A roundup of some of the North American equities making moves in both directions today
On the rise
Toronto-based Spin Master Corp. (TOY-T) was up on Wednesday after announcing a deal to develop toys and games based on the Harry Potter and Fantastic Beasts movies.
The company says it has signed a global licensing agreement with Warner Bros. Consumer Products for the Wizarding World franchise.
Financial terms of the deal were not immediately available.
Spin Master says it will develop Wizarding World products inspired by the popular books and movies including dolls, figures and accessories, playsets, vehicles and games.
The toys are expected to launch on shelves in the fall of next year.
Last month, Spin Master — which includes Paw Patrol, Hatchimals and Gund among its brands — signed a deal to buy Rubik’s Brand Ltd, the owner of the Rubik’s Cube, for US$50-million.
The Ski-Doo and Sea-Doo maker says it now expects normalized earnings per share between $5.00 and $5.25 for the year, up from earlier guidance for between $3.65 and $3.95.
The increase came as BRP reported net income of $198.7-million or $2.22 per diluted share for its quarter ended Oct. 31, up from $135.3 million or $1.49 per diluted share in the same quarter last year.
Revenue totalled $1.67-billion, up from $1.64 billion a year ago.
On a normalized basis, BRP says it earned $2.13 per diluted share in its latest quarter, up from a normalized profit of $1.51 per diluted share a year earlier.
Analysts on average had expected an adjusted profit of $1.41 for the quarter and $1.60 billion in revenue, according to financial data firm Refinitiv.
In a research note, Desjardins Securities analyst Benoit Poirier called the results “impressive,” saying: “In light of the strong 3Q results across the board and increased FY21 guidance, we expect the stock to react positively this morning.”
Enbridge Inc. (ENB-T) increased after a Minnesota regulatory panel on Tuesday signed off on its planned Line 3 crude oil pipeline replacement across northern Minnesota, leaving only one minor state permit to go before construction can begin.
The independent Public Utilities Commission notified Enbridge in a filing that the company has complied with its pre-construction requirements. Enbridge said in a statement that the authorization to begin construction means only a final construction storm water permit is needed from the Minnesota Pollution Control Agency before construction can begin.
The approval came one day after the U.S. Army Corps of Engineers approved the final federal permit for the project. The PUC had approved the project several times before.
Earlier on Tuesday, Enbridge said it had filed a federal complaint in the U.S. District Court seeking an injunction to stop the State of Michigan from taking any steps to prevent the operation of Line 5.
The Enbridge Line 5 pipelines runs under the Straits of Mackinac, where Lakes Huron and Michigan meet, and ships 540,000 barrels per day of light crude oil and propane, serving both retail customers and refiners in Michigan and Ohio.
Industrial Alliance Securities analyst Elias Foscolos said: “The news received by the MPUC last night leaves ENB with one hurdle remaining to begin construction on the Line 3 Replacement Project (L3RP). The Line 5 update did not come as a surprise and at the end of the day we believe Line 5 will not be shut down. The market will likely view the news as slightly positive mainly due to the L3RP update.”
Tesla is Wall Street’s seventh most valuable company, just behind Berkshire Hathaway , and its shares have rallied over 30 per cent since Nov. 16, when it was announced Tesla would join the S&P 500 benchmark.
Index funds that replicate the S&P 500 will have to buy more than US$50-billion worth of Tesla’s stock ahead of its inclusion to the index on Dec. 21. Additionally, Goldman Sachs estimated last week that actively managed mutual funds could buy another US$8-billion of Tesla shares after it is added.
Tesla has become by far the world’s most valuable automaker, despite production that is a fraction of Toyota Motor Corp, Volkswagen or General Motors Co.
Shares of other electric vehicle (EV) makers have also rallied in recent months as President-elect Joe Biden made boosting EVs a top priority during his campaign.
On Wednesday, Tesla revealed it issuing two recalls covering about 9,500 vehicles for roof trim that may separate and bolts that may not have been properly tightened.
The larger recall covers 9,136 Model X cars from the 2016 model year, the National Highway Traffic Safety Administration (NHTSA) said on Wednesday.
NHTSA said the front and spine cosmetic roof trim may have been adhered without first using primer, and one or both pieces of trim may separate from the vehicle while it is being driven.
Tesla said in documents filed with the agency it learned in September of an event involving a 2016 Model X that prompted a company investigation into the root cause and frequency of the condition that could create a road hazard for motorists behind the vehicle.
U.S. retailer Nordstrom Inc. (JWN-N) said on Tuesday a 37-per-cent surge in online sales helped the upscale department store’s earnings top analyst expectations and boost its confidence about its holiday performance.
Shares of the Seattle-based retailer were trading up.
“We are encouraged by the positive momentum and expect continued progress in the fourth quarter and into 2021,” said Pete Nordstrom, president and chief brand officer of Nordstrom.
Net earnings more than halved to US$53-million, or 34 US cents per share, while analysts on average were expecting a loss of 6 US cents per share, according to IBES data from Refinitiv.
