A roundup of some of the North American equities making moves in both directions
On the rise
Canadian cannabis giant Tilray Inc. (TLRY-T, TLRY-Q) soared after it reported increased revenue but widening losses in its first fiscal quarter since closing a reverse-merger with Leamington, Ont.-based cannabis company Aphria Inc.
The newly formed company’s results for the full year and fourth quarter of fiscal 2021 reflect four weeks of legacy Tilray earnings, and three months of legacy Aphria earnings.
The company reported net revenue of US$142.2-million for the quarter ending May 31, 2021, a 25 per cent increase from the prior year quarter. That increase was driven primarily by a growth in cannabis revenue which included a four-week revenue contribution from legacy Tilray.
Notably, the company’s distribution revenue from its Germany-based pharmaceutical business CC Pharma – which has long propped up total revenue in the wake of stale Canadian cannabis sales – dipped by 10 per cent in the quarter.
Net losses grew substantially to US$336-million in fiscal 2021, compared to a net loss of $100-million in 2020 because of transaction costs and fees related to the merger as well as a US$170-million loss on convertible debentures that the company did not end up using.
- Vanmala Subramaniam
Loblaw Cos Ltd. (L-T) gained ground in the wake of beating market estimates for quarterly revenue on Wednesday, as consumer demand for groceries and other essentials stayed robust during the COVID-19 pandemic.
Loblaw has performed strongly over the past year as coronavirus-led lockdowns prompted stuck-at-home customers to stock up groceries and other essentials.
The company said it expects the resurgence in COVID-19 cases, which has triggered fresh lockdowns and strict distancing measures in several parts of Canada, to continue to boost its grocery sales.
Net earnings available to common shareholders rose to $375-million, or $1.09 per share, for the quarter ended June 19 from $169-million, or 47 cents per share, a year earlier.
Loblaw’s revenue increased to $12.49-billion in the second quarter from $11.96-billion a year earlier, surpassing analysts’ estimates of $12.16 billion, according to IBES data from Refinitiv.
China’s Jiangxi Copper Co Ltd had been speculated as a potential suitor for minority interests in First Quantum’s Kansanshi and Sentinel mines.
Benchmark copper has pulled back after reaching a peak of $10,747.50 a tonne in May, hit by concerns about a resurgence of the pandemic, the potential for central banks to taper stimulus and China’s sale of strategic reserves due to concerns about rising raw material prices.
Even so, First Quantum on Tuesday flagged rising costs on the back of higher Zambian royalty rates driven by increased copper prices.
“There has been limited progress” on talks with the Zambian government for terms which would pave the way for an expansion of ore processing at Kansanshi ahead of national elections, Mr. Pascall said.
Zambian President Edgar Lungu faces his most serious challenge yet from businessman and serial presidential hopeful Hakainde Hichilema in elections set for August 12.
The Calgary-based company says it earned $3.65 per diluted share in the quarter, compared with a loss of 27 cents per share or $145.1 million a year earlier.
The gain flowed from a $1.9-billion after-tax reversal of non-cash impairment due to an increase in commodity prices and a gain of more than $70-million from an asset sale.
Adjusted profits for the three months ended June 30 were $117.6-million or 20 cents per share, up from a loss of $27.9-million or five cents per share in the second quarter of 2020.
Crescent Point was expected to post 22 cents per share in adjusted profits, according to financial data firm Refinitiv.
The company’s average daily production in the quarter was 148,641 boe/d, up from 120,842 boe/d in the second quarter of 2020, while the average selling price was $62.78 per barrel of oil equivalent, up from $23.55 in the same quarter last year.
“We also closed two strategic transactions during the quarter, further enhancing our asset portfolio and long-term sustainability,” stated CEO Craig Bryksa.
“The seamless integration of the Kaybob Duvernay assets and the constructive commodity price environment have set us up for a strong second half of the year and into 2022.”
