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A survey of North American equities heading in both directions

On the rise

Gildan Activewear Inc. (GIL-T) rose 2.1 per cent in the wake of chief executive Vince Tyra, fighting to win support for his leadership ahead of a crucial shareholder meeting next month, saying the Canadian T-shirt maker will push further into overseas markets and strengthen its main brands as it sets up its next leg of growth.

Speaking during an investor update Monday after his first 90 days as Gildan CEO, Mr. Tyra outlined how he’s spent his time so far. And he provided a snapshot of his general strategic priorities for the company, whose future could be decided in a proxy contest in the weeks ahead.

Mr. Tyra sees an opportunity to capitalize on the apparel maker’s low-cost manufacturing base and further expand sales from its stronghold in the United States to select international markets, such as Western Europe. His plans also include building up the company’s three main brands – Gildan, Comfort Colors and American Apparel – by emphasizing their comfort and quality, not just price and availability, in a bid to boost customer awareness and sales.

“We have a great company today and we’re simply looking to thinking about ways to enhance it,” Mr. Tyra said in an interview, adding that Gildan has to work on driving the demand for its factory output. He promised a comprehensive strategic plan in the fall.

Whether investors view Mr. Tyra’s vision as credible and ambitious is key because his future hinges on it, to an extent. Gildan’s board is locked in a fight with U.S. investment firm Browning West and other dissident shareholders over its decision to hire Mr. Tyra after dismissing long-time CEO Glenn Chamandy in December.

- Nicolas Van Praet

Morgan Stanley’s (MS-N) first-quarter profit beat estimates on Tuesday, fueled by a resurgence in investment banking led by equity underwriting where revenue more than doubled, sending its shares up 2.5 per cent.

Investment banking revenue climbed 16 per cent from a year ago, while fixed-income underwriting remained a bright spot for a second quarter in row, driven by higher bond issuance.

“As a result of strong net new asset growth, the firm has reached $7 trillion of client assets across wealth and investment management,” CEO Ted Pick said on Morgan Stanley’s first quarter under his helm.

The Wall Street giant reported profit of US$2.02 per share sailing past analysts’ average estimate of US$1.66, according to LSEG data. Its total revenue rose to US$15.14-billion compared with US$14.5-billion a year ago.

Investment banking activity has rebounded from a two-year dealmaking drought as large corporates issued near-record levels of debt and equity capital markets became more active.

Still, Morgan Stanley revenue from the segment came in weaker than its main rival Goldman Sachs (GS-N). Goldman impressed markets on Monday with a 28-per-cent rise in profit due to more fees in leading large deals and also good results in trading.

In their earnings last week, JPMorgan Chase (JPM-N) and Citigroup (C-N) cited rising activity, particularly in debt and equity capital markets.

Total revenue for the institutional securities division that houses investment banking, equities and fixed income stood at US$7-billion, compared with US$6.8-billion a year ago. Fixed income trading revenue slid 4 per cent, while equities rose 4 per cent.

Morgan Stanley has built its wealth business into a powerhouse that generates more stable revenue and helps smooth out revenue from more volatile businesses such as trading and investment banking.

But as the race for market share in wealth management increases, markets are focused on whether Morgan Stanley can grow assets.

Net new assets for the quarter stood at US$95-billion, of which around half came from family offices, the bank said.

UnitedHealth Group (UNH-N) expects to take a hit of as much as US$1.6-billion this year from disruptions caused by the February cyberattack at its Change Healthcare unit.

Despite the disruptions, UnitedHealth still beat estimates for first-quarter adjusted profit, sending its shares up 5.2 per cent. It has already booked US$872-million in costs related to the data breach in the quarter, most of it as one-time items.

This is the healthcare conglomerate’s first full public disclosure on the financial impact of the data breach, which disrupted services at pharmacies, hospitals, doctors’ offices and other providers as well as at community health centers in the United States.

The health insurer had to relax or remove prior authorization processes for some claims following the hack, stoking concerns of an increase in costs. At the same time, there were delays in claim submissions as medical care providers struggled with paperwork.

UnitedHealth reported a rise in medical care ratio - the percentage of premiums spent on medical care - to 84.3 per cent from 82.2 per cent a year earlier.

The disruptions from the hack are expected to impact profit by as much as US$1.35 per share this year, the company said in a statement.

UnitedHealth is yet to disclose the amount of personal data that was breached in the hack. It must report that information within 60 days as required by federal law.

For the quarter, UnitedHealth reported an adjusted profit of US$7.16 per share, excluding a 25-US-cent hit from business disruptions caused by the data breach, versus estimates of US$6.61 per share, according to LSEG.

The healthcare conglomerate recorded a net loss of US$1.53 per share due also to a US$7-billion charge related to the sale of its Brazil unit, Amil.

