A survey of North American equities heading in both directions
At the open
Sun Life Financial Inc. (SLF-T) rose 3.8 per cent in the wake of reporting better-than-expected quarterly profits after the bell on Monday, helped by growth at its wealth and asset management unit and higher fees.
The insurer, however, reported a fall in underlying earnings hurt by weakness in the United States and fewer sales of personal health insurance.
Sunlife has been diversifying its business across the globe and expanded its U.S. footprint with the US$2.5-billion acquisition of DentaQuest last year.
Sales of dental insurance in the U.S. fell 75 per cent in the reported quarter hurt by the impact of Medicaid renewal following the end of the public health emergency and investments in the Advantage Dental+ business, Sun Life said.
“The dental business reported middling results this quarter... short-term volatility is a part of this business, from a long-term perspective, the investment should be positive,” Morningstar analyst Suryansh Sharma said.
The company said it had extended its Teledentistry.com partnership to DentaQuest in the U.S. and expects about 3.5 million people across 20 states access to oral and dental care.
The results follow those of bigger rival Manulife (MFC-T), which also beat earnings estimates, boosted by insurance sales in Asia and higher returns on investment amid rising interest rates.
Sun Life said underlying earnings from its U.S. segment were down 19 per cent. Underlying net income from wealth and asset management rose 9 per cent to $457-million.
The insurer posted underlying net income of $930-million, or $1.59 per share, for the three months ended Sept. 30, compared with $949-million, or $1.62 per share, a year earlier.
Analysts were expecting $1.57 per share, according to LSEG estimates.
In a research note released before the bell, Scotia Capital analyst Meny Grauman said: “After a wave of adjusted EPS beats across peers in Q3, SLF’s in-line quarter seems like an underwhelming way to close out insurance reporting season. That said, there were notable positives here including only a modestly lower reported EPS number, as well as a very strong performance in Asia driven by big sales in Hong Kong and the lifeco’s high net worth business. When combined with the fact that SLF shares have materially lagged the group heading into reporting season, we see upside here especially when considering that core ROE came in at a peer-high of 17.7 per cent this past quarter. More importantly, it is set to climb above 18 per cent next year thanks in part to an ongoing 3 per cent NCIB. We acknowledge that SLF’s U.S. unit missed expectations this quarter and adjusted earnings there are down not just sequentially but year-over-year as well. However, much of the pressure on earnings here is temporary and includes Medicaid redeterminations and elevated investments in Advantage Dental+.”
WELL Health Technologies Corp. (WELL-T) gained 0.5 per cent with the release of stronger-than-anticipated third-quarter financial results and an increase to its full-year 2023 guidance.
Before the bell, the Vancouver-based digital health technology company reported revenue and EBITDA of $204.5-million and $28.2-million, respectively, topping the Street’s expectations of $199.4-million and $28-million. The beat was driven by organic growth from its Canadian businesses, which saw 24-per-cent year-over-year growth to EBITDA of $12.3-million. Overall, the company grew by 16 per cent.
WELL now projections 2023 revenue of $755-million to $765-million, rising from a range of $740-million to $760-million and higher than the consensus estimate of $755-million.
“Perhaps more notably, WELL released 2024 revenue guidance which is expected to exceed $900-million (compared to our current 2024 forecast of $902.9-million and consensus at $893.1-million) with continued and sustained gains in EBITDA and cash flow,” said Echelon Partners analyst Rob Goff in a note.
“WELL delivered another expectedly strong quarterly result, albeit on relatively moderated organic growth (approximately 12 per cent year-over-year) compared to what we’ve come to expect from the Company – as a result, this is the first quarter in two years that WELL has missed its Rule of 30 target (organic growth rate + EBITDA margin) that it introduced in November 2021 – Q323′s total amounts to 26 per cent. That being said, this isn’t an unexpected development – WELL’s recent acquisitions in CarePlus and Healwell’s primary care clinics have contributed a meaningful amount of revenues to operations without much EBITDA – that should change and accelerate throughout 2024 and beyond as WELL executes on its M&A playbook of buying EBITDA negative/neutral assets at steep discounts before leveraging its broader platform to ramp up profitability. Additionally, as WELL continues to gain larger scale at a rapid pace, organic growth will naturally be harder to come by. The Company remains well-positioned to take advantage of a challenged macro landscape and continues to deliver strong operating results.”
Canada’s largest insurer Manulife Financial Corp. (MFC-T) was higher by 0.9 per cent after its global wealth and asset management arm, Manulife Investment Management, announced it has cut 250 jobs globally.
The layoffs are limited to Manulife Investment Management across its offices in U.S., Canada, Britain and Asia, the spokesperson said.
