A survey of North American equities heading in both directions
On the rise
Shares of Thomson Reuters Corp. (TRI-T) gained 2 per cent on Wednesday reported higher-than-expected third-quarter profit as its biggest divisions serving legal, tax and accounting professionals performed well amid economic uncertainty.
The provider of information and tools for lawyers, accountants and other professionals reported adjusted earnings of 82 US cents per share, above analyst forecasts of 71 US cents.
Thomson Reuters, which owns the Westlaw legal database, Reuters news agency and the Checkpoint tax and accounting service, announced a new US$1-billion share repurchase program, and maintained its 2023 outlook except for updates to depreciation and amortization, and interest expense.
Total revenue rose 1 per cent in the quarter to US$1.59-billion, missing expectations of US$1.61-billion, according to LSEG data.
In an interview, Chief Executive Steve Hasker said the company has made significant progress making generative AI a key component of its products.
On Nov. 15, the company will launch AI enhancements to its flagship product, Westlaw Precision, in the U.S. Using a chat-based interface, new features will allow legal customers to ask a question in conversational format and receive an accurate answer in seconds, drawing from Thomson Reuters content.
“There’s nothing experimental about it,” Mr. Hasker said. “It will be a full-fledged launch.”
In the first half of next year, Thomson Reuters will launch new AI products beginning with legal, and later with tax and accounting around “intelligent contract analysis and drafting” in partnership with Microsoft .
Mr. Hasker said the company achieved “solid momentum” despite an uncertain economic environment.
Brookfield Infrastructure Partners L.P (BIP.UN-T) jumped 10.8 per cent on the premarket announcement of a US$ $775-million dealt to acquire the majority of the assets of bankrupt Cyxtera Technologies Inc.
In connection with the asset purchase agreement and the court supervised process, Brookfield will purchase from several landlords the real estate at which seven of Cyxtera’s U.S. data centres are located.
Miami-based Cxtera has also signed an agreement to sell its business in its Montreal and Vancouver data centres to Cologix Inc.
Before the bell, Brookfield Infrastructure reported third-quarter funds from operations per unit of 73 US cents, a penny below the Street’s expectation. Earnings per unit of 3 US cents fell short of the 15-US-cent estimate.
However, it said the “market backdrop has created a strong environment for capital deployment” with returns on new investments expected to be “well in excess” of its 12-15-per-cent target.
“Our 2023 deployment is expected to provide us with some of the best risk-adjusted returns we have seen in the last decade,” the company said.
Brazilian miner Sigma Lithium Corp. (SGML-X) surged 4.7 per cent after it said on Wednesday its strategic review process has advanced to the final stage and will likely be completed by the end of the year.
Sigma announced in September it was evaluating strategic alternatives for the whole company, including its Brazilian unit.
Lithium miners have seen their stocks tumbling this year as weak electric-vehicle (EV) sales growth led to high inventory levels and pressured prices of the metal, a key ingredient in making EV batteries.
TSX-listed shares of Sigma have fallen 8.2 per cent so far this year.
Sigma said its review process is advancing to the final round, with consortiums formed among certain strategic parties.
The company earlier said it had received multiple proposals for its Grota do Cirilo project in Brazil, Sigma Brazil and parent company Sigma Lithium.
The miner was working with Bank of America to coordinate talks with parties interested in acquiring it, CEO Cabral-Gardner said in July in an interview to Reuters.
Centerra Gold Inc. (CG-T) gained 9.1 per cent after reporting after the bell on Tuesday it earned US$60.6-million in the third quarter, up from a loss of $33.9-million a year earlier.
Earnings per share of 20 US cents topped the consensus forecast on the Street of 15 US cents.
The Toronto-based company says revenues for the quarter ended Sept. 30 were US$343.9-million, up from US$179 million during the same quarter last year.
The company also reaffirmed its gold production guidance for the rest of the year.
President and CEO Paul Tomory says the company expects to generate significant free cash flow in the fourth quarter.
Centerra declared a quarterly dividend of seven cents per share.
