A roundup of some of the North American equities making moves in both directions today
On the rise
Air Canada (AC-T) was up 3.7 per cent on Tuesday on saying it expects higher capacity and revenues during the last three months of 2019, after reporting lower-than-expected third-quarter profit in the wake of the grounding of Boeing Co’s 737 MAX jets.
Canada’s largest carrier, which has 24 grounded MAX jets, forecast capacity growth of 3 per cent during the fourth quarter, following a 2-per-cent dip during the third quarter.
“Looking ahead to the fourth quarter, we anticipate year over year traffic and revenue growth despite the MAX grounding,” Air Canada chief commercial officer Lucie Guillemette told analysts during a call.
The fast-selling 737 MAX has been grounded worldwide since mid-March while Boeing updates flight control software at the center of two crashes in Indonesia and Ethiopia that together killed 346 people within a span of five months.
At the same time, potential rival Canada Jetlines Ltd. (JET-X) announced it is postponing its planned December launch and laying off most employees after failing to secure $40-million in required financing and losing investment partners.
The company says the Dec. 17 startup of the ultra-low-cost airline will be delayed to an undisclosed date and it will not pay additional deposits to receive the first two Airbus 320 planes next month.
Its stock plummeted over 67 per cent.
The Calgary-based airline says that equated to $1.02 per diluted share, compared with 61 cents per share or $70.1 million a year earlier.
Revenues increased 10.5 per cent to $1.39-billion, up from $1.26-billion in the prior year despite carrying fewer passengers.
Cannacord Genuity analyst Doug Taylor said: “Given WestJet’s pending sale to Onex, we consider the Q3 results largely academic. With that said, results were ahead of expectations on profitability and were another demonstration that higher load factors and yields are more than offsetting the costs and capacity constraints produced by the ongoing B737 MAX grounding. We have nudged our forecasts higher as a result. There was no substantive update on the timing of the closing of the transaction – the press release suggests closing is still targeted by the end of the year, and we see little reason to doubt it."
Pfizer Inc. (PFE-N) jumped 2.4 per cent after posting third-quarter profit well above analysts’ estimates on higher sales of cancer drug Ibrance and arthritis medicine Xeljanz, encouraging the largest U.S. drugmaker to lift its earnings forecast for the year.
The results suggested that Chief Executive Officer Albert Bourla’s efforts to slim down the sprawling drugmaker were paying off.
Pfizer announced in July it would separate its off-patent branded drugs business and combine it with generic drugmaker Mylan NV,, allowing it to focus on its more profitable drugs such as Ibrance and Xeljanz.
Bourla said on Tuesday Pfizer would become a “smaller, science-based company” following the Mylan deal, which is expected to close next year.
Pfizer raised its 2019 adjusted earnings per share forecast to between US$2.94 and US$3.00, from a prior estimate of US$2.76 to US$2.86. Analysts on average were expecting US$2.82 per share, according to Refinitiv IBES.
General Motors Co. (GM-N) was up despite slashing its earnings forecast for 2019, saying that a 40-day U.S. labor strike by the United Auto Workers union that brought virtually all of its North American operations to a standstill would cost it around US$3-billion in profits this year.
Shares rose 4.3 per cent on the back of a better-than-expected quarterly net profit because of robust U.S. sales of high-margin pickup trucks and SUVs. Wall Street analysts have viewed the strike costs as a tradeoff for three U.S. plant closures agreed to with the union that will boost GM’s profitability.
“The underlying business was strong this quarter,” Chief Financial Officer Dhivya Suryadevara told reporters at GM’s headquarters, describing the strike as a “one-time impact.”
Canfor Corp. (CFP-T) increased 2.1 per cent after announced it has agreed to be taken private for $16 per share by Great Pacific Capital Corp. Great Pacific announced in August that it was bidding $16 a share in cash for the 49 per cent of Canfor that it doesn’t already own.
Raymond James analyst Daryl Swetlishoff said: “While we are not surprised the formal independent valuation provided such a wide range in the fair market value of Canfor shares, we are still of the view that the $16/share offer materially undervalues Canfor for investors with a longer term time horizon.”
“We contend the go private bid was opportunistic. Further emphasizing this, is the recovery in lumber stocks since the announcement of the deal, with large cap lumber peers Interfor and West Fraser up 49 per cent and 33 per cent respectively (vs the TSX flat) since the announced takeover offer in mid-August. Absent of the proposed offer, we expect Canfor’s shares would be trading in the $13-14/sh range given their high correlation to lumber stocks and lumber prices.”
