A survey of North American equities heading in both directions
On the rise
Celestica Inc. (CLS-T) jumped 18.3 per cent on the heels of the late Wednesday release of better-than-expected third-quarter results.
The Toronto-based electronics company reported revenue of US$2.5-billion, up 22 per cent year-over-year and ahead of the consensus forecast of US$2.41-billion as well as its own guidance (US$2.325-$2.475-billion). Adjusted earnings per share of US$1.04 also topped the Street’s estimate of 95 US cents.
“We remain Outperform on CLS and have raised our estimates and target price following solid Q3/24 results and guidance, driven by ongoing strength in CCS (specifically CLS’s switching business) which more than offset a softer quarter, and outlook, for ATS,” said BMO analyst Thanos Moschopoulos. “CLS announced a win with Groq for AI servers and a 1.6T switching win with a major hyperscaler. We believe the AI capex cycle, and CLS’s market position, will be more durable than the stock’s current valuation implies — and see further upside to the stock, particularly given CLS’s consistent margin execution.”
Mullen Group Ltd. (MTL-T) closed 9.3 per cent higher following the premarket release of better-than-anticipated third-quarter results.
The Okotoks, Alta.-based transportation and logistics provider reported a 5.6-per-cent year-over-year rise in revenue to $532-billion, exceeding the Street’s expectation of $521.3-million as acquisitions helped push daily revenue up to $8.6-million (from $8.1-million a year ago). Earnings per share slipped 1 cent year-over-year to 42 cents, but topped the consensus forecast by 6 cents.
“MTL reported strong Q3 results that beat our estimates and consensus and were up year-over-year as a result of acquisitions and a focus on cost control,” said Acumen Capital analyst Trevor Reynolds. “Management highlights continued headwinds facing the freight industry with plans to remain disciplined and patient.”
Tesla’s (TSLA-Q) stock soared on Thursday, a day after it forecast surging car sales growth, reassuring investors that CEO Elon Musk was still looking to expand the core business of selling electric vehicles.
The stock rose 21.9 per cent to US$260.48, adding more than US$140-billion in market value. It was the biggest gain since May 2013, and erased recent losses on concerns that Musk was distracted by new projects like the recently unveiled robotaxi.
Mr. Musk has been pivoting Tesla into an artificial intelligence and robotics company from an EV market leader, but has yet failed to lay out a detailed business plan for his new focus.
Last quarter, he made bold company announcements about everything but cars - from driverless taxis to humanoid robots - leaving investors worried about dwindling margins already squeezed by lowered prices.
On a post-earnings call on Wednesday, though, Mr. Musk forecast 20-30-per-cent sales growth next year, promising an affordable vehicle, and said efforts to slash production costs boosted margins.
“He definitely seemed more passionate and invested in it this time,” said Jessica Caldwell, head of insights at car research and buying website Edmunds.
“I feel like so much of Tesla is tied up in the future but we need to figure out how you get there. That’s what people needed to hear and they were a little bit better in providing those details than they have been in the past.”
The results followed a flashy event this month to unveil a two-seater robotaxi dubbed Cybercab that will go into production in 2026 without a steering wheel or pedals and cost less than US$30,000 to buy. The event also featured a 20-seater driverless van and humanoid robots that danced for attendees.
Disappointed by the lack of some key details on how quickly Tesla could ramp up robotaxi production and clear inevitable regulatory hurdles, investors punished the company’s stock after that event.
Mr. Musk on Wednesday said Tesla aims to produce at least 2 million Cybercabs a year.
Not all investors are likely to be mollified by Tesla’s reassurances on Wednesday.
Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a prominent Tesla investor, said robotaxis and AI were not the fundamental businesses he wanted Musk to focus on.
“The days were good when Elon slept at the factory. He was there every day, working. Not going on Trump rallies of all things he could be doing,” Gerber said, referring to Musk’s well-publicized support of the Republican presidential candidate. Gerber made a short-lived run for the Tesla board last year.
Tesla shares are trading at 72.75 times its 12-month forward earnings estimates, much higher than the 5.94 times for legacy automaker Ford Motor and 30.79 for technology giant Microsoft.
At least five brokerages raised their price target on the stock, with a median PT of US$221, according to LSEG data.
