A survey of North American equities heading in both directions
On the rise
Uber Technologies Inc. (UBER-N) beat Wall Street estimates for second-quarter revenue and core profit on Tuesday, helped by steady demand for its ride-sharing and food-delivery services, sending the company’s shares up almost 11 per cent.
With more people returning to offices and stepping out of their homes, ride-sharing demand has got a boost over the past several months benefiting companies such as Uber and rival Lyft (LYFT-Q).
“Mobility had a standout second quarter ... growth was consistent across use cases and geographic strength was led by LatAm and APAC, in particular Brazil, Australia and India,” Uber CEO Dara Khosrowshahi said.
Improvements in airport rides and initiatives such as Uber Shuttle, discounted subscriptions for students and pre-scheduled shared rides also helped drive bookings, Mr. Khosrowshahi added.
The company’s revenue rose 16 per cent to US$10.70-billion in the second quarter ending June, while gross bookings increased 19 per cent to US$39.95-billion. Analysts had expected US$10.57-billion and US$39.68-billion, respectively, according to LSEG data.
On an adjusted basis, Uber reported core earnings of US$1.60-billion, beating estimates of US$1.51 billion.
Revenue from the company’s ride-sharing segment, its largest, rose 25 per cent to US$6.13-billion, above expectations of US$5.94-billion. Uber’s delivery business reported revenue of US$3.29-billion, compared with estimates of US$3.32-billion.
“While there have been some concerns about consumer spend on restaurants and delivery, we are not seeing any impact today,” Mr. Khosrowshahi said, adding that a greater push on groceries through expanded partnerships with Instacart and Costco Wholesale was boosting deliveries.
Uber, however, forecast third-quarter gross bookings — which include its mobility, delivery and freight segments — between US$40.25-billion and US$41.75-billion, the midpoint of which was below analysts’ estimates of US$41.26-billion.
The company said it expects adjusted core earnings between US$1.58-billion and US$1.68-billion in the third quarter, compared with estimates of US$1.62-billion.
Caterpillar Inc. (CAT-N) beat Wall Street estimates for second-quarter profit on Tuesday, as higher prices on its larger excavators and other equipment countered moderating demand in North America.
Shares of the company, known for its ubiquitous yellow excavators, rose 3.1 per cent after forecasting full-year adjusted operating profit to be higher than it had previously anticipated. Peer Deere (DE-N) also gained ground.
Caterpillar, which makes machinery for the construction, mining and oil and gas industries, reported a favorable price realization of US$578-million in the second quarter.
“Caterpillar’s pricing strength will continue to hold a steady base for their profit forecasts, but softening order volume compared to 2023 highlights uncertainty in markets outside of the US, particularly in China,” Third Bridge analyst Ryan Keeney said.
Higher prices on its equipment have shielded the company’s profits against rising manufacturing costs.
Overall sales in North America were up 1 per cent, while sales in its construction equipment business were flat in the region.
Benefits from President Joe Biden’s 2021 infrastructure law, a US$1-trillion enactment aimed at upgrading roads, bridges and other transport infrastructure, are beginning to taper after helping the company weather weak sales in other regions.
Meanwhile, second-quarter equipment sales in Asia-Pacific region declined 9 per cent, while they fell 16 per cent in Europe, Africa and Middle East. Latin America was a bright spot with a 5-per-cent bump in sales.
The decrease in sales volume was mainly driven by the impact from changes in dealer inventories, the company said. Dealer inventory decreased during the second quarter of 2024, compared with an increase during the same period a year earlier.
China’s troubled real estate market has pressured infrastructure spending in the country, resulting in a decline in Caterpillar’s sales for the past several quarters.
The company also cited the hit from a weak Japanese yen for the decline in the Asia-Pacific region.
Caterpillar reported an adjusted profit per-share profit of US$5.99 in the second quarter, compared with analysts’ average estimates of US$5.54.
The company said sales and revenue for the quarter through June fell to US$16.7-billion from US$17.3-billion a year earlier, in line with Wall Street expectations.
