A roundup of some of the North American equities making moves in both directions today
On the rise
New Gold Inc. (NGD-T) jumped almost 11 per cent on Tuesday after saying it has agreed to sell a 46-per-cent free cash flow interest in its New Afton mine to Ontario Teachers’ Pension Plan for an upfront cash infusion of $300-million, which the gold miner will use to cut debt.
The deal will also give one of Canada’s biggest pension funds an option to convert the interest into a 46-per-cent joint venture in four years.
The Toronto-based miner’s long-term debt stood at $714.5 million for the year ended Dec. 31.
Aimia Inc. (AIM-T) increased 3.1 per cent after saying it earned a profit of $4.9-million in its latest quarter, compared with a loss of $126.2-million in the same quarter a year earlier.
The company says the profit amounted to 20 cents per share for the three months ended Dec. 31 compared with a loss of 86 cents per share in the fourth quarter of 2018 when it had more shares outstanding.
Aimia also said six new non-management directors have been appointed to replace six outgoing board members.
Thomson Reuters Corp. (TRI-T) was up 0.6 per cent after it said on Tuesday it had appointed former Nielsen Holdings Plc president Steve Hasker as its new chief executive officer, succeeding Jim Smith.
The parent of Reuters News also announced higher-than-expected fourth-quarter earnings on Tuesday, reporting a 60-per-cent year-on-year rise in operating profit, helped by lower costs and investments following the separation of the Financial and Risk (F&R) business.
Mr. Hasker, most recently a top executive at Hollywood talent agency CAA, will assume his new role on March 15, Thomson Reuters said. Smith, a former journalist who oversaw a period of major change at the company, will stay on for a transition period and become chairman of the Thomson Reuters Foundation.
Stephane Bello, Chief Financial Officer, will also step down from his role and will be succeeded by Mike Eastwood, current Senior Vice President of Corporate Finance. Mr. Bello will oversee strategy and business development into 2021, the company said.
HP Inc. (HPQ-N) increased 5.7 per cent after saying on Monday it would step up efforts to slash costs and buy back stock, as it seeks investor support to defend against a US$35-billion takeover offer from U.S. printer maker Xerox Holdings Corp.
The announcement came after Xerox raised its cash-and-stock bid for HP earlier this month by US$2 to US$24 per share, ahead of a tender offer it plans to launch in early March. It is also asking HP shareholders to replace HP’s board directors with Xerox’s nominees at the company’s annual shareholder meeting later this year.
After the bell Monday, HP reported US$14.6-billion in fourth-quarter revenue, slightly lower from last year, as growth in its personal computer business offset the continuous decline of the printing business. Adjusted earnings per share came in at 65 US cents for the fourth quarter, beating analysts’ estimate of 54 US cents, according to Refinitiv data.
Credit Suisse analyst Matthew Cabral said: “We continue to think industry consolidation makes sense and view HP and Xerox as complementary businesses. For standalone HP, we like the more aggressive capital structure and appreciate the clarity on cost savings, both of which drive our EPS higher; however, the ongoing Print business model transition remains an overhang. HP’s ‘poison pill’ announced last week effectively neutralizes Xerox’s proposed tender and likely extends the focus to the upcoming proxy fight, unless a negotiated transaction emerges.”
On the decline
Alimentation Couche-Tard Inc. (ATD.B-T) was 1.9 per cent lower after takeover target Caltex Australia said it was talking to other suitors and named a stand-in chief executive on Tuesday, as it tries to wring best value from the rival bids of the Canadian company and Britain’s EG Group.
The supplier of a quarter of Australia’s fuel suspended its search for a new boss and tapped Chief Financial Officer Matthew Halliday to lead it for now as it evaluates the two takeover proposals, talks with others, and looks to boost returns from its refining and marketing businesses.
Mr. Halliday temporarily replaces Julian Segal, who flagged his retirement last August after more than 10 years at the helm.
Expedia Group Inc. (EXPE-Q) lost 3.1 per cent in response to a late Monday announcement that it would cut about 3,000 or 12 per cent of its workforce as part of a plan to streamline its business.
The online travel services company had 25,400 employees globally as of Dec. 31.
“We are announcing our intent to reduce and eliminate certain projects, activities, teams, and roles to streamline and focus our organisation,” the company said in an email to employees, a copy of which was obtained by Reuters.
The job cuts include 500 people in its headquarters in Seattle, a company spokeswoman said in a statement.
