A roundup of some of the North American equities making moves in both directions today
On the rise
TC Energy Corp. (TRP-T) jumped 7.4 per cent after it said on Tuesday it will proceed with the contentious Keystone XL oil pipeline more than a decade after the company first applied to build it to southern U.S. refineries from Alberta.
Calgary-based TC Energy said the US$8-billion project will include US$1.1-billion in funding from the Alberta government, to cover construction costs through 2020.
Keystone XL will ship 830,000 barrels of crude a day to Steele City, Neb., from Hardisty, Alta., giving Alberta oil a long-sought new route to refineries in the U.S. Gulf Coast.
TC Energy first applied to build the project in 2009. It became a flashpoint for the environmental movement, as international green groups, landowners in Nebraska and various celebrities waged a lengthy campaign against it. They argued that it went against global efforts to combat climate change and could damage a massive aquifer that is a water source to a large part of the United States.
- Jeffrey Jones
RBC Dominion Securities analyst Sam Crittenden said: “We expect a positive reaction from Hudbay shares on its annual reserve update and updated Snow Lake mine plan. The updated Snow Lake mine plan is highlighted by a 41-per-cent increase in life of mine gold production for Lalor including annual gold production more than 150,000 ounces per year for the first 8 years of production from New Brittannia, 9 per cent higher than the previous mine plan with low sustaining cash costs at $657/oz. The increased production was made possible by a 35-per-cent increase in total gold reserves to 2.2 million ounces at Snow Lake which added material at Lalor and also now incorporates the WIM and 3 Zone deposits. ... Increased production via the processing of ore in the New Britannia mill is expected to start in late 2021 (assuming no delays or deferrals due to COVID-19).”
Aecon Group Inc. (ARE-T) sat 1.2 per cent higher after it announced it’s withdrawing its outlook for 2020 as it evaluates the impact of the temporary slowing or suspension of work on several of its projects in multiple jurisdictions “due to directives recently issued by clients and governments in light of the COVID-19 pandemic, as well as the deferral of certain project procurement processes in the company’s bidding pipeline.”
Aecon said it has activated continuity plans and “a rigorous COVID-19 health and safety assurance process, which meets or exceeds guidance by applicable government health authorities, to minimize disruptions to its business and adapt to evolving market conditions and safety standards.”
AltaCorp Capital analyst Chris Murray said: “We take the announcement as neutral as we have been assuming some impact to the Company, although the situation remains fluid. We see the Company as being less impacted by COVID-19 than others within and outside the construction industry.”
Imperial Oil Ltd. (IMO-T) was 7.1 per cent higher after it said on Tuesday it would cut its full-year capital spending by 30 per cent or $500-million and will suspend share buybacks to cushion the impact of a plunge in oil prices.
The company now expects a capital spend of $1.1- billion to $1.2-billion for 2020, from the previous forecast of $1.6-billion to $1.7-billion.
“The current COVID-19 pandemic, as well as business and commodity price environment, poses many challenges for our industry,” said chairman, president and chief executive officer Brad Corson. “Imperial’s integrated business model, high quality asset portfolio, and strong balance sheet offer valuable stability during this period, and we are taking steps to exercise flexibility in our plans to respond to market conditions by reducing our capital investment and operating costs.”
A day earlier, Inter announced a dividend reduction, exploration of partnership options for its Heartland Petrochemical Complex and the suspension of the sale of its European Bulk Liquids Storage business.
Raymond James’ Chris Cox said: “On the whole, we are encouraged that the company is finally taking steps in the right direction toward a manageable and prudent funding outlook, especially given the acute pressures on the sector and the added capital constraints likely to face the industry. While the dividend cut may still weigh on the shares over the near-term - especially given the company’s retail-heavy ownership - we believe the move was a necessary step in the right direction, particularly given the significant dilution the company was incurring with the DRIP..”
U.S. packaged foods giant Conagra Brands Inc. (CAG-N) was up 3.8 per cent in the wake of raising its financial expectations for 2020 on Tuesday on increased demand for its snacks and groceries as consumers stocked up amid the fast-spreading coronavirus pandemic.
