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On the rise

Exchange Income Corp. (EIF-T) jumped o Wednesday after it reported record first-quarter results and announced the completion of two acquisitions.

The first was the acquisition of Northern Mat & Bridge of Calgary for $325-million, which it said was its largest purchase to date. The company said the acquisition was funded by issuing $35-million of its common shares and $290-million in cash from its credit facility.

EIC has also acquired Advanced Paramedic Ltd of Peace River, Alta for $15-million. It said the purchase was funded by issuing $2-million shares to the vendors and $13-million in cash from its credit facility.

The company also reported record-high revenue of $400-million for its first quarter, an increase of 33 per cent versus a year ago. The expectation was for revenue of $339-million.

Net earnings came in at $4-million or 10 cents per share compared to net earnings of $7.1-million or 20 cents a year ago. Adjusted net earnings of $7.8-million for the quarter, or 20 cents per share, compared to $10.5-million or 30 cents per share a year ago.

Before the bell, Scotia Capital analyst Konark Gupta upgraded his rating for Exchange Income shares, saying: ““Since the start of the pandemic, our primary concerns were headwinds facing EIF’s dominating segment (aviation), lack of visibility on cash flows when government support ends, and stock’s rich valuation vs. history. However, our long-term earnings outlook has now significantly improved (more than 20 per cent) on the latest acquisition, while valuation has become highly attractive as the stock has underperformed over the past several months (down 8 per cent year-to-date).”

Intact Financial Corp. (IFC-T) was flat after saying its net income fell in the first quarter compared with a year ago while its revenues rose.

The insurer says it had a net income of $447-million for the quarter ending March 31, compared with $514-million for the same quarter last year.

Earnings came in at $2.53 per share, down from $3.51 per share last year.

Net operating income per share, however, was up 13 per cent to $2.70 compared with the $2.40 per share in the same quarter last year.

Revenues totalled $5.3-billion for the quarter, up from $3.05 billion in the first quarter last year.

Analysts had expected revenue of $4.86-billion and net income of $397.6-million, according to financial markets data firm Refinitiv.

MDA Ltd. (MDA-T) was higher after reporting net income of $8.4-million in its first quarter compared with a net loss of $1.6-million in the same quarter last year as its revenue edged up four per cent.

The space technology firm says its profit amounted to seven cents per diluted share for the quarter ended March 31 compared with a loss of two cents per diluted share a year earlier.

Revenue totalled $128.4-million, up from $123.4-million in the first three months of 2021.

The company says revenue at its robotics and space operations business rose to $42.4-million compared with $34.3-million a year ago, while its geointelligence business reported $48.9-million in revenue, down from $49.0-million last year.

Revenue at MDA’s satellite systems business fell to $37.1-million compared with $40.1-million a year earlier.

MDA’s backlog at March 31 stood at $1.52-billion, up from $684.7-million at the end of March last year and $864.3-million at Dec. 31, 2021.

Stella-Jones Inc. (SJ-T) saw gains with the premarket release of better-than-anticipated first-quarter results, driven by higher sales and pricing power.

The Montreal-based manufacturer of pressure treated wood products reported revenue of $651-million, up 4.5 per cent year-over-year and above the Street’s forecast of $589-million. Adjusted earnings per share of 73 cents beat the consensus projection by 5 cents.

“SJ reiterated its prior medium-term guidance,” said National Bank Financial’s Maxim Sytchev said in a note. “As a refresh, post Q4/21, the company outlined a plan to increase capital returned to shareholders by 50 pe cent over the next three years to $500-$600-million in the form of NCIB and dividends. The company will expand its capex program in the utility poles segment (that will see high single-digit organic growth) by $90-100-million. Resi price normalization after 2021 highs will reduce sales as a percentage of the total to around 20 per cent (in Wednesday’s press release management is looking for the busy summer season to better gauge the divisional outlook). With growth in other segments expected to be more visible, the company sees ties, utilities and industrial product categories to represent 75-80 per cent of the top line.”

