A survey of North American equities heading in both directions
On the rise
Shares of TC Energy Corp. (TRP-T) were higher by 0.8 per cent on Wednesday after it beat third-quarter profit estimates, as it gained from higher demand for liquefied natural gas (LNG).
The company also said it is open to joint ventures in Mexico and Canada as part of the pipeline operator’s $3 billion divestiture program.
The company, best known for its Keystone oil pipeline, has disclosed plans to sell assets to reduce debt and fund its other projects grappling with high costs.
TC was focusing on multiple transactions to hit the $3-billion target, company executives said on the call, as “smaller bundles” were more attractive in the current interest rate environment.
In July, the company said it would spin off its oil pipeline business and focus on transporting natural gas while also announcing divestment of a 40-per-cenmt interest in its Columbia Gas Transmission and Columbia Gulf Transmission pipelines.
The pipeline operator said its long-delayed Coastal GasLink project had achieved mechanical completion ahead of its year-end target.
“Mechanical completion on Coastal GasLink with no further overruns. This is particularly nice given the challenge the Trans Mountain Expansion has had,” said Morningstar analyst Stephen Ellis.
The $14.5-billion project had been dogged by protests due to environmental concerns and a C$346,000 fine levied by British Columbia for non-compliance with environmental regulations.
The Calgary-based company’s U.S. natural gas pipelines’ third-quarter LNG deliveries averaged at 3.1 billion cubic feet per day (Bcfpd), up 1.4 per cent from a year earlier, and the segment’s earnings rose 9.5 per cent to $782-million.
That helped the company report an adjusted profit of $1.00 per share for the quarter ended Sept. 30, topping the average analyst estimate of 97 cents, according to LSEG data.
Intact Financial Corp. (IFC-T) gained 4.7 per cent with the release of better-than-anticipated quarterly results, benefitting from strength in underwriting income and investment & dividend income.
It reported net operating income per share was $2.10, down from $2.78 a year earlier but above the Street’s expectation of $1.46.
Intact says increased catastrophe losses offset the impact of improving underwriting fundamentals, as well as higher earned premiums and investment income.
The company says that over the next 12 months, it expects hard insurance market conditions to continue in most lines of business, driven by inflation and natural disasters.
“While we had expected some broad softening in industry pricing this year — in part due to rising investment yields — persistent inflation, high reinsurance costs and consistently high cat losses have extended the current firm market,” said Raymond James analyst Stephen Boland. “We do expect more softening to occur in 2024.Despite a challenging quarter due to the cat losses, the core operating results continue to deliver solid underwriting profit.”
Nuvei Corp. (NVEI-T) soared 19.9 per cent after raising its full-year volume and earnings expectations, touting “momentum in the business.”
It’s now projecting adjusted EBITDA of US$427-million to US$435-million, up from US$417-million to US$432-million previously.
“Daily average volumes in October and early November have remained consistent with our expectations, and we are not seeing any signs that the near-term spending environment has changed,” it said in a late Tuesday release. “In terms of our updated ranges for the full year, we are raising our outlook range for Total volume and Adjusted EBITDA, and we are narrowing our outlook range by raising the low end for Revenue and Revenue at constant currency. These updates to our outlook ranges reflect our view of consistent execution into year end in driving margin expansion.”
For the third-quarter, the Montreal-based payment processor reported revenue of US$304.9-million, rose 55 per cent topping the Street’s expectation of $302.4-million. Adjusted earnings per share of 39 US cents was also well ahead of projections (4 US cents).
In a research note, National Bank analyst Richard Tse said: “Consistent with our recent earnings preview where we called out Nuvei as one of the names with the most potential for upside surprise into the results, the Company reported strong FQ3 results with increased guidance for the remainder of the year based on what appears to be some company-specific advantages combined with actions to reduce operational friction. With respect to the outperformance, it’s attributed to customer mix (more mid-size vs larger enterprise) combined with its industry positioning (challenger vs incumbent = more share gain opportunities) plus a focus on growth markets where competitors have dedicated less effort. With mid-term guidance pointing to a reacceleration of growth to 15-20 per cent combined with a compelling valuation (7.1 times F24E EV/EBITDA vs. a peer average of 10.4 times) we continue to believe the risk-to-reward profile remains compelling. We reiterate our Outperform [rating].”
MDA Ltd. (MDA-T) increased 3.4 per cent after it reported net income of $9.3-million in its latest quarter, down from $17.9 million a year earlier, as its revenue rose nearly 20 per cent.
The Brampton, Ont.-based space technology firm says the profit amounted to eight cents per diluted share for the quarter ended Sept. 30, down from 15 cents per diluted share a year earlier.
