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On the rise

Colliers International Group Inc. (CIGI-T) was higher with the premarket release of better-than-expected first-quarter results and an increase to its full-year outlook on Tuesday.

The Toronto-based diversified professional services and investment management company reported revenue of $1.0-billion, exceeding the Street’s US$886.1-million estimate with growing coming across all its segments. Adjusted earnings per share of US$1.44 were also higher than anticipated (US$1.23).

Colliers now sees full-year revenue growth in the low double digits, up from high single digits previously and above the Street’s 8-per-cent forecast.

“Colliers management felt confident enough to increase growth projections for the remainder of the year, exceeding Street forecast,” said National Bank Financial analyst Maxim Sytchev. “High-teens EPS growth in 2022 on the back of record 2021 is impressive, firming up 2025 objectives, as a result. On the business development front, CIGI added affiliate operations in the U.S. and Italy while also expanding its engineering consulting footprint in US Southwest. After quarter-end, the co also completed Antirion transaction in Europe; once Basalt Infrastructure gets folded in, Investment Management will represent 23 per cent of consolidated EBITDA. With $400-million-worth of topline added so far this year via M&A, management sees 2022 as a record capital deployment year.”

Mr. Sytchev said he sees Colliers’ current share price weakness as a “buying opportunity,” adding: “We view CIGI’s management in high regard and company’s transition towards a less cyclical entity should be multiple- and value-accretive over time. Despite a very strong 2021, we are still seeing material growth from the company, further compressing valuation on a forward basis. We understand that investors are now concerned about geopolitics, impact of interest rates and a potential recession. We cannot be certain when macro cycle will roll over. However, at 9.5 times 2022 estimated EV/EBITDA, under-levered balance sheet (0.9 times) and firm grip on capital allocation (note that the co bought back 600K shares during the quarter for $76-million and almost 400K post), we believe investors can own this name through the cycle (especially with EBITDA now fluctuating less vs. prior economic gyrations – on the way to 65 per cent of EBITDA coming from recurring sources by 2025). M&A pipeline also remain robust, creating further optionality as a result.”

Nutrien Ltd. (NTR-T) soared as it posted a more than 10-fold jump in first-quarter profit on Monday after the bell and raised its earnings forecast for the year, as the world’s largest fertilizer company was helped by soaring crop nutrient prices.

On Tuesday, interim Chief Executive Ken Seitz said Nutrien, the world’s largest fertilizer company, is assessing whether to further increase potash production as sanctions continue to limit shipments from Russia and Belarus.

Prices of crop nutrients such as potash and phosphate have skyrocketed as sanctions on major exporter Russia for its invasion of Ukraine have disrupted already tight supplies.

The price increases have raised concerns about food shortages as some farmers apply less fertilizer and boosted profits for manufacturers including Nutrien and rival Mosaic .

Nutrien is assessing the duration of the Ukraine conflict to determine whether there is a need to ramp up production, Seitz said. Combined, Russia and Belarus accounted for more than 40 per cent of global exports of potash last year, one of three critical nutrients used to boost crop yields.

In March, Nutrien said it planned to increase potash output by nearly 1 million tons to about 15 million tons this year in response to the supply uncertainty from Eastern Europe.

The company could further expand its production to 18 million tons without a major capital investment at mines in Saskatchewan, Seitz said. Larger investments would be needed to increase capacity from 18 million to 23 million tons, he said.

“We intend to grow our volumes but just not stop at 18 million tons,” Mr. Seitz said in an interview on Tuesday. “We intend to continue to grow with the market.”

Mr. Seitz told analysts on a conference call that the timeline for increases would be a few years, not decades, and that Russia’s invasion of Ukraine, which Moscow describes as a “special military operation”, could impact global fertilizer markets beyond 2022.

The company expects 2022 adjusted earnings of US$16.20 to US$18.70 per share, compared with its previous forecast of US$10.20 to US$11.80 per share.

Nutrien’s net earnings rose to US$1.39-billion, or US$2.49 per share, in the quarter ended March 31 from US$133-million, or 22 US cents per share, a year earlier.

Canfor Corp. (CFP-T) increased after it reported a 25-per-cent increase in net profits in its latest quarter on near record high North American lumber prices that also boosted revenues.

The Vancouver-based company said it earned $534-million of $4.29 per diluted share in the first quarter, up from $427.8-million or $3.42 per share a year earlier.

Adjusted profits were $529-million or $4.25 per share, compared with $434.2-million or $3.42 per share in the first quarter of fiscal 2021.

Revenues for the three months ended March 31 were $2.2-billion, up 14 per cent from $1.9-billion in the prior year quarter.

Canfor was expected to earn net income of $584.2-million on $2-billion of revenues, according to financial data firm Refinitiv.

