A survey of North American equities heading in both directions
On the rise
Shares of Canada’s second-largest oil producer Suncor Energy Inc. (SU-T) closed up 0.4 per cent on Wednesday after it beat first-quarter profit estimates, boosted by strong demand for refined products and record oil sands production.
The Calgary-based company said total upstream production was 835,300 barrels per day (bpd), a record for the first quarter and up 12.6 per cent from a year earlier, while oil sands output hit an all-time high of 785,000 bpd.
The production records suggest Suncor is making progress in improving safety and performance in its oil sands business after a string of fatalities and operational setbacks hurt the company’s share price and unnerved investors in recent years.
Suncor appointed former Exxon Mobil executive Rich Kruger as CEO last year, after previous CEO Mark Little resigned in 2022.
“Our strong 2024 first quarter performance continued to build on the momentum established in the second half of 2023,” Mr. Kruger said in a statement.
The company said it achieved its highest-ever first-quarter refining throughput at 455,300 bpd, up 23.8 per cent from a year ago. Refinery utilization was at 98 per cent in same period, compared with 79 per cent from a year earlier.
Global demand for refined products remained high in the quarter as outages at Russian refineries following Ukrainian attacks and heavy refinery turnarounds tightened fuel supplies.
Suncor reported adjusted operating earnings of $1.41 per share for the quarter ended March 31, compared with analysts’ average estimate of $1.29, according to LSEG data.
Intact Financial Corp. (IFC-T) rose 1.3 per cent on Wednesday after saying it earned $673-million in the first quarter, up from $377-million a year earlier.
The Toronto-based company says earnings per share were $3.68, up from $2.06 per share during the same quarter last year.
Intact says the higher earnings per share were driven by investment gains on its equity portfolio as well as a gain on the sale of its U.K. direct Personal Lines operations.
Insurance revenue was $6.5-billion, up from $6.4-billion during the same quarter last year.
Intact says it expects favourable market conditions to continue, driven by inflation and catastrophe losses.
On Tuesday, Intact rolled out a pilot project to fireproof customers’ homes when a fire is nearby.
In a research note, Raymond James analyst Stephen Boland said: “Overall, this was another strong quarter due to strong premium growth, lower cat losses and higher investment income. Intact reported NOIPS of $3.63 vs consensus of $3.40 and RJL at $3.24. The overall combined ratio was 91.2% and better than expected. Firm market conditions are expected across all divisions for the remainder of 2024. This would translate into premium growth in a range of mid single digit growth to low double-digit growth for most divisions. We believe the main focus on the conference call will be on Canada personal auto with the recent actions taken by the Alberta government
“We continue to believe the P&C industry is in a sweet spot with firm markets and high interest rates driving investment income. With uncertainty when interest rates may drop this may prolong the strong income growth. As such, we continue to view IFC as a core holding for any financial services investor.”
Canadian Utilities Ltd. (CU-T), a subsidiary of Calgary-based holding company ATCO Ltd (ACO.X-T), gained 1.3 per cent after saying it plans to build a new natural gas pipeline in Alberta to supply a massive net-zero petrochemical project being built northeast of Edmonton.
Canadian Utilities says it plans to spend more than $2-billion on the new pipeline, which will be the largest-ever energy infrastructure project by an ATCO Energy Systems company.
Canadian Utilities says the pipeline will supply natural gas to Dow Chemicals’ $9-billion Path2Zero facility, which is being built near Fort Saskatchewan, Alta. and is billed as the world’s first net-zero-emissions integrated ethylene cracker and derivatives site.
The company says the new pipeline will be around 200 kilometres long and will run from the hamlet of Peers in west-central Alberta to the northeast Edmonton area.
The new pipeline will be called Yellowhead Mainline and is expected to have the capacity to deliver one billion cubic feet per day of natural gas.
Canadian Utilities says construction on the new pipeline is expected to begin in 2026, and the pipeline should be operational in the fourth quarter of 2027.
Alternative lender Goeasy Ltd. (GSY-T) turned higher and finished 3.3 per cent higher after saying it had a record volume of credit applications in its first quarter, up 41 per cent from a year earlier.
