A survey of North American equities heading in both directions
On the rise
Shares of Rogers Communications Inc. (RCI.B-T) surged 3.2 per cent on Thursday after it saw a net loss of $99-million during its most recent quarter, even as its revenue grew 36 per cent year over year to $5.09-billion.
The telecom attributed the loss, which compared to a net profit of $371-million a year ago, to higher depreciation and amortization, higher finance costs and higher restructuring, acquisition and other costs, primarily related to its recent acquisition and continuing integration of Shaw Communications Inc.
The company also took a $422-million loss on an obligation to purchase at fair value the non-controlling interest in one of its joint ventures’ investments.
After adjusting for various items such as depreciation and amortization, finance costs and income tax expenses, the company had $679-million in profit for the three month period ended Sept. 30, up 56 per cent from $436-million a year ago.
The adjusted earnings amounted to $1.27 per share, up from 84 cents per share during the same quarter last year.
Analysts were expecting adjusted earnings of $1.13 per share and revenue of $5.07-billion, according to the consensus estimate from S&P Capital IQ.
The Toronto-based wireless giant added 261,000 net new wireless customers during the quarter, including 225,000 net new postpaid subscribers. (Postpaid customers are billed at the end of the month for the services they used, versus prepaid customers, who pay upfront for wireless services.)
“Six months into our Shaw integration, we’re tracking ahead of our synergy targets and deleveraging plans,” Rogers president and CEO Tony Staffieri said in a statement.
“At the same time, we continue to introduce new technology, new innovations, and new value propositions to Canadians. The team is firing on all cylinders and executing with discipline, I am very pleased with our progress,” he added.
In a research note, Desjardins Securities analyst Jerome Dubreuil said: “This morning, RCI reported a positive update, with better-than-expected financials, impressive wireless loadings and accelerated synergy realization, and with management now targeting FCF to land at the upper end of guidance. The company is also rapidly deleveraging, which is encouraging as leverage remains an important concern for investors. We expect a share price reaction firmly in positive territory.”
- Alexandra Posadzki
First Quantum Minerals (FM-T) gained over 8 per cent on news Chinese copper miner Jiangxi Copper Co Ltd. has increased its stake in the Canadian company to 19.5 per cent from 18.3 per cent, after buying a total of 1.35 million shares, according to a public filing in Canada on Wednesday.
First Quantum shares have been under pressure since the Panama government moved to revoke the contract for the Canadian miners’ flagship copper mine in the Central American country.
Jiangxi Copper, which already is the largest shareholder of First Quantum, made the purchases over three trading days starting Nov. 3, taking its total shares in the Canadian company to 128.2 million shares, or about 19.5 per cent, according to Reuters calculations.
In 2020, First Quantum adopted a poison pill takeover defense that prevents the Chinese company from buying more than 20-per-cent stake, under a standstill agreement.
First Quantum shares extended their gains to trade as much 8.9 per cent on the news. Still, the shares are down about 40 per cent since the Panama government proposed a referendum to decided whether the Cobre Panama mining license should be canceled after massive protests against the government awarding the contract to FQM and lack of transparency while signing the contract.
Suncor Energy Inc. (SU-T) closed 3.7 per cent higher after it beat market estimates for third-quarter profit, helped by strong refining margins and higher sales volumes from its oil sands operations.
Demand for refined products remained stable during the quarter after the voluntary production cut from top OPEC+ oil producers Saudi Arabia and Russia.
The company’s refinery utilization averaged 99 per cent, higher than the 85 per cent in the second quarter. Refinery throughput declined marginally to 463,200 barrels per day (bpd) compared with a year earlier.
Peer Cenovus Energy (CVE-T) also reported a rise in its quarterly profit last week, helped by a jump in refinery throughput as operations at two major U.S. plants improved following extensive rebuilds.
Suncor’s total upstream production fell to 690,500 barrels of oil equivalent per day (boepd), compared with 724,100 boepd a year earlier due to international asset divestments.
