A roundup of some of the North American equities making moves in both directions
On the rise
SNC-Lavalin Group Inc. (SNC-T) closed higher after the World Bank gave it an early reprieve on a decade-long ban for corruption tied to contracts in Bangladesh and Cambodia, a potential boost for the Canadian engineering giant as it tries to rebuild its reputation after years of crisis.
The global lender ended its sanction on SNC-Lavalin and some 100 affiliates after the engineering company served eight years of a 10-year ban imposed in April 2013, Montreal-based SNC confirmed in a statement early Tuesday morning. At the time, the bank said it was the longest ban that has ever been agreed to in its settlements.
The discharge means SNC-Lavalin is now free to bid on projects funded by the international development cooperative, which expects to deploy up to US$160-billion through the end of June 2021 to help countries deal with the blow from COVID-19 and stoke their long-term growth. But the bigger impact could be to SNC’s wider reputation and credibility on ethics and compliance matters, which will likely jump up a notch following the World Bank’s decision.
- Nicolas Van Praet
Miner Alamos Gold Inc. (AGI-T) was higher after saying it intends to launch a $1-billion international arbitration suit against Turkey, alleging “expropriation and unfair and inequitable treatment,” after the government failed to renew a key mining license.
In Oct. 2019, Alamos halted construction of the Kirazli mine after the Turkish government refused to issue a seven-year renewal on its mining license. The government’s decision came after thousands of people turned out to protest the construction of the mine on environmental grounds.
Since then, Alamos has worked with Turkey to try to resolve the dispute but things have gotten worse in the interim. Late last year, the government failed to renew Alamos’s forestry permit.
On Tuesday, Toronto-based Alamos said the value of the arbitration claim, which will be filed under the Netherlands-Turkey Bilateral Investment Treaty, is based on the value of its Turkish assets.
Alamos acquired the Kirazli project in 2010 and since then has invested more than $250-million and paid in excess of $20-million in royalties and various other fees to the Turkish government.
- Niall McGee
International Business Machines Corp. (IBM-N) recorded highest quarterly sales growth in more two years and beat Wall Street targets on Monday, boosted by its bets in the high-margin cloud computing business.
Shares of the Dow component, which have gained nearly 6 per cent so far this year, were up further on Tuesday.
Finance chief James Kavanaugh said cloud spending by clients in retail, manufacturing and travel industries in the United States was picking up after the initial pandemic-driven slump.
Sales from its cloud computing services jumped 21 per cent to US$6.5-billion in the quarter. The 109-year-old firm is preparing to split itself into two public companies, with the namesake firm narrowing its focus on the so-called hybrid cloud, where it sees a US$1-trillion market opportunity.
Big Blue recorded a sales decline in global technology services, its largest unit, but that was largely offset by a rise in revenue in the remaining three units, including a surprise growth in the business that hosts mainframe computers.
Mainframe saw strong traction from the financial services industry, where its banking clients shopped for more capacity as trading volumes soared during the retail trading frenzy, CFO Kavanaugh said.
“I am glad to see that strategic projects, which are IBM’s bread and butter, are coming back,” said Patrick Moorhead, analysts at Moor Insights & Strategy, adding that systems and global business services growth was a surprise.
“This is a good start to the year for the company who is all-in on the cloud.”
Excluding items, the company earned US$1.77 per share, beating market expectation of US$1.63.
Johnson & Johnson (JNJ-N) rose as ut said on Tuesday it will resume rolling out its COVID-19 vaccine in Europe after the region’s medical regulator said the benefits of the shot outweigh the risk of very rare, potentially lethal blood clots.
Europe’s health regulator, the European Medicines Agency (EMA), on Tuesday recommended adding a warning about rare blood clots with low blood platelet count to the vaccine’s product label and said the benefits of the one-dose shot outweigh its risks.
Use of the J&J vaccine was temporarily halted by U.S. regulators last week after rare brain blood clots combined with a low blood platelet count were reported in six women, prompting the company to delay its rollout in Europe.
J&J said it will adjust the package label on its vaccine to warn of the risk of the rare side effect and provide instructions on how to recognize and treat it. The company said it would resume shipments to the European Union, Norway and Iceland.
“It’s an extremely rare event. We hope by making people aware as well as putting clear diagnostic and therapeutic guidance in place that we can restore the confidence in our vaccine,” J&J Chief Scientific Officer Paul Stoffels said during a conference call to discuss the company earnings.
Similar rare blood clot issues were reported with use of AstraZeneca’s COVID-19 vaccine in Europe.
J&J earlier on Tuesday said it was working with European countries to resume ongoing clinical trials for its shot.
