A roundup of some of the North American equities making moves in both directions today
On the rise
Lululemon Athletica Inc. (LULU-Q) was up over 6 per cent after it said on Monday it would buy home fitness company Mirror for US$500-million, as the high-end yogawear maker looks to cash in on booming demand for home workout classes spurred by coronavirus lockdowns.
The closure of gyms and fitness clubs due to the COVID-19 pandemic has led many shut-in Americans to splurge on home-workout equipment and subscriptions, boosting sales of companies such as Mirror and Peloton Interactive Inc.
New York-based Mirror, which launched in 2018, is set to reach over US$100-million in revenue this year through sales of its about US$1,500 mirror-like video monitors and monthly subscriptions for live workout classes, Lululemon said.
Lululemon has also maintained a much stronger financial position compared with other apparel brands during the coronavirus crisis, as consumers rushed to buy comfortable clothing for their indoor workouts.
Under the deal, the Toronto-based company will receive immediate access to official MLB data, league marks and logos for its mobile sports betting app, theScore Bet.
Cornerstone Capital Resources Inc. (CGP-X) rose 13.2 per cent in the wake of BHP-backed SolGold Plc, acopper-gold company focused on Ecuador, making a second attempt to take it over, more than a year after its previous approach was rebuffed.
The all-stock transaction of 11 ordinary shares of SolGold for each Cornerstone share represents a premium of around 22 per cent to the company’s closing price on Monday, SolGold said in a statement.
At a market capitalization of $103.1-million , Cornerstone has an 8-per-cent share in SolGold, making it its fourth biggest shareholder, and 15 per cent in SolGold’s project Cascabel, Refinitiv data shows.
A tie-up could bolster Uber’s delivery business, Uber Eats, and help it compensate for the cratering of its core ride-hailing business, which has collapsed in many cities because of the coronavirus pandemic. Food delivery is not profitable, but demand has soared while restaurants are closed and people are staying at home.
The deal would also be a lifeline for Postmates, a 9-year-old company that was one of the earlier startups to harness the power of the smartphone and the nascent “gig economy” to offer city dwellers a courier service that could deliver anything at the tap of a button.
Micron Technology Inc. (MU-Q) sat 4.8 per cent higher after it forecast current-quarter revenue above Wall Street estimates as home-bound employees and students spur demand for its chips that power notebooks and data centers.
The work-from-home boom has also driven demand for data center chips, with Micron, one of the biggest DRAM chip suppliers, working to sell more profitable solid-state storage drives rather than the raw NAND memory chips that go into the drives. The company said sales of the drives hit a record in its fiscal third-quarter and that three-quarters of its NAND chips were sold as part of higher-value products rather than raw chips.
Micron said it expects consumer demand for smartphones and other consumer electronics to fall below its initial expectations in the second half of 2020, but data center demand is strong enough that supply shortages are emerging. The company said it plans to shift its supplies from the smart phone market to the data center market, for both DRAM and flash memory chips.
RBC Dominion Securities analyst Mitch Steves said: “While Micron pre-announced May-quarter results earlier, the August quarter guide was well ahead of expectations. We think investors were bracing for weaker Data Center comments and weaker smartphone comments and neither came to fruition. Overall, we do think there is risk to consumer (calendar year 2021), but we remain confident in CY20 execution.”
Paramount Resources Ltd. (POU-T) was up 3.9 per cent after announcing amendments to its senior secured revolving bank credit facility before the bell, includin a reduction in its borrowing base to $1-billion.
Desjardins Securities analyst Scott Van Bolhuis said: “We view the reduction as largely expected given the rapid deterioration in commodity prices and a lower risk appetite for lenders as a result of COVID-19. Paramount also received waivers on its covenants, which should allow for more flexibility to manage the volatility in oil prices over the next 6–12 months. That being said, we remain cautious on Paramount shares during this period of volatility due to the heightened debt levels and relatively weak cash flow netbacks.”
Conagra Brands Inc. (CAG-N) gained 4.4 per cent after it forecast a 10-per-cent to 13-per-cent rise in current-quarter organic net sales after beating fourth-quarter estimates on strong demand for its frozen foods and snacks amid coronavirus-led lockdowns.
Demand for packaged foods has continued into the current quarter even as several U.S. states ease lockdowns, with consumers working from home choosing to make their own meals rather than go to restaurants due to fears of contracting the virus.
The Chef Boyardee pasta maker also expects to earn 54 US cents to 59 US cents per share on an adjusted basis in the first quarter, above Wall Street expectations, offset by decreased demand for its foodservice products and COVID-19-related costs.
