A survey of North American equities heading in both directions
On the rise
MTY Food Group Inc. (MTY-T) rose 1.9 per cent on Wednesday following the premarket announcement that it is raising its quarterly dividend by 12 per cent.
The restaurant franchisor and operator says it will now pay shareholders a quarterly dividend of 28 cents per share, up from 25 cents per share.
The increase comes after MTY chief executive Eric Lefebvre says the company posted record results in the first nine months of 2023.
Mr. Lefebvre says acquisitions of Wetzel Pretzel’s and Sauce Pizza and Wine in the first quarter of 2023 as well as BBQ Holdings Inc. in the last quarter of 2022 contributed to the improved results.
MTY franchises and operates quick-service, fast casual and casual dining restaurants under more than 90 different banners in Canada, the United States and internationally.
Netflix (NFLX-Q) soared 10.7 per cent on Wednesday as its blowout subscriber growth cemented investor confidence the firm has won the streaming wars with its password-sharing crackdown and a strong content slate.
The company said on Tuesday 13.1 million signed up for its service in the fourth quarter, marking its best growth since the start of the pandemic and handily beating estimates of 8.97 million subscribers.
The streaming pioneer’s shares were trading at a more than two-year high. The company was set to increase its market value by more than US$20-billion, if the gains from early trading hold.
“Netflix has already won the streaming wars and this type of strong result/guidance, especially relative to its streaming peers, is what winning looks like,” said Pivotal Research Group analyst Jeffrey Wlodarczak.
Mr. Wlodarczak raised his price target on the stock to a Wall Street high of US$700. At least six other analysts also raised their targets, pushing the median view to US$515.25, which is nearly 5 per cent higher than the last closing price of Netflix shares.
The company’s stock commands a premium relative to rivals. It trades at nearly 30 times its 12-month forward earnings, compared with Walt Disney Co’s (DIS-N) 20.41, according to LSEG data.
Some analysts believe the valuation could be justified as the ongoing push for profitability at other streaming firms will force them to license more titles to Netflix, which may help Netflix drive up subscriber growth and average revenue per user.
The firm highlighted strong demand for licensed titles such as Young Sheldon in its earnings call on Tuesday. Its slate of shows in the fourth quarter also included the final season of the The Crown and David Fincher’s film The Killer.
The company plans to spend as much as US$17-billion on content this year, after last year’s dual Hollywood strikes by actors and writers disrupted some productions.
The company is also ramping up its bets on live programming and unveiled a more than US$5-billion rights deal on Tuesday to bring World Wrestling Entertainment’s Raw and some other programming exclusively to its service in January 2025.
“It (original content) doesn’t come cheap, and some would balk at Netflix’s annual content budget, but it’s this investment that keeps Netflix’s frame gilded,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
Online retailer eBay Inc. (EBAY-Q) saw gains of 0.5 per cent on news it will cut about 1,000 jobs, or an estimated 9 per cent of its full-time workforce, saying its number of employees and costs have exceeded how much the business is growing in a slowing economy. It marks the latest layoffs in the tech industry.
CEO Jamie Iannone said in a message to employees on Tuesday that the company also will reduce how many “contracts we have within our alternate workforce over the coming months.”
Those who are being laid off will be told through Zoom calls with their bosses, Iannone said, requesting that people work from home Wednesday to allow privacy for those conversations.
“We need to better organize our teams for speed — allowing us to be more nimble, bring like-work together, and help us make decisions more quickly,” he said in the note, which was posted online.
“These changes are difficult, but I’m confident that by working together we will become stronger than ever,” Iannone added.
San Jose, California-based eBay is the latest tech company to roll out a series of layoffs after quickly ramping up hiring during the COVID-19 pandemic while people spent more time and money online.
Now, companies from Google to Amazon have been making painful job cuts to reduce costs and bolster their bottom lines.
Copper miner Freeport-McMoRan (FCX-N) beat Wall Street estimates for fourth-quarter profit on Wednesday, helped by strong production and sales volumes along with higher commodity prices, sending its shares up.
Prices of copper rose in the quarter thanks to a weaker dollar, lower inventories and as major metals consumer China moved to boost its struggling housing and stock markets.
Freeport’s quarterly copper sales gained 7.1 per cent year-over-year to 1.1 billion of recoverable pounds, while average realized price per pound rose 1.1 per cent to US$3.81.
