A roundup of some of the North American equities making moves in both directions today
On the rise
E-commerce company Shopify Inc. (SHOP-T) was up 7.5 per cent in late trading and surged past Royal Bank of Canada to become the largest publicly traded Canadian company after it posted stronger-than-expected first quarter results Wednesday, joining other e-commerce companies that have experienced a similar lift as shoppers shifted more of their buying to the internet in the early weeks of the pandemic.
But the Ottawa retail software company, which has routinely beat earnings expectations since it went public five years ago, sounded a somber note and noted a few pockets of deteriorating results in its earnings report. The release comes a month after the company pulled its financial guidance for the year due to uncertainty over how the widespread economic damage will affect the prospects of its largely small-business customers and, in turn, its own.
“The vast majority of people are employed by small businesses, and they struggle the most during a crisis,” said Shopify CEO Tobi Lütke in a statement. “The spread of COVID-19 is going to be a tough time for all entrepreneurs. We are working as fast as we can to support our merchants by re-tooling our products to help them adapt to this new reality. Our goal is that, because Shopify exists, more entrepreneurs and small businesses will get through this."
- Sean Silcoff
Sun Life Financial Inc. (SLF-T) gained 7.3 per cent despite CEO Dean Connor said Canada’s life insurers will continue to face challenging times for the remainder of the year as profits declined sharply in the company’s first quarter due to the coronavirus outbreak.
On Tuesday, Canada’s second largest insurer reported first-quarter net income of $391-million, or 67 cents a share, down from $623-million, or $1.04, in 2019’s first quarter.
The drop in net income for the quarter was mostly due to declines in equity markets, brought on by the COVID-19 pandemic, said Mr. Connor, during the company’s annual general meeting Tuesday evening.
“While it’s difficult to determine today how the business will be impacted by future claims and investment experience, we entered the second quarter in a position of strength..” he added, in a release.
Sun Life reported what it calls “underlying net income," of $770-million, or $1.31 per share. This excluded $360-million of losses from stock market performance for the quarter.
- Clare O’Hara
Norbord Inc. (OSB-T) increased 6.2 per cent in the wake of cutting its dividend due to the uncertainty caused by the pandemic as it reported a profit in its first quarter, boosted by higher oriented strand board prices and lower raw material and energy prices.
The company says it will pay a quarterly dividend of cents 5 per share, down from 20 cents.
The lower payment to shareholders came as Norbord, which reports its financial results in U.S. dollars, says its first-quarter profit amounted to US$20-million or 25 US cents per share. That compared with a profit of US$1 million or 1 US cent per share in the first quarter of 2019.
Sales totalled US$467-million, down from US$476-million in the same period a year ago.
General Motors Co. (GM-N) was up 4.1 per cent after it reported a huge plunge in first-quarter profit that still raced past expectations, and the automaker outlined plans for a May 18 restart of most of its North American plants shut down by the coronavirus pandemic.
The No. 1 U.S. automaker posted net income attributable to common stockholders of US$247-million or 17 US cents per share, down more than 88 per cent from US$2.12-billion or US$1.48 per share in the same period in 2019. Excluding one-time items, GM reported 62 US cents per share, higher than the 30 US cents per share expected by Wall Street analysts.
The Detroit automaker has slashed costs and made other moves during the COVID-19 outbreak, including suspending its dividend and share buybacks, closing its Maven car-sharing unit, delaying work on some product programs, reducing marketing budgets and cutting white-collar workers’ salaries. It also added US$16-billion to its cash position by drawing down credit lines.
GM said ended the first quarter with US$33.4 -llion in automotive cash, including an approximately US$16-billion drawdown from its revolving credit facilities.
GM had previously suspended its 2020 profit outlook because of uncertainty over the outbreak and did not provide an update on Wednesday.
Beyond Meat Inc. (BYND-Q) jumped over 23.8 per cent after it beat quarterly profit and revenue estimates on Tuesday after the bell, benefiting from rising demand for its plant-based products at supermarkets and grocery chains and amid weak sales from restaurants due to COVID-19 lockdowns.
