A survey of North American equities heading in both directions
On the rise
Loblaw Companies Ltd. (L-T) rose 0.9 per cent after it said on Tuesday it expects to invest over $2-billion this year to create more than 7,500 jobs.
While the investment is in line with last year’s, the retailer plans to create roughly 1,500 more jobs in 2024.
Loblaw plans to use the investment to improve its store network by renovating more than 700 stores and building more than 40 others.
The retail chain in November beat third-quarter profit estimates on steady demand for essentials amid surging food prices in the country.
Walmart (WMT-N) kicked off U.S. retailers’ reporting season on Tuesday with robust fourth quarter results after inflation-squeezed shoppers flocked to its stores, and said it would buy smart-TV maker Vizio (VZIO-N) for US$2.3-billion.
Shares of the retail giant rose as much as 6.5 per cent to an all-time high of US$181.35 after it also gave an upbeat annual sales forecast and announced a 9-per-cent rise in its dividend, the biggest increase in more than a decade.
Walmart’s proposed offer to buy Vizio for US$11.50 per share in cash, is another bet on the retailer’s fast-growing U.S. advertising business, where ad sales rose 22 per cent in the quarter ended Jan. 31 and is a bigger margin driver than its traditional grocery business.
The deal also gives Walmart access to Vizio’s SmartCast operating system, through which it can rake in advertising revenue by offering its suppliers the ability to display ads on streaming devices. It also gives Walmart control of a fifth of the U.S. television market, analysts have previously said.
“The deal makes sense,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds Walmart shares.
“I am not at all surprised to see Walmart want to be in that same competitive arena (of retail advertising) because of just the sheer amount of dollars that are available,” he said.
The offer price is a premium of 47 per cent to Vizio’s closing price of US$7.82 as of Feb. 12, the day before reports about deal talks emerged. Vizio shares were up in trading on Tuesday.
Walmart reported a 3.9-per-cent rise in comparable sales, excluding fuel, for its fourth quarter ended Jan. 31, compared to LSEG estimates of 2.91 per cent. Global eCommerce sales grew 23 per cent.
Fourth quarter adjusted profit came in at US$1.80 per share, compared to expectations of US$1.65 per share.
Walmart said it expects consolidated net sales in fiscal 2025 to grow between 3 per cent and 4 per cent, largely above analysts’ expectations of a 3.4-per-cent rise.
The size of the retailer’s dividend hike also beat expectations.
“This year’s 9-per-cent increase is the largest in over a decade, and a sign of our confidence in our growth potential and cash flow,” said John David Rainey, executive vice president and chief financial officer at Walmart Inc.
Home Depot (HD-N) forecast full-year results below analysts’ estimates on Tuesday, signaling that lacklustre demand would continue to affect the company this year as people tighten spending on home remodeling amid sticky inflation.
The company’s shares closed narrowly higher, recovering from an early decline as it also reported a bigger-than-expected drop in fourth-quarter sales.
With food prices and borrowing costs still elevated, customers are limiting home-related spend to just repair and maintenance rather than undertaking larger renovations, resulting in weak demand for discretionary categories such as flooring, kitchen and furniture.
Even as demand for key items such as plumbing and hardware have held up, Placer.ai data showed foot traffic at Home Depot fell in the fourth quarter, with declines worsening toward the end of the reporting period.
Home Depot forecast comparable sales to decline about 1 per cent for 2024, while analysts expected a marginal rise of 0.06 per cent, according to LSEG data.
“There was an expectation from the market that the company could return to growth sooner than they’re guiding to,” said Jonathan Reid, a director at Fitch Ratings covering the retail and consumer goods industries.
While the home-improvement industry is expected to recover in the second half of the year, analysts believe Home Depot will continue to experience near-term pressure.
Transactions at the retailer fell 1.7 per cent in the fourth quarter, logging their eleventh straight quarterly decline.
The company forecast 2024 per-share earnings to grow about 1 per cent, compared to analysts’ expectations of a 3.62-per-cent rise to US$15.61.
Comparable sales fell 3.5 per cent in the fourth quarter, versus estimates of a 3.3-per-cent drop, but a tighter lid on costs and easing supply chain expenses helped Home Depot post a per-share profit of US$2.82, beating estimates of US$2.77.
Capital One (COF-N), a U.S. consumer lender backed by Warren Buffett, turned higher after it said on Monday that it will acquire credit card issuer Discover Financial Services (DFS-N) in an all-stock transaction valued at US$35.3-billion.
The tie-up, which will combine two of the largest U.S. credit card companies, aims at building “a payments network that can compete with the largest payments networks and payments companies,” Richard Fairbank, chairman and CEO of Capital One, said in a statement.
Visa (V-N), Mastercard (MA-N) and American Express (AXP-N) are among other U.S.-based payments networks.
Discover shareholders will receive 1.0192 Capital One share for each Discover share. It represents a 26.6-per-cent premium over Discover’s closing price on Friday.
When concluded, Capital One shareholders will own 60 per cent of the combined company, while Discover shareholders will own approximately 40 per cent, according to the statement.
