A roundup of some of the North American equities that made moves in both directions
On the rise
Metro Inc. (MRU-T) was higher by 1 per cent on Wednesday after reporting its second-quarter profit rose from a year ago and sales climbed as shoppers began stocking up due to the pandemic during the last two weeks of the period.
The grocery and drug store company says it earned $176.2 million or 69 cents per diluted share for the 12-week period ended March 14 compared with a profit of $121.5 million or 47 cents per diluted share in the same quarter a year earlier.
Sales for the quarter totalled $3.99 billion, up from $3.70 billion a year earlier. Food same-store sales were up 9.7 per cent for the quarter, while pharmacy same-store sales were up 7.9 per cent.
Excluding the COVID-19 impact, Metro says food same-store sales were up 5.2 per cent and pharmacy same-store sales were up 6.4 per cent.
In its outlook, Metro says food same-store sales during the first four-weeks of its third quarter were up 25 per cent compared with a year ago.
Canadian Pacific Railway Ltd. (CP-T) gained 4.8 per cent after it slashed its earnings outlook for the rest of the year as the COVID-19 pandemic has caused the North American economy to slow and rail shipments to plummet.
The Calgary-based railway reported its first-quarter results on Tuesday and said it expects revenue ton miles will fall by about 5 per cent this year, while adjusted profit will be flat compared with 2019.
Keith Creel, CP’s chief executive officer, told analysts on a conference call the company’s strong balance sheet and ample liquidity will ensure the company survives the crisis and emerges in good shape. “We’re not panicked, we’re not distracted, we’re prepared,” Mr. Creel said.
CP, Canada’s second-largest railway, said its profit for the first quarter ended March 31 fell by 4 per cent to $409-million, or $2.98 a share, from $434-million ($3.09 a share) in the first quarter of 2019. Revenue rose by 16 per cent to $2.04-billion, the railway said in financial results released after markets closed on Tuesday.
Citi analyst Christian Wetherbee said: “Coming off CP’s 1Q20 conference call we can’t help but be impressed by the operating and cost trends in 1Q. This strong performance yielded a big down payment on earnings power for 2020 and allowed the company to guide to flattish earnings growth year-over-year, a mark which will likely be unique amongst the group. Nevertheless, the updated guidance and outlook for 2Q-4Q still suggests downside to our and consensus estimates (4 per cent and 8 per cent, respectively) and actually implies fairly negative operating leverage, at least in 2Q. So while we like the results and believe CP’s management stands out as premier operators, it’s difficult to expect material upside given the strong outperformance already notched by the company year-to-date and near-term uncertainty. That said, it’s clear earnings power will be strong in a recovery, which should help underpin valuation and makes the 12-24 month outlook attractive.”
- Eric Atkins
TFI International Inc. (TFII-T) jumped 9.7 per cent in the wake of the release of better-than-anticipated first-quarter results after the bell on Tuesday.
The Montreal-based transport and logistics company reported revenue and adjusted earnings per share for the quarter of $1.241-billion and 83 cents, respectively. Both topped the consensus expectations on the Street ($1.183-billion and 70 cents).
Desjardins Securities analyst Benoit Poirier said: "Since the beginning of the COVID-19 outbreak in North America, many of the end markets served by TFII have remained strong, including transport of essential household goods, medical products and e-commerce. Management has implemented temporary cost-saving measures, including a wage reduction of 5–15 per cent for executives as well as reduction in directors’ fees, a reduction in the work week for more than 1,000 full-time employees, and a reduction in the workforce (which TFII expects to be temporary).
“Bottom line, we are pleased with the company’s performance in 1Q, which in our view is a testament to management’s disciplined approach. We believe TFII’s diversified business model focused on FCF generation and ROIC, and its strong balance sheet (net debt to EBITDA of 2.0 times) should help it to weather the forthcoming economic downturn. We therefore recommend investors buy the shares.”
ATS Automation Tooling Systems Inc. (ATA-T) rose 6.5 per cent after it announced it has received a $65-million order booking from Tessy Plastics to design, build and deliver two automated manufacturing systems within the next four months.
The company said the program is expected to enable the production of 10 million units per month of critical components for point-of-care testing kits that can be used to detect COVID-19.
National Bank analyst Maxim Sytchev said: “When we upgraded the shares on Feb. 9 on FQ3 noise that drove the stock lower, the scope of COVID-19 impact was only starting to be felt across the world. That being said, Healthcare/EV/nuclear end-market skew is making the business much more resilient now versus the company’s past while supply chain localization thematic ... will gather momentum over the coming months/years. As a reflection of this dynamic, ATS is by far the most topical name of discussion with accounts now.”