United Parcel Service (UPS-N) exceeded Wall Street estimates for quarterly profit on Thursday, ahead of the peak holiday season, benefiting from rebounding volumes and effective cost controls, boosting its shares 5.3 per cent.
The company also raised its full-year adjusted operating margin forecast.
UPS has been seeing volume growth in the U.S. since May, following nine quarters of weak demand after pandemic-induced lockdowns ended and inflationary pressures crimped some e-commerce purchasing.
Its third-quarter domestic volumes grew 6.5 per cent.
However, a large portion of the growth has been driven by new e-commerce entrants, identified by industry experts and shoppers as bargain retailers Shein and Temu.
This has exacerbated the shift from premium air services to less expensive ground services and then to the even more low-profit SurePost services, where UPS picks up packages and hands about 60 per cent of them off to the U.S. Postal Service for final delivery.
The company had slashed its full-year adjusted operating margin target to 9.4 per cent in July, despite an uptick in U.S. volumes because of the shift. It now expects a full-year operating margin of 9.6 per cent.
“UPS seems to be controlling what it can at this late stage in the cycle,” said Jonathan Chappell, equity analyst at Evercore ISI, adding that the improved margin forecast points to cost cuts outweighing lingering macro headwinds.
The company’s third-quarter adjusted operating margin of 8.9 per cent was above last year’s 7.7 per cent.
The parcel delivery firm reported an adjusted profit per share of US$1.76, above analysts’ average estimate of US$1.63 per share.
Consolidated revenue of US$22.25-billion was also above analysts’ average estimate of US$22.14-billion.
“Posting a solid, nearly all-around beat after two years of misses and lowers” will confirm the view that “fundamentals and stock price have bottomed,” Mr. Chappell said.
On the decline
Shares of Rogers Communications (RCI.B-T) missed third-quarter revenue estimates on Thursday as lower-than-expected wireless subscribers additions offset its higher sports-related revenue, sending its shares down 3 per cent.
The owner of the Toronto Blue Jays baseball team also announced a $7-billion equity financing deal with an undisclosed investor, which would help it reduce its debt.
Rogers to raise $7-billion in ‘structured equity’ deal to reduce debt
Under this deal, Rogers will sell a minority equity interest in a portion of its wireless backhaul transport infrastructure.
Wireless backhaul transports data from the base of towers to the core of the network.
The telecom and media company added 101,000 monthly bill-paying wireless phone subscribers in the third quarter, compared with estimates of 129,040, according to analysts polled by Visible Alpha.
Under pressure from persistently high inflation, consumers in Canada have been switching to cheaper wireless plans to lower their expenses. Rogers also faces stiff competition from rivals BCE and Telus.
Still, its the media segment remains a bright spot, growing 11 per cent in the third quarter and beating expectations, owing to higher sports related revenue.
Rogers has been aggressively investing into Canadian sports over the past few years to capitalize on its strong viewership and loyal fanbase amid a broader decline in traditional media.
The company bought Bell’s stake in Maple Leaf Sports & Entertainment for $4.7-billion last month to become the majority owner of the Canadian sports firm behind Toronto Raptors basketball team and NHL’s Toronto Maple Leafs.
The company’s total revenue of $5.13-billion missed estimates of $5.17-billion, according to data compiled by LSEG.
On an adjusted basis, Rogers earned $1.42 per share, compared with estimates of $1.35, aided by a 3-per-cent fall in total operating costs.
Canadian Pacific Kansas City Ltd. (CP-T) dipped 0.3 per cent after enjoying a jump in profits last quarter despite a costly derailment and a labour disruption that forced the railway to wind down operations over a two-week stretch last summer.
On a conference call Wednesday, CEO Keith Creel highlighted “a very challenging operational quarter” but said the company bounced back to keep it on track for double-digit earnings growth this year.
Net income climbed 7 per cent year-over-year in the third quarter and revenue rose 6 per cent, the Calgary-based company reported.
Reaction from the Street: Thursday's analyst upgrades and downgrades
CPKC took a $60-million “expense hit” after rail cars carrying hazardous material derailed and burst into flames in a remote area of North Dakota in July, said chief financial officer Nadeem Velani.
In August, CPKC and rival Canadian National Railway Co. (CNR-T) grappled with a countrywide work stoppage that ground Canadian Pacific to a halt for four days, capping off a two-week operational wind-down.
