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A survey of notable North American equities heading in both directions

On the rise

Shares of Canadian National Railway Co. (CNR-T) were higher on Wednesday after its boosted its financial outlook for the year as it reported gains in revenue and adjusted profits in the third quarter on higher volumes and rates, while net income was down.

After the bell on Tuesday, the Montreal-based railway says net income for the quarter ending Sept. 30 was $1.46-billion, down from $1.69-billion for the same quarter last year.

Adjusted profits for the last quarter were unchanged at $1.4- billion, while last year’s adjusted profits were $1.08 billion after several exclusions including an $886-million payout related to its failed takeover of a U.S. railway.

Revenue of $4.51-billion for the quarter was up from $3.59-billion last year as the company brought in higher fuel surcharge revenue, raised freight rates, and saw higher volumes of coal exports and U.S. grain shipments.

The railway says it now expects to deliver free cash flow of about $4.2-billion in 2022, up from a range of between $3.7-billion and $4-billion it gave in an April guidance.

It also now expects to deliver adjusted, diluted earnings per share growth of about 25 per cent, up from the 15 to 20 per cent it guided in April.

In response to the quarterly release, several equity analysts raised their financial forecasts and target prices for CN shares before the bell.

In a recent note, Citi’s Christian Wetherbee said: “Coming off CN 3Q22 earnings call and our call back with management, we think results were solid and the outlook for 4Q was particularly good, which should be positive for shares. CN raised its 2022 EPS guidance to 25 per cent year-over-year, which implies at least $2.05 in 4Q EPS and is at least in line with consensus and 4c above our target. CN also reiterated its target for a sub-60-per-cent operating ratio for 2022 including a $47-million backwards-looking catch-up for under-accruing U.S. labor expense. Collectively, we think 4Q implied guidance is conservative and coupled with the upside in 3Q (even if driven more heavily by fuel than peers) is a relative positive and with a still solid volume outlook through 1H23 we’d expect CN to continue to be a relative outperformer vs. the U.S. rails.”

Shares of rival Canadian Pacific Railway Ltd. (CP-T) were also higher on Wednesday ahead of the release of its quarterly results after the bell.

Air Canada (AC-T) gained after announcing it is adding 15 Airbus A220 passenger jets to its fleet, buying the Canadian-made aircraft as it emerges from the pandemic.

The narrow-body A220, formerly known as the Bombardier C-Series, is made in Mirabel, Que., has lower greenhouse gas emissions and fuel consumption than older planes, features Canada’s largest airline says will help reach its goal of net zero emissions by 2050.

In 2016, the airline ordered 45 A220s and has 31 in service on its North American network.

“The A220 has become an important component in the modernization of Air Canada’s fleet and a key part of our narrow-body fleet, thanks to its performance and passenger comfort,” said Mark Galardo, an Air Canada vice-president in charge of network planning and revenue management, in a statement on Wednesday.

- Eric Atkins

Shaw Communications Inc.’s (SJR.B-T) shares jumped on Wednesday after the federal government’s intervention late on Tuesday was seen as a sign that Canada was likely to approve Rogers Communications’ (RCI.B-T) $20-billion bid for Shaw after being blocked by the competition bureau.

Analysts pointed out that the conditions slapped by Canada can be viewed as a good omen, signaling a settlement of the long-dragged deal.

Rogers has offered to sell Shaw’s Freedom Mobile unit to Quebecor Inc’s Videotron to allay the antitrust bureau’s concerns over reduced competition in the Canadian market following the deal.

Earlier on Tuesday, Canadian Industry Minister François-Philippe Champagne said that Videotron would be required to hold the Freedom Mobile unit for at least 10 years.

“We believe this pragmatic view by the minister has the chance to provide a good middle ground to build on between the parties,” said Scotiabank analyst Maher Yaghi, who upgraded Shaw to “sector outperform” on increasing odds of the deal closing.

Crescent Point Energy Corp. (CPG-T) increased in the wake of announcing a special dividend as it reported third-quarter net income of $466.4-million, up from $77.5-million in the same quarter last year.

The company says it will pay a special dividend of 3.5 cents per share based on its latest quarterly results in addition to its regular quarterly dividend of eight cents per share.

Crescent Point says its net income for the quarter ended Sept. 30 amounted to 82 cents per share, up from 13 cents per share a year earlier.

Oil and gas sales totalled nearly $1.1-billion, up from $826.7-million in the third quarter last year, boosted by higher realized oil and natural gas prices.

