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On the rise

Ritchie Bros. Auctioneers Inc. (RBA-T) was higher with the late Monday release of better-than-expected first-quarter.

Despite a tight equipment market, the Burnaby, B.C.-based company reported gross transactional value of US$1.4-billion, up 12.9 per cent year-over-year, leading to an 18.8-per-cent rise in revenue to US$393.9-million, exceeding the Street’s forecast of US$346.8-million. Adjusted earnings per share, based on its new definition after adding back share-based expenses, came in 46 US cents, also topping the consensus estimate (25 US cents).

National Bank analyst Maxim Sytchev said: “The quarterly cycle remains somewhat tactical. This was a good quarter that showed GTV acceleration from flat momentum in Q4/21. While we thought that the miss would be unlikely for RBA , the quantum of positive surprise was more pronounced. Looking at Houston (up 2 per cent year-over-year) and Edmonton auctions (down 2 per cent year-over-year), we are only getting a sense of what’s happening in the upcoming quarter but sustaining Q1/22 momentum will probably be not easy; SG&A run rate also appears to be a bit higher. All in, one has to figure out for oneself if the economy is dipping into a recession. If that’s the case, RBA will outperform OEMs and dealers given the counter-cyclical nature of the business. In a sluggish muddle-through backdrop (perhaps an optimistic case now), we see more value in dealers at the moment. We rate RBA shares Sector Perform with a US$55.00 target.”

Markham, Ont.-based Pet Valu Holdings Ltd. (PET-T) surged after raising its full-year financial guidance in response to stronger-than-anticipated first-quarter results.

The retailer reported revenues of $213.2-million, up 25.4 per cent year-over-year and topping the consensus forecast of $200-million as same-store sales rose 22.8 per cent (versus a 16-per-cent estimate). Earnings per share rose to 35 cents from 13 cents a year ago and above the 28-cent projection from the Street.

Pet Valu hiked its 2022 guidance by 3 per cent for revenue and 2 per cent for EBITDA. It now expects same-store sales to grow by 9-12 per cent, compared to 6-9 per cent previously.

“The 2022 EBITDA guidance suggests that EBITDA growth for the remainder of the year will be muted at 1 per cent year-over-year,” said Stifel analyst Martin Landry. “This may be a focus in the earnings call at 8:30am this morning. Overall, we believe investors will react well to these strong results. Pet Valu is included in Stifel GMP’s Top Picks list.”

Cronos Group Inc. (CRON-T) saw large gains after it reported first-quarter revenue of US$25-million, an increase from US$12.6-million a year ago.

“The increase year-over-year was primarily driven by an increase in net revenue in the rest of world segment driven by growth in the Israeli medical market and the Canadian adult-use market,” the company stated.

Its net loss of US$32.7-million was an improvement from a loss of US$161.6-million a year ago.

Novavax Inc’s (NVAX-Q) shares turned positive despite uncertainty over global demand for the company’s COVID-19 vaccine following a slow start to deliveries.

The company said in September it had targeted for the delivery of at least 2 billion doses of its COVID-19 vaccine in 2022. Novavax said on Monday it delivered about 42 million doses globally in the first quarter.

Serum Institute of India, the world’s biggest vaccine maker, also produces the company’s COVID-19 vaccine under the brand name Covovax.

Novavax continues to see low vaccination rates across low-income countries, Chief Business and Commercial Officer John Trizzino said on a conference call.

“To date, we have not yet received an order from Gavi and the timing and quantities of future orders to deliver 2373 (the vaccine) to the COVAX facility are unclear,” Mr. Trizzino said.

COVAX, a program aimed at equitable access to COVID-19 vaccines, is backed by the World Health Organization and global vaccine alliance Gavi.

Novavax’s COVID-19 vaccine is based on a more conventional technology and was expected to persuade some skeptics of the mRNA technology used by companies such as Pfizer and Moderna.

However, Novavax has been plagued by manufacturing and regulatory delays, as well as a slow uptake in key markets such as the European Union.

The company on Monday reiterated its forecast for total revenue of US$4-billion to US$5-billion for 2022, saying it expects shipments to key markets and sales to increase in the second quarter.

On the decline

Shares of Suncor Energy Inc. (SU-T) gave back gains after it exceeded analysts’ estimates for first-quarter profit and boosted dividend by 12 per cent to its highest level, as Canada’s No.3 oil major benefited from soaring crude prices.

In a Tuesday morning conference call, it said it is making progress on safety and operational improvements after posting stronger-than-expected first quarter results.

Last month Elliott Management publicly called for new board directors, a management overhaul and a strategic review at Suncor, arguing its shares have lagged peers even as crude prices surged to multi-year highs.

