A survey of North American equities heading in both directions
On the rise
Shares of Rogers Communications Inc. (RCI-B-T) rose 0.7 per cent on Thursday after it reported its fourth-quarter profit declined by 35 per cent to $328-million, while its revenue rose 28 per cent to $5.34-billion.
The profit for the three-month period ended Dec. 31 amounted to 62 cents per share, down 38 per cent from $1.00 per share during the same quarter last year.
The Toronto-based telecom giant attributed the lower profit to higher depreciation and amortization on assets it acquired when it took over Shaw Communications Inc., higher financing costs and higher restructuring, acquisition and other costs, primarily due to the takeover and integration of Shaw.
After adjusting for some of those items, the Toronto-based telecom giant had $630-million of profit, up 14 per cent from a year ago.
The adjusted profit amounted to $1.19 per share, surpassing analyst expectations of $1.12 per share for adjusted earnings and revenue of $5.27-billion, according to the consensus estimate from S&P Capital IQ.
Rogers added 184,000 net new postpaid wireless customers during the quarter, down 9 per cent from a year ago when it added 193,000 net new subscribers. (Postpaid customers are billed at the end of the month for the services they used, versus prepaid customers, who pay upfront for wireless services.)
Churn – the rate of customer turnover on a monthly basis – in the telecom’s postpaid subscriber base increased to 1.67 per cent, from 1.24 per cent during the fourth quarter of 2022.
- Alexandra Posadzki
Canada Goose Holdings (GOOS-T) jumped 7.9 per cent after it forecast fourth-quarter revenue above analysts’ estimates on Thursday, as the luxury goods maker bets on a sharp rebound in crucial market China to help ride out a slowdown in the U.S.
Luxury brands such as LVMH and Cartier owner Richemont also signaled a bounce back in China in their latest reports, easing investor worries about demand in the region that has emerged as a key growth driver.
Canada Goose’s revenue in Asia-Pacific surged 62 per cent in the third quarter, driven by an improvement in tourism and strong sales during the Singles’ Day in Greater China.
This compares to the 13-per-cent rise in the prior quarter when a post-pandemic spending spree failed to materialize.
“In terms of the Asia recovery, I think that there is a lot of volatility in the number,” said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.
He added although other companies also pointed to relatively resilient demand, management commentaries have noted “underlying demand is probably not as strong as they would have hoped and there is a clear issue impacting the Chinese consumer in the short term.”
Revenue from North America fell 14 per cent to $252.4-million. Luxury goods demand in the U.S. has waned as pandemic-era savings depleted and living costs remained elevated.
Canada Goose was pinched by U.S. retailers reducing wholesale orders, with wholesale channel revenue slumping 29 per cent.
The Toronto-based company forecast fourth-quarter revenue between $310-million and $330-million, compared to expectations of $301-million, according to LSEG data.
Current-quarter adjusted profit is projected to be between 2 cents and 13 cents per share. Analysts were expecting 8 cents.
Third-quarter revenue rose 5.8 per cent to $609.9-million, missing expectations of $620.1-million.
Adjusted profit of $1.37 per share edged past estimates of $1.36.
Methanex Corp. (MX-T) increased 3.2 per cent with the late Wednesday release of better-than-expected fourth-quarter 2023 results and 2024 production guidance.
The Vancouver-based company reported adjusted EBITDA of US$148-million, rising 41.2 per cent from the third quarter and above the Street’s expectation of US$146.7-million. Revenue was up 12 per cent to US$922-million as total sales gained 5.2 per cent.
It now sees production at “approximately” 8.1 million tons, topping 2023 output and exceeding analysts’ forecast.
“There was nothing unexpected to call out,” said Scotia’s Ben Isaacson in a note. “G3 should be running at full rates by the end of Feb, while the outage in Egypt has been fixed (restart over the next two weeks). ‘24 volume guide of 8.1M mt looks solid vs. 8.0M/7.9M mt for the Street/Scotia. On the call, we expect to hear on the extent of Chinese methanol demand recovery (ex MTO), how methanol trade-flow is evolving, and how the incremental S/D balance looks in ‘24 vs. ‘23.
“Our first blush on Q1 EBITDA is $190-million, based on 1.8M mt in sales and a $344/mt ASP, and which assumes no change to contract pricing in March.”
Apple Inc. (AAPL-Q) was up 1.3 per cent ahead of the highly anticipated release of its quarterly results after the bell on Thursday.
iPhone sales likely rose 3 per cent in the key holiday period, the best growth in five quarters, but analysts expect a tough year for the company in China, where it faces regulatory headwinds and resurgent competition from Huawei.
Wall Street expects the company’s latest flagship iPhone 15 to face stiff competition from Samsung’s new Galaxy S24 packed with generative artificial intelligence features and a Huawei phone powered by a China-made chip.
