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A look at North American equities heading in both directions

On the rise

Shares of Bombardier Inc. (BBD.B-T) raised its 2022 forecast for revenue and free cash flow above analysts’ expectations, helped by robust demand for private planes.

Montreal-based Bombardier, which also took steps to reduce the cost of its debt, now expects full-year revenue to come in at about $6.9 billion, up from a prior outlook of about $6.5 billion. Analysts on average expected the company to post annual revenue of $6.56 billion, according to Refinitiv data.

Bombardier’s shares soared 9.5 per cent in Toronto following the announcement, which precedes the company’s fourth-quarter and full-year 2022 results on February 9.

Corporate jet makers have reported swelling order backlogs on persistent strong demand for private flying, especially in the United States, the world’s largest market for business aviation.

That trend has benefited Bombardier, whose stock has risen about 31 per cent in the past year, along with rivals Gulfstream business jet maker General Dynamics Corp and Cessna jet maker Textron Inc, which report earnings on January 25.

But industry consultancies like WINGX forecast private flying in North America to moderate in 2023, after two years of record highs, and expect softening in the charter market.

Private planemakers also face pressure from supply chain and labor disruptions as well as soaring inflation and broader concerns over a softening global economy.

Bombardier, which faced a cash crunch in 2015, is focused on lowering its debt, which dropped by $100-million during the third quarter.

The company on Tuesday also launched a process to push out debt payments at a lower rate.

Bombardier, which has a worldwide fleet of about 5,000 aircraft in service, said it expects its full-year free cash flow to be about $735-million, compared with its prior estimate of $515-million.

First Quantum Minerals Ltd. (FM-T) reversed early losses and finished 0.9 per cent higher after saying late Monday it expects copper and gold production for 2022 to be down from 2021, at 4.9 per cent and 8.3 per cent respectively, while it expects nickel production to be 29.4 per cent higher.

The Vancouver-based company says its Cobre Panama mine delivered record production in 2022.

That mine is at the centre of ongoing talks between First Quantum and the Panama government in attempts to reach an agreement that will allow the company to continue operating the mine.

The company says its guidance for 2023 through 2025 is based on normal operations with no disruption to production.

It expects copper production in 2023 to be between 770,000 and 840,000 tonnes, rising slightly year over year to between 775,000 and 865,000 tonnes in 2025.

The company expects similar production trajectories for gold and nickel, with gold production in 2023 between 265,000 and 295,000 ounces, and nickel production in 2023 between 28,000 and 38,000 tonnes.

In response to the release, several equity analysts on the Street lowered their target prices for First Quantum shares.

“First Quantum Q4/22 and full-year results were broadly consistent with expectations; however, the revised 2023-2024 and maiden 2025 guidance fell short of market expectations,” said BMO’s Jackie Przybylowski. “Note that guidance included Cobre Panama on a go-forward basis.

“We expect a negative share price response tomorrow. We have updated our estimates to reflect the revised guidance; we maintain our Market Perform rating but our oneyear target has fallen to $20/share (from $24/share) - we note that at the January 16 close price this represents a negative 30-per-cent return to our target.”

Vancouver’s Neovasc Inc. (NVCN-T) soared 33.7 per cent after announcing a deal to be acquired by Shockwave Medical Inc. (SWAV-Q) in an all-cash deal for US$73.78-million.

Under the agreement, Shockwave, a California-based cardiovascular medical device company, will pay US$27.25 per share, which is a premium of 26.5 per cent to Neovasc’s last close.

Neovasc is also eligible to receive additional payment of up to US$47-million on meeting a regulatory milestone.

The transaction is expected to be complete in the first half of the year.

Mississauga-based Cargojet Inc. (CJT-T) was up after saying it has extended its master services agreement with Canada Post Corp. and Purolator Inc. until Sept. 30, 2029.

The company says the extended agreement with the Canada Post Group of Companies (CPGOC) will continue to have minimum guaranteed volumes.

Cargojet first signed the agreement in 2014 for a seven-year term, with CPGOC exercising an option in 2017 extending the agreement until March 31, 2025.

An additional option to renew the deal to March 31, 2031, remains available.

Cargojet provides air cargo services to major cities across North America and select international destinations.

Montreal payments-and-retail platform Lightspeed Commerce Inc. (LSPD-T) was up after it said it will lay off about 300 people amid a reorganization as it integrates the many companies it has acquired in recent years.

It’s the latest major Canadian technology company to shed workers amid a prolonged downturn in the sector that’s seen more than 175,000 people lose their jobs globally since the start of 2022. That’s when months of surging inflation prompted a spike in interest rates, weighing on tech valuations and forcing companies to reconsider their high spending.

Lightspeed said in a press release Tuesday morning that the cuts represent a tenth of its headcount-related operating costs, and that half of the total cost reductions would come from managers being let go.

The company saw its fortunes turn a few months earlier than the rest of the tech sector, when a short-seller’s report in September 2021 raised concerns over the company’s customer counts and revenue growth, sending its share price into a tailspin. Its price has never recovered, and remains down more than 80 per cent.

- Josh O’Kane

Morgan Stanley (MS-N) gained almost 6 per cent in the wake of reporting a smaller-than-expected 41-per-cent drop in fourth-quarter profit on Tuesday as the bank’s trading business got a boost from market volatility, offsetting the hit from sluggish dealmaking.

