A roundup of some of the North American equities that made moves in both directions
On the rise
Gilead Sciences Inc. (GILD-Q) jumped after announcing before the bell its experimental antiviral drug remdesivir helped improve symptoms in COVID-19 patients who were given the drug early than among those who were treated later
The closely-watched drug has moved markets in the past few weeks and on Wednesday broader markets once again rose on the data and Gilead shares also increased 5.7 per cent.
In Gilead’s study, 62 per cent of patients treated early were discharged from the hospital, compared with 49 per cent of patients who were treated late, the company said.
The trial was testing 397 patients, evaluating the safety and efficacy of five-day and 10-day dosing regimens of remdesivir in hospitalized patients with severe manifestations of COVID-19.
Interest in Gilead’s drug have been high as there are currently no approved treatments or preventive vaccines for COVID-19, and doctors are desperate for anything that might alter the course of the disease that attacks the lungs and can shut down other organs in extremely severe cases.
The company also said a separate trial by the National Institute of Allergy and Infectious Diseases had met the main goal of the study, but it did not provide details on the data.
Boeing Co. (BA-N) rose after it reported a loss for the second straight quarter and said on Wednesday it would cut its workforce by about 10 per cent as the planemaker further reduces 787 Dreamliner production against a slump in global travel demand.
The planemaker said it was confident of getting sufficient liquidity to fund its operations, sending its shares up 5.9 per cent.
Boeing, which last month drew down its entire US$13.8-billion credit line, is working with investment banks on a potential bond deal worth at least US$10-billion, Reuters reported on Tuesday.
Demand for Boeing’s bigger and more profitable 787 jet had waned as a result of the U.S.-China trade war. The pandemic has made it more difficult for the company to sustain production of the aircraft, which is its main source of cash at a time when the 737 MAX remains grounded.
Boeing said it plans to cut the jet’s production to seven units per month by 2022. In October, it had decided to lower it to 12 per month in late 2020 from 14 and to 10 aircraft per month in early 2021.
A drop in Google ad sales steadied in April and some consumers returned to using the search engine for shopping in addition to finding novel coronavirus information, parent Alphabet Inc. (GOOGL-Q) said on Tuesday, sparking an 8.9-per-cent rally in shares.
Some financial and advertising analysts had estimated ad sales declines of up to 20 per cent in the coming quarters, with hotels, airlines, film studios and other big spenders cutting ad buys because of the coronavirus pandemic.
But Alphabet said search ads, its most lucrative business, saw revenue decline by a mid-teens percentage in late March compared with a year earlier and that the slowdown did not worsen this month.
The company also is working to lure money from advertisers that normally sponsor sporting events canceled by the coronavirus.
Alphabet’s overall revenue in the first quarter was US$41.2-billion, up 13 per cent compared with the same period last year. The average estimate among financial analysts tracked by Refinitiv was US$40.29-billion, up 10.87 per cent expecting the slowest growth since 11.1 per cent in the second quarter of 2015.
Credit Suisse analyst Stephen Ju said: “Given Google’s sprawling global footprint for its advertising franchise, trying to pin down headwinds against 2Q20 growth on an absolute basis on limited visibility was always going to be a difficult exercise. That said with management providing 1Q20 exit velocity for Search, YouTube, and Network at around -15%, up high-single-digits, and down low-double-digits respectively, this serves to at least quantify the value destruction from COVID-19, which today is no longer as open ended. As we have noted, Google should emerge from this crisis in a stronger position, with Product Listing Ads, local/Google My Business, and YouTube to benefit from advertising, and GCP to benefit from what should be accelerated enterprise adoption. Our 2Q20 estimates decrease primarily as our Search and Network forecasts were in hindsight overly aggressive, with a directional/sequential recovery in 3Q20 and 4Q20. FY21 estimates reflect a general recovery scenario. Our price target increases to $1,600 versus prior $1,500, and we maintain our Outperform rating based on the following thesis points: 1) ongoing monetization improvements in Search advertising through product/AI-driven updates, 2) greater-than-expected revenue contribution from non-Search businesses (YouTube, Cloud, and Play), 3) optionality and shareholder value creation from new monetization initiatives such as Maps, Discover tab, as well as the eventual commercialization of Google’s Other Bets (Waymo, life sciences).”
