A survey of North American equities heading in both directions
On the rise
Amazon (AMZN-Q) rallied almost 7 per cent on Friday on signs that growth in its main profit driver, the cloud business, was picking up pace after two years of sluggishness due to lower client spending.
The company was on track to add more than US$90-billion to its market capitalization. Smaller cloud rival Microsoft (MSFT-Q) rose, while Alphabet (GOOGL-Q) slipped.
Amazon CEO Andy Jassy said on Thursday the cloud business was stabilizing as large expansions with existing customers and first-time agreements were likely to aid growth in the final three months of the year.
He also touted the AI opportunity for Amazon Web Services (AWS), saying that he expected the technology to lead to “tens of billions of dollars in revenue over the next several years”.
Wall Street cheered the positive commentary for the business that brings in almost all of Amazon’s profit, but had slowed after the pandemic as customers cut costs.
“Tech investors can breathe a sigh of relief, Bernstein analysts said in a client note, adding that “AWS growth sounds ready to re-accelerate even without AI.”
About 19 brokerages raised their price targets on the stock, pushing their median view to US$173, according to LSEG data.
Intel Corp. (INTC-Q) soared 9.3 per cent after its upbeat forecast signaled that the personal computer market was rebounding from its quarters-long slump.
The chipmaker increased its market value by nearly US$10-billion. Other chip firms such as Advanced Micro Devices (AMD-Q) , Nvidia (NVDA-Q) and Arm (ARM-Q) had a mixed reaction.
“(Intel) does appear to have turned the corner on the worst of it,” Bernstein analysts said, pointing to the improvements in the PC-focused business and customers it had signed for its chip contract manufacturing business, among others.
Intel forecast fourth-quarter revenue and margins above Wall Street estimates on Thursday, after it reported a smaller-than-feared decline in the segment that houses its PC business for the July-September period.
Under CEO Pat Gelsinger, Intel is trying to turn around its business by making heavy infrastructure investments that the company hopes will give it an edge in chipmaking and allow it to compete with the likes of Taiwan’s TSMC for foundry clients.
After securing three unnamed clients for the contract manufacturing unit, Gelsinger told Reuters on Thursday that he expects to close a deal for a fourth customer before the end of the year.
“The foundry business is slowing taking shape. The announcement of new customers is a clear positive that shows there is customer interest in what Intel brings to the table,” Logan Purk, analyst at Edward Jones, said.
At least 17 analysts raised their price targets on the stock, boosting the median view to US$37, according to LSEG data. Intel has rallied 23 per cent this year, but its gains have paled in comparison to the 44.6-per--cent jump at AMD and nearly three-fold rise at Nvidia.
Intel trades at 22.2 times its 12-month forward earnings estimates, compared with Nvidia’s 26.06.
Bernstein analyst Stacy Rasgon said Intel’s “AI story still seems marginal” and the “datacenter performance continues to suffer from significant headwinds.”
The company is under heavy pressure in the data center chip market from Nvidia, whose graphic processing units are used for training artificial intelligence models.
On the decline
Shares of Imperial Oil Ltd. (IMO-T) were lower by almost 2 per cent on Friday despite posting a sharp drop in its third-quarter profits on Friday, hurt by lower commodity prices.
U.S. WTI crude prices averaged US$81.49 a barrel in the July-September quarter, down 12.7 per cent from a year earlier when they surged to multi-year highs after Russia’s invasion of Ukraine.
Imperial said average WTI prices for the reported quarter were US$82.32 per barrel, down from US$91.43 a year earlier.
Profit also came under pressure after refining margins for the quarter fell from a year earlier.
Additionally, Imperial, majority-owned by Exxon Mobil , announced it would initiate a share buyback program of up to $1.5-billion.
Imperial’s production averaged 423,000 gross oil-equivalent barrels per day (BOEPD), down from 430,000 gross BOEPD a year earlier.
Adjusting for the sale of XTO Energy Canada, which closed in the third quarter of 2022, Imperial’s production increased by about 5,000 gross BOEPD.
