A survey of North American equities heading in both directions
On the rise
Software company C3.ai Inc. (AI-N) rose almost 2 per cent on reports it cut jobs last week, citing employee performance and the need to save costs.
Employees were fired across departments, the report said, citing people familiar with the matter. In a meeting on Thursday with hundreds of workers, an executive said C3.ai needed to reduce costs, a report from Bloomberg added.
Managers framed the cuts as related to the performance of individual workers rather than layoffs, and many of those fired received only one month of severance, according to the report.
The software company had 914 fulltime employees, with 746 based in the United States and 168 in its international locations as of April 30, according to a regulatory filing.
“C3 AI continues to hire and fill open positions to fuel our strategic areas. We currently have jobs posted for 109 open positions,” a company spokesperson said.
“Like many high-performance companies, we regularly manage out lower performance employees.”
C3.ai in September had scrapped its quarterly forecast that it would be profitable by the end of the fiscal year as it looks to invest further in its generative AI offerings.
U.S.-listed shares of China’s biggest internet search engine provider Baidu Inc. ADR (BIDU-Q) were up 1.9 per cent on Tuesday after it beat third-quarter revenue estimates, helped by stronger advertising income as the Chinese economy shows signs of recovery.
Revenue for the quarter ended Sept. 30 was 34.45 billion yuan (US$4.72-billion), compared with analysts’ estimate of 34.33 billion yuan, according to LSEG data.
China’s economy is set to grow 5.4 per cent this year, the International Monetary Fund said earlier this month, making an upward revision to its earlier forecast of 5-per-cent growth. This has prompted companies to spend more on consumer advertising online.
Baidu’s online marketing revenue rose 5 per cent in the third quarter to 19.7 billion yuan.
During the quarter, Baidu reported net income of 6.68 billion yuan, reversing a loss of 146 million yuan for the same period last year.
The company reported an adjusted profit of 20.4 yuan per American Depositary Share (ADS), compared with a profit of 16.87 yuan per share a year earlier. This also exceeded analysts’ average estimate of 16.55 yuan per ADS, according to LSEG.
Shares of Abercrombie & Fitch Co. (ANF-N), which have climbed 220 per cent so far this year, erased an early decline and rose 2.4 per cent on Tuesday even though it raised its annual net sales growth forecast, signaling strong demand for its lifestyle brands heading into the crucial holiday shopping season.
Updated inventories and trendy logoless basics and jackets have allowed the company to rein in promotions and markdowns from a year earlier, when it was dealing with softer consumer demand.
This reflected in an 11-per-cent rise in net sales at its Hollister brands, targeted at teen customers, as the company logged a strong back-to-school season, echoing results from footwear retailers Hibbet (HIBB-Q) and Dick’s Sporting Goods (DKS-N).
“The retailer’s expansion into new categories like occasion wear and athleisure is helping it capture more spending and stay relevant,” said Rachel Wolff, senior analyst at Insider Intelligence.
Demand for the company’s “on-trend” selection should insulate Abercrombie from a broader decline in discretionary spending, she added.
Abercrombie expects holiday-quarter net sales growth to be up in the low double-digits, compared with analysts’ average estimate of a growth of 11.6 per cent, as per LSEG data.
Net sales at Abercrombie namesake brand soared 30 per cent in the quarter ended Oct. 28.
The company’s net sales for the third-quarter jumped 20 per cent to US$1.01-billion, topping market expectations of US$980.9-million.
Abercrombie now expects net sales to rise between 12 per cent and 14 per cent for fiscal 2023, compared with its earlier forecast of about 10-per-cent growth.
On the decline
Shares of George Weston Ltd. (WN-T) were lower by 5.7 per cent as it reported its third-quarter profit fell compared with a year ago as it was hit by one-time charges driven by its stake in Choice Properties Real Estate Investment Trust (CHP.UN-T).
The company says its net earnings available to common shareholders from continuing operations totalled $610-million or $4.41 per diluted share for the quarter ended Oct. 7, down from $889-million or $6.14 per diluted share a year earlier.
George Weston says the decrease was due to the unfavourable year-over-year net impact of adjusting items, primarily driven by a fair value adjustment on investment properties.
Revenue totalled $18.41-billion for the quarter, up from $17.52-billion in the same quarter last year.
On an adjusted basis, George Weston says it earned $3.36 per diluted share from continuing operations in its latest quarter, up from an adjusted profit of $3.12 per diluted share a year earlier but 4 cents lower than the Street’s expectation.
George Weston owns a majority stake in Loblaw Cos. Ltd. (L-T) and a large stake in Choice Properties REIT.