Snap Inc. (SNAP-N) was up almost 38 per cent in the wake of beating Wall Street estimates for quarterly revenue and user growth for its Snapchat app, as more people seek entertainment while they stay at home during the global coronavirus pandemic.
Snapchat, known for its disappearing messages, said it saw a jump in usage in the last week of March compared with the end of January, as people increasingly used the app to communicate with friends and family. Usage also increased for Snapchat’s original content and in-app games.
Daily active users (DAU) on Snapchat rose 20 per cent to 229 million in the first quarter ended March 31, compared with a year earlier. The figure stood at 218 million in the fourth quarter.
DAU, a widely watched metric by investors and advertisers, beat analysts’ average estimate of 224.68 million, according to Refinitiv data.
Revenue, which Snap earns mainly by selling advertising on the app, increased 44 per cent from a year earlier to US$462.47-million. The company said higher revenue in the first two months of the quarter offset lower growth in March, when advertisers began to tighten marketing budgets as non-essential stores closed amid the pandemic.
Citi analyst Jason Bazinet said: “SNAP’s 1Q results beat the market expectations in both revenue and user metrics, and was in-line with the pre-COVID-19 management guidance. However, much of the outperformance was driven by the accelerated growth in the first two months and we remain cautious on the near-term revenue outlook as the company navigates through the impact of COVID-19.”
Chipotle Mexican Grill Inc. (CMG-N) rose 13.6 per cent after it reported after the bell on Tuesday soaring digital and delivery sales driven by the coronavirus crisis helped offset the impact of shuttered dining rooms, and the fast-casual chain said it had enough cash and liquidity to get through the next year.
Overall, same-store sales fell 16 per cent in March as locations were forced to shut dining rooms. While in-store ordering was 75 per cent lower at the start of April, delivery orders rose 150 per cent and mobile pickup orders were 120 per cent higher.
For the first quarter, digital sales rose nearly 81 per cent to US$371.8-million and accounted for 26.3 per cent of total sales, compared to 19.6 per cent of sales in the fourth quarter.
The company is looking to reopen its dining rooms in some areas in coming weeks but expects employees to still wear masks and gloves, offer hand sanitizer and likely have a worker just tasked with sanitizing tables and high-traffic areas, executives said on a call to discuss the quarterly results.
“I’m very excited about the opportunity to get our dining rooms reopened,” said Chief Executive Brian Niccol. “I think we’re going to hang on to a lot of our gains, digitally.”
Texas Instruments Inc. (TXN-Q) sat 4.7 per cent higher in the wake of reporting better-than-expected results for the first quarter but forecast current-quarter revenue and profit largely below Wall Street estimates, as the chip industry braces for a big hit from the coronavirus outbreak.
As TI supplies chips for everything from smart phones to automobiles and often reports earnings before other chipmakers, investors watch its results closely as a proxy for both the health of the chip industry and other sectors where semiconductors are key components.
Despite the forecast, investors buoyed TI’s shares higher, in part because some aspects of its business such as analog chips appeared to be little hurt by the coronavirus while the company maintained focus on staying profitable and returning dividends to shareholders.
The company said it was prepared for the disruptions caused by the pandemic due to strong inventory, but faces demand uncertainty.
In a research note, RBC Dominion Securities’ Mitch Steves said: “Texas Instruments believes COVID-19 will result in an economic recession which has caused the Company to provide a wider than normal guidance for March at $2.61-3.19-billion/$0.64-1.04. Overall, after the call back and the conference call we note the following: 1) it appears the Company believes the PC uplift will be short-lived and TXN remains dedicated to Industrial/Auto, 2) an important highlight was that 2008-2009 occurred during a hotter semiconductor environment and demand still snapped back. In 2020, we were coming off a downturn creating potential for a more pronounced upside in 2021 - at this point we assume 2021 is similar to 2019 from a revenue perspective, and 3) capital allocation remains unchanged from their prior comments.”
Online travel services company Expedia Group Inc. (EXPE-Q) jumped 7.4 per cent following a Wall Street Journal report that it is in advanced talks to sell a stake to private-equity firms Silver Lake Partners and Apollo Global Management Inc for about US$1-billion.
The company’s shares have fallen about 47 per cent so far this year as global travel restrictions due to the coronavirus pandemic ground the travel and tourism industry to a virtual halt.
The company is expected to give board representation to the investors as part of the deal, which could be announced this week, the Journal reported, citing people familiar with the matter.