On the decline

Barrick Gold Corp. (ABX-T) shares were lower by 5 per cent after it said on Tuesday that its gold and copper production fell sequentially in the first quarter, hurt by lower grades and maintenance at its mines.

The company added that it expects gold and copper production to increase each quarter through the year, with its Pueblo Viejo gold mine in the Dominican Republic ramping up from the second quarter.

Barrick reported a total preliminary output of 940,000 ounces of gold and 40,000 tons of copper in the three months ended March 31, down from 1.05 million ounces of gold and 113 million pounds of copper in the previous quarter.

All-in sustaining costs (AISC) per ounce of gold in the quarter, an industry metric that reflects total expenses, is expected to be about 7 per cent to 9 per cent higher than previous quarter.

Copper’s AISC for the first quarter is expected to rise between 14 per cent to 16 per cent from the previous quarter.

The Toronto-based company is scheduled to release its fourth-quarter results on May 1.

Canadian oil and gas producer Tamarack Valley Energy Ltd. (TVE-T) closed down 1.5 per cent after saying it has temporarily shut in about 6,200 barrels of oil equivalent per day (boepd) of production after a fire at a third-party gas plant at Mitsue, Alberta.

The plant, which processes Tamarack’s gas from various batteries in the Nipisi area, was shut down on Saturday.

CEO Brian Schmidt declined to say which company owns the affected gas plant.

Tamarack said in a statement it is considering several options to accelerate the resumption of its production as the plant operator evaluates how long it will take to restart the facility.

“I suspect from the fire and equipment it’s not going to be a short time,” Schmidt told Reuters in a phone interview.

Tamarack’s options include re-routing its gas to other processing plants and seeking relief from an Alberta Energy Regulator directive that limits gas flaring, he added.

The volumes temporarily shut-in amount to roughly 10 per centof Tamarack’s total production, RBC Capital Markets analyst Luke Davis said in a research note.

“We expect the stock to lag peers until further clarity is provided,” Mr. Davis wrote.

Flight simulator maker CAE Inc. (CAE-T) slid 0.9 per cent despite saying it has signed an agreement with Nav Canada to help train flight service specialists and air traffic controllers beginning this fall.

CAE instructors will use Nav Canada’s training curriculum and courseware as it conducts initial training at its new Air Traffic Services Training Centre on CAE’s campus in Montreal.

The two organizations say the partnership will provide additional training capacity while Nav Canada, which has previously acknowledged flight delays stemming in part to a lack of air traffic controllers, continues to deliver existing training programs across the country.

In July, the International Air Transport Association called out air traffic control organizations in North America, which include Nav Canada, for staffing shortages that “continue to produce unacceptable delays and disruptions.”

CAE president and CEO Marc Parent says the company has an extensive background in advanced training delivery and modern learning sciences, noting the “challenges posed by the increased demand for highly skilled people throughout the aviation sector.”

Nav Canada says it plans to recruit more than 500 additional students by 2028 who will be trained by CAE.

Bank of America (BAC-N) declined after reporting a drop in first-quarter profit as the lender set aside more money to cover souring loans, but still beat estimates on surging investment banking fees.

A resilient U.S. economy, buoyant equities and a flurry of large deals have reignited hopes of a nascent economic recovery, although industry executives have expressed guarded optimism.

Investment banking fees jumped 35 per cent to US$1.6-billion in the reported quarter from a year earlier, partially offsetting a decline in interest payments. Last month, Chief Financial Officer Alastair Borthwick said he expected investment banking revenue to jump 10 per cent to 15 per cent in the first quarter.

Excluding one-off items, Bank of America earned 83 US cents a share in the quarter ended March, sailing past analysts’ average estimate of 76 US cents a share, according to LSEG data.

Its sales and trading revenue rose 2 per cent to US$5.2-billion with equities contributing a 15-per-cent jump and fixed income currencies and commodities (FICC) posting a 4-per-cent decline.

“Bank of America’s sales and trading businesses continued their strong 2023 momentum this quarter, reporting the best first quarter in over a decade,” chief executive officer Brian Moynihan said.

Bank of America is among the large lenders, including rival JPMorgan, that are weighing the potential for the U.S. Federal Reserve to cut interest rates this year. The move could crimp banks’ income from interest payments, but could potentially spur economic activity and borrower demand.

Johnson & Johnson’s (JNJ-N) first-quarter revenue missed Wall Street estimates on Tuesday with sales of its blockbuster psoriasis drug Stelara coming in lower than expected as the company prepares for its loss of exclusivity in the U.S.

Stelara sales were flat at US$2.45-billion, falling short of analysts’ expectations of US$2.6-billion, according to LSEG data, and shares were lower.

J&J Chief Financial Officer Joe Wolk said Stelara revenue was flat because of contracting with healthcare providers and pharmacy benefit managers in anticipation of the drug’s loss of exclusivity in the U.S. next year.

