimates compiled by financial markets data firm Refinitiv.
Quebecor Inc. (QBR.B-T) rose 0.3 per cent after it reported its first-quarter profit attributable to shareholders fell to $120.9-million compared with $121.4-million in the same quarter a year ago.
The company says the profit amounted to 52 cents per diluted share for the quarter ended March 31, up from 51 cents per share a year earlier when it had more shares outstanding.
Revenue for the quarter totalled $1.12-billion, up from $1.09-billion in the same quarter last year.
On an adjusted basis, Quebecor says its income from continuing operations amounted to 59 cents per share, up from 54 cents per share in the first three months of 2022.
The result matched the average analyst estimate for the company’s adjusted profit, while the average estimate for revenue was $1.10-billion, according to estimates compiled by financial markets data firm Refinitiv.
Quebecor’s Videotron subsidiary completed its acquisition of Freedom Mobile in April for a total purchase price of $2.85-billion.
Calling the release “slightly negative,” Desjardins Securities analyst Jerome Dubreuil said: “QBR reported 1Q23 EBITDA which missed expectations but was probably close to the whisper number as the miss was commensurate with TVA’s miss reported earlier this week. Subscriber numbers were generally better than anticipated. No incremental information was provided on the Freedom acquisition/out-of-Québec expansion. We also note that QBR had industry-leading leverage of 3.1x at the end of 1Q (before Freedom), which is good to see ahead of the Freedom deal, which we expect will take leverage to the high 3s. While we are cautious on the sector, we continue to believe the Freedom acquisition is not fully reflected in QBR’s share price—we will monitor the call for potential further disclosure on Freedom, which could help the Street reflect additional value.”
RioCan Real Estate Investment Trust (REI.UN-T) rose 0.3 per cent after saying its net income for the first quarter was $118-million, down from $160-million a year earlier.
The Toronto-based company says same property net operating income grew by 3.4 per cent, driven in part by increases in rent and occupancy.
RioCan says the decrease in net income was mainly due to a fair value loss on investment properties, compared to a fair value gain a year earlier.
Revenue for the quarter ended March 31 was $279.5-million, down from $294.0-million a year earlier, while fair value loss on investment properties was $17.4-million, down from a gain of $35.4-million during the same quarter in 2022.
Funds from operations totalled $131.3-million, or 44 cents per diluted unit, up from $130.6-million a year ago, or 42 cents per diluted unit.
RioCan says its committed occupancy rate for the quarter was 97.4 per cent, up from 97.0 per cent a year ago.
On the decline
Shares of Manulife Financial Corp. (MFC-T) were lower by 0.2 per centafter saying it had a net income of $1.4-billion attributed to shareholders in the first quarter in its first results under new accounting standards.
It says profits were up about $100-million from its transitional net income last year, which reflects what last year’s results would have been under the new standards.
The insurer says it had diluted earnings per share of 73 cents in the quarter, up four per cent from a transitional earnings per share of 66 cents in the same quarter last year.
The company says its earnings per share growth came from strong core earnings and from the results of a share buyback program.
Manulife reported core earnings of $489-million for its Asia division in the quarter, down from a transitional net income of $479-million last year.
Its Canadian division had core earnings of $353-million, up from a transitional net income of $334-million last year, while its U.S. division saw core earnings of $385-million, up from $293-million a year earlier.
The company compared its latest earnings to quarterly 2022 results that were adjusted for comparison purposes to account for the new reporting standards that came into effect Jan. 1, 2023.
In a research note, RBC Dominion Securities analyst Darko Mihelic said the in-line results “should be viewed positively.”
“We have a positive view on Q1/23 as core EPS was in line with our estimate and consensus (and this is better than peer results so far),” he said. “Results were better than we expected in Canada and Corporate, which offset weaker than expected results in Asia and the U.S., but judging results against expectations built on IFRS 4 is difficult.”
Canadian Tire Corp. Ltd. (CTC.A-T) slid 2.5 per cent after saying its first-quarter profit fell compared with a year ago as it faced unseasonably mild winter weather, a slow start to spring in several regions of Canada and a fire at a key distribution centre in Ontario.
