A roundup of some of the North American equities making moves in both directions today
On the rise
Pretium Resources Inc. (PVG-T) soared after Australia’s biggest gold producer, Newcrest Mining Ltd. (NCM-T), said on Tuesday it would buy the rest of it in a deal that values the Canadian miner at $2.8-billion.
Newcrest, which already owns a 4.8-per-cent stake, has offered Pretium’s shareholders the right to receive $18.50 in cash or 0.8084 of a Newcrest share for each share of Pretium held. The cash offer represents a 22.5-per-cent premium to Pretium’s last close, the company said.
“All the gold companies are absolutely flush with cash. The outlook for gold is supposedly looking better because of the reflationary trade,” said analyst David Lennox of Fat Prophets in Sydney.
As a hard asset, gold’s value typically rises in line with inflation. Soaring price pressures spurred rate hike expectations even for central banks in the United States, Australia and Britain.
“You don’t want to be a bank holding cash, you want to put that money out to work. I think you’ll find there will be more M&A in the space into the end of the year and next year,” Lennox added.
Pretium’s operations include the Brucejack gold mine in British Columbia, which is close to Newcrest’s majority-owned-and-operated Red Chris mine.
Hexo Corp. (HEXO-T) closed higher after saying on Tuesday it will close three production sites in Canada, affecting 155 employees, as part of its integration plans following recent acquisitions.
In the coming months, HEXO said it will cease operations at Kirkland Lake and Brantford facilities in Ontario and Stellarton in Nova Scotia.
Other pot producers including Canopy Growth (WEED-T), Tilray Inc (TLRY-T) , Sundial Growers Inc (SNDL-Q) and Aurora Cannabis (ACB-T) have also cut their workforce, emphasizing a push towards faster profitability as investors grow impatient.
Profits have been wearing thin at most pot firms, weighed down by fewer-than-expected retail stores, cheaper rates on the black market and sluggish overseas growth.
Last week, rival Canopy growth posted a bigger second-quarter loss, citing domestic supply challenges and slower revenue growth in the United States.
But with more than three years into Canada’s legalization of recreational cannabis, demand for pot and related products is surging and to tap into it, HEXO bought privately owned Canadian cannabis producers Redecan and 48North Cannabis Corp in September.
Earlier this year, HEXO also said it was taking over Zenabis Global Inc for $235-million, giving it access to the European medical cannabis market.
TransAlta Corp. (TA-T) saw gains after raising its guidance for the year as it reported a loss of $456-million in its latest quarter compared with a loss of $136-million in the same quarter last year.
The power utility says the loss amounted to $1.68 per diluted share for the quarter ended Sept. 30 as it faced asset impairment charges and expenses related to its decision to suspend its Sundance 5 repowering project, planned retirements of its Sundance Unit 4 and Keephills Unit 1. It lost 50 cents per diluted share in the same quarter last year.
Revenue in the company’s third quarter totalled $850-million, up from $514-million a year ago.
Funds from operations totalled $297-million or $1.10 per share, up from $193-million or 70 cents per share in the same quarter last year.
In its outlook, TransAlta says it expects comparable earnings before interest, taxes, depreciation and amortization between $1.2-billion and $1.3-billion for the full year, up from earlier guidance for between $1.1-billion and $1.2-billion.
The company also raised its guidance for free cash flow to between $500-million and $560-million compared with its previous outlook for between $440-million and $515-million.
General Electric Co. (GE-N) jumped after announcing before the bell it would spilt into three public companies, as the storied U.S. industrial conglomerate seeks to streamline its business, pare down debt and breathe life into a share price battered over several years.
The split marks the end of the 129-year-old conglomerate that was once the most valuable U.S. corporation and a global symbol of American business power.
GE has faced investor skepticism about its ability to turn a corner since the 2008 financial crisis, while struggling with rising debt. The company was also removed from the Dow Jones Industrial Average in 2018 following years of sliding valuation.
The Boston-based company said the three divisions would focus on energy, healthcare and aviation. It will combine GE Renewable Energy, GE Power, and GE Digital and spin off the business in early 2024.
GE will also separate the healthcare company, in which it expects to retain a stake of 19.9 per cent, in early 2023.
Following the split, it will become an aviation company, which will be helmed by Chief Executive Officer Lawrence Culp.