Capital Power Corp. (CPX-T) dropped 6.3 per cent after announcing before the bell it has signed a pair of deals with CSG Investments, Inc., a subsidiary of Beal Financial Corp., to buy two natural gas power plants in the United States for a total of US$1.1-billion.
Under the first deal, the Edmonton-based company will acquire CXA La Paloma, which owns the La Paloma natural gas-fired generation facility in Kern County, Calif.
The second agreement will see Capital Power form a 50-50 partnership with an affiliate of a fund managed by BlackRock’s Diversified Infrastructure business to buy New Harquahala Generation Co. LLC, which owns the Harquahala natural gas-fired generation facility in Maricopa County, Ariz.
Capital Power and BlackRock will each be responsible for half of the cash consideration for the Harquahala deal, while Capital Power will be responsible for the operations and maintenance and receive an annual management fee.
The acquisitions are both expected to close in the first quarter of 2024, subject to regulatory approvals and other customary closing conditions.
To help fund the acquisitions, Capital Power says it is raising $400-million, including $100-million from Alberta Investment Management Corp.
TransAlta Corp. (TA-T) fell 6.4 per cent after saying more than two-thirds of its profits will come from renewable electricity production by 2028 — a major transformation for a company that once was one of the largest emitters of greenhouse gases in the country.
It announced an updated capital growth plan at its investor day on Tuesday which will see the company invest $3.5-billion, focused mainly on clean electricity generating and storage capacity by the end of 2028
The Calgary-based company, which has brought online more than 800 megawatts of wind and solar power since 2021 alone, said it will add an additional 1,750 MW of clean power within the next five years.
Most of that new generation will be organic growth — developing wind and solar projects from scratch — though the company is also open to growth through mergers and acquisitions if the right opportunity comes along, said TransAlta CEO John Kousinioris in an interview with the Canadian Press.
“What’s interesting about it is just the impact it will have on our company,” Mr. Kousinioris said of the new growth projections.
“It will end up pushing us pretty firmly into a more contracted and greener generation company. By 2028 and frankly, even earlier, somewhere in the range of 70 per cent of our EBITDA (earnings before interest, taxes, depreciation and amortization) will come from renewables.”
Currently, approximately 40 per cent of TransAlta’s EBITDA is attributable to renewable energy. The company is one of the largest producers of wind power in Canada, having grown its total renewable energy capacity from approximately 900 MW in 2000 to more than 2,900 MW in 2022.
But just a decade ago, the company’s bread-and-butter was its large fleet of coal-fired power plants. TransAlta’s move to convert those coal-fired plants to natural gas, at a cost of close to $300 million, was completed in late 2021 and has been widely hailed as a significant environmental accomplishment.
Shifting away from coal has reduced TransAlta’s greenhouse gas emissions by 32 million tonnes annually — or 76 per cent — from what they were in 2005.
TransAlta is not turning its back on natural gas. The company recently announced a $658-million acquisition of Heartland Generation, a deal that adds 1,844 MW of gas-fired electricity production — mostly in Alberta — to the company’s portfolio.
A day after closing at an all-time high, shares of Microsoft Corp. (MSFT-Q) slid 1.2 per cent as the fallout from the OpenAI co-founder Sam Altman joining the U.S. tech giant continued to send shockwaves through the industry.
OpenAI named ex-Twitch boss Emmett Shear as interim CEO in response to the a surprise turn of events that clouded the future of the startup at the heart of the artificial intelligence boom.
The appointments, settled late on Sunday, followed Mr. Altman’s abrupt ousting just days earlier as CEO of the ChatGPT maker and ended speculation that he could return.
By Monday, close to all of OpenAI’s more than 700 employees threatened to quit in a letter demanding the resignation of the board and reinstatement of Mr. Altman and former President Greg Brockman, according to a copy viewed by Reuters and a person familiar with the matter. The document was signed by employees including OpenAI chief scientist Ilya Sutskever, the board member who fired Mr. Altman.
“I deeply regret my participation in the board’s actions. I never intended to harm OpenAI. I love everything we’ve built together and I will do everything I can to reunite the company,” Mr. Sutskever said in a post on social media platform X, formerly known as Twitter, on Monday.
Hours later, Mr. Altman and Microsoft CEO Satya Nadella sought to quell fears of a collapse at OpenAI. Mr. Altman wrote on X that his top priority “remains to ensure OpenAI continues to thrive” and said he was “committed to fully providing continuity of operations.
Mr. Nadella, during a CNBC interview, said he was open to staff staying at OpenAI or coming to Microsoft. He said governance at the ChatGPT maker needed to change no matter where Altman ended up.
Lowe’s Companies Inc. (LOW-N) projected a bigger drop in annual same-store sales than previously expected, as inflation-hit consumers cut spending on home-improvement projects, hitting the company’s key do-it-yourself (DIY) business segment.
