A survey of North American equities heading in both directions
On the rise
Shares of Lundin Mining Corp. (LUN-T) rose 1.8 per cent on Wednesday after a Chilean court ordered a striking union at the Caserones copper mine to stop blocking roads around the mine.
Vancouver-based Lundin, which owns the mine, filed a complaint with a court in the northern city of Copiapo amid a strike that has lasted over a week.
“The union is ordered to immediately cease blocking the routes that allow workers to enter both the Caserones Mine and the internal routes that connect the Camp with the industrial areas,” the court said in its ruling, seen by Reuters.
The union has around 300 members, representing 30% of the total number of employees at Caserones.
The court also banned bus stops and inspections that the company claims are carried out by the strikers, saying that it threatens the freedom of employees not participating in the strike to work.
Neither the union nor the company immediately responded to a request for comment. The union launched the strike in mid August and told Reuters this week that the dispute showed no signs of being resolved soon.
Toronto-based Bitfarms Ltd. (BITF-T) erased early losses and closed up 0.9 per cent with the premarket announcement of a deal to acquire smaller rival Stronghold Digital (SDIG-Q) in an all-stock agreement valued at $125-million.
The transaction, which is expected to close in the first quarter of 2025, represents more than 100-per-cent premium to Stronghold’s previous close.
It could add up to 307 megawatts of power capacity for Bitfarm and put it on track to increase its energy portfolio to over 950 megawatts by the end of 2025.
Target (TGT-N) raised its full-year profit forecast on Wednesday and reported its first increase in quarterly comparable sales in over a year, driven by price cuts that attracted more shoppers to its stores.
Shares of the Minneapolis-based retailer soared over 11 per cent after the chain said it expects 2024 profit in the range of US$9.00 to US$9.70 per share, up from its prior forecast of US$8.60 to US$9.60.
Second-quarter comparable sales, or sales from online and stores open at least 12 months, rose 2 per cent in the quarter ended Aug. 3, the first rise in over a year. Analysts on average estimated a 1.15-per-cent rise in comparable sales, according to LSEG.
Traffic drove all its gains in comparable sales as price cuts on thousands of items proved to be a powerful lure for shoppers who have been dealing with a rapid rise in grocery prices and interest rates, the company said.
Analysts and industry watchers said the retailer’s results show that while U.S. consumers are constrained, they are not in recession mode. However, it also indicated that they are willing to hold out for whoever offers the best discounts and are increasingly being driven by banner events and occasions.
“The consumer is feeling nervous and pinched, and that will weigh on overall spending, but consumers still have plenty of purchasing power. They’re just being picky about where they spend,” said Brian Jacobsen, chief economist at Annex Wealth Management.
Rising prices of food and items made for immediate consumption since the pandemic have led Americans to prioritize spending on groceries and everyday essentials, while cutting back on purchases of apparel, electronics, and home goods, which are key categories for Target.
To reverse more than a year of sales declines, Target reduced prices on over 5,000 popular items, including bread, soda, paper towels, and pet food this summer. In February, it introduced a new private-label basics line called dealworthy, with most of the 400 items priced under $10. Additionally, it expanded its Good & Gather and Favorite Day brands by adding 125 new food products.
Target ran its Circle Week sales event in July, with an early focus on back-to-school products, which stimulated interest among shoppers, driving online sales up 8.7 per cent in the quarter.
Brian Cornell, Target’s Chief Executive Officer said “newness,” price cuts and sales events were key factors that drove a 3-per-cent rise in visits to its nearly 2,000 stores. This was a turnaround from the 1.9-per-cent traffic decline in the prior quarter.
Target’s report and bigger rival Walmart’s (WMT-N) raising of its annual sales and profit forecasts last week are a sign that U.S. consumer spending is strong ahead of the Federal Reserve’s expected rate cuts in September.
Target retained its full-year comparable sales forecast of flat to 2-per-cent rise, but cautioned that the growth will be skewed to the lower half of the range. Analysts polled by LSEG were expecting a 0.36-per-cent rise.
“The guide overall seems prudent not per se conservative,” said Christopher Horvers, an analyst at J.P. Morgan Securities LLC.
Target reported second-quarter earnings on both a net and adjusted basis of US$2.57 per share. Analysts on an average were expecting US$2.18 per share.
Brookfield Asset Management (BAM-T) gained 0.4 per cent on news it is in talks with banks to raise funds for its possible takeover bid for beleaguered Spanish drugmaker Grifols.
Brookfield teams up with Spain’s Grifols family to explore a bid for Spanish drug maker
Those banks include Bank of America and UBS , one source told Reuters.