Average production for the quarter was 133,019 barrels of oil equivalent per day, up from 132,186 a year earlier.

On an adjusted basis, the company says its net earnings from operations amounted to 43 cents per share, up from 24 cents per share in the same quarter last year.

Visa Inc. (V-N) rose following better-than-expected quarterly earnings as more Americans took advantage of a stronger U.S. dollar to fly to international destinations and splurge on shopping and entertainment.

Upbeat earnings from Visa and rival American Express (AXP-N) further underscore the strength in U.S. consumer spending, which has largely managed to shrug off worries over inflation and rising interest rates.

However, Visa said the skyrocketing greenback does not bode well for the American tourism industry, which relies on a big portion of its revenue from international travelers.

“Travel outbound from the U.S. to all geographies continue to pick up steam,” Chief Financial Officer Vasant Prabhu said on a post-earnings call.

“The strong dollar and delays in visa issuance from some countries appear to be impacting travel into the U.S,” he added.

Transactions processed at the world’s largest payments processor rose 12 per cent on a constant dollar basis to 50.9 billion in the fourth quarter ended Sept. 30.

“The substantial growth in processed transactions is a good indication that inflation isn’t the primary driver of increased spending,” said Ted Rossman, senior industry analyst at

On a constant dollar basis, Visa’s payment volumes surged 10 per cent, while cross-border volumes - a key measure that tracks spending on cards beyond the country of issue - jumped 36 per cent.

Excluding items, the world’s largest payments processor reported a profit of US$1.93 a share, beating estimates of US$1.86, according to Refinitiv IBES data.

“We still plan to grow our expenses in high single digits next year,” Prabhu said, adding that the company will scale costs back if a recession or a geopolitical shock arises.

On the decline

Google parent Alphabet Inc. (GOOGL-Q) dropped with disappointing ad sales sparking worries across the digital media sector as advertisers cut back on their spending in the face of an economic slowdown.

Alphabet called out slowing spending by advertisers on YouTube, said financial services spending was cooling on Google, and plans to cut hiring by more than half.

The negative results shattered many expectations that Google, which is the world’s largest digital advertising platform by market share, would remain strong in a weakening economy and reinforced worries on Wall Street that inflation will continue to hurt advertising spending. Last week, smaller rival Snap Inc’s (SNAP-N) slowest-ever revenue growth rate sent inflation fears through tech sector and temporarily wiped out $40 billion in market capitalization.

Alphabet’s weak results raises concerns for other companies in the sector, especially advertising-dependent Meta Platforms (META-Q). The Facebook parent, which reports results on Wednesday after the bell, saw shares drop as well.

Ruth Porat, Alphabet’s chief financial officer, said the deceleration in overall advertising revenue was due to last quarter’s “very strong performance,” adding that lower ad sales on YouTube were due to some advertisers pulling back on their ad spending.

The company said total revenue was US$69.09-billion in the quarter ended Sept. 30, compared with US$65.12-billion a year earlier.

Analysts on average expected revenue to be US$70.58-billion, according to Refinitiv data.

“Google’s earnings miss this quarter proves it’s not immune to the challenges facing the digital advertising industry at large,” said Jesse Cohen, senior analyst at

During a conference call with analysts, Alphabet Chief Executive Sundar Pichai said the company would continue to evaluate its projects and make “course corrections” as needed. “Times like this are clarifying,” he said.

Microsoft Corp. (MSFT-Q) projected second-quarter revenue below Wall Street targets across its business units, stoking fear that macroeconomic headwinds are impacting the cloud business in addition to the PC unit.

Revenue growth in the first quarter was Microsoft’s lowest in five years, and shares of the software giant fell in Wednesday trading.

Microsoft’s cloud business, called Azure, has supercharged revenue growth at the software giant for years. But in its first fiscal quarter of 2023, that growth dropped to 35 per cent and the company projects that to drop again in the current quarter, which is its second quarter. Microsoft missed the 36.5-per-cent analyst target compiled by Visible Alpha due to a stronger dollar.

“If this growth deceleration continues, it could harm an investment case in the company’s stock which is considered a safe-haven amid the market turmoil,” said Haris Anwar, senior analyst at

The company said it expects the Intelligent Cloud business to pull in revenue of US$21.25-billion to US$21.55-billion in the second quarter, slightly below analysts’ estimates of US$22.01-billion, according to Refinitiv IBES data.

“We expect Azure revenue growth to be sequentially lower by roughly five points on a constant currency basis,” Chief Financial Officer Amy Hood told analysts on a conference call. That would be a growth of 37% on a constant currency basis, and much lower taking into account foreign exchange rates.

