A roundup of some of the North American equities making moves in both directions
On the rise
Shares of Great-West Lifeco Inc. (GWO-T) were higher after it beat analyst estimates for second-quarter core profit, which rose from a year earlier driven by strong growth in earnings from its U.S. business and higher equity markets.
Base earnings, which excluded one-off items, were $826-million, or 89 cents a share, in the three months ended June 30, from $706-million, or 76 cents, a year earlier. Analysts had expected 79 cents.
Canada’s No.3 life insurer by market value has been expanding its U.S. business in recent years by striking deals. Massachusetts Mutual Life Insurance Co, which Lifeco acquired at the end of December, contributed $63-million to base earnings, and helped more than double profit from the U.S. to $190 -million, the company said in a statement.
That compared with a 7-per-cent drop in base earnings from its Canadian business, primarily due to lower investment contributions, a 3% increase in Europe and a 9-per-cent rise in its corporate and risk solutions unit, which includes investment and reinsurance.
Last month, Lifeco’s U.S. unit agreed to buy Prudential Financial Inc’s full-service retirement business for about $4.45-billion, which would lift the U.S. contribution to earnings to 30 per cent by 2023.
Reported net income attributable to shareholders declined to 84 cents from 93 cents a year earlier, due to the positive effects of changes in actuarial assumptions and market-related impacts in the prior period.
Lifeco shares are up 24 per cent this year, compared with a 17-per-cent gain in the Toronto stock benchmark.
In a research note, RBC Dominion Securities analyst Darko Mihelic said: “Overall, we have a positive view on Q2/21 results. Base EPS excluding the net tax benefit was above our estimate and consensus. Results in the U.S. were well above our forecast, driven by the strong MassMutual contribution. Run-rate cost synergies also appear to be on track.”
Sleep Country Canada Holdings Inc. (ZZZ-T) soared with the release of better-than-expected second-quarter results.
After the bell on Tuesday, the retailer reported revenue of $192.2-million, up 67.3 per cent year-over-year and above the Street’s forecast of $165.4-million despite pandemic-related store closures. Adjusted diluted earnings per share of 48 cents also blew past estimates (31 cents) as same-store sales jumped 65.5 per cent from the same period a year ago.
Canaccord Genuity Corp. (CF-T) was up as it generated more than half-a-billion dollars in revenue last quarter – an increase of almost 40 per cent from the same quarter a year ago – driven mostly by a surge in fee revenue from its advisory business.
The Toronto-based investment bank raked in a profit of $81-million on revenue of $523-million for the fiscal first quarter ending June 30, 2021, compared to a profit of $29-million on $377-million in revenue a year prior.
Chief executive Dan Daviau said in an interview that Canaccord generated its highest-ever revenue from advising on mergers and acquisitions last quarter, and that he expects this pace of M&A deals to continue for the rest of the year. Canaccord generated $78-million in fees from advisory work, a 271-per-cent increase from the same quarter last year.
The quarter’s revenue, however, was almost 25 per cent lower than the $692-million that Canaccord generated in the first three months of 2021, which was characterized by trading volatility and a blistering pace of equity financings and initial public offerings – all of which contribute significantly to an investment bank’s revenue.
- Vanmala Subramaniam
Vancouver-based Finning International Inc. (FTT-T) jumped with second-quarter results that beat the Street and an increase to its dividend for the 20th consecutive year.
After the bell on Tuesday, Finning reported adjusted earnings per share of 56 cents, topping the consensus projection by 11 cents.
“With demand for Caterpillar equipment, parts, and service in recovery mode, management’s past efforts to reduce overhead and the cost to serve drove operating leverage above expectations,” said Canaccord Genuity’s Yuri Lynk.
Activision Blizzard Inc. (ATVI-Q) on Tuesday forecast current-quarter adjusted revenue above estimates, as it expects demand for its popular franchises Call of Duty and Candy Crush to remain strong, sending its shares higher.
Video game publishers have seen a jump in consumer spending, as the COVID-19 pandemic made social distancing a norm last year, preventing casual gatherings with friends and family.