Panicking consumers have hoarded cases of packaged and frozen foods to prepare for a lockdown as cases related to the coronavirus pandemic increased in the United States over the past few weeks.
In response to the growing demand, Conagra manufactured more of the products in demand and even paid a one-time bonus to its employees at its 50 manufacturing facilities.
“While we are still early in our fourth quarter, we have seen significantly elevated demand for our retail products as consumers have started filling their pantries for more at-home eating,” Chief Executive Officer Sean Connolly said in a statement.
Top U.S. oilfield services provider Schlumberger NV (SLB-N) was up 1.4 per cent after announcing will implement widespread salary and job cuts as it grapples with a sharp decline in revenue from the oil price collapse.
Executives will take a voluntary 20% salary reduction, beginning April 1, and worldwide support personnel will adopt unspecified modified schedules that reduce salaries. In North America, it will accelerate a restructuring that includes job cuts and furloughs over the next couple of months, a spokesman said.
Carnival Corp. (CCL-N) rose 2.8 per cent on Tuesday after it said it was raising about US$6-billion in combination debt and equity and suspending its dividend payouts to strengthen its balance sheet as it reels from the fallout of the coronavirus pandemic.
The world’s largest cruise operator said it would raise about US$1.2-billion in equity and the rest in debt
Carnival also said it was suspending its share buyback plan and reducing capital expenses to improve liquidity.
Carnival has already fully drawn on its US$3-billion revolving credit agreement and is expected to post a loss this fiscal year ending Nov. 30 due to the outbreak.
On the decline
Air Canada (AC-T) erased gains late in the trading session and closed down 2.1 per cent after announcing late Monday it is temporarily laying off 16,500 people – half its work force – as Canada’s largest airline parks planes and slashes capacity by up to 90 per cent amid the COVID-19 pandemic that has closed most international borders.
In a research note released Tuesday, Canaccord Genuity analyst Doug Taylor said: “For the third time in three weeks we are reducing our estimates on Air Canada to reflect the ongoing fallout from the COVID-19 pandemic. The company’s update on Monday confirmed what we believe the market already likely assumed: Q2 capacity has been reduced 85-90 per cent year-over-year (from prior down 50 per cent), about half of front-line employees are being temporarily laid off to reduce variable costs, and management salaries are being reduced broadly. Other cost savings announced are consistent with the prior update. We believe Air Canada has an exceptionally strong capital position to weather a prolonged period of severely depressed revenue (potentially more than 12 months). Our longer-term estimates underpinning our $30.00 target are not materially changed at this point until we have better visibility on the timing of travel restrictions being lifted. As such, we continue to believe the bottom will be tough to call but think this pullback will ultimately yield an extraordinarily attractive entry point and maintain a BUY rating.”
Restaurant Brands International Inc. (QSR-T) slid 0.5 per cent higher after announcing it is advancing cash payments and rebates to restaurant owners in many markets, including US$70-million in North America.
In an open letter released Monday after the bell, chief executive officer Jose Cil said: “These initiatives have allowed us to unlock thousands of dollars of immediate liquidity per eligible restaurant.”
Mr. Cil also announced the company has proactively drawing down its full $1-billion revolving credit facility “out of an abundance of caution” and now has approximately $2.5-billion of cash on hand.
Ford Motor Co. (F-N) was down 4 per cent after it said on Tuesday it was postponing its plan to restart production at its North America plants due to safety concerns for its workers amid the coronavirus pandemic.
To generate cash, the No. 2 U.S. automaker had said last week it was poised to restart production at some plants in North America as early as April 6, bringing back such profitable vehicles as its top-selling F-150 full-sized pickup, the Transit commercial van and SUVs.
But on Tuesday, Ford said that although it had been aiming to resume production at several key U.S. plants on April 14, it would now do so at dates to be announced later on.
