A survey of North American equities heading in both directions
On the rise
Shares of BCE Inc. (BCE-T) rose 1.1 per cent on Thursday as it boosted its profits despite a dip in revenue last quarter as the telecom giant began to feel the financial effect of thousands of job cuts from earlier this year.
Earnings attributable to shareholders jumped 63 per cent year-over-year to $537 million in the company’s second quarter.
The higher profits stemmed from lower expenses, including lighter buying obligations and severance and acquisition costs, the company said.
Revenues in the quarter ended June 30 slipped one per cent from the same period a year earlier to $6.01-billion. Chief executive Mirko Bibic attributed the decrease to cheap offers at rival mobile and internet providers that drove down prices and lured away customers as well as the closure of 107 outlets of The Source — 39 per cent of the electronics retailer’s locations.
“On wireless and on pricing, we are facing the most intense competitive pressure in the history of our industry in Canada,” he told analysts on a conference call Thursday.
“While consolidated top-line growth continued to be impacted by sustained competitive pricing pressures and expected revenue loss from The Source, we remain laser-focused on profitable margin-accretive subscriber growth and driving costs out of the organization.”
In February, BCE announced that 4,800 jobs “at all levels of the company” would be cut in a staff reduction of about nine per cent. The layoffs came as part of a restructuring that axed multiple television newscasts, including at CTV and BNN Bloomberg.
The company also sold 45 Bell Media-owned regional radio stations across the country.
The move drew widespread backlash, including from Prime Minister Justin Trudeau, who specifically called the 440 scrapped media positions at the company a “garbage decision.” Frustration over the cuts spilled over at the company’s annual general meeting in May, as investors and employees questioned executives on their compensation during a period of belt-tightening for staff.
However, the decision seemed to bear financial fruit.
Analyst Jerome Dubreuil of Desjardins called BCE’s financial results “slightly positive,” as better margins offset lower revenues.
“BCE’s restructuring plan is becoming more apparent,” he said in a note to investors.
“We believe telecom value creation will have to come from tight cost control in the future given the challenged top line, and we are encouraged by BCE’s progress in this regard.”
Pipeline operator TC Energy Corp. (TRP-T) increased almost 2 per cent after it beat second-quarter profit estimates on Thursday, helped by strength in its natural gas pipelines.
Extremely hot weather prompted consumers to increase their usage of air conditioners and refrigerators in the reported quarter, creating demand for natural gas.
Quarterly earnings from its Canadian natural gas pipelines, came in at $514-million, compared to a loss of $394-million in the year-ago period. Earnings from its Mexico pipelines were up 46.2 per cent at $266-million.
The company reported an adjusted profit of 94 cents per share for the quarter ended June 30, compared with analysts’ average estimate of 91 cents per share, according to LSEG data
Toronto-based waste management company GFL Environmental Inc. (GFL-T) finished 3.8 per cent higher in the wake of ruling out a sale of the entire company to private buyers, but is considering running an auction for its environmental services division.
In early June, The Globe and Mail reported that GFL had retained J.P. Morgan to assess two buyout offers – one for the entire business and another for the environmental services unit.
Late Wednesday, GFL killed the prospect of a complete sale as part of its second-quarter earnings report. Because management sees strong organic growth potential, “we do not believe that taking GFL private at this time is in the best long-term interest of our shareholders,” founder and chief executive officer Patrick Dovigi said in a statement. “At its current disconnected market valuation, we are a buyer of GFL, not a seller.” As of Wednesday’s market close, the company’s market capitalization is $20.1-billion.
However, Mr. Dovigi said a sale of GFL’s environmental services division, which offers liquid waste management and soil remediation services, was a possibility, adding that the proceeds from such a sale could be used to pay down debt.
“We have received current preliminary expressions of interest in a transaction that supports our valuation perspective and are actively engaged in implementing preparatory steps required to potentially complete such a transaction,” he said of the division. Mr. Dovigi added that any sale would be completed through a formal auction.
- Tim Kiladze
Gildan Activewear Inc. (GIL-T) was higher by 1.9 per cent after saying costs related to the leadership struggle at the company cost it US$57.2-million in the second quarter.
The costs helped push down earnings to US$58.4-million for the quarter from US$155.3-million for the same quarter last year.
The lawyer who took on Gildan’s board sheds light on the months-long corporate battle
The Montreal-based company saw a protracted power struggle that originally saw chief executive Glenn Chamandy pushed out only to later retake the helm.
The company says the costs included US$18-million for advisory fees, US$21.6-million for severance costs and US$7.8-million for expenses related to Mr. Chamandy’s firing and subsequent reinstatement.
Gildan says its adjusted net income worked out to US$124.7-million, up from US$112.3-million last year.
The company says net sales for the quarter came in at US$862.2-million, up from US$840.4-million last year.
