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A survey of North American equities heading in both directions

On the rise

Eli Lilly and Co. (LLY-N) increased 3.1 per cent after it said on Tuesday its weight loss drug cut the risk of developing type 2 diabetes by 94 per cent in patients with pre-diabetes and those who were obese or overweight in a long-term study.

The drugmaker disclosed the data from a three-year follow-up of a late-stage trial called “SUMROUNT-1″, the results of which were initially published in 2022.

Both Eli Lilly and rival Novo Nordisk (NVO-N) have been pushing to extend the use of their obesity drugs to related conditions such as sleep apnea and heart conditions.

Treatment with tirzepatide, the chemical name for Lilly’s obesity drug Zepbound and diabetes treatment Mounjaro, resulted in an average weight reduction of 22.9 per cent, compared to just 2.1 per cent for the placebo, the company said.

“These data reinforce the potential clinical benefits of long-term therapy for people living with obesity and pre-diabetes,” Lilly’s senior vice president of product development, Jeff Emmick, said in a statement.

The company said the safety profile of the drugs was consistent with previously published data.

Palo Alto Networks (PANW-Q) forecast fiscal 2025 revenue and profit above Wall Street estimates on Monday, a sign of growing demand for its comprehensive cybersecurity products as digital threat landscape evolves.

Shares of Santa Clara, California-based Palo Alto Networks rose over 7 per cent, as the company also announced an additional US$500-million for share repurchases.

A surge in digital scams, online threats and high-profile cybersecurity incidents have triggered robust demand for companies such as Palo Alto offering integrated security products.

The results come at a time when analyst say the July 19 global IT outage, linked to CrowdStrike’s software update, has laid bare the risks of dependence on single-vendor providing consolidated security solutions.

The analysts added that the outage could partially slowdown aggressive vendor consolidation.

Palo Alto’s products include cloud security suite Prisma and AI-powered Cortex portfolio that help in prevention and detection of complex cybersecurity attacks on the endpoint.

The company expects its annual revenue to be between US$9.10-billion and US$9.15-billion, compared with analysts’ average estimate of US$9.11-billion, according to LSEG data.

Palo Alto expects its annual adjusted profit per share in the range of US$6.18 to US$6.31, compared with estimates of US$6.19 per share.

Its revenue for the fourth quarter rose about 12 per cent from a year earlier to US$2.19-billion, beating the average analyst estimate of US$2.16-billion.

Hawaiian Holdings (HA-Q) and Alaska Air (ALK-N) jumped after clearing a regulatory obstacle with the U.S. Department of Justice, just days after they agreed to extend a review period of their US$1.9-billion merger

“The time period for the U.S. Department of Justice to complete its regulatory investigation of the proposed combination of Alaska Airlines and Hawaiian Airlines under the HSR Act has expired,” Alaska Airlines said in a statement on its website.

The company added that it was now awaiting next steps with the U.S. Department of Transportation (DOT).

Alaska Airlines, which announced the merger last year, had agreed last week to extend the review period of its proposed acquisition of Hawaiian Holdings with the DOJ.

“Today, the proposed merger of Alaska Airlines and Hawaiian Airlines cleared an important milestone. The regulatory review period for the U.S. Department of Justice has ended,” Hawaii’s governor Josh Green said.

“The merger will vastly expand the number of destinations throughout North America for Hawai’i residents that can be reached nonstop or one-stop from the islands, and HawaiianMiles members will retain the value of their miles while gaining access to more destinations around the world.”

Mergers and acquisitions in the aviation industry have faced tough scrutiny from regulators. Earlier this year, a federal judge blocked JetBlue Airways’ planned US$3.8-billion acquisition of ultra-low-cost carrier Spirit Airlines.

On the decline

Shares of Alimentation Couche-Tard Inc. (ATD-T) closed down over 1 per cent while Japan’s Seven & i , the owner of 7-Eleven, lost nearly 11 per cent lower on Tuesday in Tokyo as investors weighed up regulatory hurdles to a takeover bid from the Canadian retailer to create a convenience store giant ‘with almost a fifth of the U.S. market.

While the value of the preliminary proposal by Circle-K owner Couche-Tard has not been disclosed, it would make the 7-Eleven parent the largest-ever Japanese target of a foreign buyout.

The news of the deal sent Seven’s shares surging by almost 23 per cent in Tokyo on Monday, valuing the retailer at around 5.6 trillion yen (US$38-billion).

Andrew Willis: Alain Bouchard takes one more big swing to cement his Couche-Tard legacy

The deal would allow Couche-Tard to boost its global reach and improve economies of scale. Yet it would almost certainly attract regulatory scrutiny in the U.S., analysts said, where grocery chain Kroger’s proposed US$25-billion merger with smaller rival Albertsons, announced in 2022, was halted last month due to an antitrust lawsuit.