However, the talks could still collapse and Expedia could opt to raise funds in a public-debt offering instead, the report added.
Chevron Corp. (CVX-N) was 3.6 per cent higher despite the Trump administration giving it until Dec. 1 to “wind down” its business in Venezuela and allowing it to conduct only limited operations there until then.
Chevron was the last major U.S. oil company still operating in the OPEC member-nation
Ratcheting up pressure on socialist President Nicolas Maduro, the U.S. Treasury Department imposed new restrictions on Chevron’s joint ventures with Venezuela’s state-run oil company PDVSA, paving the way for the California-based company’s departure.
Chevron has had a special U.S. operating license exempting it from sanctions on Venezuela’s vital oil sector since last January but the latest three-month waiver was due to expire on Wednesday.
Rogers Communications Inc. (RCI.B-T) gained 1.2 per cent after it pulled its 2020 forecast and reported lower-than-expected quarterly profit due to a drop in ad sales and weaker demand for its wireless services as a result of the coronavirus outbreak.
Revenue from the telecom operator’s wireless unit, its largest business, slipped 2 per cent to $2.08-billion as subscriber activity slowed during the pandemic and roaming sales fell.
Rogers, which faces stiff competition from rivals BCE Corp and Telus Corp, generated average revenue per user of $52.85 from its wireless services, compared with $54.13, a year earlier.
Rogers said the suspension of major sports matches in March and lower ad sales led to a 12-per-cent fall in first-quarter revenue in its media segment, which includes television and radio broadcasting, specialty channels and digital media.
The telecom operator’s revenue for first quarter ended March 31 fell 5 per cent to $3.42-billion due to lower subscriber activity during the pandemic.
U.S. oilfield firm Baker Hughes Co. (BKR-N) rose 1.7 per cent in the wake of reporting a US$10-billion loss and lower-than-expected revenue in the first quarter on Wednesday as an 80-per-cent plunge in oil prices crushed demand for services and equipment.
Baker Hughes had warned investors last week it would take a US$1.5-billion charge to earnings in the first quarter, and a US$15-billion goodwill impairment charge as it reduced the long-term prospects for its oilfield and equipment unit.
Revenue of US$5.43-billion for the quarter was down 3 per cent from a year earlier and below analysts’ average estimate of US$5.63-billion, according to Refinitv Eikon data.
Net loss attributable to Baker Hughes stood at US$10.21-billion, compared with a profit of US$32-million a year earlier.
On the decline
Netflix Inc. (NFLX-Q) was down 3 per cent after announced before the bell it is set to raise about US$1-billion in debt, a day after the streaming pioneer doubled its own projections for new customers as stuck-at-home users binged on original shows.
The company plans to use the proceeds to fund original shows, acquire content and for possible acquisitions, at a time when major U.S. studios are halting production and delaying film releases due to the coronavirus-led lockdowns.
After the bell on Tuesday, the company said it more than doubled its own projections for new customers as quarantined audiences binged on series such as Tiger King.
However, the company predicted a weaker second half of the year if stay-at-home orders to fight the coronavirus are lifted.
The world’s largest streaming service gained 15.8 million paying customers from January through March, bringing its global total to 182.9 million. Netflix had predicted it would add 7 million during the period.
The company warned that it expected fewer new subscribers from July to December compared with a year earlier, however. Many people who would have joined then are likely to have already signed up, executives said.
“We expect viewing to decline and membership growth to decelerate as home confinement ends,” Netflix said in a letter to shareholders.
The company is among the few businesses to benefit from government orders imposed in March to keep people away from each other in order to stop the spread of the highly infectious novel coronavirus. While the S&P 500 Index has fallen 19 per cent from its Feb. 19 record high, Netflix has gained 11 per cent during the same period.
Netflix also issued a bullish forecast that it would add 7.5 million new customers for the current quarter, which ends in June, though the company said it was “mostly guesswork” given uncertainty over when stay-at-home orders might be lifted. Analysts surveyed by FactSet had expected 3.8 million.
AT&T Inc. (T-N) slipped 1.3 per cent after its first-quarter revenue falling short of Wall Street expectations and the company pulled its annual forecast on Wednesday, as the impact of the coronavirus outbreak overshadowed strong growth in monthly phone subscribers.
The Dallas-based phone giant is the first of the big U.S. communications companies to report quarterly results, providing a glimpse into the resiliency of the telecoms sector.
AT&T said the pandemic reduced earnings by 5 cents per share. Advertising sales, which was severely hit due to the postponement of live sports such as March Madness and lower wireless equipment sales, led to a $600 million decline in revenue.
