A survey of North American equities heading in both directions
On the rise
Intact Financial Corp. (IFC-T) was higher by 7.2 per cent after reporting it earned $531-million in the fourth quarter of 2023, a 50-per-cent increase from earnings of $353 million during the same quarter a year earlier.
The Toronto-based company says earnings of $1.3-billion for 2023 as a whole, however, were down 46 per cent compared with a year earlier amid numerous natural disasters.
Reaction from the Street: Wednesday's analyst upgrades and dowgrades
Earnings per share were $2.78 for the fourth quarter, up from $1.88.
Intact says its board approved a quarterly dividend on outstanding common shares of $1.21 per share, an 11-cent increase.
The company says over the next twelve months, it expects hard insurance market conditions to continue, driven by inflation and losses from catastrophes.
In January, the company estimated total catastrophe losses for the fourth quarter were $200-million on a pre-tax basis.
Shares of Toromont Industries Ltd. (TIH-T) jumped 5.4 per cent following the release of stronger-than-expected fourth-quarter 2023 financial and a dividend increase.
After the bell on Tuesday, the Toronto-based heavy equipment dealer reported revenue of $1.227-billion, up 9 per cent year-over-year and 3 per cent above the Street’s projection of $1.190-billion. Adjusted earnings per share of $1.85, excluding one-time asset sales gains, was 7 per cent better than the consensus estimate of $1.72.
Toromont raised its quarterly dividend for the 35th consecutive year by 12 per cent to 48 cents.
In a research note, National Bank analyst Maxim Sytchev said increase is “underlining TIH’s status as a quality, compounder name as well as management’s confidence in the long-term health of the business.”
“Toromont delivered another above-expectations print on the back of broad-based top-line momentum and phenomenal cost control,” he added. “Four out of five Equipment Group lines, as well as CIMCO, saw year-over-year sales growth (Used was down on increased supply and continued price normalization) on strength in construction, mining and power systems deliveries. Despite some uncertainty in the construction space, we believe continued infrastructure spending and record population growth should continue to provide a structural level of support despite economic wobbles.”
“Toromont delivered another solid quarter in absolute (good bookings, stable margins off very high levels, SG&A control, EPS growth) and relative terms (4-per-cent Product Support characterized by parts and services momentum and no unusuals). While we always hear that Toromont’s valuation is ‘expensive’, the premium appears to be justified when considering the investment thesis holistically – performance driven by Eastern Canadian demographic trends that are more predictable in nature while also sporting a net cash balance sheet that affords another double-digit increase in the dividend. We don’t know when the next capital deployment opportunity comes along (contrary to obvious’ and contiguous Hewitt deal), but we trust the management team/Board to do the right thing when we face that dynamic.”
Toronto-based toymaker Spin Master Corp. (TOY-T) was up 1.7 per cent after reporting preliminary fourth-quarter 2023 revenue of $502.6-million, up 7.9 per cent year-over-year but below the Street’s forecast of $529.90, according to LSEG data.
“The difference compared to our expectations comes from lower than expected digital games revenues, offset by higher entertainment revenues. Revenues for the toy segment were largely in line with our expectations,” said Stifel analyst Martin Landry. “On the back of these results and recent industry comments, we are slightly tweaking downward our 2024 revenue estimates. 2024 should be a strong year for Spin Master, with revenue growth of 23 per cent year-over-year and EPS growth of 17 per cent year-over-year driven by the Melissa & Doug acquisition and a strong pipeline of new toys and digital games. TOY trades at 6 times our 2024 EBITDA estimates, a good entry point, with limited downside risk, in our view.”
The company’s full results are scheduled to be released after the bell on Feb. 28.
Shares of cryptocurrency companies on Wednesday, powered by bitcoin crossing the US$1-trillion market value for the first time in more than two years amid improving investor sentiment.
Hut8 Corp. (HUT-T), Bitfarms Ltd. (BITF-T) and Galaxy Digital Holdings Ltd. (GLXY-T) were among the companies seeing gains across the industry.
Bitcoin’s price reached as high as US$52,079 on Wednesday, its latest 25-month high. It was last up 4.29 per cent at US$51,690, taking the token’s market cap to $1.013 trillion according to price platform Coingecko.
The world’s largest cryptocurrency has risen around 22 per cent since the start of February, already set for its biggest monthly rise since October.
Bitcoin prices have been steadily gaining ground following the U.S. securities regulator’s approval of the first spot bitcoin exchange-traded funds (ETFs) last month.
The launch of ETFs has been touted as a game-changer for the industry, already known for its appeal to retail traders, since investors can now have an exposure to bitcoin without directly holding the asset.
