A survey of North American equities heading in both directions
On the rise
Sobeys parent company Empire Co. Ltd. (EMP-A-T) gained 5.6 per cent after it reported a modest increase in sales in its first quarter, while profits were impacted by the sale of gas stations and a recent decision to slow the pace of its e-commerce expansion.
The Stellarton, N.S.-based grocer reported on Thursday that net earnings fell to $207.8-million or 86 cents per share in the quarter ended Aug. 3, compared to $261-million or $1.03 per share in the same period the prior year.
Profits were impacted by a decline in fuel sales, related to last year’s sale of the company’s Western Canadian gas station locations to Shell Canada subsidiary Canadian Mobility Services Ltd. The $100-million deal closed in July of 2023.
Empire also reported a non-cash charge in the quarter, related to its decision in June to end its exclusive partnership with e-commerce technology provider Ocado Group PLC. Empire has been slowing the pace of its e-commerce expansion, and ended the Ocado partnership early as it seeks to make the Voilà online service more profitable.
In addition, Empire made changes to its leadership team during the summer and cut some jobs through employee buyouts.
Not including those factors and other adjustments, Empire reported its adjusted net earnings grew to $218.7-million or 90 cents per share in the quarter, compared to $196.2-million of 78 cents per share in the prior year.
Sales grew by 0.8 percent compared to the prior year, to $8.14-billion While shoppers continue to visit Empire’s discount FreshCo stores in search of deals, the company reported its full-service banners such as Sobeys, Safeway and IGA are also performing well. Same-store sales – an important metric tracking sales growth not attributable to new store openings – grew by 1 per cent in the quarter compared to the prior year. Voilà's online sales increased by 26.2 per cent.
- Susan Krashinsky Robertson
Canaccord Genuity Group Inc. (CF-T) increased 2.4 per cent after it signed a deal to buy wealth management business Brooks Macdonald Asset Management (International) Ltd.
Under the deal for the subsidiary of Brooks Macdonald Group plc, Canaccord Genuity will pay 28 million pounds ($49.6-million) in cash.
The company will also pay up to an additional 22.85 million pounds ($40.5-million) on the second anniversary of the deal closing, subject to meeting certain revenue targets.
BMI was started in 2012 and provides investment management, financial planning and fund management services with offices in Jersey, Guernsey and the Isle of Man.
Canaccord Genuity says the deal represents an important addition to its international operations.
Nvidia (NVDA-Q), which rallied 8.2 per cent on Wednesday following a report the U.S. government is considering allowing the firm to export advanced chips to Saudi Arabia, extended gains by 1.9 per cent.
The sales of the chips were a main but unofficial topic at GAIN, Saudi Arabia’s global AI summit, Semafor reported.
Attendees of the summit, including some who work for the Saudi Data and AI Authority, told Semafor that the country is making efforts to comply with U.S. security requirements to expedite the acquisition of the chips.
The Biden administration imposed sweeping new curbs on AI chip exports last year, in a bid to cut off more avenues for China to obtain them, imposing a licensing requirement on their shipment to the UAE and other Middle Eastern countries.
The Saudi government is expecting shipments of the company’s most advanced chips, Nvidia H200s, according to the report. The H200 was first used in OpenAI’s GPT-4o, a multimodal platform capable of realistic voice conversation with the ability to interact across text and image.
Microsoft (MSFT-Q) closed 0.9 per cent higher after Bloomberg reported it is cutting 650 jobs in its Xbox unit, the third such layoff this year as the company tries to rein in costs and integrate its US$69-billion acquisition of Activision Blizzard.
Microsoft said its cloud-based software suite was recovering after an outage impacted thousands of its users on Thursday.
“We’ve worked with the third-party internet service provider (ISP) and confirmed that a change within their managed-environment resulted in impact. The ISP has reverted the change and we’re now seeing signs of recovery,” Microsoft’s service dashboard said.
The Microsoft 365 productivity software suite includes Word and Excel, among other widely used tools.
The gaming industry saw mass layoffs, studio shutdowns and project cancellations in the first half of the year, triggered by a slow recovery in spending by gamers after player engagement rates peaked during the pandemic.
The job cuts will affect mostly corporate and supporting functions, the report said, citing a memo sent to staff by Xbox chief Phil Spencer.
No games, devices or experiences are being canceled and no studios are being closed as part of these adjustments, the report said, citing the memo.
Microsoft and Xbox did not immediately respond to Reuters’ requests for comment.
