A survey of North American equities heading in both directions
On the rise
Canadian cannabis stocks soared Thursday afternoon after the U.S. Justice Department formally reclassified marijuana as a less dangerous drug, a historic shift in generations of the country’s drug policy.
Canopy Growth Corp. (WEED-T), Aurora Cannabis Inc. (ACB-T), Organigram Holdings Inc. (OGI-T) and Tilray Brands Inc. (TLRY-T) were among the big gainers on news a proposed rule sent to the federal register recognizes the medical uses of cannabis and acknowledges it has less potential for abuse than some of the nation’s most dangerous drugs. The plan approved by Attorney General Merrick Garland would not legalize marijuana outright for recreational use.
The Drug Enforcement Administration will next take public comment on the proposal in a potentially lengthy process. If approved, the rule would move marijuana away from its current classification as a Schedule I drug, alongside heroin and LSD. Pot would instead be a Schedule III substance, alongside ketamine and some anabolic steroids.
The move comes after a recommendation from the federal Health and Human Services Department, which launched a review of the drug’s status at the urging of President Joe Biden in 2022.
Mr. Biden also has moved to pardon thousands of people convicted federally of simple possession of marijuana and has called on governors and local leaders to take similar steps to erase convictions.
“This is monumental,” Mr. Biden said in a video statement, calling it an important move toward reversing longstanding inequities. “Far too many lives have been upended because of a failed approach to marijuana, and I’m committed to righting those wrongs. You have my word on it.”
David Klein, chief executive of the Smiths Falls, Ont.-based Canopy, says the move is a “major leap forward” because it could help tackle the restrained state of the U.S. weed industry and even pave the way for federal legalization.
Meanwhile, Beena Goldenberg of Organigram positioned the latest move as long overdue and said it was the first substantive change to the country’s federal cannabis policy in more than 50 years.
Last month, The Associated Press reported that the U.S. Drug Enforcement Agency was planning to shift cannabis from a Schedule I drug like heroin and LSD to a Schedule III drug like ketamine and some anabolic steroids.
Canada Goose Holdings Inc. (GOOS-T) beat Wall Street estimates for fourth-quarter revenue and profit on Thursday, riding on a recovery in North America and steady demand in China for its pricey puffer jackets, sending its shares soaring 15.5 per cent.
Revenues jumped 24.5 per cent in North America, compared with a 14-per-cent decline in the prior quarter. Wholesale revenues fell 9 per cent, after dropping 28 per cent in the previous quarter.
The company had grappled with sluggish sales for its luxury jackets, which retails for more than US$1,000, as customers cut back on luxury spending and retailers trimmed excess inventories in the U.S.
There was a fear that investors might see bigger destocking or decline in the wholesale, said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.
Sales rose about 30 per cent in China, the company said.
“I think it’s a really bad luxury environment in general... (Canada Goose’s results) are showing different attributes compared to other luxury goods,” said Cole Smead, chief executive of Smead Capital Management in Phoenix.
Several luxury brands have echoed a slowdown in demand for their products in key market China, which is grappling with a property crisis and youth unemployment.
Canada Goose forecast fiscal 2025 revenue to grow in the low single-digits from a year earlier. That compared with revenue growth of about 10 per cent for fiscal 2024.
The company withdrew its long-term growth targets announced last year, citing changes in business conditions including a more challenging consumer spending environment.
Toronto-based Canada Goose’s revenue rose to $358-million in the fourth quarter, compared with analysts’ expectations of $315.5-million, according to LSEG data.
It earned a profit of 19 cents per share, versus expectations of 7 cents.
Lightspeed Commerce Inc. (LSPD-T) stock soared Thursday after the Montreal point-of-sale software company beat quarterly financial targets and issued a sharply higher operating profit forecast than analysts had expected for its new fiscal year. The company also confirmed founder Dax Dasilva would become permanent CEO, after stepping in on an interim basis to replace ousted predecessor Jean Paul Chauvet in February.
The stock was up more than 15 per cent in mid-afternoon trading on the Toronto Stock Exchange, following a recent pattern for Canadian software vendors. Those like Shopify Inc, Open Text Corp. or Docebo Inc. that have given disappointing financial outlooks have seen their stocks sell off by 15 per cent or more, while those like Lightspeed and Copperleaf Technologies Inc. that have issued stronger-than-anticipated forecasts have jumped by a similar degree.
