A survey of North American equities heading in both directions
On the rise
Valcourt, Que.-based BRP Inc. (DOO-T) closed up 0.7 per cent after announcing before the bell it has put its marine businesses up for sale as it looks to focus on its powersports operations.
The recreational vehicle manufacturer says it is looking to sell its Alumacraft, Manitou, Telwater and marine parts, accessories and apparel businesses.
The sale excludes its Sea-Doo personal watercraft, Sea-Doo Switch pontoons and jet propulsion systems.
BRP chief executive Jose Boisjoli says the company has built a solid foundation by investing in the development of innovative marine products and upgrading the production facilities.
He says the brands for sale can offer attractive value creation opportunities for a new owner.
BRP has hired National Bank Financial Inc. to help with the process.
In a research note, Stifel analyst Martin Landry said: “Recall that BRP re-entered the marine business in 2018/2019 with three acquisitions valued at $300 million. Revenues from that segment peaked in FY2020 at $560 million while in FY25, management guides for revenues to range between $220 million and $260 million. This significant decline from the peak is mostly due to the challenging industry conditions. We estimate that Marine was a drag of $1.50 on FY25 EPS. Management did not see a path to a turnaround in the short term, which triggered the decision to sell the business. Given the timing of the sale (depressed environment) and operating losses, in our view, proceeds could be below $200 million. Financially, the disposition makes sense and could lead to upside revisions to estimates. However, it suggests that industry conditions are depressed and that the recovery could be long.”
Sienna Senior Living Inc. (SIA-T) gained 1.1 per cent following the announcement after the bell on Wednesday of the $182-million acquisition of four continuing care homes in Alberta.
The deal includes 540 suites in the Calgary, Edmonton, Fort Saskatchewan and Medicine Hat.
“The transaction is largely in line with our forecasts, but nonetheless moves the ball downfield strategically,” said RBC Dominion Securities analyst Pammi Bir. “Specifically, the portfolio acquisition marks SIA’s expansion into seniors housing ownership in Alberta, via a high-quality, recently constructed portfolio of ‘lighter care’ long-term care homes that create immediate scale. The $182-million (approximately 6.5-per-cent going-in cap rate) price tag is in line with our $220-million (6.75-per-cent cap rate) of 1H/25E acquisitions. However, management cited potential NOI upside as Alberta Health Services reviews its funding model. As well, SIA estimates the $336K/suite price is 25-30 per cent below replacement cost. Given the high LTV ratio (83 per cent) on the portfolio, we expect lower leverage on future investments as SIA deploys the balance of its recent $144-million equity raise. At 7 per cent above NAV (6.8-per-cent implied cap rate/16 times 2025 estimated AFFO), we see current valuation as well-supported.”
Before the bell on Thursday, Markham, Ont.-based Sienna announced the completion of its previously announced offering of $150-million aggregate principal amount of series D senior unsecured debentures.
Shares of Dye & Durham Ltd. (DND-T) rose 2.4 per cent after announcing it has surpassed $150-million in annual recurring revenue, which it explained is “a metric which includes revenues from subscriptions and minimum spend contracts.”
The Toronto-based provider of cloud-based legal practice management software also said it is track toward an ARR of more than 50 per cent of total revenue by the end of fiscal 2026.
U.S. chip stocks rose before the bell on Thursday after industry bellwether TSMC’s strong sales forecast fanned investor optimism about demand for processors used to power artificial intelligence applications.
Taiwan Semiconductor Manufacturing Co. (TSM-N), the world’s largest contract chipmaker, raised its expectation for annual revenue growth and said sales from AI chips would account for mid-teen percentage of its full-year revenue.
TSMC bullish on outlook as AI boom blows third-quarter profit past forecasts
The forecast from the leading producer of advanced AI chips reinforced investor confidence in the outlook for chipmakers whose market values have skyrocketed over the past two years due to a surge in chip spending by Big Tech.
U.S.-listed TSMC shares rose 9.8 per cent, lifting the company’s market capitalization above US$1-trillion.
TSMC customer and AI chip frontrunner Nvidia (NVDA-Q), smaller rival AMD (AMD-Q) as well as networking chipmaker Broadcom (AVGO-Q), smartphone semiconductor maker Qualcomm (QCOM-Q) and memory chip provider Micron (MU-Q) all rose as well.
Struggling chipmaker Intel’s (INTC-Q) shares were also higher. Intel has been expanding its chip fabrication facilities in an attempt to challenge TSMC in advanced contract manufacturing - an undertaking analysts expect will take years.