Johnson & Johnson reported first-quarter earnings that exceeded Wall Street expectations and raised its dividend payouts to shareholders.
The company said it expects a big improvement in sales from its medical device business in the second quarter of 2021 compared with a year earlier, when COVID-19 lockdowns took a toll.
J&J slightly raised its full-year adjusted profit forecast and now sees earnings of US$9.42 to US$9.57 per share, up from its prior view of US$9.40 to US$9.60 per share.
Total sales rose 7.9 per cent to US$22.32-billion, beating estimates of US$21.98-billion.
AutoNation Inc. (AN-N) rose in the wake of reporting Tuesday quarterly adjusted profit that almost tripled from last year as the U.S. auto retailer benefited from higher earnings per vehicle, amid a global chip shortage that has forced automakers to cut production and raise prices.
“Demand continues to exceed supply for new vehicles, and we expect this to continue throughout 2021, in part due to the production disruption,” Chief Executive Officer Mike Jackson said.
AutoNation’s gross profit per new vehicle at stores that have stayed open for at least a year jumped 61 per cent to US$2,739 in the first quarter from a year earlier. The company’s gross profit per used vehicle jumped 17 per cent to US$1,744.
At the same time, Jackson said AutoNation kept overhead costs down using digital sales systems. Overhead costs were 62.7 per cent of revenue, down 11.2 percentage points from a year earlier.
Fort Lauderdale-based AutoNation’s quarterly adjusted net income from continuing operations jumped 183.7 per cent to US$233.8-million, or US$2.79 share, in the first quarter, compared with US$82.4-million, or 91 US cents per share, a year earlier.
Revenue rose 26.5 per cent to US$5.90-billion. The company said it had US$2.1-billion of liquidity as of March 31.
Procter & Gamble Co. (PG-N) rose with it beating quarterly sales and profit estimates on Tuesday, as pandemic-weary people kept up their stocks of soaps, detergents and other cleaning products, even as COVID-19 vaccines began to roll out.
The global health crisis has boosted sales of P&G’s hygiene and washing products such as Charmin toilet paper and Tide laundry detergents for over a year, as consumers stockpiled on essentials and cleaning supplies to stay prepared for lockdowns.
With the demand still up, P&G maintained its annual sales growth at 5 per cent to 6 per cent. The Gillette razor maker also raised its planned share buybacks for fiscal 2021 by US$1-billion to US$11-billion.
However, the roll out of vaccines and people starting to return to more relatively normal lives have raised doubts over how long that level of growth can be maintained.
Besides, commodity prices are also rising. To offset that the company said it has started increasing prices on its baby care, feminine care and adult incontinence products in the United States.
Cincinnati-based P&G’s price hikes follow rival Kimberly-Clark that said in March it would hike prices of its Scott toilet paper, tissues and diapers in North America by similar levels as P&G, starting June.
P&G’s net sales rose 5 per cent to US$18.1-billion in the third quarter ended March 31, compared with analysts’ average estimate of US$17.90-billion, according to IBES data from Refinitiv.
Net income attributable to the company rose 12 per cent to US$3.27-billion, or US$1.26 per share, beating estimates of US$1.19 per share.
On the decline
Canadian National Railway Co. (CNR-T) was lower after revealing a competing offer for Kansas City Southern (KSU-N), topping a bid by Canadian Pacific Railway Co. (CP-T).
Montreal-based CN said on Tuesday it has offered US$29.9-billion in cash and stock for the U.S.-based railway, attempting to block CP’s purchase of KCS for US$25.2-bilion. That deal was recommended by KCS’s board but requires approval of shareholders, and regulators.
CN said in a statement its purchase of KCS, whose network extends into Mexico, could yield US$1-billion in cost savings.
“We firmly believe our proposal is far superior to KCS’ existing agreement with CP because it offers superior financial value over the immediate and long term, a more complementary strategic fit, greater choice and efficiencies for customers and enhanced benefits for employees and local communities,” said Robert Pace, CN’s chairman.
In a letter to KCS’s board of directors, CN said it is offering US$200 and 1.059 CN shares for each KCS stock for a value of US$325 a share, in addition to assuming US$3.8-billion in debt.
Under the CP deal, KCS shareholders will receive 0.489 of a CP share and US$90 in cash for each stock.
- Eric Atkins
See also: Review urged ahead of CP-Kansas City Southern Railway merger
PrairieSky Royalty Ltd. (PSK-T) was down despite saying late Monday its net income more than doubled in the first quarter on a nearly 13-per-cent increase in revenues on a rise in crude oil and natural gas prices.
The Calgary-based company, which collects royalties from oil and gas production on lands for which it has the petroleum mineral rights, says it earned $18.8-million or eight cents per share.
