A roundup of some of the North American equities making moves in both directions today
On the rise
General Motors Co. (GM-N) rose 1.9 per cent on Wednesday after it forecast flat profits for 2020 and reported a better-than-expected fourth-quarter result as it kicked off a new effort to win over investors stampeding into shares of electric car rival Tesla Inc..
GM said it expects earnings per share for 2020 in a range from US$5.75 to US$6.25, excluding one time items, taxes and interest. Analysts are expecting GM to earn US$6.23 this year on a comparable basis, according to IBES data from Refinitiv.
GM’s fourth quarter profits took a US$3.6-billion hit from a 40-day United Auto Workers strike that shut down the automaker’s profitable U.S. operations. Profits from its operations in China also fell.
The company said pre-tax profits were 5 US cents a share for the latest quarter excluding certain restructuring costs, down from US$1.43 a year earlier. Analysts had forecast pre-tax income of a penny a share for the latest quarter.
Aimmune Therapeutics Inc. (AIMT-Q) jumped 3 per cent after announcing Wednesday the health science arm of Nestle SA will invest an additional US$200-million in the California-based drugmaker, bringing the Swiss company’s total investment to US$473-million.
The investment comes days after the company won U.S. approval for the first therapy intended to reduce and potentially eliminate allergic reactions to peanuts in children.
The company said Nestle’s total investment will amount to 19.9 per cent of Aimmune’s outstanding common stock and voting power and 25.6-per-cent stake in its fully-diluted capitalization.
The company says its fourth-quarter saw lower North American OSB prices as well as lower shipment volumes compared with a year ago.
Norbord says its loss amounted to 15 US cents per share for the quarter ended Dec. 31 compared with a loss of US$28-million or 32 US cents per share in the last quarter of 2018 when it took an US$80-million impairment charge.
Macy’s Inc. (M-N) was up 6.1 per cent after it said on Tuesday it plans to close 125 of its least productive stores over the next three years to tackle slowing mall traffic and will slash more than 2,000 corporate jobs as a part of a cost-savings effort.
The Cincinnati, Ohio-based company operated 867 stores according to a regulatory filing a year ago. It had 130,000 total employees at the time.
Macy’s said it would close stores in “lower tier” malls, and explore new off-mall formats, as it looks to tackle plummeting mall traffic in the United States.
The 161-year-old department store chain has been grappling with retaining existing shoppers and attracting new ones as consumers opt for online shopping. Since 2015, it has closed more than 100 stores and cut thousands of jobs.
On the decline
Shares of Ford Motor Co. (F-N) fell over 9.5 per cent on Wednesday, a day after the automaker forecast a lower profit for 2020, surprising analysts who also criticized the company’s management for holding back details on the earnings shortfall.
The disappointing outlook underscores the higher costs that Ford has been spending on developing self-driving and electric cars to keep pace with pioneers like Tesla Inc.
The No. 2 U.S. automaker by sales volume is far behind Tesla in the development of electric car technology. A recent rally in Tesla’s shares have taken its market capitalization to US$160-billion, nearly four times that of Ford’s valuation, despite having sales volumes that are less than 10 per cent of Ford.
Ford forecast 2020 adjusted earnings before interest and taxes (EBIT) between US$5.6-billion and US$6.6-billion, largely below at the midpoint, compared with US$6.4-billion in 2019.
Bombardier Inc. (BBD.B-T) was down 3.9 per cent amid news it is in talks to sell its business-jet unit to the U.S. maker of Cessna jets, Textron Inc., The Wall Street Journal reported, citing people familiar with the matter.
The move will help the struggling Canadian train and plane maker to pare billions of dollars in debt, the report said.
Bombardier’s shares have plunged more than 30 per cent so far this year. On Jan. 16, the company flagged a 2019 profit warning, citing problematic rail contracts, and warned of a potential writedown in the value of a plane partnership with European plane maker Airbus.
Bombardier declined comment on the WSJ report, but a source familiar with the company’s thinking told Reuters it was holding talks over both rail and aviation assets to keep all its options open.
West Africa-focused gold miner Endeavour Mining Corp. (EDV-T) slid 0.2 per cent after CEO Sebastien de Montessus said it is not looking for other potential acquisitions after its failed offer for Centamin.
“Like many first dates, if it doesn’t go well at the end of the first date, then you move on,” he told Reuters on the sidelines of the Mining Indaba in Cape Town.
“We came to a conclusion on both sides that we were not understanding each other.”
Endeavour abandoned its 1.5 billion pound pursuit of Centamin in January, citing a lack of information on the company, while Centamin said the offer was too low.
Walt Disney Co. (DIS-N) slid 2.4 per cent after it reported quarterly earnings that beat Wall Street forecasts after the bell on Tuesday, as its new streaming service Disney+ reached 28.6 million paying subscribers.
The results showed Disney made a strong entrance into the streaming video wars dominated by Netflix Inc. The owner of sports powerhouse ESPN is trying to transform its business to capture audiences that are moving online.
Analysts at three brokerages had expected more than 20 million subscribers to Disney+, which is available in five countries including the United States. Disney+ will be available in India on March 29 through streaming service Hotstar.
Netflix, which began delivering online video 13 years ago, boasts 67.7 million paid subscribers in the United States and Canada.
Subscribers at Hulu, a streaming service Disney now controls, climbed to 30.7 million as of Monday, the company said. ESPN+ customers reached 7.6 million this week.
Merck & Co Inc. (MRK-N) was down 2.8 per cent in reaction to news Wednesday that it intends to spin off its women’s health, biosimilar drugs and older products into a new publicly traded company, a move that will allow the company to focus on growth drivers like cancer drug Keytruda and vaccines.
The spin-off will reduce the number of human health products that Merck makes and sells by about 50 per cent.