The shutdown dented revenue ton miles — a key metric measuring how much revenue a company makes per volume of freight hauled — by 3 per cent, the company said Wednesday.
“The good news is the bulk of that business was our bulk business. It was potash, coal, grain. Opportunities like that simply will roll forward” — rather than being lost — said chief marketing officer John Brooks.
“No doubt there’s certain areas we’re feeling more pressure. Certainly the intermodal space, with all the trucking capacity and the cheaper spot rates for trucks, that has been a little more challenging,” he qualified.
Revenues from container shipments slipped four per cent year-over-year amid softer consumer demand brought on by inflation and higher interest rates.
However, revenues for CPKC’s two biggest categories last quarter — grain and energy, plastics and chemicals — both surged by 11 per cent. The railway road a bumper wheat crop and greater shipments to Mexico from the Prairies — one example of “synergy wins and more market share gains” that spanned various commodities, said Brooks.
The efficiencies stem largely from Canadian Pacific’s takeover of Kansas City Southern in December 2021. The acquisition marked North America’s first major rail merger in decades, but operations merged only in April of last year following regulatory approval of the deal.
The larger economic environment “remains challenging in a few areas,” but Mr. Brooks said earnings should continue to grow next year regardless. He highlighted container shipping through the Port of Lazaro Cardenas, Mexico’s largest seaport, as well as CPKC’s monopoly on single-line freight service between that country and the U.S. Midwest as selling points.
On Wednesday, CPKC said net income increased to $837-million in the three months ended Sept. 30 from $780-million in the same period the year before.
Third-quarter revenues rose to $3.55-billion from $3.34-billion a year earlier, the company said.
On an adjusted basis, core combined diluted earnings rose to 99 cents per share from 92 cents per share, coming in two cents short of analysts’ expectations, according to financial markets firm LSEG Data & Analytics.
Canadian miner Teck Resources (TECK.B-T) slipped 5.4 per cent even though it beat third-quarter profit estimates on Thursday, helped by higher copper production volumes at its Chile mine and on strong prices of the red metal.
Copper prices remained elevated in the quarter, supported by optimism about Chinese demand following a series of stimulus measures from Beijing. Long-term demand view for the red metal continues to be bullish on the back of its critical role in the energy transition.
Teck said copper prices rose by about 11.7 per cent from a year earlier and averaged around US$4.21 per pound.
The Quebrada Blanca (QB) mine in Chile reported record production during the quarter as operations continued to ramp up. This helped Teck achieve a jump of around 60 per cent in copper output to 115,000 metric tons.
However, the company cut its full-year copper production forecast for the second time in a row, citing labour issues and mining delays at the Highland Valley Copper mine in Canada.
It also reduced the upper end of its 2024 annual copper production guidance for QB. Teck now expects full-year copper production of 420,000 to 455,000 tons, compared with the previous guidance of 435,000 to 500,000 tons.
Teck revamped its operations this year by selling 77-per-cent interest in the steelmaking coal unit to Swiss miner Glencore Plc. The deal, one of the largest in the industry, was completed in July.
The deal was part of Teck’s transition into a pure-play energy transition metals company.
“We have returned more than $1.3-billion to shareholders so far this year, while also reducing debt and ramping-up copper production,” CEO Jonathan Price said in a statement
The company reported an adjusted profit of 60 cents per share for the quarter ended Sept. 30, compared with analysts’ average estimate of 37 cents per share, according to data compiled by LSEG.
Newmont (NGT-T) expects 2025 production from its core assets to largely remain relatively flat compared to this year, due to lower-than-expected output from two newly acquired mines, the top gold miner announced on Thursday.
“We expect gold production from our tier one portfolio to remain largely consistent with this year, driven by the lower than previously expected production from two of our new operations in Lihir and Brucejack,” CEO Tom Palmer said in a call with analysts.
The company had forecast 2024 production from its core assets to be 5.6 million gold ounces in February.
Shares of the Denver, Colorado-based company were down 14.7 per cent on Thursday after missing third-quarter profit expectations on higher costs, mainly from increased contractual labour expenses and elevated operational costs in three projects.
Palmer added that the company expects costs to stay the same next year.