Its quarterly gold sales also rose, gaining 19.9 per cent to 549,000 of recoverable ounces with the average realized price per ounce up 13.7 per cent at US$2,034.
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, helping gold miners such as Freeport.
On an adjusted basis, the company earned 27 US cents per share for the three months ended Dec. 31, compared with analysts’ average estimate of 22 US cents, according to LSEG data.
“During 2024, we will continue to prioritize productivity gains, operating and capital cost discipline and the advancement of organic opportunities for future long-term growth,” said CEO Richard Adkerson.
The company reported revenue of US$5.91-billion in the quarter, beating estimates of US$5.86-billion.
On the decline
Shares of BlackBerry Ltd. (BB-T) plummeted almost 18 per cent after the announcement of a proposed private offering of US$160-million of convertible senior notes in a private offering.
The notes are due in 2029 and offered only to qualified institutional investors.
The Waterloo, Ont.-based company said net proceeds will be used fund the repayment or repurchase of its outstanding US$150-million aggregate principal amount of 1.75-per-cent. extendible convertible unsecured debentures due Feb. 15.
Shares of Canadian National Railway Co. (CNR-T) dipped 1.8 per cent on Wednesday after it saw revenues slide slightly in its fourth quarter due to lower grain and container shipments, even as the company shored up parts of its operations.
The railroad operator reported revenues of $4.47-billion in the three months ended Dec. 31, a two per cent decrease from $4.54-billion in the same period a year earlier.
Reaction from the Street: Wednesday's analyst upgrades and downgrades
The Montreal-based company says net income rose 50 per cent to $2.13-billion last quarter from $1.42-billion the year before, with improvements in train speed and dwell time adding to the gains.
On an adjusted basis, diluted earnings fell four per cent to $2.02 per share from $2.10 per share, and slightly beat analyst expectations of $1.99 per share, according to financial markets data firm Refinitiv.
CN says lower container storage fees and fuel surcharge revenues were partly offset by freight rate hikes and bigger shipments of potash, natural gas liquids and refined petroleum products.
CN’s operating ratio — a measure of the railway’s efficiency that divides operating expenses by net sales — worsened by 1.4 points to hit 59.3 per cent.
CN’s board of directors approved a seven per cent increase to its 2024 quarterly cash dividend, effective for the first quarter of 2024.
Montreal-based Theratechnologies Inc. (TH-T) dropped 15.5 per cent after announcing the U.S. Food and Drug Administration has declined to approve the new, more concentrated formulation of its fat reduction drug Egrifta SV.
Egrifta has already been approved in the U.S. to reduce excess abdominal fat in HIV-infected patients with a rare condition called lipodystrophy, which impacts the ability to accumulate and maintain healthy fat in certain parts of the body.
Theratechnologies said the FDA has requested clarifications around manufacturing of the reconstituted drug as well as additional information related to the immune response of the new formulation of the drug.
It plans to address the requests “as swiftly as possible.”
Tesla Inc. (TSLA-Q) gave back early gains and closed down 0.6 per cent on a Reuters report that it has told suppliers it wants to start production of a new mass market electric vehicle codenamed “Redwood” in mid-2025, according to four people familiar with the matter, with two of them describing the model as a compact crossover.
Tesla CEO Elon Musk has long whetted fans’ and investors’ appetites for affordable electric vehicles and self-driving robotaxis that are expected to be made on next-generation, cheaper electric car platforms.
Those models, including an entry-level US$25,000 car, would allow it to compete with cheaper gasoline-powered cars and a growing number of inexpensive EVs, such as those made by China’s BYD.
BYD overtook Tesla as the world’s top EV maker in the final quarter of 2023.
Mr. Musk had first promised to build a US$25,000 car in 2020, a plan he later shelved and then revived. Tesla’s cheapest offering, the Model 3 sedan, currently has a starting price of US$38,990 in the United States.
Mr. Musk said last year he was concerned about the impact of high interest rates on consumer demand for big-ticket items like cars.
Tesla sent “requests for quotes,” or invitation for bids for the “Redwood” model, to suppliers last year, and forecast weekly production volume of 10,000 vehicles, two of the sources said.
Production would begin in June 2025, three of the sources said. All spoke on condition of anonymity because the matter is confidential.