It increased its annual average production guidance to 130,000 to 134,000 boe/d, up from the prior range of 128,000 to 132,000 boe/d, in part due to the reactivation of higher-cost production that was shut-in when energy prices were lower.
Adjusted cash flow from operations increased to $387.8-million from $109-million in the prior year quarter as production.
In a research note, ATB Capital Markets analyst Patrick O’Rourke said: “Overall, we view the event as positive, with both operational and financial results ahead of consensus expectations (production +3.8% vs. street; CF +8.5% vs. street), and the Company providing an incrementally positive 2021 guidance adjustment from management (production of 130.0-134.0 mboe/d vs. prior 128.0-132.0 mboe/d), with the Company also now calibrating investors to 2021 excess cash flow of $675mm to $775mm – the bulk of the noted excess cash flow improvement results from moving oil pricing assumptions from a US$55-65/bbl range to US$65-75/bbl, however, the June investor deck CF scenario previously suggested $625-750mm, so again a small incremental positive. Finally, ESG focussed investors should provide credit to the Company for its improved ESG rating (MSCI to “A” from a prior “BBB”).”
Intact Financial Corp. (IFC-T), Canada’s biggest property and casualty insurer, closed narrowly higher as it handily beat second-quarter profit estimates on Tuesday as premiums grew 29 per cent, driven in part by the company’s acquisition of British insurance group RSA.
Intact posted operating income of $515-million, or $3.26 a share, up from $350-million, or $2.35 a share, a year earlier. Analysts had expected $2.44 a share, according to Refinitiv data.
Intact’s purchase of RSA’s Canada, UK and international operations, which closed on June 1, also helped boost net investment 9 per cent year-on-year to $154 million, and book value per share by the 44 per cent, the Canadian insurer said.
With the added scale offered by RSA, Intact remains “focused on growing net operating income per share by 10 per cent annually over time and outperforming the industry (return on equity) by 500 (basis points) every year,” Chief Executive Charles Brindamour said in a statement.
Industry profitability has improved over the past year, helped by lower catastrophe-related losses and lower auto claims, the company said. Hard market conditions, one of the characteristics of which is higher premiums, are also expected to continue in the United States and Canada and in the U.K. commercial market, it said.
RSA contributed $734-million, or 17 per cent, of Intact’s total premiums, and $57-million, or 12 per cent of underwriting income, in June, the insurer said.
Intact also recorded a $200-million gain in non-operating income on the difference between RSA’s purchase price and the fair value of its assets, offset by $108-million in expenses related to the deal.
Boeing Co. (BA-N) saw gains as it posted its first quarterly profit in almost two years, as deliveries of its best-selling 737 MAX jets to airlines gained traction amid a sharp rebound in travel bookings following an increase in global COVID-19 vaccinations.
The 737 MAX is integral to Boeing’s financial recovery, as the U.S. planemaker scrambles to recoup billions of dollars in lost sales from the pandemic, and deals with production-related structural defects of its bigger, more profitable 787 planes.
Chief Executive Officer David Calhoun said the company now plans to keep staffing levels stable at around 140,000 employees, after previously targeting a reduction to 130,000 by the end of 2021.
“While our commercial market environment is improving, we’re closely monitoring COVID-19 case rates, vaccine distribution and global trade as key indicators for our industry’s stability,” Mr. Calhoun said in remarks accompanying results.
While he sounded a note of optimism, Boeing’s recovery has been hobbled by low levels of international travel and tensions between Washington and Beijing.
It is also grappling with costly repairs and forensic inspections due to production-related structural defects on its 787 program. It said earlier this month it would cut 787 production after finding a new issue, first reported by Reuters, and would deliver fewer than half of the lingering 100 or so 787 Dreamliners in its inventory this year - instead of the “vast majority” it had expected.
Boeing said it is building 16 737 MAX jets per month at its Seattle-area factory. The company has said it would lift the jet’s output to 31 a month by early 2022.
Boeing’s core operating profit was US$755-million in the second quarter ended June 30, compared with a loss of US$3.32-billion a year earlier.