“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value,” Mr. Culp said in a statement.
Scott Strazik will head the combined Renewable Energy, Power and Digital business and Peter Arduini will lead GE Healthcare, the company said in a statement.
Roblox Corp. (RBLX-N) exceeded market estimates for quarterly bookings on Monday as demand for its video games MeepCity and Adopt Me! stayed strong even after pandemic-led curbs eased, boosting its shares to big gains..
People had turned to video games for entertainment during last year’s months-long isolation, sparking a boom that is yet to slow down despite schools reopening and COVID-19 restrictions easing.
Roblox, among the world’s most popular gaming sites for children, said daily active users grew 31 per cent to 47.3 million during the third quarter and gamers spent 11.2 billion hours on the platform.
“Based on our October results, we appear to be having a great start to the last quarter of the year,” Chief Financial Officer Michael Guthrie said.
Bookings surged 28 per cent to US$637.8-million, while analysts had expected US$636.5-million, according to IBES data from Refinitiv.
CFRA Research analyst John Freeman said Roblox’s growth is driven by its video games, its social media element and the way it has developed a platform for building video game experiences.
San Mateo, California-based Roblox has capitalized on the gaming boom by allowing users to create an in-game metaverse, a shared virtual world where their avatars can interact with others. It has also attracted users by hosting virtual concerts of artists like Twenty One Pilots and rapper Lil Nas X.
“This company is not just going to be a revenue machine, its going to be an earnings machine,” Freeman added.
CFO Guthrie also said Roblox generated healthy cash from operations despite significant investment in hiring and developer economics.
On an adjusted basis, it reported a loss of 13 US cents per share, compared with estimates of 14 US cents per share.
On the decline
Stella-Jones Inc. (SJ-T) fell with the release of largely weaker-than-anticipated third-quarter results and the announcement of its intention to repurchase 4 million shares.
Before the bell, it announced revenue of $679-million, down 9 per cent year-over-year and slightly below the Street’s $690-million forecast. Earnings per share, adjusted to removed a $7-million inventory writedown, came in at 60 cents, which was 2 cents lower than the consensus projection.
National Bank Financial analyst Maxim Sytchev said: “Given how quickly the street has given up on this name and expectations of disappointment heading into the quarter, this should be good enough. SJ shares have come under pressure on year-to-date basis (down 2 per cent vs. TSX up 23 per cent) as the resi lumber trade has fully unwound. The churn of investors and expectations make investment thesis search for a bottom, and we believe this is where we are, scraping the expectations reset while building a clean slate for 2022 which appears to be slightly better (by 3 per cent) on EBITDA. With so little absolute value left in CAD industrial names, we think that SJ’s stability, and finally an announcement of M&A, should help us build momentum from here. Biden’s infra package should also be beneficial to the company (ties – as transport vertical will see a US$66-billion injection while poles should benefit from greater rollout of rural broadband), providing a more constructive backdrop for 2023 (as it takes time for the money to trickle down into actual projects).”
MEG Energy Corp. (MEG-T) gave back early gains as it boosted its output forecast for the year after swinging to a $54-million profit in its latest quarter on a doubling of revenues.
The Calgary-based company said it earned 17 cents per diluted share in the third quarter, compared with a loss of three cents per share or $9-million a year earlier.
Revenues for the three months ended Sept. 30 were $1.09-billion, up from $533-million in the third quarter of 2020.
MEG was expected to earn 29 cents per share on $1-billion of revenue, according to financial data firm Refinitiv.
Adjusted funds flow increased to $239-million or 77 cents per share from $26-million or nine cents per share a year earlier.
Quarterly production increased 28 per cent to 91,506 barrels per day, compared with 71,516 bbls/d in the prior year quarter. As a result, it again increased its annual average production guidance, this time to 92,500 to 93,500 bbls/d from 91,000 to 93,000 bbls/d.
“Given what we are seeing operationally we have upwardly revised our annual production guidance and look forward to a strong finish to 2021,” stated CEO Derek Evans.
In a research note, Raymond James analyst George Huang said: “3Q21 was another strong quarter for MEG as strong heavy oil realizations drove a cash flow beat versus our expectations. With a more fulsome update expected at the end of the month with the Company’s 2022 budget release, the near-term FCF outlook is helped by the upwardly revised 2021 production guidance pointing to robust 4Q21 production. We expect the Company to remain focused on its balance sheet heading into 2022, and it is the Company’s current glide path of debt reduction and FCF generation given its unhedged production for next year that informs our Outperform Rating.”