Microsoft had closed its deal for Activision Blizzard last year, which boosted its heft in the video-gaming market with best-selling titles, including Call of Duty, to better compete with industry leader Sony.
The technology giant had said in January it would let go of 1,900 employees at Activision Blizzard and Xbox.
In May, Xbox shut down a number of gaming studios, including Arkane Austin.
Norfolk Southern (NSC-N) finished narrowly higher after it said late Wednesday it has fired CEO Alan Shaw for having an inappropriate relationship with a subordinate.
His ouster comes after two difficult years in the top job and just days after the company’s board announced it was investigating him for alleged ethical lapses.
The Atlanta-based railroad said Mr. Shaw had an inappropriate consensual relationship with Norfolk Southern’s chief legal officer, who was also terminated. Norfolk Southern promoted Chief Financial Officer Mark George to be the railroad’s next CEO.
Mr. Shaw was leading Norfolk Southern in February 2023 when one of its trains derailed, spilled toxic chemicals and caught fire in East Palestine, Ohio, the worst railroad disaster in the last decade. Then, activist investor Ancora Holdings tried to take control of the railroad earlier this year and fire Mr. Shaw.
He weathered congressional hearings and difficult community meetings after the East Palestine derailment, while promising to make Norfolk Southern the “gold standard for safety” in the industry. He also managed to persuade investors not to back the majority of Ancora’s board nominees. Three of its nominees did win seats on the railroad’s board, but that wasn’t enough to give it control.
The derailment near the Ohio-Pennsylvania border prompted the nation to re-examine railroad safety and led lawmakers and regulators to call for reforms. But those proposals have largely stalled, and the industry has made only minimal changes since the derailment, such as installing more trackside detectors to spot overheating bearings like the one that caused the East Palestine crash.
On the decline
Alimentation Couche-Tard (ATD-T) lost over 1 per cent after Bloomberg reported it is discussing how much it could raise the offer price to buy Japan’s Seven & i Holdings, citing unnamed sources familiar with Couche-Tard’s internal talks.
Couche-Tard earlier this week said it was willing to continue the buyout talks after Seven & i rejected its US$38.5-billion offer.
Couche-Tard must offer a significantly higher price than the initial proposal to get Seven & i to enter negotiations, but whether the suitor will submit another proposal to Seven & i remains uncertain, Bloomberg reported citing the sources.
Seven & i has tapped Nomura to advise its board in preparation for a potential takeover battle with Couche-Tard, the Financial Times separately reported on Thursday.
Seven & i declined to comment on the raised offer price and advisor appointment. Nomura declined to comment on its reported appointment.
Couche-Tard has said it was confident of arranging financing for the deal, which would be the largest-ever foreign takeover of a Japanese company.
Seven & i last week said the deal was not in the best interests of its shareholders and could face antitrust challenges in the U.S., where the combined company would be the biggest convenience store operator by a considerable margin.
Travel company Transat AT Inc. (TRZ-T) plummeted 7.7 per cent after it reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9-million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3-million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2-million, down from $746.3-million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guerard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
Vaccine maker Moderna (MRNA-Q) slumped 12.4 per cent on Thursday after saying it expects sales of between US$2.5-billion and US$3.5-billion next year, and forecast that new product launches would drive an average annual growth rate of 25 per cent in revenue between 2026 and 2028.
The vaccine maker last month projected sales of US$3-billion and US$3.5-billion for this year, which will be its lowest annual revenue since Moderna launched its COVID-19 vaccine in late 2020 - the company’s first commercial product.
Analysts on average expect the company will generate revenue of US$3.27-billion and US$3.74-billion for 2024 and 2025, respectively, according to LSEG data.
The company said last year it expected to return to sales growth in 2025.
Moderna Chief Financial Officer James Mock said next year’s forecast reflects the uncertainty of the COVID and respiratory syncytial virus (RSV) markets in the U.S., as well as Moderna’s prediction that the 10 new products it expects to be approved by 2027 will start to generate meaningful revenue in 2028.
“For 2025, we might have some new product approvals assumed, but there’s not assumed to be much revenue from them,” he said.
The Cambridge, Massachusetts-based company has been banking on revenue from newer mRNA shots, including its RSV vaccine mRESVIA, to make up for declining revenue from its COVID shot since the end of the pandemic.
Moderna said it plans to submit an application to the U.S. Food and Drug Administration this year to expand approval for its RSV shot to high-risk adults under the age of 60, following new data from a late-stage trial.