Molson Coors (TAP-N) beat Wall Street expectations for second-quarter sales and profit on Tuesday, driven by strong demand for its premium Coors Light and Miller Lite beers in the European and Asian regions.
Shares of the beer maker rose 5.4 per cent in Tuesday trading.
Molson Coors, just like Corona beer maker Constellation Brands (STZ-N), is seeing that customers are more than willing to spend on their favorite beers since they have started to cut back spending on wine and spirits to save dollars.
The Europe, Middle East and Africa region along with its Asia-Pacific region saw a 2-per-cent increase in volumes during the second quarter while Americas brand volumes fell 7.3 per cent mainly due to lower sales of its premium brands, which became more expensive following attempts to pass on rising costs to customers.
The company’s second-quarter net sales fell 0.4 per cent to US$3.25-billion, compared to analysts’ expectations of US$3.18-billion, according to LSEG estimates.
Molson Coors’ underlying profit came in at US$1.92 per share, beating estimates of US$1.68 apiece.
The company continues to expect full-year 2024 net sales to rise in the low single-digit percentage range and underlying profit to grow in the mid-single-digit percentage range.
Palantir Technologies (PLTR-N) raised its annual revenue and profit forecast for the second time this year on Monday, the latest sign that the generative AI boom is driving demand for its software services.
Shares of the Denver, Colorado-based company soared 10.4 per cent, adding to a year-to-date gain of more than 39 per cent on the back of a rally in AI-linked stocks.
The data analytics company also forecast third-quarter sales above estimates and reported its largest ever quarterly profit, in the April-to-June period, CEO Alex Karp said in a letter to shareholders.
Its AI platform, used to test, debug code and evaluate AI-related scenarios, has enabled Palantir to tap into surging demand for services that help companies develop GenAI technology.
The company co-founded by billionaire Peter Thiel now expects annual revenue between US$2.74-billion and US$2.75-billion, compared with US$2.68-billion to $2.69 billion expected earlier. This is above the estimate of US$2.70-billion, according to LSEG data.
It also raised its annual forecast for adjusted income from operations to between US$966-million and US$974-million, up from its earlier expectation of US$868-million to US$880-million.
The results also allayed some investors’ concerns. Palantir’s shares were down about 9 per cent last week after Big Tech earnings such as those from Microsoft signaled that payoffs from huge AI bets could take longer to materialize than Wall Street had initially expected.
Chief Revenue Officer Ryan Taylor told Reuters Palantir was driving growth by helping companies overcome “the huge bottleneck” between AI application prototypes and finished products deployed to customers.
The company also forecast third-quarter revenue above estimates.
The U.S. commercial business, which grew 55 per cent to US$159-million, was the highlight for the quarter, D.A. Davidson managing director Gil Luria said.
“Enterprise customers are increasingly selecting Palantir to help them find a path to leveraging artificial intelligence within their business,” Mr. Luria said.
Palantir recorded adjusted earnings of 9 UScents per share in the second quarter, compared to an estimate of 8 US cents per share.
Taco Bell parent Yum Brands (YUM-N) beat expectations for second-quarter profit as strength in the U.S. Taco Bell business and cost controls helped offset a sales hit from weak demand at KFC and boycotts related to the Middle East conflict.
Its shares rose 2.5 per cent on Tuesday even as the company reported a bigger-than-expected fall in sales driven by lower-income consumers paring back spending on dining out.
Like its peers in the fast-food industry, Yum has been investing in loyalty programs and refreshing its menus in an attempt to appeal to budget-conscious consumers, but stiff competition for value meals and promotions has dogged its KFC business in the U.S. this year.
Company executives said on a post-earnings call that the impact from boycotts related to the Middle East conflict have surfaced in “several other markets” beyond Malaysia, Indonesia and the Middle East.
“Significant volatility remains, and we recognize sales are some markets are not where we want them to be,” said CEO David Gibbs.
Yum’s sales weakness this quarter echoes results from other restaurant majors such as Domino’s, McDonald’s and Starbucks.