Goeasy says the jump in applications led loan originations to climb 12 per cent to $686-million for the quarter as it experienced strong performance across several categories including unsecured lending and automotive financing.
Chief executive Jason Mullins says it was a strong start to the year with over $200-million in loan portfolio growth, and the lender expects to finish at the high end of its loan growth forecast for the year.
The growth comes as inflation and elevated interest rates have led many Canadians to borrow more, while those with lower credit scores often have to rely on alternatives to major banks.
The company says it saw stable credit and payment performance as its net charge-off rate, or the amount of loans it doesn’t expect to get paid back, was within its targeted range at 9.1 per cent.
The lender reported net income of $58.9-million, or $3.40 per diluted share, up from $51.4-million or $3.01 per share last year.
In a research note, Raymond James analyst Stephen Boland said: “GSY reported another strong quarter as expected. The company reported headline EPS of $3.40 and adjusted EPS of $3.81 vs consensus and RJL at $3.81. Credit continues to be stable with strong growth across the portfolio (9.1% charge-off rate). The reported and adjusted ROEs were 21.9 per cent and 24.6 per cent, respectively. The adjusted operating margin remained above 40 per cent as scale (and product shift) impacts the operations. Management points to the adjusted operating margin as there were several items in the quarter that were one-time and not indicative of ongoing operations. These included advisory costs, integration costs, and the amortization of intangible assets related to LendCare. The company reiterated its 3-year guidance cut indicated they will achieve the high end of guidance for loans for 2024. Management is hosting a conference call May 8.
“The reported results continue to be impressive and in within guidance each quarter. The consistency in underwriting and the high ROE is the rationale for increasing the target price ahead of the call [Wednesday]. We maintain our Outperform rating.”
Montreal-based Stella-Jones Inc. (SJ-T) jumped almost 11 per cent after it reported a first-quarter profit of $77-million, up from $60-million a year ago, as its revenue rose nine per cent.
The maker of utility poles and railway ties says its profit amounted to $1.36 per diluted share for the quarter ended March 31, up from a profit of $1.03 per diluted share a year earlier.
Analysts on average had expected a profit of $1.07 per share, according to data provided by LSEG Data & Analytics.
Sales for the quarter totalled $775-million, up from $710-million in the first quarter of 2023.
Stella-Jones chief executive Eric Vachon says the performance reflects the ongoing robust fundamental market trends in its infrastructure product business and an improvement over its fourth-quarter results.
“Overall, we are pleased with the EPS and EBITDA beat, driven by strong pricing and growth of Railway Ties,” said Desjardins Securities analyst Benoit Poirier. “However, we anticipate continued questions on the year-over-year drop in volumes for Utility Poles driven by slower purchases as this is the main growth driver for SJ. We expect a positive stock price reaction today despite the minor Utility Poles miss as sentiment coming into the quarter had been quite negative following the Koppers miss.”
Nuvei Corp. (NVEI-T) rose 0.5 per cent after saying it lost US$4.8-million in the first quarter of 2024, compared with a loss of US$8.3 million a year earlier.
The Montreal-based fintech company says revenues were US$335.1-million, up from US$256.5-million during the same quarter last year.
Net loss per diluted share was 5 US cents, compared with 7 US cents a year earlier.
Just over a month earlier, the company said it was going to be taken private by U.S. private equity firm Advent International in a deal valuing the company at about US$6.3-billion. The all-cash transaction values Nuvei’s shares at US$34 each.
The deal is expected to close in late 2024 or the first quarter of 2025.
Nuvei went public less than four years ago, in what was the Toronto Stock Exchange’s largest tech IPO ever.
The privatization deal got the OK from existing Canadian shareholders, Nuvei CEO Philip Fayer, private equity firm Novacap and pension fund CDPQ.
Mr. Fayer, who founded Nuvei in 2003, will indirectly own or control about 24 per cent of the equity in the new private company, with Novacap holding 18 per cent and CDPQ owning 12 per cent.
Mr. Fayer will remain as the company’s chair and chief executive.
Nuvei previously said it will benefit from the significant resources, operational and sector expertise brought by Advent, as well as the capacity for investment.
Advent, founded in 1984, had US$91-billion in assets under management as of Sept. 30. The company is focused on business and financial services, health care, industrial, retail, consumer, leisure and technology investments.