Shares slipped 3.1 per cent as the company also trimmed its annual earnings target despite easing supply chain costs driving a third-quarter profit beat.
Lowe’s saw a “greater-than-expected pullback in DIY discretionary spending” particularly in categories including appliances, home decor, kitchen and bath where customers even postponed some purchases, CEO Marvin Ellison said.
The company relies on DIY customers to drive 75 per cent of its revenue, making it susceptible to a wobbly economy, especially when consumers hit the brakes on big home remodeling and discretionary projects.
“(Consumers are) spending on what I call activities - services, concerts, restaurants, travel ... But I think sustained interest rates, sustained inflation, the resumption of student debt repayment ... are all creating a level of cautiousness,” Mr. Ellison told Reuters.
Average spending at Lowe’s - particularly on big-ticket items - was under pressure in the quarter, resulting in a 7.4-per-cent drop in same-store sales while analysts expected a 5-per-cent decline, according to LSEG IBES data.
Meanwhile, larger rival Home Depot’s (HD-N) bigger customer base of “Pro-customers” like builders and contractors helped the retailer ride out the weakness in DIY spending and beat expectations for quarterly results.
Lowe’s, however, is doubling down on same-day delivery services and offering holiday deals on key products like power tools and appliances to draw more price-conscious shoppers, executives said on an earnings call.
It expects full-year comparable sales to decline 5%, compared with its prior outlook for a 2-per-cent to 4-per-cent drop.
“There may be an element of conservatism in there, but there also may be an element that (Lowe’s is) just not seeing the discretionary customer come back like (it) originally anticipated,” M Science analyst John Tomlinson said.
Ford Motor Co. (F-N) declined 1.4 per cent after announcing it will scale back the investment, capacity and the number of jobs planned for an electric vehicle (EV) battery plant in Michigan that has drawn fire from U.S. lawmakers for its use of technology supplied by Chinese battery maker CATL.
Ford said it would restart construction of the factory near Marshall, Michigan, after being paused two months ago.
The automaker plans to start producing low-cost lithium-iron batteries by 2026 based on technology licensed from CATL. Ford will own the factory, and has agreed to give the United Auto Workers the opportunity to organize the plant’s workers without a vote.
The company’s ties with CATL have drawn fire from U.S. lawmakers, who oppose the country’s EV subsidies flowing to a Chinese entity.
Ford is pushing for the U.S. Treasury Department to approve lithium-iron, or LFP, batteries made at the Michigan factory to qualify for Inflation Reduction Act EV subsidies. Ford is already using imported LFP batteries in its Mustang Mach-E electric SUV.
“We are confident in terms of IRA benefits,” Ford spokesman Mark Truby told reporters in a teleconference on Tuesday.
Ford said it was scaling back its original plans to spend US$3.5-billion to make the Blue Oval Battery Park Michigan big enough to produce 35 gigawatt hours of batteries annually and employ about 2,500 people.
Ford now plans to cut the Michigan battery plant’s capacity to 20 gigawatt hours and reduce hiring to 1,700 jobs.
Zoom Video Communications (ZM-Q) finished narrowly lower after it raised its annual revenue and profit forecasts on Monday, as hybrid work trends and the integration of artificial intelligence technology into its products boosted demand.
Platforms including Zoom, Microsoft’s (MSFT-Q) Teams and Cisco’s (CSCO-Q) Webex became household names during the COVID lockdowns and have enjoyed resilient demand as many businesses shifted to hybrid work models.
Zoom now expects annual adjusted profit per share between US$4.93 and US$4.95, higher than its prior forecast of US$4.63 and US$4.67.
The company lifted its full-year revenue forecast to between US$4.506-billion and US$4.511-billion, from $4.485 billion to US$4.495 billion earlier.
“We bolstered Zoom’s all-in-one intelligent collaboration platform with advanced new capabilities like Zoom AI Companion and continued to evolve our customer and employee engagement solutions,” CEO Eric Yuan said.
Zoom’s AI Companion, introduced during the third quarter, allows paid users to access features including meeting summaries and catch-ups, as well as email and chat composed prompts. More than 220,000 accounts had enabled it as of Monday.
The company’s quarterly free cash flow grew 66.2 per cent to US$453.2-million, and Zoom expects US$1.34-billion to US$1.35-billion for the full year.
“Cash flow was the highlight, but also encouraged by traction with Phone and Contact Center... gives us greater confidence that we can see growth re-accelerate in the near term,” RBC analyst Rishi Jaluria said.
The Phone segment grew to roughly 7 million paid seats while Contact Center reached about 700 customers as of quarter-end.
Zoom’s current-quarter revenue is expected to be between US$1.125-billion and US$1.130-billion, in line with expectations, according to LSEG data.
