A survey of North American equities heading in both directions
On the rise
Toronto-Dominion Bank (TD-T) closed 1.1 per cent higher after it reported first-quarter profit that beat analysts’ estimates as the lender booked record revenue in its capital markets division, offsetting rising provisions for loans that could default.
TD earned $2.8-billion, or $1.55 per share, in the three months that ended Jan. 31. That compared with $1.58-billion, or $0.82 per share, in the same quarter last year.
A breakdown of the big banks’ first-quarter earnings
Adjusted to exclude certain items, including costs related to the restructuring charges announced last quarter and its acquisition of New York-based investment bank Cowen, TD said it earned $2 per share. That topped the $1.89 per share analysts expected, according to data from the London Stock Exchange Group.
“TD had a good start to the year, with revenue growth reflecting higher fee-income from our markets-driven businesses, including the contribution from TD Cowen, and higher volumes and deposit margins in the Canadian personal and commercial bank,” TD chief executive officer Bharat Masrani said in a statement. “Expense growth moderated from last quarter as we made progress on our restructuring initiatives, delivering efficiencies across the bank.”
The bank kept its quarterly dividend unchanged at $1.02 per share.
TD is the final major Canadian bank to report earnings for the fiscal first quarter. Canadian Imperial Bank of Commerce also released results on Thursday. Bank of Nova Scotia, Bank of Montreal, Royal Bank of Canada and National Bank of Canada reported financial results earlier this week.
TD booked $213-million in after-tax restructuring charges, adding to the $266-million it posted for the program last quarter. Last year, any of the banks trimmed expenses through measures including job cuts and real estate reductions. TD expects to post savings of about $400-million pretax in 2024.
The lender is targeting a 3-per-cent reduction in its work force through initiatives including employee severance and other personnel-related costs and reducing its real estate footprint.
- Stefanie Marotta
Canadian Imperial Bank of Commerce (CM-T) increased 2.2 per cent after it reported first quarter profit that beat analysts’ estimates on stronger performance in Canadian banking, even as the lender posted higher provisions for loans that could default.
CIBC earned $1.73-billion, or $1.77 per share, in the three months that ended Jan. 31. That compared with $433-million, or $0.39 per share, in the same quarter last year when the bank’s earnings were weighed down by a large legal provision.
Adjusted to exclude certain items, including a charge stemming from a special assessment by the U.S. Federal Deposit Insurance Corp., the bank said it earned $1.81 per share, a 7-per-cent decrease from the same quarter a year prior. That topped the $1.68 per share analysts expected, according to data from the London Stock Exchange Group.
“These first-quarter results demonstrate our success in executing on our client-focused strategy which is delivering results for our stakeholders,” CIBC chief executive officer Victor Dodig said in a statement. “We have clear momentum in attracting and deepening client relationships, underpinned by continued expense discipline, a robust capital position, and strong credit quality, giving us a strong foundation as we continue to proactively manage our bank to further our progress and momentum in 2024.”
The bank kept its quarterly dividend unchanged at $0.90 per share.
In the quarter, CIBC set aside $585-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $93-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, CIBC set aside $295-million in provisions.
Total revenue rose 5 per cent in the quarter, to $6.22-billion as expenses decreased 22 per cent to $3.47-billion. On an adjusted basis, excluding last year’s large legal provision, expenses increased 3 per cent on higher technology and staffing costs.
- Stefanie Marotta
Oil and gas firm Canadian Natural Resources (CNQ-T) rose 5.2 per cent after it beat fourth-quarter profit estimates on Thursday, helped by record production.
The company’s overall production was up 9.6 per cent to 1.42 million barrels of oil equivalent per day (boe/d) from last year.
Total U.S. oil demand rose 3.4 per cent in October versus the prior year, according to U.S. Energy Information Administration (EIA)data, benefiting Canadian firms as the U.S. is the largest importer of the country’s oil and gas.
The Calgary-based company’s quarterly production of crude oil and natural gas liquids (NGLs) was at 1.05 million of barrels per day (bbl/d), an 11-per-cent growth compared with a year earlier.
The oil and gas producer also increased its quarterly dividend by 5 per cent to $1.05 per share.
The company reported an adjusted profit of $2.34 per share for the quarter ended Dec. 31, compared with analysts’ average estimate of $2.15 per share, according to LSEG data.
The Canadian firm’s reported profit jumped nearly 73 per cent to $2.63-billion in the quarter, compared with the previous year.
