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A look at North American equities that headed in both directions

On the rise

Walmart Inc. (WMT-N) on Tuesday forecast a smaller fall in annual profit as demand for groceries holds up despite higher prices, while discounts on clothing and electronics attract more inflation-hit shoppers to the top U.S. retailer’s stores.

The company also raised its full-year net sales expectations and announced a new US$20-billion share buyback plan, pushing its shares higher.

Its results boosted stocks of other major retailers including Target Corp (TGT-N) and Macy’s Inc. (M-N).

Sales of food and other essentials that fill much of Walmart’s shelf space have proved resilient, even as shoppers cut back on discretionary spending amid decades-high inflation.

Average transactions at its Walmart U.S. business rose 2.1 per cent in its third quarter ended Oct. 31, compared with a 1-per-cent rise last quarter, while average bills rose 6 per cent, mainly due to inflation.

“Walmart U.S. continued to gain market share in grocery, helped by unit growth in our food business,” Chief Executive Officer Doug McMillon said in a statement.

“We significantly improved our inventory position in the third quarter, and we’ll continue to make progress as we end the year,” he added.

Walmart enters the holiday quarter with inventories valued at nearly US$65-billion, up from about US$60-billion three months ago. Chief Financial Officer John David Rainey told Reuters the 13-per-cent rise in value of the inventories was 70-per-cent inflation driven but on a unit basis was “much lower.” The company also forecast holiday quarter U.S. same-store sales, excluding fuel, to increase about 3 per cent, below estimates of a 3.4-per-cent increase. Rainey attributed the forecast to a cautious outlook on the consumer.

FedEx (FDX-N) and Amazon (AMZN-Q) have warned of a slump in holiday season demand in recent weeks.

Fourth-quarter adjusted earnings per share for Walmart are expected to decline 3 per cent to 5 per cent, compared to analysts’ estimates of a 4.5-per-cent fall.

For the full-year, the Bentonville, Arkansas-based chain said it expects fiscal 2023 adjusted earnings per share to fall 6 per cent to 7 per cent, compared to its previous forecast of a 9-per-cent to 11-per-cent decline.

Net sales, however, are expected increase 5.5 per cent, compared to its previous forecast of a 4.5-per-cent increase.

See also: Walmart offers to pay $3.1-billion to settle U.S. opioid lawsuits

Home Depot Inc. (HD-N) tapped higher prices to override a drop in customer transactions for the third quarter and left its annual forecasts unchanged, signaling a weak holiday season amid a housing market slowdown.

The No. 1 U.S. home improvement chain still beat Wall Street estimates for sales and profit on Tuesday as consumers worried about rising mortgage rates stuck to renovating their existing homes instead of buying new ones.

The fourth quarter will be the weakest of the year for comparable sales, it said, amid mounting uncertainties around the housing market.

“There are definitely some mixed signals ... and that’s why we’re cautious,” Chief Executive Ted Decker told analysts on a call, adding that customers have proven largely resilient so far.

Home Depot saw customer transactions fall 4.3 per cent, but higher prices of lumber, copper and other building materials helped drive average ticket - or the average amount of sales per customer - 8.8 per cent higher, offsetting some pressure. Robust demand for big-ticket items such as pipes and fittings also helped.

Wall Street analysts noted that the company’s reiterated outlook implied a full-year profit range of US$16.15 to US$16.46 per share and was below market consensus, but said that should not be “overly concerning.”

“The cautious approach in this uncertain environment makes sense and could prove conservative,” Telsey Advisory Group analyst Joe Feldman said.

Comparable sales rose 4.3 per cent in the three months ended Oct. 30, beating estimates of a 3.1-per-cent increase, according to Refinitiv IBES data.

Net earnings increased to US$4.34-billion, or US$4.24 per share, while analysts on average expected a profit of US$4.12 per share.

Shares of the company reversed course to gain ground, after Walmart Inc raised its annual sales and profit forecasts, sending retail stocks higher.