“We think the best days of bitcoin are ahead,” Bernstein analyst Gautam Chhugani said.
“The ETF has added a sense of legitimacy, so far missing in the crypto sector. We expect many of these new bitcoin enthusiasts to allocate capital in the coming days and we think bitcoin ETFs or bitcoin miners could benefit.”
Lyft (LYFT-Q) forecast error that sent shares into a tizzy overnight may invite regulatory or legal scrutiny, analysts and experts said on Wednesday, overshadowing its solid quarter and forecast.
An error in its earnings statement caused a brief 67-per-cent surge in shares before a clarification from Chief Financial Officer Erin Brewer in a conference call with analysts.
Lyft said incorrectly that a key margin metric was expected to rise by 500 basis points this year, but Brewer later corrected that forecast to an increase of 50 basis points.
Still, Lyft shares surged to a one-year high on Wednesday and were last up 35.1 per cent, adding more than US$1.65-billion to the market value. The company said it cut expenses by 12 per cent in 2023, helping it exceed the average Wall Street estimate.
About 48 million shares traded after-hours Tuesday, more than triple the usual daily regular-session volume in the stock.
“The SEC will probably review the situation given the scale of the share price movement upon release of the original results and Lyft could potentially be fined,” said Dan Coatsworth, an investment analyst at AJ Bell.
Analysts said the surge could have included significant short covering from hedge funds. Lyft had short interest of US$566.1-million, or 13.1 per cent of its free float as of Feb. 12, according to data and analytics firm Ortex.
Whether the company could face legal liability is unclear, experts said.
“Since the error relates to a forecast, it’s likely that liability under securities regulations will not attach unless it can be proved that it was made with knowledge that it was wrong or with some intent to mislead,” said Bobby Reddy, professor of corporate law and governance at the University of Cambridge.
Uber Technologies (UBER-N) rose after it said on Wednesday it would buy back up to US$7-billion worth of company shares for the first time ever following a strong recovery in ride-share and healthy demand at its food delivery business.
“Today’s authorization of our first-ever share repurchase program is a vote of confidence in the company’s strong financial momentum,” Uber CFO Prashanth Mahendra-Rajah said.
Over the next three years the ride-hailing firm expects gross bookings growth in the mid to high teens percentage and adjusted core profit growth in the high 30s to 40 per cent.
Free cash flow as a percentage of adjusted earnings before interest, taxes, depreciation and amortization is expected to be 90 per cent or higher annually, the company said.
Following a slump during the pandemic, the ride-share market expanded sharply as people stepped out more and employees were called back to offices. That helped Uber more than double its market value last year.
The ride-hailing firm posted its first annual net profit last week since the company went public in 2019. Uber had a free cash flow of US$3.4-billion in 2023, up from US$390-million a year earlier.
On the decline
Barrick Gold Corp. (ABX-T) on Wednesday projected higher gold production in 2024 after beating fourth-quarter profit on strong prices and output of the precious metal.
Shares were 0.7 per cent lower after the world’s second-largest gold producer also announced a new share repurchase program of up to $1 billion.
Barrick expects gold production to range between 3.9 million ounces and 4.3 million ounces this year, compared with 4.05 million ounces in 2023.
The company expects its Porgera gold mine in Papua New Guinea to produce 50,000 to 70,000 ounces during the year. The mine was placed on care and maintenance in 2020 following a dispute over benefit sharing as part of the lease renewal.
Gold production rose 1.4 per cent to 1.05 million ounces while the average realized price per ounce increased 3 per cent to US$1,986 in the fourth quarter, from the previous quarter.
“Nevada Gold Mines had a stronger fourth quarter on the back of higher grades and operational improvements, while Pueblo Viejo advanced the commissioning of the expansion plant, addressing most of the equipment failures,” the company said.
Average spot gold prices rose more than 13 per cent in the quarter on a softer dollar and hopes that the U.S. Federal Reserve would cut interest rates this year.
The miner’s copper production rose marginally to 113 millions pounds.
The company reported an adjusted profit of 27 US cents per share for the three months ended Dec. 31, beating average analysts’ estimate of 21 US cents, according to LSEG data.
Keyera Corp. (KEY-T) closed down 0.9 per cent despite a fourth-quarter earnings beat driven by outperformance from its Marketing segment.
Before the bell, the Calgary-based company reported adjusted EBITDA of $339-million, topping the Street’s expectation of $290-million.
While its Alberta EnviroFuels “continues to operate well achieving record production in 2023 and strong year-to-date performance,” Keyera announced it will be taking the facility offline for approximately 6 weeks in the spring to “proactively complete maintenance activities.”