Generative AI could become central to deciding who grabs the crown of the world’s biggest company this year.
Microsoft (MSFT-Q) edged ahead of Apple in the past few trading sessions with a US$3-trillion valuation, and analysts expect it to cement that lead soon as it sells more AI-packed products.
While Apple shares climbed nearly 50 per cent last year, they were still the smallest gainer among the so-called Magnificent Seven stocks.
Megacap stocks keep lifting U.S. market, but worries over their dominance grow
Apple has been facing some headwinds in China, with the country’s property sector grappling with problems, while officials in China have signaled that iPhones are out of favor in government offices.
IPhone shipments to China fell 2 per cent in the December quarter, according to market research firm IDC, and analysts said Android phones are making a big comeback there, helped by Huawei’s popularity.
Mega-caps Amazon (AMZN-Q) and Meta (META-Q) were also higher ahead of their Thursday quarterly releases.
U.S.-listed shares of Shell (SHL-N) saw gains of almost 2 per cent in the wake of reporting a US$28-billion annual profit on Thursday after beating fourth quarter earnings forecasts on strong liquefied natural gas (LNG) trading, allowing the oil giant to increase its dividend and extend share repurchases.
Annual profit was down 30 per cent from the previous year’s record, marked by lower chemicals and refining profit margins and slower fuel sales amid sluggish global economic activity following a blockbuster 2022 fuelled by a surge in energy prices after Russia’s invasion of Ukraine.
The British company increased its quarterly dividend by 4 per cent and said it would repurchase a further US$3.5-billion of its shares over the next three months, a similar rate to the previous three months.
Shell’s payouts to shareholders reached around US$23-billion in 2023, over 10 per cent of the company’s market value, highlighting investors’ focus on returns as the sector grapples with an uncertain outlook for fossil fuels.
Shell is the first major global energy company to report 2023 full year results. Its shares have outperformed rivals over the past year, rising by over 8 per cent.
Chief Executive Wael Sawan took over in January 2023 with a vow to revamp Shell’s strategy to focus on higher-margin projects, steady oil output and increase natural gas production.
In recent months Shell has begun company-wide staff reductions, including in its low-carbon solutions division.
Norfolk Southern Corp. (NSC-N) surged 9.1 per cent on news an Ancora Holdings-led investor group has taken a roughly US$1-billion stake and nominated a majority slate of directors to the railroad operator’s board in a bid to oust CEO Alan Shaw.
The director slate includes former Ohio Governor John Kasich and Sameh Fahmy, who was an executive at railroad operator Kansas City Southern, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
In the past few weeks, Norfolk Southern - among the top-five largest railroad operators in North America by revenue - has met with the group and the group’s director nominees have raised a number of issues including how the firm handled a train derailment last year and what they view as Shaw’s failure to hit operating targets, the report added.
A Norfolk train comprising three locomotives and 150 freight cars derailed near East Palestine, Ohio, last February, sending a cloud of smoke over the town and causing temporary evacuation for thousands of residents.
Norfolk Southern last week reported fourth-quarter profit below analysts’ estimates, hurt by lower revenue across the U.S. railroad operator’s merchandise, intermodal and coal businesses.
Hedge funds Sachem Head Capital Management and D.E. Shaw have also recently been building their own stakes in Norfolk Southern, the report said.
Post-pandemic changes in U.S. consumer spending, shifting from goods to services, combined with global shipping delays, have left freight railroads operating in a low volume environment.
Elliott Investment Management reached a settlement with online market place Etsy (ETSY-Q) that hands a board seat to the activist investment firm, the two sides said on Thursday.
Elliott, one of the world’s most prominent investors, has a 13-per-cent economic stake, including both common shares and swaps, a person familiar with the matter said, declining to be named because the discussions are private. That makes Elliott the biggest investor in Etsy.
Etsy shares, which have tumbled from their 2021 high of US$294, traded up just over 9 per cent on Thursday to exchange hands at US$72.62 per share.
Elliott portfolio manager Marc Steinberg, who specializes in technology, media and telecommunications investments at the company, will join the Etsy board on Feb. 5. With Steinberg, the board now has 10 members, nine of whom are independent.
“We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation,” Steinberg said in a statement.
Tesla Inc. (TSLA-Q) rose 0.8 per cent in volatile trading after CEO Elon Musk said Thursday it will hold a shareholder vote to transfer its state of incorporation to Texas from Delaware, days after a judge invalidated his $56 billion pay package at the electric vehicle (EV) maker.
On Tuesday, Delaware judge Kathaleen McCormick called the 2018 share-based pay package, the largest in corporate America, “an unfathomable sum” that was unfair to shareholders and found it was negotiated by directors who appeared beholden to Mr. Musk.
