A roundup of some of the North American equities making moves in both directions
On the rise
TFI International Inc. (TFII-T) surged on better-than-anticipated quarterly results as it sees increased benefits from its US$800-million acquisition of UPS Freight.
After the bell on Monday, the Montreal-based transportation and logistics services provider reported adjusted EBITDA of US$279-million easily topping the Street’s forecast of US$219-million. Adjusted fully diluted earnings per share of US$1.44 also topped the consensus estimates (US$1.00).
“TFII reported a solid quarter, driven by a strong performance at the recently acquired UPS Freight and pricing tailwinds on capacity tightness. The company also raised EPS and FCF guidance, exceeding our prior expectations, but we still see potential upside in guidance from stronger organic trends and/or future M&A. We have materially improved our EPS outlook (above guidance) and have slightly expanded our EV/EBITDA multiple to 9.0 times (was 8.5 times) to reflect further upside potential to our estimates as TFII continues to execute well on its growth strategy,” said Scotia Capital analyst Konark Gupta in a research note.
FirstService Corp. (FSV-T) also jumped with the release of better-than-anticipated second-quarter results before the bell.
The Toronto-based property services provider reported consolidated revenues of US$831.6-million, up 34 per cent year-over-year and exceeding the Street’s estimate of US$735.2-million. Adjusted earnings per share of US$1.21 also topped the consensus projection (US$1.03).
“”The strong results for this second quarter reflect an acceleration of activity in many of our brands and a resumption of amenity services approaching normalized levels in our property management business,” said CEO Scott Patterson.
A quarterly earnings beat and better-than-expected guidance for the current third quarter also pushed Toronto-based Celestica Inc. (CLS-T) higher.
After the bell on Monday, the multinational electronics manufacturing services company reported revenue and earnings per share of US$1.42-billion and 25 US cents, respectively. The Street’s forecasts were US$1.38-billion and 21 US cents.
“A decline in revenue driven by the Cisco disengagement obscured underlying signs of a return to growth,” said Canaccord Genuity analyst Robert Young. “The HPS (former JDM) segment was driven by service provider demand and the semi capital end market was particularly strong. COVID-19 and material (particularly semiconductor) shortages remain headwinds although chip shortages are a net positive for Celestica, with strength in semicap expected to continue with faster-than-market growth. Most importantly, management laid out a return to growth in 2022 with revenue expected to eclipse $6-billion and operating margins recovering to the 3.75-4.5-per-cent target range. A robust balance sheet allows for continued stock buybacks or opportunistic M&A.”
Shares of Noront Resources Ltd. (NOT-X) soared on news BHP Group has made a $325-million approach, rivaling an offer from Australian mining billionaire Andrew Forrest’s Wyloo Metals for the Canadian nickel-copper miner.
The scramble for Noront underscores the race to secure supplies of battery metals among miners ahead of an expected surge in demand due to the rise of electric vehicles.
Noront owns the early-stage Eagle’s Nest deposit, billed by Wyloo as the largest high-grade nickel discovery in Canada since the Voisey’s Bay nickel find in the eastern province of Newfoundland and Labrador, with an initial mine life of 11 years.
BHP said on Tuesday its offer valued Noront at 55 cents per share, representing a premium of 129 per cent to the firm’s closing price on May 21, a day before Wyloo unveiled its proposal.
“For BHP, the acquisition of Noront presents a world-class growth option, in a key future-facing commodity,” BHP Chief Development Officer, Johan van Jaarsveld, said in a statement.
Noront said its board has recommended the Anglo-Australian company’s offer.
General Electric Co. (GE-N) sat higher despite Chief Executive Larry Culp saying on Tuesday the industrial conglomerate is facing inflationary pressure that is set to intensify in the remainder of the year.
The comments came after the Boston-based company lifted its free cash flow forecast for the year after unexpectedly reporting positive cash flow in the second quarter as industrial orders and revenue returned to growth.
In an interview, Mr. Culp said the company is managing the inflationary pressure through a combination of price increases, better sourcing of parts and raw materials, elimination of waste and higher productivity.
“We’re certainly not immune from these inflationary pressures,” he told Reuters. “We’re going to see more of that pressure in the second half.”
But for the price pressure, Mr. Culp said the company’s quarterly earnings would have been better. The company is drawing up mitigation measures as it expects a supply chain logjam to persist in 2022, he said.
GE now expects free cash flow this year to be US$3.5-billion to US$5-billion, up from its prior forecast of US$2.5-billion to US$4.5-billion.
It reported a free cash flow of US$388-million in the quarter. That compared with Refinitiv’s average analyst estimate of an outflow of US$287-million and followed an outflow of US$2.1-billion last year.
On the decline
Vancouver-based Teck is one of Canada’s biggest base metals miner by market value, selling metallurgical coal, copper and zinc.
Sales rose to $2.6-billion from $1.7-billion year-over-year powered in part by materially higher copper prices. The industrial metal hit a record high in the quarter of US$4.78 a pound, as global economies staged a strong recovery with the COVID-19 pandemic ebbing.