The job cuts impact roughly about 2.5% of the total number of staff in Manulife’s wealth and asset management unit, according to a source.
The insurer, which has assets under management (AUM) of over $1.3-trillion and about 40,000 employees, reported better-than-expected earnings for the third-quarter earlier this month, boosted by insurance sales in Asia and higher returns on investment amid rising interest rates.
Canadian financial companies are also facing challenges from high costs and a slowing economy, forcing many banks to slash hundreds of jobs.
Parkland Corp. (PKI-T) rebounded and closed 1.6 per cent higher after saying it expects $6-billion in cumulative available cash flow from 2024 to 2028 that it plans to use to fund dividends, share buybacks, growth and debt reduction.
The company says it plans to use 25 per cent of the expected cash on dividends and share buybacks and 25 per cent to pay for organic growth initiatives.
Parkland says the priority for the remaining $3-billion or 50 per cent will be reducing its leverage ratio to the low end of its two to three times target range by the end of 2025.
Beyond that and looking forward through 2028, it says it expects capital will be allocated toward opportunities that generate the greatest shareholder returns.
For 2024, Parkland says it expects adjusted earnings before interest, taxes, depreciation and amortization of about $2-billion and capital expenditures between $475-million and $525-million.
Parkland has made a number of changes to its business since last March, when U.S.-based activist investor Engine Capital LP publicly urged the company to get rid of what it called “non-core assets” and become a pure play fuel and convenience retailer. Engine called on Parkland to sell or spin off its Burnaby, B.C. refinery, a recommendation the company rejected following a strategic review.
Home Depot (HD-N) was up 5.4 per cent ) turned lower in afternoon trading and finished down after it hed downafter it hed dowafter it hed doafter it hed dafter it hed after it hedafter it heafter it hafter it after it fter it ter it er it r it heish after it heis after it hei after it he after it h after it after itfinished down after it fter it ter it er it r it it it t sted a lower-than-expected drop in comparable sales on Tuesday, as the top U.S. home-improvement retailer tapped into a switch by customers to small-scale projects and essential repair work.
U.S. consumers have put big renovations and discretionary home-improvement projects on the back burner as they battle still high food prices, lingering caution around the economy and higher interest rates.
“Similar to the second quarter, we saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories,” CEO Ted Decker said in a statement.
Customer transactions fell 2.4 per cent in the third quarter, declining for the 10th straight quarter, while average spending at stores also dipped slightly.
Meanwhile, comparable sales declined 3.1 per cent for the three months ended Oct. 29, while analysts on average had expected a 3.31-per-cent drop. Profit of US$3.81 per share topped estimates of US$3.76.
“With continued pressure in certain big-ticket discretionary categories and a trend to smaller projects, HD took the conservative approach – which we agree with,” Evercore analyst Greg Melich said.
Some investors, however, might be disappointed by the narrowing of full-year forecasts despite the slight results beat, he added.
Home Depot tightened its annual sales forecast range to a decline between 3 per cent and 4 per cent, compared with its prior forecast for a 2-per-cent to 5-per-cent decrease.
It now expects annual per-share profit to fall 9 per cent to 11 per cent, compared with a 7-per-cent to 13-per-cent slump estimated previously.
“I don’t really think it’s the type of (results) beat that would change any sort of investment viewpoint ... for the home improvement retailers,” M Science analyst John Tomlinson said.
“Unless housing turnover improves, we have muted expectations going into 2024. I don’t know if you’re going to see the same level of decline that we’ve seen this year ... but the general consumer and sales will remain soft and under pressure,” he added.
After suffering large early losses, Canadian Solar Inc. (CSIQ-Q) shares finished up 2.9 per cent despite a weaker-than-expected forecast for its fourth quarter.
Before the bell, the Guelph, Ont.-based company now expects revenue of US$1.6-billion to US$1.8-billion, well below the Street’s projection of US$2.65-billion, according to LSEG data.
“While margins are expected to rebalance over the next couple of quarters driven by further destocking in the distributed generation channels, we see significant pent-up demand due to lower equipment costs and higher and more volatile energy prices,” said CEO Shawn Qu following the release of its third-quarter results.
For that quarter, its net revenue slid 4 per cent year-over-year to US$1.85-billion from US$1.93-billion, below the Street’s forecast of US$2.03-billion due to “lower project sales during the quarter and a decline in module average selling price.” Earnings per share dropped to 32 US cents from US$1.12 a year ago, also missing the consensus estimate of 82 US cents.
The company’s Recurrent Energy unit, its project development arm, posted a quarterly loss from operations of US$9.18-million versus a profit of $27-million during the comparable period a year ago.
