A survey of North American equities heading in both directions
On the rise
Shares of Vancouver-based Aritzia Inc.’s (ATZ-T) soared almost 21 per cent following the release of better-than-anticipated third-quarter 2024 financial results after the bell on Wednesday.
The clothing retailer reported revenues of $654-million for the quarter, up 5 per cent year-over-year and exceeding the Street’s expectation of $623-million. That was driven by same-store sales growth of 0.5 per cent, topping the consensus of a 3-per-cent drop, while earnings per share of 47 cents was a decline of 30 per cent from a year ago but 6 cents better than the consensus.
Reaction from the Street: Two analysts upgraded Aritzia shares
“As expected Aritzia lost market share during the quarter given a lack of product innovation,” Stifel analyst Martin Landry said. “This trend is expected to continue into Q4FY24 as the new spring/summer collection will mostly impact Q1FY25. We expect same-store-sales growth to return closer to historical levels in FY25, expecting a growth of 5.7 per cent, but our visibility is limited. Competition is intense in the apparel sector, and it’s not clear if the Aritzia brand is as hot as it was in 2021 and 2022. Store openings in calendar 2024 should help drive new customer growth and boost ecommerce sales.”
Cogeco Communications Inc. (CCA-T) reversed course in afternoon trading and closed up 0.2 per cent following the Wednesday post-market release of first-quarter financial results that largely fell in line with the Street’s expectations.
Consolidated revenue slid 1.9 per cent year-over-year to $748-million, missing the Street’s projection of $752-million, however EBITDA of $359-million, down 2.3 per cent, topped the consensus estimate of $349-million.
“Broadband subscriber loading in Canada was healthy as Oxio continued to draw more customers,” said Scotia analyst Maher Yaghi in a note. “In the U.S., broadband loading was weak again with subscriber loading remaining under pressure both in and outside the Ohio segment. We don’t expect to see a material improvement in broadband loading in the US in F2024 as Verizon and T-Mobile continue to be very active in selling FWA to effectively monetize unused spectrum capacity within their footprint. FY2024 guidance remains unchanged calling for flat revenues and EBITDA and FCF to decline by 5-15 per cent year-over-year.”
Parent company Cogeco Inc. (CGO-T) finished narrowly lower after it reported its first-quarter profit fell compared with a year earlier as its revenue also edged lower.
It reported a profit attributable to owners of the corporation of $34.5-million or $2.21 per diluted share for the quarter ended Nov. 30.
The result was down from a profit of $42.1-million or $2.67 per diluted share in the same period a year earlier.
Revenue for the quarter totalled $776.2-million, down from $789.7 million a year earlier.
On an adjusted basis, Cogeco says it earned $2.57 per diluted share in its latest quarter, down from an adjusted profit of $2.71 per diluted a year earlier.
Vancouver-based Solaris Resources Inc. (SLS-T) jumped 5.3 per cent after announcing an agreement for an approximately $130-million private placement of common shares with an affiliate of China’s Zijin Mining Group Co., Ltd..
The deal comes with a subscription price of $4.55 per share, which represents a 14-per-cent to its Wednesday closing price.
“Zijin is one of the most successful major mining companies in the world. It boasts an unprecedented track record of growth from its origins operating a single gold mine in the early 1990s to becoming a global major operating in 16 countries with total revenue far in excess of its gold mining peers, including excepted top five-ranked copper production in 2024,” said Solaris president and CEO Daniel Earle in a statement. “We take tremendous pride in announcing our new strategic partnership with Zijin and look forward to leveraging its deep technical expertise and financial capacity in delivering the full potential of one of the last remaining greenfield copper districts at low elevation and adjacent to infrastructure available globally.”
Chesapeake Energy (CHK-Q) was higher after said on Thursday it would buy smaller rival Southwestern Energy Co. (SWN-N) in an all-stock transaction valued at US$7.4-billion, a deal that would enable the second-largest U.S. natural gas producer to take the top spot.
The move extends a recent spate of multi-billion deals in the U.S. energy sector including Exxon Mobil’s (XOM-N) US$60-billion Pioneer Natural Resources (PXD-N) offer and Chevron’s (CVX-N) US$53-billion agreement for Hess (HES-N), as companies seek lucrative acreage to rebuild depleting assets.