“In a weird way, everyone expected there to be a disaster when the pandemic hit. And it was the exact opposite. But at some point that impact was going to hit and it’s hitting now,” said Bob O’Donnell, an analyst for TECHnalysis Research, adding that even businesses like the cloud can’t escape the impact. Still he said Microsoft has diversified its business and is in a good position to ride out the hard times.

Revenue growth in the first quarter was US$50.12-billion, up 11 per cent year-on-year. The figure was slightly above analysts’ expectations of US$49.61-billion.

Net income fell to US$17.56-billion, or US$2.35 per share, during the quarter ended Sept. 30, from US$20.51-billion, or US$2.71 per share, a year earlier.

Boeing Co’s (BA-N) ailing defence unit on Wednesday recorded a US$2.8-billion charge, but the U.S. planemaker stuck to its forecast of generating cash this year despite struggling to raise commercial jet production due to labor and supply shortages.

Shares fluctuated between gains and losses after the results as cost overruns in Boeing’s defence, space and security segment have hobbled a recovery for the company attempting to come out of successive crises by cashing in on rising air travel demand.

Both Boeing and its European rival Airbus SE have ramped up production of narrowbody jets, with Boeing delivering 112 jets in the third quarter compared to 85 jets last year.

That helped it generate a free cash flow of US$2.9-billion in the quarter. It had recorded a cash burn of US$507-million in the same period a year ago.

However, rising cost pressures over the last few months have hampered fixed-price contracts for U.S. aerospace and defence firms, prompting an industry body to ask the U.S. Congress for inflationary relief.

“Our revenue and earnings were significantly impacted by losses on fixed-price development programs in our defense business, driven by higher estimated manufacturing and supply chain costs,” Boeing Chief Executive Dave Calhoun said in a message to employees.

Third-quarter revenue rose 4 per cent to US$15.96-billion, but adjusted loss per share widened to US$6.18 from 60 US cents a year ago.

Demand at the global services business that provides spare parts and services such as jet conversions was a bright spot in the quarter through September, with revenue rising 5 per cent.

Kraft Heinz Co (KHC-Q) beat third-quarter sales and profit estimates on Wednesday, benefiting from price increases in the face of rising costs for its packaged foods and condiments.

However, shares of the Jell-O and Philadelphia Cream Cheese maker slid as the company also reaffirmed its full-year sales and profit guidance.

Global packaged foods makers have been steadily raising product prices over the past year to counter increased costs tied to labor, ingredients and transportation at a time when consumers are steeling their wallets against skyrocketing energy and food prices.

Although the preference for cooking at home, which developed during the pandemic, has proven to be relatively sticky so far, cracks in demand are beginning to emerge as shoppers hunt for more affordable alternatives and analysts caution that packaged makers may be reaching their ceiling on price hikes.

Kraft said average selling prices rose 15.4 percentage points in the quarter, which partly dented sales volumes that fell 3.8 percentage points.

Still, Chief Executive Miguel Patricio said the Heinz ketchup maker was seeing continued consumption growth across all income levels in the quarter, with trends improving relative to the first half of the year.

The company’s net sales rose to US$6.51-billion in the third quarter from US$6.32-billion a year earlier. Analysts on average had expected US$6.27-billion, according to IBES data from Refinitiv.

Excluding items, it earned 63 US cents per share, above estimates of 56 US cents.

Chipmaker Texas Instruments Inc. (TXN-Q) on Tuesday forecast fourth-quarter revenue and profit below estimates as it expects demand across most of its end markets to decline, sending its shares down.

After a two-year boom in the chip industry, triggered by tight supply and high demand, a downturn is setting in as personal electronics makers and retailers, who are sitting on bloated inventories due to inflation-hit demand, cut orders for chips.

On the earnings call, TI said order cancellations increased during the third quarter. Chip makers Advanced Micro Devices (AMD-Q) and Micron Technology (MU-Q) have also warned of worsening demand.

“During the quarter we experienced expected weakness in personal electronics and expanding weakness across industrial,” TI Chief Executive Rich Templeton said.

While TI called the automotive sector an exception to this trend, Summit Insights Group analyst Kinngai Chan noted that many automakers continue to order double the chips they need and expects the demand to slip to pre-pandemic levels in the first half of next year.

Shares of the Dallas, Texas-based company have declined about 14 per cent so far this year, mirroring decline in shares of its peers as investors brace for the chip industry boom to normalize.