In a research note, Scotia Capital analyst Ovais Habib said: “We view the results as positive for [Centerra] shares as the company generated significant FCF during the quarter and reiterated its consolidated FY production and cost guidance.”
Laval-based Bausch Health Companies Inc. (BHC-T) jumped 4.1 per cent after announcing a victory in its fight with generic drugmaker Norwich Pharmaceuticals Inc.
The U.S. District Court for the District of Columbia rules denied Norwich’s motion in its lawsuit against the U.S. Food and Drug Administration seeking immediate approval of its version of Bausch’s (BHC) bowel disease therapy Xifaxan.
Netflix (NFLX-Q) rose 2.1 per cent after it said on Wednesday its ad-supported tier had reached 15 million active users per month, a year after the streaming giant launched the cheaper plan to revive subscriber growth and revenue following a slowdown.
The company had five million monthly ad-tier users in May and has been hiking prices on its ad-free options in an effort to nudge more subscribers to the other tier, where commercials help bring in more revenue per user.
Netflix increased subscription prices for some streaming plans in the United States, Britain and France last month, after its third-quarter subscriber additions of 9 million shattered Wall Street expectations of 6 million.
After resisting commercials for years, Netflix had a change of heart in April 2022 after it lost subscribers in the first quarter of the year.
A month after Netflix’s ad-plan launch last year, rival Disney+ also rolled out its ad version in an attempt to push its streaming business into profitability.
Shares of Advanced Micro Devices (AMD-Q) jumped 9.7 per cent on Wednesday, after an upbeat AI chip sales forecast signaled the company was making progress in its bid to catch up with market leader Nvidia (NVDA-Q).
The optimism over AI chip sales helped ease worries about a disappointing fourth-quarter forecast and put it on course for market value gains of about US$13-billion, based on the US$106.41 share price.
CEO Lisa Su on Tuesday provided a 2024 sales forecast for the first time for the MI300 chips, designed to compete against the advanced H100 chips sold by Nvidia.
She projected annual sales of more than US$2-billion, and raised the chip’s current-quarter revenue expectations by US$100-million.
That would make the MI300 the fastest product to ramp to US$1-billion in sales in AMD’s history.
“Hitting this milestone is likely a key first step towards proving AMD is the clear second source to Nvidia in the AI accelerator market,” said analysts at TD Cowen.
The CEO also said the MI300 chips had won commitments from “multiple, large hyperscale customers,” a term that refers to large tech and cloud computing companies.
AMD’s shares have gained 61 per cent this year through last close, but those gains pale in comparison to Nvidia’s 184-per-cent rally.
Still, the conservative forecast and weakness in several of AMD’s markets led at least 18 analysts to cut their price targets on the stock, pushing down the median view to US$130, per LSEG data.
“Forecasts were below our prior estimates ... and it’s quite possible that such estimates could be conservative,” Morningstar analyst Brian Colello said.
While the PC market has been seeing signs of recovery, a weak gaming market and decline in demand for programmable chips used by industries such as wireless communications, healthcare and automotive have been a drag.
U.S. solar panel maker First Solar (FSLR-Q) increased 0.3 per cent after it reported a third-quarter profit compared to a year-ago loss on steady demand for renewable energy and raised the lower end of its full-year profit forecast.
It now expects full-year earnings per share of US$7.20 to US$8.00, from a previous US$7.00 to US$8.00, essentially raising the mid-point of its outlook to US$7.60 from US$7.50.
The Biden administration’s 2022 Inflation Reduction Act, which allocates about US$370-billion toward climate change and clean energy efforts, provides a tax credit for panels made in U.S. benefiting companies such as First Solar.
The U.S. solar industry expects to add a record 32 gigawatts (GW) of production capacity this year, up 53% on new capacity in 2022, as per a report by Solar Energy Industries Association (SEIA) and Wood Mackenzie, despite higher interest rates increasing project costs.
First Solar’s year-to-date bookings have risen to 27.8 gigawatt, the company said.
The company reported a profit of US$268.4 million, or US $2.50 per share, for the quarter ended Sept. 30, compared to a loss of US$49.2-million, or 46 US cents per share, in the year-ago period.