United Airlines Inc. (UAL-Q) was down 6.5 per cent after it withdrew its full-year 2020 forecast citing the impact of the coronavirus outbreak and said it was seeing an about 100-per-cent decline in near-term demand to China.
As a result of the outbreak, the company said it has suspended flights between the United States and Beijing, Chengdu, Shanghai and Hong Kong through April 24.
“Due to the heightened uncertainty surrounding this outbreak, its duration, its impact on overall demand for air travel and the possibility the outbreak spreads to other regions, the Company is withdrawing all full-year 2020 guidance issued on January 21, 2020,” United said in a regulatory filing.
Bank of Nova Scotia (BNS-T) was down 0.9 per cent despite beating Wall Street estimates for quarterly profit, boosted by strong growth in its global banking and markets unit.
However, the results were marred by a decline in the international division earnings of Scotiabank, which has the biggest global business among Canadian banks Earnings from that unit, even excluding the impact of divestitures, fell 4 per cent from a year ago, analysts and the company said.
Scotiabank’s focus on international markets - particularly the Pacific Alliance trading bloc of Peru, Mexico, Chile and Colombia - but some macroeconomic headwinds and acquisitions and divestitures have contributed to lumpy results.
Overall, adjusted net income at the unit surged 35 per cent, driven by strong performance across Scotiabank’s trading businesses, and asset growth.
Meanwhile, adjusted net income from domestic banking rose 5 per cent to $908-million, boosted by higher net interest income.
On an adjusted basis, the lender earned $1.83 per share, compared with analysts’ estimate for profit of $1.74 per share, according to IBES data from Refinitiv.
Bank of Montreal (BMO-T) lost 2.2 per cent after it beat analyst estimates for first-quarter profit on Tuesday amid strength in its capital markets and wealth businesses, even though earnings fell from U.S. retail and loan-loss provisions doubled.
BMO’s U.S. business posted a 20-per-cent decline from a year ago.
“While we modeled higher loan losses for the quarter, they were significantly higher than expected as a series of issues in the United States (both in commercial banking and capital markets) held the result back this quarter,” Robert Sedran, an analyst at CIBC World Markets, wrote in a note.
Overall, net income before one-off items rose to $1.62-billion, or $2.41 per share, in the three months ended Jan. 31, from $1.54-billion, or $2.32 per share, a year earlier. Analysts had expected $1.51-billion, or $2.37 a share.
BMO’s capital markets unit led the gains with a 38-per-cent jump in adjusted net income, and wealth management followed with a 21-per-cent rise from a year ago.
“Capital Markets had a strong quarter in all businesses, demonstrating its earnings potential, with an increased contribution from our U.S. segment resulting in 38% total net income growth,” Chief Executive Darryl White said in a statement.
Gibson Energy Inc. (GEI-T) was 4.5 per cent lower after releasing better-than-anticipated fourth-quarter results after the bell on Monday.
The Calgary-based company reported EBITDA of $126-million, exceeding the consensus projection on the Street of $116.
In a research note released before the bell, Industrial Alliance Securities analyst Elias Foscolos said: “GEI announced quarterly results that beat consensus but were in line with our Street-high estimates ... The Company posted record distributable cash flow of $309-million for 2019 and as a result of two years of growth and strengthening its financial position, it has elected to raise its dividend $0.01 to $0.34 per common share. Our estimates remain on the upper end of consensus for 2020 as we believe the Company will continue to benefit from opportunities within its Marketing segment.”
Secure Energy Services Ltd. (SES-T) dropped 17.5 per cent after reporting fourth-quarter results on Monday after the bell that exceeded the Street’s expectations.
In a research note, Industrial Alliance Securities analyst Elias Foscolos said: “SES’s Q4/19 financial results were a bit higher than our estimates and consensus, but not enough to move the needle on our forecasts. The Company’s growth plan remains unchanged and no update was provided in regards to planned divestures of drilling & completions-driven assets. We estimate that SES can generate $100-million in funds flow from operations in 2020 with its pared down capital program, giving the Company flexibility to reduce debt, buy back shares, or pursue opportunistic growth.”
EXFO Inc. (EXF-T) fell 9.8 per cent after updating its revenue outlook for the second quarter of fiscal 2020 “due to the coronavirus impact on its supply chain and manufacturing operations in China as well as an information technology issue.”