The company forecast fourth-quarter revenue between US$4.4- billion and US$4.80-billion, compared with estimates of $4.93 billion, per Refinitiv data.

It forecast profit between US$1.83 and US$2.11, below estimates of US$2.21.

In the third quarter, the company reported a 13-per-cent rise in revenue to US$5.24-billion on strong demand for its semiconductors from the auto sector. Analysts had expected US$5.14-billion.

Excluding items, the company earned US$2.45 per share, beating estimates of US$2.39.

After significant post-market gains, Chipotle Mexican Grill Inc. (CMG-N) fell back despite reporting quarterly sales and profits that topped Wall Street expectations late Tuesday, passing on higher burrito prices to wealthier customers even as lower-income consumers ate there less often.

Chipotle’s menu prices were about 13 per cent higher in the quarter versus last year. But companies that can pass those prices on to customers are raising outlooks even as consumer sentiment worsens amid record inflation and fears of a coming recession.

On Tuesday, Coca-Cola Co (KO-N) joined rival PepsiCo Inc (PEP-Q) in lifting its annual forecasts, as customers buy sugary sodas despite multiple rounds of price hikes.

The California-based chain’s comparable sales jumped 7.6 per cent in the third quarter ended Sept. 30, while analysts on average had expected a 7.3-per-cent rise, according to Refinitiv IBES.

Even so, traffic fell about 1 per cent and “we continue to see a widening of trends by income level, with the lower-income consumer further reducing frequency,” said Chief Executive Officer Brian Niccol during a call with investors.

“We’ve got to treasure every guest because... it’s going to be a tougher environment for the consumer going forward,” he said.

The chain is expanding in Canada and small U.S. towns, driving growth by opening 43 new restaurants during the quarter, including 38 with a so-called “Chipotlane” drive-through option - a format the company said was performing well.

Chipotle earned US$9.51 per share, topping estimates of US$9.21, excluding one-time items. Restaurant level margin also rose to 25.3 per cent from 23.5 per cent a year earlier.

Hilton Worldwide Holdings Inc. (HLT-N) was down as it raised its annual profit forecast after third-quarter earnings topped estimates, as people eager to travel after the pandemic set aside recession worries to book flights and hotels.

The hospitality industry is benefiting from U.S. consumers spending more on travel emboldened by a strong dollar and more flexible work arrangements that allow them to work from wherever they want, extending the travel season into the fall.

“We expect these strong trends to continue throughout the fourth quarter with system-wide RevPAR (revenue per available room) once again exceeding prior peaks,” Hilton Chief Executive Officer Christopher Nassetta said.

Hilton, which owns several brands including the Waldorf Astoria Hotels & Resorts, said it now expects net income between US$1.22-billion and US$1.24-billion this year, compared with its previous forecast of US$1.15-billion and US$1.22-billion.

The company said it expects 2022 adjusted earnings per share for 2022 between US$4.46 and US$4.54 compared with US$4.21 and US$4.46 forecast earlier, as it benefits from strong pricing power amid resilient travel demand.

The Virginia-based company reported a 44-per-cent rise in third-quarter profit, or US$1.31 per share, beating analysts’ estimates of US$1.24 per share, according to Refinitiv data.

Mattel Inc. (MAT-Q) cut its annual profit forecast on Tuesday and said it would ramp up promotions heading into the busy holiday season as red-hot inflation discourages Americans from spending on its Barbie dolls and Fisher-Price toys.

Shares of the California-based toymaker were lower in rocky trading after it also missed quarterly sales estimates for the first time since March 2020.

Although demand for toys typically stays resilient during economic downturns, repeated price increases to combat rising costs of raw materials, freight and labor have started to weigh on toymakers.

Earlier this month, Hasbro Inc (HAS-Q) tempered its full-year revenue outlook and warned that demand was starting to slip ahead of the festive season.

Mattel, meanwhile, expects demand to accelerate during the crucial holiday shopping season, but said it would conduct more promotions to remain competitive.

“We are in the midst of a challenging macroeconomic environment, which equals volatility,” Chief Executive Ynon Kreiz told Reuters.

Mattel reduced its 2022 adjusted profit forecast to between US$1.32 and US$1.42 per share from US$1.42 to US$1.48 earlier, but the toymaker’s raised prices helped it post an adjusted gross margin of 48.3 per cent in the third quarter, compared with last year’s 47.8 per cent.

Excluding items, the company earned 82 US cents per share, beating estimates of 74 US cents. It also reiterated its full-year sales forecast.

With files from staff and wires

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