A survey of North American equities heading in both directions
On the rise
Suncor Energy (SU-T) jumped 4.6 per cent in the wake of raising its quarterly dividend on Tuesday after the integrated oil and gas firm beat estimates for third-quarter profit, as it benefited from higher oil production and demand for refined products.
Data from the U.S. Energy Information Administration showed that the country’s total oil consumption rose in July to the highest seasonal level since 2019.
Reaction from the Street: Wednesday's analyst upgrades and dowgrades
In July, gasoline demand was also at the highest seasonal levels since 2019, whereas jet fuel demand was the highest for any month since August 2019.
The Canadian firm’s quarterly upstream production was up 20 per cent at 828,600 barrels per day (bpd), from the previous year and refinery utilization was up at 105 per cent, with throughput of 487,600 bpd.
Last year, Suncor completed the acquisition of French energy firm TotalEnergies’ Canadian operations for $1.47-billion to bolster its bitumen production capacity.
Its total oil sands bitumen production in the quarter ended Sept. 30 was at 909,600 bpd, up 15.6 per cent from the previous year.
The company also raised its quarterly dividend by 5 per cent to 57 cents per share, from the prior quarter.
The company reported an adjusted profit of $1.48 per share for the three-month period, compared with analysts’ average estimate of $1.08 per share, according to data compiled by LSEG.
Shares of CAE Inc. (CAE-T) soared almost 12 per cent on Wednesday on news its chief executive is set to step aside after a 15-year run as the Canadian aviation training company tries to get its defence business back on track.
Marc Parent will relinquish his role at the company’s annual meeting next August, Montreal-based CAE said in a statement after markets closed Tuesday. The company said it has hired an executive search firm to hunt for a replacement.
“Marc’s lasting impact on CAE and global aerospace is unanimously recognized by the board,” CAE Chairman Alan MacGibbon said in the statement. “As we continue our succession process for the next CEO of CAE, we are fortunate to benefit from the considerable leadership depth he has built across the organization.”
Mr. Parent is widely credited with expanding CAE’s business model from an industrial company focused on manufacturing flight simulators to a service company that trains pilots, both civil and military. The company’s revenue has nearly doubled under his tenure to $4.3-billion and the share price has more than tripled.
But the company has hit some turbulence of late.
In May, CAE announced it would take an impairment charge of $568-million on its defence business and another $126-million in contract adjustments and asset writedowns tied to the unit. At the time, Mr. Parent called it “a disappointing but necessary step” as his team works to improve defence profit margins.
- Nicolas Van Praet
Alimentation Couche-Tard Inc. (ATD-T) increased 1.7 per cent on news Japan’s Seven & i Holdings is weighing a takeover offer from a member of its founding Ito family, a white-knight bid that could thwart efforts by the Canadian company. to buy the 7-Eleven chain.
A special committee of Seven & i directors is reviewing options including Couche-Tard’s offer as well as a non-binding and confidential proposal received from Junro Ito, a Seven & i vice-president and director, the Japanese company said in a statement Wednesday. Mr. Ito’s family founded Seven & i.
“We are committed to an objective review of all alternatives before us,” Stephen Dacus, chair of the special committee, said in a statement. He said directors will “continue to engage with all parties” in a bid to maximize value and that no decision has been made to pursue a transaction.
Mr. Ito’s offer, which he’s making with an affiliate called Ito-Kogyo, would be a management buyout to take the company private, according to Japanese media. Taking that route would eliminate pressure on the company from shareholders pushing for asset sales. It could also become a preferred option if Couche-Tard goes hostile with its offer.
Mr. Ito is working with trading conglomerate Itochu on the offer and has the support of three of Japan’s top megabanks for a bid worth around 9 trillion yen (or US$58-billion), Bloomberg reported. Seven & i did not confirm the value of the bid and did not provide any other specifics in its statement.
Couche-Tard is currently offering US$47-billion or US$18.19 a share. The Ito group’s offer would be worth about US$22 a share, just over 20 per cent higher than Couche-Tard’s offer, according to Bank of Montreal analyst Tamy Chen.
- Nicolas Van Praet
Nuvei Corp. (NVEI-T) was higher by 1.7 per cent after saying it has received all the regulatory approvals it requires for the company to be taken private.
The Montreal-based financial technology firm due to be bought by American private equity firm Advent International and taken private at a US$6.3-billion valuation now says it expects the transaction to close on Friday.
The company reported Tuesday evening that its third-quarter net income totalled US$17.2-million compared with a net loss of US$18.1-million a year ago.
The company says the profit amounted to 10 US cents per diluted share attributable to shareholders for the quarter ended Sept. 30 compared with a loss of 14 US cents per share a year earlier.
On an adjusted basis, Nuvei earned 34 US cents per diluted share attributable to shareholders in its latest quarter compared with an adjusted profit of 39 US cents per share in the same quarter last year.
Revenue increased 17 per cent to US$357.6-million in the latest quarter from US$304.9-million a year prior.
Rivian Automotive Inc. (RIVN-Q) saw large gains in reaction to Volkswagen Group raising its investment in it by 16 per cent to US$5.8 billion, the two automakers said on Tuesday, as the companies kick off their planned joint venture to develop electric vehicle architecture and software.
