A roundup of some of the North American equities making moves in both directions today
On the rise
SNC-Lavalin Group Inc. (SNC-T) was up after announcing before the bell it is selling its oil and gas business and taking more financial charges on construction contracts as the Canadian engineering company pushes on with a strategic reinvention it hopes will provide stability after years of crisis.
SNC has entered into a binding agreement to sell its resources oil and gas unit to Kentech Corporate Holdings Limited, the Montreal-based engineering firm said in a statement Tuesday. No firm purchase price was disclosed but SNC said it expects to book a gain on the sale when the transaction is finalized after taking a fair value writedown on the asset of between $260-million and $295-million.
“The sale of the Oil & Gas business further simplifies and de-risks our business and allows us to enhance our focus on growing our high potential core engineering services business,” SNC-Lavalin Chief Executive Ian Edwards said.
More than a year after striking a deal with federal prosecutors to settle a criminal corruption scandal centred on past business dealings in Libya, Mr. Edwards is trying to reshape SNC-Lavalin into a company that does more consultancy and project management-type work while closing out billions of dollars worth of higher-risk construction contracts.
- Nicolas Van Praet
Canopy Growth Corp. (WEED-T), the world’s largest pot producer, rose after it said on Tuesday it expects to turn a profit in the second half of 2022 after aggressive cost-cutting and higher demand for cannabis products helped narrow third-quarter losses.
Canadian pot producers have been under pressure from investors seeking returns as profits remain elusive due to oversupply crimping sales in Canada and overseas expansion bets turning sour.
Canopy said it expects to start generating cash by fiscal 2024 and become operating cash flow positive a year before that, soothing market worries on profitability.
Since early last year, Canopy and its rivals like Aphria Inc. (APHA-T) and Aurora Cannabis Inc. (ACB-T) have been slashing expenses by shuttering plants, scaling down indoor cultivation and laying off hundreds of employees.
Canopy is also pinning its hopes on the large U.S. market that is likely to open up, thanks to the Joe Biden administration’s favorable view on the cannabis industry.
Meanwhile, market conditions too have improved. As the pandemic shuttered several businesses and economies contracted, demand for cannabis products such as gummy bears, brownies and drinks, known for their links to relaxation, surged.
Canopy, which sells a range of products from dried flowers to chocolates and drinks mixed with weed, said its net revenue rose 23 per cent in the quarter to $152.5-million.
Its adjusted loss shrank to $68.4-million from $97-million in the third quarter, although asset impairments and one-time restructuring costs led the company to post a net loss of more than $900-million.
Tilray Inc. (TLRY-Q) followed Canopy Growth and other cannabis companies higher on Tuesday after announcing it has secured a deal with Grow Pharma, the medical cannabis distributor in the United Kingdom, to import and distribute its products.
Tilray, based in Nanaimo, B.C., says it expects to have a range of medical cannabis products available for patients in the United Kingdom by March.
Tilray announced a deal last year to merge with Leamington, Ont.-based Aphria Inc.
The cannabis companies have said the move will help them slash costs and give them control of the biggest slice of the Canadian retail market.
Shopify Inc. (SHOP-T) rose after announcing it would expand its payment option, “Shop Pay,” to all users choosing to sell on Facebook and Instagram.
The move marks the first time the feature will be available outside Shopify’s platform and will help the company tap into the rise of shopping through social media platforms during the COVID-19 pandemic.
The option would become available to Shopify merchants selling products in the United States through Instagram on Tuesday and will be rolled out on Facebook within the coming weeks, the company said in a blog post.
Social media shoppers will be able to use Shop Pay alongside other payment options on the social media company’s payments system Facebook Pay.
TFI International Inc. (TFII-T) rose with the release of stronger-than-expected fourth-quarter results after the bell on Monday.
The Montreal-based transportation and logistics company reported adjusted EBITDA and fully diluted earnings per share of US$191-million and 98 US cents, exceeding the Street’s expectations of US$181-million and 82 US cents. Free cash flow of US$135-million also easily topped the consensus projection (US$88-million).
Desjardins Securities’ Benoit Poirier said: “TFII reported solid 4Q20 results across the board ... Management’s strong operational track record gives us confidence in its ability to unlock shareholder value with the transformative acquisition of UPS Freight. Meanwhile, we are encouraged by the strong operational results posted by TFII in 4Q, thanks to very strong market conditions.”
Shares of Toronto-based Antibe Therapeutics Inc. (ATE-T) jumped with the announcement of a strategic licensing deal with Nuance Pharma for the commercialization of its otenaproxesul drug in China, Hong Kong, Macau, and Taiwan
Under the agreement, Antibe is entitled to US$100-million in milestone payments, including US$20-million upfront and US$80-million in development and sales milestones, in addition to a double-digit royalty on sales.
TMX Group Ltd. (X-T) was higher in the wake of its fourth-quarter profit rising from a year ago, driven by increased equities and fixed income trading revenue and capital formation activity, which helped offset declines in derivatives trading and clearing business, it said on Monday.
