A survey of North American equities heading in both directions
On the rise
Manulife Financial Corp. (MFC-T) was higher by 0.4 per cent on news it has entered into a multi-year partnership with travel loyalty program Aeroplan as it looks to bolster demand for its new healthcare initiative it is planning to launch this spring.
Tuesday's upgrades and downgrades: National Bank analyst on Canada's insurance industry
The agreement with Air Canada-owned loyalty program is part of the insurer’s initiative to launch new features for its mobile app and expand beyond its traditional mainstays to gain a foothold in the digital healthcare industry.
Under the terms of the tie-up, eligible members within Manulife’s group benefits business can earn points for engaging in health and wellness challenges or completing educational courses, the companies said on Tuesday.
Members can redeem the points for flight rewards with Air Canada or partner airlines. They can also be used to save on hotel bookings.
Canadian Solar Inc. (CSIQ-Q) surged over 14 per cent after announcing a US$500-million capital commitment from BlackRock through a fund managed by its Climate Infrastructure business.
The Guelph, Ont.-based company said subsidiary Recurrent Energy has secured a preferred equity investment commitment, convertible into common equity. It will represent 20 per cent of the outstanding fully diluted shares of Recurrent on an as-converted basis and provide additional capital to grow its project development pipeline.
Montreal-based Nuvei Corp. (NVEI-T) increased 6.7 per cent with the premarket announcement of a partnership with Adobe Systems Inc. (ADBE-Q) to provide customers access to their payments technology through their existing integration with Adobe Commerce.
“The partnership enables B2B and B2C businesses operating on Adobe Commerce to simplify payments relationships and expand into new markets,” it said.
Streaming pioneer Netflix Inc. (NFLX-Q) took a big step into live events on Tuesday with a more than US$5-billion rights deal that would make it the exclusive home of World Wrestling Entertainment’s Raw from January 2025.
The 10-year partnership will see Raw on the streaming platform in the United States, Canada, United Kingdom and Latin America, among other territories, the companies said.
Netflix will also exclusively telecast outside the U.S. all WWE shows and specials, including SmackDown, as well as pay-per-view live events such as WrestleMania and Royal Rumble.
Shares of Netflix rose 1.3 per cent, while TKO Group (TKO-N) - the parent company of WWE - jumped 15.8 per cent.
Netflix has in recent years has been keen on live events. It secured rights to a tennis face-off between Rafael Nadal and Carlos Alcaraz last month and had streamed a celebrity golf tournament in November featuring Formula One drivers and golfers.
The deal marks a major shift for WWE as Raw, which debuted in 1993 and has 1,600 episodes, leaves linear television for the first time since its inception.
WWE merged with UFC parent Endeavor Group to form TKO Group Holdings in a deal valued at US$21-billion last year, forming one of the biggest names in wrestling and entertainment.
WWE also announced Tuesday that it reached a deal with Dwayne “The Rock” Johnson that will give the star the rights to his nickname. Mr. Johnson will also join the board of TKO Group.
United Airlines (UAL-Q) CEO Scott Kirby said in a CNBC interview on Wednesday the company was going to build a fleet plan that does not include Boeing’s (BA-N) 737 MAX 10 jets, citing delivery delays.
In the best case, MAX 10 deliveries are five years behind the original delivery date, Kirby added. United had placed orders for 150 MAX 10s in 2021 and retained an option to convert the order to other MAX variants.
U.S. planemaker Boeing has said it expects the MAX 10 to be certified in 2024.
Shares of United Airlines rose in trading on Tuesday after an upbeat 2024 profit forecast from the carrier despite an impact from grounding its entire fleet of Boeing 737 MAX 9 jets earlier this month.
The forecast also lifted shares of rivals Delta Air Lines (DAL-N) and American Airlines (AAL-Q), as they ride a wave of strong international travel demand. Shares of domestic carrier Southwest Airlines (LUV-N) also increased.
Boeing’s MAX 9 jets were grounded indefinitely by the Federal Aviation Administration for safety checks after a cabin panel of an Alaska Airlines plane blew off mid-flight on Jan. 5.