Vancouver-based Premium Brands Holdings Corp. (PBH-T) ended up 0.7 per cent after the release of third-quarter results that fell short of the Street’s expectations and reduction to its full-year earnings guidance.
Before the bell, the specialty foods company reported revenue of $1.645-billion, up 1.3 per cent year-over-year but under the consensus forecast among analysts of $1.714-billion. Earnings per share of $1.27, fell 7 per cent and came in 14 cents under the Street’s forecast.
However, EBITDA margins of 9.7 per cent rose 1 per cent from the same period a year ago to the highest level of the last five years, driven by the Specialty Foods segment.
Premium Brands now expects EBITDA for 2023 of $575-$590 million, down 3 per cent from its previous expectation. The Street was projecting $590-million.
“The strong EBITDA margins are likely to catch investors’ attention and provide visibility on the path to management’s 10-per-cent goal,” said Stifel analyst Martin Landry in a note. “The EPS miss and the downward guidance revision will be overshadowed by margin expansion, in our view. As such, we don’t expect shares to be down much today.”
On the decline
Shares of Teck Resources Ltd. (TECK-B-T) turned lower in afternoon trading and finished down 0.3 per cent after it agreed to sell its coal business to Swiss commodities trading giant Glencore PLC and two Asian steelmakers, in a US$8.9-billion transaction that requires federal approval, and will be closely scrutinized by Ottawa before it can proceed.
Vancouver-based Teck has been fielding offers for its core metallurgical coal business since the spring, when an earlier plan to spin it off was cancelled at the eleventh hour because of insufficient shareholder support.
Founded in 1913, Teck is Canada’s largest diversified mining company, a major employer in British Columbia and one of the oldest miners in the country.
Glencore (GLNCY) originally proposed buying all of Teck in April, including the company’s copper and zinc mines, in what would have been a US$23.1-billion cash and stock deal. Teck repeatedly rejected Glencore’s advances, citing a number of risks – some jurisdictional, some related to the deal’s execution and some related to concerns about Glencore’s past bribery and market manipulation settlements with international regulators.
In an interview with The Globe and Mail, Jonathan Price, Teck’s chief executive officer, called the deal to sell the coal business a “very different transaction.”
He pointed to a long list of commitments Glencore has made, including that it will maintain jobs in Canada, make billions in capital expenditures over the next few years and increase spending on research and development.
According to the terms of the transaction, which were set to be unveiled on Tuesday, Glencore has agreed to pay US$6.9-billion for 77 per cent of Teck’s coal business, known as Elk Valley Resources. Japan’s Nippon Steel (NPSCY) will pay US$1.7-billion and swap its interest in one of Teck’s coal operations for 20 per cent of the coal business. South Korea’s POSCO (PKX-N) will swap its interests in two of Teck’s coal operations for 3 per cent.
- Niall McGee
CAE Inc. (CAE-T) turned lower and lost 4.4 per cent despite continuing to ride the tailwinds of a resurgence of commercial air travel last quarter, boosting its profits by 31 per cent year over year.
CEO Marc Parent said Tuesday that the flight simulator maker’s double-digit growth in revenues and net income was driven mainly by strong momentum in civil aviation as well as by higher sales in its other main segment, defence.
The Montreal-based company also increased its backlog to a record $11.8-billion in the quarter ended Sept. 30, up by $1.2-billion or 11 per cent from a year earlier. The sales included 15 civil flight simulators — six of them for the Boeing 737 Max jetliner — and simulation-based training for the U.S. army’s latest airborne intelligence, surveillance and reconnaissance system.
Mr. Parent stressed short-term demand for flight simulators at airlines as they scramble to train pilots as well as longer-term defence needs fuelled by unstable international relations.
“Higher expected pilot training demand in commercial and business aviation are enduring positives for the civil business,” he said.
“Management believes the defence sector is in the early stages of an extended up-cycle, driven by an increased focus on near-peer threats, greater commitments by governments to defence modernization and readiness in context of geopolitical events.”
The company added that a fatter profit margin in its defence segment is now expected in the next fiscal year, rather than this year as previously forecasted.
Fallout from upheaval in the U.S. Congress has reached CAE, taking a toll on its defence profits.
“The prevailing U.S. government budget appropriation uncertainty is delaying the ramp-up of certain newer and higher-margin defence programs,” the company said in a release.
Inflationary pressures on legacy contracts are also a major strain on margins, it said.
National Bank analyst Cameron Doerksen viewed the company’s overall quarterly results as “mixed.”
“On the one hand, we are encouraged by the stronger than previously expected performance in the civil segment,” he said in a note to investors, adding that the market remains promising in coming years.
