A survey of North American equities heading in both directions
On the rise
Jetblue Airways Corp. (JBLU-Q) surged 20.9 per cent after activist investor Carl Icahn disclosed an about 10-per-cent stake in the airline.
The shares were undervalued and represented an attractive opportunity, according to a regulatory filing by Mr. Icahn on Monday.
Icahn intends to assess the possibility of a board representation at a time when the airline faces the fallout of its US$3.8-billion merger with ultra-low-cost carrier Spirit Airlines being blocked by a U.S. judge last month.
Both airlines have asked for an expedited appeal to the ruling and a U.S. appeal court will hear arguments in June.
“We are always open to constructive dialog with our investors...,” JetBlue said on Tuesday.
Last month, the airline said it was evaluating deeper cost cuts after it forecast higher expenses and a fall in revenue in the current quarter as it grapples with uneven travel demand.
JetBlue’s stock has gained 24 per cent since the merger ruling.
On the decline
Shopify Inc. (SHOP-T) topped Wall Street estimates for fourth-quarter revenue and profit, riding on demand for its ecommerce services from merchants during the holiday shopping season.
However, the company’s shares, which had more than doubled last year, fell over 12.5 per cent in Tuesday trading.
Shopify posts strong profit, revenue growth, but shares skid on outlook
“Shopify reported a strong quarter and exceeded revenue growth expectations. While guidance for the first quarter was also healthy, it may not be enough given high investor expectations,” said Gil Luria, analyst at D.A. Davidson.
Total revenue rose 24 per cent to US$2.14-billion for the three months to December, higher than analysts’ average estimate of US$2.08-billion, according to LSEG data.
On an adjusted basis, Shopify earned 34 US cents per share, beating expectations of 31 US cents.
Shopify, which offers tools and services for businesses to set up their online stores, has launched new tools and offerings along with artificial intelligence products to stay ahead in a competitive e-commerce space.
Merchants on the platform reached a record of US$9.3-billion in sales over the Black Friday-Cyber Monday weekend, the company had said in November, a 24-per-cent increase from a year earlier.
The company expects first-quarter revenue to grow at a low-20s percentage rate, while analysts were expecting a 20-per-cent rise.
In a research note, Citi analyst Tyler Radke said: “Into very high expectations, SHOP delivered strong operational results with total revenue growth of 24 per cent year-over-year (400 basis points beat) led by GMV strength (up 22 per cent year-over-year vs. 18 per cent consensus) and slightly higher profitability. That said, it’s possible results underwhelmed vs. expectations with a slightly smaller revenue and profitability beat magnitude than prior Qs, a modest miss in calculated ‘take rate’. In addition, the outlook was a bit underwhelming, particularly on the cost side with opex guided up in the low teens vs. expectations of single digits implying weaker profitability. We look to the conference call for incremental color on the cost side and what could be driving the slightly lower take rates (i.e. BWP, international, etc.). With the strong run in shares post the 3Q print, we’d expect the stock to trade down modestly given the expectations miss.”
Restaurant Brands International (QSR-T) beat Wall Street estimates for quarterly results on Tuesday, lifted by signs of a turnaround at its Burger King business and robust demand at coffee chain Tim Hortons.
Shares of the company, however, fell 3.7 per cent as the international business took a hit from the Israel-Hamas war, as well as softer performance in China and some markets in Western Europe.
Restaurant Brands quarterly profit more than doubles as Tim Hortons results perk up
The impact of the conflict in the Middle East was felt in “upwards of a dozen countries,” CEO Josh Kobza said on an earnings call.
Burger King in September 2022 set the ball rolling on a revamp that included remodeling stores and tailoring marketing to draw more younger customers to boost sales amid intense rivalry with McDonald’s.
The turnaround plan has helped improve customer experience and food quality, which, coupled with strong demand for its cheaper menu items such as the Crispy Wraps, helped fuel a low single-digit percentage growth in fourth-quarter traffic, Mr. Kobza said.
