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A survey of North American equities that made moves in both directions

On the rise

Martinrea International Inc. (MRE-T) surged after saying it hit record quarterly sales in the third quarter as supply shortages eased and it passed on more inflationary costs to customers.

The auto parts maker says sales of $1.19-billion for the quarter ending Sept. 30 were 41 per cent higher than the same quarter last year.

Net income of $35.9-million, or 45 cents per diluted share for the quarter, was up from a net loss of $17.1-million or 21 cents per share for the same quarter last year.

Adjusted net income was $45.1-million or 56 cents per share, while analysts expected earnings of $32.3-million or 40 cents per share according to financial markets data firm Refinitiv.

Company chief executive Pat D’Eramo says operations improved not only from last year but also from the second quarter as it saw improved production volumes and reduced product launch costs, though it still faces some supply-related disruptions.

D’Eramo says the company continues to make progress in difficult negotiations on raising prices for customers to offset inflationary pressures, but still faces significant energy cost headwinds in Europe.

Calling it a “big” beat, Scotia Capital’s Mark Neville said: “Q3 results came in well ahead of expectations: sales beat consensus by approximately 8 per cent, adjusted EBIT by 35 per cent, and adjusted EPS by 47 per cent. On a sequential basis, adj. EBIT was up 54 per cent on (only) a 7-per-cent increase in production sales, with the improvement driven by lower launch costs (should continue), less volatility in customer production schedules (hopefully continues), commercial recoveries (negotiations continue), and mix.”

An equity analyst at Raymond James upgraded the stock before the bell.

Secure Energy Services Inc. (SES-T) rose with the premarket release of better-than-anticipated third-quarter results and an increase to its annual dividend.

The Calgary-based company reported EBITDA of $154-million, topping the Street’s expectation of $139-million by 11 per cent.

“The results achieved in the third quarter of 2022 demonstrate the enhanced scale, utilization and efficiencies we have been able to achieve from the merger with Tervita,” said Rene Amirault, President and Chief Executive Officer, said in a statement. “Our disciplined approach to pursuing merger synergies and continued focus on managing costs, along with improved industry fundamentals, drove a 42-per-cent increase in discretionary free cash flow compared to the third quarter of 2021. In the near-term, we expect to continue repurchasing our 11-per-cent senior secured notes which will result in lower interest costs and improved financial flexibility. Since September 30, 2022, we have repurchased an additional US$46-million of these notes, resulting in US$174-million principal amount outstanding. We are extremely pleased with our efforts to date in achieving these operational and financial objectives.”

Secure also announced annual dividend will rise to 40 cents from 3 cents, increasing its yield from less than 1 per cent to approximately 55 per cent. It also revealed plans to apply for a normal course issuer bid (NCIB) in the fourth quarter to opportunistically repurchase shares.

Charlotte’s Web Holdings Inc. (CWEB-T) finished flat as it signed a deal with Tilray Brands Inc. (TLRY-T) for the manufacturing, marketing and distribution of Charlotte’s Web CBD hemp extract products in Canada.

Financial terms of the agreement were not immediately available.

The deal means Charlotte’s Web’s full spectrum CBD products will be available in Canada through Tilray’s distribution network.

The companies say Charlotte’s Web hemp extract previously had only been available to Canadians that qualified for a special access medical exemption through Health Canada.

Under the deal, Tilray will acquire and extract Charlotte’s Web proprietary hemp biomass and manufacture it into the final product at its production facilities in Canada.

The products are expected to become available early next year starting with hemp extract oil tinctures, followed by gummies and topicals.

Chemicals maker DuPont De Nemours Inc. (DD-N) gained after saying on Tuesday it was ending its US$5.2-billion buyout of Rogers Corp. (ROG-N), the first collapse of a major U.S. deal in four years caused by a failure to clear Chinese regulatory hurdles.

DuPont said the termination of the deal was agreed with Rogers as they have been unable to obtain timely clearance from all the required regulators. They said in September that they had received all approvals, except from China.

China’s commerce ministry and its State Administration for Market Regulation, the antitrust regulator that reviews deals, did not immediately reply to a Reuters’ request for comment.

Shares of engineering materials maker Rogers plunged on Wednesday, while those of DuPont rose.

Rogers is evaluating all options in response to DuPont’s notice, the company said in a statement issued on Wednesday.

The collapse of the deal raises uncertainty over the restructuring of DuPont, which has been tweaking its portfolio to focus on high-margin operations and fast-growing industries such as electric vehicles, 5G and clean energy.