Yum Brands (YUM-N) was up 0.4 per cent after it topped Wall Street estimates for third-quarter results on Wednesday as a reboot of menu items at Taco Bell and promotional offers at KFC helped pull in budget-strapped customers looking for cheaper restaurant meals.
The company has banked on aggressive promotions and limited-time offers across its brands to attract customers. It brought back the fan-favorite Volcano Menu at Taco Bell in the quarter, while KFC launched a $20 Fill Up Box deal offering a family meal including 12-piece nuggets, fries and biscuits.
Taco Bell’s strategy to lean on offers has helped the chain offset an industry-wide slowdown in traffic, with visits increasing 3 per cent in the quarter, according to data from location analytics firm Placer.ai.
Meanwhile, Pizza Hut has been losing market share to rivals including Papa John’s, Papa Murphy’s and to a lesser extent Little Caesars, with losses noticeably worsening in September, data from research firm M Science showed.
“We’ve seen a lot of competition in the pizza space ... and it is driving the incremental weakness at Pizza Hut,” said Sante Faustini III, director of product intelligence at M Science.
Pizza Hut’s same-store sales globally rose 1 per cent in the quarter, missing estimates of 2.08 per cent, according to LSEG data.
Global same-store sales at Taco Bell restaurants rose 8 per cent, above estimates of an increase of 6.49 per cent, while KFC posted an increase of 6 per cent, compared with estimates of 5.39 per cent.
Restaurants have benefited from a step down in costs of commodities such as vegetables, paper and some proteins like chicken, after months of struggling to protect margins from cost inflation.
Yum Brands’ operating margins expanded across all three of its top divisions in the third quarter ended Sept. 30.
Total same-store sales at Yum Brands rose 6 per cent in quarter, beating analysts’ estimates of a 4.73-per-cent increase, while adjusted profit of US$1.44 per share also topped estimates of US$1.28.
On the decline
Canada Goose Holdings Inc. (GOOS-T) fell almost 9 per cent after it cut its annual sales forecast on Wednesday, in a sign that a sharp rebound in China was starting to falter and sales in the U.S. stayed under pressure.
While China demand bounced back in the prior two quarters, hopes for a sustained recovery in the market is uncertain.
The company also appointed current Deputy Finance Chief Neil Bowden as CFO. Bowden would succeed Jonathan Sinclair, who has been named president, APAC, effective April 1, 2024.
The Toronto-based company expects fiscal 2024 revenue to be between $1.20-billion and $1.40-billion, compared with its previous forecast of $1.40-billion to $1.50-billion.
Annual adjusted profit is expected to be between 60 cents and $1.40 per share, compared to the prior range of $1.20 to $1.48.
Canada Goose also posted a nearly 11-per-cent decline in revenue in the United States region, as demand for high-end goods from affluent shoppers sag after staying strong since the pandemic.
Global companies ranging from L’Oreal to LVMH have indicated that inflation and economic turmoil are curbing a post-pandemic spending spree, mainly in the world’s second-largest economy China.
Luxury companies have also flagged a hit from Beijing’s tighter controls of “daigou” resellers - people who buy items at lower prices abroad and resell them at a discount in the country.
“They are very exposed to the daigou trade and are also big beneficiaries...the Chinese authorities have clearly clamped down on these bigger trades and it might have fundamentally changed the trade from here,” said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.
Canada Goose, whose luxury parkas retail for over $1,000, said sales in China slowed in the second quarter from the preceding quarter, while Estee has struggled with a weaker-than-expected rebound in demand from fliers in Asia, mainly in travel destinations such as Korea and China’s Hainan province.
“Their (Canada Goose’s) Chinese business has not gone back to what they would have anticipated at this point...,” said Cole Smead of Smead Capital Management. “The people selling the stock today are just saying in the interim they do not think it is going to recover anytime soon.”
Smead Capital owns Canada Goose shares in its International Value portfolio.
Shares in Canadian miner First Quantum Minerals (FM-T) continued their fall for the third straight day, on looming uncertainty over the future of the company’s key open pit copper mine project in Panama.