“As expected, but to a greater extent than expected, Lightspeed’s returning CEO is placing a greater relative emphasis on driving profitability, which we think should be helpful for the stock,” BMO Capital Markets analyst Thanos Moschopoulos said in a note.
Lightspeed said it generated US$230.2-million in the fourth quarter ended March 31, up 25 per cent year over year, and lost US$32.5-million, an improvement over a loss of $74.5-million a year earlier.
However, analysts pay more attention to its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which came in at US$4.4-million for the quarter. It was the third straight quarter in which the company has delivered a positive result on this measure, which is not a recognized accounting standard and adjusts for items including share-based compensation and related payroll taxes. Both revenues and adjusted EBITDA beat analyst expectations.
- Sean Silcoff
Cambridge, Ont.’s ATS Corp. (ATS-T) saw gains of 5.4 per cent in the wake of reporting a fourth-quarter profit of $48.5-million, up from $29.6-million a year earlier, as its revenue rose 8.3 per cent.
The maker of automation systems says the profit amounted to 49 cents per share for the quarter ended March 31, up from 32 cents per share in the same quarter last year.
Revenue for the quarter totalled $791.5-million, up from $730.8-million a year earlier.
On an adjusted basis, ATS says it earned 65 cents per share in its latest quarter, down from an adjusted profit of 73 cents per share in the same quarter last year.
The company’s order backlog stood at $1.79-billion at March 31.
ATS announced Wednesday a deal to buy Montreal-based Paxiom Group, an automated packaging machine company focused on the food and beverage, cannabis, and pharmaceutical industries.
U.S. retail giant Walmart (WMT-N) raised its full-year forecast and reported better-than-expected first-quarter results on Thursday, betting on easing inflation to further boost demand for essentials and bring a rebound in sales of discretionary products like apparel and electronics.
Shares of the Bentonville, Arkansas-based company were up 7 per cent.
The strong performance by the nation’s largest retailer could assuage some investors’ fears about ebbing U.S. consumer spending. Americans have largely been able to weather higher prices but a long bout of inflation has raised concerns that shoppers could become more constrained and a recovery in spending will be slower than previously expected.
While U.S. consumer prices rose less than expected in April, domestic demand has shown signs of cooling as Americans struggle with higher mortgage rates and car insurance premiums. On Thursday, Walmart reported total U.S. comparable sales up 3.9 per cent, excluding fuel, for its first quarter ended April 30. Average transactions rose by a similar amount and unit sales also rose, Walmart said in a statement. Analysts on average were expecting U.S. comparable sales growth of 3.15 per cent, according to LSEG.
First-quarter adjusted earnings per share came in at 60 US cents easily beating the 52-US-cent average forecast. Total revenue of US$161.51-billion also topped estimates.
The retail bellwether now expects annual consolidated net sales to rise at the high end or slightly above its prior forecast of 3-per-cent to 4-per-cent growth.
It also expects adjusted profit per share to be at the high end or slightly above its prior estimate of US$2.23 and US$2.37, it said on Thursday.
Warren Buffett’s Berkshire Hathaway (BRK.B-N, BRK.A-N) on Wednesday revealed a new, US$6.72-billion stake in the insurer Chubb Ltd. (CB-N), confirming months of speculation that it had made a big new investment.
Berkshire owned 25.92 million Chubb shares as of March 31, according to a regulatory filing detailing Berkshire’s U.S.-listed holdings as of that date.
The disclosure sent Chubb’s share price to a record high.
Shares often rise when Berkshire reveals new holdings, reflecting what investors believe is Mr. Buffett’s seal of approval.
“Chubb is an attractive equity investment for Berkshire because it operates in a business Berkshire knows well: property-casualty insurance,” Cathy Seifert, a CFRA Research analyst who covers Berkshire, said in an email.
Ms. Seifert would not speculate whether Berkshire might buy all of Chubb, but said Chubb’s focus on commercial lines specialty coverage and high-end homeowners’ protection would be a “good fit” in Berkshire’s insurance and reinsurance portfolio.
Berkshire ended March with US$189-billion of cash and equivalents.
At Berkshire’s annual meeting on May 4, Mr. Buffett said the cash stake could reach US$200-billion by June, and that cash looked “quite attractive” relative to high-priced stocks and in light of “what’s going on in the world.”