Revenue for the company’s third quarter totaled $204.7-million, up 19 per cent from $172.0-million in the same quarter last year and above the consensus forecast of $195.2-million., helped by strength in its satellite systems and robotics and space operations businesses.
In its outlook, MDA says it now expects revenue for 2023 to come in between $790-million and $810-million, compared with its earlier guidance for between $785-million and $810 million.
It also raised its 2023 guidance for adjusted earnings before interest, taxes, depreciation and amortization to between $165-million and $170-million, compared with $155-million to $165-million.
MDA said it expects its 2023 capital expenditures to range between $200-million and $210-million compared with its earlier forecast for between $200-million and $220-million.
Tricon Residential Inc. (TCN-T) was higher by almost 2 per cent on Wednesday despite a reduction to its full-year 2023 growth guidance.
The Toronto-based reported fully diluted funds from operations of 14 US cents for its third quarter after the bell on Wednesday, falling 7 per cent, or 1 cent, from the same period a year ago.
While it maintained its full-year FFO guidance of 55 US cents to 58 US cents, versus the Street’s projection of 56 US cents, Tricon narrowed its 2023 same-property net operating income expectation to a range of 6 per cent to 6.5 per cent year-over-year from 6 per cent to 7 per cent previously. It also narrowly reduced its expectation for single-family rental homes acquisitions in 2023 to approximately 1,850 from 2,000.
“TCN’s report is likely better than feared after noticeable underperformance in the stock due to fears around rising rates and what that means for TCN’s earnings trajectory given higher leverage, floating rate debt and fee income (e.g. lower external growth = lower fee income),” said Citi analyst Eric Wolfe. “While SSNOI was lowered by 25bps to a 6.25-per-cent midpoint (with SSREV and SSEXP also lowered by 25bps to 6.25 per cent) and acquisition guidance was cut to $600-million from $700-million, core FFO was reiterated and we don’t think either guidance adjustment was a surprise (as we wrote last quarter that SSREV guidance seemed high). Still, FFO guidance seems to be benefiting from lower G&A and higher income from U.S. residential development, so it’s unclear whether this is sustainable going forward and there’s likely to be volatility in consensus estimates over the coming months as the street attempts to model what ‘higher for longer’ means for TCN.”
“We would expect a bit of a relief rally on this report, as it’s likely better than feared, though it’s difficult to say given less liquidity in the name (e.g. one large seller can make a difference on the day). TCN’s reiterated guidance implies approximately 15.5 cents of 4Q FFO, which if annualized, would bring TCN close to 2024 Bloomberg consensus at $0.62 (granted the low end only implies 14 cents/56 cents annualized). While lower external growth, lower fees, and higher interest expense will need to filter into consensus, we believe the market is prepared for this and mainly owns the stock due to inexpensive valuation combined with strong SFR fundamentals.”
Winnipeg’s NFI Group Inc. (NFI-T) gained 4.2 per cent after raising its financial guidance for its full year as it reported a loss of US$39.9-million in its third quarter.
The bus maker says its loss amounted to 42 US cents per share for the quarter ended Oct.1, compared with a loss of US$40.2-million or 53 US cents per share a year earlier
Revenue totalled US$709.6-million, up from US$514.0-million in the same quarter last year.
On an adjusted basis, NFI says it lost 41 US cents per share in its latest quarter compared with an adjusted loss of 60 US cents per share a year earlier.
In its outlook, NFI says it now expects revenue of US$2.7-billion to US$2.8-billion for 2023, up from earlier expectations for US$2.6-billion to US$2.8-billion.
Adjusted earnings before interest, taxes, depreciation and amortization are expected to total between US$45-million and US$65-million, up from earlier guidance for between US$40-million and US$60-million.
New York Times Co. (NYT-N) rose 6 per cent as it beat estimates for quarterly revenue on Wednesday, benefiting from increasing advertising spend and more subscribers converting to higher-priced bundles.
The company reported revenue of US$598.3-million for the third quarter, above analysts’ average estimate of US$589.4-million, according to LSEG data.
The Times has been promoting its bundled offerings of news, entertainment and lifestyle articles as well as podcasts as it looks to attract and retain subscribers, making the publication a lucrative spot for advertisers.
Subscription revenue grew 9.4 per cent to US$418.6-million in the three months to September, above estimates, as introductory promotional prices graduated to higher prices for many customers.
Strong results by technology giants Meta and Alphabet have signaled a rebound in the advertising market as firms which were earlier bogged down by high interest rates are gradually increasing enterprise spend.
Advertising revenue increased 6 per cent year-over-year to US$117.1-million, exceeding market expectations as well.
On the decline
Despite reporting better-than-expected third-quarter results and fourth-quarter guidance after the bell on Tuesday, shares of Ovintiv Inc. (OVV-T) were lower by 1.3 per cent.