With the easing of restrictions due to vaccine roll-outs, however, gamers are cutting their console time for outdoor activities, causing a dip in video games sales. Last week, Microsoft said its fourth-quarter revenue for Xbox content and services fell.
Activision Blizzard’s raised full-year adjusted revenue forecast of US$8.65-billion came in below analysts’ expectations of US$8.77-billion, according to IBES data from Refinitiv.
The company also forecast third-quarter adjusted revenue at US$1.85-billion, above estimates of US$1.81-billion.
Earlier on Tuesday, the company said J. Allen Brack, president of Blizzard Entertainment, would leave the firm after nearly three years in the role. Jen Oneal and Mike Ybarra have been appointed co-leaders of Blizzard.
The departure comes weeks after the California Department of Fair Employment and Housing filed a lawsuit against Activision over equal pay violations, sex discrimination, and sexual harassment.
“We remain intensely focused on the well-being of our employees and we are committed to doing everything possible to ensure that our company has a welcoming, supportive and safe environment where all of our team members can thrive,” Chief Executive Officer Bobby Kotick said on Tuesday.
Santa Monica, California-based Activision Blizzard reported adjusted revenue of US$1.92-billion for the second quarter ended June 30, slightly above expectations of US$1.90-billion.
On the decline
Gibson Energy Inc. (GEI-T) fell following the late Tuesday release of better-than-expected second-quarter results and the sanctioning of construction of new tankage at its Edmonton Terminal.
The Calgary-based company reported adjusted EBITDA of $128-million, easily exceeding the Street’s forecast of $105-million, while discounted cash flow per share of 63 cents also topped the consensus projection (46 cents).
RBC Dominion Securities analyst Robert Kwan said: “We positively view the quarterly disclosures, in particular the new tank project at the Edmonton Terminal contracted on a longterm, take-or-pay basis to a new investment grade energy customer with economics consistent with Gibson’s 5-7x targeted build multiple. Financials wise, we believe the market was a bit nervous heading into the quarter, particularly with respect to Marketing, which actually came in above the Q2/21 guidance range of $10-15 million. Nevertheless, we believe the market will look to the conference call for management’s Marketing outlook for Q3/21.”
General Motors Co. (GM-N) was lower after swung to a second-quarter profit from a loss last year when the COVID-19 pandemic shut operations, and raised its full-year forecast despite an US$800-million recall bill and uncertainty over Covid and a global semiconductor shortage.
Net income was US$2.8-billion, or US$1.90 a share, compared with a loss in the year-earlier quarter of US$806-million, or 56 US cents a share. Analysts were expecting US$2.23 a share, according to IBES data from Refinitiv.
GM said adjusted earnings before interest and taxes were a record US$4.1-billion, and US$8.5-billion in the first half. It boosted full-year EBIT-adjusted guidance to US$11.5-billion-$13.5-billion, from the previous US$10-billion-$11-billion.
The company expects to lose production of about 100,000 vehicles in North America in the second half, and anticipates commodity costs rising by US$1.5billion-$2.0-billion.
Chief Executive Officer Mary Barra, in an earnings call on Wednesday, said GM will “continue to see the impact this year” of the chip shortage, and expects it will continue into the new year.
The largest of the Detroit automakers benefited from strong demand and the high prices it was able to charge for its popular trucks and sport utilities, which offset costs related to the Bolt recalls and production disruptions caused by shortages of semiconductors.
Ms. Barra said GM’s U.S. inventories are “pretty lean,” at 25 days’ supply. “I anticipate it will be pretty tight for the rest of the year and continuing into next.”
Lyft Inc. (LYFT-Q) slid as it posted an adjusted quarterly profit three months ahead of target as it kept costs down while rides rebounded.
The company made an adjusted profit before interest, taxes, depreciation and amortization for the first time in its nine-year history. For the three months ending in June it posted adjusted earnings of US$23.8-million. The adjustments exclude one-time costs, primarily stock-based compensation, which drove a US$252-million net loss.
Shares of Uber Technologies Inc. (UBER-N) also fell, as the Lyft results raised expectations for its larger rival, which releases its own quarterly report on Wednesday.