That’s up from $8.6-million or four cents per share a year earlier when the COVID-19 pandemic had a big impact on the economy
Revenues for the three months ended March 31 were $59.5-million, up from $52.7-million a year earlier and $47 million in the prior quarter.
Royalty production averaged 19,380 barrels of oil equivalent per day, down from 22,160 boe/d a year ago.
It says it realized an average of $55.71 per barrel for oil in the first quarter, up from an average of $42.80 in the first quarter of 2020. Meanwhile, its realized natural gas price rose to $2.45 per thousand cubic feet, up from $1.57 a year earlier.
See also: Tuesday’s analyst upgrades and downgrades
Turquoise Hill Resources Ltd. (TRQ-T) was flat in the wake of saying on Tuesday the Oyu Tolgoi mine in Mongolia had partially resumed shipments to China, after the Canadian miner declared force majeure on some Chinese contracts last month due to COVID-19-led curbs.
The company is evaluating multiple contingencies, including an alternative shipping route via Mongolia’s capital city of Ulaanbaatar, to deal with the force majeure, which refers to unexpected external factors that prevent a party from meeting contract obligations.
Turquoise Hill’s force majeure was related to coronavirus-related restrictions at the Chinese-Mongolian border crossing. The company partially resumed shipments to China on April 15.
Oyu Tolgoi, the world’s largest copper-gold-silver mine, was already at the center of a protracted dispute between Turquoise and its top shareholder, Rio Tinto, over funding for the underground expansion of the mine.
Turquoise said that it continues to be in talks with Rio Tinto and the government of Mongolia, after reaching a binding agreement over the funding spat two weeks earlier.
Rio owns 51 per cent of Turquoise Hill, which owns 66 per cent of the Oyu Tolgoi mine. The rest of the mine is owned by the government of Mongolia.
Shares of Apple Inc. (AAPL-Q) were lower after it announced a line of slim iMac computers and iPads with higher-quality video that use its own processors, as it speeds its migration away from Intel and caters to a work-from-home world.
The company also launched products including AirTags to find lost items and podcast subscription services. AirTags will cost $29 each, while the iMac will start at $1,299.
The wide variety of announcements largely had been telegraphed before the presentation, which had no major surprises.
The thinner iMac computers will use an Apple-designed central processor unit and come in seven colors, including purple and green. With a 24-inch (61-cm) display, the iMacs are just 11.5 millimeters thick.
See also: Investors turn to growth stocks’ results after strong earnings start
United Airlines Holdings Inc. (UAL-Q) lost ground after reporting late Monday a bigger-than-expected US$2.4-billion adjusted net loss for the first quarter, as fuel costs rose and the airline operated fewer flights amid continued weak demand due to the COVID-19 pandemic.
Average fuel cost climbed nearly 30 per cent to US$1.74 per gallon in the quarter from the previous three months, while passenger traffic fell 52 per cent compared to the same period in 2020. The World Health Organization did not declare COVID-19 a pandemic until near the end of the first quarter in 2020.
United Airlines said it expects fuel costs to rise by another 5 per cent in the second quarter.
The airline, however, forecast a return to profitability later this year and said it expects to restore some capacity cuts as more people are willing to travel.
Capacity should reach 45 per cent of 2019′s level in the second quarter from 2019, United said.
United’s adjusted net loss was about US$2.40-billion for the first quarter, compared with analysts’ average estimate for a loss of about US$2.23-billion, according to IBES data from Refinitiv.
Tobacco companies, including Altria Group (MO-N) and Philip Morris International Inc. (PM-N), were mixed after the Wall Street Journal reported that the Biden administration is considering a rule that would limit nicotine or ban menthol in cigarettes.
According to the report, the policy would lower the chemical in cigarettes to nonaddictive or minimally addictive levels.
Boeing Co. (BA-N) announced the retirement of its finance chief for the past decade, Greg Smith, and the crisis-hit jetmaker’s shares fell even as it signaled stability by prolonging its chief executive.
Boeing extended its required retirement age of 65 to 70 to allow CEO Dave Calhoun to stay in the top job as the U.S. planemaker battles to recover from the coronavirus and 737 MAX crises, and manufacturing flaws on its aircraft programs.
But shares fell as investors were rattled by the surprise retirement of Mr. Smith, 54, Boeing’s face to financial markets during one of the most turbulent periods in its history, marked by a safety crisis followed by rising debts during the pandemic.
Mr. Calhoun told shareholders at the annual meeting that Boeing would have positive cash flow in the near or medium term, and will prioritize paying down its debt as travel markets and plane demand rebound. Boeing has seen signs of recovery in the single-aisle market.
With files from staff and wires
David Leeder