Panama President Laurentino Cortizo said on Sunday the country would hold a referendum to decide whether to scrap contract with First Quantum’s local unit following days of protests by thousands of people opposed to the project.
At least 10 brokerages have cut their price target on the stock since the news of the referendum emerged.
First Quantum shares have nearly halved since the start of the week.
Investors are reluctant to stay exposed to political risk that cannot be reasonably predicted, Raymond James analysts said in a note about the mine that has produced 350,438 tons of copper in 2022, and accounted for about 45 per cent of the company’s total copper production.
“Share price performance over the past two days reflects a market view that the likelihood of a negative outcome on Cobre Panama is more likely than not,” they said.
Analysts said given the importance of the mine to First Quantum’s overall portfolio, stock may fall further in case the contract is scrapped.
Estee Lauder (EL-N) on Wednesday cut its annual profit forecast and said it expects a drop in annual sales, as the MAC lipstick maker struggles with a slower-than-anticipated recovery in its Asia travel retail business. Shares of the New York-based company were down significantly in Wednesday trading.
Estee’s shares tumbled as much as 21 per cent to hit an over six-year low of US$102.22
Major global companies including European peer L’Oreal have flagged ongoing challenges to their travel retail businesses in Asia, particularly China, as the world’s second-largest economy struggles to revive domestic demand post-pandemic.
Last quarter, Estee had said the recovery in Asia travel retail - sales made at airports or travel destinations like Korea and China’s Hainan - has been under pressure with retail sales trends turning negative in May and June.
Estee makes about 36 per cent of its annual revenue from the Asia Pacific region.
The company now expects full-year 2024 adjusted profit per share between US$2.17 and US$2.42, compared with its prior forecast of US$3.50 to US$3.75.
Estee now expects full-year 2024 sales to decrease 2 per cent to an increase of 1 per cent, compared with the previous forecast of an increase between 5 per cent and 7 per cent.
Norwegian Cruise Line Holdings (NCLH-N) declined 3.8 per cent after it warned of a hit to its annual profit from elevated fuel costs and booking disruptions due to the escalating Israel-Hamas conflict and a lingering impact of the wildfires in Maui.
Higher expenses linked to food, fuel and labor have continued to strain profits of cruise operators, which are now also expecting an impact from the ongoing military conflict in the Middle East that started on Oct. 7.
Norwegian Cruise cut its full-year adjusted profit forecast to 73 US cents per share from 80 US cents, while peer Royal Caribbean Group (RCL-N) last week warned of a 3-US-cent-per-share impact to its annual profit from the Israel-Hamas war.
“We are prudently moderating short term expectations and keeping a close eye on rapidly evolving global macroeconomic and geopolitical events,” said Norwegian Cruise Line Holdings CEO Harry Sommer.
The company said it had redirected and cancelled all trips to Israel and to the surrounding region for the remainder of 2023. Meanwhile, its unit, Oceania Cruises was making changes to its 2024 itineraries, and canceled stops in Israel, Reuters reported on Tuesday.
The Israel conflict, coupled with a slowdown in bookings to Hawaii as a result of the Maui fires in August, has impacted the fourth-quarter occupancy levels and led Norwegian Cruise to downgrade its full-year occupancy expectations.
“While exposure to Hawaii and Israel (ports of call) is expected to impact short-term performance, underlying demand appears robust,” M Science analyst Michael Erstad said.
The cruise operator expects a fourth-quarter adjusted loss of 15 US cents per share, compared with analysts’ average estimate of a break even, according to LSEG data.
Its third-quarter revenue of US$2.54-billion narrowly beat analysts’ expectations, and adjusted profit of 76 US cents also topped expectations.
DuPont de Nemours Inc. (DD-N) slid 8 per cent as it trimmed its full-year revenue forecast as the chemical and materials maker struggles with lower demand across its businesses and predicted “additional restructuring actions” in response.
Chemical makers had flagged a potential blow in the second half of the year from lower demand in key markets like China and Europe.
