A roundup of some of the North American equities making moves in both directions today
On the rise
Target Corp. (TGT-N) jumped with it beating estimates for quarterly profit and sales on Wednesday, raising hopes of booming demand through the year as consumers flock to stores and shop for more than just essentials.
Target shares rose after the retailer also forecast growth in comparable sales for the last two quarters of the year, countering Wall Street fears of a sales drop, as it keeps pace with surging sales recorded during the pandemic’s peak.
With the reopening of the economy due to the vaccination drive; Target, like Walmart (WMT-N) and Macy’s (M-N), said shoppers are spending more on apparel and beauty products as they prepare to socialize and travel.
“With vaccinations rolling out across the country and consumers increasingly comfortable venturing out, we’ve seen an enthusiastic return to in-store shopping” Chief Executive Officer Brian Cornell told analysts.
Target’s focus in building its private label brands, including designer dress collection and activewear line All in Motion, is paying off, with sales from the business rising 36 per cent in the first quarter, their best growth so far.
That also helped drive its overall apparel sales, which rose in the low 60-per-cent range.
Increased store traffic and surging digital sales, boosted by same-day delivery services, helped overall comparable sales for the first quarter grow by a better-than-expected 22.9 per cent. Analysts were expecting a 9.93-per-cent rise, according to IBES data from Refinitiv.
“Stimulus turbo boosters will inevitably ebb, yet Target’s ability to win and retain consumers during and after COVID is what should hopefully serve them well into the future,” Evercore analyst Greg Melich wrote in a note.
Excluding items, Target earned US$3.69 per share, US$1.44 more than what analysts’ had estimated.
Take-Two Interactive Software Inc. (TTWO-Q) rose despite releasing a full-year adjusted revenue forecast below analysts’ estimates as the lifting of pandemic-led stay-at-home orders, compared with a year earlier, resulted in lower demand for its popular franchises Grand Theft Auto and NBA 2K.
Video gaming companies across the world have profited from a pandemic-induced boost in consumer spending. Data from research firm NPD showed a nearly 30-per-cent rise in spending on video games in the United States between January and March, compared to the same period a year ago.
However, rapid vaccinations and easing of restrictions will likely encourage people to venture outdoors for entertainment and social interaction, leaving their consoles behind.
On an adjusted basis, the game publisher’s revenue in the fourth quarter ended March 31 stood at US$784.5-million, beating analysts’ average estimate of US$664-million, according to IBES data from Refinitiv.
The company sees full-year adjusted sales between US$3.2-billion and US$3.3-billion, below analysts’ average estimate of US$3.51-billion, according to Refinitiv IBES data.
On the decline
Cenovus Energy Inc. (CVE-T) was lower after announcing it is selling an Alberta production royalty interest to Topaz Energy Corp. (TPZ-T) for $102-million, the first step in a plan to sell non-core assets to retire debt in the wake of its takeover of Husky Energy Inc. early this year.
Cenovus says it retained the royalty interest in its Marten Hills oil assets when it sold them to Headwater Exploration Inc. in December.
At the time, it said the assets which were producing about 2,800 barrels per day of medium gravity oil were being sold for $35-million in cash, 50 million shares of Headwater and 15 million Headwater purchase warrants exercisable at $2 per share with a three-year term.
Cenovus CEO Alex Pourbaix has said that sales of non-core assets would help the company reach its year-end 2021 goal to reduce net debt to less than $10-billion.
He has said the company is weighing assets for potential sale that could include Husky’s Asia-Pacific offshore natural gas projects with Chinese partner CNOOC Ltd. in China and Indonesia, and Husky’s chain of Canadian retail fuel stations.
Topaz is a company created by Tourmaline Oil Corp. (TOU-T) to hold petroleum processing and handling assets. It was taken public in a $250-million initial public offering in October.
“This is the first transaction of our broader initiative and we will continue to explore all options to create value for Cenovus shareholders and position our balance sheet for increasing shareholder returns,” said Pourbaix in a news release on Tuesday.
In a research note, ATB Capital Markets analyst William Lacey said: “CVE has been very clear on its debt reduction targets, and with value-adding deals like this, the Company looks to be well on its way to meeting them.”
First Quantum Minerals Ltd. (FM-T) fell with the premarket announcement of the sale of a 30-per-cent equity interest in the Ravensthorpe Nickel Operation in Western Australia to South Korea’s POSCO for cash consideration of $240-million.
The Toronto-based miner will retain a 70-per-cent interest and remain the operator. It said proceeds of the transaction will be used to reduce debt.
Concurrently, POSCO and First Quantum announced a strategic partnership to produce battery precursor materials from production at Ravensthorpe.
Aviation training specialist CAE Inc. (CAE-T) fell after it reported a 77-per-cent drop in fourth-quarter profit, as demand for its full-flight simulators and pilot drills remained stressed due to the COVID-19 pandemic.
Faced with the slowdown in its civil aviation division, CAE in March agreed to buy L3Harris Technologies Inc’s military training division to double its defense business in the critical U.S. market.
Montreal-based CAE said deliveries of flight simulators fell to 14 units in the fourth quarter from 21 units a year earlier.
The company said its net income fell to $18.8-million, or 7 cents per share, in the fourth quarter, from $81.1-million, or 29 cents per share, a year earlier.
Revenue fell to $894.3-million from $977.3-million in the year-ago period.
Copper miners tracked prices lower on Wednesday as rising inflation pushed investors into a risk-off sentiment, offsetting the impact of potential supply disruptions in the top producing region of South America.
Benchmark three-month copper on the London Metal Exchange (LME) shed 2.6% to $10,136 a ton.
The metal, widely used in the power and construction industries, was on track for its biggest daily fall since February. Last week, copper hit a record of $10,747.50 a ton and has jumped 32 per cent so far this year.