“Another quarter of Marketing outperformance drove record ‘23 Marketing realized margin,” said Citi analyst Spiro Dounis. “Notably, AEF will be offline for maintenance for 6 weeks in Spring ‘24 - driving a $35-45-million realized margin headwind. That said, management still expects ‘24 marketing margin to be within its base marketing guidance ($310-350-million) - though formal guidance will come in May. Marketing margins would still need to fall approximately 20 per cent to reach the high end of long term guidance. No change to EBITDA or ‘24 capex guidance. KAPS continues to unlock more commercial success. Specifically, KAPS and KFS added 30kbpd and 33kbpd of long term commitments with majority backed by take-or-pay contracts while KFS also added storage and ancillary services.”
“We expect the large beat to skew the reaction positive, unchanged guidance likely mutes the reaction overall though. AEF downtime is a headwind; however, the reiteration of EBITDA guidance through ‘25 (high end of 6-7-per-cent CAGR) neutralizes that headwind, in our view.”
CAE Inc. (CAE-T) dropped 9.8 per cent with the release of weaker-than-anticipated third-quarter results before the bell.
The Montreal-based flight simulator manufacturer reported revenue of $1.094.5-billion, up from $969.9-million during the same period a year ago but narrowly below the Street’s expectation of $1.11-billion. Adjusted earnings per share of 24 cents miss the consensus forecast by 2 cents.
“Overall, we believe investors will be disappointed with the weaker-than-expected Civil margin (a key focus for investors), the limited new disclosures for the Defence segment (we suspect investors were expecting more details, eg a potential post-legacy margin target) and the longer tail of risks (6‒8 quarters; we and consensus both had Defence margins increasing to more than 8 per cent in FY26),” said Desjardins Securities analyst Benoit Poirier.
Kraft Heinz (KHC-Q) was down as it forecast slower annual core sales growth, after missing quarterly sales estimates on Wednesday, a sign that demand for its soups, sauces and meat cold cuts are likely to remain subdued as customers digest past price hikes.
The company has wrestled with weakening organic sales over the past year, hit by a volume decline in its North America meat business, as well as a shift in preference to cheaper private label brands by cash-strapped customers in the face of sticky inflation.
Packaged food peers Mondelez, McCormick, Hershey and PepsiCo have all flagged softer volume growth in their latest quarterly results.
The Heinz sauce maker’s quarterly volumes were down 4.4 percentage points in the fourth quarter, driven by weaker demand in North America, while prices rose 3.7 percentage points across Kraft Heinz’s portfolio.
However, Kraft Heinz CFO Andre Maciel said the company expects a positive contribution from price throughout the year, with volumes inflecting positive in the second half of the year.
The Jell-O maker forecast annual organic net sales between flat to 2-per-cent growth. It posted organic net sales growth of 3.4 per cent in 2023.
Kraft Heinz expects its adjusted gross profit margin to expand in the range of 25 to 75 basis points in fiscal 2024, slowing from a 240-basis-point increase reported in 2023.
Higher promotions to pull customers and efforts to limit pricing in a bid to remain competitive is likely to take a toll on its margins.
It posted net sales of US$6.86-billion in the three months ended Dec. 30, compared with analysts’ average estimate of US$6.99-billion, according to LSEG data.
Instacart (CART-Q) forecast on Tuesday its first-quarter gross transaction value and core profit above analysts’ estimates, and said it plans to cut 250 jobs, or about 7 per cent of its workforce, to focus on “promising” initiatives.
However, shares of Instacart, formally known as Maplebear, were down after the company missed fourth-quarter revenue estimates.
Grocery-delivery firm Instacart joins several U.S. and Canadian firms that have been laying off thousands of employees as they scramble to reduce costs amid an uncertain macroeconomic environment.
“This (job cuts) will allow us to reshape the company and flatten the organization so we can focus on our most promising initiatives that we believe will transform our company and industry over the long term,” CEO Fidji Simo said in a letter to shareholders.
As of June 30, 2023, the company had a total employee count of 3,486, according to a regulatory filing.
The company said on Tuesday it expects current-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) between US$150-million and US$160-million, compared with analysts’ estimates of US$151.6-million, according to LSEG data.
It forecast gross transaction value (GTV) - a key industry metric that shows the value of products sold based on prices shown on Instacart - between US$8-billion and US$8.2-billion, compared with analysts’ estimates of 6.1-per-cent growth to US$7.92-billion.
The company also authorized an additional US$500-million share repurchase program, over and above the US$500-million it announced last quarter.
Its fourth-quarter total revenue rose 6 per cent to US$803-million, falling short of expectations of US$804.2-million indicating a slowing growth after a pandemic-driven boom.
With files from staff and wires
David Leeder