“On the other hand, the weak margin performance in defence has been an investor focus for the last two years, so CAE’s indication that the market will have to wait even longer to see a positive inflection in margins until sometime in 2025 is a clear disappointment.”
Last month, CAE announced a deal to sell its health-care business to U.S. company Madison Industries for $311-million. The segment, which accounted for less than four per cent of the company’s earnings last quarter, focuses on training for medical professionals via patient simulators.
On Tuesday, CAE reported net income attributable to equity holders of $58.4-million or 18 cents per share in its second quarter. The result marked a big jump from profits of $44.5-million or 14 cents per diluted share in the same quarter last year.
Revenue for the three-month period rose 10 per cent to $1.09-billion from $993.2-million.
On an adjusted basis, CAE earned 27 cents per share, up from an adjusted profit of 19 cents per share a year earlier and beating analyst expectations of 20 cents per share, according to financial markets data firm Refinitiv.
Toronto-based Li-Cycle Holdings Corp. (LICY-N), a lithium-ion battery resource recovery company, dropped over 55 per cent after announcing it has engaged Moelis & Company LLC as a financial advisor to assist in evaluating financing and strategic alternatives.
On Oct. 23, the company announced that it was pausing construction work on the Rochester Hub project, pending completion of a review of the go-forward strategy for the project.
“The Company has recently experienced escalating costs and, accordingly, the anticipated aggregate cost of the existing scope of the project is expected to significantly exceed the previously disclosed budget of $560 million. As part of the comprehensive review, the Company is also examining expected capital cost, timing of completion and go-forward construction strategy options for the Rochester Hub project,” said Li-Cycle in a press release announcing its quarterly results on Monday.
Aimia Inc. (AIM-T) slipped 1 per cent after it reported a loss in its latest quarter compared with a profit a year ago when its results were boosted by the sale of its stake in the PLM loyalty program.
The investment holding company says its net loss attributable to equity holders amounted to $27.8-million or 37 cents per diluted share for the quarter ended Sept. 30. The result compared with a profit of $517.5-million or $5.89 per diluted share a year ago, when the company recorded a one-time gain of $530.6 million.
Revenue totalled $114.3-million, up from $300,000 in the same quarter last year.
Aimia says its adjusted earnings before interest, taxes, depreciation and amortization amounted to $9.7-million in its latest quarter compared with a loss of $7.5 million a year earlier.
Last month, Aimia’s board recommended shareholders reject a takeover offer from Mithaq Capital SPC because it says it undervalues the company and does not reflect some of the potential growth opportunities that the company is pursuing.
Mithaq, which is the largest shareholder in Aimia, has offered $3.66 per share in cash for the stake in Aimia it does not already own.
Electric-vehicle startup Fisker Inc. (FSR-N) fell to an all-time low on Tuesday after the electric-vehicle startup slashed its production targets as it struggles to ramp up deliveries.
Fisker now expects production of 13,000 to 17,000 electric vehicles in 2023, down from its prior projection of 20,000 to 23,000 vehicles to make sure the company does not sit on too much inventory and to better manage working capital.
“This may be short-term pain and it may not be something that Wall Street wants to hear but it is extremely responsible for us, and it is essential for us that we do this for the long term,” Chief Financial Officer Geeta Fisker said on a post-earnings conference call.
Fisker had already cut its production forecast in August, blaming a key supplier that needed more time to lift capacity, and on Monday said that though supply chain had stabilized it still expects “the occasional bottleneck” from a few suppliers going ahead.
Fisker’s latest cut comes amid fears of a slowdown in EV demand, with market leader Tesla TSLA-Q) CEO Elon Musk warning that high interest rates, meant to cool stubborn inflation, are souring consumer sentiment and cautious commentary from Ford (F-N) and General Motors (GM-N).
Last week Luxury EV maker Lucid (LCID-Q) also slashed its production forecast to align with the lower number of deliveries.
Fisker cut prices of its high-end Ocean Extreme SUV last month, joining peers in a profit-sapping price war sparked by Tesla to stoke demand.
But Fisker said it was limited by its delivery and service infrastructure rather than production and demand, tough it acknowledged the impact of high interest rates on consumer spending.
“We have not been able to follow through with deliveries fast enough,” CEO Henrik Fisker said on the call.
“People have paid and are waiting for their cars, and some of them are really getting annoyed,” he said, adding that Fisker was hiring 20-30 people a week, getting more logistics partners and opening new facilities in an effort to ramp up deliveries.
Fisker said it delivered 1,200 vehicles in October, more than the 1,097 it delivered in the third quarter, and was on track to deliver even more cars this month.
Revenue for the third quarter was, however, lower than analysts’ expectations at US$71.8-million with a larger-than-expected loss of US$91-million.
With files from staff and wire(0.