The company said it had limited visibility for the rest of the year, but added that it had enough free cash flow to pay dividends and make debt payments.
The coronavirus pandemic has battered stock markets and forced companies to withdraw financial guidance amid spending cuts and massive layoffs.
Delta Air Lines Inc. (DAL-N) shares lost 2.7 per cent after it reported on Wednesday its first quarterly loss in eight years as the coronavirus crisis devastates air travel demand, but said its daily cash burn would slow through June as it braces for a recovery that could take two to three years.
“We should be prepared for a choppy, sluggish recovery even after the virus is contained,” Chief Executive Ed Bastian said in an employee memo on Wednesday.
In a matter of months, U.S. airlines like Delta have gone from expansion to survival, searching for ways to raise and save as much cash as possible as flight cancellations started outnumbering new bookings around mid-March.
By the end of the quarter, passenger volumes had dropped by as much as 95 per cent and Delta was burning US$100-million per day.
After a series of cost-cutting measures and capital raisings, including a government bailout, the airline’s daily cash burn will slow to about US$50-million by the end of June, it said, when it expects to have US$10-billion in liquidity.
It had US$6-billion in liquidity in March.
Cowen analyst Helane Becker pointing to cash conservation as “the name of the game” for airlines in the near term..
United Airlines Holdings Inc. (UAL-Q) was lower by 7.2 per cent after announcing late Tuesday a public offering to raise more than US$1-billion, the first major airline to sell equity to help it survive a sharp travel downturn in the coronavirus pandemic.
The offer of 39.25 million shares, underwritten by Morgan Stanley and Barclays, was priced at US$26.50 per share, United said in a statement, a discount of 4.9 per cent on Tuesday’s close.
Shares in United, like other airlines, have been punished by decimated travel demand, losing 67 per cent over the past three months as the pandemic forced lockdowns in many countries.
In an effort to boost capital and save costs until people start flying again, U.S. airlines have grounded fleets, raised debt, cut executive salaries, asked employees to take unpaid leaves of absence and sought government aid.
United is set to receive US$5-billion from the U.S. Treasury to cover payroll through Sept. 30 and has said it expects to borrow up to about US$4.5-billion from a separate government package for airlines. In exchange for part of the funds, the airline must issue warrants for the Treasury to purchase shares at its April 9 closing price of $31.50.
Tyson Foods Inc. (TSN-N) was down 3.2 per cent after announcing before the bell it plans to indefinitely suspend operations at its largest pork plant in the United States to contain the rapid spread of the coronavirus.
It said the Waterloo, Iowa plant had already been working at reduced capacity, adding that the 2,800 workers at the plant, to be compensated during the closure, would be invited to come in later this week for coronavirus testing.
The announcement marks the latest disruption to the U.S. food supply chain from the coronavirus outbreak, which has killed at least 177,000 people across the globe.
Smithfield Foods, the world’s biggest pork processor, has also shut a U.S. plant indefinitely following cases of COVID-19 among employees and warned the country was moving “perilously close to the edge” in supplies for grocers.
“The combination of worker absenteeism, COVID-19 cases and community concerns has resulted in our decision to stop production,” Steve Stouffer, group president of Tyson Fresh Meats said.
Biogen Inc. (BIIB-Q) fell 9.4 per cent after it said on Wednesday it would delay filing for marketing approval of its much-awaited experimental Alzheimer’s disease drug to the third quarter/
Biogen had scrapped two clinical studies of the drug, aducanumab, in March 2019 after initial analysis showed the trials would not succeed.
It later reversed course, saying analysis of the discontinued clinical studies showed some patients benefited from taking higher doses over an extended period of time.
The company had previously planned to file the application in early 2020.
Biogen posted a bigger-than-expected first quarter profit on higher demand for its spinal muscular atrophy drug, Spinraza, as well as its multiple sclerosis treatment, Tecfidera.
The company also said it expected some impact to timelines of ongoing clinical trials from the coronavirus pandemic.
Investment firm Sycamore Partners is looking to terminate its deal to buy Victoria’s Secret from L Brands Inc. (LB-N) on grounds that it breached some deal terms, a court filing on Wednesday showed, sending the company’s shares down 15.5 per cent.
Earlier this year, L Brands had said it would sell a controlling stake in its Victoria’s Secret unit to Sycamore, valuing the lingerie brand at US$1.1-billion, to focus on its better-performing Bath & Body Works brand.
With files from staff and wires
David Leeder