Cenovus Energy Inc. (CVE-T) jumped 14.2 per cent after it swung to a quarterly loss on Wednesday, hurt by a significant decline in global demand for crude oil caused by the coronavirus outbreak and a price war between Saudi Arabia and Russia.
Net loss stood at $1.80-billion, or $1.46 per share, in the first quarter ended March 31, compared to a profit of $110-million, or 9 cents per share, from a year earlier.
Vermilion Energy Inc. (VET-T) rose 11.5 per cent after it reported a net loss of $1.3-billion or $8.42 per share in the first quarter thanks to a $1.2-billion writedown in the value of its oil and gas assets around the world due to low global commodity prices.
The loss compares with a net gain of $39.5-million or 26 cents per share in the same period of 2019 and analyst expectations of a loss of about $43-million or 14 cents, according to the financial markets data firm Refinitiv.
In a research note, Raymond James analyst Jeremy McCrea said: “Just a few months ago, our thesis on VET was one of profitability given its low sustainable capex requirements and strong reserve reports historically. Much of this is due to their international diversification where ‘conventional’ style geology generally has better rates of return than shale/tight oil plays - something important if commodity prices stay subdued. Unfortunately, the rapid decline in commodity prices has had Vermilion playing defence given where its balance sheet had grown over the last several years. Encouragingly, we have now seen management appreciate the unknown risks COVID-19 presents to oil prices and have acted aggressively to protect the balance sheet with the dividend suspension and capex reductions in March. With much of the company’s debt termed out for the next 4 years, there is increasing breathing room. That said, we still expect to see plenty of volatility and we remind investors many of these E&P names remain very high risk..”
Husky Energy Inc. (HSE-T) was 12 per cent higher after it slashed its dividend as it reported a $1.7-billion loss in its first quarter due to impairment charges related to the plunge in crude oil prices as a result of the pandemic.
The company says it will now pay a quarterly dividend of 1.25 cents per share, down from 12.5 cents per share.
Husky says its loss for the first quarter amounted to $1.71 per share for the quarter ended March 31 compared with a profit of $328 million or 32 cents per share in the same quarter a year earlier.
Maple Leaf Foods Inc. (MFI-T) increased 1.5 per cent after saying before the bell it expects higher pork demand from Asia in the second quarter, while reporting a 12.8-per-cent jump in first-quarter sales due to consumers stockpiling food during the coronavirus pandemic.
The company had a bump in sales in the quarter from restrictions on movement put in place to arrest the spread of the novel coronavirus, which prompted consumers to buy more essential supplies such as meat, tissues and disinfectant products.
The company’s first-quarter sales rose to $1.02-billion from $907.1-million, even as it reported a loss because of higher costs.
Sales in Maple Leaf’s meat protein group unit, which sells value-added fresh pork and poultry products, jumped 12.7 per cent to $981.4-million in the first quarter ended March 31.
West Fraser Timber Co. Ltd. (WFT-T) sat 13.6 per cent higher after withdrawing its production outlook for the year due to the uncertain impact of measures to cope with the COVID-19 pandemic.
The Vancouver-based forest products producer says it expects output to be further hurt over the coming months from the novel coronavirus’s influence on the supply chain and market demand.
The warning came as the company swung to a profit in the first quarter, earning $12 million or 18 cents per basic share for the period ended March 31. That compared with a loss of $5 million or seven cents per share a year earlier.
Excluding one-time items, adjusted profits were $28 million or 42 cents per share, up from $22 million or 32 cents per share in the first quarter of 2019.
Raymond James’ Daryl Swetlishoff said: “West Fraser’s 1Q20 results highlight how frustrating the economic impacts of COVID-19 are for the sector as post shutdown, improving markets turned abruptly and remain very challenged. Shares are now trading below the historic minimum valuation range at levels last seen in 2012. While near-term market uncertainty remains high, we note the company maintains strong liquidity with no near-term debt maturities. West Fraser owns the largest, most profitable North American lumber footprint – well positioned to benefit from a recovery; we have conviction that long-term investors will be rewarded.”
Mastercard Inc. (MA-N) reported better-than-expected first-quarter earnings and the payment processor said it has started seeing early signs of spending levels stabilizing, even as the novel coronavirus outbreak wreaked havoc on consumer spending.
