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A look at North American equities heading in both directions

On the rise

Shares of Lithium Americas Corp. (LAC-T) surged 9.9 per cent after a U.S. judge ordered regulators to reconsider part of the permit approving its Thacker Pass lithium mine project in Nevada, though the mixed ruling rejected claims that the project would cause unnecessary harm to the environment or wildlife.

The proposed mine would be North America’s largest source of lithium for electric vehicle batteries and a key pillar in President Joe Biden’s efforts to wean his country off Chinese supplies of the metal.

General Motors Co. (GM-N) signed a US$650-million deal last week to help develop the project, an agreement that hinges in part on a positive outcome in the long-running court case.

In a 49-page ruling, Chief Judge Miranda Du of the federal court in Reno, Nevada, ordered the U.S. Bureau of Land Management (BLM) to determine whether Lithium Americas has the right to dump waste rock at the site.

Du, however, did not vacate a 2021 decision by former President Donald Trump to approve the mine. The ruling can be appealed.

Much of the U.S. mining industry is ruled by an 1872 law that gives companies wide berth to extract metals on federal lands. However, a court ruled last year that miners do not necessarily have the right to store waste rock or erect buildings on federal land not containing valuable minerals.

Du ordered the BLM to determine whether roughly 1,300 acres at the Thacker Pass site where Lithium Americas hopes to store waste rock contains lithium. Du did not issue a time limit for the new review. Federal officials had told the court last month that they did not believe fresh studies were warranted.

Du also rejected claims from the Reno Sparks Indian Colony and other Native American tribes that they were not properly consulted about the project and its potential effects on cultural and historical sites.

The favorable ruling by the federal court leaves in place the final regulatory approval needed in moving Thacker Pass into construction, Jonathan Evans, chief executive officer of Lithium Americas, said in a statement.

The company said it intends to work closely with the BLM to complete the required follow-up.

TFI International Inc. (TFII-T) rose 6.8 per cent after receiving a positive response to its 2023 financial guidance.

While its fourth-quarter results were largely in-line with the Street’s expectations, the Saint-Laurent, Que.-based transport and logistics company now expects earnings per share of US$7.50 to US$7.69 for fiscal 2023, well ahead of the consensus forecast of US$7.37.

“While Q4 results were slightly below consensus, the guidance provided was nicely ahead of expectations and does not include acquisitions and M&A - both of which we expect (and mgmt. confirmed) will likely be meaningful in 2023. Accordingly, we remain constructive on the TFII shares and reiterate our OP [outperform] rating,” RBC Dominion Securities analyst Walter Spracklin said in a research note.

Cineplex Inc. (CGX-T) saw gains after it reported before the bell a profit of $10.2-million in its fourth quarter compared with a loss of $21.8-million a year earlier as its revenue increased more than 15 per cent.

The movie theatre company says its net profit amounted to 16 cents per diluted share for the quarter ended Dec. 31 compared with a loss of 34 cents per share in the last three months of 2021.

Revenue totalled $350.1-million, up from $300.0-million a year earlier.

Theatre attendance totalled 9.2 million customers, down from 10.2 million in the fourth quarter of 2021.

However, Cineplex says it saw record box office revenue per patron and record concession revenue per patron for the quarter.

Box office revenue per patron was $13.06 in the fourth quarter, up from $12.29 in the fourth quarter of 2021, while concession revenue per patrol rose to $8.93 compared with $7.49 a year earlier.

Spin Master Corp. (TOY-T) was higher after saying its preliminary fourth-quarter revenue totalled US$465.8-million, down from US$620.- million a year earlier.

The toy company, says toy revenue for the quarter totalled US$396.7-million, down from US$542.0-million, while entertainment revenue amounted to US$31.20million, up from US$28.5-million. Digital games revenue for the quarter came in at US$37.9-million, down from US$50.0 million.

Spin Master says constant currency revenue for the quarter was down 22.0 per cent compared with the fourth quarter of 2021.