DuPont’s all-cash takeover of Rogers, announced last year, would have been its biggest acquisition since splitting from DowDuPont in 2019.

It also announced an US$11-billion deal earlier this year to sell most of its mobility and materials business to Celanese Corp. (CE-N) and planned to use the sales proceed to fund the Rogers deal.

The collapsed Rogers deal is the most prominent global acquisition to be called off in four years due to Chinese regulatory hurdles.

In 2018, Qualcomm Inc walked away from a US$44-billion deal to buy NXP Semiconductors after failing to secure Chinese regulatory approval amid China-U.S. trade tensions.

The New York Times Co (NYT-T) was up as it raised its full-year forecast for adjusted operating profit on Wednesday, a sign that the media organization’s plan of bundling subscriptions was helping offset a decline in ad spending from recession-wary businesses.

The publisher has been trying to reach a wider audience and increase revenues by bundling its traditional print and digital news offerings with cooking recipes, crossword puzzles, product review site Wirecutter and sports news site The Athletic, which the Times bought earlier this year.

That helped the company add 180,000 online subscribers in the three months to September, powering its third-quarter adjusted profit above Wall Street estimates and sending its shares 7% higher in premarket trading.

“It was our best quarter yet for bundle net additions,” said Chief Executive Meredith Kopit Levien, adding the Times’ bundle subscribers had crossed more than a million.

Users opting for bundled subscriptions are lucrative for the company as they pay about 50% more than news subscribers, Kopit Levien said.

The Times is under pressure from activist investor ValueAct Capital, which disclosed a near 7-per-cent stake in the publisher in August, to ramp up its subscription bundling push.

Revenue in the third quarter came in at US$547.7-million, slightly below analysts’ expectations of US$548.6-million, according to Refinitiv data.

The miss was mainly driven by a wider slowdown in ad spending that sapped growth at the Times’ digital ad business. The company expects digital ad revenue to decline in the last three months of the year.

The weakness mirrors results from tech giants such as Meta Platforms Inc and Google-parent Alphabet Inc, which have sounded the alarm on a decline in advertising from businesses grappling with decades-high inflation.

“We are improving our outlook for full-year 2022 results and expect adjusted operating profit between $320 (million) and $330 million,” the Times said.

MTY Food Group Inc. (MTY-T) rose as it announced that it’s buying COP WP Parent, Inc., known as Wetzel’s Pretzels, for US$207-million.

Wetzel’s Pretzels has more than 350 locations in 25 states in the U.S., as well as in Canada and Panama. During the last twelve months, total network sales have reached approximately US$245-million, serving nearly 21 million customers, the company stated.

“This transaction represents another key acquisition for MTY as it adds another iconic brand to MTY’s U.S. portfolio,” stated CEO Eric Lefebvre.

Shares of Match Group Inc. (MTCH-Q), which have dropped 66.1 per cent this year, were higher after it topped quarterly revenue estimates as more users looking for matches and connections took paid subscriptions on dating app Tinder.

The results are welcome news for the company which has been rocked this year by executive changes and analyst concerns about poor execution of new features on its dating apps. Spiraling inflation has also pressured spending on its apps.

Despite the odds, the company’s revenue came in at US$810-million for the three months ended Sept. 30, beating the average analyst estimate of US$793-million, according to Refinitiv data.

Tinder’s revenue grew 6 per cent and its paying users jumped 7 per cent, aided by the return of a feature that lets users swipe right and left from their desktops. The company, however, forecast flat growth in fourth-quarter revenue for Tinder.

“Product execution is already improving,” Chief Executive Bernard Kim and finance chief Gary Swidler said in a letter to shareholders.

But they warned that a weakening global economy was hitting Match’s brands that serve lower-income consumers, while also weighing on discretionary spending across its apps.

Match plans to tackle the slowdown with reductions in headcount-related expenses and marketing spend and expects to have flat margins in 2023..

Match forecast fourth-quarter revenue between US$780-million and US$790-million, below market estimates of US$809.2-million, as it expects to take an additional US$14-million hit from a stronger U.S. dollar than it had previously expected.

On the decline

Canada Goose Holdings Inc. (GOOS-T) dropped after it trimmed its full-year revenue and profit forecast on Wednesday as its luxury parka sales in China take a hit from COVID-19-related restrictions.

The Chinese government’s efforts to contain the spread of COVID-19 cases with zero-COVID policy has impacted luxury fashion retailers, who have taken a hit on their revenues due to store closures, inflated inventories and fall in demand as consumers turn more cautious in the region.