U.S. department stores, which were struggling to boost sales even before the health crisis, have poured money into their online operations, delivery and curbside pickup services ahead of the all-important holiday season to keep pace with deeper-pocketed, “essential” retailers like Walmart Inc and Target Corp.
Like many of its peers, Nordstrom suffered from a months-long closure of its stores across the United States, bringing foot traffic to a standstill. Shoppers staying home to curb the spread of the virus did not find themselves purchasing as much upscale apparel and formal work attire.
Sales in Nordstrom’s higher-margin full-price channel decreased 7 per cent, compared with a 58-per-cent slump in the previous quarter, boosted by the Anniversary Sale being moved to the third quarter from the second. The retailer also benefited from cutting costs, it said.
The company’s net sales fell to about US$3-billion in the third quarter ended Oct. 31, from US$3.57-billion last year.
ViacomCBS Inc. (VIAC-Q) lost ground after selling publisher Simon & Schuster to German media group Bertelsmann for US$2.175-billion in cash.
Bertelsmann outbid Rupert Murdoch’s News Corp in a contest for the publisher of Dan Brown, Hillary Clinton and Stephen King that Viacom put up for sale this year to refocus on its online and advertising operations.
The deal represents the second major move in CEO Thomas Rabe’s drive to consolidate Bertelsmann as the world’s biggest bookseller, after the 185-year-old publisher took full control of Penguin Random House less than a year ago.
“This acquisition will create enormous added value for our company,” Rabe said of Simon & Schuster deal.
“We are building our position as one of the leading creative content companies in the United States ... I’m convinced that this a good day both for book publishing and for authors.”
The deal to acquire Simon & Schuster, which reported revenue of US$814-million in 2019, is profitable and employs 1,500 staff, is expected to close during 2021 subject to antitrust approval.
On the decline
Alimentation Couche-Tard Inc.’s (ATD.B-T) was lower despite its profits increasing from last year in the three months ending Oct. 11, as shoppers consolidated shopping trips to convenience stores amid the COVID-19 pandemic.
The Circle K parent company says it earned US$757-million, or 68 US cents per diluted share, compared with US$578.6-million, or 51 US cents per diluted share, in the same period last year.
The Laval, Que.-based brand says revenues were US$10.66-billion during the quarter, down from US$13.68-billion during the same quarter last year.
Analysts surveyed by Refinitiv expected net income of US$559-million, or 50 US cents per share, on sales of US$11.17-billion.
The company says its same-store merchandise sales grew 4.4 per cent in the U.S., 8.6 per cent in Europe and 11.4 per cent in Canada.
Couche-Tard’s quarterly report says traffic was soft during the quarter as many people worked from home, but it sold more fuel this summer than in the spring in Europe, thanks to sunny weather.
In a research note, Desjardins Securities analyst Chris Li said: “Outperformance was due to higher-than-expected fuel margins, continued solid merchandise samestore sales and good expense control. These results and the company’s comments suggest that its organic growth initiatives are on track. We believe structural improvement in the competitive landscape, with many small c-store competitors (more than 60 per cent of industry store count) struggling due to COVID-19, could pose upside to our longer-term fuel margin estimates.”
Cascades Inc. (CAS-T) fell in the wake of saying it will close its napkin plant in Laval, Que., at the end of June next year.
The plant currently employs 54 workers.
Cascades says it will offer to relocate as many employees as possible to its other operations in Quebec and employees who are not able, or do not wish to relocate, will be offered help in their search for other employment.
The Laval plant has an annual capacity of 1.4 million cases.
The company says the COVID-19 pandemic has reduced the number of visitors to restaurants, hotels and public buildings, key markets served by the plant.
It says the situation, combined with high logistics costs, has prompted the company to move production to other operations.
Deere & Co. (DE-N) dipped on Wednesday after it reported a rise in quarterly earnings, defying Wall Street estimates for a decline, as higher crop prices, government subsidy payments and replacement demand for an aging fleet lifted demand for farm machines.
The Moline, Illinois-based company reported earnings of US$2.39 per share for the fourth quarter to Nov. 1, versus US$2.27 per share last year. Analysts surveyed by Refinitiv on average expected earnings to fall 36 per cent year-on-year to US$1.45 per share.
Deere, known for its John Deere brand farm machinery, said it expects net income of about US$3.6 billion-US$4.0 billion in the fiscal year 2021, above the US$3.3-billion estimated by analysts surveyed by Refinitiv and the US$2.75 billion reported for 2020.
“Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment,” said Chief Executive John May.
Tightening grain supplies and strong demand from China have increased prices for soybeans and corn in the United States by a third since early August. Wheat prices are up by 22 per cent on the back of an increase in baking.
The rally is a sharp reversal of the fortunes for the U.S. agricultural economy after four years of global surplus grain stocks that have kept prices low.
