A survey of North American equities heading in both directions
On the rise
WSP Global Inc. (WSP-T) closed 2 per cent higher after announcing late Monday it has struck a deal to acquire U.S. consulting firm Power Engineers Inc. as the Canadian engineering giant bulks up its capabilities in the North American energy sector.
Montreal-based WSP will pay US$1.78-billion in cash for Hailey, Idaho-based Power Engineers and take on its 4,000 employees, according to the terms of the agreement announced after market close Monday.
Employee-owned Power has a proven track record doing business with the most prominent utilities on the continent, WSP said in a statement. Its revenues are almost entirely generated within the United States, with over 90 per cent of this revenue coming from repeat business.
“The acquisition will mark a transformative step that will position us at the forefront of the energy transition,” WSP Chief Executive Alexandre L’Heureux said in the statement. “This opportunity brings forth a wealth of strategic benefits.”
WSP said it expects the acquisition to drive accelerated growth and that it will be immediately accretive to its adjusted net earnings per share. It will finance the deal through a combination of new terms loans and stock sales.
The Canadian engineering company said it intends to launch a public offering of subscription receipts worth about $500-million in a bought deal led by CIBC Capital Markets, National Bank Financial and RBC Dominion Securities as joint book-runners. It is also selling $500-million of shares through private placements with four of its major shareholders, namely GIC Pte. Ltd, Caisse de dépôt et placement du Québec, British Columbia Investment Management Corp., and a subsidiary of Canada Pension Plan Investment Board.
- Nicolas Van Praet
Sun Life Financial (SLF-T), Canada’s second-largest life insurer, increased 5 per cent on Tuesday after it beat analysts’ estimates for quarterly profit boosted by strong sales at home and in Asia, a key growth market.
The results follow earnings from bigger rival Manulife Financial (MFC-T), which also beat analysts’ estimates driven by strong growth in Asia, where both compete for market share.
Sun Life earned $1.72 per share, surpassing the average estimate of $1.58 per share, according to LSEG data. Its underlying net income rose 8.7 per cent to $1-billion.
“These results reflect continued solid growth in Canada and Asia,” CEO Kevin Strain said.
Sun Life has said it would focus on partnerships to expand in Asian markets, a key playground for Canada’s biggest life insurance companies as they look for global exposure.
Sun Life, a major insurer and asset manager that is also increasingly pushing into health-care services, has inked several deals in Asia, including those with Hong Kong-based virtual insurer Bowtie and a bancassurance deal with Dah Sing Bank.
Core earnings from Asia rose 19 per cent and in Canada they rose 8 per cent.
The U.S business however reported a 5-per-cent decrease in core earnings hurt by challenges in its Dental insurance segment reflecting the impact of Medicaid redeterminations and the end of the Public Health Emergency.
Underlying earnings from wealth asset management segment, which contribute about 45 per cent of overall earnings, rose 9 per cent helped by higher fees.
The group health and protection businesses fell 15 per cent while individual insurance sales rose 31 per cent.
Toronto-based bitcoin miner Bitfarms (BITF-T) was up 3.3 per cent after it said on Tuesday its co-founder and chair Nicolas Bonta, one of the three board members its rival and top shareholder Riot Platforms sought to replace, will exit immediately.
The two companies have been locked in a dispute since April, when Riot made an unsolicited $950-million offer to acquire the company.
Bitfarms said the bid undervalued it and adopted a poison pill to fend off any attempts at a hostile takeover.
Riot withdrew its offer, but is seeking three board seats on Bitfarms, and has said it is “ready to engage” with the reconstituted board on a potential transaction.
Bitfarms said its lead director Brian Howlett will replace Mr. Bonta, and its newly appointed CEO Ben Gagnon will also join the board. Additionally, the company said Liam Wilson will be its new chief operating officer. He was previously the COO of digital assets infrastructure firm Mawson Infrastructure Group.
OrganiGram Holdings Inc. (OGI-T) soared after it on Tuesday reported fiscal third-quarter earnings of US$2.1-million.
On a per-share basis, the Toronto-based company said it had net income of 2 US cents.
The results surpassed Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for a loss of 5 IUS cents per share.
The cannabis producer posted revenue of US$30-million in the period, also surpassing Street forecasts. Three analysts surveyed by Zacks expected US$28.7-million.
Starbucks (SBUX-Q) jumped 24.5 per cent after it named Chipotle Mexican Grill (CMG-N) head Brian Niccol as its new CEO on Tuesday in a management shakeup as it tries to fend off pressures from activist investor Elliott Investment Management
Mr. Niccol replaces Laxman Narasimhan, who was tapped in 2022 from Lysol maker Reckitt to undertake a “reinvention” of the world’s biggest coffee chain.
