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A roundup of some of the North American equities making moves in both directions today

On the rise

Coca-Cola Co. (KO-N) raised its full-year profit forecast on Wednesday, indicating that higher prices and demand for its sodas across the globe were helping it counter a profit squeeze from supply chain disruptions.

The beverage giant’s shares gained ground as it also beat estimates for third-quarter revenue and profit.

Coca-Cola’s revenue surged 16 per cent to US$10.04-billion in the quarter, as the reopening of public venues such as theaters, stadiums and restaurants across the world led to a rebound in demand for its soft drinks.

Unit case volumes, a key indicator of demand, were up 6 per cent in the reported quarter, with Europe, Middle East, Africa and Latin America markets being their major drivers.

The average value of products sold also rose 6 per cent, after Coca-Cola raised prices to counter some of the impact from surging commodity and freight costs created by clogged shipping ports, a labor shortage and the pandemic.

Other companies, including PepsiCo (PEP-Q) and consumer goods giants Unilever (UL-N) and Procter & Gamble (PG-N), have warned that they would have to increase prices again to counter persistent supply-chain bottlenecks.

PepsiCo, which raised prices recently, said this month it would likely implement more hikes again early next year to overcome everything from a shortage of Gatorade bottles to a lack of truck drivers.

“While Coke is not immune to inflation, and could see more of it next year, improvements in its operations and new product innovation should help offset at least some of the impact from rising costs,” Edward Jones analyst John Boylan said.

Coca-Cola expects its annual adjusted earnings per share to rise 15 per cent to 17 per cent, compared with a prior forecast of a 13 per cent to 15-per-cent increase.

On an adjusted basis, the company earned 65 US cents per share in the third quarter, beating analysts’ estimates of 58 US cents, according to IBES data from Refintiv.

McDonald’s Corp. (MCD-N) reported quarterly U.S. sales on Wednesday that beat Wall Street expectations, helped by higher prices, larger order sizes and newer menu items such as the crispy chicken burger.

The company’s shares rose, as the fast food giant’s global same-store sales jumped 12.7 per cent in the third quarter ended Sept. 30, compared with estimates of a 10.31-per-cent rise, according to Refinitiv IBES data.

With pandemic-related restrictions easing and restaurants opening at full capacity, McDonald’s has been gaining market share from competitors by investing in new menu items such as the crispy chicken sandwich and its “Famous Orders” campaign with pop stars including South Korean boy band BTS and rapper Saweetie.

The company, which has been seeking to grow sales digitally, launched a new loyalty program in the United States, while also doubling down on advertising.

The upbeat results from McDonald’s is in contrast to some other restaurant chains such as Domino’s Pizza Inc. (DPZ-N) and Burger King-owner Restaurant Brands International Inc. (QSR-T) that flagged a slowdown due to the tight labor market.

Several food service chains, including McDonald’s, have had to bump up menu prices to counter rising labor costs and food inflation.

Comparable sales for McDonald’s in the U.S. rose 9.6 per cent in the reported quarter, and was higher than expected, which the company attributed in part to increased menu prices and customers buying more items per order.

Most of the company’s international markets also returned to sales growth, especially the UK, Canada and Japan, as coronavirus-related restrictions eased, while Australia and China sales continued to be pressured due to the resurgence of COVID-19 cases.

McDonald’s total revenue increased 14 per cent to US$6.20-billion in the reported quarter, beating expectations of US$6.03-billion.

Net income rose 22 per cent to US$2.15-billion and the company earned US$2.76 per share on an adjusted basis, beating estimates of US$2.46 per share.

Microsoft Corp. (MSFT-Q) was up as it forecast a strong end to the calendar year thanks to its booming cloud business but said supply chain woes will continue to dog key units such as those producing its Surface laptops and Xbox gaming consoles.

The company beat Wall Street expectations for its fist quarter ended Sept. 30, with pandemic-induced demand for the software giant’s cloud-based services driving sales.

Contracts for cloud services provided by Microsoft, Inc’s AWS and Alphabet Inc-owned Google Cloud have surged since last year when the COVID-19 pandemic shut offices and schools, pushing more activity online.

First-quarter revenue growth for Azure, the company’s flagship cloud-computing business, came in at 48 per cent in constant currency to beat analysts’ estimates of 47.5 per cent, according to consensus data from Visible Alpha. Amy Hood, executive vice president and chief financial officer of Microsoft, said that the company also expected “broad based growth” for the unit in the fiscal second quarter.

Azure’s growth rate is the best direct measure of competition with rivals such as AWS and Google Cloud as Microsoft does not break out revenue from the cloud-computing unit.

Microsoft appeared to hold off Google Cloud’s rising challenge. Google Cloud said on Tuesday its revenue surged by 45 per cent to US$4.99-billion, but failed to live up to estimates of US$5.2-billion.