Capital One, valued at US$52.2-billion, is the fourth largest player in the U.S. credit card market by volume as of 2022, according to Nilson, while Discover is the sixth.
Intel Corp. (INTC-Q) increased 2.3 per cent following a report on Friday that the Biden administration is in talks to award more than US$10-billion in subsidies to the semiconductor firm.
Negotiations are underway, and Intel’s award package will likely include both loans and direct grants, according to Bloomberg
The U.S. Department of Commerce, which oversees the disbursement of CHIPS Act funds, and Intel declined to comment.
The department has already announced two smaller Chips Act grants and U.S. Commerce Secretary Gina Raimondo said earlier this month that her department planned to make several funding awards within two months from the government’s US$39-billion program to boost semiconductor manufacturing.
The semiconductor fund is intended to subsidize chip production and related supply chain investments, and the awards will help build factories and increase production.
Intel plans to spend tens of billions of dollars to fund chip factories at longtime sites in Arizona and New Mexico, along with a new site in Ohio that the Silicon Valley company says could become the world’s largest chip plant.
A group of investors led by Ancora Holdings on Tuesday said they have proposed replacing the top management, including the CEO, at railroad operator Norfolk Southern Corp. (NSC-N) and has also nominated eight directors to its board.
The investor group, which holds a “large equity stake” in the company, aims to replace CEO Alan Shaw with former UPS executive Jim Barber and COO Paul Duncan with Jamie Boychuk.
Shares of Norfolk rose on Tuesday. They fell nearly 5 per cent in 2023 amid operating challenges and the fallout from a costly derailment in East Palestine, Ohio, last year, which invited scrutiny from regulators.
“Norfolk Southern, which has exceptional rail workers and the country’s best customers, has suffered for years due to its Board’s poor decisions with regard to the Company’s leadership,” the investor group said.
The candidates for the board include several railroad industry veterans and former Ohio governor and congressman John Kasich.
On the decline
Vancouver-based Methanex Corp. (MX-T) dropped 10.5 per cent after announcing commercial production at its new methanol plant in Louisiana has been delayed due to complications during the late stages of its initial startup process.
The company says there was significant damage to a large number of supporting refractory bricks at the Geismar 3 plant that will need to be replaced.
Methanex says the specialty bricks will require time to procure and, as a result, management believes commercial production could be delayed up to the end of the third quarter of 2024.
Based on preliminary findings, the company says it believes that the issue relates to complications in the initial startup process and is not a plant design or construction issue.
It says management believes the total capital cost of the plant will not significantly exceed the upper end of its guidance of US$1.3-billion.
Methanex is the world’s largest supplier of methanol.
First Quantum Minerals Ltd (FM-T) fell 4.2 per cent after re-shuffling top-tier personnel at its Zambian operations in a bid to tackle production and safety shortfalls in the South African country, an internal memo seen by Reuters showed.
The latest action comes as the company continues to deal with fallout from the sudden closure order of its flagship Panama mine late last year. FQM has lost more than half its market value since public protests against the Cobre Panama project started in October.
“Whilst we recognise the solid efforts of the teams at both Sentinel and Kansanshi, the last two production years at our Zambian operations have fallen short of our overall expectations in terms of safety and production,” said an email sent by Chief Operating Officer Rudi Badenhorst to the employees of the Kansanshi mine last week.
With the impact of the suspension of operations at Cobre Panama towards the end of last year, the memo said, “we recognise our need to reinvigorate our commitments to deliver on our investments in Zambia.”
Meiring Burger, who was part of First Quantum’s group mining team was promoted to general manager of Kansanshi mine, while Axel Kottgen who led the Enterprise nickel project in Zambia was promoted to assistant general manager “to achieve target outcomes at Kansanshi,” the note said.
Anthony Mukutuma, will lead external relations in Zambia to work on government and political strategy, the note added.
Macy’s Inc. (M-N) was down 1.1 per cent after it said on Tuesday that investor Arkhouse Management has nominated nine individuals to its board, setting off a proxy battle just a month after the department store rejected a $5.8 billion go-private bid.
The company had rejected the offer from Arkhouse and Brigade Capital on concerns over valuation, while it continues discussions for more information on deal financing.
The push for board seats comes as the Bloomingdale’s parent struggles with weak demand as customer cut back spending due to elevated inflation and high borrowing costs.
But the company beat market expectations for quarterly results in November on efforts to trim inventory and strong demand for its beauty products.
“Arkhouse and Brigade have yet to provide any financing details ... of their proposal despite multiple opportunities to do so and instead ... Arkhouse has chosen to launch a proxy contest,” Macy’s said.
Sports-focused streaming service FuboTV (FUBO-N) was lower as it has sued Walt Disney (DIS-N), Fox (FOX-Q) and Warner Bros Discovery (WBD-Q) over a planned sports streaming platform by the companies, the Wall Street Journal reported on Tuesday, citing a court filing.
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The lawsuit alleges that the deal would not let Fubo carry a small bundle of sports-focused channels that are being planned to be included in the new service, according to the report.
With files from staff and wires
David Leeder