NFI Group Inc. (NFI-T) rose 11.3 per cent after reporting it earned US$3-million in its second quarter, up from a net loss of US$48-million a year earlier.
The Winnipeg-based company says its revenue for the quarter totalled US$851-million, up from US$660-million last year.
Earnings per share were 2 US cents, compared with a loss of 62 US cents last year.
NFI says the second quarter of 2024 was their first positive earnings quarter in three years.
President and CEO Paul Soubry says the company’s supply chain health has improved, though in some areas some of its suppliers are experiencing delivery delays.
Mr. Soubry says the company anticipates this will continue throughout the year as suppliers ramp up production to meet demand from NFI.
“NFI delivered solid results, driven by normalizing Manufacturing activity and continued strength in Aftermarket,” said ATB Capital Markets analyst Chris Murray. “The Company confirmed that legacy contracts are now “materially completed” paving the way for a stronger recovery in H2/24 after production/delivery volumes continued to normalize in Q2/24. Management reaffirmed 2024 and 2025 guidance, as improving supply chain conditions, demand conditions, and liquidity levels remain supportive of the Company’s recovery. ... NFI delivered a solid quarter, positioning the Company’s normal production rates and margins in H2/24 and 2025. We expect the results to be well-received.”
Meta Platforms Inc. (META-Q) soared 4.8 per cent on Thursday after the tech firm beat quarterly revenue estimates and forecast upbeat third-quarter sales indicating that strong digital-ad spending on its social media platforms can cover the cost of its AI investments.
It was on track to add about US$120-billion to its market value of US$1.204-trillion, after it topped second-quarter revenue expectations and forecast growth for the July-September period that was above Wall Street’s estimates.
The Facebook parent recorded revenue of US$39.1-billion for the April to June period, compared with analysts’ expectations of US$38.3-billion, according to LSEG data.
Meta was “continuing to see healthy global advertising demand” and was also reaping the fruits of a multi-year project to use artificial intelligence to improve targeting, ranking and delivery systems for digital ads on its platforms, Chief Financial Officer Susan Li said on a post-earnings call.
Meta also signaled it would continue to spend big on AI infrastructure, forecasting 2024 capital expenditure between US$37-billion and US$40-billion.
“GenAI will require significant infrastructure investments to train the next generation of large foundational models and Meta is getting ahead of a multi-year capacity ramp,” J.P.Morgan analysts said.
Meta’s 12-month forward price-to-earnings ratio stands at 21.1, compared with Alphabet’s 20.6 and Microsoft’s 31.
Analysts have a median price target of US$550 on Meta’s shares.
On the decline
Shares of Thomson Reuters Corp. (TRI-T) were lower by 1.5 per cent on Thursday after it reported second-quarter earnings that topped Wall Street expectations as revenue rose 6 per cent and it continued to aggressively deploy artificial intelligence technology for its customers.
The company now forecasts full year revenue at the high end of projections, or a rise of about 7 per cent.
Steve Hasker, President and CEO, said in an interview after publishing financial results, “We remain highly encouraged by the customer reaction to our new AI driven products” that include generative AI products such as Westlaw AI and CoCounsel.
CoCounsel is a chat-based generative AI (GenAI) assistant that can help draft documents, sift through research and locate information scattered across different sources for legal professionals.
Technology company investors have questioned whether the euphoria over the productivity and cost-saving benefits of the new technology popularized by OpenAI’s ChatGPT and Microsoft’s Copilot services are actually translating to usage across workforces.
Thomson Reuters Chief Financial Officer Mike Eastwood said the company would begin providing a new generative AI-type metric to help directly address questions on customer usage of new products.
“So far so good,” Mr. Eastwood said, pointing to the company’s sales forecast as an indication of its confidence level in generative AI yielding returns.
The Toronto-based content and technology company reported quarterly revenue of US$1.74-billion, up from US$1.65-billion a year earlier. Wall Street had expected US$1.75-billion in the quarter, according to LSEG data.
Operating profit fell 50 per cent to US$415-million, falling short of expectations of $463 million. The 2023 period included a US$347-million gain on the sale of a business. Adjusted earnings, excluding one time items, came it at 85 US cents per share, versus 82 US cents expected.
Revenue in the “Big 3″ segments of the company comprised of legal, tax and accounting and corporates, rose 7 per cent.
Executives said capital expenditure as a percentage of revenue, or what it calls capital intensity, is expected to remain at 8.5 per cent this year and at around 8 per cent for 2025 and 2026.
Canadian Natural Resources Ltd. (CNQ-T) turned lower, joining the selloff in the energy sector, despite beating second-quarter profit estimates on Thursday, as the energy producer benefited from higher crude prices and a rise in output.
Crude prices traded higher in the April-June quarter on escalating tensions in the Middle East, OPEC+ production cut extension and expectations of interest rate cuts from the U.S. Federal Reserve.