U.S.-listed shares of Taiwan Semiconductor Manufacturing (TSM-N) jumped after Warren Buffett disclosed his Berkshire Hathaway (BRK.A-N, BRK.B-N) bought more than US$4.1-billion of stock in the company

The news boosted investor sentiment for the world’s largest contract chipmaker, which saw its shares hit a two-year low last month due to a sharp slowdown in global chip demand.

In a Monday regulatory filing describing its U.S.-listed equity investments as of Sept. 30, Berkshire said it owned about 60.1 million American depositary shares of TSMC.

Berkshire also disclosed new stakes of US$297-million in building materials company Louisiana-Pacific Corp. (LPX-N) and US$13-million in Jefferies Financial Group Inc. (JEF-N). It exited an investment in Store Capital Corp. (STOR-N), a real estate company that agreed in September to be taken private.

Buffett-backed Nu Holdings Ltd (NU-N) soared after it posted a near three-fold jump in third-quarter revenue after the bell on Monday, as the digital banking firm saw rapid customer growth in its key domestic Latin American market.

The Brazilian lender has so far weathered a downturn in the sector on the back of robust demand for its credit cards and other core products. It has lately also expanded its footprint in Mexico, its second largest international market.

“Our customer base grew to over 70 million with a record high activity rate of 82%,” said founder and Chief Executive David Vélez in a statement.

The upbeat results come at a rocky time for the global banking industry that has been hit by harsh investor sentiment as economists around the world predict a harsh upcoming economic downturn due to geopolitical turmoil and soaring inflation.

Total revenue of the company, popularly known as Nubank, surged 171 per cent to a record US$1.3-billion on a FX-neutral basis for the quarter ended Sept 30.

Still, Nubank, which made a blockbuster market debut in New York late last year, has seen its U.S. shares lose over half their value this year, amid the capital markets turmoil and concerns around the stability of new-age financial firms when faced with harsh macroeconomic headwinds.

Estee Lauder Companies Inc. (EL-N) was up after the Wall Street Journal reported it is nearing a deal to buy Tom Ford for roughly US$2.8-billion, building on a longstanding licensing deal and marking the cosmetics giant’s largest-ever acquisition.

On the decline

Canadian Pacific Railway Ltd. (CP-T) was lower after billionaire investor Bill Ackman’s Pershing Square Capital Management revealed in a 13F filing it has increased its stake in the company.

During the third quarter, the hedge fund bought 12.29 million shares of CP, up from its holdings of 2.94 million shares previously.

From March: William Ackman’s Pershing Square takes new stake in Canadian Pacific

Pershing also increased its stake in Tim Hortons parent Restaurant Brands International Inc. (QSR-T) to 24.19 million shares from 23.82 million.

It exited its position in Domino’s Pizza Inc. (DPZ-N).

Canadian gold miner Argonaut Gold Inc. (AR-T) fell after it reported the death of a contractor following an “isolated incident” at its Magino Project in northern Ontario.

The company is working with authorities to investigate the cause of the accident, and will provide additional information as it learns more, it said.

Vancouver-based Diversified Royalty Corp. (DIV-T), which owns Mr. Lube, AIR MILES, Sutton, Mr. Mikes, Nurse Next Door, and Oxford Learning Centres trademarks, dropped after it announced a 2.1-per-cent dividend increase, a US$30-million bought-deal financing and an acquisition.

The company said it would acquire California-based SBS Franchising, LLC for US$59.4-million. The company is a franchisor of commercial cleaning services and building maintenance services in the United States and Canada under the “Stratus Building Solutions” system and trademarks.

The US$30-million bought-deal public offering will be led by Cormark Securities Inc. at a price of $2.80 per share.

The annual dividend will increase from 23.5 cents per share to 24 cents per share effective Jan. 1.

With files from Brenda Bouw, staff and wires