A survey of North American equities heading in both directions
On the rise
National Bank of Canada (NA-T) gained 2.3 per cent in the wake of reporting higher first-quarter profit that beat analysts’ estimates as a revenue boost in Canadian banking and capital markets offset higher reserves for loans that could default.
National Bank earned $922-million, or $2.59 per share, in the three months that ended Jan. 31. That compared with $876-million, or $2.47 per share, in the same quarter last year.
On an adjusted basis, the bank said it earned $2.59 per share. That edged out the $2.36 per share analysts expected, according to Refinitiv.
“National Bank delivered strong performance and excellent return on equity for the first quarter of 2024, underpinned by sustained momentum and execution across our business segments,” National Bank chief executive officer Laurent Ferreira said in a statement. “These results reflect the earnings power of our diversified business mix and relevance of our defensive posture.”
The bank kept its quarterly dividend unchanged at $1 .06 per share.
In the quarter, National Bank set aside $120-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $30-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, National Bank reserved $86-million.
Total revenue rose 6 per cent in the quarter to $2.71-billion, while expenses increased 4 per cent to $1.45-billion.
Profit from Canadian personal and commercial banking was $339-million, up 4 per cent from a year earlier, driven by growth revenue which were partially offset by higher expenses and provisions for credit losses.
- Stefanie Marotta
MDA Ltd. (MDA-T) rose 0.6 per cent after it reported a fourth-quarter profit of $13.5-million, up from $8.8-million a year earlier, as its revenue rose 10 per cent.
The Brampton, Ont.-based robotics and space technology firm says the profit amounted to 11 cents per diluted share for the quarter ended Dec. 31, up from seven cents per diluted share in the last three months of 2022.
Revenue for the three-month period totalled $205.0-million, up from $186.1-million a year earlier.
On an adjusted basis, MDA says it earned 23 cents per diluted share in its latest quarter, up from an adjusted profit of 18 cents per diluted share a year earlier.
In its outlook for 2024, the company says it expects full year revenue to total between $950-million and $1.05-billion, an estimate that would mean growth of about 25 per cent based on the midpoint of the guidance compared with its result for 2023.
For the first quarter of 2024, MDA says it expects revenue between $205-million and $215-million.
TJ Maxx parent TJX Companies Inc. (TJX-N) increased 0.6 per cent after it surpassed market expectations for fourth-quarter sales on Wednesday as budget-conscious shoppers flocked to the off-price retailer’s stores in search of holiday deals on apparel, cosmetics and home goods.
It also announced a share buyback plan of up to US$2.5-billion in fiscal 2025.
With interest rates still high, discount retailers such as TJX and Ross Stores (ROST-Q) will shine in an environment of cautious consumer spending, helping them take market share from department stores like Macy’s (M-N) and Nordstrom (JWN-N), analysts have said.
Still, TJX forecast fiscal 2025 comparable sales growth of 2 per cent to 3 per cent, below expectations for a 3.72-per-cent rise. It expects diluted earnings per share of US$3.94 to US$4.02, compared with estimates of $4.11.
Net sales for TJX’s core Marmaxx segment in the U.S. grew 5 per cent in the quarter, driven by demand for cosmetics and skincare products. Its HomeGoods segment rose 7 per cent.
“We saw comp sales growth at every division, driven by customer transactions, which underscores our confidence in our ability to gain market share across all of our geographies,” CEO Ernie Herrman said.
Overall comparable store sales rose 5 per cent, higher than analysts’ expectations of 4.15 per cent, indicating holiday demand remained robust, aided by a healthy inventory.
The company posted net sales of US$16.41-billion for the three months to Feb. 3, compared with analysts’ average estimate of US$16.21-billion, according to LSEG data. Its quarter earnings per share of US$1.22 came in above estimates of US$1.12.
TJX also intends to raise its quarterly dividend in April by 13 per cent to 37.5 US cents per share.
E-commerce platform eBay (EBAY-Q) beat market expectations for quarterly revenue and profit on Tuesday, helped by healthy consumer spending during the holiday season and strength in its focus categories such as refurbished goods and auto parts.
Shares of the company rose almost 8 per cent in Wednesday trading.
EBay’s board of directors also authorized an additional US$2-billion share repurchase program.
“We started to see our business improve towards the end of November, particularly in the U.S., driven by consumers looking for value to stretch their limited holiday budgets,” eBay CFO Stephen Priest said in a post-earnings call.