In light of the proposed deal, Advent says that going forward it will suspend earnings conference calls as well as the practice of providing a financial outlook.
Ride-hailing company Lyft (LYFT-Q) projected higher-than-expected gross bookings and core profit for the current quarter on Tuesday, driven by robust demand for its services and benefits from new user and driver features.
It also reported first-quarter revenue and profit above expectations, sending its shares up over 7 per cent in Wednesday trading.
Lyft has been luring consumers with shortened wait times for some pre-scheduled rides and drivers with minimum wage guarantees while trimming costs to boost profitability.
Since CEO David Risher took charge last April, the company has cut hundreds of jobs, reduced the firm’s losses, and managed to keep fare increases in check.
Lyft slashed costs by 13 per cent and narrowed its net loss by 78 per cent in 2023.
The company’s shares rose 36 per cent over the last year.
Lyft is benefiting from the industry-wide trend of a pickup in ride-hailing demand and its strong execution of new functionalities, Mr. Risher told Reuters in an interview.
“Our pickup times now are better than they’ve been in four years,” he said.
The company estimated gross bookings, representing the total value of transactions on its platform, to range from US$4.0-billion to US$4.1-billion in the current quarter ending June, compared to estimates of $3.96 billion, per LSEG data.
Lyft forecast adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) between US$95-million and US$100-million, surpassing analysts’ average expectations of $81.1 million.
For the quarter ending March 31, Lyft’s revenue increased 28 per cent to US$1.28-billion, outperforming analysts’ expectations of US$1.16-billion. It earned 15 US cents per share on an adjusted basis, higher than a 3 US cent per share estimate.
The San Francisco-based firm said it had benefited from heightened demand during morning work commutes and weekend evening trips. It also gained from further expanding its service in Canada and growth in its advertising business.
Rivian Automotive Inc. (RIVN-Q) stuck to a 2024 production forecast well below Wall Street targets and reported a wider-than-expected first-quarter loss as it ended a weeks-long manufacturing halt.
Rivian shares closed narrowly higher in volatile trading as the muted forecast drew questions from some analysts about demand for its pricey R1S SUVs and R1T pickups. High inflation has soured consumer sentiment for electric vehicles, with hybrids gaining sales traction.
Rivian shut down for the start of its second quarter and resumed production of its flagship vehicles late last month. The three-week shutdown allowed it to upgrade its assembly line to reduce costs in the long run.
“We didn’t produce for the first month this quarter. We’ve moved from three shifts to two. That’s all balanced by the fact that the lines are running faster,” Rivian CEO RJ Scaringe told Reuters. “We are optimistic on the guidance we provided, but we’re not updating it.”
Rivian said it will make 57,000 vehicles this year, while nine analysts polled by Visible Alpha expected 62,277.
The factory retooling, however, added costs in the first quarter, and the supplier changes might limit the production ramp and rate in the near future, Rivian said.
“We believe it is being cautious,” said Garrett Nelson, senior equity analyst at CFRA Research. “We also think there is some uncertainty regarding its sales looking out until later this year, so it is possible that sales can’t support a higher production total.”
While a broader slowdown in EV demand has forced automakers to slash prices, Rivian has shied away from major discounting. It has instead introduced lower-priced variants with shorter range.
As a result, the average selling price of its vehicles has fallen to US$88,607 in the first quarter from US$94,123 in the prior quarter.
In March, Rivian revealed its smaller, more affordable R2 SUV aimed at the mass market. Production is due to start in the first half of 2026 at its existing Illinois factory instead of a previously proposed plant in Georgia. That will save the company more than US$2-billion in expenses.
On Tuesday, the company cut its annual capital expenditure forecast by US$550-million to US$1.2-billion. Analysts had expected capital spending of $1.59 billion.
The Amazon.com-backed company has been trimming costs by renegotiating supplier contracts and building some parts, including its drive unit dubbed Enduro, in-house to reduce dependency on vendors.
Revenue for the quarter ended March 31 totaled US$1.2-billion, compared with analysts’ average estimate of US$1.16-billion according to LSEG data.
