A survey of North American equities heading in both directions
On the rise
Playmaker Capital Inc. (PMKR-X), a Toronto-based digital sports media company, soared almost 32 per cent after announcing late Monday it has agreed to be acquired by Copenhagen-based Better Collective A/S for total consideration of approximately €176-million.
Under the terms of the deal, Playmaker shareholders will receive 70 cents for each common share held, representing a 46-per-cent premium to its closing price on Friday.
Axios media reporter Sara Fischer called the deal a “betting mega-merger” and noted Better Collective, which owns the U.S.-based Action Network, will nearly double its audience across the globe.
Shares of Element Fleet Management Corp. (EFN-T) rose 1.2 per cent following the late Monday release of better-than-expected third-quarter results.
The Toronto-based company reported operating earnings per share of 36 cents, topping the Street’s projection by 4 cents, and originations of $2.72-billion, beating the consensus estimate of $2.02-billion.
It also raised its quarterly dividend by 20 per cent, or 2 cents, to 12 cents per share.
Further reaction from the Street: Tuesday’s analyst upgrades and downgrades
“Q3/23 results re-affirmed why EFN is our high-conviction #1 best idea as EPS was solidly ahead of forecast and consensus with originations well ahead of forecast and consensus, providing further evidence OEM production appears back to normal levels, which we think is important to provide another driver of EPS growth,” said RBC Dominion Securities analyst Geoffrey Kwan in a note.
“2024 EPS guidance appears conservative as Q3/23 run-rate EPS is already at the lower end of guidance and the F/X assumption is below the current rate. We think EFN has the best risk-reward profile in our coverage universe, with significant growth potential; strong defensive attributes; multiple potential catalysts; and valuation that is mispriced (13.5 times P/E and 9.1-per-cent FCF yield on 2024 estimates).”
Stella-Jones Inc. (SJ-T) jumped 7.4 per cent with the release of stronger-than-expected third-quarter results before the bell as heightened demand for utility poles and railway ties continued.
The Montreal-based producer of pressure-treated wood products reported revenue of $949-million, up 13 per cent year-over-year and 5 per cent above the Street’s forecast ($905-million). Adjusted earnings per share of $1.91 also easily exceeded the consensus estimate of $1.31 as a EBITDA margin of 20.3 per cent was much higher than anticipated.
“Stella’s core poles and ties verticals delivered a strong print on sustained pricing increases, as volumes in both categories were relatively flat on a year-over-year basis,” said National Bank analyst Maxim Sytchev. “The Baldwin acquisition and ongoing capital improvement projects helped secure additional pole supply, and we were pleased to see replenished tie inventories. Today’s results are a testament to the sustained pricing momentum — most notably for poles — that was a big factor in our decision to upgrade SJ shares on Oct. 9 (Upgrading to Outperform as infra momentum is likely to be resilient for longer). Residential lumber experienced the opposite dynamic as higher year-over-year volumes were more than offset by significantly lower prices (no doubt exacerbated by consumer affordability challenges), though the category is now a significantly smaller proportion of the company’s sales mix than in the initial COVID-induced dislocation. This shift in the product mix was also cited as a driver in the 620 basis points year-over-year increase in SJ’s consolidated gross margin. The company also confirmed its Investor Day 2023–2025 targets, though it is worth reiterating that they impute strictly organic growth.”
In a note, Mr. Sytchev added: “We were hoping for a strong print, and the company delivered more than expected. We upgraded the shares in early October (up 17 per cent since then vs. TSX up 3 per cent) positing that a strong pricing dynamic in Poles will be sustained for longer. Today’s results support that notion. While investments in capacity enhancements are bound to influence the product availability over the coming months/quarters, we believe momentum should be sustained as we do subscribe to the notion that utility companies are behaving differently now when it comes to securing supply vs. prior cycles in order to modernize/fortify their grids. Ties/resi were also better than feared. All in, with a reasonable 15.1 times P/E valuation on 2024E and another 5-per-cent NCIB announced this morning (note that management has been buying shares quite aggressively over the past 12 months), we continue to like the structural set-up for SJ shares.”
TransAlta Corp. (TA-T) rose 2.5 per cent in the wake of reporting its third-quarter profit rose compared with a year ago as its power production and revenue also came in higher.
TransAlta chief executive John Kousinioris says the third-quarter results demonstrate the value of the company’s strategically diversified fleet, which benefited from its asset optimization and hedging activities.
The power utility says its profit attributable to common shareholders totalled $372-million or $1.41 per diluted share for the quarter ended Sept. 30, up from $61-million or 23 cents per share a year earlier.
Revenue for the quarter totalled $1.02-billion, up from $929-million in the same quarter last year.
Production amounted to 5,678 gigawatt hours for the quarter, up from 5,432 gigawatt hours in the third quarter of 2022.