WSP Global Inc. (WSP-T) gained 1.2 per cent in the wake of saying it earned $130.6-million in the fourth quarter, up from $120 million a year earlier.
The Montreal-based company says revenues for the quarter ended Dec. 31 were $3.7-billion, up from $3.6-billion during the same quarter in 2022.
Basic net earnings per share were $1.05, up from 96 cents.
Earnings for the full financial year were $550-million, up from $431.8-million in 2022.
Revenues were also higher at $14.4-billion, up from $11.9-billion in 2022.
In its outlook for 2024, WSP Global says it anticipates organic growth in net revenues in its Canadian operations to be in the mid-to-high single digits.
In a research note, National Bank Financial’s Maxim Sytchev said: “WSP capped off a strong 2023 and introduced full-year 2024E guidance as supportive market fundamentals and quality execution have put the company on track to surpass the 2024 targets set forth in the current strategic plan (Let compounding continue). Organic revenue growth guidance of 5 per cent to 8 per cent is quarterbacked by the key Canadian and U.S. markets, where infrastructure and energy transition spending continues in full force. While capex is expected to step up somewhat, costs for acquisition-related integration and ERP implementation are expected to moderate. The balance sheet remains in good shape with leverage at 1.5 times, and we fully expect management to announce further acquisitions as it seeks to continue scaling its platform. Given that higher utilization rates and positive operating leverage continue to push margins higher, we remain confident that a 20-per-cent margin is achievable within a few years.
“We feel that investors are ready to ascribe to the ‘new paradigm’ when it comes to valuation amid strong organic growth and optionality on M&A where some PE firms must be hurting (or privates struggling with succession issues)… so we have premium multiples from aggressive CAD acquirers; this actually sounds like a good combination. As a result, we continue to see the shares grinding higher (WSP was one of our top ideas for 2024, and so far, we’ve had a strong start — shares up up 15 per cent year-to-date vs. TSX up 1 per cent).”
Crescent Point Energy Corp. (CPG-T) was up 2.1 per cent after it raised its quarterly base dividend by 15 per cent as it reported fourth-quarter net income of $951.2-million compared with a loss of $498.1-million a year earlier.
The company says it will now pay a quarterly base dividend of 11.5 cents per share, up from 10 cents per share.
Crescent Point says its profit for the quarter ended Dec. 31 amounted to $1.70 per share compared with a loss of 90 cents per share in the last three months of 2022.
Total oil and gas sales were $1.01-billion compared with $1.02-billion a year earlier.
Average daily production in the quarter was 162,269 barrels of oil equivalent per day, up from 134,124 boe/d in the same quarter in 2022.
Adjusted funds flow from operations were $1.03 per share for the quarter, up from 93 cents a year earlier.
C3.ai’s (AI-N) shares jumped to a six-month high on Thursday after the AI software firm delivered third-quarter results ahead of Wall Street expectations and narrowed its full-year revenue forecast on strong enterprise demand.
The company’s shares have surged 165 per cent since the end of 2022, valuing the company at US$3.56-billion, drawing strong interest from active traders, especially retail investors, looking to bet on the boom in artificial intelligence (AI).
However, in that same period, Nvidia (NVDA-Q), the poster child for AI, has rocketed 431 per cent, or more than five-fold, in market value.
In the latest quarter, strong demand from federal customers helped C3.ai’s subscription revenue increase 23 per cent to US$70.4-million and beat analysts’ average estimate of US$66.77-million, according to LSEG data. Subscription revenue is about 90 per cent of total revenue.
“The company is having notable success in the federal sector while signing more multi-year subscription agreements that trend similarly to consumption revenue behavior,” said D.A. Davidson analyst Gil Luria.
Salesforce (CRM-N) rose as it expanded its stock buyback program by US$10-billion and announced a new dividend, but its annual revenue forecast that was below estimates.
The company’s downbeat forecast signals a likely slowdown in cloud and tech spending as clients grapple with high interest rates and rising inflation, compelling them to keep a lid on costs.
The company sees revenue between US$37.7-billion to US$38-billion for full-year 2025, compared with analysts’ estimate of US$38.62-billion, according to LSEG data.
Warnings of a slow economy prompted Salesforce to cut about 700 employees, or roughly 1 per cent of its global workforce, last month, adding to the slew of layoffs across the tech and media industry.