Suncor chief executive Mark Little said the company looked forward to engaging in constructive discussions with Elliott. The company will hold its annual general meeting later in the day.

He pointed to new executives in the company’s oil sands business as a sign of concrete action to address repeated operational mishaps that have resulted in four fatalities on Suncor sites since 2020 and raised questions about Little’s future as chief executive.

Mr. Little also emphasized the value of Suncor’s retail fuel business, which Elliott has urged the company to explore selling to provide additional returns to shareholders. Suncor is an integrated oil company, meaning it has both upstream production and downstream refining and marketing operations.

“We think it’s key to maximizing value across the integrated business chain,” Mr. Little said. “We think we have the best downstream business in North America and we think it’s important that it stay together.”

How oil sands giant Suncor became vulnerable to a U.S. activist

On Monday evening Suncor reported a net income of $2.95 billion, increased its dividend and said it was exploring the sale of its UK North Sea assets.

“We applaud Suncor for the better-than-expected results; however, we believe the market needs to see consistent meet (or) beats and a lack of operational mishaps,” Eight Capital analyst Phil Skolnick wrote in a note, referring to Suncor meeting or exceeding analyst forecasts.

Its total production fell to 766,100 barrels of oil equivalent per day (boepd) from 785,900 boepd a year earlier. Its refinery throughput was 436,500 barrels per day, up marginally from a year ago.

The company reported on Monday a net income of $2.95-billion, or $2.06 per share, for the three months ended March 31, up from $821-million, or 54 cents, a year ago.

Excluding items, the company posted adjusted operating earnings of $1.92, beating analysts’ expectations of $1.51, as per Refinitiv data.

Suncor’s rivals - Enbridge Inc (ENB-T), Imperial Oil Ltd (IMO-T), Canadian Natural Resources Ltd (CNQ-T) and Cenovus Energy Ltd (CVE-T) - have also posted profit jump.

In a research note released before the bell, Raymond James equity analyst George Huang said: “Stronger than expected1Q22 results from Suncor were accompanied by a 12-per-cent hike to the dividend as well as, an expansion of the NCIB to 10 per cent. Robust FCF generation during the period allowed SU to return $1.4-billion to shareholders while continuing to reduce indebtedness. The accelerated deleveraging achieved versus the plan laid out at last year’s Investor Day has afforded the Company the ability to accelerate shareholder returns and pull forward its longer-term plan to return a larger proportion of FCF to shareholders. The accelerated plan is comparable to those laid out by industry peers. A competitive return of capital framework combined with SU’s integrated business model supports our Outperform Rating.”

Parkland Corp. (PKI-T) turned lower after it outlined plans to spend $600-million expanding renewable fuel production at its Burnaby, B.C., refinery.

The project is subject to a final investment decision, due in the second half of 2023.

If it goes ahead, Parkland will boost the refinery’s co-processing volumes to 5,500 barrels per day (bpd) from 1,500 bpd currently, and build a stand-alone 6,500 bpd renewable diesel complex that will be the largest in British Columbia.

Co-processing involves blending small amounts of renewable feedstock into traditional petroleum refining processes.

Parkland said the project will create up to 1,000 jobs during construction, and produce cleaner fuels that will cut greenhouse gas emissions from transportation by approximately two megatons a year. Production is expected to start in 2026.

The company has received provincial government support for more than 40 per cent of the project cost in the form of credits generated by compliance with British Columbia’s Low Carbon Fuel Standard, which requires fuel suppliers to progressively decrease the average carbon intensity of their product.

“Today’s announcement will help Parkland advance our decarbonization strategy and increase our ability to provide low-carbon fuels for British Columbia,” Parkland Chief Executive Bob Espey said in a news release.

iA Capital Markets analyst Matthew Weekes said: “The renewables fuel initiatives at Burnaby enable Parkland to provide a low carbon solution to customers within its BC network. Global RD demand is expected to grow, with growth in the BC market supported by the provincial LCFS. According to Tidewater Renewables, LCFS credits have been trading at record highs due to demand through both mandatory and voluntary CI reductions. These initiatives should be viewed as adding value to PKI’s Refining operations, and we would note that Tidewater Renewables trades at just under 10 times EV/EBITDA on a forward basis based on consensus estimates”

Bausch Health Companies Inc. (BHC-T) plummeted after it reported a loss of US$69-million in its latest quarter compared with a loss of US$610-million a year earlier when it took a goodwill impairment charge in its Ortho Dermatologics business.

The company says the loss amounted to 19 US cents per share for the quarter ended March 31 compared with a loss of US$1.71 per diluted share in the first quarter of 2021.