The company had sold its British oil and gas business to Norway Equinor earlier in March.
Its net production of synthetic crude, a processed form of raw and heavy bitumen, rose to 469,300 bpd, compared with 405,100 bpd a year ago, due to lower maintenance activities.
Suncor said its Terra Nova offshore site would return to service in the fourth quarter.
On an adjusted basis, the company earned $1.52 per share in the quarter ended Sept. 30, compared with analysts’ average estimate of $1.36 per share, according to LSEG data.
The company reported a net profit of $1.54-billion, compared with a year-ago loss of $609-million when it was hit by impairment charges.
On Thursday, Suncor said it is making progress on fixing a number of safety and operational issues that caused the share price of Canada’s second-largest oil producer to lag its rivals and spurred the resignation of its previous CEO.
Calgary-based Suncor has been dogged by performance issues in recent years, culminating in a string of fatalities at oil sands sites and slope stability issues at its Fort Hills mine in northern Alberta.
Rich Kruger, who replaced Little in April, said the company saw improvement in safety and plant turnaround performance and progress on Fort Hills in the third quarter of this year.
“We’ve got more to do. But I think we have a business plan that we’ll be talking about in the not-too-distant future that has continuous improvement about it,” Mr. Kruger told analysts on an earnings call on Thursday. “As I sit here seven months in, I feel better than I did in the first month.”
In a research note released before the bell, TD Securities analyst Menno Hulshof said: “There were clear signs of operational improvement and momentum in the quarter. We hope to see this extend through year-end (note only minimal downstream turnarounds planned for Q4/23), and into 2024. Should SU deliver, the Street should begin to factor in the upside associated with ongoing improvements and its push for greater clarity, simplicity, and focus across business lines.”
The country’s largest insurer Manulife Financial Corp. (MFC-T) increased 3 per cent after it reported better-than-expected earnings for the third-quarter, boosted by insurance sales in Asia and higher returns on investment amid rising interest rates.
Core earnings rose 28 per cent to $1.74-billion, or 92 cents per share. Analysts were expecting 82 cents per share, according to LSEG estimates.
Manulife said its business in Asia was driven by demand from mainland Chinese visitors following the reopening of the Hong Kong border this year.
The company said higher interest rates boosted its earnings from investments and surplus assets, as well as improved insurance sales in Canada.
Life insurance companies generally buy long term bonds to support their products that cover long periods of time. The rise in interest rates have benefited life insurers as they can roll over their maturing bonds at higher interest rates.
Morningstar analyst Suryansh Sharma noted that high interest rates would continue to benefit insurers.
“Your incremental interest income is increasing because of higher interest rates,” Mr. Sharma said, noting Manulife’s core return on equity for the quarter was 16.8 per cent, higher than the company’s long-term target of 15 per cent.
Manulife said higher rates would continue to boost its businesses.
“We are in a position of strength to weather macroeconomic uncertainties,” CEO Roy Gori said in a statement.
Annual premium equivalent (APE) sales, an annualized sales metric, at Manulife’s Asia unit rose 20 per cent to $835-million and in Canada rose 51 per cent. Overall, APE sales rose 21 per cent.
Asia is the biggest sales contributor, given Manulife’s presence in 12 markets that includes over 100,000 agents and over 100 bank partnerships.
Core earnings in Asia rose 33 per cent, while they rose 4 per cent in Canada.
“Results were solid this quarter, particularly the significant improvement in Asian new business and growth in new business CSM,” said TD Securities analyst Mario Mendonca. “LTC did not impact results meaningfully. Finally, CSM amortization continues to improve. Offsetting these positive attributes, the significant market charges (real-estate valuation) continue to hurt our otherwise positive view on the sector.”
Great-West Lifeco Inc. (GWO-T) rose 1.8 per cent with better-than-expected third-quarter results.
The company attributed the increase primarily to business growth, as well as higher average equity markets and interest rates.
After the bell on Thursday, Great-West Lifeco reported adjusted earnings per share of $1.02, up 18 per cent year-over-yea and 4 cents higher than the consensus projection on the Street.
