A roundup of some of the North American equities making moves in both directions today
On the rise
HEXO Corp. (HEXO-T) soared after it said on Friday it would buy Redecan, a Canadian privately-owned licensed cannabis producer, for $925-million in a cash-and-stock deal, as the pot producer bolsters its portfolio to tap surging demand.
Cannabis demand increased last year as many people turned to weed during COVID-19 lockdowns for entertainment and relaxation. The industry is now benefiting from a wave of legalization that has swept many key U.S. states in recent months.
“We will also be able to provide consumers across Canada with a diverse and innovative range of high-quality products, with an enhanced brand offering that will enable us to better compete against other LPs (license producers) in Canada,” HEXO’s Chief Executive Officer Sebastien St-Louis, said in a statement.
The deal will also position the company for a future expansion in the United States, St-Louis added.
Redecan will be paid $400-million in cash and $525-million through the issuance of HEXO common shares at an implied price per share of $7.53 at the close of the deal, which is expected in the third quarter of 2021.
Interfor Corp.’s (IFP-T) was up in the wake of the late Thursday announcement of the US$375-million acquisition of four U.S. sawmill operations from Georgia-Pacific Wood Products LLC and GP Wood Products LLC
Raymond James analyst Daryl Swetlishoff said the deal is “fairly priced, given the high asset quality and the point in the cycle.
“We estimate modest synergies in the $5-10-million range, offset by modest near term capital requirements,” he said in a note.
See also: Friday’s analyst upgrades and downgrades
A day after its shares notched a 35-per-cent gain in a rally that burned bearish investors and sparked jubilation among its online supporters, AMC Entertainment Inc. (AMC-N) closed higher in volatile trading on Friday.
The movie theater chain’s market value ended Thursday’s trading session at US$11.9-billion as its shares closed at US$26.52, with the highest trading volume of any stock on U.S. exchanges on the day. The shares were up 1,150 per cent year-to-date after hitting their highest level in four years.
Market watchers have attributed the moves in AMC - as well as in shares of GameStop (GME-N) which also rallied this week - to a range of factors, including the enthusiasm of retail investors congregating on sites such as Reddit’s WallStreetBets and the unwinding of bearish bets against the companies’ shares.
“I’m continuously amazed by the things we are seeing,” said Michael Antonelli, market strategist at Baird, who does not have a view on where AMC’s stock will trade. “All of us are getting an education in what moves stocks and that education is ongoing.”
About 91 million shares, or roughly 20 per cent of AMC’s float are sold short, with bearish investors suffering just under US$2-billion in mark-to-market losses year-to-date, according to data from S3 partners.
On the decline
National Bank of Canada (NA-T) declined after its second-quarter profit increased 111 per cent as loan loss provisions fell sharply and lending to retail banking clients started to rebound.
For the three months that ended April 30, the Montreal-based bank earned $800-million, or $2.25 per share, compared with $379-million, or $1.01 per share, in the same quarter last year.
On average, analysts expected earnings per share of $1.99, according to Refinitiv.
Quarterly profit rose as provisions for credit losses plunged to $5-million, from $504-million in the second quarter last year, when banks were building large reserves in the early months of the coronavirus pandemic. National Bank set aside $67-million to cover loans that are in danger of defaulting, but that was mostly offset by a recovery of $62-million that had previously been set aside in case performing loans went bad.
Earlier this week, Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal and Canadian Imperial Bank of Commerce each reported a surge in earnings driven in large part by low provisions.
National Bank also reported rising profits across its main divisions.
- James Bradshaw
See also: Falling loan loss provisions fuel rising profits for big banks
CWB Financial Group (CWB-T) slipped after it topped expectations as it reported its second-quarter profit rose 40 per cent compared with a year ago.
The Edmonton-based bank says it profit available to common shareholders totalled $72-million or 82 cents per diluted share for the quarter ended April 30, up from $51.4-million or 59 cents per diluted share a year ago.
The improvement came as its provisions for credit losses totalled $14.8-million, down from $34.9-million a year earlier at the start of the pandemic.
Revenue totalled $247.1-million, up from $214.4-million in the same quarter last year.
On an adjusted basis, CWB says it earned 84 cents per share in its latest quarter, up from an adjusted profit of 60 cents per share a year ago.
Analysts on average had expected a profit of 76 cents per share, according to financial data firm Refinitiv.
“Our financial results surpassed our expectations again this quarter, supported by very strong branch-raised deposit and loan growth across the country,” CWB CEO Chris Fowler said in a statement.
Lightspeed POS Inc. (LSPD-T) was lower after filing for a mixed shelf offering of US$3.316-billion, according to an SEC filing.