Imperial reported a net income of $1.60-billion, or $2.76 per share, for the quarter ended September 30, down from $2.03-billion, or $3.24 per share, a year earlier.
Shares of St. John’s-based Fortis Inc. (FTS-T) gave back early gains and ended down almost 1 per cent on Friday after it reported a third-quarter profit of $394-million, up from $326-million a year earlier.
The gas and power utility says the profit amounted to 81 cents per diluted share for the quarter ended Sept. 30, up from 68 cents per diluted share in the same period of 2022.
Revenue for the quarter totalled $2.72-billion, up from $2.55-billion.
On an adjusted basis, Fortis says it earned 84 cents per share in its latest quarter compared with an adjusted profit of 71 cents per share a year earlier.
The company says its increased profits reflect the new cost of capital parameters approved for the FortisBC utilities in September 2023, higher retail revenue in Arizona due to warmer weather and new customer rates at Tucson Electric Power, and rate base growth across its utilities.
It says earnings were tempered by lower long-term wholesale and transmission revenue, as well as higher operating and corporate finance costs.
Corus Entertainment Inc. (CJR.B-T) plummeted over 25 per cent despite reporting a net income attributable to shareholders of $50.4-million in its latest quarter, a turnaround from its net loss of $367.1-million in the fourth quarter of last year.
Investors focused on the television and radio broadcaster’s decision to suspend its dividend, citing a plan “to redirect the use of free cash flow from dividends to debt repayment given the impact of continuing macroeconomic uncertainty, and the impact of the extended Writer’s Guild of America (’WGA’) strike (resolved on October 9, 2023) and the ongoing labour action of Screen Actors Guild-American Federation of Television and Radio Artists (’SAG-AFTRA’) on audience levels, advertising demand and revenue.”
The Toronto-based company says its profits amounted to 25 cents per diluted share for the quarter ended Aug. 31, compared with a loss of $1.82 cents per diluted share in the same quarter last year.
Revenue totalled $338.8-million for the company’s fourth quarter, down slightly from $339.6-million a year earlier.
But on an adjusted basis, Corus says it recorded a loss of four cents per share for the quarter, compared with a loss of eight cents per share in the same quarter last year.
The company says revenues for the year decreased as a result of declines in almost all advertising categories as well as subscriber revenues, which was partially offset by an increase in distribution, production and other revenue.
The company says it is awaiting a decision from the CRTC in response to its application earlier this month asking the regulator to ease some Canadian content spending requirements.
In a research note, TD Securities analyst Vince Valentini said: “Revenue and EPS exceeded consensus and TD estimates. EBITDA above TD but below consensus. Debt/EBITDA declined to 3.62 times, versus 3.85 times at the end of Q3. Yes, this leverage reduction occurred only because of ToonBoom divestiture proceeds, but we expect Corus to pursue other asset sales (at well above 3.62x private market multiples) to continue debt reduction in the future.”
“We doubt that anyone will care about those items above, with the focus likely to be on two negative items:
“1. As we had expected, the dividend was cut to zero as priority is being given to debt repayment (covenant relief from the banks was extended to the end of fiscal 2024, with some extra restrictions on distributions to shareholders).
“2. TV advertising revenue was down 10 per cent year-over-year in Q4/23 (we had recently lowered our estimate to negative 7 per cent from down 4 per cent), and management is guiding to negative 15 per cent to down 20 per cent for Q1/24 (recession plus Hollywood strikes). Management also expects programming costs to be down 15-20 per cent in Q1/24, given that shows are not being made and delivered. We had modelled ad revenue down 10 per cent in Q1/24 and program expense down 3 per cent, which resulted in TV segment EBITDA being down 13 per cent year-over-year (and an end of Q1/24 pro forma debt/EBITDA ratio of 3.80 times). Plugging in negative 18 per cent for both ad revenue and content costs gets us almost the exact same EBITDA/leverage outputs, so the perfect storm quarter in Q1/24 looks to be no worse than we had expected.”
Ford Motor Co. (F-N) on Thursday after the bell withdrew its full-year results forecast due to the pending ratification of its deal with the United Auto Workers (UAW) union, and warned of higher losses on electric vehicles, sending shares of the company down over 12 per cent.