Meanwhile federal payments to farmers are projected to hit a record $51.2 billion this year, contributing to the fastest growth in U.S. farm income in at least nine years. Improving financial conditions have lifted farmer sentiment to a record high.
A growing need for farmers to replace their aging tractors and combines is also helping agriculture equipment demand.
Deere expects worldwide sales of agriculture and turf equipment to increase by 10-15 per cent in 2021.
Deere’s shares have outperformed the S&P 500 to gain 31 per cent since its last earnings report in late August, buoyed by a turnaround in the farm economy.
CAE Inc. (CAE-T) was down after signing a deal with Textron to buy TRU Simulation + Training Canada Inc. for US$40-million.
The company says the acquisition of expands its installed base of commercial flight simulators and customers.
CAE says TRU Canada also brings with it a backlog of simulator orders, full-flight simulator assets and provides access to a number of airline customers.
The transaction is subject to regulatory approvals and other customary closing conditions.
Textron says the deal is expected to close during the fourth quarter of 2020 or early 2021.
The agreement follows an announcement earlier this month that CAE has signed a deal to buy Amsterdam-based Flight Simulation Company B.V. for $108-million.
Dell Technologies Inc. (DELL-N) declined after it forecast current-quarter sales above market expectations as a pandemic-driven shift to remote work and learning powered demand for its desktops and notebooks, helping it post a surprise rise in third-quarter revenue.
The company said, on an earnings call with analysts on Tuesday, that it expects fourth-quarter revenue to rise 3 per cent to 4 per cent sequentially, implying a range between US$24.18-billion and US$24.42-billion, compared with analysts’ average expectation of $23.09 billion.
The PC maker’s shares were up marginally in volatile after-market trading, as adjusted earnings matched Wall Street expectations of US$2.03 per share.
Consumers and businesses are spending on notebooks at a rate Dell has not seen in over a decade, according to an earnings presentation, helping its client solutions group rake in a record US$12.29-billion in revenue, up about 8 per cent from a year earlier.
Global shipments in the traditional PC market, which includes desktops, notebooks, and workstations, jumped 14.6 per cent year-over-year to 81.3 million units in the third quarter of 2020, according to data from IDC.
While the health crisis lifted demand for Dell’s remote workstation products, the company’s data center business remained under pressure.
Revenue from its data center business fell about 4 per cent to US$8.02-billion in the quarter.
Sales at VMware Inc rose about 8 per cent to US$2.89-billion. Dell plans to spin off its 81-per-cent stake in the software unit to help reduce debt.
Total revenue rose nearly 3 per cent to US$23.48-billion in the three months ended Oct. 30, while analysts had estimated a drop of 4.4 per cent to US$21.85-billion, according to IBES data from Refinitiv.
Net income attributable to the company rose to US$832-million, from US$499-million a year earlier.
U.S. oil major Exxon Mobil Corp. (XOM-N) fell after it lowered its expectations for oil prices for much of the next decade, according to a Wall Street Journal report on Wednesday, citing internal company documents.
As part of an internal financial-planning process conducted this fall, the company has cut its outlook for future oil prices for each of the next seven years by 11 per cent to 17 per cent, the report said.
Gap Inc. (GPS-N) fell short of Wall Street estimates for quarterly profit on Tuesday, hit by higher marketing and shipping costs due to the shift to online shopping, sending the apparel retailer’s shares down .
The company, which houses the Old Navy, Banana Republic and Athleta brands, has invested in digital marketing campaigns such as “Stand United” and “Be the Future” as shopping moved online during the COVID-19 pandemic.
Online sales surged 61 per cent in the third quarter, accounting for 40 per cent of all sales, helping the company report a surprise rise in comparable sales.
Comparable sales rose 5 per cent, compared with the average analyst estimate of a 0.62-per-cent fall, according to IBES data from Refinitiv.
But this came at a cost. Operating expenses rose about 8 per cent in the quarter.
The company forecast fourth-quarter sales, including the busy holiday season shopping, to be flat or slightly higher than last year, and said it expected higher shipping costs.
The San Francisco-based retailer reported a net income of US$95-million, or 25 US cents per share, for the quarter ended Oct. 31, down from a profit of US$140-million, or 37 US cents per share, a year earlier.
Analysts had expected the company to earn 32 US cents per share.
In a research report released before the bell, Citi analyst Paul Lejuez downgraded Gap shares to “neutral” from “buy.”
“Following strong stock performance over the past several months (including a move higher after their Oct analyst day), there were several things we heard on their 3Q call that make us less bullish on the 12 month story for GPS stock,” he said. “In an environment where many specialty apparel retailers are seeing significantly higher product margins (ANF, AEO, URBN) driven by well-controlled inventories, product margins at GPS have not been as strong. And at the same time, while others have been able to pull back on mktg during the pandemic period, GPS is investing more heavily in marketing at a time it is shrinking its store base. With the stock 73 per cent over the past three months, we believe the risk-reward is more balanced at current levels.”
With files from staff and wires