“Salesforce is guiding for only 8-9-per-cent growth (for the full year), which moves it out of the high growth category. In order to make up for that, it is introducing a dividend, which is appropriate for the lower level of growth,” said Gil Luria, analyst at D.A. Davidson.
However, Salesforce beat revenue estimates for fourth-quarter revenue and profit as it benefited from higher cloud spending, joining other cloud giants like Amazon and Microsoft.
The company reported revenue of US$9.29-billion for the quarter ended Jan. 31, beating analysts’ estimate of US$9.22-billion.
On an adjusted basis, the company earned US$2.29 per share compared with estimates of US$2.26 per share.
Best Buy (BBY-N) reported a smaller-than-expected drop in quarterly comparable sales on Thursday, as holiday deals led shoppers to spend on big-ticket purchases like electronics and home appliances, sending its shares up.
Consumers, however, remained cautious as higher borrowing costs force them to make trade-off decisions to cover for household essentials.
Domestic revenue weakened about 1 per cent to US$13.41-billion in the fourth quarter, driven by softness in demand for home theater, appliances, mobile phones and tablets across its stores and online.
Still, Best Buy’s focus on its paid membership program during the peak holiday shopping season resulted in customers opting for its product services and delivery.
With subscription tiers of US$179.99 per year, US$49.99 per year and a free membership, the program led to better services margin rates, helping quarterly gross profit rate rise to 20.5 per cent from 20 per cent a year ago. CFO Matt Bilunas said he expects memberships to help expand the rate by about 20 to 30 basis points in fiscal 2025.
The company forecast a drop in comparable sales of as much as 3 per cent compared to market expectation of a 0.23-per-cent rise.
In the fourth quarter, Best Buy took US$169-million in charges, mainly related to employee termination benefits tied to its restructuring plan. It earned US$2.72 per share, compared to LSEG estimates of US$2.52.
The top U.S. electronics retailer’s comparable sales fell 4.8 per cent, its ninth straight quarterly decline, compared to average analysts’ expectation of a 5.36-per-cent drop, according to LSEG data.
On the decline
Laurentian Bank of Canada (LB-T) slipped 1.7 per cent after it reported a first-quarter profit of $37.3-million, down from $51.9-million a year earlier.
The Montreal-based bank says the profit amounted to 75 cents per diluted share for the quarter ended Jan. 31, down from a profit of $1.09 per diluted share in its first quarter last year.
Revenue totalled $258.3-million, down from $260.1-million a year earlier.
The results came as Laurentian’s provision for credit losses totalled $16.9 million, up from $15.4 million in its first quarter last year.
On an adjusted basis, the bank says it earned 91 cents per diluted share in its latest quarter, down from an adjusted profit of $1.15 per diluted share a year earlier.
Analysts on average had expected a profit of 95 cents per share, according to estimates compiled by financial markets data firm Refinitiv.
Spin Master Corp. (TOY-T) slid 3.2 per cent following the late Wednesday release of better-than-expected fourth-quarter 2023 results and guidance for fiscal 2024.
The Toronto-based toymaker reported adjusted EBITDA of $65-million, up from $12.4-million during the same period a year ago and well above the Street’s projection of $47-million. Gross margins came in a 52.1 per cent, up 2.2 per cent year-over-year and also better than forecasts.
“The company’s 2023 adjusted EBITDA margin of 22 per cent is impressive and much higher than historical levels of 19-20 per cent,” said Stifel analyst Martin Landry in a note. “Spin Master expects to maintain this high level of profitability on its legacy businesses in 2024 calling for EBITDA margins to remain stable at 22 per cent when excluding Melissa & Doug. This guidance translates into 2024 adjusted EBITDA of $498-million, higher than our expectations of $484-million and consensus of $482-million. Management expects 2024 revenue to be flat year-over-year when excluding the contribution from the Melissa & Doug acquisition which is similar to Mattel’s flat revenue and better than Hasbro’s 7-per-cent decline in revenues. We expect Spin Master’s shares to react well to these results [Thursday].”
Stella-Jones Inc. (SJ-T) fell 7.4 per cent despite a fourth-quarter earnings beat and a 22-per-cent dividend hike with investors worrying about slowing growth for pole purchases as capital budget constraints restrict key customers.
Driven by pricing gains in its utility poles and railway ties business, the Montreal-based manufacturer of pressure treated wood products reported revenue of $688-million, up 3.5 per cent year-over-year but below the Street’s forecast of $725-million. However, EBITDA of $120-million and adjusted earnings per share of 98 cents topped the consensus estimates of $118-million and 94 cents, respectively, driven by strong margin gains.