The company says North American lumber market conditions remained very strong for much of the quarter led by continued strength in new home construction along with tight supply stemming from supply chain disruptions.

“We are very pleased to see the sustained strength in global lumber markets continuing into 2022 and while our pulp business continued to face challenges, we also saw improved results (from the fourth quarter),” stated CEO Don Kayne.

Canfor Pulp Products Inc. (CFX-T) lost $19.9-million on $219.7-million in sales due to ongoing transportation challenges and pulp supply disruptions. That compared with a net loss of $101.1-million on $249.3-million of revenues in the fourth quarter and profit of $8.4-million on $262.4-million of revenues in the first quarter of fiscal 2021.

MEG Energy Inc. (MEG-T) jumped after saying higher energy prices contributed to it earning a $362-million profit in its latest quarter as revenues surged 68 per cent.

The Calgary-based oil sands developer says it earned $1.15 per diluted share in the first quarter, compared with a loss of six cents per share or $17 million a year earlier.

Revenues for the three months ended March 31 were $1.53-billion, up from $914 million in the first quarter of 2020.

MEG Energy was expected to earn $1.10 per share on $1.63-billion of revenues, according to financial data firm Refinitiv.

The company says its net debt was cut to $2.15 billion from nearly $2.8-billion in the year-ago period.

Chief executive Derek Evans said the first quarter was a record quarter for the company from an operational and financial perspective.

“The team achieved record quarterly production, which together with strong benchmark pricing and low differentials drove record free cash flow in the quarter, setting us up to be able to accelerate debt reduction and initiate share buybacks under our normal course issuer bid in the second quarter of this year,” he stated in a news release.

Among the records were $587-million in adjusted fund flow from operations and 101,128 barrels per day in bitumen production volumes.

It realized an average AWB (access western blend) sales price of US$83.55 per barrel during the quarter, up from US$65.42 in the fourth quarter, as the average WTI (West Texas Intermediate) price increased by US$17.10 per barrel.

In a research note, Raymond James’ George Huang said: “For investors bullish on the price path of oil, 1Q22 demonstrated the immense operating leverage inherent in MEG’s top-tier SAGD assets. The Company generated $499-million in FCF in the quarter compared to $468-million through the entirety of 2021. This has put MEG in a position to imminently begin returning cash to shareholders through its NCIB. With management articulating a longer term capital allocation strategy that will see the Company return 100 per cent of FCF to shareholders upon the Company reaching US$600-million in net debt, we continue to see an asymmetric risk/reward set-up in MEG shares. We continue to recommend MEG to investors looking for an unhedged vehicle to gain leverage to a persistently strong oil price. As a final note, we believe the headwind that project payout poses to 2023 estimates is well understood by the market and, point to the Company’s attractive pace of deleveraging and long range capital allocation strategy as adequate offsets to remain bullish on the equity.”

Gibson Energy Inc. (GEI-T) rose following the late Monday release of better-than-anticipated first-quarter results.

The Calgary-based company reported adjusted earnings before interest, taxes, depreciation and amortization of $121-million, exceeding the $113-million forecast on the Street. The beat was driven by big gains in its Marketing segment.

“The crude component of the marketing segment continues to be challenging for GEI,” said Raymond James analyst Michael Shaw. “The typical crude marketing opportunities – time, location, and quality di1erentials – were either tight (in the cases of location and quality) or worked against GEI in 1Q (steep backwardation). Even so, products from its Moose Jaw Facility have recovered (asphalt, drilling fluids, and lighter distillates), which helped o1setthe challenging crude market and drove the better-than-expected results.”

“Gibson has traded 5.7 per cent off its most recent high in late March in a down-trending and volatile energy market, despite its strong underlying fundamentals and improving EBITDA outlook (TSX down 6.0 per cent). We think this is an opportunity for investors. GEI is currently trading at 10.2 times our 2023 EBITDA estimate versus a trading range of 10.0 times to 11.5 times since 2017. With valuations in the midstream group moving higher in 2022 and positive catalysts on the horizon (sanctioning Phase 2 of the DRU, renewable diesel at Moose Jaw, and TMX tank adds), we expect GEI to outperform over the coming month.”

TMX Group Ltd. (X-T) was up after saying its profits and revenues increased in the first quarter despite elevated volatility and geopolitical events that affected equity trading in Canada and around the world.

The company, which operates the Toronto Stock Exchange, says its net income attributable to shareholders was $267.4-million or $4.75 per diluted share, up from $96.4-million or $1.70 per share a year earlier.

The results included a gain of $3.16 per share from the voting control of Box Holdings Group LLC, an all-electronic equity options market, on Jan. 3.

Excluding one-time items such as the $178-million gain on Box, adjusted net income fell three per cent to $102.7-million or $1.82 per diluted share, down from $106.4-million or $1.88 per share in the first quarter of 2020.

