A roundup of some of the North American equities making moves in both directions today
On the rise
Calgary-based Sylogist Ltd. (SYZ-T) rose following the announcement after the bell on Tuesday of several new customer wins, including a $3-million deal with Serenic Navigator and a $500-million contract with a major Canadian healthcare non-profit.
The software company, which provides enterprise resource planning (ERP) solutions, now expects its pace of growth to “accelerate over the coming months, reaching the high single digits in FY2022.”
Acumen Capital analyst Jim Byrne said: “We view the press release as positive for SYZ as it demonstrates the growth trajectory should improve over the coming quarters. Following the company’s recent acquisitions and investments made in their sales, marketing, and product innovation, we believe SYZ is well positioned for FY22 and beyond.”
On the decline
Shares of Royal Bank of Canada (RY-T) finished lower Wednesday after it reported higher fourth-quarter profit and raised its dividend by 11 per cent but earnings fell shy of analysts’ estimates despite strong performance from its core retail banking unit.
The Toronto-based bank lifted its quarterly dividend to $1.20 per share, and also announced a plan to buy back up to 45 million shares - about 3.2 per cent of shares outstanding.
For the three months that ended Oct. 31, RBC earned $3.9-billion, or $2.68 per share, compared with $3.2-billion, or $2.23 per share, in the same quarter last year.
Adjusted for certain items, RBC said it earned $2.71 per share. On average, analysts expected adjusted earnings per share of $2.81, according to Refinitiv.
For the full 2021 fiscal year, RBC reported revenue of $49.7-billion, up 5 per cent from 2020.
RBC is the second major bank to report fourth-quarter earnings after Bank of Nova Scotia (BNS-T) released results that topped analysts’ expectations and also raised its dividend by 11 per cent on Tuesday.
- James Bradshaw
National Bank of Canada (NA-T) declined after it reported higher fourth-quarter profit driven by strong retail banking results and raised its dividend by 23 per cent but missed analysts’ estimates as financial markets earnings cooled.
Montreal-based National Bank hiked its quarterly dividend to 87 cents per share on Wednesday and announced plans to buy back up to 2 per cent of its shares - about 7 million shares in total.
For the fiscal fourth quarter that ended Oct. 31, National Bank earned $776-million, or $2.19 per share, compared with $492-million, or $1.36 per share, in the same quarter last year.
After adjusting to exclude some items, National Bank said it earned $2.21 per share. On average, analysts expected adjusted earnings per share of $2.24, according to Refinitiv.
Revenue for the full 2021 fiscal year was $8.9-billion, up 13 per cent from 2020.
- James Bradshaw
Cenovus Energy Inc. (CVE-T) dipped after announcing late Tuesday it has agreed to sell its retail fuels network and assets in Wembley, Alta., in two separate deals worth about $660-million, as the oil and gas producer looks to shed non-core assets to repay debt.
Cenovus, which acquired Husky Energy earlier this year for about $5 billion, has set an interim net debt target of $10-billion and is expecting to meet that goal by offloading assets not central to its operations.
The company said it would sell 337 gas stations in its Husky retail fuels network to Parkland Corp. (PKI-T) and Federated Co-operatives Ltd for $420-million, while retaining its commercial fuels business.
It, however, did not disclose the buyer of its Wembley assets, where total production averaged about 3,200 barrels of oil equivalent per day in 2021, with about 38-per-cent oil and natural gas liquids.
“With these latest transactions, we now expect to realize more than $1.1 billion of total proceeds from sales announced in 2021,” Cenovus Chief Executive Officer Alex Pourbaix said.
In a research note, Raymond James analyst George Huang said: “While the sale of these assets was largely expected, it is nonetheless positive to see the Company bring additional cash in the door to help accelerate deleveraging efforts which will ultimately support a more rapid inflection in the cash return profile of the business. Recent developments at the Company including the divestitures announced yesterday are why we continue to view CVE as the best rate-of-change story within our large-cap coverage. This combined with the Company’s significant valuation discount relative to peers supports our Outperform rating.”
On Parkland, iA Capital Markets analyst Elias Foscolos said: “Although the size of the acquisition is not too significant (we estimate 7 per cent on PKI’s 2021E Canada EBITDA on a post-synergy basis), we believe that PKI will be able to generate synergies to drive accretion from the acquisition. Additionally, we believe that the acquisition will enable the ‘Diversify’ pillar of PKI’s strategy, providing the opportunity to leverage the well-recognized Husky forecourt brand to create high-quality convenience destinations and grow earnings contribution from the acquired retail sites.”
GFL Environmental Inc. (GFL-T) fell after Canada’s Competition Bureau said on Wednesday it was challenging its purchase of Terrapure Environmental Inc, saying the deal would harm customers of industrial waste and oil recycling services.
In a statement, the bureau said Terrapure had been GFL’s closest competitor in western Canadian markets before being bought for $927-million in August. It said the deal was likely to cause substantial lessening of competition in three western Canadian provinces.
Toronto-based Celestica Inc. (CLS-T) turned negative after reaffirming its financial guidance for the fourth quarter of 2021.
““Despite the unique challenges presented by the constraints on global supply chains, the demand backdrop and mix of business remains strong across the majority of our end markets, and the great work of our entire global team has allowed us to continue to execute. Based on these factors, we are reaffirming our guidance for Q4 2021,” said president and CEO Rob Mionis in a press release. “As we approach the end of our fiscal year, we remain firmly on track to achieving our goals of returning to top-line growth and realizing a record quarterly non-IFRS operating margin. Additionally, our outlook continues to be positive heading into 2022.”