“SJ shares are down 14 per cent year-to-date, 200 basis points better than tech-laden S&P 500 but lagging TSX at down 6 per cent (KOP:NYSE – not rated is down 26 per cent). As was the case last quarter, Koppers’ weakish RUPS results did not translate into SJ’s disappointment; more than anything else, the company appears to be effectively managing the fluid supply/inflation dynamic by leaning into its pricing power, even though there are some lagging dynamics. Under previous management’s leadership (and greater amount of M&A), the shares had gotten to as high as 14 times EV/EBITDA; now, they are fetching 8.1 times 2022; Wednesday morning’s print is also not suggesting to us that there is a need for negative earnings revisions, making the multiple a real number. With sectoral rotation out of unprofitable, high-multiple names, we are still waiting for SJ to catch a bid but this classical value name, with now a more deliverable return of capital strategy should provide a respectable risk-adjusted return on prospective basis.”

Equitable Group Inc. (EQB-T) gained as it reported its “best-ever quarter of earnings” for the period ended March 31.

The company said its revenue was $187.7-million up from $150.2-million a year ago. Net interest income was $162.2-million, which was ahead of expectations of $160.5-million, up from $133.9-million a year ago.

Net income of $87.9-million or $2.51 per share compared to net income of $68.1-million or $1.98 per share a year ago. The result was above expectations of $2.10 per share.

Equitable also announced a 4-per-cent increase to its quarterly dividend to 29 cents per share or $1.16 annualized.

In a research note, TD Securities analyst Graham Ryding said: “Equitable delivered a solid beat, with originations and loan growth above expectations, and 2022 guidance re-affirmed. Credit trends were constructive and the CET 1 ratio ticked higher. Adjusting for some arguably lower quality factors (low tax rate, elevated securitization gains, and PCL releases) earnings were still a comfortable beat. Our 2022 estimates are higher, given strong loan growth, while 2023 is lower reflecting PCLs building.”

On the decline

Kinross Gold Corp. (K-T) turned lower on Wednesday after its first-quarter operating results fell short of expectations, prompting to a decline in its full-year guidance.

After the bell on Tuesday, the miner reported production of 409,857 gold equivalent ounces at an all-in sustained cost of US$1,245 per ounce. The Street had expected 538,000 ounces at US$1,251 per ounce.

“KGC posted a weaker than expected operating quarter in 1Q with production from Paracatu, Fort Knox and Bald Mountain missing our estimates on a mixture of lower grades, mill downtime and seasonality a,ecting leach recoveries,” said Raymond James analyst Farooq Hamed. “Grade and recoveries at each of the operations is expected to improve as the year progresses and particularly in 2H.”

Aurora Cannabis Inc. (ACB-T) slid after saying it will wind down operations at an outdoor grow site in the B.C. Interior.

The Edmonton-based cannabis company says it no longer has a need for the Westwold property called Aurora Valley because it recently acquired Thrive Cannabis, which has indoor and outdoor grow facilities.

Aurora spokesperson Kate Hillyar says in an email to The Canadian Press that less than 10 employees will be impacted by the closure of the site.

She says staff were informed of the decision ahead of the spring planting season and were offered transition opportunities wherever possible.

Hillyar says Aurora Valley was mostly an exploratory outdoor grow operation, whereas Thrive’s outdoor site has been commercializing product for years.

Aurora announced it would buy Thrive parent company TerraFarma Inc. in March in exchange for $38 million in cash and shares.

Coinbase Global Inc. (COIN-Q) missed estimates for first-quarter revenue on Tuesday after the bell and posted a loss as turmoil in global markets curbed investor appetite for risk assets including trading in cryptocurrencies.

Shares of Coinbase plunged after the cryptocurrency exchange operator also reported a fall in trading volumes and forecast an even bigger drop in the current quarter due to a decline in crypto asset prices.

Among its mix of crypto assets, bitcoin accounted for 24 per cent of trading volume, up 16 per cent from the prior quarter but down 39 per cent from a year earlier.

Coinbase chief executive Brian Armstrong said a disclosure in its latest quarterly filing did not indicate the largest U.S. cryptocurrency exchange faced a bankruptcy risk, and it had been made to meet a regulatory requirement.

His comments came after the company said in the event of bankruptcy, crypto assets held by the exchange could be considered property of the bankruptcy proceedings and customers could be treated as unsecured creditors.

An unsecured creditor would be one of the last to be paid in any bankruptcy and last in line for claims.

Coinbase said its disclosure might lead customers to believe that keeping their coins on the platform would be considered “more risky”, which would in turn materially impact its financial position.

“We have no risk of bankruptcy,” Mr. Armstrong said on Twitter after the disclosure. He said it was unlikely that “a court would decide to consider customer assets as part of the company in bankruptcy proceedings” although it was still possible.

With the files from Brenda Bouw, staff and results.

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