Canadian Natural said the realized price for exploration and production liquids rose to $86.64 per barrel in the quarter from $72.06 per barrel a year ago.
It delivered 8-per-cent growth in average production despite the second quarter of each calendar year being a period of high turnaround activity for the company.
Total production stood at 1.29 million barrels of oil equivalent per day (boepd) in the quarter, higher than 1.19 million boepd a year earlier.
Realized prices for synthetic crude oil rose over 14 per cent to $108.81 per barrel.
The Calgary-based company’s second-quarter net income rose 17.2 per cent to $1.72-billion from a year earlier.
“Our capital program for 2024 remains on target and as per our free cash flow allocation policy, we are returning 100% of free cash flow to shareholders in 2024 and we will continue to manage this allocation on a forward looking annual basis,” Canadian Natural’s CFO Mark Stainthorpe said in a statement.
Canadian Natural posted adjusted net earnings from operations of 88 cents per share for the three months ended June 30, compared with analysts’ average estimate of 81 cents per share, according to LSEG data.
Cenovus Energy Inc. (CVE-T) slid 5.9 per cent after it posted a more than 15-per-cent rise in its second-quarter profit on Thursday, as the oil and gas producer got a boost from higher crude prices, refining throughput volumes and production.
Brent crude averaged at US$85.58 per barrel in the second quarter, 7 per cent higher than the year earlier, buoyed by an extension of a production cut by OPEC+, forecast of strong travel demand and interest rate cuts by the U.S. Federal Reserve.
Calgary’s Cenovus raised its total upstream production forecast for the year by 7,500 barrels of oil equivalent per day (boepd) at the midpoint. It now expects output to be between 785,000 boepd and 810,000 boepd for 2024.
Its quarterly production rose nearly 10 per cent to 800,800 boepd, while downstream throughput climbed nearly 16 per cent to 622,700 barrels per day (bpd).
Cenovus CEO Jon McKenzie said the company is now in a position to substantially increase shareholder returns.
Beginning in the third quarter, Cenovus will begin returning 100 per cent of excess free funds flow to shareholders.
For full-year 2024, the company raised its downstream throughput projection to 640,000 bpd to 670,000 bpd, an increase of 5,000 bpd from its previous forecast at midpoint.
Net income rose to $1-billion, or 53 cents per share, in the April-June quarter, from $866-million, or 44 cents per share, a year earlier.
Canada Goose Holdings Inc. (GOOS-T) declined 5.2 per cent even after beating Wall Street estimates for quarterly revenue on Thursday, benefiting from steady consumer demand in China for its puffer jackets and sweats, bucking an industry-wide slowdown seen by luxury players in the region.
The company’s efforts to expand into the non-winter category by offering products that include rain and warm weather clothing such as fleece, t-shirts and shorts helped bump sales in the Asia-Pacific region and resulted in a third consecutive quarter of growth in China.
That came in contrast with results from top luxury names like LVMH, Burberry and Hugo Boss which still pointed to reduced spending on their products by shoppers in China, and a market that was taking longer to recover post-pandemic.
“(In China) we continue to open popup stores where and when we have opportunities to do that in the right time, and really our seasonally relevant spring and summer products have helped drive strong consumer demand,” CEO Dani Reiss told Reuters.
Canada Goose’s sales in Greater China rose 2.4 per cent during the first quarter, while the United States saw a 0.4-per-cent rise.
After several quarters of falling sales, Canada Goose last quarter noted that demand had rebounded in the U.S. mainly in the e-commerce segment, while the wholesale segment remained under pressure.
Its wholesale revenues were down 41 per cent in the first quarter, while sales through its own stores and online - known as the direct-to-consumer channel - rose 13 per cent in the same period.
The Toronto-based group’s first-quarter revenue rose 3.3 per cent to $88.1-million, beating LSEG estimates of $86.1-million.
It also posted a smaller-than-expected quarterly loss of 79 cents, compared to analysts’ expectations for a loss of 80 cents.
Lightspeed Commerce Inc. (LSPD-T) closed lower after it reported better-than expected revenue and adjusted earnings in its fiscal first quarter and slightly upped its bottom line forecast for the year.
But the Montreal commerce software company’s report for the three months ending June 30 underscored continued weakness in key areas where investors are looking for a notable lift before reigniting a stock that has shown little signs of life since crashing at the start of the tech downturn nearly three years ago. The company’s performance challenges resulted in the departure of CEO Jean Paul Chauvet earlier this year and return of founding CEO Dax Dasilva, as well as a 10-per-cent staff cut and stock buyback announced in April.
Subscription revenue, a key indicator of growth in the business, increased by six per cent over the same period a year earlier to US$83.3-million. The company in May said that revenue growth would be “consistent” with the seven per cent it posted in the fourth quarter.