For its full year, the company says revenue totalled US$2.02-billion, down from US$2.04-billion in 2021 as toy revenue amounted to US$1.74-billion, up from US$1.73-billion a year earlier. Entertainment revenue for the year totalled US$118.8-million, down from US$135.8-million in 2021 when Paw Patrol: The Movie was released while digital games revenue for 2022 totalled US$163.9-million, down from US$174.8-million.

On a constant currency basis, Spin Master says its revenue for 2022 was up 1.4 per cent from the previous year. Excluding the Paw Patrol movie distribution revenue in 2021, constant currency revenue was up 2.7 per cent.

Spin Master is expected to report its full financial results after the close of markets on March 8.

Canada Goose Holdings Inc. (GOOS-T) gained 1.3 per cent following the premarket release of its updated strategic growth plan and five-year financial outlook.

The Toronto-based luxury winter clothing manufacturer projects its annual revenue to grow to US$3-billion by fiscal 2028 (versus US$1.175-billion and US$1.195-billion in 2023), representing a compound annual growth rate of 20 per cent, with an adjusted EBIT margin of 30 per cent. It also expects to more than double its retail footprint from the 51 permanent stores at the end of Q3 fiscal 2023.

On Feb. 2, the company’s shares dropped almost 24 per cent after it cut annual forecasts as a spike in COVID-19 infections in China dulled store traffic and inflation bit into spending power in North America. It also missed third-quarter revenue and profit estimates.

“We know how to execute. Our track record shows that,” Canada Goose CEO Dani Reiss said during the company’s first investor day since going public in 2017.

“Today the wind is at our back. Our vision is clear and we know who we are,” he said. “That is how you build an enduring brand. You live by your north star.”

Canada Goose has launched new products in recent years including rainwear, apparel and footwear, and aims to continue expanding into new categories like eyewear, luggage and home, the company said.

“We will create new and expand existing categories rapidly,” Mr. Reiss said. “Our vision has our consumers shopping with us for all their wardrobe and accessory needs.”

The company said it plans to work on retaining longstanding customers while focusing on attracting new customers, especially women and generation Z.

“Today, women represent approximately 48 per cent of our sales, which means we have a lot of room to grow to reach a luxury average of more than 60 per cent,” Mr. Reiss said.

“We’ve also set our sights on increasing the number of younger consumers that shop with us,” he said. “Gen Z represents a significant segment of the global luxury market today.”

TMX Group Ltd. (X-T) rose after saying its revenue and earnings rose in the fourth quarter of 2022 compared to the same period last year, and announced an increase to its dividend of five per cent to 87 cents per common share.

The company, which operates the Toronto Stock Exchange, says its net income attributable to shareholders for the quarter ended Dec. 31 was $102.2-million, up 16 per cent from $87.9-million during the same quarter last year.

Diluted earnings per share were $1.83, up from $1.56 a year earlier.

Revenue for the quarter was $274.1-million, up nine per cent from $252.4-million a year earlier, with the increase in revenue including $27.7-million related to the company’s acquisition of voting control of BOX Options Market LLC.

The company says revenue for 2022 was $1.12-billion, up 14 per cent from $980.7-million in 2021, while earnings for the year were $542.7-million, up 60 per cent from $338.5 million in 2021.

The company attributed much of the bump in earnings in 2022 to its acquisition of voting control of BOX, as well as lower tax expenses.

“TMX Core Adj. EPS came in ahead of expectations, however, the beat was driven largely by what we believe to be an unusually low tax which offset higher-than-anticipated operating expenses with the top line coming right in line with our forecast,” said Scotia Capital analyst Phil Hardie. “A positive surprise was that the company announced a number of pricing changes including a CPI adjustment of 7 per cent to 8 per cent across its Trayport segment. That said, on net, our 2024 estimates move down by roughly 3 per cent.

“We believe investors are recognizing TMX for its resilience, and the next leg up for the stock is to gain improved recognition for its growth potential. That said, TMX faces tough year-over-year comparables, and likely a reduced benefit of operating leverage in the near term.”