The Denver-based large-cap energy company logged cash flow per share of the quarter of US$4.02, exceeding the Street’s expectation of US$3.85 as production topped estimates across its product stream (572,000 barrels of oil equivalent versus the consensus estimate of 558,000 boe/d).
With the results, Ovintiv raised its full-year production guidance to 550,000-560,000 boe/d from 535,000-550,000 previously.
Calling the results “neutral,” Citi analyst Scott Gruber said: “4Q guidance is in-line with Citi/consensus expectations on total volumes, but 3 per cent and 5 per cent higher, respectively, on oil/condensate and NGLs vs our estimates. FY2024 guidance for 200mbo/d of oil and condensate at $2.1-2.5-billion of capex remains, though OVV is now guiding to oil/condensate production stabilizing earlier (2Q2024). Overall, the strong 3q print and 4q guide will likely be offset by OVV not raising the 200mbo/d landing point.”
While CGI Inc.’s (GIB.A-T) fourth-quarter results fell in line with expectations, featuring a sequential decline in organic growth but encouraging booking trends, its shares fell 2.2 per cent in Wednesday trading.
Before the bell, the Montreal-based IT and business consulting services firm reported revenue of $3.51-billion, narrowly under the Street’s expectation of $3.53-billion as organic growth slid from 4.6 per cent in the third quarter to $2.2 per cent. Adjusted earnings per share of $1.79 topped the consensus projection by 3 cents.
“This [slowing revenue growth] trend is similar to what the company’s most comparable peers have reported,” said Desjardins Securities analyst Jerome Dubreuil. “We highlight that the quarter was affected by the fact that it included one less business day compared with last year, a 1 per cent impact which was not present last quarter. We note that financial services revenue represented the same percentage of the total in the quarter as for the rest of the year, showing the vertical’s resilience, probably due to its larger bank exposure—this contrasts with comments by global peers. Next-quarter consensus implies 3.3-per-cent year-over-year organic growth, representing a slight sequential improvement; this contrasts with peers’ next-quarter guidance, but CGI’s bookings of late have been strong. In contrast to many peers, CGI does not provide financial guidance and, therefore, any potential macro weakness could take longer to be reflected in Street estimates.”
“We would not be surprised to see slight pressure on the stock this morning as the market appeared to focus on sequential organic growth trends last quarter.”
Calfrac Well Services Ltd. (CFW-T) turned lower and closed down 2.9 per cent with the premarket release of better-than-expected operational and financial third-quarter results.
The Calgary-based oilfield services company reported adjusted EBITDA of $89.8-million, up 7 per cent year-over-year and above the Street’s expectation of $89-million as revenue jumped 10 percent with improvement seen in both North America and its operations in Argentina. Adjusted earnings per share of 65 cent blew the consensus expectation of 44 cents.
Calfrac also cut its net debt by 13 per cent, or $43.7-million, to $288-million, reducing its net debt-to-EBITDA ratio to 0.92:1
Calling it a “very strong” quarter, ATB Capital Markets analyst Waqar Syed said: “Overall, we view CFW’s results positively, given the Q3 EBITDA beat, strong FCF generation, and nearly 13 per cent reduction in net debt quarter-over-quarter, which brought the key Net Debt to LTM [last 12-month] EBITDA to its lowest level in recent history. Q4 guidance of improvement in the U.S. results quarter-over-quarter, and declines in Canada on seasonality and customer budget exhaustion, also remain consistent with our outlook, though we await more specific management guidance. We expect the strong FCF generation to continue as Q4 is typically the largest positive working capital quarter for CFW, which should lead to further deleveraging.”
Box office smash Barbie helped Warner Bros Discovery (WBD-Q) top quarterly profit estimates, but the effect of two Hollywood strikes and a weak advertising market could hamper the company’s earnings into next year, company executives said on Wednesday.
The dour outlook sent the company’s shares tumbling over 19 per cent, their worst one-day performance since August 2022.
Although Hollywood’s film and television writers ratified a new, three-year contract in September, ending their 148-day work stoppage, members of the SAG-AFTRA actors union have been on strike since July, roiling the industry’s 2024 film slate and depriving media companies of new content to sell.
Chief Financial Officer Gunnar Wiedenfels said on a call with investors that there’s a “real risk” that the financial hit from the strike will linger into 2024.
“It is becoming increasingly clear now that much like 2023, 2024 will have its share of complexity, particularly as it relates to the possibility of continued sluggish advertising trends,” Mr. Wiedenfels said. “We don’t see when this is going to turn.”
Chief Executive David Zaslav said the company saw its lightest original content slate in years and had to delay some releases, leading to a drop in third-quarter streaming subscriber numbers.