The airline, however, expects an adjusted loss of 35 cents to 85 cents per share in the current quarter, assuming all its 79 MAX 9 planes remain grounded through the end of January.
United Airlines said on Monday it expects an adjusted profit of US$9 to US$11 per share in 2024, with the midpoint well above analysts’ average expectation of US$9.58.
“The quarter’s beat included good cost control and lower fuel prices,” Citi analyst Stephen Trent wrote in a note, while reiterating a “buy” rating on the company’s stock.
Shares of United were trading 4.04 times forward profit estimates, compared with an industry median of 6.61.
“Overall demand for travel remains strong and is expected to grow in the years ahead,” Third Bridge senior analyst Christopher Raite said. While a full recovery of business travel is unlikely, airlines such as United still have growth ahead in international markets and healthy U.S. consumers, Raite added.
Procter & Gamble (PG-N) rose as it cut its annual profit forecast on Tuesday following a writedown in the value of its Gillette business in December and as the boost from earlier price hikes starts to fade in the United States.
P&G had said it would record a US$1.3-billion charge related to a drop in the book value of its Gillette business at a time when volume growth in the segment slowed due to the hybrid post-pandemic work culture and a stronger dollar.
The company previously estimated it would record up to US$2.5-billion in charges over two fiscal years due to the Gillette business write down and restructuring of certain markets.
This along with waning benefits from price hikes that most of the consumer goods companies enjoyed for two years have started to weigh on profits.
P&G now expects fiscal 2024 earnings to range from a fall of 1 per cent to in line with fiscal 2023 earnings per share, compared with its prior forecast of a 6-per-cent to 9-per-cent growth.
Focus will also be on the company’s ability to maintain strong volume growth as production costs have started to ease. That has helped P&G increase its gross margin by 520 basis points in the second quarter.
They were able to maintain some pricing in an environment where consumers have become cautious of higher prices, Donald Nesbitt, senior portfolio manager at Ziegler Capital Management said.
However, P&G’s overall volumes were flat, while average prices across product categories rose 4 per cent.
The company’s net sales rose 3.2 per cent to US$21.44-billion in the second quarter, missing LSEG estimates of US$21.48-billion, due to weak demand for its beauty and personal-care products in major market China.
In China “we see a recovery since COVID that is not linear and is somewhat bumpy,” P&G CFO Andre Schulten said on a media call.
P&G’s second-quarter sales in the country were down 15 per cent driven by a generally slower recovery in terms of consumer sentiment, Schulten added, since China abandoned its strict “zero-COVID” policy.
On an adjusted basis, the company earned US$1.84 per share, beating estimates of US$1.70.
Halliburton Co. (HAL-N) gained as its fourth-quarter profit beat market expectations on Tuesday as strength in offshore and overseas drilling activities boosted demand for oilfield services and equipment.
With a better economic environment and acerages internationally, oilfield services are setting their sights outside the United States to grow, with the North American segment dominated by higher efficiencies but fewer wells.
Halliburton’s international revenue rose 10 per cent to US$3.3-billion in the reported quarter year over year, while revenue from North America fell 7.7 per cent to US$2.4-billion.
However, fourth-quarter overall revenue slightly missed analysts’ expectations, coming in at around US$5.74-billion against expectations of US$5.78-billion.
The company’s international revenue was boosted by improved activity in the Middle East, in line with larger rival SLB (SLB-N), which beat analysts’ estimates for quarterly profit last week.
“I am excited about 2024. The outlook for oilfield services demand remains strong,” Chief Executive Jeff Miller said in a statement.
The company said in 2023 it returned US$1.4-billion of cash to shareholders through stock repurchases and dividends, which represents over 60 per cent of its free cash flow.
Analysts had expected the company to return well over a minimum of 50 per cent of free cash flow to its shareholders.
The Houston-based company said adjusted net income stood at 86 US cents per share for the three months ended Dec. 31, higher than 80 US cents expected by analysts, according to LSEG analysts.
Alibaba (BABA-N) co-founder Jack Ma and Chairman Joe Tsai bought millions worth of shares in the Chinese e-commerce giant in the fourth quarter, the New York Times reported on Tuesday, sending the company’s U.S.-listed shares up.