The company has been doubling down on its expansion in retail outlets, the most recent being its deal with Amazon Fresh. Its products are now sold at grocers, including Walmart Inc. and Amazon.com Inc.’s Whole Foods.
“We’re repurposing lines that were running for food service to retail... So this is not about just waiting this out, it’s about how do we reroute to get to the consumer,” Chief Executive Officer Ethan Brown told Reuters.
The rethink in strategy comes as closure of dine-in areas and movement restrictions severely dented sales at its partner restaurants and Beyond Meat itself, leading it to suspend 2020 forecast.
Food service sales in March were about 23 per cent lower than what the company had expected, while sales at retail outlets rose 12 per cent.
“We can neither predict when or in what form normalcy will resume for our customers in this segment, nor when we’ll see resumption of any expansion plans for our product lines for the quick service restaurant customers in trial or test phase,” Mr. Brown told analysts.
Activision Blizzard Inc. (ATVI-Q) rose after it raised its revenue forecast for the year as millions of people stuck indoors turned to video games such its Call of Duty to shake off lockdown boredom in the past two months.
Shares of the company increased about 6.3 per cent as Activision also said it was on track to deliver the next premium release in the Call of Duty franchise.
Videogame sales in the United States surged in the last two months as the virus shut down the country, with sales in March hitting their highest in over a decade.
Call of Duty: Modern Warfare is the best-selling game of this year so far according to data from research firm NPD. The company also released a free-to-play battle-royale extension Call of Duty: Warzone in March, which it said had already recorded over 60 million players to date.
Activision has been pushing to increase user engagement on its big-budget titles by offering free content like new multi-player maps, hoping to boost in-game spending.
Conversely, rival Electronic Arts Inc. (EA-Q) was down 3.5 per cent despite forecasting full-year adjusted revenue above Wall Street estimates on Tuesday.
Analysts expect the extended stay-at-home orders to further boost sales and user engagement for videogames across all platforms.
“I think investors thought that shelter-in-place would trigger even more growth than they guided to” said Wedbush analyst Michael Pachter.
“Expectations were too high, and the company is probably being a wee bit conservative.”
The company forecast full-year adjusted revenue of US$5.55-billion, beating analysts’ average estimate of US$5.37-billion.
On an adjusted basis, the company’s quarterly revenue fell to US$1.21-billion from US$1.36-billion, but edged past analysts’ estimates of US$1.19-billion, according to IBES data from Refinitiv.
“The year-on-year decrease is driven by the massive launch of Apex Legends a year ago,” Blake Jorgensen, chief financial officer, said on a post-earnings call with analysts.
Walt Disney Co. (DIS-N) gained 0.7 per cent after it estimated on Tuesday after the bell that global measures to contain the coronavirus pandemic cut profits by US$1.4-billion, mostly from its shuttered theme parks, but said it would reopen Shanghai Disneyland to a reduced number of visitors next week.
It is unclear when Disney’s other parks in Asia, the United States and France would again welcome visitors, executives said, or when the company’s range of idled businesses including retail stores and cruise ships would return.
Disney said it will not pay a dividend for the first half of the fiscal year, which will preserve US$1.6-billion in cash assuming it had kept the dividend constant at 88 US cents per share.
Bob Chapek, who became Disney’s chief executive in February just as the novel coronavirus was spreading around the globe, said Disney would reopen the Shanghai park on May 11.
The Chinese government has asked Disney to cap attendance at 30 per cent of capacity, or roughly 24,000 people, Mr. Chapek said. Disney will restart operations with “far below” that number for a few weeks while it adjusts to new safeguards including social distancing, masks and temperature screenings, he said.
Wendy’s Co. (WEN-Q) said on Wednesday its new breakfast menu was doing well and estimated current-quarter same-store sales to improve as lockdowns across the country ease, allowing the burger chain to open more stores, sending its shares up 7.9 per cent.
The company also cut its quarterly divided to shore up its finances to deal with the hit from the COVID-19 pandemic.