Grifols said last month it would study a preliminary offer presented by Brookfield and the Grifols founding family, which holds a stake of around 30 per cent in Grifols, for a possible joint takeover bid with the intent to de-list Grifols.
Bloomberg reported earlier on Wednesday that Brookfield has asked banks, without identifying them, to backstop up to US$10.6-billion to refinance Grifols’ existing debt for a potential take-private deal for the Spanish pharmaceutical firm, sending Grifols’ shares up as much as 6 per cent.
Since early January, short-seller fund Gotham City Research has released several reports accusing Grifols of overstating earnings and understating debt.
The accusations, which Grifols denies, have erased 40 per cent of the Barcelona-based company’s market value.
Following the reports, Grifols, which makes medicine using blood plasma, announced management changes and revised its reported leverage higher after Spain’s market supervisor required that it change its calculations.
Ford Motors (F-N) rose 1.6 per cent after announcing it’s reshuffling its electric vehicle plans, killing its three-row SUV and delaying its next-generation pickup while adding a new pickup and van to its future lineup as it adjusts to slower-than-expected EV growth.
The automaker will take a special non-cash charge of about US$400-million for the write-down of certain assets for the previously planned three-row SUVs, which may also result in additional expenses and cash expenditures of up to US$1.5-billion.
The slowdown in demand for EVs has caused automakers such as Ford, General Motors and others to delay or cancel plans to avoid spending heavily on vehicles that consumers are not buying as quickly as anticipated.
Ford CEO Jim Farley has been touting the company’s skunkworks team in California, which has been developing an architecture for affordable EVs. The first vehicle on that new technology will be a mid-size electric pickup released in 2027, the company said Wednesday.
“The work of this highly talented team has evolved into a critical enabler of our electric vehicle strategy. These electric vehicles will be lower cost, and not compromised in any way,” Mr. Farley said in a statement.
Analog Devices (ADI-Q) forecast fourth-quarter revenue and profit above Wall Street expectations on Wednesday, as it benefits from returning demand for its chips used in consumer electronics.
A decline in surplus chip inventory across sectors, including communication, consumer and industrial, has helped chipmakers see a recovery in orders after a years-long slump.
Analog Devices’ consumer segment revenue rose 3 per cent to US$316.6-million in the third quarter, compared with analysts’ average estimate of US$289.3-million, according to LSEG data.
Shares of Wilmington, Massachusetts-based Analog Devices gained ground after the company’s third-quarter profit of US$1.58 per share also beat LSEG estimates of US$1.51.
The company now expects fourth-quarter revenue of US$2.40-billion, plus or minus US$100-million, above LSEG estimates of US$2.37-billion. It also sees adjusted earnings per share of US$1.63, plus or minus 10 US cents, compared with estimates of US$1.62.
The upbeat forecast follows strong results from rival chipmaker Texas Instruments (TXN-Q).
However, economic and geopolitical uncertainty continues to limit the pace of recovery, Analog Devices CFO Richard Puccio said.
U.S. off-price retailer TJX Cos (TJX-N) raised annual profit forecast after quarterly results beat estimates, banking on gains from easing costs and strong demand for its affordable apparel and accessories.
Shares of the company were up 6.1 per cent in Wednesday trading.
Over the past six quarters, TJX has kept prices low to attract shoppers who are worried about spending in an inflationary environment.
With newer product assortments and well-maintained inventories, the company has been able to lure in customers looking for their back-to-school purchases.
According to the Commerce Department’s Census Bureau, U.S. retail sales rose more than expected in July as consumers kept spending by bargain hunting and trading down to affordable substitutes.
“The third quarter is off to a strong start,” CEO Ernie Herrman said, adding that the company sees strong buying opportunities in the marketplace and is positioned to ship fresh merchandise both to stores and online throughout the fall and holiday selling seasons.
Furthermore, benefits from easing freight costs helped the company strengthen its quarterly margins to 30.4 per cent.
The company expects annual earnings per share of US$4.09 to US$4.13, above its prior forecast of US$4.03 to US$4.09.
TJX reported net sales of US$13.47-billion in the quarter ended Aug. 3, compared with analysts’ average estimate of US$13.31-billion, according to LSEG data.
It earned a quarterly profit of 96 US cents per share, compared with analysts’ estimates of 92 US cents apiece.
TJX also announced its agreement to invest about US$360-million for a 35-per-cent stake in privately held Brands For Less. It also maintained the upper end of its annual comparable sales forecast of a 3-per-cent rise.
Arch Resources (ARCH-N) jumped after it agreed to merge with Consol Energy (CEIX-N) in an all-stock deal on Wednesday to create a North American coal mining giant that will be valued at more than US$5-billion.