Rivian’s net loss widened to US$1.45-billion from US$1.35-billion the year-ago quarter, partly due to costs to retool the factory. It posted a loss of US$1.24 per share, steeper than the US$1.17 per share loss expected by Wall Street according to LSEG data.
Reddit (RDDT-N) soared as much as 11 per cent and finished higher by 3.9 per cent on Wednesday after the social media firm floored investors with strong revenue growth and improving profitability in the first earnings since its market debut.
The company surprised Wall Street late on Tuesday with a forecast that it could post an adjusted profit in the second quarter, and its revenue outlook was also far above estimates.
The projections followed better-than-expected results for the first three months of 2024, showing that Reddit’s push to grow its advertising business and content licensing deals with AI-focused companies such as Google were paying off.
“We suspected that Reddit would come out strong out of the gates, and Reddit exceeded our bullish expectations,” Bernstein analyst Mark Shmulik said in a client note.
“Reddit appears to be reaping the benefits of a strong digital ad market, buoyed by some ‘free’ IPO marketing, alongside increased traffic courtesy of their new favorite AI partner Google.”
Several analysts have said that despite being founded in 2005, Reddit was still in early stages of the process to generate ad revenue and should benefit in the coming quarters from expanded ad targeting and measurement tools, among others.
On the decline
Ottawa-based e-commerce platform Shopify Inc. (SHOP-T) forecast its slowest quarterly revenue growth in two years against the backdrop of an uncertain economy and tepid consumer spending, sending its shares slumping 18.5 per cent.
While e-commerce growth has been normalizing after a post-pandemic slump, consumers have been looking to cut down on costs, putting Shopify at a disadvantage despite price hikes and new AI-based tools.
Adding to the company’s pressure, its core clientele is made up of small and medium-sized businesses (SMBs) that have been more susceptible to the hit from sticky inflation.
The company said on Wednesday it expected second-quarter revenue to grow at a high-teens percentage, disappointing investors who had seen average growth of about 26 per cent over the past few quarters.
Analysts estimated current-quarter revenue to grow 19.35 per cent, according to LSEG data.
The company expects operating expenses to be up at a low-to-mid-single digit percentage rate for the second quarter, compared with a 4-per-cent fall in the first three months of the year.
The results included the impact of the sale of its logistics arm to freight forwarder Flexport.
Shopify reported first-quarter revenue of US$1.86-billion, compared with analysts’ average estimate of US$1.85-billion.
Excluding items, earnings of 20 US cents per share also topped expectations of 17 US cents.
In a research note, Citi analyst Tyler Radke, who upgraded Shopify on April 29, said: “Headline numbers were slightly ahead of consensus, but fell short of buyside expectations as a solid GMV [gross merchandise volume] performance(maintaining last Qs 23-per-cent growth) did not translate into the same revenue strength we’re used to with take rates missing our/consensus expectations by 2 basis points. It’s possible this is driven by stronger international or up-market traction (where take rates are lower and newer up-market/international MS ‘Take rate’ drivers are still early). From an expense perspective, SHOP largely performed in-line with prior guidance, with opex up $90-million quarter-over-quarter (though higher spending vs. our more optimistic view of $50-$70-million). Guidance was also mixed, with 2Q revenue growth 1 point below consensus/our estimates with slightly higher spending. Stepping back, Q1 results looks like another expectations miss. The GMV strength is encouraging, and signals e-comm/macro resiliency), the GMV conversion to revenue is lagging and investments are continuing.”
Brookfield Asset Management Ltd. (BAM-T) was down 1.5 per cent after saying it raised US$20-billion in the first quarter and increased its fee-related earnings, but profits declined as the company prepares for a ramp-up in deal-making.
The Toronto-based asset manager said distributable earnings - a measure of cash profits that could be paid out to investors - were US$547-million in the quarter that ended March 31. That was down from US$563-million in the same quarter last year.
Net income was US$441-million, down from US$516-million a year earlier.
But the company’s earnings from fees increased modestly to US$552-million, from US$547-million last year. On average, analyst were expecting fee-related earnings of about US$600-million, according to data from the London Stock Exchange Group.
Brookfield said it has US$106-billion available to invest, and is looking to take advantage of thawing markets as interest rates appear to have peaked and buyers and sellers start to see eye to eye on price more often.