Microsoft Corp. (MSFT-Q) jumped 4.2 per cent after it confirmed it is revamping its Bing search engine with artificial intelligence in one of its biggest efforts yet to lead a new wave of technology and reshape how people gather information.

Microsoft is staking its future on AI through billions of dollars of investment. Working with the startup OpenAI, the company is aiming to rival Alphabet Inc’s Google and potentially claim vast returns from tools that speed up all manner of content creation, automating tasks if not jobs themselves.

“This technology is going to reshape pretty much every software category,” said Microsoft Chief Executive Satya Nadella, in a briefing for reporters at Microsoft headquarters in Redmond, Washington.

The power of so-called generative AI that can create virtually any text or image dawned on the public last year with the release of ChatGPT, the chatbot sensation from OpenAI. Its human-like responses to any prompt have given people new ways to think about the possibilities of marketing, writing term papers or disseminating news, or even how to query information online.

Microsoft is now aiming to market OpenAI’s technology, including ChatGPT, to its cloud customers and add the same power to its suite of products, including search.

China’s Baidu Inc. (BIDU-Q) said on Tuesday it would complete internal testing of a ChatGPT-style project called “Ernie Bot” in March, as interest in generative artificial intelligence (AI) gathers steam.

The news sent search engine giant Baidu’s U.S.-listed shares up 12 per cent on Tuesday.

A flurry of Chinese AI stocks also rallied, as the global frenzy around the Microsoft-backed (MSFT-Q) chatbot sensation ChatGPT spurred speculative bets on the new technology.

Retail investors flock to small-cap AI firms as Big Tech battles for share

Just two months after its launch, ChatGPT - which can generate articles, essays, jokes and even poetry in response to prompts - has been rated the fastest-growing consumer app in history.

It has prompted many tech firms to double down on the heavily hyped generative AI technology, which until recently existed more in the background than as a solid contributor to the bottom line.

Google owner Alphabet Inc. (GOOGL-Q) said on Monday it would launch a chatbot service

and more AI for its search engine, while Microsoft plans its own AI reveal on Tuesday, underscoring growing rivalry to lead a new wave of computing.

Baidu, China’s answer to Google, joined the frenzy on Tuesday.

It said Ernie or “Enhanced Representation through Knowledge Integration,” is a large AI-powered language model introduced in 2019, and has gradually grown to be able to perform tasks including language understanding, language generation, and text-to-image generation.

The person said Baidu aims to make the service available as a standalone application and gradually merge it into its search engine by incorporating chatbot-generated results when users make search requests.

ChatGPT and key Google services are not available in China, although some users have found workarounds to access such tools.

Zoom Video Communications Inc. (ZM-Q) soared almost 10 per cent after Chief Executive Officer Eric Yuan said in blog post it plans to lay off 15 per cent of its workforce, or about 1,300 jobs.

Mr. Yuan also said that he will take a salary cut of 98 per cent for the coming fiscal year, foregoing his fiscal 2023 corporate bonus.

The video conferencing software maker also said that its executive leadership team will reduce their base salary by 20 per cent in the same period.

A raft of U.S. companies from Goldman Sachs Group Inc to Alphabet Inc have laid off thousands this year to ride out a demand downturn wrought by high inflation and rising interest rates.

Royal Caribbean Group (RCL-N) reported a smaller-than-expected loss for its fourth quarter on Tuesday, as pent-up demand for leisure travel helped offset the pressures from rising fuel prices and stronger dollar.

Shares of the company rose 7.2 per cent after the company said booking volumes in the reported quarter were significantly higher than the corresponding period in 2019, before the pandemic outbreak shut down the industry.

Occupancy rates have strongly rebounded since restrictions imposed during the pandemic were lifted, while the easing of on-board COVID-19 protocols has boosted spending on casinos and spas.

Cruise liners are also seeing strong booking volumes and occupancy rates by well-to-do Americans for the wave season, an important period between January and March where the operators offer special cruise deals and discounts for the year.