U.S. same-store sales in the week ended April 12 declined about 25 per cent and were down about 2.1 per cent in the first week of May during the current quarter, the company said.
However, first-quarter U.S. same-store sales were flat, including a 7.7-per-cent fall in March, largely helped by a boost in its recently launched breakfast category, which included versions of its popular burger Baconator and drink Frosties.
“Our U.S. breakfast launch in early March exceeded our initial expectations and the breakfast daypart continues to perform well in today’s environment, which is encouraging,” Chief Executive Officer Todd Penegor said.
Drugmaker AbbVie Inc. (ABBV-N) was 1 per cent higher after announcing it has won U.S. antitrust approval to buy Botox maker Allergan (AGN-N), a blockbuster US$63-billion deal when it was announced last year.
Shares of Allergan were also up 1 per cent.
AbbVie, which has been under pressure to diversify its portfolio, said in June 2019 that it would acquire Allergan in a deal that gives AbbVie control over the lucrative wrinkle treatment Botox and buys time to seek new growth before its arthritis treatment Humira loses U.S. patent protection in 2023.
A four-week supply of Humira, the world’s best-selling medicine, has a list price of about US$5,174 or more than US$60,000 for a year. Its sales were US$4.70-billion for the most recent quarter despite declines outside the United States, where it has begun facing competition from cheaper biosimilar versions.
The combined AbbVie and Allergan will be based in AbbVie’s home of North Chicago.
On the decline
Barrick Gold Corp. (ABX-T) was down 4.7 per cent in the wake of reporting a nearly 55-per-cent rise in quarterly adjusted profit on Wednesday, benefiting from a surge in gold prices, but trimmed production outlook for the precious metal over a mining lease issue in Papua New Guinea.
The Canadian miner now expects attributable gold production to range between 4.6 million ounces to 5 million ounces compared with the earlier range of 4.8 million ounces to 5.2 million ounces.
The government of Papua New Guinea had announced in April that it would not renew a 20-year special mining lease for the Porgera gold mine, which is jointly owned by Barrick and China’s Zijin Mining, due to environmental damage and social unrest.
Barrick (Niugini) Limited (BNL), the local venture in which both miners have a 47.5% stake, had produced about 597,000 ounces of gold in 2019 from the Porgera mine.
Barrick has said it will contest the move, which it regards as “tantamount to nationalization without due process”, and in the meantime has placed Porgera on temporary care and maintenance, while suspending 2020 outlook for the mine.
The outlook cut also comes at a time when gold prices have gained about 12 per cent this year, fueled by growing investor appetite for a safe haven as fears mount over economic damage caused by the coronavirus.
Crescent Point Energy Corp. (CPG-T) dipped 4.7 per cent after it reported a $2.32-billion first-quarter loss as it took a non-cash charge of $3.56-billion due to the plunge in oil prices.
The company says the loss amounted to $4.40 per diluted share for the quarter ended March 31 compared with a profit of $1.9 million or less than a penny per diluted share a year ago. Crescent Point says its adjusted net earnings from operations totalled $48.7-million or nine cents per share for the quarter ended March 31 compared with $158.3-million or 29 cents per share in the first three months of 2019.
AltaCorp Capital analyst Patrick O’Rourke said: “Overall, we view the event as neutral to modestly positive, with production in-line with our estimate and consensus estimate, and cash flow modestly ahead of our expectation, mainly owning to less operating cost slippage than we had previously modelled. The Company had previously amended guidance on April 20th, and there was no material further change to the outlook.”
Suncor Energy Inc. (SU-T) lost 2.1 per cent after it deepened its spending cuts, suspended its share repurchase program and cut its quarterly dividend by 55 per cent, hit by a historic plunge in oil prices caused by a feud between Saudi Arabia and Russia and the COVID-19 pandemic.
Canada’s second-largest oil and gas producer produced a total of 739,800 barrels of oil equivalent per day (boepd) in the first quarter, down from 764,300 boepd a year ago.