See also: Lightspeed reports $42-million fourth-quarter loss, revenue more than doubles
Toronto-based Pivotree Inc. (PVT-X) plunged to the lowest level since its initial public offering in late October of 2020 after releasing weaker-than-anticipated quarterly results before the bell.
“First quarter revenue was impacted by lower seasonal consumption patterns, and as we indicated at the end of the fourth quarter, revenue declines and client churn from some of our customers that were negatively affected by the pandemic,” said CEO Bill Di Nardo.
See also: Pivotree shares surge after IPO of Toronto e-commerce company draws huge investor demand
Membership-only retail chain Costco Wholesale Corp. (COST-Q) dipped after it reported quarterly revenue on Thursday night that beat analysts’ estimates and said it was optimistic about sustained demand for high-margin items, such as jewelry and home furnishings.
Costco, like several other retailers, has benefited from the easing of pandemic-related restrictions and stimulus checks, as more people visited its cavernous stores to buy everything from groceries to sporting goods.
The company said it was beginning a phased return of food sampling and plans to bring back seating at most of its food courts.
Costco added it continued to see strength in its non-foods businesses and its travel division, which offers hotel rooms and cruise tickets to its members, aided by pent-up demand and COVID-19 vaccine roll-outs.
However, the company said it was still pressured by supply delays, higher freight costs and chip shortages, which were impacting deliveries.
“There have been and are a variety of inflationary pressures that we and others are seeing. Inflationary factors abound,” Chief Financial Officer Richard Galanti said.
Costco added it was tackling supply chain delays by adjusting orders.
Comparable sales, excluding the impact of fuel and currency fluctuations, jumped 15.1 per cent, compared with estimates of a 11.46-per-cent rise, according to Refinitiv IBES.
Net income attributable to the company rose to US$1.22-billion, or US$2.75 per share, in the quarter ended May 9, from US$838-million, or US$1.89 per share, a year earlier.
Net sales rose 22 per cent to US$44.38-billion in the third quarter, from US$36.45-billion a year earlier, compared with estimates of US$43.16-billion.
Dell Technologies Inc. (DELL-N) and HP Inc. (HPQ-N) reported quarterly revenue that beat Wall Street estimates on Thursday, as customers continued to shop for personal computers, even as pandemic-led restrictions eased in many parts of the world.
However, their shares fell after both companies warned the ongoing computer chip shortage could impact their ability to meet demand for laptops this year.
“The component supply situation remains constrained,” Dell Chief Financial Officer Thomas Sweet said in post earnings call, adding that rising costs to procure these chips would hit its operating income in the current quarter by the low to mid-single digits and lead to slightly lower revenue on a sequential basis.
HP Inc, which ranks second among global PC vendors according to IDC data, said the shortages would limit its ability to supply personal computing devices and printers at least until the end of the year.
Still, the companies, which are leaders in the personal computing industry, said they were bullish on the overall market, expecting the surge in demand for laptops needed by people working and going to school remotely to continue.
Global shipments of PCs, the industry’s collective term for laptops and desktops, grew 55.2 per cent during the first quarter, according to preliminary data from research firm IDC.
Dell said revenue from its client solutions group, which includes desktops, notebooks and tablets, rose 20 per cent to US$13.31-billion in the reported quarter.
HP’s PC-related sales rose 27 per cent in the quarter ended April 30, while notebook sales surged 47 per cent from the same period a year earlier.
Dell’s revenue rose 12 per cent to US$24.49-billion in the first quarter, beating estimates of US$23.40-billion, according to Refinitiv IBES data, while HP posted overall revenue of US$15.9-billion above the US$15-billion estimate.
Boeing Co. (BA-N) was lower as it said on Friday it was providing the U.S Federal Aviation Administration with more information on its undelivered 787 Dreamliners, after a report it was again halting deliveries of the troubled planes.
The U.S. planemaker’s 737 MAX and 787 craft have been afflicted by electrical and other issues since late last year, and it only resumed deliveries of the bigger planes in March after a five-month hiatus.
The Wall Street Journal reported earlier on Friday that Boeing had again halted deliveries of the 787, citing people familiar with the matter.
“We are working to provide the FAA with additional information concerning the analysis and documentation associated with the verification work on undelivered 787s,” a Boeing spokesperson said in an emailed statement responding to Reuters’ questions on the report.
“We continue to work closely with the FAA in a transparent and timely manner. There is no impact on the in-service fleet.”
The WSJ report also said that it was unclear how long the halt would last, referring only to short-term delays of planes due to be delivered in coming days.
With files from staff and wires