Revenue at the firm’s other business units that house Windows software, the Teams messaging service and LinkedIn professional social networking platform also beat analyst expectations.

Overall, revenue rose 22 per cent to US$45.32-billion in the first quarter ended Sept. 30, beating expectations of about US$43.97-billion.

Net income rose to US$20.51-billion, or US$2.71 per share. The company said its results included a US$3.3-billion net income tax benefit.

On an adjusted basis it earned US$2.27 per share, trumping analyst expectations of US$2.07 per share.

For the fiscal second quarter, Microsoft predicted a midpoint of US$18.23-billion in revenue for its intelligent cloud business for the fiscal second quarter, above estimates of US$17.84-billion, according to Refinitiv data.

First-quarter revenue from “Intelligent Cloud” surged 31 per cent to US$17-billion. Analysts had expected a figure of US$16.58-billion, according to Refinitiv data.

Microsoft’s forecast for its software app and Windows centric segments with midpoints of US$15.83-billion and US$16.55-billion, respectively, were also above Refinitiv estimates of US$15.40-billion and US$15.51-billion.

Google owner Alphabet Inc. (GOOGL-Q, GOOG-Q) was higher after it reported higher than expected third-quarter ad sales, a sign that the business is overcoming new limits on tracking mobile users and that online shopping is as popular as ever heading into the holiday season.

Through its search engine, YouTube video service and partnerships across the Web, Google sells more internet ads than any other company. Demand for its services surged in the past year as the pandemic forced people to spend more time online, and their new habits have persisted.

Google advertising revenue rose 41 per cent to US$53.1-billion during the third quarter. Alphabet’s overall sales jumped to US$65.1-billion, above the average estimate of US$63.3-billion among analysts tracked by Refinitiv.

“The consumer shift to digital is real and will continue even as we start seeing people return to stores,” said Philipp Schindler, Google’s chief business officer. “The underlying takeaway is that people want more choice, they want more information, more flexibility, and we don’t see this reversing.”

Quarterly profit was US$18.936-billion or US$27.99 per share, beating expectations of US$24.08 per share and marking a third-straight quarter of record profit. Alphabet’s profit is subject to wide fluctuations because accounting rules require the company to measure unrealized gains from its investments in startups as income.

Investors had braced for some sales challenges for Google.

Anxiety by consumers over how Google and other companies use their browsing behavior to profile them and then pick which ads to show has become widespread. In the latest challenge, Apple Inc, whose iPhones account for half of the smartphones in the United States, gave its users more control to stop tracking over the past few months. The change led advertisers to recalibrate their spending in ways that Google rivals Snap Inc and Facebook Inc said hurt their third-quarter sales.

Alphabet shares have outperformed those of many big peers since the end of last year, rising about 57 per cent. Microsoft is up 39 per cent, Facebook 20 per cent and Amazon 2 per cent over the same period.

But shares of Alphabet trade at a slight discount to Facebook, the internet’s No. 2 seller of online ads. Facebook trades at 6.8 times expected revenue over the next 12 months compared with 6.4 times for Alphabet.

U.S. hotel operator Hilton Worldwide Holdings Inc. (HLT-N) gained after beating revenue estimates for the third quarter on Wednesday, as easing pandemic restrictions drive a recovery in leisure travel.

“Leisure travel remained strong and business travel continued to pick up during the quarter,” Chief Executive Officer Christopher Nassetta said, adding global tourism is likely to see a strong recovery in months and years ahead.

Hotel operators around the world, including Hilton, are seeing occupancy rates inch towards pre-pandemic levels amid rising vaccination rates.

However, labour shortages in the U.S. and tighter social restrictions in southeast Asia, especially in China, continue to weigh on the tourism and hospitality sectors.

Occupancy in Hilton’s Asia Pacific region came in at 49.5 per cent for the third-quarter, down 4.8 per cent from a year ago.

The company reported total expenses in the quarter of US$1.31-billion, up 42 per cent versus last year.

But comparable RevPAR OR ‘revenue per available room’, a key performance measure for the hotel industry, was US$90.39 for the quarter, about 98.7 per cent higher than the same period last year.

Revenue in the quarter rose 87.5 per cent to US$1.75-billion, beating estimates of US$1.65-billion, according to IBES data from Refinitiv.

However, excluding items, Hilton earned 78 US cents per share, missing analysts’ average estimate of 85 US cents per share.

On the decline

Miner Teck Resources Ltd (TECK.B-T) was down after it reported an eight-fold jump in third-quarter adjusted profit on Wednesday, driven by higher prices for steelmaking coal on the back of surging demand from China.

See also: Teck warns construction costs likely to be higher at QB2 copper mine

Limited supply of coal and higher demand from economies recovering from the COVID-19 pandemic have boosted prices for coal used in making steel.