Mr. Ma bought US$50-million worth of Hong Kong-traded stock, the report said, citing a person with knowledge of the matter.
It added Mr. Tsai purchased about US$151-million worth of Alibaba’s U.S.-traded shares in the quarter through his Blue Pool Management family investment.
The Jack Ma Foundation, which handles media queries for the Chinese billionaire, did not immediately respond to a Reuters request for comment.
Alibaba had said in November the family trust of Mr. Ma, who stepped down as executive chairman of Alibaba in 2019, was set to sell 10 million American Depository Shares of Alibaba Group Holdings for about US$871-million.
On the decline
Shares of West Fraser Timber Co. Ltd. (WFG-T) were lower on Tuesday on the announcement it is permanently closing its sawmill in Fraser Lake, B.C., after an orderly wind-down.
The Vancouver-based company says it’s unable to access economically viable fibre in the region.
West Fraser says the closure will affect about 175 employees, and it will mitigate the impact by providing work opportunities at its other operations.
The closure will reduce the company’s Canadian lumber capacity by around 160 million board feet.
The news comes after an announcement earlier in January that West Fraser was closing its Maxville, Fla., sawmill and indefinitely curtailing operations at its Huttig, Ark., sawmill.
The company attributed the decision to high fibre costs and soft lumber markets.
Algoma Steel Group Inc. (ASTL-T) dipped after saying work is underway to restart its blast furnace after it was taken off-line following the collapse of a structure supporting utilities piping at its coke-making plant on the weekend.
The company says it expects some impact on shipments, the extent of which will depend on how long it takes to resume blast furnace operations.
Algoma currently expects to resume production within two weeks.
Algoma’s combined plate/strip mill and cold mill operations were unaffected by the incident at the coke-making plant.
It says a repair plan for the coke-making plant is being developed, while limited production has resumed at three coke-production units.
Algoma says it believes that it will be able to source enough coke from outside suppliers to supplement its own coke production and inventory on site.
Farmers Edge Inc. (FDGE-T) turned lower in afternoon trading with the late Monday announcement of a go-private agreement with 15635594 Canada Inc., a newly-formed subsidiary of the majority shareholder Fairfax Financial Holdings Ltd.(FFH-T).
The Winnipeg-based agriculture technology provider said Fairfax will acquire all of the common shares at a purchase price of 35 cents each, payable in cash. The purchase price represents a 218-per-cent premium to both the Monday closing price and to the 20-day volume weighted average price
From November: Farmers Edge in go-private talks for tiny fraction of IPO price
The signing of the agreement followed the unanimous recommendation of the special committee of independent directors of the board.
General Electric Co. (GE-N) dipped in the wake of reporting a higher fourth-quarter profit as its business that makes aircraft engines benefited from strong demand for spare parts and services, while costs cuts helped narrow losses in its renewable energy unit.
The Boston, Massachusetts-based company said adjusted profit for the quarter through December was US$1.77-billion, compared with US$1.37-billion reported a year earlier.
GE’s aviation business is riding a surge in demand for aftermarket services as a strong rebound in travel and a shortage of new jets prompt airlines to keep their planes in the air for longer periods.
CFM International, GE’s joint venture with France’s Safran SA, is an engine supplier for Boeing Co’s 737 MAX jetliners and competes with RTX’s Pratt & Whitney to power Airbus’ 320neo jets.
“The recent Alaska Airlines accident makes the commercial aerospace aftermarket once again the safest portion of the sector into earnings, with demand robust and pricing power firmly intact,” J.P. Morgan analyst Seth Seifman wrote in a note last week.
Losses at GE’s renewable business narrowed to US$347-million from US$454-million a year earlier, largely helped by cost cuts.
The renewable business has struggled due to a combination of weak demand and higher costs of raw materials and labor.
GE, which completed the separation of its healthcare unit, has said it would spin off its energy businesses, including renewables, into a separate company at the start of the second quarter.
On a per-share basis, adjusted profit was US1.03 per share, compared with 66 US cents a year earlier. Total revenue rose 15 per cent to US$19.42-billion.