The union and Ford on Wednesday reached a tentative agreement that included a 25-per-cent wage hike for 57,000 workers over 4-1/2 years, ending a strike at some of the automaker’s biggest factories.
Ford Chief Financial Officer John Lawler in a media briefing on Thursday said the company will delay some of its planned multibillion-dollar investment in new EV production capacity, citing “tremendous downward pressure” on prices.
Like many of its competitors, Ford is “trying to find the balance between price, margin and EV demand,” Mr. Lawler said.
Rival General Motors (GM-N) earlier this week also withdrew its 2023 results forecast and said it would delay by a year the opening of an electric truck plant in Michigan.
Ford’s adjusted third-quarter earnings per share of 39 US cents missed the Wall Street average target of 45 US cents, according to LSEG data.
Ford said its EV unit posted a higher-than-expected loss in earnings before interest and taxes of US$1.3-billion. The company has forecast a full-year loss of US$4.5-billion for the Ford Model e unit.
The automaker said its EV business was experiencing “sharply compressed” prices and profitability, and said customers were not willing to pay a premium for EVs over comparable combustion and hybrid models.
Ford’s third-quarter revenue rose 11 per cent to US$44-billion, with profit of US$1.2-billion compared with a year-earlier loss of US$827-million.
The automaker said its Ford Pro commercial vehicle business and Ford Blue combustion and hybrid vehicle business both posted higher year-on-year revenue, EBIT and EBIT margins.
Exxon Mobil Corp. (XOM-N) gave back premarket gains and fell after posting a US$9.1-billion third-quarter profit, about a 54-per-cent drop from record earnings a year ago but up from the prior quarter as oil prices recovered.
Earnings at the largest U.S. oil producer have benefited from higher crude oil prices compared to the previous quarter and demand for gasoline and diesel. Wall Street analysts this month trimmed the third-quarter outlook after the company pointed to weaker chemical profits and refining margins.
Results came “broadly in line” with market expectations, according to RBC analyst Biraj Borkhataria, with weaker than expected results in refining and chemicals.
Third-quarter profit was US$2.25 a share, 12 US cents below LSEG consensus of US$2.37 per share. That compares with US$4.68 in the same quarter a year ago when oil and gas prices climbed following Russia’s invasion of Ukraine.
Exxon’s buoyant performance has led to two all-stock deals: for shale rival Pioneer Natural Resources and for carbon pipeline operator Denbury, both struck as shares traded near an all-time record.
The latest quarter’s results benefited from global oil prices that averaged $85.92 per barrel in the quarter compared with US$77.73 in the second quarter, according to LSEG data.
The results were aided by higher oil and fuel prices, but damped by Exxon’s chemical business, which was hit by higher raw materials costs. Chemical Products third-quarter earnings were US$249-million, down from US$828-million in the second quarter.
Exxon in the third quarter achieved a target to reduce its costs by year end by US$9-billion compared to 2019, with further savings expected by year-end.
Chevron Corp. (CVX-N) posted third-quarter profit that missed Wall Street estimates by a wide margin, sending its share price down in Friday trading.
Oil company earnings have slumped from record year-ago levels as crude prices eased and higher costs crimped refining and chemical profits. Results remain strong by historical standards but are well off year-ago levels.
The company earned US$6.5-billion, or US$3.48 per share, compared to US$11.2-billion or US$5.78 per share in the same period last year.
Adjusted profit was US$3.05 a share, compared to analysts’ expected US$3.75-per share, according to LSEG data.
Results come after Chevron agreed to buy U.S. Hess Corp. (HES-N) for US$53-billion to expand its shale and deepwater oil production. The Hess deal was the latest in a series of purchases.
Chevron has spent heavily in recent months to expand its reserves of oil and gas and to build its lower-carbon business. In addition to Hess, it acquired shale oil and gas producer PDC Energy and ACES Delta, a hydrogen storage firm.
The earnings miss came after the company warned that maintenance in its oil and gas production and refining businesses would hurt results.
With files from staff and wires
David Leeder