“It may face obstacles from the Japanese government as the largest foreign acquisition of a Japanese conglomerate, (and) the Federal Trade Commission in the U.S.,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.

If successful, he said, the combined company would be a “formidable force” for negotiating supply contracts and expanding into new markets in Asia and South America.

In 2021, Couche-Tard abandoned its US$20-billion bid for European retailer Carrefour SA after the takeover plan ran into stiff opposition from the French government.

“We’re unsure the (Japanese) government would part with a national food retail champion (France did not). In the U.S., look no further than Kroger and Albertsons. Fuel is politically sensitive, and overlap looks relatively high,” Wells Fargo’s Anthony Bonadio said.

7-Eleven is the biggest operator in the U.S. convenience retail store space with a 14.5-per-cent share of the market in 2023 and Couche-Tard’s banners had a 4.6-per-cent market share, according to analytics and consulting firm GlobalData. Combining the two would create the industry leader by a considerable margin.

“It seems like it’s financially compelling. Seven & i is undervalued and getting the industry leader at a multiple lower than your own, and having synergies and taking out your main competitor is compelling,” said a source familiar with the two companies’ reasoning.

Still, sealing the deal seemed a bit of a stretch, the source said.

“I don’t really know how Couche-Tard can think this deal will get an FTC approval and if it does how it won’t be like a Kroger/Albertsons process that was long and super painful and expensive.”

Several analysts also said divestitures would be required to complete the deal.

Canada’s Gran Tierra Energy Inc. (GTE-T) slid 8.5 per cent on news it has offered to buy British oil and gas producer i3 Energy (ITE-T) in a deal valued at 174.1 million pounds ($226.23-million).

The deal has an implied valued of 13.92 pence per i3 Energy share, which represents a premium of 49 per cent to the London-listed company’s Aug. 16 closing price.

“This looks to be at a hefty premium to the prevailing I3E price...deal makes sense for GTE as it diversifies the portfolio outside South America and gives it a hefty boost to reserves and production,” said Panmure Liberum analyst Ashley Kelty.

With the deal, Gran Tierra Energy aims to create an independent energy company of scale in the Americas, with increased production, reserves, cash flows, and development options across Canada, Colombia, and Ecuador.

The combined entity would have about 1.4 million net acres in Colombia, 138 thousand net acres in Ecuador and 584 thousand net acres in Canada.

Once the deal is completed, i3 Energy shareholders are expected to own up to 16.5 per cent of the combined company and its shares will be cancelled from trading on the AIM market of the London Stock Exchange and delisted from the Toronto Stock Exchange.

The offer also contains a “mix and match” facility that will allow i3 Energy shareholders vary the proportions in which they receive cash and new Gran Tierra shares.

B.C.’s Interfor Corp. (IFP-T) declined 1.4 per cent after saying it will indefinitely curtail operations at its sawmills in Meldrim, Ga., and Summerville, S.C., due to weak lumber market conditions.

The move will impact about 180 employees across both facilities.

Interfor says it expects to mitigate some of the affect on employees by providing work opportunities at other company operations, where possible.

The sawmills produce kiln-dried Southern Yellow Pine dimensional lumber.

Combined, the facilities have an annual capacity of 330 million board feet.

The company says log deliveries will be curtailed immediately, followed by a wind-down of operations, which is expected to be complete by the end of the third quarter.

Canadian Pacific Kansas City Ltd. (CP-T) and Canadian National Railway Co. (CNR-T) were down as contract talks with the Teamsters union continued ahead of possible lockouts or strikes on Thursday at both domestic freight haulers.

Both are winding down their domestic operations to ensure a stoppage at either railway will be orderly, with trains, crews and goods in safe positions.

Business groups say Canada’s railways move more than $380-billion worth of goods a year and warn a rail stoppage would have a damaging impact on the economy. They say a stoppage threatens the movement and supply of everything from fuel and food to raw materials and consumer goods.

Why Canada is on the verge of an unprecedented rail labour stoppage

Calgary-based CPKC on Tuesday will stop picking up all shipments within or bound for Canada, deepening the service disruption that began on Aug. 12 with dangerous goods. Montreal-based CN is also shutting down its Canadian system to make sure shipments are not stranded and trains are in the right place, said Jonathan Abecassis, a spokesman for CN.

“The parties still remain far apart,” Mr. Abecassis said. “We have no choice but to move forward with our progressive shutdown.”