Consol will issue 1.326 of its common stock for each share of Arch Resources, or about US$125.61 on a per-share basis, according to Reuters’ calculations, as per the last close.
The new company would be called Core Natural Resources, which will trade under a new ticker symbol that the companies are yet to disclose.
There has been a lack of investment in new coal mines amid tight emission regulations, but the fossil fuel is expected to remain part of the energy mix for years to come.
The two companies had sold an aggregate of about 101 million tons of coal in 2023.
The combined entity would own 11 mines across six states that produce thermal and metallurgical coal, used for heat generation at power plants and in steel-making.
The deal is expected to generate US$110-million to US$140-million of annual cost and operational savings in a period of six to 18 months following the close of the transaction, which is expected in the first quarter of 2025.
Arch stockholders will own about 45 per cent of the combined company, with Consol shareholders owning the rest.
Deal-making in the sector has gained momentum over the last one year as demand, especially for coking coal, remains strong.
On the decline
Macy’s (M-N) lowered its annual net sales forecast on Wednesday, blaming higher promotions and weak demand for upscale apparel and accessories from deal-hungry consumers in the U.S., sending its shares falling.
It also reported a bigger-than-expected fall in net sales for the second quarter, setting a somber tone for the busy back-to-school and holiday shopping seasons.
Department store chains have seen few takers for men’s apparel, home decor goods and accessories such as handbags, forcing them to ramp up discounts and offers to attract cost-conscious consumers.
“As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle,” said CEO Tony Spring.
Macy’s now expects annual net sales of US$22.1-billion to US$22.4-billion, compared with its prior forecast of US$22.3-billion to US$22.9-billion.
Second-quarter net sales fell 3.8 per cent to US$4.94-billion, compared with analysts’ expectations for a 0.23-per-cent fall to US$5.12-billion, according to LSEG.
In July, the Bloomingdale’s parent terminated buyout talks with an investor group comprising Arkhouse Management and Brigade Capital on grounds that the bid failed to provide “compelling value.” The offer was for $6.9 billion.
Excluding items, its second-quarter adjusted earnings per share of 53 US cents beat expectations of 30 US cents, as margins grew due to lower costs.
The company now expects to close 55 stores in 2024, up from about 50 estimated earlier, as part of its three-year cost-saving plan.
U.S.-listed shares of Chinese e-commerce firm JD.com Inc. (JD-Q) dropped after Walmart (WMT-N), its biggest shareholder, sold its entire stake, according to a person familiar with the matter, exiting an eight-year investment to focus on its own operations in China.
A placement of the Walmart shares was fully subscribed, the person said, and at the top end of the offered range would be worth US$3.74-billion.
The U.S. retail giant plans to double down on its warehouse business Sam’s Club in China after the stake sale that underscores the country’s e-commerce sector, once an investor darling, is losing its appeal as it grapples with poor margins due to brutal price competition and weak consumer demand.
Shares of JD.com have fallen around 70 per cent from their peak in early 2021 and prices are little changed from the levels in 2016 when Walmart became its major shareholder.
“This decision allows us to focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities,” Walmart said in a statement, adding it was committed to a continued commercial relationship with the Chinese company.
Walmart offered 144.5 million American depositary shares of JD.com in the price range of US$24.85 to US$25.85, a term sheet seen by Reuters showed, and Morgan Stanley was the broker-dealer of the offering.
The shares were offered at a discount of up to 11.8 per cent to Tuesday’s closing price of US$28.19.
The company reported a better-than-expected second-quarter profit last week on its low-price policy, but China’s retail market has been hit by a persistent downturn in consumer confidence, sparked by a property market slowdown and concerns about employment and incomes.
Major e-commerce firms, including JD.com and rivals Alibaba and PDD Holdings’ Pinduoduo have engaged in a brutal price war in order to entice consumers to buy, pressuring revenue growth and margins.
The stake sale allows Walmart to raise capital and refocuses JD.com on its core online business, but a strategic partnership between the pair can continue, especially in data sharing, said Jeffrey Towson, a Beijing-based partner at TechMoat Consulting.
Walmart reported a 17.7-per-cent year-on-year rise in revenue from its China business to US$4.6-billion in the second quarter on the back of strong growth in its Sam’s Club warehouse chain and its digital offering.
The U.S. retailer owned a 5.19-per-cent stake in JD.com, according to LSEG data. The partnership between the companies began in 2016 when Walmart sold its Chinese online grocery store, Yihaodian in return for a 5-per-cent stake in JD.com.
With files from staff and wires