Canadian Tire first-quarter profit hit by costs from fire at key distribution centre
The retailer reported net income attributable to shareholders of $7.8-million or 13 cents per diluted share for the quarter ended April 1, down from $182.1-million or $3.03 per diluted share a year ago.
Revenue for the quarter totalled $3.71-billion, down from $3.84-billion in the same quarter last year.
The drop in revenue came as comparable sales at its Canadian Tire stores fell 4.8 per cent. Comparable sales at its Mark’s banner gained 4.8 per cent, while SportCheck comparable sales grew 3.7 per cent. Helly Hansen revenue rose 22.9 per cent compared with a year ago.
Canadian Tire says its normalized earnings for the quarter amounted to $1.00 per diluted share, down from a normalized profit of $3.06 per diluted share a year ago.
Analysts on average had expected an adjusted profit of $1.31 per share and $3.64-billion in revenue, according to estimates compiled by financial markets data firm Refinitiv.
Nutrien Ltd. (NTR-T) may consider further slowing its expansion of potash capacity, its CEO said on Thursday, after falling prices and sales volumes led the world’s biggest fertilizer producer to cut its annual profit guidance.
Potash prices have been volatile since Russia invaded Ukraine in February, 2022, as sanctions against big global producers Russia and Belarus initially drove up prices, causing farmers to buy less and bring prices back down.
Nutrien is increasing Canadian potash production by 20 per cent to an annual 18 million tons by 2026, a delay of one year from its original plan.
The expansion may slow further, CEO Ken Seitz said on a conference call.
“Yes we would consider slowing down,” Seitz said. “If we see that the market’s not there, then we’ll pace our capital accordingly.”
Nutrien’s expansion spans four mines in the province of Saskatchewan, adding machines and underground equipment and increasing storage and loading capability.
Nutrien’s shares dropped 1.6 per cent in Toronto. On Wednesday, the company cut its forecast for 2023 earnings as lower potash prices and volumes cut first-quarter profit more than expected.
Even so, Seitz said demand for the company’s potash is growing in North America and Brazil, with Russia and Belarus expected to export 30 per cent less combined this year than they did in 2021, before Russia’s invasion of Ukraine.
U.S. farmers this spring are aggressively applying potash, Nutrien said.
Algonquin Power and Utilities Corp. (AQN-T) turned lower and closed down 2.7 per cent on Thursday after saying it has initiated a strategic review of its renewable energy group, following a push by Corvex Management and other activist firms for changes.
The company said in January that it planned to raise US$1-billion through asset sales and would slash its dividend by 40 per cent, to bolster its finances.
A deal to buy the Kentucky operations of American Electric Power also fell through last month, following multiple delays since its announcement nearly 1-1/2 years ago.
Algonquin owns and operates regulated utilities, as well as power generating and water assets, across Canada and the United States, with its regulated business serving more than 1 million customers, according to its website.
Renewable energy group includes all of the company’s non-regulated operating and development power generation assets.
The company also added on Thursday that there can be no assurance that the strategic review will result in any deal or execution of any strategic alternative.
WSP Global Inc. (WSP-T) was lower by 3.1 per cent after saying its net earnings attributable to shareholders for the first quarter were $112.5-million, up 18.4 per cent from $95.0-million a year earlier.
The Montreal-based company says revenues for the quarter ended April 1 were $3.5-billion, up 28.7 per cent from $2.7-billion the same quarter last year.
Diluted earnings per share were 90 cents, up from 80 cents a year earlier.
The company says the first quarter saw higher-than-expected organic growth in net revenues and adjusted earnings before interest, taxes, depreciation and amortization.
President and CEO Alexandre L’Heureux said in a press release Wednesday that the results highlight the company’s diligent execution of its strategic plan, driven in part by positive industry dynamics and high demand for WSP’s services.
The company also announced a dividend of 37.5 cents per share, and announced the termination of its dividend reinvestment plan.
Calling the release “strong,” Benoit Poirier, an analyst at Desjardins Securities, said: “At first glance, we are pleased with the stronger-than-expected results and reaffirmed guidance, which demonstrate management’s ability to unlock value from past acquisitions while continuing to drive strong organic growth. On upcoming M&A, we expect management to take the time to find the right target and we remain confident in the company’s disciplined ability to generate shareholder value as it has executed well over 120+ acquisitions since 2006. In April, WSP acquired Australia-based Calibre for a price tag of $250-million; this has already been added to our model”
Canadian miner American Lithium Corp. (LI-X) was down 3.4 per cent despite saying its Peruvian arm has received authorization from the South American nation’s authorities to carry out additional explorations near its current lithium project.