“We probably expect this year to be flattish, maybe a little bit up in the United States, as we prepare for some contracts to preserve volume, but maybe give a little bit on price for the longer term,” Mr. Wolk said.

J&J has struck deals to delay U.S. launches of biosimilars, or close copies, of Stelara until 2025, after a key patent expired last year.

Analysts have said the delayed competition will make the drug a larger contributor for J&J’s 2024 and 2025 revenue than previously anticipated.

Stelara biosimilars are expected to launch elsewhere later this year. J&J reached an agreement with Alvotech in February to launch its version in Japan, Canada and Europe this year. The Luxembourg-based drugmaker began selling the medicine in Canada last month under the name Jamteki and can launch in Japan in May.

Sales of cancer drug Darzalex jumped about 19 per cent to US$2.69-billion, about in line with expectations. The multiple myeloma treatment is expected to bring in sales of more than US$11-billion for J&J this year, according to analysts.

On an adjusted basis, J&J earned US$2.71 per share in the first quarter, beating estimates of US$2.64. It reported total revenue of US$21.38-billion, shy of estimates of US$21.40-billion.

J&J raised the low end of its 2024 forecast by 5 US cents and now expects an adjusted profit of US$10.60 to US$10.75 per share.

It also increased its quarterly dividend by 4.2 per cent to US$1.24 per share.

Tesla (TSLA-Q) suffered a further decline after falling over 5 per cent in the last session, when an internal memo seen by Reuters showed the EV marker was laying off more than 10 per cent of its global workforce.

Its global job cuts include reducing staff in the U.S. and China, the automakers’ two biggest markets, across sales, tech, and engineering, five sources briefed on the matter said.

Several U.S.-based service centres saw heavy layoffs effective immediately, primarily of sales staff and technicians, one source said. Another location laid off all front-of-house staff, the source said.

A Tesla program manager in California posted a spreadsheet on LinkedIn of over 140 staff, mostly engineers, who had been laid off and were seeking new jobs.

Two sources said members of Tesla’s China sales team were being notified they were being made redundant, with one saying more than 10 per cent were losing their jobs.

A third source said that in Shanghai, where Tesla’s largest plant is located, the company will only lay off a small proportion of staff, amounting to “several dozen” people.

Switzerland’s UBS Group AG (UBS-N) raised its forecast for first-quarter combined net interest income (NII) in its wealth management and personal and corporate banking businesses on Tuesday, although its shares fell along with other European banks.

The UBS stock price has dropped more than 8 per cent since the government last week said it would tighten banking regulation, against a 3.2-per-cent drop in the European banking sector.

Adding to the heat were remarks by Swiss Finance Minister Karin Keller-Sutter, who indicated UBS could have to find US$15-billion to US$25-billion in extra capital under the plans.

UBS revised its first-quarter NII forecasts to single digits, an improvement from February when the Zurich-based bank said it expected NII for personal and corporate banking and global wealth management to be roughly flat.

The new guidance reflected how the first quarter had gone, a person familiar with the bank’s thinking told Reuters.

UBS declined to comment on the revised projection, which it made as it published restated historical financial data at a business segment level, which it said would improve consistency.

Bank of New York Mellon (BK-N) turned lower after it beat Wall Street expectations on Tuesday with a 5-per-cent increase in profits, as rising asset values boosted investment services fees, more than offsetting lower interest income for the world’s largest custodian bank.

The oldest U.S. bank saw its assets under custody increase as hopes of a soft landing for the economy led to a market rally.

But income from interest on its portfolio of securities, loans and deposits fell. Lower volatility in foreign exchange markets also hurt profits.

“What we see is really strong underlying underpinnings for the U.S. economy,” CEO Robin Vince said, echoing the sentiments of other executives in the finance industry.

He warned, however, that geopolitical tensions, uncertainty around the trajectory of interest rates and the United States fiscal deficit could have a destabilizing impact.

BNY said net income applicable to common shareholders rose to US$953-million, or US$1.25 per share in the first quarter, up from US$911-million, or US$1.13 per share in the same period last year.

Adjusted net income during the quarter was US$1.29 per share, while revenue rose 3 per cent, to US$4.53-billion - its highest-ever quarterly revenue on an ongoing operating basis.

Wall Street expected the lender to report adjusted earnings per share of US$1.19 on US$4.39-billion of revenues, according to LSEG data.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/05/24 4:00pm EDT.

SymbolName% changeLast
Bank of America Corp
Bank of New York Mellon Corp
Barrick Gold Corp
Cae Inc
Gildan Activewear Inc
Johnson & Johnson
Morgan Stanley
Tamarack Valley Energy Ltd
Tesla Inc
UBS Group Ag ADR

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