Chesapeake has offered US$6.69 per Southwestern share held, representing a discount of about 3% to the stock’s last close, according to Reuters calculation.
Southwestern’s shares fell in Thursday trading. The stock had gained 7.7 per cent since the Wall Street Journal reported on the deal talks last week.
U.S. natural gas prices are expected to tick higher from a jump in exports, analysts have said, after a gloomy 2023 due to record production, ample inventories and a mild winter.
The 40-per-cent plunge in prices in 2023 from a year earlier also weighed on profits at natural gas producers. Southwestern reported third-quarter net income that was a tenth of its year-earlier earnings.
The Southwestern bid is the biggest in Chesapeake’s efforts to add heft to a pivot to natural gas assets since emerging from bankruptcy in 2021. Last year, it beefed up its position in the gas-rich shale plays of the U.S. northeast with its $2.5 billion buyout of Chief E&D.
Oklahoma City-based Chesapeake exited Eagle Ford basin last year in multiple sales for total proceeds of more than US$3.5-billion to focus on the gas-rich Marcellus and Haynesville shale formations.
Most of Southwestern’s production is in Appalachia’s shale formations and the Haynesville basin in Louisiana.
Combining these acreage the pro forma company has current net production of about 7.9 billion cubic feet equivalent per day (Bcfepd), the companies said.
Occidental Petroleum Corp. (OXY-N) saw gains after Warren Buffett-led Berkshire Hathaway (BRK.B-N, BRK.A-N) has acquired an additional 5.2 million shares, bringing its stake in the oil company closer to 28 per cent, according to a regulatory filing on Thursday.
Berkshire purchased the shares between Dec. 19 and Dec. 21 for about US$312.1-million, with its stake in Occidental totaling to 27.7 per cent, a filing with the U.S. Securities and Exchange Commission showed.
Last week, Berkshire Hathaway acquired nearly 10.5 million shares of Occidental for about US$588.7-million after the company agreed to buy U.S. shale oil producer CrownRock in a US$12-billion deal.
Motor fuels distributor Sunoco LP (SUN-T) rose after it said on Thursday it has agreed to sell 204 convenience stores in West Texas, New Mexico and Oklahoma to 7-Eleven Inc for about US$1.0-billion.
Sunoco said the proceeds from the sale will allow them to materially reduce leverage and help them with future growth.
The Dallas-based company also announced it will acquire liquid fuels terminals in Amsterdam in the Netherlands and Bantry Bay in Ireland from Zenith Energy. Sunoco did not provide a transaction value was for the deal.
Sunoco’s liquid fuels acquisition, which is expected to close in the first quarter of 2024, will provide supply optimization for the company’s existing East Coast business.
Netflix (NFLX-Q) was up 2.9 per cent on news its ad-supported tier has reached more than 23 million global active users per month, the Variety magazine reported on Wednesday, quoting the streaming giant’s advertising chief Amy Reinhard.
The ad tier plan was launched in November 2022 in 12 markets, including the United States, to attract more customers and add a new revenue stream as competition for online viewers intensified.
A year after its launch, Netflix said the ad tier plan had reached 15 million active users per month.
The streaming giant has been hiking prices on its ad-free options in an effort to nudge more subscribers to the other tier, where commercials help bring in more revenue.
“Of Netflix’s customers on ad-supported plans, 85 per cent of are streaming on the platform for more than two hours per day,” the report quoted Ms. Reinhard as saying at the Variety Entertainment Summit at CES 2024 at Las Vegas’ Aria Resort and Casino.
U.S.-listed shares of Infosys (INFY-N), India’s No. 2 IT services provider, increased 4 per cent as it tightened its full-year revenue forecast on Thursday after reporting its first year-on-year drop in quarterly profit in over four years and missing expectations on sluggish demand from clients.
The US$245-billion information technology (IT) sector, which had gained immensely from a pandemic-induced digital services boom, has been struggling in recent quarters as clients cut spending on non-essential projects amid inflationary pressures and recession fears.
Consolidated net profit fell 7.3 per cent to 61.06 billion rupees (US$735.55-million) in the seasonally weak third quarter from a year earlier. Analysts, on average, expected a profit of 61.67 billion rupees, as per LSEG data.
Infosys revised its revenue growth forecast for a third consecutive quarter to 1.5-2 per cent on a constant currency basis for the full year from 1-2.5 per cent previously.
