A roundup of some of the North American equities making moves in both directions today
On the rise
Great-West Lifeco Inc. (GWO-T) rose after it said on Wednesday its U.S. unit would buy Prudential Financial Inc’s full-service retirement business for about $4.45-billion in one of its biggest deals yet, accelerating its expansion in the world’s biggest economy.
The acquisition by Empower Retirement, the U.S’s second-largest retirement plan provider, expands the subsidiary’s contribution to earnings to 30 per cent by the end of 2023, from 10 per cent in 2020, according to Lifeco. It will contribute about $325-million in after-tax earnings by the end of 2023, Lifeco said.
Winnipeg, Manitoba-based Lifeco has spent billions of dollars on a raft of U.S. acquisitions in recent years, including the retirement plan business of MassMutual, which closed in January, and financial technology company Personal Capital, which it completed in mid-2020.
The Prudential deal underscores continued interest among Canadian insurers in expanding overseas as rising premiums and high levels of capital drive them to seek options to deploy them. Canadian insurers overseas acquisitions reached a 20-year high last year, according to Refinitiv data.
While rivals Manulife Financial Corp and Sun Life Financial have been expanding more in Asia, Great-West is focused on growing in the U.S., amid expectations that the population of Americans aged 65 and over will more than double in the next 40 years.
Canadian National Railway Co. (CNR-T) increased after it reported a rise in quarterly revenue and profit that was broadly in line with estimates as a North American economic recovery boosted freight volumes at the country’s biggest railroad operator.
See also: CN profit nearly doubled in past quarter amid COVID-19 recovery
The Montreal-based company benefited in particular from rising industrial production as it shipped more petroleum, chemicals, metals and minerals. Revenue from automotive shipments nearly doubled as auto manufacturing facilities opened and demand recovered.
“We’re quite confident about the broad economic recovery,” Chief Financial Officer Ghislain Houle said in a conference call, while reaffirming the company’s full-year results forecast.
However, Canadian National lost two weeks of shipments across a “critical bridge” on a route to Vancouver due to wildfires in the British Columbia area and said the situation remained “fluid.” It did not quantify any hit to earnings but said traffic averages about 25 trains a day on the Kamloops and Boston Bar route.
Labor costs rose 23 per cent in the quarter to $692-million, as companies continued to pay more to hire workers amid a shortage.
Canadian National’s total revenue rose 12.1 per cent to $3.598-billion in the three months ended June 30 versus average analyst expectations of $3.66-billion, according to IBES data from Refinitiv.
See also: Wednesday’s analyst upgrades and downgrades
Canfor Corp. (CFP-T) reversed early losses after saying it is curtailing production capacity at its Canadian sawmills beginning Monday as a result of extreme wildfire conditions in Western Canada.
The Vancouver-based lumber producer says about 115 million board feet of capacity will be reduced during the third quarter due to significant supply chain challenges and a transportation backlog.
Canfor says the wildfires are significantly impacting its ability to transport product to market.
Executive vice-president Stephen Mackie says it is developing plans to minimize impacts to employees and contractors.
Canfor says it is working closely with the provincial wildfire services and governments to support a safe response to the very dynamic wildfire conditions that are raging in British Columbia, Saskatchewan and Manitoba.
Canfor produces primarily softwood lumber with interests in B.C., Alberta, North and South Carolina, Alabama, Georgia, Mississippi, Arkansas and Louisiana, as well as in Sweden.
United Airlines Holdings Inc. (UAL-Q) was up after it reported its sixth consecutive quarterly loss on Tuesday due to the coronavirus pandemic, though revenue quadrupled from a year ago and topped estimates with a strong domestic travel rebound.
U.S. leisure travel has nearly recovered to pre-pandemic levels as more people fly for vacation or to visit friends and family following a massive nationwide vaccination campaign.
Chicago-based United said it will continue ramping up flying in the third quarter and forecast its total unit revenue - comparing sales to flight capacity - for the period will be higher than the same quarter in 2019, a turning point for the airline.
The company said business and long-haul international travel, to which it is more exposed than rivals, accelerated faster than anticipated, and it expects a full recovery in demand by 2023.
United’s adjusted net loss narrowed to US$1.26-billion, or US$3.91 per share, in the quarter, from US$2.6-billion, or US$9.31 per share, a year ago. Analysts had estimated a loss of US$3.94, according to IBES data from Refinitiv.
Excluding items, the company lost US$434-million in the second quarter. United has said it expects to be profitable in the third and fourth quarter.
United’s second-quarter adjusted operating revenue rose to US$5.47-billion from about US$1.47-billion a year ago, above analysts’ average estimate of US$5.35-billion.
Shares of Coca-Cola Co. (KO-N) rose in response to increase to its full-year sales and profit forecasts on Wednesday, as demand bounces back from pandemic lows for its beverages following the re-opening of theaters, restaurants and stadiums.
Coca-Cola’s revenues in North America, its biggest market, rose 28 per cent in the second quarter, helped by the vaccine-aided reopening and easing of capacity restrictions across the United States.
Reopening economies in Europe, Asia and Latin America also lifted the company’s adjusted overall revenue by 41.1 per cent in the reported quarter to US$10.13-billion, beating analysts’ average estimate of US$9.32-billion, according to IBES data from Refinitv.
“Our results in the second quarter show how our business is rebounding faster than the overall economic recovery,” Coca-Cola Chief Executive Officer James Quincey said in a statement.