Dealmaking was at a virtual halt for most of last year as risk appetite waned sharply in the face of rapidly deteriorating macroeconomic conditions and geopolitical tensions.

The gloom follows what was a bumper 2021 for Wall Street’s investment bankers who advised on multi-billion dollar mergers and buyouts, while underwriting listings of some of the biggest clients to tap the public markets in over a decade.

Revenue from Morgan Stanley’s investment banking business fell 49 per cent to $1.25 billion in the fourth quarter, with revenue declines across the bank’s advisory, equity and fixed income segments.

The investment banking business slowdown weighed on the company’s net revenue, pulling it down 12 per cent to US$12.7-billion.

“As far as investment banking is concerned, it has been a rough year for the stock market so I don’t think anyone expects the industry to report huge earnings,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York, said.

Trading has been a surprise bright spot for Morgan Stanley, with the unit’s revenue jumping 26 per cent to US$3.02-billion in the fourth quarter, as clients look to hedge against market risks by rejigging portfolios toward more defensive assets.

On an adjusted basis, Morgan Stanley earned US$1.31 per diluted share, the bank said.

Profit applicable to the company’s common shareholders for the three months ended Dec. 31 was US$2.11 billion or US$1.26 per diluted share.

According to Refinitiv data, analysts expected the bank to report a profit of US$1.19 per share.

Morgan Stanley increased its provision for credit losses in the fourth quarter to US$87-million from US$5-million a year earlier amid worries of a looming recession in the U.S. and worsening consumer credit quality.

On the decline

Barrick Gold Corp. (ABX-T) was down 3.8 per cent on Tuesday after it reported a 13.4-per-cent sequential rise in gold production in what could be its highest quarterly output last year, driven by strong performances from its mines in Nevada and Ivory Coast.

Gold prices gained 9.9 per cent during the October-December quarter, the best since mid-2020. They have continued their upward trend this year as cooling U.S. inflation raised hopes for slower interest rate hikes from the Federal Reserve.

Lower interest rates tend to boost bullion, decreasing the opportunity cost of holding the non-yielding asset.

Barrick said in October that access to high-grade ore, which essentially contains more gold, at its Nevada mines would drive the company to a “strong finish” in the fourth quarter.

The miner had previously expected high-grade ore in late third-quarter.

Carlin and Cortez mines are part of Nevada Gold Mines, a joint venture between Barrick and Newmont Corp. Tongon mine in Ivory Coast also reported higher output.

Barrick on Tuesday reported total preliminary gold output of 1.1 million ounces in the quarter ended Dec. 31, up from 988,000 ounces.

The company said it expects all-in sustaining costs per ounce of gold, an industry metric that reflects total expenses, to fall about 1 per cent to 3 per cent from the previous quarter.

Copper production during the quarter fell 22 per cent sequentially to 96 million pounds, due to lower throughput as well as lower grades at Lumwana mine in Zambia.

Barrick, which is scheduled to post its fourth-quarter results on Feb. 15, said Copper’s AISC is expected to rise in the range of 26 per cent to 28 per cent from the previous quarter.

Goodfood Market Corp. (FOOD-T) was down almost 7 per cent after it reported a first-quarter loss of $11.7-million compared with a loss of $21.6-million in the same quarter a year earlier as its revenue fell, but margins improved.

The meal kit company says the loss amounted to 16 cents per diluted share for the quarter ended Dec. 3 compared with a loss of 29 cents per diluted share a year earlier.

Net sales totalled $47.1-million for the three-month period, down from $77.8-million the previous year.

The company says the drop came as it focused on attracting and retaining customers that provide higher gross margins and by changing customer behaviours, partially offset by an increase in average order values.

Goodfood CEO Jonathan Ferrari says the company’s gross margin topped 35 per cent for the first time.

Goodfood says its adjusted earnings before interest, taxes, depreciation and amortization amounted to a loss of $2.3-million compared with a loss of $14.6-million in the same quarter a year earlier.

Goldman Sachs Group Inc. (GS-N) declined after it reported a bigger-than-expected 69-per-cent drop in fourth-quarter profit as it struggled with a slump in dealmaking and weakness in its wealth management business.

Wall Street banks are making deep cuts to their workforce and streamlining their operations as dealmaking activity, their major source of revenue, stalls on worries over a weakening global economy and rising interest rates.

Goldman is also curbing its consumer banking ambitions as Chief Executive Officer David Solomon refocuses the bank’s resources to strengthen its core businesses such as investment banking and trading.

Goldman’s investment banking fees fell 48 per cent in the quarter, while revenue from its asset and wealth management unit dropped 27 per cent due to lower revenue from equity and debt investments.

It also reported a pre-tax loss of US$778-million in its platform solutions unit, which houses transaction banking, credit card and financial technology businesses.

Full-year net loss for the platform solutions business was US$1.67-billion, the bank said.

It reported a profit of US$1.19-billion, or US$3.32 per share, for the three months ended Dec. 31, missing the Street estimate of US$5.48, according to Refinitiv IBES data.

“Widely expected to be awful, Goldman Sachs’ Q4 results were even more miserable than anticipated,” said Octavio Marenzi, CEO of consultancy Opimas.

“The real problem lies in the fact that operating expenses shot up 11%, while revenues tumbled. This strongly suggests more cost-cutting and layoffs are going to come,” he added.

With files from staff and wires