Revenues for the three months ended March 31 were $287.1-million, up 14 per cent from $252-million in the prior year’s quarter. It included $33-million from Box and $8.80million from AST Canada. Excluding several acquisitions, revenues were down three per cent.

TMX was expected to earn $1.73 in adjusted profits on $261.2-million in revenues, according to financial data firm Refinitiv.

Geoffrey Kwan, an equity analyst at RBC Dominion Securities, said: “Q1/22 adjusted EPS was solidly ahead of consensus and slightly ahead of our forecast. TMX Group is our second-best idea, reflecting positive fundamentals, potential catalysts (e.g., M&A), and strong defensive attributes, yet with a P/E multiple that is below average vs. recent years.”

Pfizer Inc. (PFE-N) increased after it maintained sales forecasts for its COVID-19 products for the first time since launching its coronavirus vaccine, in a sign that the dizzying growth of the past few quarters has slowed.

The company said it expects US$22-billion in sales of its COVID pill Paxlovid this year, compared with analysts’ average expectation of US$26.1-billion.

Pfizer had previously said that its forecast for US$22-billion in Paxlovid sales only represents a fraction of the 120 million courses the company is able to manufacture this year.

The company’s reluctance to lift the forecast could suggest that it did not sign significant new sales contracts for the pill during the first quarter.

In prepared remarks for the company’s conference call with investors, Chief Executive Albert Bourla said the company had seen a significant pickup in the drug’s use in the United States recently and said that some countries that have experienced recent outbreaks have asked for more treatment courses.

The drugmaker also reiterated its forecast of US$32-billion in sales from the vaccine it developed with BioNTech. It has raised the forecast for the vaccine’s sales every quarter in 2021.

“Sales (of the vaccine) are expected to eventually slow as an increasing percentage of the global population receive a complete vaccination course,” said Millie Gray, analyst at Informa Pharma Intelligence.

At the request of the U.S. Securities and Exchange Commission, several drug companies have adjusted their forecasts to include expenses from milestone payments and acquisitions.

The company said it now expects full-year adjusted profit of US$6.25 to US$6.45 per share, below its prior forecast of US$6.35 to US$6.55, mostly due to the impact of those expenses.

DuPont de Nemours (DD-N) erased an early decline as it cut its annual sales and earnings forecast to reflect higher raw material and logistics costs.

The industrial materials maker, once part of the erstwhile chemical giant DowDuPont, has been hard hit by rising costs for raw materials and energy, as well as other inflationary pressures due to global supply chain challenges prompted by the pandemic and now intensified by Russia’s invasion of Ukraine.

“We anticipate key external uncertainties in the macro environment, namely COVID-related shutdowns in China, will further tighten supply chains resulting in slower volume growth and sequential margin contraction in the second quarter 2022″, Chief Executive Officer Ed Breen said in a statement.

The company cut its full-year net sales forecast for continuing operations to between US$13.3-billion and US$13.7-billion from a previously outlined forecast of US$17.4-billion and US$17.8-billion.

It also expects full-year adjusted earnings to be between US$3.2 and US$3.5 per share, compared with its previous forecast of US$4.60 to US$4.90 per share.

Adjusted earnings for the first quarter of 82 US cents per share came above expectations of 67 US cents per share for the company, which makes electronic materials used in chip packaging, mobile devices and autonomous vehicles.

On the decline

Shares of Restaurant Brands International Inc. (QSR-T) beat estimates for quarterly results on Tuesday, boosted by higher prices and strong demand at its Burger King and Tim Hortons chains.

Comparable sales at the two brands jumped, as they invested in fresh advertising campaigns, and as more people returned to restaurants while continuing to place orders for delivery and carry out.

Shares, however, fell amid broader weakness in the restaurant industry, signaling that the upbeat report did little to alleviate investors’ concerns around labor and inflation pressures.

Costs for labour and commodities have spiraled due to the COVID-19 pandemic and war in Ukraine, forcing most restaurants to shield profits by raising menu prices.

Toronto-based Restaurant Brands, which often caters to lower-income consumers, has hiked U.S. prices about 7 or 8 per cent over the year, in line with broader inflation, Chief Executive Officer Jose Cil told Reuters in an interview.

The increases helped the company cushion a hit from a 3-per-cent decline in comparable sales at its Popeyes chain. The brand is facing staffing shortages and competition from rivals launching fried chicken sandwiches similar to the one it popularized with its 2019 rollout.

The price of a Popeyes’ crispy chicken sandwich at one New York City location jumped nearly 13 per cent to US$4.49 in late March, according to a Reuters review. It had been US$3.99 since launch.

Even so, U.S. consumers pressured by higher gas and grocery prices have not started trading down to cheaper or fewer items or otherwise changing their behavior, Cil said.

“We’re well positioned to be stable if not grow in the most difficult of environments,” he said.