Revenue for the quarter totalled US$1.92-billion, down from US$2.03-billion in the same quarter last year.

Bausch Health says its adjusted net income for the first quarter of 2022 was US$263-million, down from US$370-million a year earlier.

The company says it expects to complete the initial public offering of its eye health business Bausch + Lomb today and remains on track to spin off the business.

Thomas Appio will become CEO of Bausch Health once the IPO closes. Current Bausch Health CEO Joseph Papa will remain as chairman until the full separation of Bausch + Lomb when he will be succeeded by Robert Power.

“Following the closing of the initial public offering of the Bausch + Lomb eye health business later today, we will operate as two companies, which enables Bausch Health to increase its focus on accelerating growth with strategic commercial investments and expanding our pipeline with innovative products that improve the quality of life for patients around the world,” Mr. Appio said in a statement.

With the release of weaker-than-anticipated first-quarter results as sales slumped, shares of Hudbay Minerals Inc. (HBM-T) dipped on Tuesday.

The Toronto-based miner reported adjusted earning per share of 2 cents, which fell 7 cents short of the Street’s expectations due largely to lower copper and gold sales volumes. Free cash flow of $7-million also missed estimates.

“We expect a negative reaction to Q1 results that came in below our estimates and consensus on lower sales volumes as rail car availability impacted the company’s ability to ship concentrate at Manitoba and COVID absenteeism and high rainfall impacted production at Peru,” said RBC Dominion Securities analyst Sam Crittenden. “Despite the weaker than expected results, Hudbay reiterated its 2022 production and costs guidance as Q1 was inline with quarterly cadence expected by the company. Hudbay continues to expect to deliver a PEA for Copper World in Q2/22.”

Finning International Inc. (FTT-T) reversed course with the release of strong first-quarter results and a 5-per-cent dividend increase.

Late Tuesday, the Vancouver-based Caterpillar dealer reported net revenue of $1.74-billion and adjusted EBITDA of $221-million, both exceeding the Street’s forecasts ($1.71-billion and $202.1-million). Adjusted earnings per share of 59 cents was 9 cents higher than the consensus estimate.

Finning raised its quarterly dividend to 23.6 cents per share from 22.5 cents, which it notes marks a 21st consecutive year of growth.

“[Finning expects] above mid-teens EPS growth in 2022 ($2.50 - $2.60+ per share while we were modeling $2.32 pre-quarter; Street at $2.50), and higher revenue expected for the remainder of 2022 due to Upcycle demand across all regions and sectors — note that all geographies are now seeing robust growth and improved operating leverage vs. 2021,” said analyst Maxim Sytchev. “Management cited inflationary and global supply chain pressures to continue to impact the availability of New for most of the year, but the company is closely monitoring price increases from key suppliers and customer contracts as well as fixed-cost reduction initiatives (warehouse optimization savings expected) to manage the impact. 2022E revenue growth will be driven by backlog deliveries, growth in product support and a higher new equipment mix. Strong commodity tape, increased customer capex budgets, and public investments in infrastructure driving construction, all contribute to the robust outlook. The company also expects to advance its capital allocation strategy after the Hydraquip transaction by using ROIC as the deciding metric (leverage is at 1.1 times now vs. 1.6 times last quarter). Finally, the company has been active on its NCIB with the purchase of $61-million worth of shares during the quarter while also renewing its NCIB for 5 per cent of shares outstanding.”

“While the numbers are telling us we ARE in an upcycle, it does not feel like it. However, we believe the inflation / commodity / infra narrative is powerful, with staying power, making FTT shares as highly attractive on prospective 13-14 times 2022E P/E. The market is of course concerned now that we are on a cusp of a recession, pushing investors to dump the cyclical shares. That being said, (most) investors have to be long something and if the commodity complex is benefitting from fund flow now, we put FTT in the same (positive) bucket.”

Dentalcorp Holdings Ltd. (DNTL-T) was lower as it reported revenue of $280.2-million for the first quarter, an increase of 13.4 per cent compared to $247-million for the same period last year. The expectation was for revenue of $275-million.

Its net loss was $11-milion versus a loss of $9-million a year earlier. The company said its adjusted net income was $28.6-million, compared to $12.5-million for the first quarter of 2021.

Calling the release “slightly positive,” Desjardins Securities analyst Gary Ho said: “Adjusted EBITDA beat our estimate and the Street, driven by robust M&A growth, offset by Omicron in early 1Q. For the call, we will be looking for: (1) more clarity into the M&A pipeline; (2) organic growth outlook toward the end of the year; and (3) updates on organic growth initiatives (orthodontic and implants insourcing, hellodent/PC Health partnership, etc).”