Coal prices in China have also increased steadily since the middle of the 2020 fourth quarter, when China imposed import restrictions on Australian coal.

Teck said its prices for steelmaking coal more than doubled to $237 per ton, while production rose 17.6% to 6 million tonnes.

It now expects fourth-quarter sales of steelmaking coal of between 6.4 million and 6.8 million tons, while record prices in Australia and China in September are expected to bolster the steelmaking division’s earnings in the same period.

Copper prices also rose 43 per cent, while production was up 4.4 per cent.

Teck said it was expecting the initial production from its Quebrada Blanca Phase 2 project, considered one of the world’s largest undeveloped copper resources, in the second half of 2022. Construction was temporality halted at the project last year due to the pandemic.

The company stuck to its previously issued forecast for 2021 but warned of cost pressures in 2021 and into 2022, due to inflation from diesel prices, supplies and labour costs.

Adjusted profit rose to $1.02-billion, or $1.88 per share, in the quarter from $130-million, or 24 cents per share, in the previous quarter.

That compared to analysts’ average estimates of $1.50 per share, according to Refinitiv IBES.

First Quantum Minerals Ltd. (FM-T) fell in the wake of the release of third-quarter results after the bell on Wednesday that largely met the Street’s expectations.

The miner reported revenue and adjusted earnings per share of $1.802-million and 28 cents, versus the consensus forecasts of $1.801-million and 28 cents.

“Overall, an in line quarter and FM remains on track to achieve guidance,” said iA Capital Markets analyst Puneet Singh in a research note. “We expect FM’s deleveraging of its balance sheet, continued unwinding of hedges, and growth from CP to lead to a further push higher in the Company’s shares in the coming year as copper prices rise.”

Algonquin Power & Utilities Corp. (AQN-T) shares were down after announcing late Tuesday it has agreed to acquire Kentucky Power Company for US$2.846-billion from American Electric Power.

To help pay for the acquisition, Algonquin has agreed to a bought deal financing with a syndicate of underwriters in which they will purchase 44.080 million common shares at a price of $18.15 per share. There is also an overallotment option, which if exercised in full, will mean gross proceeds of the deal will be worth $920-million.

Capital Power Corp. (CPX-T) dropped with the release of weaker-than-anticipated third-quarter results.

ATB Capital Markets analyst Nate Heywood said: “Overall, we view the print as neutral considering Adjusted EBITDA of $286-million fell shy of Consensus ($304-million) by almost 6 per cent but the suspension of the DRIP and messaging around guidance are offsetting. Aside from lower than anticipated results in the Alberta commercial business, the contracted segments were in-line. The Alberta commercial business was impacted by the forced outage at the Genesee 2 facility, which is expected to remain offline until late-Q4/21, and hedging challenges. In addition to the Q3/21 release, Capital power continues to guide towards the mid-point of 2021 Adjusted EBITDA of $1,090-$1,140-million ($830-million year-to-date) and modestly above the mid-point for AFFO of $570-$620-million ($456-million YTD).”

Twitter Inc. (TWTR-N) fell after it reported its quarterly revenue grew 37 per cent and avoided the brunt of Apple Inc. (AAPL-Q) privacy changes on advertising that hobbled its rivals

The social networking site has been working to add new features such as audio chat rooms to attract users, and also rolled out improvements to its advertising capabilities to reach its goal of doubling annual revenue by 2023.

Advertising revenue was US$1.14-billion during the quarter ended Sept. 30, in line with consensus estimates.

The company said it saw a “modest” impact to ad revenue due to privacy changes Apple rolled out, which prevent advertisers from tracking users on their devices without their consent.

Investors had expected Twitter would be relatively shielded from being hurt by the changes, because most of its advertisers do not rely on highly targeted ads.

As the San Francisco-based company works to expand its targeted advertising business, it is introducing more features like topics that users can follow on Twitter. Those features provide data on people’s interests that can eventually be used to help deliver relevant ads, said Twitter Chief Financial Officer Ned Segal, during a conference call with analysts.

“A lot of this is opportunity that’s in front of us,” he said.

Twitter said monetizable daily active users, its term for users who are served ads, was 211 million during the third quarter, missing analyst estimates of 212.6 million, according to IBES data from Refinitiv.

While Twitter increased its number of users outside the United States by 5 million from the previous quarter, its U.S. base remained flat.

Total revenue, which also includes money that Twitter earns from data licensing, was US$1.28-billion, also in line with Wall Street targets.

Twitter said its costs this year from hiring and investing in a new data center will flow into next year, resulting in a mid-20-per-cent increase in total costs for 2022.

The company forecast fourth quarter revenue between US$1.5-billion to US$1.6-billion.

