A survey of North American equities heading in both directions
On the rise
Shares of Thomson Reuters (TRI-T) were higher by 3.2 per cent after it reported higher than expected third-quarter revenue of US$1.72-billion on Tuesday, as it continued to invest in generative AI.
The Toronto-based content and technology company said it was spending more than US$200-million on AI investments in 2024. This was up from more than US$100-million in 2023, executives said.
Thomson Reuters also said it now has about US$10-billion to spend on potential acquisitions through 2027.
“We remain focused on driving innovation across our portfolio and markets to best serve our customers, demonstrated by our investment in AI now increasing to more than $200 million in 2024,” Thomson Reuters CEO Steve Hasker said in a statement.
Thomson Reuters products already include Westlaw AI and CoCounsel, which is a chat-based generative AI (GenAI) assistant that can help legal professionals draft documents, sift through research and locate information scattered across sources.
In August, Thomson Reuters announced the acquisition of Safe Sign Technologies, a British-based company developing large language models for the legal industry.
In October, it announced the purchase of Materia, which makes so-called agentic AI assistants, which can perform tasks and solve complex problems on their own, for the tax and accounting industries.
Mr. Hasker said in an interview that new technology acquisitions could apply to the broader product portfolio in the future.
Thomson Reuters will also introduce one way to track the value of its generative AI investments to the business, chief financial officer Michael Eastwood said in an interview.
Mr. Eastwood said about 15 per cent of Thomson Reuters’ underlying annual contract value, which breaks down a contract’s total value by year, of about US$6-billion now comes from generative AI.
Thomson Reuters reported an 8-per-cent rise in quarterly revenue to US$1.72-billion, which LSEG data showed was just ahead of analyst expectations. Adjusted earnings per share for the period were 80 US cents. Wall Street had expected a profit per share of 76 US cents.
The company said it now expected full-year organic revenue to rise by about 7 per cent, up from an earlier expectation of about 6.5 per cent. Organic revenue is reported on a constant currency basis and excludes the impact of acquisitions and asset sales.
Acquisitions helped drive revenue rises at some of the “Big 3″ Thomson Reuters businesses, with revenue at its legal, corporates, and tax and accounting businesses up by 9 per cent.
Reuters News revenue, which rose 10 per cent, benefited from acquisitions and generative AI-related licensing revenue.
Sun Life (SLF-T) rose 3.2 per cent after it reported a better-than-expected third-quarter profit on Monday as Canada’s second-largest life insurer benefited from robust growth in its domestic and U.S. businesses.
The earnings beat was primarily driven by strong insurance sales within Sun Life’s group businesses - which provide health and protection benefits to employer and government plan members - both at home and in the United States.
Reaction from the Street: Tuesday's analyst upgrades and dowgrades
Underlying earnings from Sun Life’s Canada business rose 11 per cent to $375-million in the quarter.
“These results reflect our leadership positions in asset management and insurance, driven by strong insurance growth,” CEO Kevin Strain said.
Underlying earnings in the U.S. business jumped 18 per cent to $219-million in the quarter, driven by strong growth in group benefits insurance sales.
U.S. group sales jumped 26 per cent to $300-million, driven by dental and employee benefits sales, Sun Life said.
The company’s U.S. dental business continued to face headwinds, driven by the impact of the Medicaid renewals following the end of the public health emergency.
Meanwhile, Sun Life’s wealth and asset management posted underlying earnings of $474-million, a 4-per-cent rise from prior year, driven by higher fee income.
Assets under management jumped 13 per cent to $1.52-trillion from a year earlier.
The company’s underlying net income was $1.02-billion, or $1.76 per share, in the three months ended Sept. 30, compared with $930-million, or $1.59 per share, a year earlier.
Analysts on average had expected Sun Life to earn $1.70 per share, according to estimates compiled by LSEG.
Bigger rival Manulife Financial (MFC-T) is slated to report its results on Wednesday.
St. John’s-based Fortis Inc. (FTS-T) saw gains of 3 per cent after it reported a third-quarter profit of $42- million, up from $394-million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77-billion, up from $2.72-billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
Moncton’s Major Drilling Group International Inc. (MDI-T) closed 8.5 per cent higher after announcing it has signed a deal to buy South American specialty drilling contractor Explomin Perforaciones in a deal worth up to US$85 million.
Under the agreement for the company based in Lima, Peru, Major Drilling will make an upfront cash payment of US$63-million.
It will also pay up to an additional US$22-million over the next three years based on the achievement of certain financial milestones.
Explomin offers specialized services including deep hole, directional, and high-altitude drilling as well as underground drilling operations.
The majority of the company’s operations are in Peru while it also services markets in Colombia, the Dominican Republic and Spain.
The deal will see Major Drilling will acquire a fleet of 92 well-maintained drills, bringing the total rig count to 701.
“This transaction is consistent with MDI’s strategy of expanding markets through quality tuck-in transactions. This deal will expand their presence in Peru, while opening up Colombia, Dominican Republic, and Spain. It also expands MDI’s exposure to copper (roughly 25 per cent of revenues currently),” said TD analyst Steven Green in a note.