“Greater stability in the markets is creating increased market liquidity,” said chief executive officer Bruce Flatt and president Connor Teskey, in a joint letter to shareholders released Wednesday. “This in turn is leading to greater transaction activity, which is supported by a significant amount of dry powder to invest.”
Since the end of the first quarter, Brookfield closed its acquisition of U.S.-based insurer American Equity Investment Life Holding Co., and also announced it is buying a majority stake in credit manager Castlelake LP, which has US$22-billion in assets under management.
- James Bradshaw
Spin Master Corp. (TOY-T) slipped 2.8 per cent after saying it lost US$54.8-million in the first quarter, compared with a loss of US$1.9-billion a year earlier.
The toy and entertainment company says revenues totalled US$316.2-million, up from US$271.4-million during the same quarter last year.
The acquisition of toy company Melissa & Doug added US$40.4-million to Spin Master’s revenue during the quarter.
Chief financial officer Mark Segal says toy gross product sales excluding the acquisition’s impact were in line with a year earlier, during what’s normally the lowest quarter for the toy industry.
Mr. Segal says the company is already starting to capitalize on cost synergies and identify revenue growth opportunities from the acquisition.
Diluted loss per share was 53 US cents, compared with two cents a year earlier.
“Spin Master reported lower than expected Q1/24 earnings with EBITDA of $19-million, down 39 per cent year-over-year, and lower than our expectations of $37-million and consensus of $31-million,” said Stifel analyst Martin Landry. “The difference vs. our forecasts comes from higher SG&A expenses than expected. Spin Master’s point-of-sale metrics were down 3 per cent Y/Y globally when excluding M&D, with Paw Patrol down 4 per cent Y/Y, Melissa & Doug down 8 per cent Y/Y, and Monster Jam up 32 per cent Y/Y. The decline in POS at Melissa & Doug may raise questions. Spin Masters’ shares were down 11 per cent in the last month, suggesting that expectations were muted heading into the Q1/24 results. While the unchanged 2024 guidance is reassuring, typically Q1 represents less than 15 per cent of TOY’s full year revenues and thus would not expect a significant share price reaction [Wednesday].”
Sleep Country Canada Holdings Inc. (ZZZ-T) was lower by 2.2 per cent after it reported its first-quarter profit fell compared with a year ago as its revenue edged higher.
Sleep Country chief executive Stewart Schaefer says shopping patterns remained volatile as consumers continued to navigate uncertain times.
The mattress retailer says it earned $8.7-million or 26 cents per diluted share for the quarter ended March 31 compared with a profit of $11.3-million or 32 cents per diluted share a year earlier.
Revenue totalled $209.7-million, up from $206.5-million in the first quarter of 2023.
Sleep Country says same-store sales in the quarter were down 1.6 per cent compared with the same quarter last year.
On an adjusted basis, the company says it earned 28 cents per diluted share in its latest quarter, down from an adjusted profit of 37 cents per diluted share a year earlier.
In a research note, Stifel analyst Martin Landry said: “Sleep Country reported lower than expected Q1/24 results with EPS of $0.28, down 24 per cent year-over-year, worse than our expectations $0.32 and consensus of $0.36. However, SSS [same-store sales] are trending in the right direction as the pace of SSS decline in Q1/24 is the lowest of the last seven quarters. The EPS miss vs. our forecasts comes mainly from higher SG&A expenses than expected, which reached 24.9 per cent of sales, the highest level in more than 5 years. This translated into and EBITDA margin contraction of 170 basis points year-over-year, a continuation of the EBITDA margin pressures seen in the last 6 quarters. We expect the EBITDA margin to expand going forward as integration benefits from the acquired DTC brands are realized. However, comments during tomorrow’s earnings call will be key. The better than feared SSS growth could offset the disappointment on EPS which may result in a muted share reaction tomorrow.”
Montreal-based The Lion Electric Co. (LEV-T) dropped 8.4 per cent after saying it lost US$21.7-million in its latest quarter compared with a loss of US$15.6 million in the same quarter last year as it faced higher manufacturing costs related to the ramp up of new products.
