A roundup of some of the North American equities making moves in both directions today
On the rise
Obsidian Energy Ltd. (OBE-T) was up 3.7 per cent on Tuesday after revealing before the bell it is initiating a process to explore strategic alternatives. Those alternatives, it said, could include a sale or merger of the company.
“While the outcome of the strategic review process will depend on the opportunities which arise within such process,” Obsidian said in a release.
Maxar Technologies Inc. (MAXR-T) jumped over 18 per cent after an equity analyst at Morgan Stanley initiated coverage of the stock with an “overweight" rating, suggesting the potential for 70-per-cent upside by the end of 2020.
Benjamin Arnstein said: ““We see Maxar as a high-risk/high-reward opportunity in the Space industry. We believe the next 24 months are critical as the company progresses on its turnaround plan and addresses its high leverage and debt levels, which should create value for equity holders.”
Shares of Apple Inc. (AAPL-Q) rose 1.1 per cent after it revealed on Tuesday that its streaming TV service will kick off Nov. 1, as the tech giant reaches a turning point where it focuses as much on services as its hardware and software.
Apple TV+ will be available in over 100 countries and buyers of an iPhone, iPad or Mac will get a free year of streaming television service, the company announced.
Apple also revealed that its new iPhone 11 will come with two back cameras, including an ultra wide-angle lens, but few big changes.
Suncor Energy Inc. (SU-T), Canada’s second-largest oil sands producer, increased 2.1 per cent after announcing Monday it will invest $1.4-billion to install two cogeneration units at its Oil Sands Base Plant, reducing greenhouse gas emissions by 25 per cent.
Canaccord Genuity analyst Dennis Fong said: "We estimate the cogeneration unit could drive $200 million of free cash flow by selling excess power into the grid (we estimate extraction and upgrading operations consume up to 250 MW of power vs. the 800 MW cogeneration units). We estimate the impact from lower emissions and maintenance capital could drive an incremental $100 million of annual free cash flow benefit from our previous estimate.
“We do not expect this announcement comes as a surprise given commentary with Q2/19 results about the immediacy of a potential decision. We view the sanction of this project as falling in line with Suncor’s focus that improving its margin and lowering emissions can be done hand-in-hand.”
Acadian Timber Corp. (ADN-T) was 0.1 per cent higher after it announced late Monday it will terminate its asset management agreement with Brookfield Timberlands Management LP, a subsidiary of Brookfield Asset Management. Acadian said it will internalize its asset management and administrative services functions.
Credit Suisse analyst Andrew Kuske said: “We believe Acadian Timber Corp.’s (ADN) announcement to internalize management should be unsurprising given the recent changing of the guard with Macer buying Brookfield Asset Management’s (BAM) legacy position in the timber player. Simply, ADN’s agreement to terminate the prior management agreement ultimately results in a clean structure without BAM involvement. The termination results in an elimination of annual base management fees, performance fees and other fees from ADN to BAM for a total cost of $18-million in cash. In light of the recent acquisition by Macer, the internalization of ADN’s management team should be viewed as a logical outcome. Clearly, a number of other questions remain about the strategic direction and future of “new Acadian”, however, this step is a positive direction.”
West Fraser Timber Co. Ltd. (WFT-T) was up 5.7 per cent in reaction to saying it will introduce variable operating schedules at five of its British Columbia sawmills, resulting in an estimated 15 to 25 per cent decrease in production.
The company says in a news release that starting next Monday, the schedules at the mills will vary and be adjusted from time to time depending on market conditions.
On the decline
“While exploration is giving me a big smile, and production at our operations in Argentina and Mexico (representing 60% of our guidance) are delivering as planned, production at Gold Bar and Black Fox has been a big disappointment. Unanticipated natural and operational issues coupled with startup delays at Gold Bar have pushed some of its production from 2019 into 2020. At Black Fox, production has been adversely impacted by slower than planned underground development. However, site management has been making steady progress towards resolving these production issues,” said chairman Rob McEwen.
Shares of Shopify Inc. (SHOP-T) fell 6.2 per cent after announcing the largest acquisition in its 15-year-history on Monday.
The Ottawa-based tech company has agreed to a US$450-million deal to buy 6 River Systems, a Boston-area startup in the warehouse order-fulfillment business.
