A look at North American equities heading in both directions
On the rise
Shares of Bank of Montreal (BMO-T) turned positive in afternoon trading and closed up 1.2 per cent after it posted a lower fourth-quarter profit on Thursday, as revenue from its capital markets business tumbled and the lender increased provisions for credit losses to brace for potential defaults in the face of a tepid economy.
Net income, excluding one-off items, fell to $2.14-billion, or $3.04 a share, in the three-month period ended Oct. 31, from $2.23-billion, or $3.33 a share, last year.
Analysts had estimated the company to report a profit of $3.07 per share, according to data from Refinitiv IBES.
The Canadian lender had set aside provisions of $226-million in the reported quarter, compared with a release of $126 million last year.
Still, BMO recorded a 30-per-cent surge in profit from its U.S. personal and commercial business. Peers Royal Bank of Canada and National Bank of Canada posted a 5-per-cent and 13-per-cent jump, respectively, in their personal and commercial businesses on Wednesday.
Last month, BMO had also booked a charge of $1.1- billion after a U.S. jury found its local unit liable for more than $550 -illion in damages in relation to a Ponzi scheme operated by a Minnesota businessman.
Toronto-Dominion Bank (TD-T) gained after it posted a surge in fourth-quarter profit on Thursday as gains from higher interest rates boosted its personal and commercial business and helped offset weakness in underwriting and capital markets.
The lender set aside $617-million in loan loss provisions, compared to a release of $123-million a year earlier.
TD Bank joined peers Royal Bank of Canada, Bank of Nova Scotia and National Bank of Canada to mark higher funds this year to prepare for potential loan losses as worries of an economic downturn grow.
The bank’s personal and commercial business posted an 11-per-cent increase in net income, reflecting higher margins and strong volume growth. U.S. retail jumped 12 per cent.
TD Bank’s results came as a sharp contrast to peers that reported lower quarterly profits for the three months ended Oct as a dearth of deals hurt their capital markets businesses.
Canada’s second-largest lender said net income, excluding one-off items, rose to $4.07-billion, or $2.18 per share, from $3.87-billion, or $2.09 per share, a year earlier.
Analysts had expected $2.09 a share, according to Refinitiv data.
Calgary-based Oncolytics Biotech Inc. (ONC-T) jumped almost 20 per cent after announcing the U.S. Food and Drug Administration has grated a “fast track” tag for its therapy for the treatment of a type of pancreatic cancer, metastatic pancreatic ductal adenocarcinoma
The FDA has granted the tag to the therapy, pelareorep, in combination with Roche Holding’s cancer drug, atezolizumab.
It represents pelareorep’s second FDA Fast Track designation
“Receiving this Fast Track designation is an important accomplishment that speaks to the impressive response rate and the durability of the response in our PDAC study, and it also reflects the pressing need to improve upon the standard of care in this indication,” said president and CEO Matt Coffey.
Wesdome Gold Mines Ltd. (WDO-T) enjoyed big gains after announcing commercial production has been achieved at its Kiena mine in Val d’Or, Que.
“The commissioning of the paste fill plant has progressed well in November, with an underground test pour successfully completed on November 17th. Demonstrating the viability of the paste fill plant was the final element for Kiena to meet its commercial production criteria,” said the Toronto-based miner in a release.
It also said it has received notice from its syndicate of credit providers of a $70-million increase to its existing $80-million-dollar revolving credit facility, for a total of $150-million.
Echelon Capital Markets analyst Ryan Walker said: “We view the expected announcement as directionally positive as the paste plant represents a linchpin to improving production at the ramping-up Kiena mine. We keenly await Q422 operating results in early 2023, especially any commentary regarding operational improvements subsequent to paste plant commissioning and would regard any positive developments on that front as a potential re-entry point in anticipation of continued production improvement and mine ramp-up going forward.”
Data cloud company Snowflake (SNOW-N) on Wednesday after the bell posted a bigger quarterly loss, hit by a sharp jump in its research and development and marketing expenses.
Shares of the company recovered from a large premarket drop after the company forecast fourth-quarter product revenue to increase between 49 per cent to 50 per cent, compared to the 67-per-cent growth in prior quarter.
However, Snowflake beat Wall Street estimates for third-quarter revenue and profit on strong demand for the company’s data storage and analytics services.
Net loss attributable to the company in third-quarter widened to US$201-million, or 63 US cents per share, from US$155-million, or 51 US cents per share, a year earlier.