Suncor cut its 2020 capital budget to a range of $3.6-billion to $4.0-billion, a $400-million reduction at mid-point compared to the previous guidance and about 33 per cent compared to the original plan.
The company also suspended share repurchases and reduced its quarterly dividend to 21 cents per common share from 46.5 cents per common share.
Raymond James analyst Chris Cox said: “Fundamentally, we believe the dividend cut was the right thing to do. While the company has the financial capacity to pay the dividend, no company in the Upstream oil & gas sector is in a position to organically cover the dividend in the current environment. Building debt just to maintain a long-term track record of dividends doesn’t strike us as a pragmatic approach to capital allocation or balance sheet management. We believe this move should allow Suncor to keep absolute debt levels at consistent levels over the next two years at strip pricing, preserving the long-term value of the company and putting Suncor in a much better position to accelerate cash returns when oil prices eventually recover (or, if the right opportunity presents itself, to be opportunistic at the bottom of the cycle, as we have seen from the company in past downturns)."
Uber Technologies Inc. (UBER-N) was down 0.7 per cent after it said on Wednesday it will cut about 3,700 full-time jobs and Chief Executive Officer Dara Khosrowshahi will waive his base salary for the remainder of the year.
The ride-hailing company expects to incur about US$20-million in costs related to severance and related charges.
Kinross Gold Corp. (K-T) dropped 2.1 per cent in the wake of reporting better-than-anticipated first-quarter results.
After the bell on Tuesday, the miner announced EBITDA and adjusted earnings per share of US$386-million and 10 US cents, respectively. Both exceeded the consensus projection on the Street (US$375-million and 8 US cents).
It also withdrew its 2020 guidance "given the pandemic's significant global impacts."
In a research note, Canaccord Genuity analyst Carey MacRury said: “In our view, the quarter was highlighted by strong FCF that we believe will continue into 2020 and 2021 on lower capital spending amid higher metal prices. Our BUY rating is based on our view of Kinross as a steady operator with a strong balance sheet, torque to gold, improving project pipeline, and discounted valuation.”
United Airlines Holdings Inc. (UAL-Q) slid almost 6 per cent in the wake of saying it plans to raise US$2.25-billion through a bond offering as it grapples with a slump in air travel demand due to government-mandated lockdowns across the world.
The No. 3 U.S. airline said it would offer the bonds in two tranches that will mature in 2023 and 2025 respectively.
The net proceeds from the offering will be used to repay a US$2-billion term loan and for general corporate purposes.
Tyson Foods Inc. (TSN-N) was down 2.8 per cent in reaction to announcing late Tuesday it will resume limited production at its largest U.S. pork plant this week,a week after President Donald Trump ordered companies to keep meat-processing plants open to protect the supply chain.
The company closed two pork processing plants, including the Iowa plant, to contain the spread of the coronavirus, further tightening meat supplies after other major slaughterhouse shutdowns.
The virus outbreak has forced meat-processing companies, including Smithfield Foods Inc, Cargill Inc, JBS USA, to halt production at about 20 slaughterhouses and plants in North America as workers fall ill.
Mattel Inc. (MAT-Q) plummeted 1.7 per cent as it predicted a steep drop in second-quarter sales due to the coronavirus lockdowns.
The toymaker said its global manufacturing and distribution facilities, including in China where it produces 60 per cent of its products, were largely back to operating at full capacity, echoing rival Hasbro Inc’s comments from last week.
Mattel Chief Executive Officer Ynon Kreiz, however, cautioned that while he was expecting demand to increase towards the vital end-of-year holiday shopping season, any ramp up in production would be dependent on evidence of consumer demand rising in the coming months.
The company forecast a bigger decline in second-quarter sales than the 14-per-cent drop it reported for the first three months of the year. Hasbro has also warned of a hit to sales in the in the current quarter.
Mattel, known for its Barbie and Hot Wheels toys, reported first-quarter net sales of US$594.1-million, missing analysts’ estimates of $652.7 million, as toy stores were forced to close in strict government lockdowns to contain the spread of the virus.
With files from staff and wires