The companies said in June that VW would invest US$5-billion in Rivian - a lifeline for the loss-making EV startup that is gearing up to roll out a smaller, cheaper SUV called R2 amid high borrowing costs and slowing EV demand.
“This partnership and this deal secures the capital for us to ensure that we can’t only take Rivian through the launch of R2 at Normal, but secures the launch of and growth of R2 in our Georgia facility and through (to being) cash flow positive for us as a business,” Rivian CEO RJ Scaringe told reporters.
R2, the first vehicle to use the new architecture, will be made at its factory in Normal, Illinois. The company has delayed the construction of its plant in Georgia, applying for a federal loan last month to start building the factory.
New vehicles from VW unit Scout Motors vehicles will also be among the first to use the new architecture.
The joint venture - named Rivian and VW Group Technology LLC - aims to integrate advanced electrical infrastructure and Rivian’s software technology for future EVs of both companies, across all relevant vehicle segments, including subcompact cars, the firms said.
On the decline
Loblaw Companies (L-T) was lower by 2.4 per cent after it missed third-quarter revenue estimates on Wednesday, hurt by a slowdown in the demand for its non-essential goods such as household items and electronics.
Consumers have been holding back on discretionary spending as prices remain relatively high despite inflationary trends declining, hurting demand for higher-end brands offered by retailers such as Loblaw.
However, demand for value deals has helped Loblaw’s discount banners such as No Frills and Maxi.
“Drug front store sales reflected continued strength in the beauty category but were pressured by the Company’s exit from certain low margin electronics categories and lower customer spend on convenience items,” the company said.
Same-store sales in the food retail segment grew 0.5 per cent in the third quarter, compared with 4.5 per cent a year ago.
The company’s quarterly revenue rose to $18.54-billion from $18.27-billion a year earlier, compared with analysts’ average estimates of $18.65-billion, according to data compiled by LSEG.
Loblaw’s adjusted earnings per share was $2.50 in the third quarter, topping expectations of $2.45.
In a research note, Desjardins Securities analyst Chris Li said: “Adjusted EPS of C$2.50 was in line with our estimate and slightly ahead of consensus of C$2.44. vs our expectations, we estimate a slightly lower tax rate (24.3 per cent vs our 26.5 per cent), and higher gains from sale-leasebacks had a favourable impact on EPS. These were partly offset by higher-than-expected non-controlling interests ($40-milion vs our $20-million), driven by an increase in franchisee earnings after profit-sharing. We estimate that these three factors had a net favourable impact of 0.09. Food SSSG was negatively impacted (~80bps) by the timing of Thanksgiving sales shifting from 3Q into 4Q this year. Excluding this impact, food SSSG improved sequentially by 110bps. .... Overall, 3Q results reinforced L’s consistent and solid execution despite navigating through some transitory headwinds. L trades at 19.9 times NTM [next 12-month] EPS vs 18.0 times for MRU and 13.3 times for EMP.A.”
Power Corporation of Canada (POW-T) was down 4 per cent after saying its net earnings for the third quarter were $371-million. That’s down from $975-million during the third quarter of 2023.
The Montreal-based management and holding company says net earnings per share were 58 cents, down from $1.47 during the same quarter last year.
Adjusted net earnings from continuing operations were $542 million, compared with $1.01 billion a year earlier.
Power Corp., which holds a 68.2-per-cent interest in Great-West Lifeco, says that company’s net earnings from continuing operations were $859 million, down from $936 million during the same quarter last year.
Power Corp. holds a 62.5-per-cent stake in IGM Financial Inc. and says that company’s net earnings for the quarter were $239.2-million, up from $209.8 -million.
Maple Leaf Foods Inc. (MFI-T) slid 5.3 per cent after it reported a third-quarter profit of $17.7-million compared with a loss of $4.3 million in the same quarter last year.
The company says the profit amounted to 14 cents per share for the quarter ended Sept. 30 compared with a loss of four cents per share a year earlier.
Sales for the quarter totalled $1.26-billion, up from $1.24-billion a year ago.
On an adjusted basis, Maple Leaf says it earned 18 cents per share in its latest quarter compared with an adjusted profit of 13 cents per share in the same quarter last year.
Maple Leaf, which is working to spin off its pork business into a new, publicly traded company to be called Canada Packers Inc., also says it has identified a way to implement the plan through a tax-free “butterfly reorganization.”
The company says it continues to expect to complete the transaction next year, however the spinoff under the new structure is subject to an advance tax ruling from the Canada Revenue Agency and will take longer than first anticipated.
Spirit Airlines’ (SAVE-N) shares plunged after a report the U.S. carrier is preparing to file for bankruptcy protection, while the company said it is in talks with creditors.
The ultra-low-cost carrier said on Tuesday it is in constructive discussion with its creditors and continues to explore strategic alternatives to improve liquidity.
The negotiations, with a supermajority of the noteholders, have remained productive, advanced materially and are resuming in the near term, it added.
If the agreement fails, it will lead to the cancellation of existing equity and it will consider all alternatives, the statement said.
The company said its adjusted operating margin in the third quarter would be down 12 per cent from last year.
Earlier in the day, the Wall Street Journal reported that the company is preparing to file for bankruptcy protection after merger talks with Frontier Airlines broke down.
With files from staff and wires