A roundup of some of the North American equities that made moves in both directions
On the rise
Beyond Meat Inc. (BYND-Q) was up 7.3 per cent on Tuesday after Starbucks Corp. (SBUX-Q) said late Monday it would roll out a new plant-based lunch menu in China this week, launching the producer’s offerings in a country where it is trying to recover from the novel coronavirus pandemic-led shutdown.
The new lunch menu will feature pastas and lasagna using Beyond Meat’s plant-based beef products, and also include dishes from Omnipork, a plant-based pork alternative brand.
Starbucks is also adding non-dairy lattes using oatmilk.
Shares of Starbucks were down 3 per cent.
Industrial Alliance Securities analyst Michael Charlton said: “In March, PrairieSky took decisive action protecting future free cash flow by trimming its dividend as domestic E&P’s rapidly cut planned 2020 capital budgets in response to weakening commodity during the quarter. The new lower, and now quarterly dividend rate, looks to be below both ours and managements’ forecasted cash flow despite the decreases seen in E&P activity/investment levels; a move that aims to protect the balance sheet while the Company waits for pricing and subsequent drilling activity to improve. With fantastic margins and no capital requirements giving it a structural advantage over traditional E&P’s, the Company looks to have the financial flexibility that will potentially allow it to acquire additional assets during this downturn, expanding its future potential or use excess free cash flow to continue repurchasing shares.”
U.S. property and casualty insurer Travelers Cos Inc. (TRV-N) finished narrowly higher after it reported a 25-per-cent fall in quarterly profit, hurt by higher catastrophe losses, as insurers braced for a slew of claims due to disruptions caused by the coronavirus pandemic.
The company’s net income fell to US$600-million, or US$2.33 per share, in the first quarter ended March 31 from US$796-million, or US$2.99 per share, a year earlier.
Analysts on average expected earnings of US$2.85 per share, according to IBES data from Refinitiv. It was not immediately clear whether the numbers were comparable.
National catastrophe losses rose significantly in the first quarter from a year earlier as a string of tornadoes tore through Nashville, Tennessee and surrounding counties early in March and several U.S. regions saw wind storms and winter storms.
It said the move is “consistent with the company’s prior announcement to significantly increase its industry leading dividend."
On the decline
The move comes as a result of the agreement between the governments of Canada and the United States to extend border restrictions by an additional 30 days, effective today, the company said.
The Canadian carrier plans to resume service to the United States on May 22.
Teck Resources Ltd. (TECK.B-T) lost 5.2 per cent after it reported a much bigger-than-expected 84-per-cent plunge in quarterly profit on Tuesday, hit by shutdowns due to the coronavirus outbreak and weak performance in its energy unit.
The blow from the health crisis is the latest setback as copper and other base metal prices were already under pressure from the long-drawn tariff war between the United States and China.
The miner has suspended its 2020 financial forecasts, temporarily suspended construction at its Quebrada Blanca Phase 2 project in northern Chile and withdrawn an application to build a $20.6-billion Frontier oil sands mine in Alberta to ride out the storm.
Production at its steelmaking coal operations, Teck Resources’ biggest business, fell 19.7 per cent to 4.9 million tonnes in the first quarter, while copper declined 1.4 per cent.
During the quarter, the company was forced to reduce Fort Hills to a single-train facility resulting in lower production of bitumen and contributing to an impairment of $474-million.
The Vancouver-based company said adjusted profit attributable to shareholders fell to $94-million, or 17 cents per share, from $587-million, or $1.02 per share, a year earlier.
Auto parts supplier Linamar Corp. (LNR-T) was down 8.7 per cent in reaction to saying after the bell it is withdrawing its 2020 financial outlook until market conditions become clearer for the global automotive industry.
Global light vehicle production is expected to be 21 per cent or 18.6 million units lower this year from the December forecast for 88.6 million vehicles.
The Guelph, Ont.,-based manufacturer says most of its North American operations are deemed essential and not required to close because of the COVID-19 pandemic, while factories in Europe have shuttered.
Reduced consumer demand has forced the shutdown of most operations in the transportation and industrial segments.
Linamar says it moved quickly to cut costs and capital spending, has more than $1.1-billion in cash and available credit and expects to be profitable for the year.
Coca-Cola Co. (KO-N) was lower in the wake of forecasting a hit to current-quarter results as restaurants, theaters and other venues that represent about half of the company’s revenue remain closed because of the coronavirus pandemic.
However, shares of the company were down 2.6 per cent after the soda maker reported better-than-expected revenue and profit for the first quarter and said it expected conditions to start improving from mid-year.
Coca-Cola provides syrups and concentrates to several fast-food chains, theaters, amusement parks among other venues, most of which have either closed all operations or limited their businesses. Several concerts and sporting events, including the company-sponsored Tokyo 2020 Olympics, have been postponed or canceled.
As a result, volumes fell about 25 per cent globally since the beginning of April, largely stemming from the loss of sales other than at retail stores, the company said. The hit to second-quarter results will be material, it said, though the ultimate impact on this quarter and the rest of the year is unknown at this time. Coca-Cola added it expected comparable revenue to include 4-per-cent to 5-per-cent hit from a stronger dollar.