Revenue rose 44 per cent to about US$17-billion.
Analysts had on average expected Boeing to report a quarterly loss of US$454.8-million on revenue of US$16.54 billion, according to IBES data from Refinitiv.
Alphabet, the world’s largest provider of search and video ads, handily beat analyst estimates. Shares of Facebook (FB-Q), which competes with Google in web ad sales and reports its own results on Wednesday, also rose.
With consumers spending more time online during the coronavirus pandemic, retailers have been pushing to reach them there, whether they’re shopping for products using Google search or watching videos on YouTube. The nascent U.S. economic rebound that’s accompanied the vaccine rollout and the easing of restrictions is also helping as consumers are enjoying increased mobility and options for purchases of all kinds.
“Alphabet has benefited from the general return of ad spend to the market and especially the balance of that return, which is more focused on digital channels than pre-pandemic,” said Tom Johnson, chief digital officer at WPP Mindshare.
Alphabet said revenue from Google advertising rose nearly 70 per cent to US$50.44-billion during the second quarter ended June 30.
Retail brands were the biggest contributor to the ads business’ growth, said Philipp Schindler, Google’s chief business officer, during a call with analysts. The travel, financial services and media and entertainment sectors were also strong, he added.
Ad revenue for the company’s streaming video platform YouTube jumped 83.7 per cent from the year-ago quarter to US$7-billion - nearly as much as Netflix (NFLX-Q) generated in quarterly revenue.
Total revenue for Alphabet rose 61.6 per cent to US$61.88-billion, well above Wall Street estimates of US$56.16-billion, according to IBES data from Refinitiv.
Quarterly profit was US$18.5 billion or US$27.26 per share, beating expectations of US$19.34 per share.
Microsoft Corp. (MSFT-Q) posted its most profitable quarter on Tuesday after the bell, beating Wall Street expectations for revenue and earnings, as PC sales declines stemming from a global chip shortage were more than made up for by a boom in cloud services.
Shares were flat after Microsoft projected that growth in its Azure cloud computing business will continue apace following a quarter in which sales climbed 51 per cent.
Overall revenue rose 21 per cent to US$46.2-billion, beating analysts’ consensus by about US$2-billion, according to IBES data from Refinitiv.
Microsoft’s “guidance was off-the-charts strong and it shows the cloud growth story in Redmond is hitting its next gear,” said Daniel Ives of Wedbush Securities.
Revenue in Microsoft’s “Intelligent Cloud” segment rose 30 per cent to US$17.4-billion, with growth in Azure revenues handily surpassing the 43.1-per-cent jump projected by analysts, according to consensus data from Visible Alpha. Microsoft’s market capitalization stands at nearly US$2.2-trillion, after climbing nearly 30 per cent so far this year, compared with 18 per cent for the overall S&P 500 Index, according to Refinitiv Eikon data based on Monday’s closing price.
It has surpassed the price-to-earnings ratios of tech titans Apple Inc and Google, fueling concerns among some analysts that it may be overvalued.
“Microsoft’s stock has made a big run since the beginning of the pandemic, and is trading at rich multiples,” said Haris Anwar, senior analyst at Investing.com. “After such a powerful rally, its shares may take a breather, especially when investors are still unclear how the demand scenario will evolve in the post-pandemic environment.”
The company reported earnings of US$2.17 per share, above the consensus estimate of US$1.92.
Pfizer Inc. (PFE-N) rose in the wake of raising its forecast for full-year sales of the COVID-19 vaccine that it developed with Germany’s BioNTech by nearly 29 per cent to US$33.5-billion, as nations stock up on doses for the rest of the year.
The company also said on Wednesday it could apply for an emergency use authorization for a potential booster dose as early as August, reiterating that a booster shot will likely be needed in the future.
The raised sales forecast of the vaccine is based on signed deals for 2.1 billion doses, and the company could increase it if it signs additional contracts.
