A roundup of some of the North American equities making moves in both directions today
On the rise
Shopify Inc. (SHOP-T) jumped over 7 per cent on Wednesday with the release of better-than-expected quarterly earnings, helped by higher holiday sales, and forecast full-year revenue above Wall Street estimate.
For full year 2020, it forecast revenue in a range of US$2.13-billion to US$2.16-billion, above the average analysts’ average estimate of US$2.11-billion according to IBES data from Refinitiv.
Shopify reported worldwide sales of over US$2.9-billion between Black Friday and Cyber Monday, up about 61 per cent from the same period in 2018.
The company posted net income of US$771,000, or 1 US cent per share, for the quarter ended Dec. 31, compared with net loss of US$1.5-million, or 1 US cent per share, a year earlier.
Excluding items, it earned 43 US cents per share, beating the average estimate of 23 US cents per share.
Hydro One Ltd. (H-T) increased 1.7 per cent after it topped expectations as it reported a fourth-quarter profit compared with a loss a year ago when it was hit by an Ontario Energy Board decision on a deferred tax asset.
The power utility says its profit attributable to common shareholders amounted to $211-million or 35 cents per diluted share for the quarter ended Dec. 31.
Industrial Alliance Securities analyst Jeremy Rosenfield said: “We continue to view Hydro One as a defensive investment, underpinned by (1) stable earnings and cash flows from its regulated utility businesses located entirely in Ontario, (2) healthy organic rate base and earnings growth (4-6 per cent per year, on average, through 2024), and (3) decent dividend (3.5-per-cent yield, 70-80-per-cent target EPS payout). Given the stable financial outlook for H and continued execution of the Company’s organic growth strategy, with aggressive cost control, we now see H as more in line with its Canadian large-cap regulated utility peers; as a result, we are increasing our relative valuation to the sector average 20 times 2021 estimated P/E (up from 18 times 2021 P/E previously), and increasing our price target [to $29 from $26] accordingly.”
In a research note, Raymond James analyst Daryl Swetlishoff said: “We rate West Fraser Strong Buy given our constructive view of lumber markets, driving earnings growth and the positive impact on valuation. In the wake of unprecedented sawmill curtailments, North American lumber shipments are declining. At the same time, U.S. housing activity levels have gained steam in recent months. We expect these factors to backstop a spring building materials rally. With West Fraser owning the largest North American lumber footprint, the company is positioned to benefit from a recovery in lumber prices.”
U.S. grain trader Bunge Ltd. (BG-N) increased 0.1 per cent after it reported a better-than-expected quarterly profit on Wednesday, as it focused on improving segment margins across its businesses.
Bunge and its agribusiness peers Archer Daniels Midland Co , Cargill Inc and Louis Dreyfus Co, hit by a years-long crop supply glut, have been seeking to shed poor-performing assets and invest in businesses with potential for higher profit margins.
In its agribusiness segment, more oil demand boosted sales of soft seeds and drove higher results in South America, the company said.
Higher sales in Argentina also helped the company’s grains unit report positive adjusted earnings before interest and tax (EBIT) margins compared with a negative margin last year, the company said.
Israel-based Teva Pharmaceutical Industries Ltd. (TEVA-N) was up 9.1 per cent in the wake of reporting slightly better than expected fourth-quarter results on Wednesday and forecast 2020 earnings in line with expectations.
The world’s largest generic drugmaker earned 62 US cents per diluted share excluding one-time items in the October-December quarter, up from 53 US cents a year earlier.
Revenue rose 1 per cent to US$4.5-billion mainly due to an increase in sales of Huntington’s treatment Austedo, new migraine drug Ajovy and certain respiratory products, partially offset by lower revenues from multiple sclerosis drug Copaxone in North America.
Analysts had forecast Teva would earn 61 US cents per share excluding one-offs on revenue of US$4.35-billion, according to I/B/E/S data from Refinitiv.
Western Forest Products Inc. (WEF-T) was over 5.5 per cent higher with the release of better-than-anticipated quarterly results after the bell on Wednesday.
The company reported a net loss of $29.2-million or 9 cents per share in the fourth quarter compared to net income of $5.3-million or 2 cents for the fourth quarter of 2018. Analysts were expecting a loss of 7 cents per share.
Raymond James’ Daryl Swetlishoff: “A tentative agreement was reached with the United Steelworkers Monday, with a ratification vote by the USW membership to be held later this week. The company is looking to get back to work following an 8-month labour dispute affecting much of its operations. Although rebounding since the announcement, Western still lags the lumber peer group, with WEF 21 per cent off the 8-month low compared to the comps up 40 per cent and the TSX up 11 per cent (since August 2019). With a tentative agreement reached (subject to membership vote) we expect Western to play catch up although it will take time to ramp up operations.”
The Calgary-based company reported funds from operations of 55 cents per share, missing the consensus projection by 4 cents. The miss was due largely to weaker-than-anticipated realized pricing and higher-than-expected operating costs in the oil sands.
Raymond James analyst Chris Cox said: “Overall, no big surprises with 4Q19 results, other than a $50-million G&A charge which we view as one-time. The strong ramp-up of oil sands volumes during the quarter, and the high degree of utilization of rail during December, demonstrate Cenovus’ unique positioning with respect to the Alberta Government’s Special Production Allowance for rail.”
On the decline
Barrick Gold Corp. (ABX-T) slid 0.6 per cent in early trading on Wednesday despite reporting a better-than-expected quarterly profit on Wednesday and boosting its dividend by 40 per cent, benefiting from higher gold output and improved prices for the precious metal.