“A lot of good news has already been priced into copper,” said Julius Baer analyst Carsten Menke, citing the muted impact of potential for higher royalties and strikes in top producer Chile and a socialist party leading polls in Peru have had on prices.
He said the metal’s supply and demand dynamics were positive relative to other metals, making copper less vulnerable to an extensive price correction from record highs.
Lowe’s Cos Inc. (LOW-N) slid after it reported a 25.9-per-cent jump in quarterly same-store sales growth that failed to match that of larger rival Home Depot Inc. (HD-N), signaling it was slipping further behind after gaining ground during the pandemic.
Sales of tools, paint and building materials to Lowe’s core base of do-it-yourself homeowners surged since the start of the COVID-19 pandemic, helping the company outpace growth at Home Depot, where a comparatively larger portion of revenue comes from builders and handymen.
However, as virus restrictions ease, those high-spending customers have been returning to Home Depot’s stores for tools to complete a backlog of projects, helping the company post a much better-than-expected 31-per-cent jump in same-store sales and putting it back ahead of Lowe’s in terms of growth for the first time in a year.
Lowe’s shares have gained over 65 per cent in the last year, compared with the 29-per-cent jump for Home Depot’s stock.
Still, both companies benefited in the reported quarter as fresh stimulus checks helped home improvement demand remain resilient even as speedy vaccinations and the reopening of economies threaten to ease the pandemic-fueled boom.
Lowe’s said it was tracking ahead what it calls a “robust market scenario” for the full year, which estimates fiscal 2021 sales of US$86-billion or down about 4 per cent from last year.
Total net sales at Lowe’s rose 24.1 per cent to US$24.42-billion in the first quarter ended April 30, beating estimates of US$23.86-billion, according to IBES data from Refinitiv.
Lowe’s net earnings rose to US$2.32-billion, or US$3.21 per share, from US$1.34-billion, or US$1.76 per share, a year earlier. Analysts had expected a profit of US$2.62 per share.
TJX Cos Inc. (TJX-N) decline though it beat quarterly net sales estimates on Wednesday as Americans returned to its discount stores following speedy COVID-19 vaccinations and the easing of restrictions.
Hamstrung by a relatively nascent online business, off-price retailers including TJX’s TJ Maxx and Ross Stores Inc. (ROST-Q) suffered sales drop last year when the pandemic shuttered the economy and accelerated a shift to e-commerce.
But the sector, which relies heavily on the treasure-hunt shopping experience it offers, is expected to rebound this year thanks to pent-up demand from customers who are flush with stimulus checks.
Overall comparable sales growth rose 16 per cent from fiscal 2020 at TJX stores that remained open during the first quarter.
TJX said second-quarter comparable store sales trends at stores that are open remain similar to the first quarter.
Net sales rose to US$10.09-billion in the first quarter, from US$4.41-billion a year earlier. Analysts on average had expected a figure of US$8.62-billion, according to IBES data from Refinitiv.
Southwest Airlines Corp. (LUV-N) slipped despite saying Wednesday that bookings are improving and leisure-travel fares for June are approaching pre-pandemic levels, further signs that the airline industry is recovering from a deep slump.
The Dallas-based airline said the average April flight was 79 per cent full, and it expects June flights to be 85 per cent full. Southwest said it has sold 55 per cent of the seats it expects to fill in June and 35 per cent for July, which it called “fairly typical” booking patterns.
Southwest said in a regulatory filing that demand is still being driven mostly by leisure travelers. It said bookings by business travelers are ticking modestly higher but remain down about 80% from 2019 levels.
Southwest said operating revenue in April was 42 per cent below April 2019. It forecast that the revenue decline compared with two years ago will narrow to between 20 per cent and 25 per cent by June.
The airline said it cut its “core” cash-burn rate to US$6-million a day in April and now expects to lose between US$1-million and US$3-million a day in the April-through-June quarter. That is US$1-million better than a previous forecast. It expects to reach break-even in June, excluding debt service, capital spending and some other costs.
U.S. cannabis producer TerrAscend Corp. (TER-CN) was down after it raised its full-year sales forecast on Wednesday as the opening of more retail stores and stronger demand for weed products helped drive a two-fold jump in quarterly revenue.
Cannabis demand increased last year as many Americans turned to weed during COVID-19 lockdowns for entertainment and relaxation. The industry is now benefiting from a wave of legalization that has swept many key U.S. states in recent months.
TerrAscend said it expected sales to exceed US$300-million this year, up from US$290-million previously. It forecast annual adjusted earnings before interest, taxes, depreciation, and amortization to be more than US$128-million.
“We continue to see the benefits from recently completed cultivation expansions, and the addition of retail locations in New Jersey, Pennsylvania and Maryland,” Executive Chairman Jason Wild said in a statement.
The company, which also has operations in California, said net sales rose to US$53.4-million in the three months ended March 31, from US$25.9-million a year earlier.
Squarespace Inc.’s (SQSP-N) plunged by more than a third in its debut on the New York Stock Exchange on Wednesday, after shares of the website-hosting service fell 13 per cent below their reference price amid a broader market sell-off.
Shares of the New York-based company opened at US$48 apiece on a day when Wall Street’s main indexes were down on inflation jitters. The NYSE had set a reference price of US$50 each.
Its latest share price of US$43.7 gave Squarespace a market capitalization of less than US$6-billion – a steep drop from its valuation of US$10-billion after a funding round in March.
The NYSE reference price was already at a 27-per-cent discount to the private deal that Squarespace completed in March at US$68.42 a share.
Squarespace continued with its listing plan despite choppy market conditions that forced at least three companies to postpone their debuts last week.
With files from staff and wires