George Weston Ltd. (WN-T) dipped after it raised its dividend by 10 per cent as it reported a profit attributable to shareholders in its latest quarter compared with a loss a year ago.

The company, which owns large interests in Loblaw Companies Ltd. (L-T) and Choice Properties Real Estate Investment Trust (CHP.UN-T), says it will now pay a quarterly dividend of 66 cents per share, up from 60 cents.

Chairman and chief executive Galen G. Weston says the firm’s operating companies are delivering on their strategic agendas, positioning the company well for continued value creation.

The increased payment to shareholders came as George Weston reported a first-quarter profit available to common shareholders from continuing operations of $363-million or $2.45 per diluted share compared with a loss of $62-million or 41 cents per diluted share a year ago.

Revenue for the quarter ended March 26 totalled $12.41-billion, up from $12.02-billion in the same quarter last year.

On an adjusted basis, George Weston says it earned $1.90 per diluted share from continuing operations compared with an adjusted profit of $1.60 per diluted share from continuing operations a year earlier.

RioCan Real Estate Investment Trust (REI.UN-T) was lower after it reported a first-quarter profit of $160.1-million, up from $106.7-million a year ago.

The trust says the profit amounted to 52 cents per diluted unit for the quarter, up from 34 cents per diluted unit a year earlier.

Revenue totalled $294-million for the quarter ended March 31, up from $276.8 million in the same quarter last year.

Meanwhile, funds from operations totalled $130.6-million or 42 cents per diluted unit, up from $106.0-million or 33 cents per unit a year earlier.

The trust says its committed occupancy rate for the quarter was 97 per cent, up from 95.8 per cent in the same quarter last year.

RioCan CEO Jonathan Gitlin says the trust continued to advance its strategic objectives from a position of strength, driven by the quality of its portfolio, resilience of our tenants, and capacity to execute its growth initiatives.

Peloton Interactive Inc. (PTON-Q) dropped with it reporting a bigger third-quarter net loss on Tuesday as expenses doubled and demand for its fitness equipment cratered from pandemic highs, leading to warn the company was “thinly” capitalized.

“The balance sheet challenge has been managing inventory,” Chief Executive Officer Barry McCarthy said in a letter to shareholders.

“We finished the quarter with US$879-million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale.”

The company said it had signed an agreement with JP Morgan and Goldman Sachs to borrow US$750-million in 5-year term debt.

Like many stay-at-home winners, the fitness equipment maker is grappling with plummeting demand. The company’s market value has tumbled to US$4.69-billion from nearly US$50-billion during the pandemic when its bikes and on-demand fitness content were lapped up.

The company said connected fitness subscribers for the fourth quarter will be about 2.98 million, compared to FactSet estimates of 3.01 million.

Revenue fell to US$964.3-million in the third quarter from US$1.26-billion a year earlier.

Peloton, in February, replaced its chief executive officer and has unveiled measures like price cuts for its equipment while focusing on its subscription plans to transform the company.

Net loss attributable to Class A and Class B shareholders widened to US$757.1-million, or US$2.27 per share, in the quarter ended March 31, from US$8.6-million, or 3 US cents per share, a year earlier.

AMC Entertainment (AMC-N) posted better-than-expected quarterly revenue and a narrower loss on Monday, as the release of big-ticket films such as The Batman drew crowds to movie halls, driving a surge in box-office collection at the world’s largest theater chain.

Shares of the company, a favourite among meme stock traders, slid in Tuesday afternoon trading.

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After becoming one of the biggest victims of the pandemic, AMC is seeing a revival in business, as a steady stream of new releases such as Scream, Uncharted and Doctor Strange and the Multiverse of Madness, the latest film in Disney’s Marvel Cinematic Universe, is keeping theaters full.

“Let me say it again to all those who doubted the consumer appeal of movie theaters: Doctor Strange, Doctor Strange, Doctor Strange, Doctor Strange” Chief Executive Officer Adam Aron said on a post-earnings call.

“Our guests have been spending like never before, with revenues per patron going through the roof at AMC, up 34 per cent above pre-pandemic norms.”

Theater chains are working extra hard to attract moviegoers as they go head-to-head with deeply funded streaming services, whose fount of content kept most people entertained during lockdowns.

The company posted an adjusted loss of 52 US cents per share on revenue of US$785.7-million in the quarter ended March 31. Analysts on average had expected a loss of 63 US cents per share on revenue of US$743.4-million, according to IBES data from Refinitiv.

The company is gearing up to screen Paramount’s Top Gun: Maverick, Marvel’s Black Panther: Wakanda Forever, Thor: Love and Thunder and the much-awaited Avatar 2.

With files from staff and wires

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