The company’s total net revenue had slumped 28 per cent in the year-ago quarter due to the lockdowns.
Rival PepsiCo Inc. (PEP-Q), which is less dependent on sales to restaurants and bars, reported a 20.5-per-cent jump in second-quarter revenue last week.
Still, Coca-Cola said volumes were pressured in markets where there has been a resurgence in infections.
The company upgraded its annual organic revenue target, expecting it to rise 12 per cent to 14 per cent versus its prior forecast of a high single digits increase.
Annual adjusted earnings per share are expected to rise 13 per cent to 15 per cent, the company said, compared with its previous estimate for a high single digits to low double digits increase.
Net income attributable to company shareholders rose 48 per cent to US$2.64-billion in the second quarter ended July 2. Excluding onetime items, the company earned 68 US cents per share, beating expectations of 56 US cents.
Chipotle Mexican Grill Inc. (CMG-N) soared in the wake of beating estimates for comparable quarterly sales on Tuesday but warned that higher beef and freight costs will offset the benefit of menu prices hikes.
Restaurants have been plagued by outages of everything from green tea to paper bags, as well as labour shortages, as the U.S. economy has reopened following pandemic-related lockdowns.
In the current quarter, commodity costs and staffing shortages at suppliers will mostly cancel out the 3.5-4-per-cent menu price increase originally implemented to pay for higher wages, Chief Financial Officer Jack Hartung said in a call with analysts.
“It shouldn’t be a surprise to anyone that Q3 is going to be challenged by several industry-wide issues,” Mr. Hartung said.
The burrito and bowl chain, which had already seen sales recover during the COVID-19 pandemic, grew even stronger as restrictions eased and Americans trickled back to offices and ordered more lunch.
Comparable sales for the second quarter ended June 30 rose 31.2 per cent, compared with Wall Street expectations of 29.4-per-cent growth, according to IBES data from Refinitiv.
Johnson & Johnson (JNJ-N) closed higher as it raised its overall revenue estimate for the year and forecast US$2.5-billion in sales of its COVID-19 vaccine, which has fallen way behind rival shots from Pfizer (PFE-N) and Moderna (MRNA-Q) as the company deals with vaccine production issues and safety concerns.
Although Johnson & Johnson’s shot was approved in the United States months after vaccines from Pfizer Inc and Moderna Inc, its vaccine outlook pales in comparison with its peers and reflects the widening gap in the vaccine race.
Pfizer and Moderna forecast US$26-billion and US$19.2-billion in annual sales of their vaccines, respectively.
The J&J shot, once touted as an important tool for vaccinations in hard-to-reach areas, has already delayed deliveries in the United States and Europe. It has also been linked to a very rare, potentially life-threatening blood-clotting condition.
J&J raised its expectations for full-year sales to a range of US$93.8-billion to US$94.6-billion including contribution from the single-dose vaccine, and to US$91.3 billion-US$92.1 billion for the rest of the business.
It had previously forecast sales to come in between US$90.6-billion and US$91.6-billion.
In the second quarter, J&J earned US$2.48 per share, beating analysts’ average estimate of US$2.27 per share, according to IBES data from Refinitiv.
On the decline
Rogers Communications Inc. (RCI.B-T) slipped on the premarket release of second-quarter revenue that beat analysts’ estimates, helped by a pick up in advertisement sales and as its cable business benefited from a pandemic-driven shift to remote work and entertainment.
The requirement of high-speed broadband networks to carry on remote work helped the telecom operator negate the slow recovery from its wireless business.
The return of live sport broadcasting also played a positive role in boosting the Toronto-based telecom operator’s revenue.
The company’s total revenue rose to $3.58-billion in the quarter ended June 30, compared with analysts’ average estimates of $3.56-billion, according to IBES data from Refinitiv.
Earlier in March, Rogers said it would buy Shaw Communications Inc for about $20-billion, aiming to double down on its efforts to roll out 5G throughout the country.
Revenue for its cable unit, which includes internet, phone and cloud-based services, rose 5 per cent during the quarter
Quarterly net income rose to $302-million, or 60 cents per share, from $279-million, or 54 cents, a year earlier.
Netflix Inc. (NFLX-Q) was lower after it said it would make a deeper dive into video games as the movie and TV streaming service projected weak subscriber growth amid growing competition and the lifting of pandemic restrictions that had kept people at home.
Netflix is weathering a sharp slowdown in new customers after a boom in 2020 fueled by stay-at-home orders to curb the COVID-19 pandemic. In the United States and Canada, Netflix reported losing about 430,000 subscribers in the second quarter, only its third quarterly decline in 10 years.
The streaming video pioneer said it was in the early stages of expanding its video game offerings, which would be available to subscribers at no extra charge. The company will initially focus primarily on mobile games.
“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” the company said in its quarterly letter to shareholders.
Co-CEO Reed Hastings said gaming and other ventures such as podcasts and merchandise sales will be “supporting elements” to help attract and retain customers to its core business of streaming video.
The company projected it would add 3.5 million customers from July through September. Wall Street had expected a forecast of 5.5 million, according to analysts surveyed by Refinitiv.
For the just-ended quarter, Netflix added 1.54 million customers, beating analyst projections of 1.04 million. Total subscribers numbered 209 million at the end of June.
A year ago, Netflix picked up 10.1 million subscribers in the second quarter.
Earnings for April through June came in at US$2.97 per share, below the average forecast of US$3.16.
With files from staff and wires
David Leeder