A roundup of some of the North American equities making moves in both directions
On the rise
Canadian National Railway Co. (CNR-T) jumped in the wake of announcing Tuesday Chief Executive Officer Jean-Jacques Ruest will retire at the end of January, following investor demands for his exit after the railroad operator’s failed bid for Kansas City Southern.
TCI Fund Management, which owns 5 per cent of CN, in August pitched former Union Pacific executive Jim Vena for the top job and on Tuesday urged Canada’s largest railroad operator to secure his leadership.
“Dismissing the same CEO that the Board put in place just three short years ago is a good start, but it does not address the fundamental problem of a lack of leadership,” TCI Founder Chris Hohn said. The hedge fund had earlier cited the company’s “ill-conceived” efforts to pursue the Kansas City merger for demanding Ruest’s ouster.
Last month, CN lost a bidding war to create the first direct railway linking Canada, the United States and Mexico as rival Canadian Pacific Railway Ltd. (CP-T) signed a $27.2-billion deal to buy Kansas City.
CN has now set up a committee to look for a new CEO both within and outside the company.
“(The board) is not on the clock. It doesn’t mean that they will go slow,” Mr. Ruest said in an earnings call, adding that he would leave it to the board to engage with TCI.
Mr. Ruest had deferred discussions on his retirement plans in order to see the company through the merger, it said, and he could helm CN until it names a replacement.
In the third quarter ended Sept. 30, adjusted profit rose 9.5 per cent on a surge in petroleum and chemicals shipments. But its operating ratio, a key profitability metric for investors, worsened to 62.7 per cent from 59.9 per cent a year earlier.
See also: Wednesday’s analyst upgrades and downgrades
Canadian Pacific Railway Ltd. (CP-T) erased an early decline after posting a 20-per-cent drop in quarterly profit and cutting its freight volume forecast amid supply-chain snarls and costs due to the pursuit of Kansas City Southern.
Calgary-based CP said revenue rose by 4 per cent to $1.9-billion, for the three months ending on Sept. 20, narrowly missing the Street’s expectation of $1.972-billion.
However, adjusted fully diluted earnings per share of 88 cents from short of the consensus forecast by 4 cents, due largely to a deterioration in its operating ratio, a measure of costs versus sales, to 60.2 per cent from 58.2 per cent. The Street had projecting an OR of 57.2 per cent
CP also revised its freight volume forecast for 2021 to low single-digit growth, from the near 10 per cent outlook the rail company issued in April.
“Despite global supply chain issues and a challenging Canadian grain crop, we remain confident in our ability to deliver full-year double-digit adjusted diluted EPS growth,” CP said in a statement accompanying the earnings results. “The underlying demand environment remains strong, and our commitment to generate sustainable, profitable growth will not be distracted by elements outside our control.”
In a research note, Desjardins Securities analyst Benoit Poirier said: “Bottom line, while we are surprised by the adjusted OR miss reported this morning, we are comforted by the reiterated guidance. As we move into 2022, we expect the challenges to gradually dissipate as the focus shifts toward the proposed acquisition of KCS (closing of voting trust expected in 4Q21/1Q22 and full regulatory approval in 2H22).”
Magna International Inc. (MG-T) also reversed course after reducing its 2021 financial outlook in response to weaker-than-anticipated light vehicle production in both North America (7 per cent below previous expectations) and Europe (9 per cent).
The Aurora, Ont.-based manufacturer now expects total sales for 2021 to be in the range of $35.4-billion to $36.4-billion, compared to $38.0-billion to $39.5-billion in its August outlook.
Citing “the decline in expected total sales, ongoing operational inefficiencies driven by unpredictable OEM production schedules, increased production costs, higher commodity costs and a provision on engineering service contracts with Evergrande,” its adjusted EBIT margin projection is now in a range of 5.1-5.4 per cent, falling from 7-7.4 per cent.
CGI Inc. (GIB.A-T) was higher after saying before the bell it has signed a deal to acquire Spanish company Cognicase Management Consulting (CMC).
Financial terms of the deal were not immediately available.
CMC, founded in 1993, provides technology and management consulting services to clients in Spain, Italy, Portugal, Colombia and Mexico.
CGI CEO George Schindler says the addition of CMC will allow the company to significantly strengthen its services portfolio and capabilities in Spain.
Montreal-based CGI says it has received foreign investment approval from the Spanish authorities and the deal is expected to close by the end of the month.
Facebook Inc. (FB-Q), under fire from regulators and lawmakers over its business practices, is planning to rebrand itself with a new group name that focuses on the metaverse, the Verge reported.
Its shares were flat on Wednesday.
The name change will be announced next week, The Verge reported, citing a source with direct knowledge of the matter.
Facebook CEO Mark Zuckerberg has been talking up the metaverse, a digital world where people can move between different devices and communicate in a virtual environment, since July, and the group has invested heavily in virtual reality and augmented reality, developing hardware such as its Oculus VR headsets and working on AR glasses and wristband technologies.
The move would likely position the flagship app as one of many products under a parent company overseeing brands such as Instagram and WhatsApp, according to the report. Google adopted such a structure when it reorganized into a holding company called Alphabet in 2015.
Facebook said it does not comment on “rumor or speculation.”
If true, the rebranding would make sense as the core Facebook business becomes less important to the group and it seeks to revamp an image tarnished by regulatory and legal scrutiny of how it handles user safety and hate speech, analysts said.
NextEra Energy Inc. (NEE-N) saw gains in the wake of reporting a better-than-expected rise in adjusted quarterly profit, as it added more than 2,000 megawatts (MW) of new projects to cater to surging demand for cleaner energy sources.
The company, which is the world’s largest producer of wind and solar energy, shot to prominence last year when it overtook ExxonMobil in market value to become the largest U.S. energy firm and marked the growing importance of renewable energy to investors.