That marked Burger King’s first traffic growth since the second quarter of 2021.
Total same-store sales at Burger King rose 6.3 per cent in the quarter, beating estimates of a 5.87per-cent increase, per LSEG data.
“(Burger King showed) nice improvement across the board ... Perhaps this is the beginning of an era where Burger King can step it up and narrow the gap (with McDonald’s),” said Stephens analyst Joshua Long.
Meanwhile, steady demand for cold drinks, donuts and breakfast bundles at Tim Hortons drove a same-store sales growth of 8.4 per cent in the three months ended Dec. 31 at the coffee chain, against expectations of 4.36 per cent.
Comparable sales growth in Restaurant Brands’ international segment slowed to 4.6 per cent from 10.5 per cent a year earlier.
Total revenue at the company, which also owns the Popeyes fried chicken chain, rose 7.8 per cent to US$1.82-billion in the fourth quarter, edging past analysts’ estimate of US$1.81-billion.
Adjusted per-share profit of 75 US cents exceeded estimates of 73 US cents.
In a note, Citi analyst Jon Tower said: “Plenty of noise with the re-segmentation of the business, but KPIs broadly met expectations as comp upside in key home markets (TH CAN/BK US) was partially offset by modest global net unit growth and adjusted EBITDA that missed Citi/Street. Franchisee profit growth across key markets is encouraging, particularly at BK US (up 47 per cent year-over-year) where management can point to early success in its brand turnaround strategy. Sustainability of these gains in a more challenging backdrop for BK’s core consumers and as incremental corporate support wanes will be key to gaining greater investor buy-in to the story, particularly with greater operating exposure to the brand due to recent/pending franchisee acquisitions. With net growth still lagging pre-COVID levels (3.9 per cent year-over-year, a deceleration quarter-over-quarter) and softer than expected Adjusted EBITDA, we expect shares take a breather in the near term the stock’s relative multiple already sits ahead of historical averages .”
BlackBerry Ltd. (BB-T) declined 2.9 per cent after it said on Monday it was targeting an additional increase of $100-million in its annual profit as the cybersecurity firm slashes costs, including reducing workforce.
The company’s new target is in addition to a $50-million annualized cost reduction plan announced and 200 job cuts in the prior quarter.
The company, which also makes the QNX and IVY platforms used in automotive applications, in December scrapped its initial public offering (IPO) plans for its Internet of Things (IoT) business, but still expects to split the IoT and cybersecurity businesses into fully standalone divisions.
Leadership teams for both divisions have been established, BlackBerry said, adding that it is in talks with a leading external consulting firm with the unit separation in progress.
It added that the company is reducing costs further in the current quarter, with additional layoffs in the cybersecurity business, which is set to provide yearly savings of about $27-million.
Hydro One Ltd. (H-T) dipped 1.2 per cent after it reported $181-million in fourth-quarter net income attributable to common shareholders as its revenue edged higher compared with a year earlier.
The power utility says the profit amounted to 30 cents per diluted share for the quarter ended Dec. 31.
The result compared with a profit of $178-million or 30 cents per diluted share a year earlier.
Revenue totalled $1.98-billion, up from $1.86-billion in the fourth quarter of 2022, while revenue net of purchased power totalled $989-million, up from $967-million.
The increase was due in part to higher average monthly peak demand and energy consumption, as well as higher rates, partially offset by regulatory adjustments.
Hydro One is Ontario’s largest electricity transmission and distribution provider.
PrairieSky Royalty Ltd. (PSK-T) closed 1.1 per cent lower following the release of its fourth-quarter results that displayed “strong” leasing activity and an increase to its annual dividend.
After the bell on Monday, the Calgary-based company announced production of 25,608 barrels of oil equivalent per day, largely flat year-over-year and falling in line with the Street’s expectation. Cash flow of $111.1-million topped the consensus forecast of $98.9-million, driven by stronger liquids production and bonus consideration of $11.2-million.