AT&T (T-N) forecast annual profit below market estimates on Wednesday as it lowers the value of its old equipment and grapples with competition from cable operators, sending its shares down 3 per cent.
The writedown of Nokia equipment will reduce annual earnings per share by nearly 17 US cents and comes as AT&T shifts to new lower-cost ORAN technology, or open radio access network.
It chose Ericsson in December to build a telecom network using ORAN that would cover 70 per cent of its wireless traffic in the U.S. by late 2026 and could cost as much as US$14-billion.
AT&T said it expected adjusted profit to be between US$2.15 and US$2.25 per share in 2024, falling short of estimates of US$2.46, according to LSEG data.
The profit expectation was also lower than last year’s figure of US$2.57 and stood in contrast to the market-beating forecast from Verizon (VZ-N) on Tuesday.
Analysts said the race with cable operators could also hurt the growth of the carriers as companies such as Charter Communications (CHTR-Q) look to take market share with a competitive network and pricing.
Despite the pressure, AT&T’s subscriber base grew in the fourth quarter. It added 526,000 net monthly bill-paying wireless phone subscribers, higher than expectations for 495,830 additions, according to Visible Alpha.
Recent price hikes and a move by consumers to higher-priced plans helped its average revenue per user rise 1.4 per cent in the period.
Total revenue rose 2.2 per cent to US$32-billion, beating analysts’ average estimate of US$31.48-billion, according to LSEG data.
But its adjusted profit of 54 US cents was below Wall Street expectations of 56 US cents.
AT&T said it expects to return to profit growth in 2025.
Chipmaker Texas Instruments Inc. (TXN-Q) forecast first-quarter revenue and profit below market estimates on Tuesday, as early signs of weakness in the automotive sector add to worries over a persistent supply glut in its industrial markets.
The analog chipmaker’s shares fell in Wednesday trading.
TI’s projection fans concerns the automotive chip industry may also face a downturn after managing to remain on the sidelines of the supply glut crisis faced by other markets.
Peer Mobileye also forecast preliminary 2024 revenue below estimates, with a pullback in orders from its customers clearing excess inventory.
Summit Insights analyst Kinngai Chan pinned supply chain corrections in the automotive segment to weaker demand for electric vehicles and the United Auto Workers strikes at major automakers.
Mr. Chan expects inventory corrections to continue into the first quarter and then recover in the second half of the year.
Revenue from the automotive market, once one of TI’s fastest growing - was down in mid-single-digits in the fourth quarter, while sales to industrial customers - the company’s largest by revenue share - declined in mid-teens .
In response to analysts’ questions regarding slower-than-expected recovery in key market China, head of Investor relations David Pahl said “from a dollar standpoint... sequentially, all the regions were down with the exception of the rest of Asia.”
Texas Instruments also continued to reduce factory loadings in the fourth quarter, looking to ship below already weak end-market demand to help normalize inventory levels, Mr. Pahl said.
The company forecast first-quarter revenue between US$3.45-billion and US$3.75-billion, compared with analysts’ average estimate of US$4.06-billion, according to LSEG data. The company’s forecast for earnings per share for the current quarter was also below estimates.
DuPont De Nemours (DD-N) said on Wednesday that it expects to report a fourth-quarter loss compared to a year-ago profit, sending its shares down.
The multi-industrial chemical company expects to report a loss from continuing operations in between US$220-million and US$370-million, compared to a reported profit of US$105-million last year.
DuPont and its peers have been hit by destocking, which follows excess inventory built up during the COVID-19 pandemic and weaknesses in key markets such as China and Europe.
The Wilmington, Delaware-based company added it will also take a non-cash goodwill impairment charge between US$750-million and US$850-million during the fourth quarter at a unit of its water and protection segment due to prevalent market conditions.
DuPont expects destocking to continue to weigh on sales into the first quarter of 2024.
The company sees sales in the first quarter to be about US$2.8-billion compared to analysts’ average estimate of US$3.04-billion according to LSEG estimates.
“As we finished 2023, we saw additional channel inventory destocking within our industrial businesses as well as continued weak demand in China. We are seeing similar trends continue and expect sequential sales and earnings to decline in the first quarter of 2024,” said CEO Ed Breen in a statement.
Rival Dow’s (DOW-N) shares also fell.
With files from staff and wires
David Leeder