The company’s total operating expenses in the quarter jumped about 54 per cent to US$572.3-million.
The company’s revenue rose 67 per cent to US$557-million, beating analysts’ average expectation of US$539.1-million, according to IBES data from Refinitiv.
On the decline
Canadian Imperial Bank of Commerce (CM-T) slid after it reported an 18-per-cent drop in fiscal fourth-quarter profit and raised its dividend as the bank was hit by higher expenses and loan loss provisions.
The Toronto-based bank is the fourth major lender to report earnings for the quarter that ended Oct. 31, and the second to fall short of analysts’ profits estimate, along with National Bank of Canada (NA-T). Royal Bank of Canada (RY-T) and Bank of Nova Scotia (BNS-T) both reported earnings that were ahead of expectations.
CIBC earned $1.19-billion, or $1.26 per share, in the fourth quarter. That compared with $1.44-billion, or $1.54 per share, a year earlier.
The bank’s results included several special charges, including a $91-million increase in legal provisions, a $37-million charge from consolidating its real estate portfolio, and $12-million of costs related to the bank’s acquisition of the credit card portfolio of retailer Costco in Canada.
Adjusted to exclude those items, CIBC said it earned $1.39 per share. That was far shy of analysts’ estimate of $1.72 per share, according to Refinitiv.
CIBC raised its quarterly dividend by two cents to 85 cents per share.
For the full fiscal year, CIBC’s profit fell 3 per cent to $6.2-billion.
- James Bradshaw
Salesforce Inc. (CRM-N) said on Wednesday that Bret Taylor would step down as co-chief executive officer in January and that co-founder Marc Benioff will become the sole CEO.
The news sent the company’s shares down in Thursday trading as investors shrugged off the annual profit raise.
Investors likely assumed that Mr. Taylor’s appointment was the beginning of a long tenure as the operational CEO at Salesforce, said Steve Koenig, managing director at SMBC Nikko Securities.
“His departure raises questions about why he’s leaving and how operational leadership will be divided and delegated,” he added.
Mr. Taylor, who previously served as chief operating officer and chief product officer of Salesforce, became the co-CEO in November 2021.
He was a key driving force behind Salesforce’s US$27.7-billion takeover of workspace messaging platform Slack Technologies.
“After a lot of reflection, I’ve decided to return to my entrepreneurial roots,” Mr. Taylor said.
A co-creator of Alphabet Inc’s (GOOGL-Q) Google Maps, Mr. Taylor is also credited with devising Meta Platform Inc (META-Q) unit Facebook’s “like” button as the social media giant’s chief technology officer.
The San Francisco-based company expects annual adjusted profit per share between US$4.92 and US$4.94, compared with US$4.71 to US$4.73 forecast earlier.
Revenue for the quarter ended Oct. 31 was US$7.84-billion, compared with analysts’ average expectation of US$7.82-billion, according to Refinitiv IBES data.
A diverse portfolio that includes its Customer 360 platform and messaging app Slack has helped Salesforce attract customers at a time when digital transformation is becoming a priority, even as businesses brace for a broader economic downturn.
The business software maker expects current-quarter revenue to be between US$7.93-billion and US$8.03-billion.
On an adjusted basis, it earned US$1.40 per share during the third quarter, compared with estimates of US$1.21.
Kroger Co. (KR-N) raised its annual same-store sales and profit forecasts on Thursday, boosted by steady demand for groceries and household essentials, and its strategy to keep product prices relatively lower than rivals.
Kroger, like Walmart Inc. (WMT-N), has been successful in using its scale and large store network to negotiate lower prices with suppliers, helping it pull in more inflation-weary customers to its stores and take market share away from smaller independent and specialty grocers.
But when inflation in food prices eases, which Kroger Chief Executive Officer Rodney McMullen expects will happen next year, investors fear the company could lose its edge over rivals and that sales growth could stall.
“A lot of investors are realizing the best times are probably behind Kroger, and that next year will be much more challenging for the company to generate top line growth,” CFRA Research analyst Arun Sundaram said.
Kroger’s shares fell, after initially rising as much as 4 per cent in premarket trading.
The company forecast fiscal 2022 adjusted same-store sales growth of 5.1 per cent to 5.3 per cent, compared with a 4-per-cent to 4.5-per-cent rise previously. It lifted its annual earnings per share forecast to between US$4.05 and US$4.15 from US$3.95 to US$4.05.