The operator of the Toronto Stock Exchange posted adjusted earnings of $81.3-million, or $1.43 per share, compared with $74.3-million, or $1.31 per share, a year earlier. Analysts had expected $1.45 per share.
Net income was $71.8-million, or $1.26 a share, versus $47.5-million, or 84 cents, a year ago.
Simon Property Group Inc. (SPG-N) forecast a rise in its 2021 profit on Monday as the U.S. mall operator benefits from improving rent collection and a recovery in the retail industry, pushing its shares up.
Sales of some brick-and-mortar retailers have risen from the pandemic troughs plumbed last year thanks to the launch of online shopping options and government stimulus checks to support household income.
That has helped retailers meet their rental obligations, with Simon saying it had collected 90 per cent of combined the second, third and fourth-quarter net billed rents as of Feb. 5. It had garnered only 85 per cent of third-quarter net billed rents as of Nov. 6.
Simon forecast 2021 earnings per share of US$4.60 to US$4.85, compared with US$3.59 per share in 2020.
However, the company wrote-off, abated or deferred about US$850-million, or nearly 18 per cent, of its contractual rents due from the second through fourth quarters of 2020 as some tenants held back on payments.
“We still, even to this day, have a handful of large tenants unfortunately, that have yet to resolve their receivables,” Chief Executive Officer David Simon said on a call with analysts.
Electronic Arts Inc. (EA-Q) was higher after it said late Monday it would buy Glu Mobile Inc. (GLUU-Q) for US$2.4-billion, bolstering its mobile platform with the addition of games such as Design Home, Covet Fashion, and MLB Tap Sports Baseball.
The U.S. video game developer has offered US$12.50 in cash for each Glu share, a premium of about 33% to its closing price on Monday.
The deal, which is expected to close in the quarter ending June 30, gives Glu an enterprise value of US$2.1 -billion.
San Francisco-based Glu received multiple takeover offers last year as its stock has underperformed those of its gaming peers, a source familiar with the situation said.
EA, known for its sports gaming franchise, expects to expand its mobile gaming titles through the acquisition and attract more female gamers through the casual game portfolio Glu owns, including Kim Kardashian: Hollywood.
On the decline
Air Canada (AC-T) was down after announcing it will temporarily lay off 1,500 unionized employees and an unspecified number of management staff as it cuts more routes.
As of Feb. 18, Air Canada will temporarily suspend service on 17 routes to the U.S. and other international destinations until at least April 30, the company says.
Cenovus Energy Inc. (CVE-T) slid as it posted a bigger-than-expected loss on Tuesday, hit by uneven demand for fuel due to renewed COVID-19 travel restrictions and weaker refinery operations.
Along with the rest of Canada’s oil and gas industry, Cenovus endured a very difficult 2020. Crude prices recovered in the final months of the year amid optimism over global vaccine rollouts, but fuel demand still remains uneven.
Cenovus’ fourth-quarter crude utilization was 68 per cent, down from 77 per cent in the third quarter, while refined products fell nearly 12 per cent to 350,000 barrels per day (bpd) from the prior quarter.
Last month, Cenovus forecasted higher production and spending for 2021 after its purchase of rival Husky Energy, but stressed its focus on cutting debt as the oil industry recovers from the pandemic.
After suspending its crude-by-rail program in early 2020, Cenovus ramped up activity in the fourth quarter.
The company on Tuesday said that with resumption of the rail program, Cenovus exited December with average loading of nearly 28,000 barrels per day (bpd) of its own crude oil for transport by rail for the month plus nearly 10,000 bpd for third parties.
Its fourth quarter refining and marketing operating margin shortfall was $73-million compared with an operating margin of $109-million last year.
On a sequential basis, the company’s production also fell nearly 1 per cent to 467,202 barrels of oil equivalent per day (boepd).
Net loss narrowed to $153-million, or 12 cents per share, in the fourth quarter ended Dec. 31, from $194-million, or 16 cents per share, in the third quarter.
On an adjusted basis, Cenovus posted a loss of 45 cents per share, while analysts had expected a loss of 10 cents per share, according to Refinitiv IBES.
After reporting fourth-quarter results that fell slightly ahead of expectations and the acquisition of a royalty package for $45-million after market on Monday, shares of PrairieSky Royalty Ltd. (PSK-T) were down.
“PrairieSky expects the package, comprising 640,000 net acres of producing and undeveloped royalty interests, to add 650 boe/d [barrels of oil equivalent per day] in royalty production and to grow at a rate of over 5 per cent per year over the next five years,” said Canaccord Genuity analyst Anthony Petrucci. “In our view, this deal is a positive one for PSK given the favourable impact on PSK’s growth plans and complementary position to the company’s existing asset base. We note that the transaction metrics of $70k per boe/d compare favourably to its existing valuation of $130k per boe/d.
“The quarter also saw management increase the dividend by 8% to an annualized rate of $0.26/share (2.2-per-cent yield on current share price), resulting in a payout ratio of 30 per cent on our numbers. Other highlights from the quarter include improving drilling and leasing activity with 74 oil and nine natural gas wells spud and previously shut-in production being brought back online, as well as the company entering into 25 new leasing arrangements. We continue to rate the stock a BUY.”