International Business Machines Corp. (IBM-N) lost 3 per cent after new Chief Executive Officer Arvind Krishna said its clients have shifted priorities toward saving capital in recent weeks because of COVID-19, hitting software sales in particular, as the company withdrew its 2020 annual forecast.
Mr. Krishna said the shift to remote work is accelerating the move towards cloud services offered by IBM. The company’s hybrid cloud offers combined management of on-premises and remote computers for clients.
Executives said most IBM customers were relatively well positioned for the pandemic and the company would continue to pay dividends.
The company posted quarterly revenue slightly lower than Wall Street expected, but beat profit targets as sales in its high-margin cloud computing business rose 19 per cent.
Citi analyst Jim Suva said: “We expect revenues to remain pressured during the COVID-19 pandemic given IBM’s exposure to large enterprises including travel, hospitality, retail etc. We also expect to see a very slow demand recovery in FY21. With IBM being cash constrained for the next few years we do not expect more acquisitions and the lack of IBM buy back stock for the next two years no longer presents valuation support and accordingly we maintain our Neutral rating.”
Lockheed Martin Corp. (LMT-N), the Pentagon’s No.1 weapons supplier, was down 2.4 per cent after it reported better-than-expected quarterly profit on Tuesday, helped by higher sales in its aeronautics business that makes the F-35 fighter jets, but lowered its 2020 sales outlook due to coronavirus-led supply chain delays.
The company said it now expects full-year sales in a range of US$62.25-billion to US$64.00-billion, down from US$62.75-billion to US$64.25-billion, forecast previously. Lockheed reaffirmed its 2020 earnings per share forecast of US$23.80 - the mid point of the range.
The company said production and supply chain activities had slowed in its aeronautics business due to the COVID-19 pandemic, forcing it to trim its sales outlook.
However, the U.S. defence sector is expected to see much less COVID-19 disruption due to generally stable cash flows compared with industrial markets, according to analysts.
Stable demand along with the Pentagon increasing interim payments to defense contractors, and also paying them for sick time or quarantined employees are expected to buoy the defence industry as coronavirus hits the economy.
AutoCanada Inc. (ACQ-T) declined 5.1 per cent on the back of the release of an operational update late Monday.
The Edmonton-based automobile dealership group announced a series of measures to “enhance financial resilience in response to evolving market conditions due to COVID-19.” They include laying off 1,700, or 40 per cent of its workforce, a reduction in executive compensation, a suspension of its dividend (40 cents per share annually), and an amendment to its senior credit facility.
Canaccord Genuity’s Derek Dley said: “In our view, while we acknowledge the update reads negatively, we remain positive on AutoCanada’s longer-term prospects. Further, we believe the declines in sales were already somewhat priced in, as evidenced by the 43% decline in the share price since early March.”
Lululemon Athletica Inc. (LULU-Q) was 5.4 per cent lower after it issued statements on Tuesday apologizing for, and distancing itself from, a T-shirt design promoted by one of its art directors that triggered outrage and accusations of racism online.
The hashtag “Lululemon insults China” was viewed 204 million times on China’s Weibo platform by Tuesday afternoon, with some commentators demanding a boycott of the brand.
The furore started on Sunday, with an Instagram link posted by the Lululemon official, Trevor Fleming, that promoted the sale of a T-shirt on the website of California artist Jess Sluder, under the name “bat fried rice”.
The long-sleeved T-shirt, bearing an image of a pair of chopsticks with bat wings on the front and a Chinese takeout box with bat wings on the back, riled critics who said the two were trying to stir anti-Asian sentiment during the coronavirus pandemic.
“We acted immediately, and the person involved is no longer an employee of Lululemon,” the firm said in an Instagram response to a customer on Tuesday, without identifying the individual.
It called the image and the post inappropriate and inexcusable, and apologized that one of its employees had been affiliated with promoting the offensive T-shirt.
However, the tobacco producer warned COVID-19 will have "adverse" impacts in its 2020 results.
"Those already observable relate to a severe reduction of our duty-free sales, slower IQOS user acquisition and delayed minimum price enforcement in Indonesia. We also have to assume that, in certain markets, unemployment and related reductions in disposable income will have a temporary impact on market dynamics or the ability of certain small retailers to operate," the company said.
“The duration of the pandemic, the magnitude of its economic impact during the government restrictions, and the subsequent speed of recovery are today unknown.”
That led it to withdraw its 2020 reported diluted earnings per share guidance of at least US$5.50.
U.S. car rental company Hertz Global Holdings Inc. (HTZ-N) dipped 8.3 per cent in reaction to saying late Monday it plans to lay off 10,000 employees across its North America operations to cut costs amid the economic fallout of the COVID-19 pandemic.
Hertz had about 38,000 employees as of Dec. 31, 2019, of which 29,000 were at its U.S. operations.
The company, which counts billionaire investor Carl Icahn as its largest shareholder, will incur employee termination costs of about US$30-million, it said in a regulatory filing.
General Electric Co. (GE-N) was down 0.6 per cent after it entered into a revolving credit agreement for US$15-billion, according to a regulatory filing on Monday.
The current agreement is set to mature on April 17, 2023 and refinances the company’s prior US$20-billion revolving credit facility that was scheduled to mature in May 2021.
The reduced loan size is a testimony to a changing bank landscape where companies seek to get better compensated for the risk they take to lend as volatility rattles the markets amid the COVID-19 pandemic.
With files from staff and wires