Johnson & Johnson (JNJ-N) fell after it reported fourth-quarter profit and revenue just above Wall Street expectations, helped by strong demand for blockbuster psoriasis treatment Stelara.
A key patent for Stelara had expired in the United States last year but J&J struck deals with competitors to delay the launches of their biosimilars until 2025.
The company is expected to face fresh competition that year from the first biosimilar versions of its anti-inflammatory drug Stelara, which brought in sales of US$2.75-billion in the quarter.
Analysts were expecting sales of US$2.63-billion, according to LSEG data.
Amgen’s (AMGN-Q) Wezlana is expected to be the first near-copy of Stelara to launch in the U.S. next year.
Analysts have said the delay in biosimilar launches would make Stelara a larger contributor to J&J’s 2024 and 2025 sales than previously anticipated.
J&J said it expects entry of biosimilars in Europe towards the middle of 2024.
The company is betting on multiple myeloma drug Darzalex and newer cancer treatments, including Carvykti and Tecvayli, to meet its 2025 pharmaceutical sales target of US$57-billion, ahead of a likely sales hit to Stelara from biosimilars.
J&J recorded restructuring expenses of US$84-million in the quarter related to the program. The drug and medical device maker posted an adjusted profit of US$2.29 per share, narrowly beating expectations of US$2.28 per share.
Quarterly revenue of US$21.40-billion exceeded estimates of US$21.01-billion.
J&J also reaffirmed its adjusted operating profit forecast of US$10.55 to US$10.75 per share for 2024.
Industrial conglomerate 3M Co. (MMM-N) forecast full-year earnings below Wall Street estimates on Tuesday as the company grapples with weak demand, sending the diversified manufacturer’s shares down.
Higher interest rates and inflation have dampened demand for non-essential big-ticket purchases, hurting 3M’s electronics business that makes displays for smartphones and tablets.
Last year, 3M undertook restructuring measures, including cutting jobs, to streamline its business and reduce costs.
“2024 outlook disappoints on margins - including both the expected restructuring savings and the underlying operating margins of the business,” UBS analyst Chris Snyder said.
The company, which in September warned of a slow growth environment this year, had also flagged in December that retailers were cutting down on inventory levels.
The gloomy forecast on Tuesday comes at a time when 3M is dealing with the fallout from lawsuits related to its Combat Arms earplugs and water pollution claims tied to “forever chemicals.”
The company expects 2024 profit between US$9.35 and US$9.75 per share, compared with analysts’ estimates of US$9.81, according to LSEG data.
On an adjusted basis, 3M earned US$2.42 per share in the fourth quarter, beating analysts’ estimates of US$2.31.
The company reported adjusted revenue of US$7.69-billion, compared with estimates of US$7.70-billion.
D.R. Horton Inc. (DH-N) missed estimates for first-quarter profit on Tuesday, as it offered incentives and discounts on new homes to whip up demand in a market that is struggling with higher mortgage rates, sending its shares down.
Among a string of incentives offered by U.S. homebuilders, mortgage rate buydowns - or a permanent or temporary interest rate reduction on a home loan - have become popular among customers looking to buy new homes.
However, the buydowns are adding pressure to the industry’s gross margins and offsetting gains from higher home sales, including for D.R. Horton.
The Arlington, Texas-based homebuilder reported pre-tax profit margins of 16.1 per cent in the first quarter, compared with 17.5 per cent last year.
Net income attributable to the company for the quarter ended December was US$2.82 per share, compared with analysts’ estimates of US$2.88 per share, according to LSEG data.
However, the company raised its forecast for full-year home sales, as it expects demand for new homes to rise despite higher mortgage rates.
The supply of existing homes in the United States remains tight as a majority of homeowners are locked into a 30-year fixed mortgage rate below 5 per cent, compared with current rates of about 6.6 perf cent, giving most buyers little option other than purchasing new homes at a higher price.
The country’s largest homebuilder by volume now expects full-year home sales to be in the range of 87,000 to 90,000 homes, compared with a prior expectation of 86,000 to 89,000 homes sold.
D.R. Horton reported first-quarter revenue of US$7.72-billion, above analysts’ estimates of US$7.59-billion, according to LSEG data.
With files from staff and wires
David Leeder