Delta Air Lines (DAL-N) said on Thursday it was seeing an improvement in third-quarter unit revenue trends, citing strength in travel demand and moderating capacity across the industry.
The airline also said it was expecting its third-quarter profit per share to be in the top end of its previous forecast range of US$1.70 to US$2.00, excluding the 45 cents per share impact related to a global cyber outage in July.
Shares of the carrier finished narrowly lower in Thursday trading.
A software update in July by global cybersecurity firm CrowdStrike triggered system problems for Microsoft customers, including many airlines.
The disruptions persisted at Delta and the Atlanta-based carrier canceled about 7,000 flights over five days. It faces an investigation from the U.S. Transportation Department for the disruptions.
The airline lowered its expectations for current-quarter revenue to a range of flat to up 1 per cent, compared with 2-per-cent to 4-per-cent growth projected earlier.
Delta had said it expects a direct revenue hit of US$380-million from the outage in the current quarter owing to refunds it owes to customers for canceled flights and compensation in cash and frequent flyer miles.
It had reported additional expenses of US$170-million related to customer expense reimbursement and crew-related costs.
U.S.-listed shares of Stellantis (STLA-N) were down 1.4 per cent after it said on Thursday it would suspend production of the fully electric Fiat 500 small car for four weeks due to sluggish demand.
The global slowdown in sales of electric vehicles (EVs), partly due to diverging policies on green incentives, has pushed automakers worldwide to adjust their EV plans.
“The measure is necessary due to the current lack of orders linked to the deep difficulties experienced in the European electric (car) market by all producers, particularly the European ones,” Stellantis said in a statement.
The 500 is made in the northwestern Italian city of Turin, the birthplace of the Fiat brand, at the historic Mirafiori plant.
The suspension of production will start on Friday, Stellantis said, adding it was “working hard to manage at its best this hard phase of transition.”
As part of these efforts, the Franco-Italian group said it is investing 100 million euros (US$110-million) in Mirafiori to adopt a higher performance battery and will produce a hybrid version of the 500 electric model, starting between 2025 and 2026.
Unions have long been asking Stellantis to relaunch the Mirafiori site, where output has slumped in recent years, including with the introduction of a new high-volume, cheap car.
“The Mirafiori complex is undergoing a deep transformation, with the aim of making it a true global innovation and development site, a key choice if we are to meet the challenge of the transition to sustainable mobility to which we are called,” Stellantis said.
U.S. chemicals maker Dow (DOW-N) declined 0.9 per cent in the wake of lowering its third-quarter revenue forecast on Thursday due to an unplanned event at one of its plants in Texas.
The company’s CEO, Jim Fitterling, said a significant unplanned event occurred in late July at one of its ethylene crackers in the Texas plant.
Dow is also experiencing higher input costs and margin compression in Europe, he added.
The company expects its third-quarter revenue to be approximately US$10.6-billion, compared with the prior view of US$11.1-billion.
Wall Street estimated a revenue of US$11-billion for the third quarter.
General Mills (GIS-N) slid 0.2 per cent in response to news it will sell its North America yogurt business to French dairy firms Groupe Lactalis and Sodiaal in a US$2.1-billion deal.
Lactalis will acquire the U.S. business and Sodiaal will buy the Canadian unit, the Cheerios maker said.
Reuters reported in April that General Mills was working with investment bank JPMorgan Chase to attract interest from potential buyers for the business, which houses brands such as Yoplait and Liberté.
Packaged food makers are divesting units not delivering high growth to keep a tight leash on costs while expanding their core brands as they respond to consumers seeking cheaper alternatives.
The divestiture will help sharpen focus on key brands that have stronger margins, Chief Executive Officer Jeff Harmening said in a statement.
Yoplait is facing tough competition in the U.S. from privately held yogurt brand Chobani, as well as Danone’s Dannon brand.
The North American yogurt business contributed about US$1.5-billion to General Mills’ fiscal 2024 net sales.
The Golden Valley, Minnesota-based company expects the deals to close in 2025, and will dilute adjusted earnings per share by about 3 per cent in the first 12 months after the close.
Yoplait was started by a group of French dairy farmers in 1964. It partnered with General Mills in 1977 through a franchise agreement giving the maker of Bisquick pancake mix exclusive rights to market the brand in the U.S.
Then in 2011, General Mills acquired a 51-per-cent stake worth US$1.2-billion in Yoplait from private equity firm PAI Partners and French dairy cooperative Sodiaal, which retained the remaining stake.
In 2021, General Mills sold the European operations of Yoplait to Sodiaal.
With files from staff and wires