Shares of the world’s second-largest payment processor were up 7.2 per cent.
Net income fell to US$1.7-billion, or US$1.68 per share, in the first quarter from US$1.9-billion, or US$1.80 per share, a year earlier, hurt by a rise in losses on equity investments and other costs.
On an adjusted basis it earned US$1.83 per share, beating analysts’ estimates of US$1.73 per share according to Refinitiv IBES.
The novel coronavirus pandemic has shutdown large parts of the global retail industry as stores remain shut and shoppers stay at home to avoid catching the highly contagious illness.
Spotify Technology SA (SPOT-N) jumped over 11 per cent as it reported a better-than-expected 31-per-cent jump in paid music subscribers to 130 million and a 22-per-cent rise in revenue in the first quarter, weathering a slowdown in ad sales due to the spread of the coronavirus.
Spotify, which launched its service over a decade ago and faces stiff competition from Apple Inc and Amazon.com Inc, earns by selling music subscriptions and showing ads to free users.
“We are fortunate that as a business we are able to operate with very little disruption and our hope is that providing music, information, and an escape for many can provide some joy and comfort,” the company said in a statement.
For the second quarter, Spotify expects premium subscribers in the range of 133 million to 138 million. Analysts were expecting 136.5 million, according to IBES data from Refinitiv.
It also forecast total revenue in the range of 1.75 billion euros (US$1.9-billion) to 1.95 billion euros, below expectation of 2.02 billion euros, according to IBES data from Refinitiv.
Spotify said it started seeing a slowdown in ad sales in the last weeks of March as buyers tightened their purse strings due to the spread of the cornonavirus.
Uber Technologies Inc. (UBER-N) was up 4.2 per cent after revealing in a regulatory filing that Chief Technology Officer Thuan Pham has resigned, effective May 16.
Mr. Pham, who joined Uber in 2013, is among the senior-most executives at the company. Mr. Pham’s departure is coming at a crucial time for Uber as stay-at-home orders around the world severely curtail demand for its services.
Uber is also discussing plans to cut around 20 per cent of its staff because of the pandemic, The Information reported on Tuesday.
The layoffs could result in more than 5,400 of Uber’s 27,000 employees losing their jobs, according to the report.
On the decline
Loblaw Companies Ltd. (L-T) was down 3.8 per cent as a surge in demand at grocery stores and pharmacies accounted for $751-million in additional sales in just the first three weeks of March .
The unusual level of demand provided a net earnings boost of 14 cents per share, the company said on Wednesday as it reported its first quarter results.
Loblaw’s revenue increased by $1.14-billion, or 10.7 per cent, to $11.8-billion in the three months ended March 21. Same-store sales -- a key metric that does not include growth due to new store openings -- grew by 9.6 per cent in the quarter at Loblaw’s grocery stores, and 10.7 per cent at its Shoppers Drug Mart chain.
- Susan Krashinsky Robertson
Starbucks Corp. (SBUX-Q) was down 2.3 per cent after it said late Tuesday it sees sales in China, the company’s biggest growth market, recovering by the end of September, following a massive drop in same-store sales in the current quarter on fallout from the coronavirus pandemic, which forced Starbucks to close stores around the globe.
Seattle-based Starbucks reported a 10-per-cent fall in global same-store sales for its fiscal second quarter ended March 29. Analysts had forecast a 9.71-per-cent decline, according to IBES data from Refinitiv.
Excluding one-time items, the company earned 32 US cents per share, in line with Wall Street expectations.
In China, where the coronavirus outbreak began late last year, Starbucks stores were closed for most of its second quarter, although 98 per cent of China locations have now reopened. Those locations have modified schedules and extra safety measures, including limited cafe seating to maintain social distancing.
General Electric Co. (GE-N) lost 3.2 per cent after it said on Wednesday the coronavirus pandemic dealt a US$1-billion blow to cash flow at its industrial business in the first quarter, while total revenue fell almost 8 per cent and the company warned the damage would worsen in the next three months.
The Boston-based conglomerate had earlier this month pulled its 2020 forecast, citing uncertainties created by the coronavirus outbreak, but backed its first-quarter industrial free cash flow expectation of near negative US$2-billion.
Free cash flow from industrial operations was negative US$2.2-billion in the first quarter, missing analysts’ estimates of negative US$2.02-billion, according to Refinitiv data.