Last week, TransAlta announced a deal to buy Heartland Generation Ltd. and its power generation business in Alberta and B.C., in a deal valued at $658-million, including assumed debt.
Shares of The Lion Electric Company (LEV-T) jumped 6.3 per cent despite reporting a drop in its vehicle order book alongside its third-quarter results before the bell.
Montreal-based company said it has a vehicle order book of 2,232 all-electric medium- and heavy-duty urban vehicles as of Nov. 6, representing a total value of US$525-million. That’s a decline from 2,559 in the previous quarter (as of Aug. 3) and lower than forecasts.
Projecting 2,864 vehicles, Desjardins Securities’ Benoit Poirier said: “We view these results as slightly negative given the sequential decrease in the vehicle order book as this remains a key driver for the stock, in our view. We believe some investors will want to see more evidence of truck order intakes before fully committing.”
Lion Electric’s revenue rose to US$80.3-million from US$41-million a year ago, exceeding both Mr. Poirier’s US$76.1-million forecast and the consensus estimate of US$75.9-million. An adjusted EBITDA loss of US$3.9-million was also better than expected (losses of $16.6-million and $11.5-million, respectively), however vehicle deliveries of 245 was lower than anticipated (325 and 305).
WELL Health Technologies Corp. (WELL-T) increased 4.1 per cent after announcing it expects to announce a record revenue when it releases its third-quarter results for fiscal 2023 on Nov. 14.
The Vancouver-based digital healthcare company said the result is “underpinned by record care metrics which includes record patient visits of over 1.03 million and almost 1.58 million Total Care Interactions, which now includes Billed Provider Hours.”
“This quarter’s strong performance was driven by organic growth as well as a full quarter of recently announced acquisitions,” the company said in a premarket release. “Q3-2023 will be WELL’s 19th consecutive quarter of record quarterly revenues.”
The Street is currently projecting earnings per share for the quarter of nil with revenue of $197.5-million. In its second quarter, it reported revenue of $170.92-million and an earnings loss of 2 cents per share.
After Pet Valu Holdings Ltd. (PET-T) met the Street’s earnings expectations for its third-quarter results, its shares turned higher on Tuesday and closed up 5.9 per cent despite a reduction to its full-year guidance as sales growth continues to slow.
Before the bell, the Markham, Ont.-based retailer reported quarterly adjusted earnings per share of 39 cents, down 9 per cent year-over-year but matching the consensus expectation. Same-stores increased 4.2 per cent below analysts’ 6.5-per-cent projection.
It now expects same-store-sales growth of 5.5 per cent to 6.5 per cent for the year, down from 7 per cent to 10 per cent previously. Its EPS estimate slid to $1.60 to $1.63 from $1.60 to $1.66 on revenue ranging from $1.055-billion to $1.065-billion, down from $1.05-billion to $1.075-billion.
“This downward revision was expected as consensus 2023 EPS estimates of $1.59 were already lower than the company guidance,” said Stifel analyst Martin Landry in a note. “Hence, we believe that the shares may not react much to the guidance revision but more on comments during the earnings call on the outlook and color on 2024. Consensus same-store-sales growth of 6 per cent for 2024 appears slightly high in light of the recent pace, which could translate into downward estimate revisions for 2024 EPS.”
Uber Technologies Inc. (UBER-N) erased early losses and gained almost 4 per cent after it forecast fourth-quarter adjusted core profit and gross bookings above market expectations on Tuesday, betting that the holiday season would boost demand for its ride-hailing and food-delivery services.
It, however, missed Wall Street’s profit target for the July-September period and posted its lowest revenue growth since 2021, which the company said was due to an accounting change.
After a bruising 2022, the dominant U.S. ride-hailing company has benefited from the return-to-office push by companies and resilient travel demand despite inflation.
Uber expects adjusted core profit, a key profitability measure, between US$1.18-billion and US$1.24-billion. Analysts expected US$1.15-billion, LSEG data showed.
“Consumer demand on our platform remains healthy as we enter the busiest period of the year,” CEO Dara Khosrowshahi said in his prepared remarks.
“This trend continued into the fourth quarter as we achieved all-time highs in October for overall trips and gross bookings, driven by strength across both mobility and delivery.”
Gross bookings, or the total dollar value earned from its services, is expected to be between US$36.5-billion to $37.5 billion compared with expectations of $36.31 billion.
Rival Lyft (LYFT-Q) has cut ride-sharing prices this year to boost its market share. But analysts said the strategy has had little impact on Uber, whose business includes a sprawling food-delivery operation.
Lyft’s shares were also up. The company will report earnings on Wednesday.
Revenue rose 11 per cent to US$9.29-billion , but missed analysts’ average estimate of US$9.52-billion. This is compared to a more than 14-per-cent growth in the prior quarter and a 70-per-cent surge a year ago.
Adjusted core profit of US$1.09-billion beat expectations of US$1.02-billion, but net earnings per share was 2 US cents lower than expectations of 10 US cents.