Newmont, the only gold producer listed in the S&P 500 Index, acquired the Lihir mine in Papua New Guinea and Brucejack in Canada through its US$17-billion acquisition of Australia’s Newcrest in 2023.
The gold miner expects to process lower-grade stockpiles - which yield less of the precious metal - at Lihir in 2025, the company said, adding it would work to improve efficiencies in the longer term.
Production at Brucejack, situated 950 kilometers from Vancouver, would decline in the second half of 2025 as the mine has transitioned into an open-pit property, the company said.
Newmont also raised its share buyback program by US$2-billion as it continues to reduce debt through its divestment program.
Vancouver-based Wheaton Precious Metals Corp. (WPM-T) decreased 0.4 per cent on the premarket announcement of the acquisition of a stream from Montage Gold Corp.’s (MAU-X) Koné Gold Project in Côte d’Ivoire for US$625-million in cash upfront as well as ongoing payments for gold ounces to delivered equal to 20 per cent of gold spot price.
“With essential permits in place coupled with its impressive scale, we believe the Koné Project stands out as one of the premier gold assets in Africa, and we are excited to partner with Montage to deliver a full financing package for its development,” said Wheaton president and CEO Randy Smallwood.
“Supported by strong shareholder backing from the Lundin Group and Zijin Mining, the Koné Project is expected to significantly boost Wheaton’s near-term annual gold production and further strengthen our peer-leading growth trajectory. We look forward to collaborating with Montage’s outstanding team, whose extensive experience in West Africa has driven remarkable progress in de-risking the project and advancing it towards construction.”
In a research note looking at the deal for Vancouver-based Montage, National Bank Financial analyst Don DeMarco said: “Positive bias. Combined with the equity raise in Aug, Koné is now fully-funded with a sizable buffer. Not your ordinary stream/debt package, however, as certain novel features allow MAU to buyback the Zijin stream and facility, and accelerate deliveries on the Wheaton stream, which comprises the bulk of the financing, is limited to the Koné and Gbongogo deposits, and excludes exploration upside on other prospective targets. Ostensibly, under certain scenarios by over delivering and contributing oz’s from elsewhere MAU could be debt-free and fully unencumbered of both streams in ~five years vs. the base case stream payment schedule of 15 years. Next up, construction to commence in Q1/25, first pour Q2/27, FS mine life through 2041 marked by elevated FCF.”
IBM (IBM-N) shares fell 6.2 per cent on Thursday, as reduced enterprise spending on non-GenAI projects pressured its consulting segment, clouding software unit strength.
An uncertain economic outlook pushed IBM’s customers to reduce discretionary spending and prioritize GenAI projects, impacting growth in its consulting services.
“Infrastructure, which had been strong YTD, slowed ahead of the FY/25 refresh cycle while consulting continued to see headwinds around discretionary spend reflected in declining signings,” RBC Capital Markets analysts said.
Total revenue rose about 1 per cent to US$14.97-billion, missing estimates of US$15.07-billion, according to data compiled by LSEG.
“The pause in discretionary spending shows continued IT budget constraints (particularly for non-AI) near term, but a glimmer of hope for 2025 growth durability,” said Piper Sandler analysts.
IBM’s software segment, however, was a bright spot in the third quarter, achieving 9.7-per-cent revenue growth to US$6.52-billion, as enterprises expand cloud infrastructure to cater to GenAI technology.
The company expects revenue trends to continue in the next quarter including strength from software, but headwinds in consulting from discretionary spend and infrastructure ahead of next year’s refresh.
Analysts at BofA Securities expect consulting to remain weaker in the first half of 2025 but offset by accelerating software and mainframe cycle.
Boeing (BA-N) shares fell 1.2 per cent on Thursday after workers voted to extend a nearly six-week-old strike, throwing fresh uncertainty over the company’s efforts to stabilize finances and restore its battered image.
Some 64 per cent of U.S. West Coast factory workers on Wednesday rejected the company’s latest contract offer, leaving assembly lines idle for nearly all the planemaker’s commercial jets including the 737 MAX, the backbone of its balance sheet.
The offer included a 35-per-cent general wage increase over four years but no defined benefit pension plan, which was one of the striking machinists’ main demands.