Teck is in the process of widening its exposure to copper as it builds a new mine in Chile. The company said that next month the QB2 mine will be about 60 per cent complete with production expected in the second half of 2022.
Profit and revenue in its core coal business also rose in the quarter compared to the previous year, with the company benefiting from higher pricing amid brisk demand for steel. Wildfires in British Columbia have lately disrupted some rail shipments from its coal mines in the current quarter, and Teck said that will result in the company selling about half a million tonnes of coal less than it previously indicated for the entire year.
- Niall McGee
Tesla Inc. (TSLA-Q) was lower in the wake of posting a bigger second-quarter profit than expected on Tuesday thanks to sharply higher sales of its less-expensive electric vehicles, as it raised prices to boost its margins on them.
Tesla also cut costs which helped it offset many of the supply chain and microchip shortfalls facing the auto industry.
For the first time since late 2019, Tesla profits did not rely on sales of environmental credits to other automakers, a sign of increasing financial health for the manufacturing operation. Tesla boosted its performance by cutting features it said were unused or unneeded and raising U.S. vehicle prices.
In a call with investors and analysts, Tesla executives said that volume production growth will depend on parts availability, and CEO Elon Musk cautioned the shortage of semiconductors will continue.
“The global chip shortage situation remains quite serious,” Mr. Musk said.
Still, Mr. Musk said Tesla expects to launch production this year of the Model Y SUV at factories under construction in Texas and Germany. He said the company expects battery cell suppliers to double production next year.
Despite the pandemic and the supply chain crisis, Tesla posted record deliveries during the quarter, thanks to sales of cheaper models including Model 3 sedans and Model Ys.
The carmaker, led by billionaire entrepreneur Elon Musk, said revenue jumped to US$11.96-billion from US$6.04-billion a year earlier, when its California factory was shut down for more than six weeks due to local lockdown orders to fight the pandemic.
Analysts had expected revenue of about US$11.3-billion, according to IBES data from Refinitiv.
Excluding items, Tesla posted a profit of US $1.45 per share, easily topping analyst expectations for a profit of 98 US cents per share.
In an aside, Mr. Musk said he “most likely will not be on earnings calls” going forward to discuss financial results with investors and analysts. These calls have been a colorful quarterly ritual Mr. Musk has used for discourses on Tesla technology, or to fire back at rivals or critics.
United Parcel Service Inc. (UPS-N) dropped in response to beating Wall Street estimates for second-quarter profit and revenue on Tuesday, helped by ecommerce deliveries, air shipments and specialized handling of healthcare products such as COVID-19 vaccines.
Analysts expect the company to benefit from sustained volume growth as people prefer to order online rather than visit stores due to the spread of coronavirus variants.
Healthcare deliveries, including temperature-monitored shipments vaccines, are among the most profitable for the company.
Under Chief Executive Officer Carol Tomé, UPS has been reining in costs and focusing on high margin packages under her “better not bigger” strategy.
Revenue in its core U.S. domestic unit rose 10.2 per cent, while international segment jumped 30 per cent, boosted by Europe.
UPS has said rate hikes and increased business from small and medium-sized businesses are expected to generate about half of the margin in the company’s core U.S. market.
Excluding items, UPS earned US$3.06 per share in the second quarter, above analysts’ estimates of US$2.82, according to Refinitiv data.
Total revenue jumped 14.5 per cent to US$23.42-billion, beating estimates of US$23.24-billion.
3M Co. (MMM-N) slid after it reported a better-than-expected quarterly profit and raised its full-year forecasts, helped by increased demand across major segments as economies recover from the impact of the COVID-19 pandemic.
The company, which caters to industries including automotive, aerospace and oral care, has seen a sharp rise in demand following vaccine rollouts and easing restrictions.
Shares of the maker of N95 face masks and Scotch-Brite home care products rose just marginally, coming under pressure from the company’s comment that it was facing higher logistics and raw material costs.
A fresh wave of infections, natural disasters in China and Germany and a cyber attack targeting key South African ports drive global supply chains towards breaking point.
3M said it now expects a raw materials and logistics charge of between 65 US cents and 80 US cents per share in 2021, up from its prior forecast of 30 US cents to 50 US cents per share.
In the second quarter, sales in health care business, which makes Clarity teeth aligners and RelyX dental cements, jumped about 25 per cent to US$2.3-billion.
The company raised its annual sales growth outlook to a range of 7 per cent to 10 per cent, from prior forecast of 5-per-cent to 8-per-cent growth.
It also increased its 2021 earnings per share outlook to between US$9.70 and US$10.10, from the prior range of US$9.20 to US$9.70.
Net income attributable to 3M rose 16.7 per cent to US$1.52-billion, or US$2.59 per share, in the quarter, beating analysts average estimate of US$2.28 per share, according to IBES data from Refinitiv.
Net sales rose about 25 per cent to US$8.9-billion.
With files from staff and wires