On the decline
Canadian oil producer Crescent Point Energy Corp. (CPG-T) dropped 9.9 per cent after it said on Monday it has agreed to acquire Hammerhead Energy Inc. (HHRS-T) in a cash and stock deal valued at $2.55-billion to boost its presence in the Montney shale play in Alberta.
Hammerhead’s assets are adjacent to Crescent Point’s position in the Montney, one of Canada’s most attractive oil and gas-producing regions due to its strong economics.
The deal would create Canada’s seventh-biggest energy producer and add about 800 net Montney drilling locations, Crescent Point said.
The company raised its 2024 production forecast to the range of 200,000 to 208,000 barrels of oil equivalent per day (boepd), compared with the 145,000 to 151,000 boepd projected earlier.
“This strategic consolidation is an integral part of our overall portfolio transformation,” said Crescent Point CEO Craig Bryksa, adding the acquisition would ensure his company has over 20 years of premium drilling inventory.
Crescent Point also bought Spartan Delta’s Montney assets earlier this year in a $1.2-billion deal.
The 50,000 square-mile (32 million acre) area spanning northern Alberta and British Columbia is considered Canada’s top shale play and also garnering interest potential U.S. investors, dealmakers said last week.
“This is another sign of the attractiveness of the entire resource in the Montney,” said RBN energy analyst Martin King. “The best thing about the play is the finding cost, especially for natural gas, is very, very low.”
Hammerhead shareholders would receive $21.00 per fully diluted common share of Hammerhead, through a combination of approximately $1.5-billion in cash and 53.2 million common shares of Crescent Point.
The share value implies a 5 per cent premium compared to Hammerhead’s closing price on Monday, according to Reuters calculations.
Crescent Point said it plans to raise its dividend by 15 per cent to 46 cents per share on an annual basis, once the deal closes
Vancouver’s Ballard Power Systems Inc. (BLDP-T) finished flat after it reported a larger loss in its latest quarter compared with a year ago despite a nearly 30 per cent rise in revenue.
The fuel cell company says it lost US$62.5-million or 21 US cents per share for the quarter ended Sept. 30 compared with a loss of US$42.9-million or 14 US cents per share a year earlier.
Total revenue amounted to US$27.6-million, up from US$21.3-million in the same quarter last year. That topped the Street’s expectation of US$26.1-million
Ballard says heavy duty mobility revenue was up 67 per cent at US$21.1-million, helped by higher rail and marine revenue, partially offset by lower bus and truck revenue.
The company’s stationary segment fell five per cent to US$2.9-million as lower sales in North America were partially offset by higher revenue in Europe.
Emerging and other markets revenue fell 37 per cent to US$3.6-million due to lower shipments to Europe.
Cargojet Inc. (CJT-T) fell 1.9 per cent in volatile trading after reporting its third-quarter profit and total revenue fell compared with a year ago and narrowly missed the Street’s expectations.
The slide in consumer spending has squeezed Cargojet Inc.’s bottom line, its CEO says, as Canadians shell out less on goods that land on shelves and doorsteps after a trip by air freighter.
“Higher interest rates are starting to impact the household disposable incomes and we are observing a division in household spending,” chief executive Ajay Virmani said in a statement Tuesday.
“The volumes for discretionary items are softening but the volumes for essential household goods are holding up well,” he added.
The Mississauga, Ont.-based company, which provides time-sensitive overnight air freight services and aircraft leases, reported a third-quarter profit of $10.5-million in the quarter ended Sept. 30, down from $83.5 million in the same period the year before.
Virmani said Tuesday the company is trimming capital expenditures and “working on identifying every cost saving opportunity.”
The cuts come after he said in August that Cargojet would rein in the “overspending” it greenlighted to meet the demand influx set off by the COVID-19 pandemic, with areas ranging from temporary labour to ground services potentially on the chopping block.
Virmani’s comments on sagging consumer demand line up with broader spending trends.
A report from Royal Bank of Canada last month found that retail sales — both nominal and inflation-adjusted — declined as autumn kicked off.
“September spending data suggests Canadians have begun to tighten their belts,” according to RBC’s Oct. 12 report.
“Canadians are spending nearly 10 per cent more on essential items than they were just one year ago. At the same time, the surge in discretionary spending has dissipated.”
Cargojet said its third-quarter revenue totalled $214.0-million, down from $232.7-million the year before.
On an adjusted basis, the company earned 30 cents per share, down from an adjusted profit of $2.18 per share a year earlier.
The outcome notched below analyst expectations of 73 cents per share, according to financial markets data firm Refinitiv.
Cargojet also raised its quarterly dividend by 10 per cent or 2.86 cents per share to 31.46 cents per share. The new dividend will be paid to shareholders of record at the close of business on Dec. 20 and will be payable on or before Jan. 5.
With files from staff and wires
David Leeder