Its same-store sales, excluding fuel, climbed 6.9 per cent in the third quarter ended Nov. 5, beating estimates of 4.5 per cent, according to Refinitiv IBES data.
Kroger’s blowout quarterly results and forecast are not expected to add to anti-competition concerns regulators have regarding the company’s planned US$25-billion acquisition of smaller rival Albertsons Cos Inc, according to Sundaram.
“Politicians will use the quarterly results as more ammo to push back on the merger, but the topics the FTC (U.S. Federal Trade Commission) is looking at are more to do with grocery market share and store divestment, rather than Kroger’s top and bottom line this quarter.”
raised its annual same-store sales and profit forecasts on Thursday, riding on steady demand for groceries and household essentials despite higher prices.
Costco Wholesale Corp. (COST-Q) fell after the membership-only retail chain reported slower sales growth in November.
It reported net sales of US$19.17-billion for the retail month of November, which included Black Friday, an increase of 5.7 per cent from US$18.13-billion last year. In October, it reported net sales of US$17.7-billion, a 7.7-per-cent increase.
In a note, Citi analyst Paul Lejuez said: “Overall it was solid month, but highlights how it is tough for COST to grow against tough comparisons. We continue to believe that COST is well positioned to navigate these inflationary times but trading at 20 times F23 EBITDA we believe the risk/reward is balanced.”
Dollar General Corp. (DG-N) cut its annual profit forecast after it missed estimates for quarterly earnings, blaming cost pressures tied to its supply chain problems, sending its shares down as much as about 10 per cent on Thursday.
Tennessee-based Dollar General said it was seeing inefficiencies in its supply chain due to unexpected delays in acquiring additional warehouse space to store inventory, and the early arrival of seasonal merchandise.
While the company is opening more storage facilities to relieve the capacity constraints, it saw more than $40 million in additional costs in the third quarter compared to its expectations, stemming from transportation and expenses related to delays in returning shipping containers.
Dollar General, which in July named insider Jeff Owen as its chief executive, now expects fiscal 2022 profit per share to increase about 7 per cent to 8 per cent, compared with its prior outlook of a rise of about 12 per cent to 14 per cent.
“It’s unusual for this well-run company to stumble on execution issues. The fact that it’s occurring during the CEO transition and seemed to come out of left field isn’t a great look,” Wells Fargo analyst Edward Kelly said.
Rival Dollar Tree Inc. (DLTR-Q) last month cut its full-year profit forecast for the second time, citing price cuts and weak demand for discretionary goods, while discount store peer Big Lots Inc. (BIG-N) also posted downbeat quarterly results earlier on Thursday.
Dollar General’s quarterly per-share profit of US$2.33 missed analysts’ estimates of US$2.54, according to Refinitiv IBES data.
The retailer, however, said its annual same-store sales would be toward the upper end of its previously expected range of 4.0 per cent to 4.5 per cent, after topping same-store sales estimates for the reported quarter.
Blackstone Inc. (BX-N) fell after announcing it will sell its 49.9-per-cent stake in the joint venture that owns the MGM Grand Las Vegas and Mandalay Bay resorts to co-owner VICI Properties Inc. (VICI-N) for about US$1.27-billion in cash, the companies said on Thursday.
The deal includes the assumption of Blackstone Real Estate Investment Trust’s (BREIT) existing property-level debt that has a principal balance of US$3-billion.
The New York-based private equity firm is paring some real-estate investments as interest rates climb and turmoil brews in the housing market. The company was set to sell a US$400-million stake in Indian REIT Embassy, Reuters has reported.
The stake sale in the two Las Vegas resorts will generate a profit of more than US$700-million for Blackstone in less than three years, including rent from the operator, the Wall Street Journal, which first reported the deal said.
“The sale of these assets is an excellent outcome for our BREIT investors and enables us to further concentrate BREIT’s portfolio in its highest growth sectors, including logistics and rental housing,” said Scott Trebilco, Senior Managing Director of Blackstone Real Estate.
The company had been ramping up investments in the real estate sector until earlier this year. In July, the company drew commitments worth US$24.1-billion for its latest real estate fund.
VICI Properties, which owns properties such as the Caesars Palace Las Vegas, MGM Grand and the Venetian Resort Las Vegas, expects the deal to be immediately add to adjusted funds from operations (AFFO) per share upon closing.
The sale is expected to be completed early in the first quarter of 2023.
With files from staff and wires
David Leeder