DA Davidson analyst Tom Forte said: “We believe the addition of 6 River Systems should provide Shopify with the infrastructure and technology to jumpstart its logistics effort, which we see, along with its international expansion and physical retail initiatives, as keys to its sustained share performance.”
Before the bell, the Calgary-based company announced Michael McAllister has been promoted to president, Brendan McCracken to executive vice president, corporate development and external relations, and Greg Givens to chief operating officer. The changes are effective immediately.
The utility company says it will now pay a quarterly dividend of 47.75 cents per share, up from 45 cents.
“Three years into our organic growth strategy, we are pleased to announce a $1 billion increase in our five-year capital plan,” said president and CEO Barry Perry in a release. “The continuation of key industry trends including grid modernization, the delivery of cleaner energy and electrification are resulting in incremental investments in our U.S. and Caribbean businesses. Also, expansion of our Tilbury liquefied natural gas site is expected to serve the local marine bunkering market, driving additional investment at our regulated natural gas operations in British Columbia.”
Alibaba Group Holding Ltd. (BABA-N) was down 1.6 per cent in New York after founder Jack Ma, who helped launch China’s online retailing boom, stepped down as chairman of the world’s biggest e-commerce company Tuesday at a time when its fast-changing industry faces uncertainty amid a U.S.-Chinese tariff war.
Shares of automaker Ford Motor Co. (F-N) were down about 1.5 per cent after Moody’s downgraded Ford’s credit rating to junk status.
Moody’s says it expects weaker earnings and cash generation as Ford pursues a costly and lengthy restructuring plan.
RBC Dominion Securities analyst Joseph Spak said: "We believe this action alone shouldn’t impact Ford’s ability to access funding nor their cost of funding. Ford Credit has access to cost-effective financing (ABS) for near-term and operating needs. So we wouldn’t expect a meaningful impact to Ford Credit earnings yet.
“While Moody’s cited Ford’s Global Redesign restructuring initiative, China turnaround and product cycle in NA, the agency appears concerned about the macro and emissions penalties in 2020/21. And while the risks brought up by Moody’s aren’t new (we have highlighted prior), the action is negative for sentiment as it brings it front and center again. If this is Ford’s cash flow now at peakcycle, what happens to their balance sheet as they need to execute a major restructuring if the macro deteriorates? And if Ford caught a downgrade at still near peak cycle, are further downgrades on the horizon?”
On Tuesday, Ford said on Tuesday it would launch eight electric vehicles in Europe this year, a key step in its target of achieving a majority of its overall sales from electric cars by the end of 2022.
Northland Power Inc. (NPI-T) fell 3.8 per cent following a Monday announcement that it plans buy most of Colombian utility Empresa de Energia de Boyaca in a deal valued at $1.05-billion, including debt.
“The Acquisition builds on our presence in Latin America and gives us an entry point into Colombia, a target market with a stable economy, growing middle class, strong rule of law and ease and transparency of doing business,” said Northland president and CEO Mike Crawley. “We are thrilled to be acquiring this high-quality regulated Colombian utility. EBSA operates in a stable regulatory framework offering an inflation-protected perpetual cash flow profile and serves as a platform for future growth.”
Wendy’s Co. (WEN-Q) plummeted 10.2 per cent after saying on Monday evening it expects a fall in its 2019 adjusted earnings, as it expands its breakfast offerings across its U.S. restaurants in 2020.
The burger chain now expects full-year adjusted earnings per share to be down about 3.5-6.5 per cent, reversing its prior expectation of 3.5-7.0-per-cent growth.
Credit Suisse analyst Lauren Silberman said: “[Monday] Wendy’s (WEN) announced plans to launch breakfast nationwide in 2020, with breakfast currently available in 300 stores (5 per cent of U.S. base). WEN is one of the only QSR chains not offering breakfast at a national level. Breakfast is generally the most profitable daypart and represents 20 per cent of QSR sales. We are surprised by the announcement given the resources and time required to launch the daypart, a tight labor market (plans to hire 20K new employees), high levels of competition, ongoing reimage program, and previous commentary noting other sales opportunities exist outside of the breakfast daypart. We are cautious on execution, as this will mark the fourth time WEN has attempted breakfast, and believe incremental company and franchise investments could pressure margins and earnings.”
With files from Terry Weber, Brenda Bouw, staff and wires