But Starbucks stock has continued to suffer, losing roughly 20 per cent of its value over the last five years when the broad-market S&P 500 has gained more than 80 per cent. In July, the company fell short of sales expectations due to weakening demand in the United States and China.
Elliott, which owns a sizable stake, has been pressuring the company to improve its performance and stock price, proposing the company expand its board and improve its governance. Elliott’s offer was reported to be part of an effort to allow Narasimhan to keep his job as CEO.
When asked if activist Elliot was consulted about the shakeup, Starbucks Board Chair Mellody Hobson said it had not been.
“We look forward to engaging with all of our shareholders about this new development,” she said on CNBC.
It is unclear what will happen with negotiations with Elliott with the appointment of Mr. Niccol.
Elliott was seeking to add Jesse Cohn, an equity and managing partner in the firm, to the Starbucks board, Reuters reported Monday, citing sources.
In May, days after Starbucks cut its annual sales forecast, former CEO Howard Schultz wrote on his LinkedIn account that its U.S. operations were the “primary reason for its fall from grace,” and that senior leaders need to spend more time with workers.
Home Depot (HD-N) warned of a decline in annual profit and a bigger drop in its annual comparable sales on Tuesday, as weak discretionary spending dampened expectations of a recovery in consumer sentiment this year.
Shares of the Dow component turned positive and finished 1.2 per cent higher after an early decline despite comparable sales for the second quarter also falling steeper than expected.
Customers have delayed big projects such as flooring, kitchen cabinets and bath to tackle steep inflation, even as higher mortgage rates and home prices hurt new homes sales.
“During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend,” CEO Ted Decker said.
Weak new home sales in May and June led to foot traffic dropping 0.4 per cent in July after a 4.3-per-cent rise in June, according to data from Placer.ai.
Home Depot expects annual comparable sales to drop between 3 per cent and 4 per cent, compared with its prior view of a nearly 1-per-cent decline.
The downbeat sales forecast drove concerns over a recovery for Home Depot in 2025, Stifel analysts said in a note.
Comparable sales in the second quarter fell 3.3 per cent, steeper than expectations of a 1.98-per-cent decline, according to LSEG data, while customer transactions fell 1.8 per cent, its 13th straight quarter of drop. The retailer expects diluted earnings per share to decline between 2 per cent and 4 per cent, compared with a prior forecast of a nearly 1-per-cent rise.
Shares of rival Lowe’s (LOW-N), which is expected to report results next week, fell with the news. Retail bellwether Walmart (WMT-N) will report earnings on Thursday.
“Depending on the type of retailer, you’re going to see more conservative viewpoints towards the back half of the year,” said John Tomlinson, global director of research at M Science. “There is probably a softening in overall consumer demand.”
On Holding (ONON-N) rose 4.4 per cent as it beat analysts’ estimates for second-quarter revenue on Tuesday on strong demand for its shoes and apparel from customers looking for trendy products, while the company maintained its annual forecast.
The company cited low stock due to capacity constraints and supply challenges at its Atlanta distribution center, which is being automated.
“We have experienced shipping delays, but we also experienced out-of-stock situations towards our DTC channel ... while we posted a record quarter, it could have been even stronger if we would not have had those impacts,” co-CEO and Chief Financial Officer Martin Hoffmann told Reuters.
The forecast reflects the company’s expectation of continued disruption for the next few months, he said.
The Roger Federer-backed company maintained its 2024 net sales growth forecast of at least 30 per cent.
On’s U.S.-listed shares have risen nearly 47 per cent so far this year, as the company and Hoka-owner Deckers Outdoor (DECK-N) edge out sportswear giant Nike (NKE-N) for shelf and online space at retailers including Dick’s Sporting Goods (DKS-N) and Foot Locker (FL-N) in the running shoe category.
On has launched products in the running and trail categories, looking to tap into the trend of customers willing to splurge on comfortable and new products even as they remain cautious about big-ticket purchases.
On the decline
Toronto’s Hudbay Minerals Inc. (HBM-T) declined 1.4 per cent after It reported a net loss attributable to owners of US$16.6 million in its latest quarter as its revenue rose by more than 35 per cent compared with a year ago.
The mining company says the loss amounted to five cents per share for the quarter ended June 30. The result compared with a loss of US$14.9-million or 5 US cents per share in the same quarter last year.
Revenue for the quarter totalled US$425.5-million, up from $312.2-million a year earlier.
On an adjusted basis, Hudbay says it profit attributable to owners amounted to US$100,000 or zero cents per share in its latest quarter compared with an adjusted loss of US$18.3-million or seven cents per share in the same quarter last year.
In its outlook for the year, Hudbay lowered its cash cost guidance for copper to a range of 90 US cents to US$1.10 per pound compared with earlier expectations for between US$1.05 and US$1.25 per pound.
The company says the improvement was the result of meaningful exposure to gold byproduct credits and continued strong cost control.
With files from staff and wires