A roundup of some of the North American equities making moves in both directions today
On the rise
Shares of Netflix Inc. (NFLX-Q) soared after it said on Tuesday its global subscriber rolls crossed 200 million at the end of 2020 and projected it will no longer need to borrow billions of dollars to finance its broad slate of TV shows and movies.
The financial milestone validated the company’s strategy of going into debt to take on big Hollywood studios with a flood of its own programming in multiple languages.
The world’s largest streaming service had raised US$15-billion through debt in less than a decade. On Tuesday, the company said it expected free cash flow to break even in 2021, adding in a letter to shareholders, “We believe we no longer have a need to raise external financing for our day-to-day operations.”
Netflix said it will explore returning excess cash to shareholders via share buybacks. It plans to maintain US$10=billion to US$15-billion in gross debt.
“This is in sharp contrast to Disney and many other new entrants into the streaming market who expect to lose money on streaming for the next few years,” said eMarketer analyst Eric Haggstrom.
West Fraser Timber Co. Ltd. (WFT-T) was up after its shareholders approved a $4-billion all-stock deal for Norbord Inc. (OSB-T) that will marry two of Canada’s big wood product producers.
Norbord chief executive Peter Wijnbergen, who will join West Fraser as president of of engineered wood, said in November that the combined company aims to be a “one-stop shop” for construction customers.
The combined company says it will operate as West Fraser with headquarters in Vancouver and a regional office in Toronto, with West Fraser shareholders owning 56 per cent of the company, and Norbord shareholders owning about 44 per cent.
Executives said when the deal was announced that the new West Fraser will have 10,000 employees.
The deal comes as lumber prices have hit record highs twice in the past six months, according to lumber statistics from RBC Dominion Securities Inc. analyst Paul Quinn.
Iamgold Corp. (IMG-T) was up despite reporting fourth-quarter results and 2021 guidance that disappointed the Street after the bell on Tuesday.
BMO Nesbitt Burns analyst Jackie Przybylowski: ”Q4/20 production fell modestly short of consensus expectations across each of IAMGOLD’s producing mines, and 2021 guidance was also below the market expectations.
“On the positive, all-in sustaining costs are consistent with expectations. The company continues to move forward with growth projects, including spending on both Côté and Boto as well as exploration across both greenfield and brownfield targets.”
Toronto-based miner Largo Resources Ltd. (LGO-T) rose to a record high after announcing record fourth-quarter and full-year operational results before the bell.
“Operations at the Maracás Menchen Mine had an exceptionally strong finish to the year resulting in new quarterly and annual production records. I am also delighted to report that the Company has exceeded its 2020 sales guidance by 260 tonnes, with Q4 2020 V2O5equivalent sales of 3,751 tonnes representing a new quarterly sales record for the Company. 2020 was transformational and demanding year for Largo; one in which the Company implemented its new sales and trading operations, started construction of its V2O3 plant and launched Largo Clean Energy in the midst of a global pandemic,” said president and CEO Paulo Misk,
Home Capital Group Inc. (HCG-T) was narrowly higher in the wake of announcing the approval of its previously announced renewal of its normal course issuer bid.
The Toronto-firm may purchase for cancellation up to 4.368 million common shares, representing approximately 10 per cent of its public float as of Jan. 11.
On the decline
Procter & Gamble Co. (PG-N) raised its full-year sales forecast for a second time on Wednesday as the consumer products giant benefited from a sustained high level of demand for its home care and cleaning products due to the COVID-19 pandemic.
The company’s shares fell after the Cincinnati-based conglomerate also said it would buy back up to US$10-billion worth of shares in fiscal 2021, compared to US$7-billion to US$9-billion it expected earlier.
Households have continued to clean their homes and wash their clothes more frequently and have also shown their willingness to pay for more premium brands over store-branded goods at a time when COVID-19 cases and deaths continue to rise in the United States, P&G’s biggest market.
Shoppers splurged on everything from Downy laundry beads to Swiffer mops and surface cleaners, the company said, sending organic sales in its fabric and home care division up 12 per cent in the second quarter.
Home care products in particular saw a 30-per-cent rise in organic sales, in line with trends seen in the first quarter.
Overall, net sales rose 8 per cent to US$19.75-billion in the three months to Dec. 31, beating analysts’ average estimate of US$19.27-billion, according to IBES data from Refinitiv.
Net income attributable to P&G rose 4 per cent to US$3.85-billion, or US$1.47 per share. Excluding items, it earned US$1.64 per share.
Expecting an upswing in consumption, the company raised its fiscal 2021 sales growth forecast to a range of 5 per cent to 6 per cent, compared with 3 per cent to 4 per cent expected earlier.
It also hiked its core earnings per share growth forecast to 8 per cent to 10 per cent, from 5 per cent to 8 per cent, and said organic sales are now expected to grow 5 per cent to 6 per cent, compared with the 4 per cent to 5 per cent it anticipated earlier for the year.
Morgan Stanley (MS-N) slid after its profits surged in the fourth quarter, comfortably beating estimates as the Wall Street bank’s trading business benefited from coronavirus-induced volatility in financial markets.
The bank on Wednesday also confirmed plans to buy back US$10-billion of shares this year, after the Federal Reserve allowed major banks to resume doing so in December.
Net income applicable to common shareholders rose to US$3.27-billion, or US$1.81 per share, in the quarter ended Dec. 31, compared with US$2.09-billion, or US$1.30 per share, a year earlier.
Analysts had expected a profit of US$1.27 per share, according to Refinitiv IBES data.
Revenue from the bank’s institutional securities business, its largest source of income, rose to US$7-billion from US$5.05-billion last year.
High trading volumes during the quarter, stemming from the U.S. elections and the release of coronavirus vaccines, benefited the bank’s trading unit, which is housed within the institutional securities business.
Net revenue rose to US$13.64-billion in the quarter, from US$10.86-billion last year, while revenue from the company’s investment banking division rose to US$2.30-billion from US$1.58-billion.
Morgan Stanley’s most comparable rival, Goldman Sachs Group Inc. (GS-N), on Tuesday posted a blockbuster fourth-quarter profit that dwarfed Wall Street estimates, but executives warned that capital markets activity fueling results lately will probably slow down.
Lithium Americas Corp. (LAC-T) plummeted after announcing the pricing of its public offering of 15.9 million common shares at a price of US$22.
The offering price represents 18-per-cent discount to the Tuesday closing price.
The Vancouver-based company intends to use the proceeds to advance its Thacker Pass Project in northern Nevada.
Health insurer UnitedHealth Group Inc. (UNH-N) was narrowly lower after it beat quarterly profit estimates for the fourth quarter on Wednesday, helped partly by lower medical costs due to fewer elective surgeries as hospitals made room for COVID-19 patients.
For the most part of last year, health insurers gained as people afraid of contracting the virus also avoided hospital visits for routine and elective medical procedures during the height of the pandemic.
UnitedHealth reported a medical loss ratio - the percentage of premiums paid out for medical services - of 79.1 per cent in the fourth quarter, improving from 82.5 per cent a year earlier, capped by COVID-19 testing, treatment and vaccine costs.
The company said its profit was impacted by a recovery in demand for healthcare services and rise in costs related to its programs to make COVID-19 testing and treatment more accessible for its customers.
In contrast, rival Humana Inc earlier this month said it expects potentially lower utilization of non-COVID healthcare services compared to usual levels, at least in the first few months of 2021.
With files from staff and wires
David Leeder