Palantir (PLTR-N) shares jumped on Tuesday after the data analytics firm raised its annual revenue forecast for the third time, bolstering investor confidence that the artificial intelligence boom was fueling demand for its services.
The company is among the biggest stock market winners of the generative AI boom, with its shares more than doubling in value this year — a rally that has sparked concerns over its steep valuation.
But Palantir’s results late on Monday allayed some of those fears as demand rose thanks to its AI platform, which is used to test, debug code and evaluate AI-related scenarios, as well as its government-oriented services that include software to visualize army positions.
Palantir raised its revenue forecast to between US$2.805-billion and US$2.809-billion for 2024, from its previous projected range of US$2.742-billion to US$2.750-billion.
For the third quarter, the company saw its revenue from U.S. government contracts surge 40 per cent, which made up more than 44 per cent of its total sales of US$725.5-million.
“We see a long runway of growth in the government sector, owing to the massive demand for AI-first solutions across governmental functions such as the military and healthcare,” Morningstar analysts said.
But the analysts cautioned that the stock’s recent surge in value means that “any bump in the road, such as sales execution challenges or weaker-than-expected top-line growth or guidance, could materially affect the stock’s valuation.”
It trades at a forward price-to-earnings ratio of 95.43, compared with 25.60 for peers Oracle and 126.92 for Snowflake.
Palantir stock has outperformed the S&P 500 index this year. It was added to the benchmark index late-September.
Yum Brands (YUM-N) rose despite reporting a surprise fall in worldwide same-store sales on Tuesday as its KFC chain grapples with sluggish demand in the U.S., as well as choppy international sales.
KFC’s same-store sales in the U.S. tumbled 7 per cent, marking their third straight quarter of declines this year.
The drop came even as Yum in August launched US$5 offers on two new items under its “Taste of KFC” value menu, including eight-piece chicken nuggets pack as well as a chicken nugget meal bowl in addition to the two-piece drum and thigh meal.
The company was responding the ongoing “value wars” in the fast-food industry from peers such as McDonald’s and Burger King.
The chain, like many of its peers, has also contended with diners seeking deals and discounts when eating out to counter menu prices that remain high.
Yum’s Tex-Mex food chain Taco Bell, in contrast, remained a bright spot. U.S. same-store sales rose 4 per cent, the 11th straight quarter of increase.
The company’s worldwide comparable sales fell 2 per cent, compared with market expectations of a 0.23-per-cent rise, as per data compiled by LSEG.
In international markets, the Pizza Hut parent faced the protracted impact from boycotts related to Israel’s war in Gaza.
Sales impact from the conflict had surfaced in several other markets beyond Malaysia, Indonesia and the Middle East, executives had said in August.
Burger King parent Restaurant Brands International missed quarterly revenue expectations on Tuesday, while McDonald’s reported its biggest quarterly global sales drop in four years last week.
Excluding items, Yum earned US$1.37 per share in the third quarter ended Sept 30. Analysts on average were expecting a profit of US$1.41 per share.
DuPont de Nemours (DD-N) increased after it raised its full-year profit forecast above Street estimates on Tuesday after the industrial materials maker beat third-quarter earnings target on strong demand for electronics and artificial intelligence-based technology.
New orders improved in the U.S. manufacturing sector in September, primarily driven by an AI surge and increased China demand, which helped DuPont raise its profit target for a third time.
The manufacturer has also been benefiting from falling interest rates and lower material prices.
DuPont’s electronics and industrial unit, the biggest in terms of turnover, reported a 13.4-per-cent rise in third-quarter net sales.
Overall sales in the Asia-Pacific markets jumped 8 per cent from a year earlier, while the U.S. markets gained 2 per cent.
The company raised its 2024 adjusted earnings forecast to around US$3.90 per share, up from US$3.70 to US$3.80 it previously forecast, and above analysts’ expectations of US$3.77, according to data compiled by LSEG.
However, DuPont estimates net sales to be around US$12.37-billion for the year, below the lower end of its earlier range of US$12.40-billion to US$12.50-billion. Analysts’ were expecting US$12.44-billion.
The company said it expects normal seasonal declines in the electronics and construction markets in the fourth quarter.
For the third quarter, Dupont reported an adjusted profit of US$1.18 per share, well above analysts’ average expectation of US$1.03.
On the decline
Restaurant Brands (QSR-T) missed estimates for quarterly revenue on Tuesday due to weak demand across key businesses such as Tim Hortons, Burger King and international markets including China and the Middle East.
The Toronto-based company’s shares fell lower.
Consumers are relying on cheaper, home-cooked meals instead of eating out as fast food prices have risen over the past year, hurting traffic at Burger King, McDonald’s and others in the restaurant industry.
Steady demand for cold drinks, donuts and breakfast bundles at Tim Hortons drove quarterly same-store sales growth of 2.3 per cent at the coffee chain, but Burger King declined 0.7 per cent, compared with a 6.6-per-cent rise last year.
The company reported net income of US$357-million, down from US$365-million in the prior-year period.
Total revenues for the three months ended September 30 came in at US$2.29-billion, below analysts’ expectations of US$2.31-billion, according to data compiled by LSEG.