TSMC’s outlook also offered some respite to investors after deep forecast cuts from chipmaking equipment giant ASML sparked fears of a slower-than-expected recovery in demand for semiconductors not used in AI.
TSMC’s U.S.-listed shares are up more than 80 per cent so far this year, while Nvidia has risen over two folds, as investors pour billions of dollars into semiconductor stocks amid Wall Street’s booming picks-and-shovels trade.
Blackstone (BX-N) gained 6.3 per cent after it beat Wall Street’s expectations on its key quarterly earnings metric on Thursday, as the world’s largest alternative investment firm’s assets under management (AUM) hit a record US$1.1-trillion and the value of its funds rose.
New York-based Blackstone said it saw US$41-billion of inflows during the third quarter, while it deployed and committed US$54-billion of capital - the highest in over two years - amid a revival in dealmaking activity as the U.S. Federal Reserve cut rates and the economic outlook remained sanguine.
Over the past few quarters, high interest rates had been a drag on some aspects of Blackstone’s business. With the Fed now entering into an easing cycle, the firm saw that weight starting to lift.
The company’s private equity funds appreciated by 6.2 per cent in the quarter and its infrastructure funds by 5.5 per cent, contributing to Blackstone’s highest fund appreciation in three years.
Chief Executive Steve Schwarzman hailed the results as “broad-based acceleration across our business.”
Blackstone’s distributable earnings, which represent cash that can be used to pay dividends, totaled US$1.3-billion in the third quarter, up 6 per cent from the previous year. This translated into distributable earnings per share of US$1.01, surpassing analysts’ average estimate of 92 US cents, according to LSEG data.
Fundraising during the quarter was led by credit. It said private wealth AUM hit US$250-billion, with individual fundraising nearly doubling year-to-date compared to the previous year.
Expedia Group (EXPE-Q) jumped 4.8 per cent after the Financial Times reported that ride-hailing giant Uber (UBER-N) explored a possible bid for the company.
As of Wednesday’s close, Expedia’s market capitalization stood at US$19.6-billlion, while Uber’s market valuation was US$172.1-billion, according to LSEG data.
Uber CEO Dara Khosrowshahi was Expedia’s chief executive between 2005 and 2017 and is on its board of directors
Uber shares were down 2.5 per cent on the news.
Meta (META-Q) was narrowly higher after saying it has laid off some employees, including staff at WhatsApp And Instagram, to realign its resources with its “strategic goals.”
A Meta spokesperson confirmed in a statement that some teams were making changes to align with their long-term goals and location strategy. Specific details on the number of impacted employees wasn’t disclosed.
See also: Meta’s oversight board seeks public comments on hate speech moderation
“This includes moving some teams to different locations, and moving some employees to different roles,” Meta said in a statement. “In situations like this when a role is eliminated, we work hard to find other opportunities for impacted employees.”
The Verge, who first reported the layoffs, said cuts were made across teams that include messaging service WhatsApp and Instagram and Meta’s virtual reality technology unit Reality Labs.
Among those affected was Jane Manchun Wong, a software engineer known for discovering unreleased features in popular social media apps prior to joining Meta in 2023.
Meta has had several rounds of layoffs to adjust its staffing after it hired aggressively during the pandemic. Earlier this year, it cut several jobs in Reality Labs after letting go of 11,000 employees in 2022. Last year, another 10,000 jobs were cut as CEO Mark Zuckerberg deemed 2023 a “year of efficiency.”
On the decline
U.S.-listed shares of Finnish telecom equipment supplier Nokia (NOK-N) fell 2.8 per cent after it reported a 9-per-cent rise in third-quarter operating profit on cost cuts, and echoed rival Ericsson in seeing demand recovery in some areas.
However, quarterly net sales fell 8 per cent to 4.33 billion euros (US$4.70-billion), missing estimates of 4.76 billion euros due mainly to lower sales to India.
Both Nokia and Ericsson said North America has started to show signs of growth after years of weakness, but Nokia’s market share in the region had dropped after losing contracts with Verizon and AT&T over the years.
“We have seen a really bad cycle... Now that decline is over and it is starting to gradually recover, which is good, but it (telecom) will never be a huge growth market,” CEO Pekka Lundmark said in an interview.
He cautioned that growth was happening more slowly than earlier expected.
“North America has started to show pretty good signs, and we had strong growth in Q3 in network infrastructure,” Mr. Lundmark said.
Reuters reported Nokia has laid off close to 2,000 people or about a fifth of its employee base across Greater China and plans to cut another 350 jobs across Europe as part of efforts to lower costs.
A Nokia spokesperson confirmed the company had opened consultations relating to laying off 350 employees in Europe but declined to comment on Greater China.