Boeing Co. (BA-N) lost early gains as it eked out a small adjusted profit in the third quarter, helped by a ramp-up in deliveries of its once best-selling 737 MAX jets amid a rebound in global air travel, but the company booked charges on its problem-plagued 787 and Starliner spacecraft programs.

The 737 MAX and 787 Dreamliner aircraft are integral to the U.S. planemaker’s ability to recoup billions of dollars in lost sales from the pandemic and move beyond the safety scandal caused by two fatal crashes.

On the 787 widebody program, Boeing said it incurred abnormal costs of roughly US$1-billion - or US$183-million in the quarter - due to inspections and repairs from structural defects embedded in the jets over the last two years, confirming for the first time a price tag first reported by Reuters in February.

Boeing also booked a charge of US$185-million on its long-delayed Starliner astronaut capsule it is developing under NASA’s Commercial Crew Program, due to delays and repairs from stuck fuel valves that sidelined the spacecraft after its last flight attempt.

The company reported a core operating profit of US$59-million in the quarter, compared with a loss of US$754-million a year earlier.

Revenue rose to about US$15.3-billion, fueled by 737 MAX deliveries and growth in Boeing’s services unit as it sees recovery in the air travel market.

Boeing also said it was currently building nineteen 737 MAX jets per month, up from the 16 last quarter.

It also said it has been producing about two jets monthly at its South Carolina factory with plans to go back to an already slow rate of five a month at some future point.

General Motors Co. (GM-N) was down in the wake of reporting stronger-than-expected results for the third quarter, despite a drop in revenue and profit, and said full-year earnings would be at the high end of its previous forecast.

GM said adjusted earnings per share in the quarter dropped to US$1.52, from US$2.83 a year earlier, citing the global semiconductor shortage. Analysts had expected 96 US cents a share.

Revenue dropped to US$26.8-billion, from US$35.5-billion in the year-ago quarter, while profit fell to US$2.4-billion, from US$4.0-billion a year earlier.

Adjusted earnings before interest and taxes dropped to US$2.9-billion from US$5.3-billion, while net margin dipped to 9.0 per cent from 11.4 per cent.

In a letter to shareholders, Chief Executive Mary Barra said, “We now believe GM’s full-year results will approach the high end of our guidance, which is for EBIT-adjusted in the range of $11.5 billion to $13.5 billion.”

GM said third quarter results dropped mainly because of lower wholesale shipments to dealers due to the continuing shortage of chips and increased commodity and logistics costs.

The company said the negative impact was partially offset by strong pricing on full-size pickups and SUVs and an agreement by supplier LG Electronics to cover most of the anticipated US$2-billion in costs related to the recall of the Bolt EV and Bolt EUV.

Adjusted automotive free cash flow was a negative US$4.4-billion, compared with a positive US$9.9-billion a year earlier. GM said the drop reflected the impact of work-in-process inventory of vehicles produced but missing some semiconductors.

“We expect to clear the majority of our work-in-process inventory but anticipate some inventory will remain at year end.” the company said.

Robinhood Markets Inc.’s (HOOD-Q) shares dropped further after they fell below their initial public offering price in after-hours trading on Tuesday in the wake of the retail broker reporting softer revenue than expected for the third quarter as trading levels declined for cryptocurrencies like dogecoin.

Shares of Robinhood slid below the US$38 they were priced at in the Menlo Park, California-based company’s July IPO and well below the $85 they hit in August.

Robinhood, which owns the app that was at the center of January’s trading mania for so-called meme stocks, said in August it expected retail investors to take a breather in the third quarter.

The slowdown in retail trading, one of the standout market trends of the COVID-19 era, comes as vaccine rollouts in the United States have helped allow the country to ease pandemic restrictions and activities like sports and other entertainment to resume.

“Looking back at Q2, we saw a huge interest in crypto, especially doge, leading to large numbers of new customers joining the platform and record revenues,” Robinhood Chief Executive Officer Vlad Tenev said on a call with analysts.

“In Q3, crypto activity came off record highs, leading to fewer new funded accounts and lower revenue.”

Last quarter, trading in dogecoin - a token started as a joke - made up 62 per cent of Robinhood’s cryptocurrency transaction volume.

Crypto revenue rose 860 per cent from a year earlier to US$51-million, but was 78 per cent off its second quarter level, Robinhood said.

Equities trading revenue fell 27 per cent from a year ago to US$50-million.

Total revenue rose 35 per cent from a year earlier to US$365-million.

Analysts had expected revenue of US$431.38-million, according to IBES data.

Robinhood said it had 22.4 million funded accounts, down slightly from last quarter, but up 96.5 per cent from a year earlier.

The retail trading slowdown has carried over into the current quarter, Robinhood said.

With files from staff and wires

Follow David Leeder on Twitter: @daveleederOpens in a new window

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