Berkshire began buying Chubb in last year’s third quarter, and had obtained U.S. Securities and Exchange Commission permission to temporarily keep its purchases confidential.
On the decline
Laurentian Bank of Canada (LB-T) dipped 1 per cent on news it is cutting jobs and eliminating its equity research unit as the lender overhauls its business after a tumultuous year that saw its chief executive officer ousted.
Late last year, the bank embarked on strategic review aimed at turning around its business after the lender failed to attract a buyer and a multi-day system outage prompted it to spend millions of dollars to compensate customers. Laurentian has said that it would need to reduce its workforce to rein in expenses, and it has already trimmed less profitable businesses.
Laurentian chief executive officer Éric Provost said Wednesday that the bank had made further reductions to its workforce, according to an internal memo seen by The Globe.
“An essential component of our plan is to simplify the entire organization to increase our efficiency,” Mr. Provost said. “To date, we have created synergies and found ways to optimize our organizational structure. More action is needed however, in order to make substantial progress toward our priorities.”
Laurentian did not disclose the number of roles affected by the layoffs, but signalled last year that it would cut 2 per cent of its workforce of 3,000 employees.
- Stefanie Marotta
Kingsey Falls, Que.-based Cascades Inc. (CAS-T) declined 1.5 per cent after it named Resolute Forest Products executive Hugues Simon as its next president and CEO.
The paper and packaging company says Simon will takeover the new job no later than July 1.
He succeeds Mario Plourde, who is retiring from the top job.
Cascades says Mr. Plourde will help support Mr. Simon during a transition period lasting until December, after which he will act as a special adviser
Mr. Simon is currently president of the wood products business at Resolute Forest Products and was previously president of BarretteWood Inc.
Deere (DE-N) has trimmed its annual profit forecast for the second time, squeezed by slumping demand for tractors and combines as falling crop prices pressure farm income, sending its shares down 4.7 per cent on Thursday.
Farm income is expected to slide 25.5 per cent to US$116.1-billion this year from 2023, according to the U.S. Department of Agriculture, set for a second consecutive annual drop, as corn and soy prices plummet and production costs increase.
Higher interest rates have also piled pressure on farmers, leaving equipment dealers with bloated inventories, prompting some to offer discounts or even auction off machines at lower prices, forcing Deere and peers to cut production.
The world’s largest farm equipment maker now expects fiscal 2024 net income of about US$7-billion, down sharply from its prior expectations of US$7.50-billion to US$7.75-billion.
The forecast implied “a very aggressive” downshift in production in the second-half of the year, Jefferies analyst Stephen Volkmann said.
Deere expects sales of large agriculture equipment to decline between 20 per cent and 25 per cent this year, compared its prior estimates for a roughly 20-per-cent fall. Industry sales for large agriculture equipment was projected to fall about 15 per cent, at the low end of its previous forecast.
“There were some signs (that guidance might be impacted), but I was still surprised to see them cut guidance for the industry... It was a bit more broad-reaching than I would have expected,” M Science research analyst Alex Prudhomme said.
“Their guidance always implied that they were going to underproduce retail sales to work down inventory. Now that they’ve cut retail sales (targets) across all markets, they’re going to have to work a lot harder to achieve that goal.”
Net income for the second quarter ended April 28 fell 17 per cent to US$2.37-billion, or US$8.53 per share. Net sales declined 15 per cent to US$13.61-billion. However, both beat Wall Street estimates.
Cisco Systems (CSCO-Q) shares declined 2.7 per cent on Thursday after an upbeat fourth-quarter forecast signaled further stabilization in networking equipment demand and benefits from its US$28-billion deal for cybersecurity firm Splunk.
The world’s largest networking equipment maker had struggled with sluggish demand as customers adjusted piled up inventory from frenetic buying during the pandemic, as well as lingering supply-chain snags.
“After the past couple of quarters of meaningful inventory digestion headwinds, we viewed these order numbers as a positive,” Morgan Stanley analysts said in a note.
Cisco on Wednesday forecast fourth-quarter revenue between US$13.4-billion and US$13.6-billion, compared with analysts’ estimates of US$13.23-billion, according to LSEG data.
“We currently expect customers to complete the installation of the majority of their inventory by the end of our fiscal year in July,” said CEO Charles Robbins on a post-earnings call.
Product orders were flat in the third quarter, excluding the impact of the Splunk buyout, compared with a decline of 12 per cent in the previous quarter.