“An active fourth quarter of leasing activity capped off another strong year in 2023,” said president and CEO Andrew Phillips in a release. “PrairieSky entered into 50 leasing arrangements in the quarter earning bonus consideration of $11.2 million, primarily from leasing of Duvernay rights, the highest quarterly bonus consideration earned since 2017. Annual bonus consideration totaled $26.0 million, the highest annual bonus consideration earned since 2017, with PrairieSky entering into 202 leasing arrangements with 110 different counterparties. In both 2022 and 2023, leasing activity was focused on oil targets which has resulted in strong organic oil growth on PrairieSky’s royalty properties.”
PrairieSky raised its annual dividend by 4 cents to $1 per share, representing a current 4.4-per-cent yield.
Calling the release “positive,” ATB Capital Markets analyst Patrick O’Rourke said: “PrairieSky’s business model is entirely royalty based, with the Company undertaking no working interest agreements. The royalty business model allows PSK shareholders to participate in any production growth and commodity price upside, while having no capital expenditure risk. PSK’s acquisition strategy has been focused on moving down the cost curve and adding assets in plays that it sees as competitive for capital even during periods of commodity price weakness, with the Company looking to see production growth on its lands outpace the broader basin’s growth. Furthermore, PSK looks for drilling/capital commitments from its counterparties on its gross overriding royalty agreements, to help ensure those lands are developed. Our Sector Perform rating is based on our view that, while we see PSK as holding a unique and high-quality asset base, run by a top-tier management team; we believe management has done an excellent job of conveying these strengths to the market and, as a result the Company is more efficiently priced relative to peers at this time”
Magna International Inc. (MG-T) was down 2.3 per cent after saying it may buy back up to 300,000 of its common shares under its normal course issuer bid over the coming year.
The auto parts company says the bid will start on Thursday and will end no later than Feb. 14, 2025.
Magna says it may purchase the shares if it believes that the market price is attractive and that the purchase would be an appropriate use of corporate funds and in its best interests.
It had 286,780,238 issued and outstanding common shares as of Feb. 1.
Under Magna’s buy back plan announced in November 2022, the company bought 245,904 common shares by the time the plan ended on Nov. 14, 2023.
By buying back shares, a company spreads its profits over fewer shares. That increases its earnings per share, a key ratio used to determine a company’s financial health and investment rating.
OrganiGram Holdings Inc. (OGI-T) dropped 13.5 per cent after it reported a loss of $11.6-million in its fiscal first quarter.
The Toronto-based company said it had a loss of 14 cents per share.
The results missed Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for a loss of 10 cents per share.
The cannabis producer posted revenue of $26.8-million in the period, which also fell short of Street forecasts. Four analysts surveyed by Zacks expected $28.6-million.
Kingsey Falls, Que.-based Cascades Inc. (CAS-T) slid 2.6 per cent after announcing is closing three plants as part of changes to its containerboard operations that will affect 310 employees.
The paper and packaging company says its corrugated medium mill in Trenton, Ont., that is currently idled will not restart operations, while converting plants in Belleville, Ont., and Newtown, Conn., will close by May 31.
It says it decided to close the facilities due to a combination of market conditions, higher operating costs, aging technology and the need for significant capital investment.
Cascades will work with the impacted employees to mitigate, where possible, the effect of the closures.
Employees who cannot or do not wish to relocate to other plants will receive support in their search for other employment, the company says.
Cascades will record $61-million in impairment and environmental obligation charges associated with the closures in the fourth quarter of its 2023 financial results as well as about $35-million in additional restructuring charges in the coming years.
Coca-Cola (KO-N) lost early gains and slipped 0.6 per cent after it surpassed Wall Street expectations for fourth-quarter revenue on Tuesday, as the beverage maker benefits from higher product prices and buoyant demand, especially for its namesake drink.
Despite the beverage maker raising prices over the last several quarters, consumers dining out and indulging in experiences like movies and sports are willing to spend more on their favorite drinks and snacks.