European peer Kering and cosmetics group L’Oreal had last month warned that curbs on travel in China due to COVID-19 dragged down their performance in the quarter.

Cosmetics maker Estee Lauder (EL-N) on Wednesday also signaled a hit to sales from persistent lockdowns in China.

Canada Goose cut its fiscal 2023 sales expectation to $1.2-billion-$1.3-billion, compared with its prior forecast of $1.3-billion-$1.4-billion.

The luxury parka maker now expects fiscal 2023 adjusted profit to be between $1.31 and $1.62 per share, compared with its prior forecast of $1.60 to $1.90.

However, the company earned second-quarter adjusted profit of 22 cents, on a revenue of $277.2-million, beating analysts’ estimates as per Refinitiv data.

Cosmetics maker Estee, similar to other U.S. companies such as Nike Inc and Levi’s, has flagged global currency headwinds as a strengthening dollar eats into profits of companies operating internationally.

Estee now expects 2023 net sales to decrease between 6 per cent and 8 per cent, compared with the prior forecast of a 3-per-cent to 5-per-cent growth.

The MAC brand owner expects full-year 2023 adjusted profit per share to decrease between 19 per cent and 21 per cent, compared with the previous forecast of a 5-per-cent to 7-per-cent growth.

Cenovus Energy Inc. (CVE-T) closed lower after it reported a nearly three-fold jump in third-quarter profit on Wednesday, benefiting from higher oil and gas prices after Russia’s invasion of Ukraine crimped global supplies.

Oil companies are reaping big profits and many are choosing to repay debt and reward shareholders rather than expand production.

Cenovus reduced its net debt in the period to $5.3-billion from $7.5-billion, announced a variable dividend and said it plans to renew a share buyback program.

The Calgary-based company’s net earnings rose to $1.61-billion, or 81 cents per share, from $551-million, or 27 cents per share, a year earlier.

The company reported disappointing U.S. refinery margins, Scotiabank analyst Jason Bouvier said in a note.

Chief Executive Alex Pourbaix told analysts that Cenovus still factors into its plans $60 per barrel as a median price in the commodity cycle, well below the current price.

West Texas Intermediate oil (WTI) was trading around $90.25 per barrel, down 27 per cent from a mid-June peak.

“I’m not convinced that the world is not going to go back to where it’s been over the last 50 years, so we’re going to stick with $60,” Mr. Pourbaix said.

“We can hope for the best but we’ve got to plan for reality.”

A bigger than usual discount on Canadian heavy oil compared to WTI has limited producers’ profits. Pourbaix attributed the wide difference to factors such as refinery outages and U.S. releases from its strategic oil reserve, and said the large discount looked to extend into 2023.

Cenovus said its upstream production fell to 777,900 barrels of oil equivalent per day (boepd) in the quarter, from 804,800 boepd a year earlier.

The company said production dropped because of planned maintenance and an unplanned power outage in August at its Foster Creek site.

Airbnb Inc (ABNB-Q) forecast fourth-quarter revenue below market estimates on Tuesday, saying a strong U.S. dollar had started to pressure its business and that bookings would moderate after a bumper third quarter.

The vacation rental firm expects fourth-quarter revenue between US$1.80-billion and US$1.88-billion, the midpoint of which missed analysts’ expectations of US$1.85-billion, according to Refinitiv IBES.

Shares of the company fell in Wednesday trading.

The industry has seen a stellar recovery this year on the back of the best summer travel season in three years, but it faces risks from the global surge in inflation.

San Francisco-based Airbnb recorded its highest ever third-quarter bookings, with nearly 100 million nights and experiences booked, but it said current-quarter bookings will “slightly moderate” from those levels.

“As the impact of the pandemic recedes but macro conditions persist, we expect a continued, albeit choppy, recovery of cross-border travel to be a further tailwind to future results,” the company said in a letter to shareholders.

Still, it is “well-positioned for the road ahead,” the company added, after surpassing quarterly revenue estimates.

Major U.S. airlines have pointed to a rise in international trips, especially to Europe, as travelers took advantage of a strengthened dollar, but Airbnb said the majority of travelers in North America and Europe had booked domestic stays.

The average daily rates for Airbnb climbed 5 per cent year-over-year to US$156 in the quarter as hybrid work fueled demand for its long-term vacation rentals, encouraging hosts to charge more.