In a research note released before the bell, Citi analyst Jon Tower summarized the release, saying: “3Q top-line results demonstrated weakness across most brands/markets including TH Canada comps slowing beyond Citi/Street expectations (up 2.7 per cent vs. 5 per cent/4.5 per cent) and global net unit growth of 3.8 per cent falling short of CIti/Street estimates (up 4.3 per cent/up 4.5 per cent), both of which should come as little surprise to investors given C3QTD competitor comments. While management spoke to global comp trends improving in Oct (as well as committed to 8-per-cent-plus AOI growth), we believe the results/outlook will do little to assuage investor concerns regarding ongoing comp choppiness and potential implications for unit growth plans into ‘25.”
Boyd Group Services Inc. (BYD-T) slipped 0.5 per cent after releasing third-quarter results that fell short of the Street’s expectations.
The Winnipeg-based company reported adjusted EBITDA of $80.1-million, down 8.6 per cent year-over-year and below the consensus estimate of $87.8-milion. Adjusted earnings per share fell 45.3 per cent to 15 cents, which was 33 cents lower than anticipated.
“We’d argue that most of the bad news is priced in (stock down 30 per cent from its March peak), although the shares could weaken today given the headline miss and slowing M&A, which we believe tie into management’s more cautious tone around long-term guidance,” said TD Cowen analyst Derek Lessard. “This may be tempered by BYD’s industry outperformance (and share gains) which should put it in a stronger position once market turbulence subsides.”
He added: “More cautious tone on near-term outlook. Management remains committed to reach its goal of doubling 2019 sales by 2025 (constant-currency), but notes the possibility of a slight delay given the unfavourable market conditions. However, the company did announce a modest 2-per-cent increase in the annual dividend to C$0.61 (from C$0.60)”
Cargojet Inc. (CJT-T) lost 6.5 per cent after saying it earned $29.7-million in the third quarter, almost triple the $10.5-million it earned a year earlier.
The Mississauga-based air freight and plane leasing company says its revenues totalled $245.6-million, up 14.8 per cent from $214.0-million during the same quarter in 2023.
Diluted earnings per share were $1.78, up from 61 cents a year earlier.
Co-chief executive officer Jamie Porteous said the company benefitted from interest rate cuts and cooling inflation.
Mr. Porteous said these factors are helping foster a more stable and optimistic economic outlook for Canada.
However, he added that geopolitical uncertainty is affecting the entire transportation industry and that Cargojet is not immune to significant cost increases facing aviation companies and supply chains.
In a note, ATB Capital Markets analyst Chris Murray said: “Revenue from the domestic network/ACMI/Charter of $205.4mm (ATBe: $201.4mm) increased 15.5 per cent year-over-year, driven by outperformance in All-In Charter (up 60.2 per cent year-over-year) on new contracts and demand for ad hoc services. Margins were slightly below ATBe as CJT added block hours in Q3/24 in response to increasing demand conditions, incurring certain “one-time costs”, limiting operating leverage. Management confirmed that easing macro pressure remains supportive of domestic volumes heading into peak season, with demand for global air cargo service remaining intact. CJT announced that it has renewed its NCIB with leverage levels and improving FCF generation supportive of an outsized repurchase program, particularly with demand conditions strengthening. CJT delivered solid Q3/24 results reaffirming our view that demand conditions on the domestic network are normalizing and the impact of new charter contracts, which we expect to support the go-forward margin and FCF generation. We expect a neutral market response.”
Boeing’s (BA-N) U.S. West Coast factory workers accepted a new contract offer on Monday, ending a bitter seven-week strike that halted most jet production and deepened a financial crisis at the troubled planemaker.
The union said members voted 59 per cent in favor of the new contract, which includes a 38-per-cent pay rise spread over four years, easing pressure on new Boeing CEO Kelly Ortberg after two previous offers were voted down in recent weeks.
Shares of the planemaker gave back early gains and turned lower, closing down 2.7 per cent on Tuesday.
“This is a victory. We can hold our heads high,” Jon Holden the union’s lead negotiator, told members after the results were announced. “Now it’s our job to get back to work.”
The end of the first strike in 16 years by Boeing’s largest union provides welcome relief for a company that has lurched from one setback to the next since a door panel blew off a near-new 737 MAX plane in mid-air in January.
In a message to Boeing employees after the vote, Mr. Ortberg said he was pleased the union had ratified a deal.
“While the past few months have been difficult for all of us, we are all part of the same team,” he said. “There is much work ahead to return to the excellence that made Boeing an iconic company.”
Around 33,000 machinists who work on the best-selling 737 MAX jet, as well as the 767 and 777 widebodies, have been on strike since Sept. 13, demanding a 40% wage increase and the restoration of a defined-benefit pension they lost a decade ago for a 401(k) retirement plan.
“I’m ready to get back to work,” said David Lemon, a worker in equipment calibration certification in Seattle who voted in favor of the contract.
He calculated that the pay hike and a 4-per-cent bonus - the guaranteed minimum annual payout to the reinstated incentive plan - amounted to the 40-per-cent increase they’d gone after. “We got there,” he said.
With files from staff and wires