Excluding one-time items, the company earned 75 US cents per share in the quarter ended May 31. Net sales rose 25.8 per cent to US $3.29-billion.
Analysts were expecting a profit of 66 US cents per share and revenue of US$3.11-billion, according to IBES data from Refinitiv.
On the decline
Air Canada (AC-T) slid 3 per cent after it said on Tuesday it would suspend flights on 30 domestic routes hit by persistent weak travel demand due to the COVID-19 pandemic.
The carrier forecast third-quarter capacity would decline at least 75% from a year ago and warned that travel restrictions and border closures were dimming prospects for a near-to-mid- term recovery.
The company said it has reduced its workforce by about 20,000 employees, which represents more than 50 per cent of its staff, and has permanently removed 79 aircraft from its fleet as it struggles with the fallout from the coronavirus outbreak.
Air Canada added that it was closing eight stations at regional airports in Canada.
As part of a cost reduction and capital deferral program, Air Canada said it has identified around $1.1-billion in savings to date.
Alimentation Couche-Tard Inc. (ATD.B-T) slipped 0.1 per cent higher after its quarterly results beat estimates on Monday, as customers spent more per trip to its convenience stores, even as overall traffic declined due to the COVID-19 pandemic.
Similar to other food and essential items’ retailers, Couche-Tard was allowed to keep most of its stores open during the coronavirus lockdowns and saw a surge in the sale of canned goods and cleaning products due to panic buying.
However, the company said traffic soon tapered off as customers increasingly chose to stay at home over fears of the fast-spreading virus.
A drop in demand at the company’s fuel stations dragged down its total revenue by 26.1 per cent to $9.69-billion from a year earlier, but it still beat analysts’ average estimate of $9.36-billion, according to IBES data from Refinitiv.
In a research note, Canaccord Genuity analyst Derek Dley said: “In our view, the key takeaway from the quarter was the resiliency of Couche-Tard’s merchandise same-store sales. In the U.S., same-store sales declined by 0.5 per cent, much better than our 8.0-per-cent estimate. Europe merchandise same-store sales declined 6.5 per cent, better than our 10.0-per-cent estimate, while in Canada merchandise same-store sales increased 4.7 per cent. While traffic was down during the quarter, this was partially offset by an increase in average basket size.
Cineplex Inc. (CGX-T) fell 19 per cent after revealing it is seeking additional financing and possibly the sale of some assets to meet its debt obligations, and has cautioned that if unsuccessful, its status as a going concern could be at risk.
The company reported its first-quarter earnings on Monday, providing a glimpse into the business impact of the COVID-19 pandemic, on the heels of its failed deal to be acquired by UK-based Cineworld Group PLC.
Under the terms of that deal, which fell apart earlier this month, Cineplex was unable to take on additional debt while absorbing the hit from widespread closures during the pandemic. The company obtained covenant relief from lenders to its credit facilities until the end of August, but warned it could default on those covenants sometime before the end of September. It is now seeking financing. As of March 31, Cineplex had $665-million in long-term debt.
- Susan Krashinsky Robertson
AltaCorp Capital analyst Patrick O’Rourke said: “Overall, we view the event as positive, with the amended facility providing a clear line of site to liquidity and the ability to execute the remainder of the 2020 capital program, despite the modest reduction to the facility’s size.”
Inovio Pharmaceuticals Inc. (INO-Q) dropped 15.3 per cent after it said on Tuesday its experimental coronavirus vaccine induced immune responses in healthy volunteers and was shown to be safe in an early-stage trial.
The vaccine, INO-4800, is one among the 17 being tested in humans, according to the World Health Organization.
Based on preliminary data, the drug developer said 34 of the 36 volunteers showed overall immunological response rates and most of the side-effects were redness at the site of the shot.
Governments, drugmakers and researchers are working on hundreds of experimental vaccines, but there is still no approved drug for COVID-19 that has killed more than 500,000 people worldwide.
The WHO has picked vaccine candidates of Astrazeneca and Moderna Inc as the world’s leading and most advanced ones among more than 200 candidates.
Boeing Co. (BA-N) tumbled 5.8 per cent after Norwegian Air canceled orders for 97 aircraft and said it would claim compensation.
The airline cancelled 92 of the 737 MAX jets, five 787 Dreamliners and so-called GoldCare service agreements related to both aircraft, just as Boeing on Monday began a crucial set of flight tests of the 737 MAX in an effort to gain regulatory approval for it to return to the skies.
“Norwegian has in addition filed a legal claim seeking the return of pre-delivery payments related to the aircraft and compensation for the company’s losses related to the grounding of the 737 MAX and engine issues on the 787,” the airline said.
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