Lightspeed also said that the number of larger customer locations generating more than US$500,000 and US$1-million in gross transaction volumes increased by four per cent year over year. That segment is important for Lightspeed as it has shifted its strategy in the past two years to serving these relatively larger clients while shedding smaller customers. The increases in both larger segments were lower than the five-per-cent and six-per-cent growth they posted, respectively, in the fourth quarter. It also marked the seventh straight quarter of declines in those segments.
- Sean Silcoff
Parkland Corp. (PKI-T) slipped 4.5 per cent after saying it earned $70-million in the second quarter, down from $78-million a year earlier.
The company’s sales and operating revenue was $7.5-billion, down from $7.8-billion during the same quarter in 2023.
Diluted earnings per share were 39 cents, down from 43 cents last year.
Parkland revised its guidance for adjusted earnings before interest, taxes, depreciation and amortization for the year to $1.9-billion, down from $2-billion.
It attributed the softer guidance to the unplanned shutdown at its Burnaby refinery in the first quarter, and unfavourable market conditions that it says could persist throughout the year.
The company’s refinery in Burnaby, B.C., saw a shutdown in January due to extreme cold weather.
In a research note, ATB Capital Markets analyst Nate Heywood said: “Overall, we view the print as neutral. Adjusted EBITDA of $504-million increased 7 per cent year-over-year (Q2/23: $470-million) and is in-line with consensus of $503mm (ATB estimate: $517-million). The miss to our estimate of $517mm was largely driven by lower Canada and US prints, partially offset by strength from the international business. With the update, management lowered its 2024 EBITDA guidance range by $50-million to $1,900-million-$2,000-million (ATBe: $1,957-million/consensus: $1,908-million) from $1,950-million-$2,050-million as a result of Burnaby refinery headwinds in Q1/24 and unfavourable market conditions for H1/24. The print was complemented with continued utilization of the NCIB, with PKI repurchasing ~$29mm of shares (0.7 million shares) in Q2/24 and $111-million of its shares across H1/24. Additionally, PKI announced the retirement of Board Chair Mr. Steve Richardson and the election of Mr. Michael Jennings to succeed him.”
Moderna Inc. (MRNA-Q) cut its 2024 sales forecast for COVID-19 and respiratory syncytial virus vaccines by up to 25 per cent, or US$1-billion, as it expects very low sales to the EU, sending shares of the vaccine maker down.
The company had previously said it expected roughly US$4-billion in sales for the year, which was already the lowest figure for annual revenue since it launched its COVID vaccine in late 2020 - the company’s first commercial product.
Moderna reported a net loss of US$1.3-billion, or US$3.33 per share, for the second quarter. Analysts had expected a loss of US$3.39 per share, according to LSEG data.
Total revenue for the second quarter was US$241-million, compared to US$344-million, a year ago.
Chief Financial Officer James Mock told Reuters it had yet to secure a joint purchasing agreement with the EU, although it was still in discussions.
“Given where we are in the season combined with where we are in the budget season for many countries and their existing supplies, we feel there’s a very low probability that we’ll have very much (EU) sales in 2024,” he said.
The company said it now expects to make between US$3-billion and US$3.5-billion in sales for the year following discussions with EU officials over COVID-19 vaccine contracts for the bloc.
Amazon (AMZN-Q) slipped ahead of the highly anticipated release of its quarterly results after the bell.
The company’s hares have risen about 23 per cent this year. The stock has shed more than 6 per cent since July 8, when it hit a record, part of a broader market selloff led by U.S. megacaps.
It is expected to join Google (GOOGL-Q) and Microsoft (MSFT-Q) on Thursday in reporting a surge in capital spending on artificial intelligence as Big Tech companies rush to capitalize on the booming technology.
The e-commerce giant’s capital investments - mostly for building cloud and generative AI infrastructure - is expected to have risen 43 per cent in the second quarter to US$16.41-billion, according to LSEG data. That represents a roughly US$1.5-billion increase from the previous three months.
The steep spending is also expected to pressure Amazon’s margins, outweighing benefits from cost cuts and supply chain efficiencies that are aiding the retail unit’s profitability.
The company’s Amazon Web Services (AWS) business has long dominated the cloud-computing market but it has been facing tough competition from Microsoft in recent quarters after the Windows maker rolled out AI-powered services to its Azure cloud business.
Growth in its North American retail business likely slowed to 8 per cent between April and June, from 12.3 per cent in the January-March quarter, amid signs of a wider slowdown in consumer spending and some competition from new and fast-growing Chinese players such as Temu and Tiktok Shop that are enticing more U.S. shoppers.
Amazon’s total revenue is expected to have grown 10.6 per cent to US$148.56-billion - the slowest rise in five quarters.
With files from staff and wires