For the third quarter, revenue grew 3.2 per cent to US$1.14-billion, slightly above estimates.
It earned US$1.29 per share on an adjusted basis, surpassing expectations of US$1.09.
Top U.S. electronics retailer Best Buy (BBY-N) on Tuesday forecast a bigger decline in annual comparable sales and pointed to “difficult to predict” consumer demand, days ahead of Black Friday that signals the start of the holiday shopping season.
The company’s shares, down nearly 15 per cent this year, fell 0.7 per cent following a miss on third-quarter revenue estimates.
Elevated interest rates, a spending shift to services from goods and a resumption in student loan repayments have further strained appetite for electronics and home-office products after a pandemic-led surge.
“In the more recent macro environment, consumer demand has been even more uneven and difficult to predict,” CEO Corie Barry said in a statement.
Revenue fell 8.2 per cent to US$9-billion in the U.S. as demand decline worsened across appliances, home theater, computing and mobile phones, signaling that higher discounts failed to entice shoppers.
Best Buy now expects annual comparable sales to decline in the range of 6.0 per cent to 7.5 per cent, citing weaker November trends, compared with its prior range of a 4.5-per-cent to 6.0-per-cent drop.
Revenue is forecast in the range of US$43.1-billion to US$43.7-billion, compared with US$43.8-billion to US$44.5-billion earlier.
Total revenue fell to US$9.76-billion in the third quarter ended Oct. 28 from about US$10.59-billion a year earlier and compared with LSEG estimates of US$9.90-billion.
Chipmaker Analog Devices (ADI-Q) projected first-quarter revenue and profit below market estimates on Tuesday, as it grapples with the ongoing supply glut in the semiconductor industry.
Shares of the firm, whose chips are used in the automotive and telecom industries, fell 1.4 per cent in Tuesday trading.
Inflation-hit customers have refrained from placing new orders for chips, leading to excess supply at companies such as Analog Devices after a pandemic-driven buying spree fizzled out.
“We expect customer inventory digestion to persist into the first half of the year,” said CEO Vincent Roche.
The company expects revenue for the three months ending January to be US$2.50-billion, plus or minus US$100-million, which was below analysts’ average estimates of US$2.68-billion according to LSEG data.
First-quarter adjusted earnings are expected to be US$1.70 per share, plus or minus 10 US cents, below analysts’ average estimates of US$1.90.
Rival Texas Instruments also gave a dour forecast last month, as demand from its industrial clients slowed down.
Cautious spending by automakers fearing a slowdown in their electric-vehicle businesses has also weighed on orders at Analog Devices. Its automotive sales, which comprised more than a quarter of the total, grew just 14 per cent - its slowest pace in at least two years.
Overall, revenue fell 16 per cent to US$2.72-billion, but beat estimates. The company’s industrial segment, which made up half of its revenue, saw a 20-per-cent drop as demand for products like its factory automation technology wavered.
Excluding items, Analog earned US$2.01 per share, which was largely in line with expectations.
U.S. retailer Kohl’s (KSS-N) posted a bigger-than-expected drop in quarterly sales on Tuesday as cost-conscious shoppers chose to spend less at its department stores amid still high inflation, sending its shares down over 8.5 per cent/.
American shoppers have continued to defer non-essential purchases and instead spend more dollars on essentials as resumption of student loan repayments, rising credit card debt, and higher interest rates squeeze household budgets.
The results come after retail bellwether Walmart (WMT-N) last week took a cautious stance going into the holiday shopping season, which is expected to grow at the slowest pace in five years.
“While Kohl’s is making progress in its attempt to shore up its bottom line, it has yet to find the right formula to convince shoppers to spend,” said Insider Intelligence analyst Zak Stambor.
Kohl’s comparable sales decreased for a seventh-straight quarter, as its 5.5-per-cent drop missed estimates for a 3-per-cent fall, according to LSEG data.
The company said it expected annual sales to fall between 2.8 per cent and 4 per cent, compared to a previous forecast for a 2-per-cent to 4-per-cent drop. Analysts have forecast a decline of 2.5 per cent.
Kohl’s inventories fell 13 per cent, its third straight quarterly decline, as its efforts to trim stocks from their 2022 highs going into the holiday season began to pay off.
“It is one thing for Kohl’s to adjust its inventory mix by expanding into new categories, but it is another to build awareness of its broader selection and drive consumers into its stores to buy those items,” Stambor said.
The company raised the lower end of its annual profit forecast, expecting per-share earnings in the range of US$2.30 to US$2.70, up from its previous forecast of US$2.10 to US$2.70.
Kohl’s reported a profit of 53 US cents per share in the third quarter, beating expectations of 35 US cents per share.
With files from staff and wires
David Leeder