Celestica continues to expect revenue in the range of US$1.425-billion to US$1.575-billion and adjusted earnings per share of 35 US cents to 41 US cents.
BRP Inc. (DOO-T) erased early gains after it beat expectations with a third-quarter profit of $127.7-million amid supply chain disruptions that caused a drop in product deliveries.
The maker of Ski-Doos and Sea-Doos says its profit amounted to $1.53 per diluted share for the quarter ended Oct. 31, down from a profit of $198.7-million or $2.22 per diluted in the same quarter last year. Revenue totalled $1.6-billion, down from $1.7-billion.
BRP says its normalized earnings per share amounted to $1.48, down from $2.13 a year ago.
Analysts on average had expected an adjusted profit of $1.33 per share, according to financial markets data firm Refinitiv.
In its outlook, BRP says it now expects normalized earnings per diluted share between $9 and $9.75 for its full financial year, compared with its earlier expectations for a result between $8.25 and $9.75.
The company says revenue growth for the year is now expected to be between 25 and 30 per cent, compared with earlier guidance for growth between 27 and 35 per cent.
Separately, BRP announced approved the renewal of its normal course issuer bid to purchase for cancellation up to 3.79 million subordinate voting shares, representing approximately 10 per cent of the public float.
In a research note, Desjardins Securities analyst Benoit Poirier said: “Overall, we are very pleased with BRP’s performance in 3Q, which demonstrated once again management’s ability to deliver solid results despite ongoing supply chain issues. Management’s confidence for FY23 should also reassure investors that FY22 results do not represent peak earnings. We encourage investors to buy the shares this morning.”
Lithium Americas Corp. (LAC-T) dropped after announcing an offering of US$225-million in convertible senior notes after the bell on Tuesday.
The Vancouver-based company plans to use the proceeds to repay its indebtedness.
Twitter Inc. (TWTR-N) was lower on news Cathie Wood’s ARK Investment Management bought more than a million shares on Tuesday, a day after Jack Dorsey stepped down as the chief executive of the social networking site.
ARK acquired 1.1 million Twitter shares worth US$48.9-million at Tuesday’s closing price of US$43.94, according to the firm’s daily trade report. Twitter closed down 4.02 per cent on the day.
On Monday, after the company named its technology chief Parag Agrawal as the CEO, the shares slid 2.7%.
Ark on Tuesday also bought 837,248 shares of online brokerage firm Robinhood Markets Inc. (HOOD-Q) worth US$21.7-million. It had on the previous day bought 915,063 shares, taking an advantage of a pullback in shares
Salesforce.com Inc. (CRM-N) dropped after it forecast current-quarter profit below Wall Street estimates on Tuesday as it faces stiff competition from rivals including Microsoft Corp. (MSFT-Q)
The San Francisco, California-based company also picked insider Bret Taylor to co-lead the company alongside top boss Marc Benioff.
Mr. Taylor was named the chairman of Twitter Inc’s board on Monday. He will also be the vice chair of Salesforce’s board, effective immediately, the company said.
Salesforce, a bellwether in the Customer Relationship Management (CRM) sector, has seen a boost in demand due to the pandemic accelerating businesses’ transition to cloud-based platforms.
However, the company continues to face stiff competition from competitors including Microsoft Corp’s Azure, Amazon.com Inc’s Amazon Web Services and Alphabet Inc’s Google Cloud.
Salesforce said it expected adjusted earnings in the fourth quarter to be between 72 US cents and 73 US cents per share, below estimates of 81 US cents per share, according to IBES data from Refinitiv.
The company also forecast first-quarter revenues to be between US$7.22-billion and US$7.25-billion, compared with estimates of US$7.36-billion.
Exxon Mobil (XOM-N) finished flat after it set annual capital spending through 2027 at US$20-billion to US$25-billion, allocating money to low-carbon projects and extending its previously projected spending rate for two years.
The top U.S. energy producer slashed costs after a historic US$22.4-billion loss last year. But an oil-price rebound this year has generated strong profits that let Exxon pay down debt, maintain its dividend and fund a new low-carbon business. The budgets extend a plan Exxon set last year to spend US$16-billion to US$19-billion this year and between US$20-billion and US$25-billion to 2025.
Wall Street has been waiting for Exxon to outline a short list of projects it will pursue and detail those it has decided to eliminate. What could be an approximately 55-per-cent increase over this year’s capital budget could disappoint investors hoping for less spending and higher shareholder returns.
Exxon’s higher spending “is designed to create shareholder value,” Chief Executive Darren Woods said in a statement. The wide annual range allows for the “flexibility to respond to future policy changes and technology advances associated with the energy transition,” he said.
“With little change in the spending ranges we see the update as largely neutral for shares,” Tudor, Pickering, Holt equity analyst Matt Murphy said in a note.
The budget was approved by a board that includes three new members elected in the spring by investors demanding the company cut spending, boost returns and better address climate concerns.
Ahead of Exxon’s disclosure, oil analyst Paul Sankey said he was worried it would continue spending at the US$20-billion to US$25-billion annual rate. “Less capex is more cash return,” Mr. Sankey wrote on Tuesday, saying past spending on production growth “led to falling upstream returns.”
Exxon sought to allay fears of overspending. It can now sustain its dividend program with oil prices at US$35 per barrel, a reduction from the “well below” US$50 per barrel disclosed last month. Exxon also boosted the estimate for the return on average capital employed to 17 per cent in 2027 from 14 per cent in 2025, both key metrics to calculate dividend sustainability.
With files from staff and wires
David Leeder