The rejection is a blow for new CEO Kelly Ortberg, who took the top job in August on a pledge to work more closely with factory workers than his predecessors.
Deadlock over the pension plan, which was withdrawn following a deal to keep jobs in Washington state a decade ago, raised immediate concerns over a longer strike as rating agencies monitor Boeing for a possible downgrade to junk status.
“A longer strike delays Boeing’s recovery and increases financial pressure on the company and its (credit) rating,” said Ben Tsocanos, aerospace director at S&P Global Ratings.
“The rejection raises the risk of a protracted strike if the obstacle is reinstatement of a pension. We believe the company is not likely to agree to a pension due because of the cost.”
Others said the continued stoppage leaves the U.S. planemaker with dwindling options as it continues to bleed cash.
“Boeing is going to have to settle it and just make a higher offer, because they are just not in a position to duke it out,” said Agency Partners analyst Nick Cunningham.
Wells Fargo analyst Matthew Akers said raising the wage offer to meet the union’s demand of 40 per cent could end the dispute, noting that online comments suggested members were divided on the pension issue.
Some machinists vowed to fight on after the vote, with many still angry about the last pension deal signed a decade ago.
Analysts said the vote could muddy efforts to carry out a re-financing needed to stabilize Boeing’s operations after the strike hampered its recovery from a string of previous crises.
American Airlines (AAL-Q) lifted its annual profit forecast on Thursday, on improved pricing power and a recovery from the missteps in its sales strategy that led to an exodus of corporate clients.
In its attempt to improve margins, the airline had cut perks and discounts tied to its contracts with corporate travel agencies and clients. But the strategy backfired, giving its peers an advantage.
Since then, American has taken several steps to win back corporate clients. In the third quarter, it renegotiated contracts with travel agencies, while many of its corporate customers reintroduced its benefits program to their business travelers.
“We have taken aggressive action to reset our sales and distribution strategy and reengage the business travel community, which we’re confident will improve our revenue performance over time,” CEO Robert Isom said.
American’s pricing power has also improved as the airline industry cut down excess capacity in the domestic market. It had led many carriers to offer seats at a discount to fill their planes during the summer season, denting their earnings.
The company expects an adjusted earnings per share of US$1.35 to US$1.60, compared with its prior forecast of 70 US cents to US$1.30.
But shares of the company were lower by 0.4 per cent after forecasting total revenue per available seat mile (RASM), a proxy for pricing power, to be down about 1 per cent to 3 per cent for the fourth quarter.
It also anticipates unit costs in the quarter to rise by about 4 per cent to 6 per cent.
“Q4′s RASM guide was a little bit light, and unit costs growth a little higher than expected, " Citi analyst Stephen Trent wrote in a note.
The airline’s adjusted profit of 30 US cents per share exceeded expectations of 16 US cents, according to data compiled by LSEG, while total operating revenue rose 1.2 per cent to US$13.65-billion, above estimates of US$13.49-billion.
TKO Group Holdings (TKO-N) was lower by 8.7 per cent after it said on Thursday it would acquire some of Endeavor Group Holdings’ sports assets in a deal valued at US$3.25-billion, bolstering its core Ultimate Fighting Championship and World Wrestling Entertainment businesses.
The deal will include Endeavor’s bull riding league Professional Bull Riders (PBR), luxury hospitality division On Location and sports marketing agency IMG.
“Within TKO, they will help power the growth of our revenue streams and position us to capture even more upside from some of the most attractive parts of our sports ecosystem: media rights, live events, ticket sales, premium experiences, brand partnerships and site fees,” Mark Shapiro, president and COO of TKO, said in a statement.
The transaction is expected to close in the first half of 2025.
PBR organizes more than 200 annual live events for more than 1 million fans. Its CEO Sean Gleason will continue to lead the organization, TKO said.
On Location provides premium hospitality for more than 1,200 sporting events, including the Super Bowl, Ryder Cup, FIFA World Cup and Olympics.
Endeavor’s IMG packages and sells media rights and brand partnerships, providing strategic consultancy, digital services, and event management for clients, including the National Football League, English Premier League and the International Olympic Committee.
TKO said the acquisition of IMG does not include businesses associated with the IMG brand in licensing, models and tennis representation, nor its full events portfolio.
With files from staff and wires