The new exploration will allow the firm to expand its existing resources in the southern Puno region, bordering Bolivia, said Ulises Solis, chief executive of the subsidiary, known as Macusani Yellowcake S.A.C.
Along with Chile, Argentina and Bolivia, Peru forms part of the “lithium triangle,” which is believed to contain more than half of the world’s resources of the metal across extensive salt flats.
Mr. Solis said in a speech during an industry event that the company received authorization last Friday to develop exploration activities in the Quelcaya area, located a few kilometers from the company’s Falchani project.
Last month, Peru’s economy minister, Alex Contreras, said “conditions were being established” to develop lithium mining projects in the country, a week after Chile launched a plan to boost state control of the industry.
Walt Disney Co. (DIS-N) shares fell 8.7 per cent on Thursday as a surprise drop in streaming subscribers fanned worries that the media and entertainment company’s success in stemming losses at the unit may be coming at the cost of growth.
The decline was set to erase about US$15-billion from the market value of the company after at least 10 analysts lowered their price targets on the stock. Shares of Warner Bros Discovery (WBD-Q) and Paramount Global (PARA-Q) also fell.
“Disney+ is losing less money not because it’s gaining subscribers but because of its price hikes and better cost management,” said Mike Proulx, an analyst at Forrester.
“Cutting marketing dollars is at odds with growing subscribers.”
Operating losses at the streaming unit narrowed by US$400-million in the second quarter from the previous three months, powered by a price hike last December in the U.S. and Canada.
The company plans to raise the price of the ad-free Disney+ service again this year and it also will remove certain films and TV shows from its services to lower costs.
In the second quarter, its flagship Disney+ offering shed about 4 million subscribers, compared with estimates for net additions of 1.3 million, according to Visible Alpha.
Finance chief Christine McCarthy said on a post-earnings call that the softness could extend into the current quarter.
“We expect that many investors will focus on the lack of direct-to-consumer subscriber growth in the fiscal second and third quarter,” veteran media analyst Michael Nathanson said.
Most of the subscriber losses were driven by an exodus at the South Asia-focused Disney+ Hotstar offering after it lost the streaming rights to the Indian Premier League cricket matches.
But Mr. Nathanson said the company would do better without the Disney Hotstar subscribers as they generate lower average revenue per user (ARPU), which tumbled 20 per cent sequentially to 59 UScents.
“Disney’s investors would be better off with a smaller total addressable market of higher paying (and higher RPU) customers. “This is a more logical, albeit less sexy, path,” he said.
Peloton Interactive Inc. (PTON-Q) will recall 2.2 million exercise bikes due to the risk of injuries from a seat-related issue, the company said on Thursday, sending its shares down 9 per cent.
The voluntary recall piles on more pressure on Peloton as it works to tackle waning demand for its fitness equipment amid an uncertain economy.
“We have identified 35 reports of seat posts breaking out of 2,160,000 units sold in the United States, as of April 30,” Peloton said in a statement, after disclosing the defect earlier this month.
During the January to March quarter, Peloton said it had accrued $8.4 million as an estimated expense related to “voluntary corrective action plan” involving the defect.
The U.S. Consumer Product Safety Commission, in a separate statement on Thursday, said consumers should immediately stop using the recalled exercise bikes and contact Peloton for a free repair.
This recall involves Peloton Bikes with model number PL01 sold from January 2018 to May 2023 in the United States and is one of the company’s flagship products.
The seat post can break unexpectedly during use, creating a potential fall and injury risk, Peloton said. There is no impact to Peloton Bike+ Members nor Peloton original Bike owners in the UK, Germany, and Australia, it added.
“We’ve noted Peloton temporarily stopped selling Bike the past few days (Bike+ still available). Clearly negative, but we believe this headline may appear scarier than the actual announcement,” BMO Capital Markets analyst Simeon Siegel said in a note.
The Bike and Bike+ products contribute to a “significant majority” of Peloton’s sales, as per its latest annual filing.
With files from staff and wires
David Leeder