Still, fresh menu items such as the Cantina Chicken at Taco Bell saw strong demand across income groups despite higher prices, driving a 5-per-cent rise in comparable sales in the division, ahead of market expectations.
“Taco Bell remains the crown jewel in Yum’s portfolio,” said TD Cowen analyst Andrew Charles in a note.
Yum’s quarterly overall same-store sales decline narrowed to 1 per cent, from 3 per cent in the preceding quarter. However, that was wider than market expectations for a fall of 0.2 per cent, according to LSEG data.
The company is also investing in improving service times and the digital experience at its stores and drive-thrus with the addition of kiosks and artificial intelligence-based technologies.
Yum said commodity inflation in the year had been lower than expected, and added it expects its ongoing cost-savings program to reduce expenses further.
“We remain on track to achieve 5-per-cent unit growth for the full year despite the extended impact of the Middle East conflict,” CFO Christopher Turner added.
On the decline
Pet Valu Holdings Ltd. (PET-T) declined 5.2 per cent after it reported a second-quarter profit of $17.8-million, down from $24.1-million a year earlier.
The pet food and pet-related supplies retailer says the profit amounted to 25 cents per diluted share for the quarter ended June 29, down from 33 cents per diluted share in the same quarter last year.
Revenue totalled $265.2-million, up from $256.4-million a year earlier.
On an adjusted basis, Pet Valu says it earned $25.9-million or 36 cents per diluted share in its latest quarter compared with $26.3-million or 36 cents per diluted share a year earlier.
In its outlook, the retail says it expects revenue between $1.08-billion and $1.11-billion for 2024, supported by 40 to 50 new store openings, higher wholesale merchandise sales penetration with Chico franchisees, and approximately flat same-store sales growth.
Adjusted net income per diluted share is expected to be between $1.50 and $1.55 for the year.
Montreal’s Heroux-Devtek Inc. (HRX-T) was down just over 0.1 per cent after it reported a first-quarter profit of $12.5-million, up from $4.0 million a year ago as its sales increased 23.7 per cent.
The aircraft landing gear maker says its profit amounted to 37 cents per diluted share for the quarter ended June 30 compared with 12 cents per diluted share a year earlier.
Sales totalled $174.0-million for the quarter, up from $140.7-million in the same quarter last year.
On an adjusted basis, the company says it earned 39 cents per share in its latest quarter, up from an adjusted profit of 12 cents per share a year earlier.
Heroux-Devtek announced a deal last month to acquired by U.S. private equity firm Platinum Equity Advisors LLC in an agreement valued at $1.35 billion.
Under the agreement, Platinum Equity will pay $32.50 in cash per share for the company.
Solar firm SunPower (SPWR-Q) said it had filed for Chapter 11 bankruptcy protection in the United States and agreed to sell some of its business to Complete Solaria (CSLR-Q) for US$45-million in cash.
Shares of SunPower fell 43.8 per cent on Tuesday after the company listed its assets and liabilities in the range of US$1-billion to US$10-billion, in a filing with the bankruptcy court in Delaware late on Monday.
“Although technically this bankruptcy process is Chapter 11 (restructuring) rather than Chapter 7 (liquidation), in effect it is a liquidation of SunPower,” said Raymond James analyst Pavel Molchanov.
Mr. Molchanov expects the asset sale process to conclude by late 2024, after which “SunPower, which had been founded all the way back in 1985, will cease to exist.”
SunPower has had a challenging few quarters after its CEO left in February and it received a subpoena from the U.S. securities regulator related to its accounting practices the same month.
The crisis deepened last month when the company said it was pausing several operations, including new product shipments and deactivating lease and purchase deals on its platform.
SunPower said it intends to continue a sale process for its remaining assets after it entered into a ‘stalking horse’ agreement with California-based Complete Solaria to sell its Blue Raven Solar and New Homes businesses, and its non-installing Dealer network.
A stalking horse bid is used as a starting or minimally accepted offer that other interested bidders must surpass if they want to buy the asset or the company.
SunPower had acquired Blue Raven for US$165-million in 2021.
With files from staff and wires