“Never incorporate your company in the state of Delaware,” Mr. Musk posted on social media X shortly after the ruling and also started a poll asking if Tesla should now incorporate in Texas. More than 87 per cent of the over 1.1 million votes cast were in favor of the shift.
“The public vote is unequivocally in favor of Texas! Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas,” Mr. Musk said in his latest post on X, formerly known as Twitter.
Mr. Musk has more than a small interest in Texas.
He shifted Tesla’s corporate headquarters from Palo Alto, California to Austin, Texas in 2021 after criticizing California’s regulations and taxes, and also clashing with health officials at the start of the COVID-19 pandemic over reopening a factory in Fremont.
On the decline
Qualcomm (QCOM-Q) forecast fiscal second-quarter profit slightly above Wall Street estimates and sales in line with market expectations but investors were concerned about the chip maker’s Android sales in China.
The sales outlook reflects interest in new Qualcomm chips with features designed to help run chatbots, image generators and other artificial-intelligence features directly on a device instead of in cloud computing data centers.
Shares were lower by 5 per cent in Thursday trading.
Qualcomm executives told analysts on a conference call that after a flurry of making new chips for Android phones released at the end of last year, they expect chip sales into the company’s most important market to be flat in the current fiscal second quarter. Analysts said this indicated Qualcomm is losing market share to rivals in China.
Qualcomm predicted sales and adjusted profit with a midpoint of US$9.30-billion and US$2.30 per share for the current fiscal second quarter ending in March. The outlook compares with analyst estimates of US$9.30-billion and US$2.25 per share, according to data from LSEG.
In addition to the results, the company said on Wednesday it has reached a chip supply deal with Samsung to supply chips globally for its top-end Galaxy S24 model. But that deal does not cover all of Samsung’s newest models, some of which will use Samsung’s own chips, a reversal from the previous generation of phone where the South Korean electronics giant used Qualcomm chips exclusively.
For the fiscal first quarter ended on Dec. 24, Qualcomm reported sales and adjusted profit of US$9.94-billion and US$2.75 per share, above estimates of US$9.52-billion and US$2.37 per share, according to LSEG data.
In Qualcomm’s chip segment, the company forecast fiscal second-quarter sales with a midpoint of US$7.9-billion, above analyst estimates of US$7.86-billion. Qualcomm predicted second- quarter sales with a midpoint of US$1.3-billion in its patent-licensing business, in line with estimates of US$1.3-billion.
For the just-ended fiscal first quarter, Qualcomm said chip and licensing revenues were US$8.42-billion and US$1.46-billion, respectively, above/below analyst estimates of US$7.99-billion and US$1.41-billion, according to LSEG data.
Allied Properties REIT (AP-UN-T) dropped 8.9 percent after it disclosed a $499-million writedown as offices remained sparsely staffed in big Canadian cities including Toronto and Montreal.
The Toronto-based real estate investment trust, which issues shares to investors against a portfolio of office real estate holdings, said the about $70-million losses came from development property valuations in Toronto and Montréal and about $425-million came from rental-property valuations in Toronto, Montréal, Calgary and Vancouver.
Allied Properties said occupancy at its properties fell to 86.4 per cent from nearly 90 per cent a year ago.
The Toronto-based firm’s shares suffered their worst day in nearly four years and dragged down peer Dream Office Real Estate Investment Trust.
The results come just a day after New York Community Bancorp renewed fears about the industry’s health after it reported pain in its commercial real estate portfolio and slashed divided.
Canada’s big banks, which are preparing to report first-quarter earnings, have warned about weakness in office real estate space, especially in the U.S.
Allied Properties said it now expects financial metrics that measure the cash generated by the REIT to contract up to 5 per cent in the first half of the year.
“Management does expect economic occupancy gains in the second half of the year, but cannot be certain as to the magnitude of those gains, given the current macroeconomic environment,” it said in a statement.
In a research note, Canaccord Genuity analyst Mark Rothschild said: “We note that 2023 performance was below guidance, indicating that fundamentals have been weaker than management had expected. Though management had been presenting a bullish tone consistently over the past few years, that is no longer the case. Guidance for 2024 is less explicit, and suggests that FFO per unit is likely to drop. Specifically, management asserted that FFO per unit, AFFO per unit, and same-property NOI ‘may contract by up to 5 per cent’, and that it would ‘strive for flat metrics’ in 2024.”
Peloton Interactive Inc. (PTON-Q) trimmed its full-year revenue forecast amid a years-long efforts to turn around the business, sending the exercise equipment maker’s shares down over 24 per cent on Thursday.
The company now expects full-year 2024 revenue to be between US$2.68-billion and US$2.75-billion, down from its previous forecast of between US$2.70-billion and US$2.80-billion.