In late December, Carnival Corp. (CCL-N) also said it was seeing a strong start to the wave season after it posted a smaller-than-expected quarterly loss.

Royal Caribbean saw occupancy rates rise to 94.9 per cent in the fourth quarter ended Dec. 31, compared to 59.3 per cent a year earlier, when Omicron-related restrictions dampened demand for cruises.

The company said the strong booking momentum has extended into early 2023 and it was seeing a record-breaking wave season.

It reported a fourth-quarter loss of US$1.12 per share, compared with analysts’ expectations of a loss of US$1.34, according to Refinitiv IBES data.

However, the cruise operator missed revenue estimates for the fourth quarter and forecast 2023 adjusted profit between US$3.00 and US$3.60 per share, compared with estimates for a profit of US$3.31.

On the decline

Toronto-based Hut 8 Mining Corp. (HUT-T) fell 8.8 per cent on Tuesday after announcing it will merge with rival US Bitcoin Corp to create a crypto mining giant in North America, consolidating after a steep fall in valuations for the crypto sector that saw high-profile collapses in recent months.

The companies said the combined entity will have a market capitalization of around US$990-million, and be equally owned by shareholders of both the companies.

The merged entity, to be called Hut 8 Corp, will be listed on both the Toronto Stock Exchange and the Nasdaq after the all-stock deal.

In December, Binance.US said it will acquire assets of bankrupt crypto lender Voyager Digital in a deal valued at roughly $1 billion.

Finning International Inc. (FTT-T) was lower by almost 3 per cent despite the release of better-than-anticipated fourth-quarter financial results after the bell on Monday as concerns of a second-half 2023 slowdown linger

The Vancouver-based industrial equipment dealer reported net revenue of $2.37-billion, up 34 per cent year-over-year on a consolidated basis and above the consensus forecast on the Street of $2.13-billion. Adjusted earnings per share of 89 cents also topped expectations (82 cents).

“Finning once again delivered standout results significantly above consensus and our own expectations on a 52-per-cent year-over-year jump in new equipment deliveries and continued growth in the high-margin Rental (up 22 per cent year-over-year) and Product Support (up 32 per cent year-over-year) verticals,” National Bank Financial analyst Maxim Sytchev said in a note. “Geographically, management sees broad-based strength in the Canadian mining, energy, and construction sectors through 2023. In South America, resilient copper pricing is expected to counteract the uncertainty created by the constitutional reform process and soft construction demand (Argentina demand is expected to be stable, though challenges in the fiscal, regulatory, and currency environments persist). Lastly, the substantial completion HS2 equipment deliveries for the UK and a weak economic environment will constrain new equipment demand, though product support should remain strong given high utilization rates.”

Mr. Sytchev was one of several equity analysts to raise their target price for Finning shares in response to the release.

Bed Bath and Beyond (BBBY-Q) plummeted 48.6 per cent after the retailer’s plans to raise about US$1-billion through an offering failed to convince investors the company could avoid bankruptcy.

The additional capital would offer the troubled home goods chain a short window of only a few quarters to revive the business, Wall Street analysts said, adding that a weakening economy would diminish any chance of a successful turnaround.

“Unfortunately, we see a low probability that the company will be able to raise equity and view this as a ‘last gasp’ before filing for bankruptcy protection,” Wedbush analyst Seth Basham said.

Reuters reported late last month Bed Bath & Beyond was preparing to seek bankruptcy protection and had lined up liquidators to close additional stores unless a last-minute buyer emerged.

Bed Bath & Beyond’s shares closed more than 92 per cent higher in the last session on interest from retail traders. The shares were trading at US$4.05 and were among the most discussed on on Tuesday.

A part of the meme stock phenomenon, Bed Bath & Beyond stock surged to as high as US$30 in August when activist investor Ryan Cohen took a stake in the company and pushed for changes.

“It’s like a cat with nine lives and we’ll see if they can take this lifeline and turn the company around. But we’re not holding our breath,” said Thomas Hayes, chairman and managing member at equity manager Great Hill Capital LLC.

With files from staff and wires