9A roundup of some of the North American equities making moves in both directions today
On the rise
Laval, Que.-based Couche-Tard offered to pay AU$34.50 in cash per share for Caltex, increasing an earlier proposal of $32 per share that was rejected, Caltex said early Tuesday. The offer is equivalent to roughly $7.8-billion.
Caltex said it was considering the non-binding bid and that talks were at a preliminary stage.
Couche-Tard, one of the world’s biggest chain of convenience stores, operates under the name Circle K in most places and Couche-Tard in Quebec. The company has been hunting for its next big takeover and many observers expected a deal in the Asia region.
- Nicolas Van Praet
Walt Disney Co. (DIS-N) was up 1.3 per cent, hitting a new record high, after a report that Disney+ is averaging nearly a million new subscribers a day.
According to research firm Apptopia, the new streaming service has been ranking No. 1 overall in the U.S. iOS and Google Play app stores since its Nov. 12 launch.
Big retailers Target Corp and Walmart Inc have also forecast a strong holiday quarter, which can account for as much as 40 per cent of annual sales for U.S. retailers.
Best Buy, which is the biggest U.S. tech retailer, said it expected fourth-quarter adjusted earnings of US$2.65 to US$2.75 per share, largely above Wall Street expectation of US$2.65.
Newmont Goldcorp Corp. (NGT-T) closed up 0.5 per cent after announcing Australia’s Evolution Mining Ltd has agreed to buy its Red Lake gold mining complex for $375-million in cash.
Evolution also agreed to pay an additional $100-million upon new resource discovery at the mine.
Canaccord Genuity analyst Carey MacRury said: “In our view, the price appears reasonable compared to other recent transactions given the mine’s higher cost structure and uncertain longer-term geologic potential. We note that Evolution expects to reduce the mine’s reserves by 30-40 per cent using its own estimation methodology and accounting for depletion since July 1, 2018. In addition, the company plans to invest $150-million into the mine over a 3-year turnaround period, on exploration, increasing production, and reducing costs.”
On the decline
A day after its shares fell to their lowest point in five years, Hudson Bay Co. (HBC-T) was down a further 1 per cent on Tuesday.
The recent drop could be a sign some investors are betting a $1.1-billion bid by the executive chairman to take the retailer private could fail to win over minority shareholders.
Bank of Nova Scotia (BNS-T) lost 0.8 per cent after it reported a modest 1.6-per-cent rise in profit in the fiscal fourth quarter, capping off a year of change at Canada’s third-largest bank.
Scotiabank is the first major Canadian bank to report its results for the full year that ended Oct. 31, amid expectations of sluggish earnings growth in the face of global uncertainty about trade and economic growth.
Scotiabank reported profit of $2.3-billion, or $1.73 per share, compared with $2.27-billion, or $1.71 per share, a year ago.
- James Bradshaw
Following Monday’s 17.3-per-cent drop in share price, Kirkland Lake Gold Ltd (KL-T) declined 0.8 per cent as the Street continued to debate its proposed acquisition of struggling open pit specialist Detour Gold Corp. in an all-stock deal valued at about $4.9-billion.
A trio of equity analysts downgraded their ratings for Kirkland Lake shares.
Dollar Tree Inc. (DLTR-Q) plummeted 15.9 per cent on Tuesday after its holiday-quarter profit forecast below Wall Street expectations, as the discount store operator expects a hit from U.S. tariffs on Chinese imports.
The tariffs as part of the prolonged trade war between Washington and Beijing have been a pressure point for retailers, which source a large chunk of their merchandise from China.
The company said it expects fourth-quarter profit in the range of US$1.70 to US$1.80 per share, below the average analyst expectation of $2.02.
Dollar Tree also said it expects fourth-quarter merchandise margin to be pressured by higher sales of low-margin consumables and rising wages at its distribution centers.
The company forecast fourth-quarter sales in the range of US$6.33-billion to US$6.44-billion, the mid-point of which is below the average analyst estimate of US$6.41-billion.
Palo Alto Networks Inc. (PANW-N) slid 12 per cent after it forecast second-quarter profit well below Wall Street expectations on Monday, as the cyber security firm grapples with higher costs and rising competition.
The company expects second-quarter adjusted profit between US$1.11 and US$1.13 per share, while analysts were expecting US$1.30, according to IBES data from Refinitiv.
Palo Alto also said it would buy Aporeto Inc for US$150-million in cash. The Santa Clara-based company has been on an acquisition spree as it looks to bolster its market share in a highly competitive cyber security industry.
Citi analyst Walter Prichard said: “While we had directional product weakness modeled it was worse than we expected. Even though there was positive trade-off to cloud, we expect some investors will take pause of the surprise, with concerns that product weakness could continue and is a sign of competitive issues. We take the other view, as we expect that the market will soon place a premium on security companies that are “on-sides” with cloud trend, where we see PANW leading. In taking our out-year numbers slightly higher on higher annuity revenue, our price target moves to $283 [from US$247] on a consistent valuation framework of 18x FY22 uFCF. PANW continues to be our favorite security stock.”
Hewlett Packard Enterprise Co. (HPE-N) slid 8.5 per cent after it missed Wall Street estimates for quarterly revenue on Monday, hit by lower demand for its servers and storage products.
Sales in its IT business, which makes storage and data center networking products, fell 10.5 per cent, while its unit that makes wireless network products posted a 6.5-per-cent drop.
The company had previously warned of “uneven demand” due to U.S.-China trade tensions.
Citi’s Jim Suva said: “Hewlett Packard Enterprise reported FQ4 (October) results Monday night that were a mixed bag where sales were softer than expected but EPS was stronger due to cost controls and an active strategy to pursue higher profit margin business. While HPE commented it expects sales growth in 2020 we note this includes the recent acquisition of CRAY which adds about $500-million of sales. While we are impressed with the company’s margin improvement and cost controls we believe investors will begin to focus on HPE’s ability to grow sales organically.”
With files from staff and wires