As of December 2023, Nokia had 10,400 employees in Greater China and 37,400 employees in Europe, according to its annual report.
Kinder Morgan (KMI-N) fell short of Wall Street estimates for third-quarter profit on Wednesday and lowered its annual forecast as the U.S. pipeline operator contends with weaker commodity prices and lower crude volumes.
Shares of the company, whose pipelines move about 40 per cent of total U.S. natural gas production, slid 0.5 per cent in Thursday trading.
“For the full year, we expect refined product volumes to be slightly below our plan to 2 per cent over 2023,” President Thomas Martin said in a conference call.
U.S. WTI crude oil prices declined about 8.1 per cent during the third quarter from a year earlier and concerns persist over global demand.
Crude and condensate volumes fell 4 per cent from the year-ago quarter, while natural gas transported rose 2 per cent.
The company projected annual adjusted core profit to be 2 per cent below its prior forecast, compared to previous expectations of in line or within 1-2 per cent below.
Kinder Morgan also cited start-up delays at its renewable natural gas facilities for the revised forecast.
The company, like many U.S. energy peers, is pinning its hopes on the artificial intelligence boom-driven data center power need to buoy natural gas sales.
“Data center demand has skyrocketed,” CEO Kimberly Dang said. The overall gas market could grow by 25 billion cubic feet per day over the next five years, she said.
Kinder Morgan posted an adjusted profit of 25 US cents per share, compared with analysts’ average expectation of 27 US cents, according to estimates compiled by LSEG.
Netflix (NFLX-Q) was down 2 per cent ahead of the post-market release of quarterly results which could see its slowest subscriber additions in six quarters as gains from a password-sharing crackdown ease, with investors looking for signs its nascent ad revenue business is accelerating.
The streaming giant likely added 4 million subscribers in the July-September period, according to analysts’ estimates compiled by LSEG. Netflix originals such as The Accident and The Perfect Couple were among the top streamed titles in the U.S. during the quarter, Nielsen data showed.
As the pace of sign-ups slows, Netflix is trying to shift investor attention towards other performance measures including revenue growth and margins. It will stop reporting subscriber data from 2025.
“Their focus is to continue to grow subscribers at a healthy clip while also leveraging their scale, ability to raise prices and increase advertising dollars,” said Pivotal Research analyst Jeff Wlodarczak.
The company’s ad-supported plan has been growing but Netflix does not offer details on the tier’s financial performance and does not expect it to become a primary driver of growth until 2026.
This has raised some concerns about its growth trajectory.
“They’re making less than a billion dollars a year in the U.S. on advertising, saying that doesn’t make them look good,” eMarketer television and streaming analyst Ross Benes said.
Some analysts have said the company needs to raise prices and phase out more of its ad free plans to nudge customers towards the tier with commercials as it usually brings in more revenue per user.
The company, which operates in more than 190 countries, is expected to report ad revenue of US$242.70-million in the third quarter, according to the average of estimates from three analysts compiled by LSEG. Overall revenue is expected to grow 14.3 per cent, a slightly slower pace than the previous three months, to $9.76 billion.
To attract more advertisers, the streamer is focusing on live events including sports. Netflix will air the highly anticipated Jake Paul vs. Mike Tyson boxing fight in November, followed by its first NFL games in December.
Netflix stock has risen 12.4 per cent since it reported second-quarter results in July, compared with a 5-per-cent rise in the S&P 500 index.
Cash-strapped electric vehicle maker Lucid (LCID-Q) said on Thursday a public offering of more than 262 million shares would likely fetch it US$1.67-billion in proceeds.
The stock sale news as well as the company’s latest warning of a bigger-than-expected loss for the third quarter sent shares of the luxury electric-sedan maker tumbling.
Lucid expects to report a loss from operations in the range of US$765-million to US$790-million for the quarter ended Sept. 30, compared with analysts’ estimates of US$751.7-million, according to data compiled by LSEG.
The company also signed a deal with Ayar Third Investment, an affiliate of Saudi Arabia’s Public Investment Fund and the company’s biggest shareholder, to sell nearly 375 million shares in a private placement.
Ayar expects to maintain its ownership of about 59 per cent of the company’s outstanding shares, Lucid said.
The sovereign wealth fund’s affiliate committed an additional US$1.5-billion in August, which Lucid had initially expected to provide sufficient liquidity till the fourth quarter of next year.
Lucid had about US$1.35-billion in cash and cash equivalents at the end of the second quarter.
The company said it intends to use proceeds from the stock sale and private placement for general corporate purposes, capital expenditure and working capital.
With files from staff and wires