It ended with 3 million connected-fitness subscribers in the second quarter, above FactSet estimates of 2.99 million.
Peloton, which was one of the biggest beneficiaries of COVID-19 lockdowns, has stuck partnerships with Amazon and Lululemon Athletica to make its products and services more accessible.
It is also betting on a boost from the reintroduction of the high-end Tread+ priced at $5,995, two years after sales were temporarily halted due to safety concerns.
Still, demand for its equipment was lower than expected as inflation-weary customers pulled back on spending during the holiday season, typically its strongest for hardware sales.
“While our paid subscriptions for connected fitness outperformed our expectations, our hardware sales were a bit softer than we expected,” Chief Financial Officer Elizabeth Coddington said on a call with analysts.
Peloton now expects to generate positive free cash flow in Q4 but said it would fall short of achieving positive free cash flow for the full year.
Revenue fell 6.2 per cent to US$743.6-million but beat analysts’ expectations of US$733.5-million, according to LSEG data.
The company said it expects third-quarter revenue to come in between US$700-million and US$725-million, below analysts’ estimates of US$753.8-million.
U.S. regional bank shares were under the lens again on Thursday after the sector’s main benchmark experienced its biggest single day decline since the collapse of Signature Bank in March last year.
The KBW Regional Banking Index fell 6 per cent on Wednesday, dragged down by New York Community Bancorp (NYCB-N), which experienced a record single-day drop of 37.6 per cent, according to LSEG data. The Federal Reserve ruling out a rate cut in March also weighed on the broader market on Wednesday.
The sell-off rekindled investor fears over the health of regional lenders, even as many analysts and investors said the problems at NYCB, which slashed its dividend 70 per cent and posted a surprise loss, were mostly unique to its balance sheet.
The Signature Bank purchases, along with its 2022 acquisition of Flagstar Bank, pushed NYCB’s balance sheet above a $100 billion regulatory threshold that is subject to stricter capital and liquidity requirements.
NYCB shares dropped a further 11 per cent on Thursday. The bank updated its earnings presentation later on Wednesday to include its net interest income (NII) forecast, after not giving a clear number earlier despite repeated requests by JPMorgan analyst Steven Alexopoulos.
NYCB sees NII in 2024 between US$2.8-billion and US$2.9 -billion, while analysts were expecting US$2.88-billion, according to LSEG data.
Mr. Alexopoulos maintained his “overweight” rating on NYCB’s stock and said it remained the brokerage’s “top pick for 2024.”
Toronto-based Westbridge Renewable Energy Corp. (WEB-X) was down 1.1 per cent with the premarket announcement of the origination of two new European projects.
The Gierre Solare Project, located in Lazio, Italy, is projected to have a capacity of 32 mega watts, while the NM Solare Project, located in Lazio and Umbria, Italy, will provide 30MW.
Westbridge said both projects have secured land and grid access, completed feasibility studies, and planning applications are in progress.
“Italy is a strong market with a favourable long-term outlook, poised to be one of the leading renewable energy markets in Europe,” said CEO Stefano Romanin. “Westbridge will leverage the team’s experience and proven track record in developing renewable projects in Italy. Diversifying our presence across Europe strengthens our portfolio and opens new avenues in another renewable forward jurisdiction. This strategic expansion underscores the diligence of our origination team evaluating development opportunities across diverse jurisdictions, bolstering the sustainability and success of our origination-to-monetization model.”
Shares of C.H. Robinson Worldwide (CHRW-Q) stock tumbled 13 per cent on Thursday after weak freight demand combined with disruptions arising from the Red Sea crisis caused the U.S. freight and logistics giant’s fourth quarter results to miss analyst estimates.
C.H. Robinson’s revenue fell about 17 per cent to US$4.2-billion in the quarter ended Dec. 31, while adjusted earnings per share fell 51 per cent to 50 US cents dragged down by poor demand and falling prices from excess freight capacity, the company reported late on Wednesday.
Wall Street analysts had expected revenue of US$4.34-billion and earnings per share of 81 US cents, according to LSEG data. C.H. Robinson shares dropped to as low as $72.29, the lowest since May 2020, and were on track for their biggest daily percent decline since October 2019.
“Our fourth quarter results did not meet our expectations as we continue to battle through a poor demand and pricing environment,” said C.H. Robinson Chief Executive Dave Bozeman during an analyst conference call on Wednesday.
Attacks by Yemen’s Iran-aligned Houthi group on vessels in the Red Sea, launched to express solidarity with Palestinians in Gaza, have forced shippers like C.H. Robinson to take longer routes that can add weeks to delivery times.
“While the Red Sea disruption continues without any clear time line of when it will be resolved, the strain on capacity and the elevated spot rates are expected to continue through at least the Chinese New Year,” Mr. Bozeman said.
With files from staff and wires
David Leeder