The company says base earnings from its Canadian segment were $296-million, down from $340-million a year earlier.
Meanwhile, base earnings in the U.S. increased slightly to $262-million, while earnings rose in Europe to $206 million.
In a note, TD Securities analyst Mario Mendonca said: “Reported earnings were slightly lower than base, reflecting assumption review charges (negative FV adjustments, which are offset by higher CSM and, therefore, support future earnings) offset by the benefit of higher rates (liabilities declined by more than assets). The benefit of higher rates was greater than the charge related to lower real estate (UK) and equity returns.”
“While GWO has delivered solid results recently, we are uncomfortable with the company’s very high dividend payout ratio (we expect dividend growth to lag) and, at this time, we favour the Asian and WM businesses of the other insurers, particularly MFC, over GWO’s large European segment and the Reinsurance segment. Additionally, we believe Reinsurance new business is generally more vulnerable to regulatory and tax changes.”
Uranium miner NexGen Energy Ltd. (NXE-T) jumped 7.1 per cent after announcing it has received Saskatchewan’s environmental assessment (EA) approval to proceed with the development of its 100-per-cent-owned Rook I Project.
The Rook I Project, which has a total initial capex of $1.3-billion is the largest development-stage uranium project in the country.
NexGen said it was the first company in more than two decades to receive full provincial EA approval for a greenfield uranium project in Saskatchewan.
The approval will allow the company to progress with securing other provincial and federal approvals to construct the project.
Demand for uranium from nuclear reactors is expected to climb by 28% by 2030 and nearly double by 2040 as governments ramp up nuclear power capacity to meet zero-carbon targets, according to a report by the World Nuclear Association (WNA).
Quebecor Inc. (QBR.B-T) was up 0.5 per cent in the wake of reporting its third-quarter profit rose compared with a year ago as the acquisition of Freedom Mobile Inc. earlier this year helped boost revenue.
The company reported $209.3-million in net income attributable to shareholders for the quarter ended Sept. 30, up from $178.4-million a year earlier.
Quebecor says the profit amounted to 91 cents per share, up from 76 cents per share in the same quarter last year.
Revenue for the quarter totalled $1.42-billion, up from $1.14-billion a year earlier.
Quebecor says its adjusted income from continuing operating amounted to 88 cents per share, up from 75 cents per share in the same quarter last year.
Last week, Quebecor’s TVA Group announced it was laying off 547 employees — nearly a third of its workforce — as part of plan that involves overhauling its news division, ending its in-house entertainment content production and optimizing its real estate assets.
“QBR reported 3Q23 consolidated results which were in line with expectations, with robust wireless net additions,” said Desjardins Securities analyst Jerome Dubreuil. “While we remain cautious on the sector, the headwinds are starting to dissipate gradually and we continue to believe the benefits from QBR’s Freedom acquisition are not fully reflected in its share price.”
Cineplex Inc. (CGX-T) rose 2.2 per cent after it reported net income of $29.7-million in its latest quarter as Barbie, Oppenheimer and Mission Impossible: Dead Reckoning helped its revenue hit an all-time quarterly record.
The movie theatre company says the profit amounted to 40 cents per diluted share for the quarter ended Sept. 30, down from $30.9-million or 43 cents per diluted share a year earlier.
The results for the quarter last year included a $49.8-million one-time gain related to the reorganization of its Scene loyalty program.
Revenue for the quarter this year totalled $463.6-million, up from $339.8-million in the same quarter last year.
The increase came as theatre attendance rose to nearly 15.7 million for the quarter compared with nearly 11.1 million a year earlier.
Box office revenue per patron rose to $12.00 compared with $11.25 a year ago, while concession revenue per patron was $8.44, up from $8.35 in the same quarter last year.
Investors in Hollywood studios on Thursday cheered a tentative deal with actors that could help restart production of movies and shows halted by a series of strikes since spring.