The maker of all-electric medium and heavy-duty vehicles says the loss amounted to 10 US cents per diluted share for the quarter ended March 31 compared with a loss of 7 US cents per share a year earlier.
Revenue for the quarter totalled US$55.5-million, up from US$54.7 million in the first quarter of 2023.
Lion says the increase in revenue was helped by a higher proportion of U.S. vehicle sales which resulted in a more favourable product mix, offset in part by a drop in sales volumes.
The company says it delivered 196 vehicles for the quarter, down from 220 delivered in the same quarter last year.
The company announced last month that it was cutting about 120 jobs. The move followed the elimination of more than 100 jobs at the company in February and 150 positions in November last year.
Analyst Benoit Poirier of Desjardins Securities said: “[Wednesday] morning, Lion Electric reported weaker-than-expected 1Q24 results. Revenue was US$55.5-million (up from US$54.7-million a year ago but down from US$60.4-million in 4Q23), below our forecast of US$84.8-million and consensus of US$69.4-million. The company delivered 196 vehicles in 1Q (184 buses, 12 trucks), below our forecast of 280 deliveries (including 30 trucks) and consensus of 211. Deliveries were once again impacted by delays for ZETF program applications. We derive an implied ASP for both trucks and buses of US$283,000/unit (vs US$321,000/unit last quarter).”
“We view these results as slightly negative given the ongoing drag on bookings/deliveries and the sequential decrease in LEV’s liquidity position.”
Uber Technologies Inc. (UBER-N) posted a surprise first-quarter loss and forecast gross bookings in the second quarter below Wall Street expectations, sending the shares of the ride-share and food delivery company down 5.7 per cent.
The report suggests that Uber’s growth could be slowing after a strong 2023 in which it dominated the U.S. ride-share market and delivery business and posted its first annual profit.
Uber reported a net loss of US$654-million, driven by legal charges and provisions and those related to fair valuation of certain company investments. Analysts were expecting a net profit of US$503.1-million.
Uber also missed market expectations for quarterly gross bookings, a key metric that indicates the total dollar value of transaction on the platform.
CFO Prashanth Mahendra-Rajah attributed it to softer ride-share demand in Latin America and the impact from certain holidays shifting into the first quarter.
“We were already expecting a deceleration in average spending in several markets due to slower-than-expected economic activity in the US in Q1 and persistent consumer pressures. However, this is way above the base case,” said Thomas Monteiro, senior analyst at Investing.com.
Uber operates in about 70 countries and offers services, including freight booking. It had a 72-per-cent share in the U.S. ride-hailing market in the March quarter, up from 68 per cent two years ago, according to YipitData.
Uber said it expects second-quarter gross bookings, or the total dollar value earned from its services, in the range of US$38.75-billion to US$40.25-billion, below estimates of US$40.04-billion.
Revenue rose 15 per cent to US$10.13 billion, narrowly beating the estimate of US$10.11-billion. On an adjusted basis, Uber lost 32 US cents per share, compared with expectations of 23 US cent profit.
Tesla Inc. (TSLA-Q) slipped 1.7 per cent on a Reuters report U.S. prosecutors are examining whether it committed securities or wire fraud by misleading investors and consumers about its electric vehicles’ self-driving capabilities.
Tesla’s Autopilot and Full Self-Driving systems assist with steering, braking and lane changes - but are not fully autonomous. While Tesla has warned drivers to stay ready to take over driving, the Justice Department is examining other statements by Tesla and Chief Executive Elon Musk suggesting its cars can drive themselves.
U.S. regulators have separately investigated hundreds of crashes, including fatal ones, that have occurred in Teslas with Autopilot engaged, resulting in a mass recall by the automaker.
Reuters exclusively reported the U.S. criminal investigation into Tesla in October 2022, and is now the first to report the specific criminal liability federal prosecutors are examining.
Investigators are exploring whether Tesla committed wire fraud, which involves deception in interstate communications, by misleading consumers about its driver-assistance systems, the sources said. They are also examining whether Tesla committed securities fraud by deceiving investors, two of the sources said.
The Securities and Exchange Commission is also investigating Tesla’s representations about driver-assistance systems to investors, one of the people said.
With files from staff and wires