This is in contrast to rival PepsiCo (PEP-Q), which last week posted a decline in sales for the first time in 14 quarters as its price hikes led to a 4-per-cent drop in volumes.
But for Coca-Cola, unit case volumes rose 2 per cent and average selling prices increased 9 per cent in the fourth quarter. Still, the Sprite maker forecast weak growth in organic revenue on concerns that benefits from price hikes will soon begin to taper off.
The Sprite maker expects fiscal 2024 organic revenue to grow between 6 per cent and 7 per cent, compared to the 12-per-cent rise seen in 2023.
Wedbush analyst Gerald Pascarelli said its organic revenue forecast is better than expected and “really strong” compared to PepsiCo, which forecast a 4-per-cent rise in organic revenue.
Coca-Cola expects annual adjusted profit to be between 4 per cent and 5 per cent, compared to market estimates of a 4.5-per-cent growth, according to LSEG data
Easing input costs and price increases during the quarter helped Coca-Cola post an operating margin of 21 per cent compared with 20.5 per cent a year ago.
Its net revenue rose 7.4 per cent to US$10.95-billion beating expectations of US$10.68-billion while adjusted profit of 49 US cents came in line with estimates.
“Coca-Cola’s results were much better than PepsiCo’s, as Coke continues to benefit from being able to pass on price increases,” said Dave Wagner, portfolio manager at Aptus Capital Advisors that holds shares in PepsiCo.
Hasbro (HAS-Q) posted a steeper-than-expected drop in holiday-quarter sales and profit on Tuesday as a persistent demand weakness in the toy industry weighed on revenues of its digital and board games, sending its shares down 1.4 per cent.
Sluggish demand from a pullback in leisure spending and cautious inventory planning by retailers like Walmart and Target hurt the company’s sales in the past year.
Last week, Barbie maker Mattel reported a softer holiday quarter and forecast tepid sales in 2024.
For fiscal year 2024, Hasbro’s consumer products segment, which made up more than half of its fiscal 2023 sales, is expected to decline by 7 per cent to 12 per cent.
Revenue in its core Wizards of the Coast segment, which includes games such as “Baldur’s Gate III” and “Monopoly Go!,” is forecast to decrease 3 per cent to 5 per cent, owing to weakness in digital gaming.
The Monopoly maker’s net revenue fell about 23 per cent, to US$1.29-billion, in the fourth quarter ended Dec. 31. Analysts on average expected a 19.3-per-cent drop, to US$1.36-billion, according to LSEG data.
Excluding items, Hasbro’s profit per share was 38 US cents, compared to the estimate of 66 US cents.
Benefiting from cost-saving efforts like job cuts, the firm expects annual adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, to be between US$925-million and US$1-billion - better than the US$709.4-million it reported in 2023.
“As we navigated the current environment, we took aggressive steps to optimize our inventory, reset the cost structure and sharpen our portfolio focus on play,” CFO Gina Goetter said.
Hotel operator Marriott International (MAR-Q) forecast 2024 profit below Wall Street expectations on Tuesday as U.S. room revenue decelerates from post-pandemic highs.
Travel demand and costs in the United States have been returning to normal levels after a post-COVID spike driven by “revenge travel”.
Meanwhile, travel companies are expecting their 2024 boost to come from China, the final region lagging in recovery from the pandemic.
“Growth is expected to remain higher in international markets than in the U.S. and Canada, with particular strength in Asia-Pacific,” Chief Financial Officer Kathleen Oberg said on a call with investors.
Marriott expects revenue per available room, a closely watched industry metric for hotels’ top-line performance, to increase between 3 per cent and 5 per cent this year. This compares to 14.9-per-cent growth in 2023.
The company’s shares were down in Tuesday trading. Shares of rivals Hilton Worldwide (HLT-N) and Hyatt Hotels (H-N) also fell.
Marriott forecast a full-year profit of US$9.18 to US$9.52 per share, while analysts had expected US$9.69 per share, LSEG data showed.