The 118-day work stoppage by actors officially ended just after midnight with a three-year deal that the SAG-AFTRA union said was valued at more than $1 billion and included increases in minimum salaries and a new bonus paid by streamers.
Walt Disney exceeded Wall Street’s earnings expectations on Wednesday as higher attendance at its Shanghai and Hong Kong theme parks offset a decline in advertising revenue at television network ABC.
The reaction from investors signals confidence in Chief Executive Bob Iger’s aggressive cost-cutting, the company’s better-than-expected streaming subscriber gains and Mr. Iger’s declaration that Disney had moved into a “building” phase again.
The company also plans to ask its board to reinstate a dividend payment to shareholders by the end of 2023, interim Chief Financial Officer Kevin Lansberry said.
For the fiscal fourth quarter ended Sept. 30, Disney reported adjusted per-share earnings of 82 US cents, topping an average forecast of 70 US cents, according to LSEG data. Quarterly revenue of US$21.2-billion was largely in line with consensus estimates.
On the decline
Canadian Tire Corp. Ltd. (CTC-A-T) finished 2.5 per cent lower in the wake of saying it is laying off 3 per cent of its work force and cutting costs, as persistent economic pressures continue to affect consumer demand and weigh on retail sales.
The Toronto-based retailer announced the cuts as it reported a $66.4-million net loss attributable to shareholders in the third quarter, which ended Sept. 30.
The job cuts, some of which happened just this week, amount to more than 200 corporate “full-time equivalent” positions. The layoffs are also accompanied by a pullback in hiring, as Canadian Tire eliminates “the majority of current vacancies,” amounting to a further 3 per cent of its headcount, according to a press release on Thursday.
The move is expected to save the company approximately $50-million on an annualized run-rate basis. Canadian Tire will also record a $20- to $25-million charge in the upcoming fourth quarter related to the cuts.
Last year, the company announced a four-year, $3.4-billion investment plan to improve its operations and bolster sales, forecasting 4-per-cent average sales growth and setting a goal to more than double diluted earnings per share from 2019 to 2025. In June, as the retailer noted a “turning point in the Canadian economy” among dampened consumer spending, Canadian Tire withdrew that forecast. On Thursday, the company also reported it no longer expects to spend as much as $3.4-billion.
“At this juncture and given the changed economic conditions since early 2022 and continued softening of demand, the company will slow the pace of previously-identified operating capital investments for the remainder of 2023 and 2024, prioritizing its highest returning capital investments,” quarterly financial reporting documents released on Thursday stated.
Canadian also raised its quarterly dividend as it reported a loss in its latest quarter, weighed down by a one-time charge related to its deal to buy back the 20 per cent stake in Canadian Tire Financial Services that is owned by Scotiabank.
The retailer says it will now pay a quarterly dividend of $1.75 per share, an increase of 2.5 cents per share.
The increased payment to shareholders came as Canadian Tire reported a net loss attributable to shareholders of $66.4-million, or $1.19 per diluted share, for the quarter ended Sept. 30 compared with a profit of $184.9-million, or $3.14 per diluted share a year earlier.
The results included a $328-million charge related to the Scotiabank transaction, offset in part by a $131-million insurance recovery related to a fire at a distribution centre in March.
On a normalized basis, Canadian Tire says it earned $2.96 per diluted share in its latest quarter, compared with $3.34 per diluted share a year earlier.
- Susan Krashinsky Robertson
Linamar Corp. (LNR-T) was down 5.2 per cent despite saying it sales and income got a boost in the third quarter thanks in part to its diversification efforts away from contracts reliant on gasoline-powered vehicles.
Sales were $2.43 billion in the third quarter, up from $2.1 billion in the same quarter last year, as the industrial segment of the manufacturer grew faster than its automotive division.
Linamar says it earned $146.7-million, or $2.38 per share, in the quarter ending Sept. 30, up from $133.2-million, or $2.10 per share, last year.
Adjusted earnings were $2.21 per share, up from $1.91 last year, while analyst had expected earnings of $2.07 per share according to financial markets data firm Refinitiv.