The media company, forged by the union of WarnerMedia and Discovery, posted third-quarter adjusted core earnings of US$2.97-billion, above estimates of US$2.92-billion, according to LSEG data. Overall revenue of US$9.98-billion was in line with estimates.
The company reported free cash flow of US$2.06-billion, compared with US$1.72-billion in the prior quarter, as it spent less on production as a result of the strikes. This surpassed expectations for US$1.74-billion, according to Visible Alpha.
The results put the company “on track to meaningfully exceed $5 billion (free cash flow) for the year and contributing to our nearly $12 billion in debt paydown to date,” the CEO said.
The company posted a net loss of US$417-million, narrowing from a US$2.3-billion net loss from a year-ago period.
“The market is not thrilled with the fact that even with the unparalleled blockbuster success of Barbie, they still found a way to lose $417M in the quarter. Not ideal,” Great Hill Capital Chairman Thomas Hayes said.
Ebay (EBAY-Q) dropped 2 per cent after it forecast fourth-quarter revenue and profit below Wall Street estimates on Tuesday and joined other e-commerce platforms in sounding the alarm on weaker-than-expected consumer spending.
High interest rates and stubborn inflation across major economies in Europe as well as in the United States have further eaten into consumers’ discretionary budgets.
Rising competition from the likes of Amazon (AMZN-Q), that sells a lot of consumer staples, has amplified eBay’s woes.
“We’ve observed softening consumer trends to date in Q4 and particular challenges in Europe, suggesting we may see a more muted seasonal uptick over the holidays,” CEO Jamie Iannone said on a post-earnings call.
Analysts at Jefferies said earlier this month that web traffic on eBay continues to decline, with data showing a worsening trend through July to October this year.
“EBay’s results are consistent with other companies we have seen in e-commerce including Amazon and Etsy, which reflect a very challenging environment for discretionary spending,” D.A. Davidson & Co analyst Tom Forte said.
EBay forecast current-quarter revenue in the range of US$2.47-billion to US$2.53-billion, compared with estimates of $2.60 billion, according to LSEG data.
The company also expects current-quarter adjusted profit per share in the range of US$1 to US$1.05, compared with estimates of US$1.04.
Third-quarter revenue rose 5 per cent to US$2.50-billion, in line with Wall Street expectations, as the company saw an uptick in demand for refurbished goods.
On an adjusted basis, eBay earned US$1.03 per share, compared with estimates of US$1.
Rivian Automotive (RIVN-Q) raised its production forecast for the full year by 2,000 vehicles to 54,000 units on the back of sustained demand for its trucks and SUVs on Tuesday, but its shares were lower by 2.4 per cent after large premarket gains.
Rivian’s upbeat forecast is a small positive for an industry reeling from the double whammy of high inflation that has dulled buyer appetite and price cuts at market leader Tesla (TSLA-Q) to stimulate demand.
Last month, Tesla CEO Elon Musk said he was concerned about the impact of high interest rates on car buyers, echoing caution from General Motors (GM-N) and Ford (F-N) amid fears of a slowdown in demand.
Smaller rival Lucid (LCID-Q) cut its production forecast on Tuesday “to prudently align with deliveries,” sending its shares down. It now expects to produce 8,000–8,500 vehicles this year, down from an earlier projection of more than 10,000.
“I’m actually surprised to be honest at how much we’ve seen others pull back,” Rivian Chief Executive RJ Scaringe said in an interview with Reuters. “I think it’s going to create, unfortunately, somewhat of a vacuum of products in the market.”
He said that “shifts in buying behavior beyond the tail end of 2023″ were not influencing Rivian’s investment strategy for cheaper R2 vehicles that the company expects to launch in 2026.
After multiple quarters of supply chain problems, Rivian may be starting to turn a corner, some analysts have said. But the company shocked investors with an earlier-than-expected bond issuance last month that sent shares crashing.
On Tuesday, it trimmed its capital expenses and loss forecasts for the year. The company was cutting costs through negotiations with suppliers and updates to components and systems, Scaringe said.
Rivian also said on Tuesday it will end its exclusivity deal to largest shareholder Amazon for its electric delivery van, opening the door for more customers around the world, but reiterated its commitment to fulfilling the order of 100,000 vans to Amazon by 2030.
Rivian said was speaking with other customers that are interested in the Rivian Commercial Vehicle platform, which underpins its electric delivery vans, but declined to reveal any names.
Rivian’s third-quarter revenue of US$1.34-billion was largely in line with Wall Street estimates, while its quarterly loss narrowed from a year earlier.
Lucid’s quarterly losses narrowed as well, but its revenue fell short of estimates. Production fell nearly 30 per cent to 1,550 vehicles.
With files from staff and wires
David Leeder