Exfo said it now forecasts revenue for the second quarter ending on Feb. 29 will reach approximately US$55-million compared to prior revenue guidance of between US$66-million to US$71-million.
“Management expects revenue to accelerate in upcoming quarters as operations return to full capacity,” it stated. “To contain the spread of infection, Chinese public health authorities have imposed preventive measures within affected regions including an extended shutdown of businesses, restrictions on various forms of public transportation and lockdown periods for individuals—all of which are affecting Exfo’s factory and supply chain.”
Mastercard Inc. (MA-N) was 6.6 per cent lower after announcing on Tuesday Chief Executive Officer Ajay Banga will step down at the start of the next year and will be replaced by Chief Product Officer Michael Miebach.
While Mr. Banga, who took over as CEO in April 2010, will become executive chairman, Mr. Miebach will take over as the company’s president on March 1.
Chairman Richard Haythornthwaite will retire after more than a decade in the role, when Mr. Banga assumes his new role, the company said in a statement.
Palo Alto Networks Inc. (PANW-N) plummeted 17 per cent with the release of second-quarter results that exhibited lower-than-anticipated product revenue, leading management to cut its third-quarter and full-year guidance.
In a research note released early Tuesday, RBC Dominion Securities analyst Matthew Hedberg downgraded his rating for Palo Alto shares to "sector perform" from "outperform."
Mr. Hedberg said: “Following another mixed quarter and outlook, we are reducing our rating to Sector Perform and our target to $235 as we have less conviction in our prior bullish views. While billings again topped expectations on next-gen security strength, the issues that materialized last quarter around sub-optimal firewall sales continue to weigh on product revenue and overall results. Changes have been made including re-balanced sales incentives, but upon further scrubbing the deal pipeline, management expects improvements to take longer than expected to materialize. To that point, we now expect product license to decline 8% in Q3/20 before returning to break-even in Q4/20 and mid-single-digit growth in FY/21, which to us is closer to market growth. Management noted that despite the softness, they still feel good about recently provided FY/22 targets, though with recent execution issues, they now look more challenging to us. While a new $1B ASR could help support the stock, outside of easy compares, we struggle to identify a material catalyst and therefore move to the sidelines as we expect the stock to remain range-bound.”
Shares of Green Growth Brands Inc. (GGB-CN) dropped 31.4 per cent after the Toronto-based company announced the execution of “Stalking Horse” agreement to sell the its CBD business to The BRN Group for an undisclosed amount at the same time as its release weaker-than-anticipated quarterly results.
Canaccord Genuity analyst Derek Dley said: “While we will wait until the company hosts its Q2/F20 conference call on Wednesday, Feb 26 before offering more opinion, given the limited disclosure, we believe the operating expenses to ramp up and grow GGB’s CBD business were heavier than previously expected, and forced the company to consider strategic options to better capitalize both its MSO and CBD divisions Looking ahead, assuming the transaction is completed, GGB will focus on its MSO division, which operates dispensaries in Nevada, and holds licenses for dispensaries in Massachusetts and Florida.”
U.S. department store chain Macy’s Inc. (M-N) declined 5.8 per cent in the wake of reporting quarterly comparable sales and profit that beat Wall Street estimates with the help of an uptick in holiday sale.
The U.S. retailer reported a small decline in holiday same-store sales in January, surprising investors who were bracing for a sharper drop after a profit warning citing o weak international tourism and sluggish mall traffic.
“We executed well during the Holiday 2019 season,” Chief Executive Officer Jeff Gennette said in a statement.
“We were pleased with the significant trend improvement in the fourth quarter, including a meaningful sales uptick in the 10 shopping days before Christmas.”
The entire year, however, did not play out as intended, Mr. Gennette added.
Home Depot Inc. (HD-N), considered a barometer for the economic health of U.S. households,slid 1 per cent in reaction to beating quarterly sales and profit estimates on Tuesday, boosted by a strong U.S. housing market and demand during the holiday season.
Same-store sales at Home Depot rose 5.2 per cent in the fourth quarter ended Feb. 2, above expectations of a 4.8-per-cent increase, according to IBES data from Refinitiv.
Net sales fell 2.7 per cent to US$25.78-billion, but beat analysts’ average expectation of US$25.76-billion.
Net earnings rose to US$2.48-billion, or US$2.28 per share, from US$2.34-billion, or US$2.09 per share a year earlier. Analysts were expecting earnings of US$2.10 per share.
With files from Terry Weber, staff and wires
David Leeder