Danish marine shipping giant A.P. Moller-Maersk said on Monday it has stopped accepting some Canada-bound shipments, less than a week after a similar move by Norfolk Southern Railway in the United States.

- Eric Atkins

Lowe’s (LOW-N) declined 1.2 per cent after it cut its annual profit and sales forecasts on Tuesday, echoing bigger rival Home Depot’s (HD-N) concerns of a slim chance of a recovery in home improvement demand in the second half of the year.

The U.S. Federal Reserve was expected to cut interest rates earlier this year, but insufficient proof of easing inflation thus far has kept the rates high, which is affecting both home sales and home improvement project demand.

Placer.ai data showed that fewer new home sales in May and June pressured store traffic for Lowe’s and Home Depot.

Unusually warm weather also dented sales as consumers put off expensive lawn and renovation projects, typically scheduled for the spring season.

Home Depot last week forecast a decline in annual profit and a bigger drop in annual comparable sales.

Tepid demand for do-it-yourself (DIY) projects hit Lowe’s second-quarter comparable sales, which fell 5.1 per cent, more than analysts’ expectation of a 4.11-per-cent drop, per LSEG data.

The company now expects full-year adjusted earnings per share of about US$11.70 to US$11.90, down from about US$12.00 to US$12.30. It also sees a 3.5-per-cent to 4-per-cent drop in comparable sales, compared with its earlier forecast of a 2-per-cent to 3-per-cent drop.

“While we never love negative revisions, we think investors already anticipated a similar change,” said Truist analyst Scot Ciccarelli in a note.

Home Depot and Lowe’s have tried to bulk up their Pro business to engage more repair and remodel contractors and property managers, as demand from individual customers for plumbing, kitchen cabinets and roofing works remains weak.

Lowe’s beat second-quarter profit expectations on gains in the Pro business and cost control measures.

Excluding items, the company reported adjusted earnings per share of US$4.10, above LSEG expectations of US$3.97.

Paramount Global (PARA-Q) was lower by 1.1 per cent following reports veteran media executive Edgar Bronfman Jr. has submitted a roughly US$4.3-billion bid to take over the company through the acquisition of National Amusements, the family holding company that owns a controlling stake in the media company.

The competing offer for the home of Paramount Pictures, the CBS broadcast network and MTV is a fresh twist in a sale process marked by a number of unexpected turns. It threatens to undo a planned acquisition by tech scion David Ellison and his firm, Skydance Media.

Mr. Bronfman’s offer includes US$2.4-billion in debt and equity for National Amusements, a source told Reuters.

Mr. Bronfman also would contribute US$1.5-billion to Paramount’s balance sheet, which could be used to pay down debt, the person said. The bid adds US$400-million to cover a breakup fee to end a rival deal.

Skydance and its deal partners reached an agreement last month to acquire Paramount in a complicated transaction, in which it would buy out the Redstone family’s controlling stake in Paramount and subsequently merge into the larger publicly traded company.

That agreement contained a 45-day “go-shop period” that allowed Paramount to solicit and evaluate other offers. That period ends on Aug. 21, but can be extended. If Paramount chooses another suitor, it must pay Skydance a US$400-million break-up fee..

Boeing (BA-N) was down 4.2 per cent after it said Monday it had halted test flights on its 777-9 that is awaiting certification after a component between the engine and airplane structure was identified as failing to perform during a maintenance check.

The FAA said Boeing had informed it the company discovered a damaged component following a 777-9 flight test last week.

Boeing in July began certification flight testing of its long-delayed 777-9 with FAA regulators onboard after receiving Type Inspection Authorization.

Boeing added “no near-term flight tests were planned on the other flight test airplanes” and said the part is custom to the 777-9.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 29/10/24 11:59pm EDT.

SymbolName% changeLast
ATD-T
Alimentation Couche-Tard Inc.
+1.93%78.69
ALK-N
Alaska Air Group
-1.58%52.3
BA-N
Boeing Company
-1.83%143.41
CNR-T
Canadian National Railway Co.
+2.07%152.52
CP-T
Canadian Pacific Kansas City Ltd
+2.14%105.08
GTE-T
Gran Tierra Energy Inc
+1.97%8.8
IFP-T
Interfor Corp
+0.94%19.25
ITE-T
I3 Energy Plc
+2.22%0.23
LLY-N
Eli Lilly and Company
-0.46%749.92
LOW-N
Lowe's Companies
+0.83%265.22
NVO-N
Novo Nordisk A/S ADR
-2.51%102.63
PANW-Q
Palo Alto Networks Inc
+1.22%397.7
PARA-Q
Paramount Global Cl B
+4.82%11.09

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