The company’s total revenue rose 15 per cent to US$1.45-billion in the first quarter ended March 31, topping Refinitiv estimates of US$1.39-billion.

Comparable sales at Tim Hortons in Canada rose 10.1 per cent, while Burger King global same-store sales jumped 10.3 per cent, both beating analyst estimates.

The company took a US$12-million hit - or 2.6 per cent of its adjusted earnings - from Russia, where it suspended corporate support for its 820 franchised Burger King locations after Moscow’s invasion of Ukraine.

On March 17, Restaurant Brands said it was trying to dispose of its 15-per-cent stake in the joint venture that operates those restaurants.

However, there has been “no substantive progress since then,” Chief Corporate Officer Duncan Fulton told Reuters on Tuesday.

On an adjusted basis, Restaurant Brands earned 64 US cents per share, also above estimates of 61 US cents.

Thomson Reuters Corp. (TRI-T) closed lower as it raised its 2022 revenue forecast on Tuesday after beating first quarter expectations on strong growth across its core legal, tax and accounting, and corporate businesses.

The parent company of Reuters News said that while the quarter gave it more confidence in its financial outlook, the pandemic, geopolitical risks and any worsening of the economy could hurt its ability to reach its goals.

The company, which also owns the Westlaw legal database and the Checkpoint tax and accounting service, reported adjusted earnings of 66 US cents per share, 5 US cents ahead of Wall Street expectations.

Total revenues rose 5.5 per cent to US$1.67-billion, just ahead of expectations, and are now forecast to increase 5.5 per cent this year, up from an earlier estimate of about 5 per cent.

“We’re off to a good start in 2022,” said CEO Steve Hasker. “We’re a little ahead of where we thought we’d be in terms of our revenue growth trajectory and we’re on track and executing on our change program.”

Thomson Reuters is wrapping up a two-year restructuring to transition from a holding company to an operating company, and from a content provider to a content-driven technology company. It said 80 per cent of its revenue was recurring, providing some protection from unpredictable economic pressures.

Its three main divisions - Legal Professionals, Tax & Accounting Professionals, and Corporates - reported higher quarterly sales, led by an 11-per-cent increase in the tax business.

Revenue at Reuters News rose 9 per cent.

While information services companies continue to grow, their shares have lagged the broader market in 2022 as investors have preferred stocks with more scope for profit recovery as the pandemic abates.

Thomson Reuters’ U.S.-listed shares are down about 20 per cent this year versus a 10-per-cent drop for the S&P 500. The company’s peers include RELX Group’s LexisNexis, Bloomberg LP, News Corp’s DowJones, and Wolters Kluwer NV.

Calfrac Well Services Ltd. (CFW-T) lost ground after it reported a first-quarter loss of $21.5-million compared with a loss of $22.4-million in the same quarter last year, as its revenue rose 38 per cent.

The oilfield services company says the loss amounted to 56 cents per share for the quarter ended March 31 compared with a loss of 60 cents per diluted share a year earlier.

Revenue in the quarter totalled $294.5-million, up from $214-million in the same quarter last year.

The company says it has committed to a plan to sell its Russian division, resulting in the associated assets and liabilities being presented as held for sale in its financial statements.

Calfrac says its loss from continuing operations amounted to $18-million or 47 cents per diluted share compared with a loss of $23-million or 62 cents per diluted share in the first quarter of 2021.

Lindsay Link, Calfrac’s president and chief operating officer, says with a positive commodity price outlook for the oil and gas industry, the company expects this momentum to continue throughout the remainder of 2022, which should result in a significant improvement in year-over-year operational and financial performance..

Estee Lauder Cos Inc. (EL-N) reduced its full-year profit forecast on Tuesday as fresh COVID-19 restrictions in China and its move to exit Russia due to the invasion of Ukraine dent sales at the luxury cosmetics maker, sending its shares down.

The maker of MAC lipsticks and Bobbi Brown foundations also missed third-quarter sales estimates.

Fresh restrictions in China, a major growth market for luxury goods makers, put the brakes on a recovery in sales of cosmetics from a pandemic-induced slump.

Estee Lauder said the restrictions in China also limited its capacity to ship orders from its distribution facilities, further pressuring sales.

The company now estimates adjusted annual profit of between US$7.05 and US$7.15 per share for the full year, compared with its prior outlook of between US$7.43 and US$7.58.

Full-year net sales now projected to rise between 7 per cent and 9 per cent, down from its prior forecast of an increase in the range of 13 per cent to 16 per cent.

The La Mer beauty products maker’s sales rose 10 per cent to US$4.25-billion in the third quarter ended March 31, missing analysts’ average expectation of US$4.31-billion, according to IBES data from Refinitiv.

With files from staff and wires

Follow David Leeder on Twitter: @daveleederOpens in a new window

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