GE reported adjusted earnings of 5 US cents per share, below the average estimate of 8 US cents, according to Refinitiv.
Fallout from the pandemic caused revenue to fall 13 per cent in both the aviation and the power divisions. Profit in aviation fell 39 per cent to US$1-billion, while the power unit lost US$129-million, GE said.
Advanced Micro Devices Inc. (AMD-Q) slid 3.3 per cent after it forecast current-quarter revenue largely below estimates as shutdowns put in place to contain the coronavirus pandemic choke demand and supply chains.
From chip equipment maker Lam Research Corp to AMD’s larger rival, Intel Corp, chipmakers have adjusted their forecasts as efforts to contain the coronavirus spread have effectively shut down large swaths of the global economy and fueled uncertainty over when supply chains will return to normalcy once the curbs are eased.
AMD forecast 2020 revenue to grow by about 25 per cent, plus or minus 5 percentage points, as it expects weaker demand in the second half of the year. That compared to the previous forecast of 28-per-cent to 30-per-cent growth.
“While we expect some uncertainty in the near-term demand environment ... our strong product portfolio positions us well across a diverse set of resilient end markets,” Chief Executive Officer Lisa Su said.
Hasbro Inc. (HAS-Q) dipped 6.4 per cent in the wake of scrapping its full-year outlook on Wednesday and forecasting a hit to its second-quarter revenue and earnings, as sales of its toys and games suffer from global lockdowns to contain the spread of the coronavirus pandemic.
Hasbro said the delay of new movie releases and the suspension of production would also hurt sales. The company which holds toy licenses to Disney’s Avengers, Star Wars and Frozen franchises is more dependent on big Hollywood blockbusters to pull in consumers than rival Mattel Inc.
However, the company said board games such as Monopoly as well as Play-Doh were seeing strong demand, as the closure of schools meant parents had to find ways to keep their children entertained at home.
The company swung to a loss of US$69.6-million, or 51 US cents per share, in the first quarter ended March 29, compared with a profit of US$26.7-million, or 21 US cents per share, a year earlier. The loss was due to Hasbro’s US$4-billion purchase of Peppa Pig series maker Entertainment One.
Mondelez International Inc. (MDLZ-Q) close down 0.2 per cent in the wake of beating Wall Street estimates for quarterly results, driven by a strong demand in North America, even as the Oreo cookie maker withdrew its 2020 outlook, citing the uncertainty caused by the coronavirus pandemic.
The rapid spread of the coronavirus outbreak that has claimed more than 211,000 lives and infected over 3 million across the globe, prompted people across the globe to stockpile essential supplies as well as snacks and chocolates.
The Toblerone chocolate maker said it saw a significant increase in demand in March for its snacks in developed markets, particularly in North America. About 15-per-cent increase in sales in North America helped offset weakness in emerging markets.
Revenue rose to US$6.71-billion in the first quarter ended March 31 from US$6.54-billion a year ago, beating analysts’ average estimate of US$6.61-billion, according to IBES data from Refinitiv.
Ford Motor Co. (F-N) declined 2.2 per cent in the wake of saying after the bell on Tuesday its second-quarter loss will more than double to US$5-billion from US$2-billion in the first quarter due to the impact of the coronavirus pandemic, but said despite the ongoing crisis it has enough money to last for the remainder of 2020.
“We believe the company’s cash is sufficient to take us through the end of the year, even with no additional vehicle wholesales or financing actions,” Chief Financial Officer Tim Stone said in a statement.
But he called the current economic environment “too ambiguous” for the No. 2 U.S. automaker to give a full-year 2020 earnings forecast.
The company has slashed costs during the COVID-19 outbreak to weather the shutdown, including cutting salaries of executives and white-collar employees.
Ford also moved to cut spending on projects, saying on Tuesday it was pushing back its commercial autonomous vehicle services by a year to 2022 and that it has decided to not develop a previously announced luxury electric Lincoln sport-utility vehicle in partnership with electric vehicle maker Rivian.
Ford’s market value of US$20.6-billion is now less than the US$35.1 -billion in cash it had on hand as of April 24, an indication that investors expect the company to burn through significant amounts of cash before a recovery takes hold.
With files from staff and wires
David Leeder