A roundup of some of the North American equities making moves in both directions
On the rise
The Valens Company Inc. (VLNS-T) jumped after announcing before the bell the acquisition of Florida-based Green Roads, the largest privately owned CBD company in the United States, for US$40-million, plus up to an additional US$20 million if earnings targets are reached.
“With the Acquisition of Green Roads, The Valens Company strengthens its capabilities to supply US domestic and global markets with an expanded product offering. Additionally, the Acquisition provides immediate entry into the US market with a trusted and leading CBD health and wellness brand with an established manufacturing and distribution platform. The Green Roads Acquisition is expected to be accretive to the Company in 2021,” it said.
In a research note, Raymond James analyst Rahul Sarugaser said: “Entering the U.S. CBD market through this transaction, with a partner that appears to share VLNS’ philosophies around quality-assured manufacturing and IP-driven product development, VLNS materially increases its TAM [total addressable market]. Also, importantly, this deal looks to be accretive on both 2021 EV/Rev. and 2022 EV/EBITDA. We do note however that the U.S. CBD market is large and highly disaggregated, with few deeply-entrenched brands; VLNS’ success here will depend on how well it can compete.”
Firstservice Corp. (FSV-T) soared with the premarket release of better-than-anticipated first-quarter financial results.
The Toronto-based property services provider announced revenue and adjusted earnings per share of $711.1-million and 66 cents, respectively, exceeding the consensus projections on the Street of $668.7-million and 46 cents.
“”We saw growing momentum in our home improvement brands and capitalized on increased restoration activity, while our FirstService Residential platform showed continued strength and resilience in countering the impact of the pandemic,” said CEO Scott Patterson in a release.
United Parcel Service Inc. (UPS-N) topped Wall Street estimates for quarterly revenue on Tuesday, as the world’s biggest parcel delivery company benefited from a surge in online purchases during the COVID-19 pandemic, sending its shares higher.
UPS has been experiencing a boom in e-commerce deliveries as consumers staying at home during the pandemic order everything from exercise bikes to sofas.
Rival Deutsche Post last month raised its medium-term financial targets, predicting that the boom in ecommerce driven by the coronavirus outbreak would continue and world trade would gradually recover.
UPS, which is also delivering COVID-19 vaccines, said revenue in its U.S. domestic unit rose 22.3 per cent, led by growth from small- and medium-sized businesses.
Excluding items, the company earned US$2.77 per share.
Total revenue rose 27 per cent to US$22.9-billion, beating estimates of US$20.49-billion, according to Refinitiv data.
Hasbro Inc. (HAS-Q) gained after sailing past first-quarter profit estimates on Tuesday as a boost from its main Nerf toys and Magic: The Gathering businesses and lower advertising expenses countered a lacklustre show in its movie and TV production unit.
The company reported a 14-per-cent rise in sales in its consumer products unit, as families spent more on Nerf blasters and Play-Doh to keep children entertained while stuck at home.
Advertising costs fell 13.6 per cent in the quarter as the company pulled back on film and TV promotions after COVID-19 disrupted studio production schedules and forced theater closures.
Hasbro has in recent years focused on entertainment production to power growth at a faster pace than traditional toy sales but the pandemic laid bare the risk of that strategy, with revenue tumbling 34 per cent in the TV, film and entertainment business.
Snake Eyes, a film based on the character from Hasbro’s popular “G.I.Joe” franchise, initially scheduled to release in 2020 has been delayed to later this year. Entertainment One, the firm behind Peppa Pig and The Walking Dead TV series, which Hasbro bought in 2019 also came under pressure last year.
Excluding certain items, Hasbro earned US$1 per share, above analysts’ estimates of 65 US cents per share.
Late Monday, the toymaker announced the sale of Entertainment One Music to Blackstone Group Inc for US$385-million.
Rival Mattel Inc. (MAT-Q), which still relies more heavily on traditional toy sales, reported a record rise in quarterly sales last week, handily beating estimates.
On the decline
Canadian National Railway Co. (CNR-T) was narrowly lower after saying says it will begin takeover talks with target Kansas City Southern (KSU-N) in the coming days, as Canada’s largest railway steps up efforts to block rival Canadian Pacific Railway Ltd.’s (CP-T) purchase of the U.S. carrier.
CN is trying to end rival CP’s agreement to buy KCS with a cash and stock bid worth US$29.9-billion, or US$325 a share. This tops CP’s offer of US$25.2-billion or US$275 a share.
CN said on Monday it has forwarded more than 500 letters in support of its KCS takeover from customers and other stakeholders to the U.S. regulator, the Surface Transportation Board (STB), which will rule on any takeover of the railway.
“Overall, we have a better bid,” JJ Ruest, chief executive officer of CN, said on a conference call held to discuss the railway’s first-quarter financial results on Monday. “We’re a better partner for KCS and the North American economy.”
For the three months ended March 31, CN’s profit slipped to $974-million, or $1.37 a share, from $1-billion ($1.42). Revenue was $3.5-billion, unchanged from the same quarter a year ago.
- Eric Atkins
Quebecor Inc. (QBR-B-T) lost ground after saying Videotron chief executive Jean-Francois Pruneau is stepping down effective June 4.
The company says Mr. Pruneau is leaving the job to focus on personal investment projects.
He has been the head of Videotron since January 2019.
Before taking the job, he was chief financial officer of Quebecor from 2010 to 2018.
Videotron, which provides cable television, internet, telephone and wireless service, is a subsidiary of Quebecor Media.
Quebecor says that following Mr. Pruneau’s departure, the president and chief executive of Quebecor Media will also take over the responsibilities for Videotron.