Cisco was set to add almost US$8-billion to its market value on Thursday, if premarket gains held.
The company is expected to benefit from the billions of dollars U.S. technology giants such as Microsoft and Meta Platforms are spending on data centers to support chatbots like ChatGPT, which need heavy computing power.
Cisco said on Wednesday three of the top four cloud-computing companies were deploying its ethernet, as it reiterated a target of US$1-billion worth of AI product orders in fiscal 2025.
The company raised its 2024 revenue forecast to a range of US$53.6-billion to US$53.8-billion, from its previous expectations for a range of US$51.5-billion to US$52.5-billion.
Apparel maker Under Armour (UAA-N) forecast its annual revenue and profit below analysts’ expectations on Thursday, a sign of soft demand for its sportswear in the U.S. as consumers cut back on discretionary spending in the face of sticky inflation.
Shares of the company, which have fallen 22 per cent so far this year, were lower by 1.3 per cent in volatile trading.
The company has also outlined a restructuring plan and expects to incur total estimated pre-tax restructuring and related charges of about US$70-million to US$90-million.
“Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions ... which will pressure our top and bottom line in the near term,” said CEO Kevin Plank.
Under Armour expects its fiscal 2025 revenue to be down at a low double-digit percentage rate, compared with analysts’ average expectation of a 2.1-per-cent rise to US$5.83-billion, according to LSEG data.
The company also expects fiscal 2025 earnings to be between 18 US cents and 21 US cents per share, compared with analysts’ expectation of 59 US cents per share.
Retail darlings GameStop (GME-N) and AMC (AMC-N) continued their slide into premarket trading on Thursday, as the euphoria over the return of “Roaring Kitty,” who was the central figure in 2021 meme stock rally, fizzles out.
Shares of the struggling videogame retailer GameStop jumpedd as much as $64.83 this week, while fetching US$1-billion in losses for short sellers, according to Ortex Technologies. Theater chain AMC saw an 88-per-cent gain since Friday’s close.
Despite the losses on Wednesday, the two companies were among the top three most-traded shares by retail investors during the session, data from J.P.Morgan showed, a position they have held every day this week.
The sharp surge in the shares began after a series of posts from Keith Gill’s X account “Roaring Kitty,” whose bullish posts on GameStop was a reason for the 2021 meme stocks frenzy.
But unlike 2021, when Reddit users banded together to target highly shorted stocks that burnt bearish hedge funds, this time institutional investors too were part of the meme stock mania, Vanda Research, which tracks retail investor flows, said.
“There’s more use of social media and professional investors know this, they’re tracking this, and they’re trying to take advantage of this,” said Ben Laidler, global markets strategist at digital brokerage eToro.
“Even though there are more retail investors today, you’re not seeing that follow through into the rally this time as you saw last time. Retail investors are once bitten twice shy after they ended up losing a lot of money last time round.”
Crescent Energy (CRGY-N) was down on news it will acquire SilverBow Resources (SBOW-N) in a US$2.1-billion deal, creating the second largest operator in the Eagle Ford basin in Texas.
The deal comes amid an ongoing consolidation wave in the U.S. energy sector that triggered US$250-billion worth of deals in 2023, as the companies sought to use their cash piles and boost reserves.
SilverBow and Crescent last year beefed up their Eagle Ford positions through acquisitions from Chesapeake and Mesquite Energy, respectively.
The new combined company would produce roughly 250,000 barrels of oil equivalent per day and the deal is expected to result in annual savings of US$65 million to US$100-million, SilverBow and Crescent said on Thursday.
Earlier this year, SilverBow rejected a buyout offer from largest shareholder Kimmeridge Energy Management, saying it “undervalued” the company. Kimmeridge is now vying for seats on the company’s board.
After the deal’s closing, which is expected in the third quarter, Crescent’s board of directors will increase to 11 members with the addition of two directors to be designated by SilverBow.
Shareholders of SilverBow would get 3.125 shares of Crescent Class A common stock for each share held, along with an option to get all or a portion of the proceeds in cash at a value of US$38 per share.
The maximum cash consideration for the deal is US$400-million, the companies said.
With files from staff and wires
Editor’s note: An earlier version of this story incorrectly stated Crescent Point Energy had reached a deal to acquire Silverbow Resources instead of Crescent Energy, based in Houston. This version has been updated.
David Leeder