The drugmaker gained a head start in December with the first U.S. emergency authorization of a COVID-19 vaccine, and has since jumped ahead of rivals that have faced manufacturing hurdles. Johnson & Johnson’s vaccine has also been under scrutiny over safety concerns.
Pfizer said it had shipped 1 billion doses of the vaccine to date since December. The companies have a production target of around 3 billion doses this year.
“Prior to the pandemic, Pfizer produced approximately 200 million doses annually across our entire Vaccines portfolio,” Chief Executive Officer Albert Bourla said in prepared remarks ahead of a conference call.
Pfizer also raised its estimate for full-year adjusted profit to between US$3.95 and US$4.05 per share, from its prior expectation of US$3.55 to US$3.65.
On the decline
Shopify Inc. (SHOP-T) was down after it reported its fifth straight profitable quarter Wednesday, capitalizing on a recent strategy to use its clout to take a bigger bite out of the huge spinoff value it has created for ecommerce service providers. The Ottawa-based ecommerce software provider also topped US$1-billion in quarterly revenue for the first time as it continued to benefit from a pandemic-fueled surge in online shopping.
Canada’s most valuable company, which prior to the pandemic had rarely reported a profitable quarter since its May 2015 initial public offering, earned a second quarter net profit of US$879.1-million, or US$6.90 per share, on sales of US$1.12-billion, and earned adjusted net income of US$2.24 per share. The company posted revenue of US$714.3-million and a slim US$36-million profit in the same period a year ago.
Analysts had warned early this year that the company, which provides an online software platform for merchants to run both their ecommerce stores and back-office operations, would struggle to repeat its huge growth pace of the past year as shoppers shifted en masse to online commerce during the pandemic. But they had recently backtracked from that view and upped their targets, predicting, on average, that Shopify’s revenue would hit US$1.04 billion in the quarter and that the company would earn adjusted earnings of US96 cents per share, the key bottom line measure they watch.
- Sean Silcoff
Information technology firm CGI Inc. (GIB.A-T) declined after reporting a nearly 30-per-cent increase in net income in the third quarter despite lower revenues.
The Montreal-based company says it earned $338.5-million or $1.36 per diluted share in the quarter, up from $260.9-million or $1 per share a year earlier.
Adjusted profits for the three months ended June 30 was $339-million or $1.36 per share, up from $308.4-million or $1.18 per share.
Revenues fell one per cent to $3.02-billion from $3.05-billion in the third quarter of 2020, but grew 3.5 per cent excluding currency fluctuations.
CGI was expected to report $340.1-million in adjusted profits on nearly $3.07-billion of revenues, according to financial data firm Refinitiv.
Bookings increased 28 per cent to $3.63-billion in the quarter, pushing its backlog up $1.05-billion to $23.3-billion.
“With robust bookings and cash from operations, we remain well positioned to continue driving profitable growth in the future,” stated CEO George Schindler.
McDonald’s Corp. (MCD-N) was down after its global sales and profit for surged past Wall Street targets on Wednesday as restaurants reopened and consumers lapped up its new crispy chicken sandwich and a wildly popular celebrity meal inspired by South Korean pop band BTS.
Same-store sales for the world’s biggest fast-food chain jumped 40.5 per cent in the second quarter and exceeded the pre-pandemic levels of 2019 for the second straight quarter. Analysts were expecting a 39.81-per-cent rise.
In the past year, fast-food chains have successfully weathered most of the impact from lockdowns, with drive-thrus, competitive pricing and a sharp focus on core menu items powering demand. Besides fresh additions to its menu, sales jump for McDonald’s in the United States was driven by larger order size and menu price increases, which helped it counter industry-wide labor shortages and higher ingredient costs.
“The BTS Meal drove visits to our restaurants and significant lifts in Chicken McNuggets sales — one of our core menu items,” McDonald’s said.
The Grammy-nominated boy band’s meal was launched in nearly 50 countries and includes chicken McNuggets, fries and two dips.