Aura Minerals Inc. (ORA-T) rose 0.5 per cent following the late Wednesday release of its fourth-quarter preliminary production results, which saw its gold output rise by 7 per cent from the previous quarter and 2 per cent year-over-year to 69,194 equivalent ounces.
The minor attributed the gain to “improved operating performance” at its three of its mines - Apoena, Minosa (San Andrés) and Alma.
On the decline
Cryptocurrency-linked stocks, like Hut8 Corp. (HUT-T), Bitfarms Ltd. (BITF-T) and Galaxy Digital Holdings Ltd. (GLXY-T), dipped after the U.S. securities regulator approved the first U.S.-listed exchange-traded funds (ETF) to track Bitcoin.
Bitcoin held near 21-month highs on Thursday, while the second-biggest cryptocurrency ether gained on hopes that ETFs tracking it could be the next to win approval.
Spot bitcoin ETFs may face uphill battle to widen token’s appeal
Several exchange-traded funds (ETFs) tied to the spot price of bitcoin began trading in the U.S. on Thursday in a landmark moment for the cryptocurrency industry that has been seeking regulatory approval for the financial product for over a decade.
The green light by the U.S. Securities and Exchange Commission finally came late on Wednesday following months-long talks with top asset managers such as BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck.
The regulator approved 11 such ETFs, paving the way for popularizing investments in the world’s biggest crypotcurrency without the risk of holding the digital token directly.
“The approval has the potential to simplify and secure Bitcoin investments for a broader investor base, which may reshape the dynamics of cryptocurrency investments,” said Rajeev Bamra, senior vice-president of digital finance at Moody’s Investors Service.
BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, Valkyrie Bitcoin Fund and ARK 21Shares Bitcoin ETF, among others, have begun trading.
Thomson Reuters Corp. (TRI-T) dipped 0.3 per cent after it said on Thursday it has offered to buy Swedish e-invoicing and tax solutions company Pagero for 6.4 billion crowns (about US$627-million), topping an earlier offer from U.S. tax technology firm Vertex.
Thomson Reuters offered to pay 40 crowns in cash for each Pagero share, which is a premium of 11 per cent to the stock’s close on Wednesday and higher than Vertex’s offer of 36 crowns per share.
Pagero, whose services involve digitizing and automating accounts processes, said an independent bid committee of its board switched its recommendation from Vertex’s offer to the Thomson Reuters offer.
Thomson Reuters, which owns the Checkpoint tax and accounting service, said Pagero’s e-invoicing compliance capabilities would expand its indirect tax offerings.
Thomson Reuters, which also owns the Westlaw legal database and Reuters news agency, has made multiple deals in the past few years.
In May last year, the company’s CFO told Reuters News that it will have a US$10-billion M&A budget until 2025. Since then, it has announced two acquisitions.
The first was Britain-based Imagen, a digital content asset management company, for an undisclosed price and the second was California-based Casetext, which helps legal professionals conduct research, analysis and prepare documents using generative AI, for $650 million.
In 2022, Thomson Reuters bought SurePrep LLC, a U.S.-based provider of tax automation software and services, for US$500-million in cash.
Citigroup Inc. (C-N) declined 1.8 per cent after it booked about US$3.8-billion in combined charges and reserves that will erode its fourth-quarter earnings set to be reported on Friday, according to a filing.
The bank stockpiled US$1.3-billion in reserves to cover risks outside the U.S., particularly currency exposure in Argentina and Russia, it said on Wednesday.
It booked US$780-million in restructuring charges, include severance pay for employees, related to the lender’s own sweeping reorganization.
The company recorded a charge of about US$1.7-billion to replenish a Federal Deposit Insurance Corp fund that was drained after the collapses of Silicon Valley Bank and Signature Bank.
“While we rarely provide information about the results of the quarter in advance of scheduled earnings announcement dates, we thought this was a prudent step in our commitment to building credibility and being transparent,” Mark Mason, Citi’s finance chief, wrote in a separate statement. “The items we disclosed today do not change our strategy.”
The US$720-million reserve for Argentina was set aside to cover risks “based on prevailing economic trends, currency devaluation and geopolitical risk that may impact Argentina’s ability to sustain external debt service,” Citi said in the filing.
With files from staff and wires
David Leeder