Electric carmaker Tesla Inc. (TSLA-Q) was down after it marginally beat Wall Street expectations for first-quarter revenue on Monday boosted by a jump in environmental credit sales to other automakers and liquidating some bitcoins.
Tesla posted record deliveries in the first quarter despite a global chip shortage that has slammed auto sector rivals, but its profit was not driven by auto sales.
Tesla has posted profits for seven quarters in a row, most quarters driven by environmental credits.
Tesla earned US$518-million from sales of those credits, up 46 per cent from a year earlier. Tesla earns credits for exceeding emissions and fuel economy standards and sells them to other automakers that fall short.
Net profit was dented by a US$299-million award to Chief Executive Elon Musk. Tesla’s quarterly performance hit targets qualifying the billionaire entrepreneur for two options payouts worth a combined US$11-billion.
In a research note released before the bell on Tuesday, Wedbush analyst Dan Ives said: “Last night was generally a ho-hum quarter for Tesla as the company importantly gave the Street a better glimpse of its demand and capacity build out globally during the course of 2021. Tesla had its strongest order intake number in the company’s history during 1Q despite what is usually a seasonal slowdown coming off a robust 4Q, with Model 3 the flagship followed by Model Y driving pent up demand throughout Europe and China. Clearly, the chip shortage is a major X variable for Tesla (and every other automaker) which speaks to the company reiterating and not raising its annual 2021 50% delivery growth (likely exceed) number which likely will be exceeded by 100k-150k vehicles in our opinion if the supply chain starts to normalize a bit in 2H. While the bears will laser focus on the chip shortage spoiling the EV party for Tesla in 2021, we believe the reality is that demand is spiking globally for Tesla’s/EVs, the company’s flagship production build outs in Berlin and Austin appear right on schedule, and the company has a treasure chest and cash flow to fund future R&D/capex endeavors in this EV arms race for the next decade. As for its Bitcoin purchase, Tesla sold $272 million worth of this crypto during the quarter resulting in a $100 million gain with a total paper profit that we believe approaches ~$1 billion so far.”
Shares of General Electric Co. (GE-N), which have gained over 145 per cent since last May, were down on Tuesday even after it saw less cash outflow than estimated in the first quarter even as its lucrative jet engine business struggled with the pandemic-led collapse of air travel, driving down company revenue.
The company also reaffirmed its full-year free cash flow and earnings per share outlook.
Tuesday’s earnings report, however, disappointed investors who were expecting the industrial conglomerate to upgrade its 2021 outlook.
The improvement in earnings at power and renewables businesses was also not as strong as some analysts were expecting.
The Boston-based company reported a cash outflow of US$845-million compared with an outflow of US$2.2-billion last year. Analysts surveyed by Refinitiv, on average, expected a cash outflow of US$1.3-billion.
The first quarter tends to be GE’s slowest period of the year. However, improved earnings from a year ago and better working capital helped slow the cash burn.
The company expects a similar year-on-year improvement in cash flow in the current quarter.
Free-cash flow is closely watched by investors as a sign of the health of GE’s operations and ability to pay down debt.
GE reported US$17.12-billion in revenue, down 12 per cent year-on-year, and lower than US$17.5-billion estimated by analysts in a Refinitiv survey.
On an adjusted basis, it earned 3 US cents per share in the quarter, compared with 2 US cents per share a year earlier.
Eli Lilly and Co. (LLY-N) slid in the wake of missing estimates for first-quarter profit and cutting the top end of its full-year forecast for adjusted earnings as demand for its COVID-19 antibody therapies took a hit due to the roll-out of vaccines in the United States.
Demand for antibody drugs from Lilly and Regeneron (REGN-Q) has failed to take off in the United States, given the complexities associated with administering the treatments.
Sales of Lilly’s COVID-19 antibody drug, bamlanivimab, also came under pressure after the U.S. government stopped its distribution as a standalone treatment last month on worries that new variants of the virus could be resistant to it.
The drugmaker is now focusing on a combination of bamlanivimab with another treatment, etesevimab.
“COVID-19 therapies are reducing in their need as the virus is being arrested by vaccines in the United States,” Lilly’s Chief Executive Officer David Ricks said in an interview with CNBC.
Lilly earned US$810.1-million from its COVID-19 drugs in the quarter, below estimates of US$985-million, according to Guggenheim analysts.
The drugs, which include bamlanivimab as well as its combination with etesevimab, had brought in sales of US$871.2-million in the fourth quarter. The company now expects adjusted full-year earnings of US$7.80 to US$8 per share from its prior forecast of US$7.75 to US$8.40 per share.
Sales from COVID-19 drugs are expected in the range of US$1-billion to US$1.5-billion from US$1-billion to US$2-billion projected previously.
Excluding items, the company earned US$1.87 per share, missing estimates of US$2.13 per share, according to IBES data from Refinitiv.
U.S. conglomerate 3M Co. (MMM-N), which makes N95 masks, dipped after it beat Wall Street estimates for quarterly profit and revenue, as people bought more personal safety products to stave off potential coronavirus infection.
The company’s N95 masks, which provide a high level of filtration against airborne contaminants, as well as its home improvement and general cleaning equipment have been in high demand as the world continues to fight the new coronavirus.
Sales in the company’s safety and industrial unit jumped 13.7 per cent to US$3.3-billion in the first quarter ended March 31, boosted by demand for personal safety products, roofing granules and industrial adhesives.
Net income attributable to 3M rose to US$1.62-billion, or US$2.77 per share, from US$1.31-billion or US$2.25 per share, a year earlier.
Analysts on average had expected the company to earn a profit of US$2.29 per share, according to Refinitiv data.
Net sales rose 9.6 per cent to US$8.85-billion, beating Wall Street estimates of US$8.47-billion.
With files from staff and wires