“The health and safety of our workforce, dealers, customers, partners and communities remains our highest priority,” Kumar Galhotra, president of Ford’s North American operations, said in a statement.
Still, the automaker will open a plant in Ypsilanti, Michigan, during the week of April 20, that will make ventilators to treat patients afflicted by the coronavirus.
Cronos Group Inc. (CRON-T) slid 11.4 per cent with the release of quarterly results deemed underwhelming by the Street.
Raymond James analyst Rahul Sarugaser said: “Cronos Group (CRON) reported 4Q19 earnings [Monday] night, after a 4.5-week delay: the results weren’t a disaster, but they sure weren’t exciting. Without CRON’s massive cash pile, compliments of Altria (MO)—and the potential of its cannabinoid biosynthesis efforts with Ginkgo Bioworks (private) and other IP-generating initiatives—this would be a very different story.”
Visa Inc. (V-N) was down 2.7 per cent after saying Monday its transaction volumes had been hit as the coronavirus pandemic wreaks havoc on consumer spending, leading it to forecast mid-single digit percentage revenue growth for the second quarter.
“As countries have imposed social distancing, shelter-in-place or total lock-down orders, domestic spending, most notably in travel, restaurants, entertainment and fuel, has sharply declined week on week,” the world’s largest payments network said in a statement.
The company said transaction volumes fell in the second half of March and there has been a rapid deterioration in cross-border travel-related spending.
Shares of Amarin Corp. (AMRN-Q) plunged 70.6 per cent on Tuesday after the drugmaker lost a major U.S. patent battle for its heart drug Vascepa, opening the door for generic competition to its main revenue contributor.
Amarin claimed in a patent lawsuit that generic versions of Vascepa produced by drugmakers Hikma Pharmaceuticals Plc and Dr. Reddy’s Laboratories infringed on six of its U.S. patents.
But the Nevada District Court ruled late Monday that the claims on the fish-oil derivative Vascepa were “obvious,” and therefore invalid.
The U.S. Food and Drugs Administration has not yet approved any generic version of Vascepa. If it does, Amarin will seek to prevent the launch of generic versions of the drug by filing a preliminary injunction, the company said.
Ralph Lauren Corp. (RL-N) dipped 6.4 per cent in reaction to saying it drew down US$475-million from an existing credit line and stopped share buybacks, as it looks to beef up cash reserves to cope with the financial blow from the coronavirus pandemic.
The fashion house will also start making 250,000 masks and 25,000 isolation gowns, joining other major fashion labels that have started making medical gear to ease shortages during the coronavirus pandemic.
Earlier this month, luxury brands such as LVMH, Saint Laurent, Balenciaga and Canada Goose had announced plans to help supply essential gear for healthcare workers and patients.
Ralph Lauren, which has shut its distribution centers in North America and Europe, said it would reopen the facilities later this week.
The company had US$1.9-billion in cash and short- and long-term investments at the end of its third quarter.
American Airlines Holdings Inc. (AAL-Q) slid 0.2 per cent after revealing it intends to apply for up to US$12-billion government aid, ensuring no involuntary layoffs or pay cuts in the next six months, executives said in a memo to employees on Monday.
“We certainly hope and expect that by that time, the virus will be contained, Americans will be flying again and we will be back to flying a full schedule,” Chief Executive Doug Parker and President Robert Isom said in the memo.
On Tuesday, Reuters reported American is set to sharply increase the number of jets it is planning to retire beyond its announced plans as it accelerates a fleet transformation to respond to the coronavirus crisis.
Some 4,700 jets have been parked globally as airlines slash operations due to travel restrictions, according to Ascend by Cirium fleet data, and American’s decision confirms industry speculation that many of those older jets won’t fly again.
In addition to the retirement of 34 Boeing Co 757s and 17 Boeing 767s announced just two weeks ago, American now plans to also sunset a batch of 76 Boeing 737s it acquired between 1999 and 2001, nine Airbus SE A330-300s and 20 Embraer 190s.
With files from Brenda Bouw, staff and wires