The move is a culmination of the drugmaker’s strategy of tightening its focus around a few key areas, particularly cancer, where Merck has turned Keytruda into one of the world’s best-selling drugs, Merck Chief Executive Officer Ken Frazier said in an interview.
“The whole key to this is that it allows Merck to be much more focused on its greatest growth opportunities.”
Merck, which expects to complete the transaction in the first half of 2021, said the new company will send it US$8-billion to $9 billion through a special tax-free dividend. The new company is expected to have US$8.5- to US$9.5-billion in debt.
Merck also forecast cost savings of over US$1.5-billion by 2024 after the spinoff.
Spotify Technology SA (SPOT-N) lost 4.8 per cent after it reported a better-than-expected 29-per-cent rise in premium subscribers in the fourth quarter, as the music streaming company rolled out promotions to battle competition from Apple and Amazon.
Premium subscribers, which account for nearly 90 per cent of its revenue, stood at 124 million for the three months ended Dec. 31. Analysts on average were expecting 122 million paid subscribers, according to FactSet.
The company also forecast first-quarter premium subscriber numbers largely in line with estimates. It expects total premium subscribers in the range of 126 million to 131 million for the first quarter compared with the estimate of 128 million, according to FactSet Estimates.
Spotify has a big lead over its two closest rivals - Apple Music had more than 60 million subscribers as of June and Amazon had over 55 million subscribers globally.
Chipotle Mexican Grill Inc. (CMG-T) slid 3.5 per cent after the fast-casual burrito chain beat analysts’ estimates for quarterly sales and profit on Tuesday, helped by increased menu prices.
Chipotle also attracted diners through deals for members of its loyalty program and boosted online sales with a drive-thru option - called “Chipotlanes” - for orders placed on its app or website.
The company’s steady growth is set to continue in 2020, according to guidance released on Tuesday, as Chief Executive Officer Brian Niccol steers it past the E. coli bacteria outbreaks that sickened customers in 14 states through early 2016.
Credit Suisse analyst Lauren Silberman said: “CMG’s industry-leading and traffic-driven SSS [same-store sales] demonstrates momentum across the business, with a multitude of sales drivers in early innings supporting our expectation for ongoing outperformance. Digital sales increased 78 per cent to 19.6 per cemt of sales, with consumer facing initiatives, restaurant enhancements and digital-forward prototypes (Chipotlane digital sales high-20-per-cent range) likely to drive an increasing digital mix. CMG now has 8.5 million members enrolled in its loyalty program, and the company should begin to realize top and bottom line benefits in 2020 as it leverages personalization to incentivize behaviors. Carne Asada is expected to be transitioned off of the menu by the end of 1Q, though the near-term launch of Queso Blanco should partially offset the mix headwind (Carne Asada 150 basis points to avg check). CMG plans to introduce one to two new menu items per year on average, with quesadillas and beverages also in test. A visible and relevant marketing strategy and improved operations also support momentum.”
Snap, which owns the popular photo messaging app Snapchat, had earlier warned its peak advertising demand period between Black Friday and the December holidays had one fewer week this year.
Revenue, which the company generates from selling advertising on Snapchat, rose 44 per cent to US$560.88-million but missed the average analyst estimate of US$563.03-million.
Credit Suisse analyst Stephen Ju said: "Similar to the results for the prior few quarters and in-line with our long-standing investment thesis, the 100-per-cent ad impressions growth year over year was the main driver of revenue growth – CPMs compressed 24 per cent year over year. Due to a shorter Holiday shopping period in North America, Snap cited advertiser demand-related headwinds during 4Q19 – this led to a less-than-usual outperformance versus the higher end of guidance. As we recalibrate the model with the latest in ad impression growth, we continue to believe the average Snap user sees a low single-digit number of ads per session even if we are to assume that only 20 per cent of total time spent is on the Discover tab. Further, as Snap is in the process of fostering rising engagement with incremental content investment for Discover as well as games, the ad load ceiling continues to shift higher as well (the company continues to call out the lack of a supply constraint). We remain positive on SNAP shares on the following thesis points: 1) potential for better-than-expected daily active user growth with a revamped Android app released in more geographies, 2) potential for better-than-expected ad revenue on ramping ad load growth, 3) Snap is a scarce asset that offers advertisers access to a coveted younger demographic.”
Gilead Sciences Inc. (GILD-Q) dropped 2.2 per cent after the drugmaker forecast 2020 results below Wall Street estimates after the bell on Tuesday.
The company also reported a lower-than-expected fourth-quarter profit, as it recorded a variety of charges.
For 2020, the Foster City, California-based company forecast adjusted earnings of US$6.05 to US$6.45 per share, including stock-based compensation, on sales of US$21.8-billion to US$22.2-billion.
Full-year 2019 revenue totaled US$22.4-billion.
The forecast is “flattish to down” from Wall Street expectations due in part to higher operating expenses, said Jefferies analyst Michael Yee.
A day after its shares jumped nearly 9 per cent, eBay Inc. (EBAY-Q) was 0.8 per cent lower in response to news Intercontinental Exchange Inc. (ICE-N), the owner of the New York Stock Exchange, has approached the e-commerce company to explore “a range of potential opportunities.”
The statement came after people familiar with the matter said ICE discussed a potential takeover of eBay. The acquisition would exceed US$30-billion and represent a substantial departure from ICE’s focus on financial markets.
The move would call on ICE’s technological expertise in running markets to extract efficiencies from eBay’s marketplace platform, which connects buyers and sellers of goods around the world.
ICE said in its statement that “eBay has not engaged in a meaningful way,” and as a result, it was not in negotiations regarding the sale of all or part of eBay.
Shares of ICE gained 0.3 per cent
With files from staff and wires