The company, which generates half of its revenue from listings outside the United States, said the rates were significantly higher excluding the impact of foreign currency fluctuations.

Net profit rose 45.6 per cent to US$1.21-billion, or US$1.79 per share, while revenue increased 28.9 per cent to US$2.88-billion, beating estimates of US$2.84 billion.

Yum Brands Inc. (YUM-N) dipped late in the wake of beating Wall Street estimates for quarterly comparable sales on Wednesday, as its value-oriented offerings at KFC and Taco Bell pulled in more inflation-weary consumers.

Fast food chains have been hiking menu prices to keep up with surging commodity and labor costs, but meals at KFC and Taco Bell are still more affordable than eating out at dine-in restaurants keeping demand resilient.

Last week, McDonald’s Corp. (MCD-N) also beat quarterly comparable sales and profit estimates helped by an increase in restaurant traffic owing to value-oriented offerings.

Restaurant sales saw an uptick in the third quarter after a slowdown in June, as gas prices eased from peaks.

Yum, which also owns the Pizza Hut chain, said comparable sales rose 5 per cent in the third quarter, compared to analysts’ average estimate of a 3.2-per-cent increase, according to IBES data from Refinitiv.

Same-store sales at KFC restaurants rose 7 per cent, while sales rose 6 per cent at Taco Bell in the quarter.

Excluding one-time items, Yum Brands earned US$1.09 per share, missing estimates of US$1.14 per share, with the company blaming the hit from a stronger dollar and a loss in profits from the exit of its KFC business in Russia.

California-based chipmaker Advanced Micro Devices Inc (AMD-Q) snatched more share in the lucrative data center market from rival Intel Corp (INTC-Q) in the third quarter, drawing praise from analysts. However, its stock gave back gains early in the session and finished down 1.7 per cent on Wednesday.

The company’s continued expansion into server processors helped it cushion a deepening slump in the personal computer market, which makes up nearly a third of its revenue.

“(AMD) is delivering on their datacenter story, and Intel’s rolling collapse has removed some of the constraints on the narrative,” Bernstein analyst Stacy Rasgon wrote in a note.

Santa Clara, California-based AMD’s forecast for a 14-per-cent rise in fourth-quarter sales while below analysts’ estimates also contrasted with expected declines at Intel and Nvidia Corp. (NVDA-Q) .

“We expect AMD’s share gains to continue, as the company’s upcoming, next-generation server CPUs are expected to outperform Intel’s lineup across price/performance metrics,” YipitData analyst Nathaniel Harmon said.

But growth is slowing even in the data center business, echoing remarks from U.S. tech giants and Microsoft that decades-high inflation and weak consumer demand were taking a toll on cloud and datacenter spending.

The PC industry, reeling from a downturn after its pandemic boom, pressured AMD’s earnings and the company also lost market share there to Intel.

A recovery in the business seems distant, with Chief Executive Lisa Su saying that AMD expects the PC market will decline by another 10% in 2023.

Some analysts, however, said the company was undershipping products even in a weak market and could see some upside next year.

“The team is significantly undershipping to PC consumption to help flush channel inventories, which should help client revenues to start to inflect to the upside,” according to J.P. Morgan analysts.

Paramount Global (PARA-Q) plummeted after it fell short of analysts’ estimates for quarterly revenue on Wednesday, as the media giant struggled with the absence of major content releases and an extended weakness in ad sales.

Total revenue rose 5 per cent to US$6.92-billion in the third quarter ended Sept. 30, but missed the average estimate of US$7.01-billion, according to Refinitiv data.

A host of factors like high inflation, softening consumer demand across product and services, and geo-political unrest in certain regions have forced companies to pull back on advertising spending.

Paramount said advertising revenue declined 2 per cent in the quarter. Revenue at TV Media, its biggest reporting segment, declined 5 per cent to US$4.95-billion, capturing the bulk of weakness in the ads market.

The company’s Paramount+ streaming services added 4.6 million subscribers in the third quarter, compared to the 4.9 million added in the preceding quarter.

Overall, revenue from the direct-to-consumer segment, which also includes Pluto TV, jumped 38 per cent to US$1.23-billion.

Fox Corp (FOX-Q) on Tuesday reported better-than-expected quarterly revenue, with an 8% rise in ad revenue due to higher political advertising revenue on its TV stations.

Comcast Corp. (CCZ-N), which reported last week, reported a decline in ad sales and its executives flagged higher costs related to the broadcast of the upcoming World Cup soccer tournament.

With files from staff and wires

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

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