The upbeat results show that eBay’s marketplace, which serves as a hub for buyers and sellers from around the world, is expected to benefit as consumers loosen budgets and spend heavily amid an easing economy.
The company reported revenue of US$2.56-billion, beating analysts’ average estimate of US$2.51-billion, according to LSEG data.
It reported adjusted profit per share of US$1.07, compared with an estimate of US$1.03 per share.
However, eBay CEO Jamie Iannone flagged weakness in UK and Germany, saying the latter was experiencing negative e-commerce growth.
The company slashed about 1,000 roles, or an estimated 9 per cent of its workforce last month, joining rival e-commerce giant Amazon and other tech firms as the industry braces for an uncertain economy.
It expects revenue for the first quarter to be in the range of US$2.50-billion to US$2.54-billion, compared to analysts’ estimate of US$2.54-billion.
The firm also forecast adjusted earnings between US$1.19 per share and US$1.23 per share, above the estimate of US$1.13 per share.
Beyond Meat (BYND-Q) shares soared on Wednesday after the plant-based meat maker placed its bets on price hikes and steep cost cuts to turn around its battered margins, triggering a squeeze on its highly shorted shares.
About 37.6 per cent of the company’s free float, or shares worth US$172.6-million, were shorted as of Monday, according to data and analytics firm Ortex. Bearish investors have lost US$93-million on paper since Tuesday’s close.
Beyond Meat was also the second most shorted U.S. stock, as per a report from S&P Global Market Intelligence this week.
The company, which supplies to McDonald’s (MCD-N) and Yum Brands (YUM-N), has lost nearly 70 per cent of its market value since its much-hyped IPO in 2019 as sentiment around plant-based meat took a beating due to higher prices amid sticky inflation.
Beyond Meat reported a 7.8-per-cent decline in fourth quarter net revenue to US$73.7-million, but that was better than the US$66.7-million analysts had expected.
The company also laid out plans to “steeply reduce” operating costs to nurse back its margins bruised by price cuts to make faux meat more appealing to budget-conscious U.S. consumers.
It expects 2024 gross margins to be in the mid- to high-teens percentage range, compared to negative 24.1 per cent in 2023.
“The shift to raising prices instead of cutting makes sense because Beyond probably needs to target a smaller set of consumers to succeed,” TD Cowen analysts said in a note.
On the decline
Royal Bank of Canada (RY-T) closed narrowly lower after it reported first-quarter profit that beat analysts’ estimates even as the lender set aside more loan loss reserves and recorded higher expenses.
RBC earned $3.6-billion, or $2.50 per share, in the three months that ended Jan. 31. That compared with $3.2-billion, or $2.29 per share, in the same quarter last year.
Adjusted to exclude certain items, including transaction and integration costs related to its proposed takeover of HSBC Bank Canada, the bank said it earned $2.85 per share, down 6 per cent from the same quarter last year. That edged out the $2.80 per share analysts expected, according to Refinitiv.
“Underpinned by our balance sheet strength, prudent approach to risk management and diversified business model, we delivered solid, client-driven volume growth and a continued focus on expense control,” RBC chief executive officer Dave McKay said in a statement. “As we look towards the completion of our planned HSBC Canada acquisition, we remain focused on being a trusted advisor to clients through the delivery of new and differentiated banking experiences.”
The bank kept its quarterly dividend unchanged at $1.38 per share.
RBC is the third major Canadian bank to report earnings for the fiscal first quarter. National Bank of Canada also released results on Wednesday. Bank of Nova Scotia and Bank of Montreal reported financial results Tuesday. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will close out the week on Thursday.
- Stefanie Marotta
Parkland Corp. (PKI-T) fell 6.2 per cent after reporting it earned $86-million in its fourth quarter, up from $69-million a year earlier, and raised its quarterly dividend by a penny.
The Calgary-based company says earnings per diluted share were 48 cents, up from 39 cents during the same quarter the year before.
Sales and operating revenue was $7.7-billion, down from $8.7-billion a year earlier.
Adjusted earnings were lower in Canada and the U.S., but higher for the international segment.
Parkland increased its quarterly dividend to 35 cents from 34 cents per common share.
The company’s Burnaby, B.C. refinery has been shut down since Jan. 21, 2024 due to an unplanned outage after extreme cold weather and technical issues. Parkland says inspections and repairs have been completed and it expects to resume normal operations at the refinery in early March.