Its quarterly dividend was increased to 28 cents per share.
National Bank analyst Maxim Sytchev said: “SJ’s core ties and pole segments saw solid year-over-year pricing gains offset lower volumes; the former category was impacted by lower Class I client purchases while pole volumes were affected by CapEx constraints. Railway Tie Association data showed tie purchase volume growing steadily past the 19 mILLION mark through Q4/23, and we are confident long-term volumes can remain at this level for the foreseeable future. For poles, we will be looking for incremental context around whether the quarter’s volume softness is a temporary factor (as infra funding is rolled out) or indicative of a structural industry shift. On the residential lumber side, both volumes and pricing was soft, likely explained by ongoing affordability challenges for consumers. That said, the 22-per-cent increase in the dividend suggests management is confident in the long-term prospects of the business (Investor Day targets were reiterated once again) and represents a conservative 19-per-cent payout ratio on our pre-quarter 2024 EPS estimates. Stella-Jones bought back an additional 494k shares (0.9 per cent of shares o/s) in the quarter for $37-million at an average price of $74.29 as it remained active on its NCIB.
“We have back-to-back prints from Koppers (NYSE: KOP; Not Rated ), and results continue to show that SJ is outgrowing its competitor. While on the call we will be seeking to understand the volume set-up around utilities on the back of material pricing hikes. The overall performance and margins were very strong, and the 22-per-cent dividend increase also signals management’s confidence in the future.”
Cronos Group Inc. (CRON-T) lost 6.6 per cent after it reported a loss of US$44.8-million in its fourth quarter.
The Toronto-based cannabis company said it had a loss of 12 US cents per share. Losses, adjusted for one-time gains and costs, came to 5 cents per share.
The results fell short of Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was breakeven on a per-share basis.
The cannabis company posted revenue of US$23.9-million in the period.
For the year, the company reported a loss of US$74-million, or 19 US cents per share. Revenue was reported as US$87.2-million.
Snowflake (SNOW-N) shares slid on Thursday after the cloud data storage services provider projected annual revenue below Wall Street estimates and disclosed a surprise retirement of long-time CEO Frank Slootman.
Snowflake expects product revenue of US$3.25-billion in fiscal year 2025, and between US$745-million and US$750-million for the quarter ending April, both below Wall Street expectations.
Analysts highlighted that a stronger adoption of the company’s Iceberg Tables product that allows users to store data in external services not managed by Snowflake could hit storage sales.
Still, some analysts said the revenue projection may be conservative, given growth trends seen for data storage and analytics products, enhanced by AI.
“While guidance for the full fiscal year product revenue growth at 22-per-cent year-over-year growth is conservative, we note that the guide does not include assumed consumption from recently released products,” D.A. Davidson senior software analyst Gil Luria said.
Cloud services providers such as Microsoft, Amazon and Alphabet’s Google have signaled stabilization of cloud services growth this year after customers optimized spending last year.
The results came alongside Snowflake’s “surprise” announcement that insider Sridhar Ramaswamy took over as chief executive after Slootman retired on Feb. 27.
Shares of WW International Inc. (WW-Q) tumbled after former talk show host Oprah Winfrey revealed she is leaving its board of directors and donating all of her interest in the company to a museum.
Ms. Winfrey, who told People magazine in December that she was using a weight-loss medication, has served on the company’s board since 2015. She will not stand for re-election at WeightWatchers annual meeting in May.
WW International said in a regulatory filing that Ms. Winfrey’s decision “was not the result of any disagreement with the company on any matter relating to the company’s operations, policies or practices.” The size of its board will go from 10 to nine members following its annual meeting, the New York company added.
“I look forward to continuing to advise and collaborate with WeightWatchers and CEO Sima Sistani in elevating the conversation around recognizing obesity as a chronic condition, working to reduce stigma, and advocating for health equity,” Winfrey said.
According to FactSet, Ms. Winfrey’s stake of about 1.1 million shares made her the company’s largest individual shareholder, with a stake of 1.43 per cent.
Ms. Winfrey said that she will donate her interest in WeightWatchers to the National Museum of African American History and Culture, part of the Smithsonian Institution in Washington. The company said that it supports Winfrey’s decision to donate all of her stake to the museum during WeightWatchers upcoming trading window in March.
With files from staff and wires
David Leeder