The company says it continues to set itself up for the electric vehicle transition, including with its recent acquisition of the Mobex chassis and suspension business.
It says 57 per cent of new business contracts for its mobility division are for EVs, while 74 per cent of new business wins in the segment are either ‘propulsion agnostic’ or for EVs.
In response to the report, an analyst at Raymond James downgraded Linamar shares, expressing concern over the performance of its mobility segment.
Martinrea International Inc. (MRE-T) declined 4.8 per cent after saying net income for the third quarter was $53.7-million, up from $35.9-million a year earlier.
Sales for the quarter were $1.4-billion, up from $1.2-billion during the same quarter last year.
The Toronto-based company says net earnings per share were 68 cents, up from 45 cents last year.
Martinrea president and CEO Pat D’Eramo says the United Auto Workers strikes in the U.S. did not have a significant effect on the company’s third-quarter performance.
However, he says the strikes will have somewhat more of an effect on fourth-quarter results.
The company declared a quarterly cash dividend of five cents per share.
In a research note, TD Securities’ Brian Morrison said: “The Q3/23 results were solid in our view, especially considering the margin headwind from higher-than-anticipated tooling sales and production interruptions on key platforms. Martinrea is clearly making progress on its key margin drivers, with visibility to improve in 2024 to within its target range. More important in our view, Martinrea generated impressive FCF of $80-million this quarter, illustrating that its focus on asset optimization is paying dividends. Slightly stronger-than-anticipated sales and an operating margin of 6.0 per cent for the second consecutive quarter generated adjusted EBITDA/EPS of $163-million/$0.68, which compares with consensus of $149-million/$0.53.”
WSP Global Inc. (WSP-T) closed 1.4 per cent lower in the wake of reporting its third-quarter profit and revenue both rose by nearly a quarter compared with a year ago, buoyed by organic growth as well as recent acquisitions.
The engineering company says its net earnings attributable to shareholders grew to $156.2-million or $1.25 per share for the three months ended Sept. 30 compared with $127.5-million or $1.05 per share in the same period a year earlier.
Revenue rose 24 per cent to $3.6-billion in its third quarter from $2.9-billion the year before.
On an adjusted basis, WSP’s profit climbed to $1.98 per share in its most recent quarter compared with $1.59 per share a year earlier.
The result beat analyst expectations for $1.90 per share, according to financial markets data firm Refinitiv.
The head of WSP said Thursday its spate of acquisitions — four so far this year, plus its biggest ever last fall — is no barrier to future deals by the engineering company, even as interest rates remain high.
“Is that a roadblock to future acquisitions? The answer is absolutely not,” CEO Alexandre L’Heureux told analysts on a conference call, referring to the US$1.81-billion acquisition of U.K.-based John Wood Group’s environment and infrastructure business in September 2022.
Since then, the former boutique firm known as Genivar has snapped up four more engineering outfits based on three continents with about 1,100 employees, bringing WSP’s head count to 67,000.
Seeing it maintaining its “strong momentum” into 2024, Raymond James analyst Frederic Bastien said: “WSP is our favourite engineering consultancy heading into 2024. The company is not only poised to outpace its Canadian peers in earnings growth over the next twelve months, per our adjusted EBITDA growth projection of 16 per cent for 3Q23-2Q24 period, but also best equipped to add value through M&A. We say this because CEO Alexandre L’Heureux packs a one-two punch of strategic sensibility and acumen for acquisitions, and his leadership team shares an entrepreneurial DNA that is unequaled in the space.
“Moreover, no competitor can claim to have as many flags on the world map as WSP, or as strong a presence in Transportation & Infrastructure, Buildings & Property, and Earth & Environment. This cross-sectional leadership yields WSP sought-after defensive attributes in an uncertain macro environment, in addition to creating a virtuous circle of opportunities. We expect this loop to self-reinforce as the firm scales its water, energy transition and digital advisory practices further.”
With files from staff and wires