Cineplex Inc. (CGX-T) was down after saying it has once again amended its credit agreement with lenders as it struggles through the financial impact of the COVID-19 virus on its operations.
The country’s largest theatre chain says the third amendment allows for the suspension of financial covenant testing to continue until the fourth quarter under certain conditions.
These include the completion of a minimum $200-million financing of second lien secured notes by March 31.
Net proceeds must be used to repay debt, including $100 million that would be a permanent repayment.
Cineplex also says it entered into an “engagement letter” with BMO Capital Markets and Scotiabank for a proposed private placement offering of second lien secured notes following the release of its fourth-quarter results on Feb. 11.
Net proceeds from the notes offering would be to repay debt and add liquidity until the return of more normalized market conditions.
“With the vaccine rollout underway, our team is looking forward to reopening our circuit of theatres and entertainment venues across Canada and currently expecting to see a return to more normal operating conditions in the second quarter,” stated president and CEO Ellis Jacob.
“With the announcement today, we remain confident as ever in our strategy and financial outlook as well as the ability of the industry as a whole to not only recover, but thrive.”
Apple Inc. (AAPL-Q) was narrowly lower despite industry data provider Counterpoint saying on Tuesday its iPhone 12 mini U.S. sales were just 5 per cent of overall sales of its new phones during the first half of January, adding to signs of muted demand for the new smaller version of its flagship device.
Smartphone users have switched to larger devices in recent years as they devour more video content on-the-go and binge on visually rich social media platforms like Facebook, Instagram, Tiktok and Snapchat.
J.P. Morgan analyst William Yang said in a note last week that weak demand for the smaller iPhone 12 and 12 mini might lead Apple to stop production of the mini in the second quarter.
“The product mix adjustment is well expected by investors and should not be a negative surprise,” Mr. Yang added.
The company launched a smaller variant of the iPhone 12 model last year, but demand for the smaller smartphones seems to be weaker, compared to the high-end iPhone 12 Pros and the older iPhone 11s.
“This is in line with what we’re seeing in the broader global market, where screens under 6.0” now account for around 10-per-cent share of all smartphones sold,” Mr. Kang added.
Shares of video game retailer GameStop Corp. (GME-N) tumbled nearly 20 per cent Tuesday to their lowest levels since he start of a retail investor-led surge that echoed across Wall Street.
Investors who followed the popular Reddit forum WallStreetBets helped push shares of GameStop to a closing high of US$347.51 on Jan. 27 as part of a strategy to squeeze hedge funds that had taken a short bet on the retailer. Since then, GameStop has tumbled about 85 per cent to near US$40 a share.
The average price target of analysts tracked by Refinitiv on the company is US$13.44.
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General Motors Co. (GM-N) was down after it said on Tuesday it was extending production cuts at three global plants through at least mid-March and building but leaving incomplete vehicles at two other factories due to the global semiconductor chip shortage.
GM did not disclose how much volume it would lose in its latest action or which supplier and vehicle parts were affected by the chip shortage, but said the focus remains on keeping production running at plants building its highest-profit vehicles - full-size pickup trucks and SUVs. GM said it intends to make up as much lost production as possible.
“Semiconductor supply remains an issue that is facing the entire industry. GM’s plan is to leverage every available semiconductor to build and ship our most popular and in-demand products,” GM spokesman David Barnas said.
GM said it was extending downtime at its plants in Fairfax, Kansas; Ingersoll, Ontario; and San Luis Petosi, Mexico through mid-March, when it will reassess the situation, he said. In addition, GM will build but leave incomplete for later final assembly vehicles at plants in Wentzville, Missouri, and Ramos Arizpe, Mexico.
GM vehicles affected by the idled plants include the Chevrolet Malibu sedan, Cadillac XT4 SUV, Chevy Equinox, and GMC Terrain SUVs, while the vehicles built for later final assembly include the Chevy Colorado and GMC Canyon pickups and Chevy Blazer SUV.
Take-Two Interactive Software Inc. (TTWO-Q) declined despite raising its annual adjusted sales targets on sustained demand for its top franchises, NBA 2K and Grand Theft Auto, as COVID-19 curbs continue to boost videogame sales worldwide.
The company lifted its full-year adjusted revenue forecast to a range of US$3.37-billion to US$3.42-billion, from an earlier view of US$3.15-billion to US$3.25-billion. Analysts had expected sales of US$3.3-billion, according to Refinitiv IBES data.
Rivals Electronic Arts and Activision Blizzard last week forecast upbeat revenue on the back of a pandemic-led boost in demand for videogames, which garnered record sales of $56.9 billion in 2020, according to research firm NPD.
Take-Two said the largest contributors to sales in the reported quarter were NBA2K21 and NBA2K20.
Grand Theft Auto V live-streams more than doubled to 229,000 viewers, on an average, in the three months ended Dec. 31, from a year earlier, data from Twitchtracker showed.
On an adjusted basis, Take-Two reported revenue of US$814.3-million for the third quarter, beating analysts’ average estimate of US$747-million.
With files from staff and wires
David Leeder