First Quantum Minerals Ltd. (FM-T) shares were up 3.7 per cent on the release of third-quarter results after the bell on Monday that narrowly missed expectations on the Street.
The Toronto-based company reported revenue and earnings per share of $987-million and 5 cents, respectively, falling short of the consensus expectations of $1.02-billion and 6 cents.
Industrial Alliance Securities analyst George Topping said: “EBITDA of $350-million was in line with consensus while CFPS [cash flow per share] of $0.40/share was a beat (cons: $0.31/share; $357-million), nonetheless FCF remained negative. Our experience is that all mining projects take time (12-18 months) to bed down, and CP is unlikely to be different. Given the very high balance sheet risk, we continue to wait on the sidelines before re-assessing and therefore maintain our $12.90/share target and Hold recommendation.”
On the decline
Shopify Inc. (SHOP-T) dropped 3.2 per cent after it posted a bigger quarterly net loss on Tuesday as it spent more to add sellers to its e-commerce platform and expand fulfillment centers across the United States.
The company had said in June it planned to spend over $1-billion for more fulfillment centers, as it faces stiff competition from Amazon.com Inc and EBay Inc.
Total operating expenses in the third quarter rose to $252.4-million from $181.1 million a year earlier.
The company’s net loss tripled to $72.8-million, or 64 cents per share, in the quarter ended Sept. 30, from a year earlier.
Hexo Corp. (HEXO-T; HEXO-N) lost 3 per cent in the wake of reporting fourth-quarter and 2019 fiscal year revenue in line with analysts’ expectations, after the grower lowered its guidance and postponed its financial report to late Monday, when it reported a net loss amid a sluggish industry-wide environment for Canada’s growers.
The Gatineau, Que.-based company said late Monday that its net revenue for the fourth quarter reached $15.4-million, versus $13-million in the third quarter, and the 2019 fiscal year ended July 31 brought in $47.3-million. It reported a net loss of $56.7-million for the three-months ended July 31, or 28 cents per share, compared with a net loss of $7.8-million the previous quarter, or 4 cents per share. For the full year, Hexo saw a net loss of $81.6-million.
Looking toward its fiscal 2020, Hexo said it expects net revenue for the first quarter to be $14-million to $18-million.
- Marcy Nicholson
In response, a trio of equity analysts downgraded their ratings for its stock.
Shares of Beyond Meat Inc. (BYND-Q) sank 22.2 per cent on Tuesday, as a lock-up period for its early backers ended, freeing them up to cash in on this year’s doubling in its share price after results which pointed to growing costs at the plant-based meat success story.
It was unclear whether any of the company’s early investors were among those selling in early deals, but analysts said that expectations some would cash in were likely to weigh on the stock in the short run.
Google parent Alphabet Inc. (GOOGL-Q) lost ground after missing analysts’ estimates for quarterly profit on Monday as it reported its highest-ever quarterly expenses.
Its shares were down about 2.1 per cent even though revenue growth topped expectations.
Google provides limited product-level financial disclosures, leaving investors increasingly uncertain about how pressures including regulatory scrutiny, advertiser boycotts and global trade tensions are affecting operations.
Alphabet shares have underperformed relative to some peers, rising 17 per cent in the last 12 months entering Monday, compared with a 33-per-cent gain for Microsoft and 29 per cent for Facebook.
Tesla Inc. (TSLA-Q) dipped 3.5 per cent after it third-quarter revenue tumbled 39 per cent in the United States, its first drop in more than two years, but sales in China and other regions surged, the electric car maker’s break down of sales by geography showed on Tuesday.
U.S. sales, which account for the biggest share of the company’s total revenue, fell to US$3.13-billion from US$5.13-billion a year earlier.
Sales in China rose 64 per cent to US$669-million and its other segment, which covers the rest of the globe, rose by more than a billion dollars to US$1.83-billion, a regulatory filing showed.
Mastercard Inc. (MA-N) sat down 0.6 per cent on Tuesday despite beating Wall Street estimates for quarterly profit as customers shrugged off fears of an economic slowdown and spent more with their credit and debit cards, boosting fees for the world’s second-largest payment processor.
The company’s gross dollar volume, the dollar value of transactions processed, rose 12.4 per cent to $1.65 trillion in the third quarter.
Around 28.2 billion transactions were processed, up about 22 per cent from a year earlier. The gain was led by a near 12-per-cent rise in the United States and a 31.4-per-cent jump in Europe.
With files from staff and wires