“Our business model has never been more healthy,” Lyft President John Zimmer said in an interview with Reuters, citing greater profitability from technology and efficiency improvements the company has made over the last couple of years.
Mr. Zimmer said the company would be able to keep costs down even when ridership returns to pre-pandemic levels.
“We expect to remain profitable on an adjusted basis going forward and are hopeful that the country will continue to come back,” Zimmer added.
Lyft on Tuesday said its platform had continued to grow in July despite increasing concerns over the more contagious Delta variant of the coronavirus spreading throughout the United States.
Analysts had expected an adjusted EBITDA loss of nearly US$50-million, according to Refinitiv data. Lyft originally had said it would achieve the profitability goal by the end of this year, then moved the target ahead to the third quarter.
The earlier-than-expected profitability announcement came as ridership grew by more than 3.6 million from the first three months of the year to more than 17 million riders during the second quarter - a time when U.S. cities lifted pandemic-related restrictions and more Americans returned to the road.
Second-quarter revenue came in at US$765-million, above analyst estimates for US$697-million.
Lyft was able to take advantage of its leaner cost structure thanks to drastic cost cuts over the last year. The company slashed around US$2.5-billion from its expenses in 2020, including through widespread layoffs.
On a yearly basis, Lyft has nearly halved total cost as a share of revenue in the second quarter. Costs as a percentage of revenue were also down significantly compared with the second quarter in 2019.
Lyft and Uber have struggled to ramp up driver supply as consumers return to their platforms, providing large incentives and payment guarantees in an effort to attract drivers.
CVS Health Corp. (CVS-N) was lower despite raisingits annual earnings forecast, after it reported a quarterly profit on Wednesday that beat analysts’ estimates, helped by higher prescription drug sales, COVID-19 testing and vaccinations at its pharmacies and clinics.
With nearly half of all Americans fully vaccinated, demand for prescription drugs and over-the-counter products at the company’s pharmacies recovered from the declines seen in previous quarters during the height of the pandemic.
CVS Health raised its 2021 adjusted profit per share outlook to between US$7.70 and US$7.80, from US$7.56 to US$7.68, after it reported an 11.1-per-cent increase in quarterly revenue to US$72.6-billion.
The company, however, warned of COVID-19 vaccinations to slow in the second half of the year, and medical costs to increase modestly at its health insurance unit Aetna.
Health insurers saw lower medical costs during the initial phase of the pandemic, as people deferred elective medical procedures, however, widespread vaccinations have led to demand for non-COVID healthcare services normalizing.
CVS said its medical benefit ratio (MBR), or the percentage of premiums paid for medical services, for the second quarter rose to 84.1 per cent from 70.3 per cent. A lower MBR is better for health insurers as it signals a tight rein on medical costs.
On an adjusted basis, CVS earned US$2.42 per share, beating estimates of US$2.06 per share, according to Refinitiv IBES data.
Kraft Heinz Co. (KHC-Q) was lower though it beat market estimates for quarterly net sales and profit on Wednesday, as demand for snacks and packaged meals remained strong even as people started venturing out following the easing of coronavirus restrictions.
Packaged food makers were among the major beneficiaries of the pandemic-induced curbs in 2020 that forced people to cook more at home.
Analysts anticipate the sales boost to last as remote working trends stay largely in place, though growth is likely to slow from the unprecedented levels seen during the height of the pandemic.
Chicago-based Kraft forecast current-quarter organic sales to decline by low-single-digit percentage compared with last year when sales surged on panic buying amid pandemic restrictions.
However, it expects organic sales to grow by mid-single-digit percentage, compared with pre-pandemic levels two years ago. Kraft also said it expects its core earnings for 2021 to be above pre-pandemic levels.
In the second quarter ended June 26, net sales fell marginally from a year earlier to $6.62 billion, beating estimates of $6.55 billion.
Excluding items, Kraft earned 78 cents per share, above estimates of 72 cents, according to IBES data from Refinitiv.
With files from staff and wires
David Leeder