NextEra and other renewable energy firms are also set to benefit from the Biden administration’s clean energy plan, which includes making federal lands cheaper to access for solar and wind power developers.
The company’s clean energy business added about 1,240 MW of new wind projects, the best-ever quarter of wind additions, NextEra said. It also added 515 MW of new solar projects and 345 MW of new storage projects.
Juno Beach, Florida-based NextEra said adjusted earnings at its clean energy business rose 12.3 per cent to US$619-million. Profit at its Florida Power & Light Company electric utility unit, which serves more than 5.1 million customers, rose nearly 10 per cent to US$836-million.
“We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted earnings per share expectations ranges in 2021, 2022 and 2023,” NextEra said in a statement.
The company posted adjusted earnings of US$1.48-billion, or 75 US cents per share, for the third quarter ended Sept.30, compared with US$1.31-billion, or 67 US cents per share, a year earlier.
That beat analysts’ average expectation of 71 US cents per share.
On the decline
Shares of Netflix Inc. (NFLX-Q) were down despite global sensation Squid Game helping lure more customers than expected and predicting a packed lineup would further boost signups through the end of the year.
After a sharp slowdown in the first half of 2021, Netflix added 4.38 million subscribers from July through September to reach 213.6 million worldwide. Wall Street analysts had projected 3.86 million additions, according to Refinitiv data.
Netflix enjoyed a subscriber boom last year as COVID-19 kept audiences at home, but growth stalled early this year. At the same time, Walt Disney Co’s Disney+, AT&T Inc’s HBO Max and other competitors bolstered their offerings. Netflix blamed the earlier weakness in part on a thin slate of new programming caused by production shutdowns from the pandemic.
Then, South Korean drama Squid Game debuted on Sept. 17 and surprised executives by becoming the streaming service’s most-watched original series in its first month. On Tuesday, Netflix said a “mind-boggling” 142 million households had watched the dark drama about people who compete in a deadly competition to erase financial debt.
The series, made with a relatively small budget, shot to the top of Netflix viewing charts in 94 countries, kick-started sales of track suits and Vans sneakers, and kindled interest in learning Korean. Squid Game merchandise is now on its way to retailers, Netflix said.
Tracking a decline in TSX-listed cannabis companies, Hexo Corp. (HEXO-T) dipped after it named Scott Cooper as the cannabis company’s new president and chief executive, effective immediately.
Mr. Cooper is president and CEO of Truss Beverages, a joint venture between Hexo and Molson-Coors.
Hexo says Mr. Cooper will head both companies for an interim period of up to six months to ensure a smooth transition.
The appointment comes as Hexo completes a strategic reorganization that saw co-founder Sebastien St-Louis, who was also CEO, leave the company this week.
Hexo also announced the resignation of chief operating officer Donald Courtney on Monday, though he is expected to remain until a replacement is found.
The company has made several acquisitions this year, including deals to buy cannabis producer Redecan, 48North Cannabis Corp. and Zenabis Global Inc.
United Airlines Holdings (UAL-Q) was down after it reported a smaller quarterly loss than a year ago, but a resurgence in coronavirus cases slowed bookings and drove up cancellations, upending the carrier’s plan to return to profit.
Chief Executive Scott Kirby, however, said recent headwinds the airline has faced are “turning to tailwinds.”
United said it expects revenue in the current quarter to recover to up to 75 per cent of 2019 levels, improving from about 68 per cent in the quarter through September.
Buoyed by a strong summer travel season, United was expecting to be profitable in the third and fourth quarters. It lowered its estimates last month, citing the impact of the fast spreading Delta variant of the coronavirus on travel.
With COVID-19 cases still high but in decline in the United States as more people get vaccinated, airlines said bookings have bottomed out.
Rival Delta Air Lines last week said domestic consumer travel has returned to pre-pandemic levels.
U.S. carriers are eyeing a strong holiday season, with United planning to fly its biggest domestic schedule since the start of the pandemic, offering more than 3,500 daily domestic flights in December - representing 91 per cent of its domestic capacity compared to 2019.
They are also optimistic about the re-opening next month of the transatlantic route - the most lucrative long-haul market - which they expect will spur a recovery in international traffic.
Betting on pent-up travel demand, the Chicago-based carrier last week announced an expansion of its transatlantic service next year, and Mr. Kirby has said he expects the route to have the busiest summer ever in 2022.
The company reported an adjusted loss for the third quarter of US$1.02 per share, compared with a loss of US$8.16 per share last year at the height of the coronavirus pandemic. Analysts were forecasting a loss of US$1.67 per share, according to Refinitiv data.
With government pandemic aid, the airline reported a net profit of US$1.44 per share for the quarter.
Shares of U.S. oilfield firm Baker Hughes Co. (BKR-N) slid sharply after it reported a quarterly profit that fell short of Wall Street expectations on Wednesday
Oil producers and service firms are expected to be supported by a rebound in oil prices to pre-pandemic levels as demand recovers and the Organization of the Petroleum Exporting Countries, Russia and their allies stick to their output increase schedule instead of accelerating production.
Crude prices climbed 4.5 per cent in the quarter ended Sept. 30. and are currently trading just above US$84 a barrel.
Baker Hughes reported adjusted net income of US$141-million, or 16 US cents per share, for the third quarter, missing forecasts for earnings of 21 US cents per share, according to Refinitiv IBES data. Revenues of US$5.093-billion also fell short of expectations of US$5.321-billion.
“As we look ahead to the rest of 2021 and into 2022, we see continued signs of global economic recovery that should drive further demand growth for oil and natural gas,” Baker Hughes Chief Executive Officer Lorenzo Simonelli said.
With files from staff and wires
David Leeder