The limited edition meal launch has sparked frenzied excitement among the large fan base of the band and had forced McDonald’s to shut some outlets in Indonesia.
The Toronto-based network management services provider for the mortgage lending and insurance industries reported revenue of $129.4-million, falling short of the consensus projection of $133.2-million. Adjusted earnings per share of 9 cents was 4 cents below analysts’ forecast.
“Despite soft top line results driven by a slowing U.S. Title segment, Real Matters remains confident in achieving its long-term market share goals,” said ATB Capital Markets analyst Martin Toner. “Declining more than the market in U.S. Title is a surprise. The Company is making changes to accommodate new large Tier 1 Title customers, which may have factored into the share loss in the quarter. U.S. Title retreated 22.2 per cent year over year, compared with an estimated 0.5-per-cent decrease in the refinance origination market.”
Apple Inc. (AAPL-Q) said late Tuesday that a global chip shortage that has bit into its ability to sell Macs and iPads will start to affect iPhone production and forecasted slowing revenue growth, sending its shares,, whose valuation has more than doubled in about three years to nearly US$2.5-trillion, lower.
Apple executives said revenue for the current fiscal fourth quarter will grow by double-digits but be below the 36.4-per-cent growth rate in the just-ended third quarter. Growth will also slow in Apple’s closely watched services business, they said.
In a conference call with investors, Apple executives also said that while the impact of the chip shortage was less severe than feared in the third quarter, it will get worse in the fourth, extending to iPhone production.
Earlier in the day, Apple reported third-quarter sales and profits that beat analyst expectations as consumers bought premium versions of its 5G iPhones and signed up for its subscription services. China sales grew 58 per cent to US$14.76-billion in the quarter, which ended June 26.
Driven by the better-than-expected iPhone sales, total revenue hit US$81.43-billion, above analyst expectations of US$73.30-billion, according to IBES data from Refinitiv. Apple’s profits were US$21.74-billion, or US$1.30 per share, above estimates of US$1.01 per share, according to Refinitiv.
During the investor call, Chief Executive Tim Cook said that chips affected by the shortages are made with older technology but are still needed as supporting parts to make the company’s flagship device, the iPhone.
“We do have some shortages,” Mr. Cook said, “where the demand has been so great and so beyond our own expectation that it’s difficult to get the entire set of parts within the lead times that we try to get those.”
Apple had told investors last quarter that the chip shortage could hold back sales by US$3-billion to US$4-billion.
In an interview on Tuesday, Mr. Cook told Reuters that the hit to overall revenue in the third quarter was “lower than the low end” of its previously forecasted range.
Starbucks Corp. (SBUX-Q) was down despite forecasting fourth-quarter sales above Wall Street estimates on Tuesday as headwinds in China due to travel restrictions related to COVID-19 are expected loom longer than expected.
The coffee chain forecast comparable sales for its current quarter to grow 18 per cent to 21 per cent, expecting strength in the Americas. Analysts on average expect growth of 17.5 per cent, according to IBES data from Refinitiv.
But the Delta variant of the coronavirus has triggered a surge of new COVID-19 cases and the reinstatement of mask rules in some places.
The United States said on Monday that it will not lift existing travel restrictions.
In the third quarter ended June 27, sales rose 19 per cent in China - Starbucks’ biggest growth market - despite a resurgence of COVID-19 in the south, Belinda Wong, chief executive officer of Starbucks China, said on a call with analysts.
Starbucks lowered its fiscal 2021 forecast for China sales growth to 18-20 per cent from 27-32 per cent, and it dropped its international sales forecast to 15-17 per cent from 25-30 per cent.
The company’s previous guidance for China had “assumed a shorter time frame for the lifting of travel restrictions and also less of the uncertainties that we have faced in the market,” Ms. Wong said of the revision.
The volatility is “only temporary” and the company is on track to add more than 600 net new stores in China this fiscal year, she said.
With files from staff and wires