“The generally solid report and guide is likely not enough to push the shares higher based on the strong performance of the past few months,” Jefferies analyst David Katz said in a note.
Revenue per available room rose 7.2 per cent in the fourth quarter, boosted by higher room rates and occupancy levels in China.
Barclays analyst Brandt Montour noted Marriott appears to have stopped giving room revenue guidance for North America.
“The U.S. is largely expected to underperform the broader globe this year,” Montour said in a note.
Marriott posted adjusted fourth-quarter earnings of US$3.57 per share, beating analysts’ forecast of US$2.12 per share. Adjusted net income of US$1.05-billion also surpassed expectations, largely due to a one-time tax benefit.
The Ritz-Carlton owner’s quarterly revenue reached US$6.1-billion, roughly in line with estimates.
Net room growth is expected to increase by 5.5 per cent to 6 per cent in 2024, as paused development projects in China resume construction, Marriott said.
Shares of Airbnb (ABNB-Q) also fell. The vacation rental company will report its earnings after markets close on Tuesday.
Montreal-based cancer-treatment developer Repare Therapeutics Inc. (RPTX-Q) was lower on news Roche is terminating its global license and collaboration agreement for the development and commercialization of leading product candidate camonsertib.
On Jan. 25, Repare said it Roche had triggered a US$40-million milestone payment after dosing the first patient with camonsertib in a trial.
“We continue to believe that ATR is a valid target in oncology, and that early camonsertib results point to it being a class-leading ATR inhibitor,” said Bloom Burton analyst David Martin in a research note. “Nonetheless, we are not privy to live data in Repare’s or Roche’s ongoing camonsertib trials, and Roche handing back the asset adds uncertainty. Repare has reassured us, and Roche did not indicate, that new safety signals have emerged. However, our confidence in ATR and camonsertib would have remained higher had Roche continued to prioritize the program.
“As a result, while Repare now regains 100 per cent of future potential camonsertib sales (up from a mid-teens forecast royalty), the company is now on the hook for all future development costs and will no longer be in line for the potential $1.2-billion in milestone payments. We believe the risks associated with development and eventual commercial success have increased.”
Canadian-listed shares of gold miner SSR Mining Inc. (SSRM-T) plummeted after the company announced suspension of operations at its Çöpler mine following a large slip on the heap leach pad.
Nine miners have been reported missing after the landslide at the mine, which is operated by Turkish miner Lidya Madencilik and partly owned by Denver-based SSRM.
Molson Coors (TAP-N) forecast its annual sales above Wall Street expectations on Tuesday, as the beer maker expects to benefit from resilient demand and higher pricing of its core brands.
Molson Coors, along with its peers such as Constellation Brands, Anheuser-Busch InBev and Brown-Forman , has been raising prices of its products over the past few quarters to counter rising costs of production, although they have now started to ease from their highs.
CEO Gavin Hattersley said Molson Coors was well positioned to benefit from the significant shifts in consumer purchasing habits, largely in the U.S. premium segment in 2023.
The Chicago, Illinois-based company has seen a transition among higher-income customers to larger 30-pack sizes as they seek more value, while lower-income customers navigated toward smaller single-pack servings or six-pack sizes.
Brand volumes in the Americas segment increased 6.7 per cent, including an 8.5-per-cent increase in the U.S. driven by growth in its core brands, with Coors Light, Miller Lite and Coors Banquet each up double digits, the company said.
Molson expects its 2024 net sales to rise in low single-digit percentage range on a constant currency basis, compared with LSEG expectations of a 0.70-per-cent increase.
The company’s net sales for the quarter ended Dec. 31 came in at US$2.79-billion, compared with analysts’ average estimate of $2.77 billion.
It reported quarterly profit of 48 US cents per share against a loss of US$2.73 per share a year ago, which was primarily driven by an impairment charge of US$692-million.
Shares of the company, which gained about 19 per cent in 2023, were down in Tuesday trading.
With files from staff and wires
David Leeder