In a research report released before the bell, ATB Capital Markets analyst Nate Heywood said: “We view the print as neutral. PKI reported adjusted EBITDA of $463-million, a modest increase from $455-million in Q4/22 and in-line with our estimate of $464-million (consensus: $468-million). Despite the ongoing refinery outage, PKI has left 2024 EBITDA and capex guidance unchanged at $1.95-$2.05-billion (ATB estimate: $1.98-billion | consensus: $1.96-billion) and $475-million-$525-million (ATBe: $510-million), respectively. At Burnaby, PKI has now completed necessary repair work and maintenance previously scheduled for February and expects operations to resume in early March. The total outage of 8 weeks is above the previous 5-6-week expectation. While no EBITDA impact was provided, we previously estimated $45-million, but could track higher based on a historical $8-million-$9-million EBITDA profile per week; however, PKI is pointing to mitigations from enhanced refining operations, optimized refinery supply and ongoing cost-cutting. The print also included a quarterly dividend increase to $0.35 (yield: 2.9 per cent) from $0.34, fairly in-line with consensus expectations. The deleveraging initiatives and annual EBITDA growth have supported the balance sheet with leverage now sitting around 2.8 times at year-end 2023 (YE2022: 3.4 times) and management continues to point to leverage near the low end of its 2-3 times target by YE2025″
George Weston Ltd. (WN-T) dipped 1.4 per cent after it reported a smaller loss in its fourth quarter compared with a year ago as its revenue edged higher.
The company, which owns a majority stake in Loblaw Cos. Ltd. (L-T) and a large stake in Choice Properties REIT (CHP.UN-T), says its net loss available to common shareholders from continuing operations amounted to $38-million or 30 cents per diluted share for the quarter ended Dec. 31.
The result compared with a loss of $114-million or 83 cents per diluted share in the last three months of 2022.
Revenue for the quarter totalled $14.70-billion, up from $14.14-billion a year earlier.
On an adjusted basis, George Weston says it earned $2.51 per diluted share from continuing operations, down from an adjusted profit of $2.59 per diluted share a year earlier.
Chairman and chief executive Galen Weston says George Weston’s operating companies delivered strong and consistent operating and financial results in the fourth quarter.
Bumble (BMBL-Q) shares slumped on Wednesday after its downbeat quarterly revenue forecast underscored the need for a revamp of the dating-app experience to attract newer generations seeking companionship.
The company is also set to eliminate 350 jobs, or about 30 per cent of its workforce, it said on Tuesday, as new CEO Lidiane Jones moves to steer Bumble through sluggish user spending in an industry she said “hasn’t seen true innovation in several years.”
Bumble announced plans to relaunch its eponymous app and refresh the Premium Plus subscription offering, nearly a month after rival Match Group (MTCH-Q) projected January-March revenue below estimates as the Tinder owner updates its apps in a bid to appeal to Gen Z users and women.
While Match and Bumble have said they are looking to use generative AI, neither have detailed how the technology can drive new features.
“There hasn’t been a lot of innovation in the space since the swipe and that experience likely needs a significant refresh beyond just new pricing tiers or filters in order to drive payer penetration for a new generation of daters,” BTIG analyst Jake Fuller said in a note.
Analysts also said revenue growth this year could be slower than Bumble expects as product improvements may take time to gain traction among users.
U.S.-listed shares of Baidu (BIDU-Q) slid after it said fourth-quarter revenue rose 6 per cent, helped by gains from its artificial intelligence applications and a growing advertising business.
For the three months through December, the company reported revenue of 34.95 billion yuan (US$4.92-billion), broadly in line with analysts’ average estimate of 34.97 billion yuan, according to LSEG data.
The company’s adjusted net income rose by 44 per cent to 7.76 billion yuan, compared with 5.37 billion yuan for the same period a year earlier, beating analysts’ forecasts for 6.32 billion yuan.
As China’s largest internet search engine, Baidu makes the majority of its revenue from advertising. But as China’s economy slows and consumers spend less, Baidu has increasingly invested in AI. In March last year, it launched its ChatGPT-like ERNIE Bot in bid to capture from the potential of the technology.
The company said ERNIE AI services have already started to contribute to Baidu’s revenues.
“Throughout 2023, we made significant strides in advancing ERNIE and ERNIE Bot, reinventing our products and services, and achieving breakthroughs in monetization.” Co-founder and CEO Robin Li said in a statement.
For the quarter, its adjusted profit was 21.86 yuan per American Depositary Share (ADS), compared with a profit of 15.25 yuan per share a year earlier.
This exceeded analysts’ average estimate of 17.87 yuan per ADS, according to LSEG.
With files from staff and wires
David Leeder