TMX Group Ltd. (X-T) slid despite saying its net income increased 10 per cent in the third quarter from a year ago on increased trading activity that elevated revenues.
The company, which operates the Toronto Stock Exchange, says its net income was $76.9 million or $1.36 per diluted share, up from $70 million or $1.23 per share a year earlier.
Adjusted profits were $88.7 million or $1.57 per diluted share, compared with $80-million or $1.40 per share in the third quarter of 2020.
Revenues for the three months ended Sept. 30 were $231.3-million, up 11 per cent from $207.6 million in the year-earlier quarter.
TMX was expected to report $1.59 per diluted share in adjusted profits on $232-million of revenues, according to financial data firm Refinitiv.
Cash flows from operating activities increased 16 per cent to $117.7-million, from $101.7-million in the third quarter of 2020.
“We are extremely pleased with TMX’s strong performance in the quarter, as we achieved double-digit top and bottom-line growth with contributions from across the enterprise, including capital formation, derivatives and Trayport,” stated CEO John McKenzie.
Cronos Group Inc. (CRON-T) plummeted after it announcing it has filed with the U.S. Securities and Exchange Commission its inability to complete its financial statements for the three and nine-months periods ended Sept. 30 “because the Audit Committee of the Company’s Board of Directors requires additional time to evaluate goodwill and indefinite-lived intangible assets in the Company’s U.S. reporting unit for impairment.”
The Toronto-based company expects an impairment charge of at least US$220-million “on goodwill and indefinite-lived intangible assets in its U.S. reporting unit for the three and six months ended June 30.” It is not expected to impact cash or revenues.
Freshii Inc. (FRII-T) dropped after it reported a net loss of $749,000 in its latest quarter as restaurant sales continued to recover.
The Toronto-based company says the loss amounted to two cents per share for the 13-week period ended Sept. 26, compared with net loss attributable to the company of $130,000 or zero cents per share in the same quarter last year.
Revenue in the company’s third quarter totalled $5.8-million, up from $4.8-million a year earlier.
Same-store sales were up 10.6 per cent compared with the same quarter last year.
On Monday, Freshii announced a deal with a hospitality operator to open 20 new restaurants in the United States over six years — the largest multi-unit franchise agreement in the company’s history.
The company said the agreement with Level Hospitality will see locations opened in Texas, with a focus on Houston and Austin.
Robinhood Markets Inc. (HOOD-Q) declined after it said on Monday a third party had obtained access to the email addresses of about five million of its customers.
The fee-free broker said the full names of a different group of about two million people were also exposed in the breach, while 310 people had more personal information, including names, birth, dates and zip codes, compromised.
Robinhood said it believed no social security numbers, bank account numbers, or debit card numbers were exposed and that there has been no financial loss to any customer as a result of the incident, which took place on Nov. 3.
“The unauthorized party socially engineered a customer support employee by phone and obtained access to certain customer support systems,” the company said in a blog post, adding that the third party had demanded an extortion payment.
PayPal Holdings Inc. (PYPL-Q) was down despite beating Wall Street estimates for quarterly profit and saying U.S. users of its peer-to-peer payment service Venmo would be able to pay on Amazon.com starting next year.
The company emerged as one of the big winners of the COVID-19 pandemic as more businesses moved online and consumers preferred using phones and other digital means to pay bills and to shop.
The San Jose, California-based digital payments company’s net income rose to US$1.09-billion, or 92 US cents per share, in the three months ended Sept. 30, from US$1.02-billion, or 86 US cents per share, a year earlier.
On an adjusted basis, PayPal earned US$1.11 per share, above analysts’ average estimate of US$1.07, according to IBES data from Refinitiv.
Net revenue in the third quarter rose over 13 per cent to US$6.18-billion.
The payments giant has been beefing up its offerings with acquisitions. In September, the company announced it was buying Japanese buy now, pay later (BNPL) company Paidy in a US$2.7-billion deal. However, the company said last month it was not pursuing a buyout of digital pinboard site Pinterest Inc, after media reports said it was in talks to buy the social media platform for as much as US$45-billion.
With files from staff and wires