Gold prices had gained about 18 per cent in 2019, as investors sought safe-haven assets on the back of global recessionary fears triggered by the long-drawn out trade spat between the United States and China.
Barrick said gold production rose 14 per cent to 1.44 million ounces in the fourth quarter from a year earlier, boosted by higher yield at its Nevada Gold Mines joint venture with Newmont Corp .
Average realized gold prices rose to US$1,483 per ounce from US$1,223.
Barrick declared a fourth-quarter dividend of 7 US cents per share payable on March 16, as the company cleaned up its balance sheet and slashed debt, net of cash, by almost half to US$2.22-billion at the end of 2019 compared with 2018.
“The board believes the dividend increase is justified by the significant reduction in net debt and strong balance sheet, together with the growth in free cash flow supported by a robust 5-year plan,” Chief Financial Officer Graham Shuttleworth said in a statement.
Cineplex Inc. (CGX-T) finished narrowly lower per cent after it reported its fourth-quarter profit fell compared with a year ago due in part to costs related to the takeover of the movie theatre company by U.K.-based Cineworld PLC.
Cineplex says it earned $3.5-million or 6 cents per diluted share for the quarter ended Dec. 31 compared with a profit of $27.2-million or 43 cents per share in the same quarter a year earlier. Revenue totalled $443.2-million, up from $427.8-million.
CVS Health Corp. (CVS-N) declined 0.1 per cent in the wake of posting a higher-than-expected quarterly profit on Wednesday as its stores sold more medicines and its pharmacy benefit management business gained from higher U.S. prescription drug prices.
Pharmacy benefit managers negotiate drug discounts for health insurers and employers, and earn from taking a cut of the rebates offered to them by drugmakers, and have come under scrutiny in the past over their role in rising healthcare costs.
List prices of branded medicines have continued to rise in the United States, although at a relatively slower pace.
Russel Metals Inc. (RUS-T) slipped 3.9 per cent in the wake of Tuesday’s release of lower-than-anticipated quarterly results.
The Mississauga-based company recorded a loss of $7-million or 11 cents per share on revenues of $837.4-million. The results compare to net income of $46-million or 74 cents per share on revenues of $1.1-billion in the 2018 fourth quarter. Analysts were expecting revenue of $850.9-million in the latest quarter.
Raymond James analyst Frederic Bastien said: “Russel Metals missed 4Q19 expectations primarily due to a steeper-than-expected decline in average selling price across its business. The good news is that steel pricing has recovered from its November lows and demand remains consistent with early 2019. This still gives us confidence that after two years of tariff driven volatility, RUS’ financial performance will normalize in 2020, with quarterly results steadily improving from its low 4Q19 base.”
Pretium Resources Inc. (PVG-T) fell 21.5 per cent after announcing its 2020 production guidance and a leadership transition plan for the role of President and CEO.
Lyft Inc. (LYFT-Q) lost 10.2 per cent after it forecast slower revenue growth in the new year and the company refused to match larger rival Uber Technologies Inc. (UBER-N), which recently moved up a key profit target by a year, sticking to its later date of projected profitability.
While Lyft reported record quarterly revenue of more than US$1-billion, it failed to change its target to achieve profitability on an adjusted basis by the end of 2021. This was in contrast to its larger rival Uber Technologies Inc, which last week moved its own profitability target, previously the same as Lyft’s, to the fourth quarter of 2020.
Analysts during an investor call repeatedly pressed the company on prospects for profitability, leading Lyft executives to defend their target and insist the company was on the right track.
Uber shares were down 0.1per cent
Credit Suisse analyst Stephen Ju said: “Lyft reported upside to both Contribution and Adjusted EBITDA margins – the onboarding of Progressive and State Farm helped to drive a sequential improvement in insurance costs, which flowed through to the EBITDA line as overall OpEx also came in below expectations. Management stressed the importance of profitable growth, and highlighted the focus on pursuing higher value rides and riders vs growth for growth’s sake. Although the 2020 Adj. EBITDA guidance was ahead of our/consensus expectations, it nevertheless contemplates about $130-million in incremental R&D ($55-million) and policy initiatives ($75-million). In our view, Contribution Margin guidance at 54 per cent and 55-55.5 per cent for 1Q20 and 2020 respectively appear conservative given the likelihood for expansion with either existing or additional carriers throughout the year. Our Active Rider and Gross Booking estimates edge modestly lower but our profit dollar estimates for 2020 and beyond march higher nonetheless. As we noted previously, the 10-K filing for 2019 should add incremental perspective on insurance reserves and incentives.”
Shares of Bed Bath & Beyond Inc. (BBBY-Q) sank 21 per cent after the retailer said sales in the first two months of the final quarter were hit by increased promotions, falling store traffic and inventory management issues.
Analysts were hoping the home furnishing chain’s new Chief Executive Officer Mark Tritton to quickly overhaul the business after almost three years of falling same-store sales through divestitures, cost cuts and a revamp of merchandise.
But after Bed Bath & Beyond’s Tuesday announcement of a 5.4-per-cent drop in same-store sales from the first two months of its fourth quarter due to increased promotions and falling store traffic, Wall Street dimmed its expectations.
“Tritton has a more difficult job ahead than we anticipated and more aggressive changes are needed. We are disappointed with the large step back in the business,” analysts at Telsey advisory group wrote in a note.
With files from Brenda Bouw, staff and wires