The company saw “ongoing volume headwinds from channel inventory destocking and continued softness in China” in the quarter, CEO Ed Breen said in a statement.
DuPont trimmed its full-year revenue forecast to US$12.17-billion from its prior expectations of between US$12.45-billion and US$12.55-billion.
Sales in the company’s electronics and industrial segment tumbled 13 per cent in the third quarter while it declined 8 per cent in its water and protection unit.
Revenue came in at US$3.058-billion, falling short of the company’s prior forecast of US$3.15-billion and also missing estimates of US$3.153-billion, as per LSEG data.
On an adjusted basis, DuPont earned 92 US cents per share in the quarter ended Sept. 30, compared with estimates of 84 US cents, according to LSEG data.
Chief Financial Officer Lori Koch highlighted underlying electronics demand in the final quarter of the year to be similar with the third quarter, expecting some higher sales in its semiconductor technologies.
The company’s semiconductor business helps in the chip manufacturing processes, packaging and assembly, and device fabrication.
DuPont now expects annual earnings per share to be US$3.45 per share, compared with prior expectations of between US$3.40 and US$3.50.
WeWork (WE-N) shares tanked almost 49 per cent on Wednesday after media reports that the flexible workspace provider was planning to file for bankruptcy as early as next week.
The New York-based firm, struggling with a heavy debt load and hefty losses for a few years now, was once privately valued at US$47-billion and now has a market capitalization of just about US$121-million.
The bankruptcy filing would follow a series of troubles for the SoftBank-backed company since its IPO plans imploded in 2019 on skepticism over its business model of taking long-term leases and renting them for short term.
WeWork, which finally went public in 2021 at a much reduced valuation than initially expected, remains a black spot for SoftBank that sunk billions for its investors.
“Although the façade had started to be chipped away to reveal big losses and high debts before the pandemic, the COVID-crisis put paid to its already weak business model,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
WeWork is mulling over filing a Chapter 11 petition in New Jersey, the WSJ first reported on Tuesday.
The company decided to withhold interest payment due on Nov. 1 on senior notes due 2025, even as it has the cash to make the payment, it said on Tuesday.
With a closing price of US$2.28 on Tuesday, the stock had lost about 96 per cent of its value this year.
CVS Health Corp. (CVS-N) beat Wall Street estimates for quarterly profit as strength in its drugstores and pharmacy benefit management business offset higher-than-expected medical costs at its insurance unit.
Shares of the healthcare conglomerate, which reiterated its annual adjusted earnings per share forecast of $8.50 to $8.70, were narrowly lower n Wednesday trading.
CVS’ health insurance business clocked better-than-expected premiums at US$24.66-billion in the third quarter, but its medical costs were high, reflecting the increased utilization of services under government-supported plans for older adults seen across the industry this year.
CVS’ medical benefit ratio, or the percentage of claims paid compared to premiums collected, was 85.7 per cent in the third quarter, compared with analysts’ estimates of 85.1 per cent.
Medical utilization usually tends to be high in the fourth quarter, which may be why the company had a “cautious approach” by maintaining its 2023 adjusted earnings forecast despite the profit beat, Morningstar analyst Julie Utterback said.
The company operates one of the largest U.S. PBMs, CVS Caremark, which negotiates drug prices between insurers and manufacturers.
Revenue at its health services business, under which CVS operates the PBM, rose 8 per cent to US$46.89-billion, partly driven by growth in specialty pharmacy and higher prices of branded drugs.
PBMs have come under heightened scrutiny over their role in surging healthcare costs in the United States, with several bills in the works that would require them to make their business dealings public.
CVS’ pharmacy and consumer wellness segment recorded 6-per-cent revenue growth to US$28.87-billion, boosted by higher drug prices and prescription volume.
The earnings come on the final day of a three-day walkout dubbed “Pharmageddon” by some CVS and Walgreens (WBA-Q) pharmacy staff over “grossly understaffed” stores.
The company reported an adjusted profit of US$2.21 per share, beating estimates of US$2.13 per share, according to LSEG data.
With files from staff and wires