A roundup of some of the North American equities making moves in both directions
On the rise
Transat AT Inc. (TRZ-T) jumped on news it will borrow as much as $700-million from the federal government, a bailout that will let the Montreal-based tour and airline operator stay afloat and give refunds to customers whose flights were cancelled in the pandemic.
Transat’s announcement on Thursday, which comes after several weeks of talks with the government, includes repayable credit facilities Ottawa last year offered to large employers under a program it called Large Employer Emergency Financing Facility (LEEFF).
Additionally, Transat will issue to the government 13 million warrants, which bear the right to purchase shares in the company for $4.50 each.
Transat has not flown since the end of January, and had halted for several months in 2020 due to the COVID-19 pandemic. Air Canada and Transat on April 2 terminated Air Canada’s agreement to buy Transat, citing insurmountable hurdles at the European anti-trust regulator.
In a statement, Transat chief executive officer and founder Jean-Marc Eustache said the new lines of credit will allow the company to “move forward with confidence.”
- Eric Atkins
See also: Rivals under pressure to copy Air Canada financing package
BCE Inc. (BCE-T) gained after announcing before the bell it grew its quarterly revenue for the first time since the start of the pandemic, but saw its profit decline by 6.3 per cent from a year ago to $687-million.
BCE, which owns Bell Canada, attributed the lower first-quarter profit to higher severance, acquisition and other costs, as well as higher expenses related to depreciation and amortization. The company had $733-million in profit during the same period last year.
The earnings amounted to 71 cents per share, down from 75 cents per share a year ago. After adjusting for items such as severance and acquisition costs, Bell had earnings of 78 cents per share, down from 79 cents per share during the first quarter of 2020.
The Montreal-based telecom had $5.71-billion of revenue for the three-month period ended March 31, up 1.2 per cent from a year ago when it had $5.64-billion in revenue. The increase stemmed from higher sales of premium mobile phones and business telecom data equipment, the company said. The increase was partly offset by lower revenue from wireless roaming, media advertising and wireless spending by business customers.
The results were above analyst expectations of $5.62-billion of revenue and 73 cents of adjusted earnings per share, according to the consensus estimate from market researcher S&P Capital IQ.
- Alexandra Posadzki
Vermilion Energy Inc. (VET-T) soared in the wake of saying it beat its own guidance for production in the first quarter as net income jumped to $500-million from a net loss of $1.3-billion in the same period of 2020.
The Calgary-based company says it had production of 86,300 barrels of oil equivalent per day in the three months ended March 31 thanks to a revitalized drilling program, ahead of its annual guidance range of 83,000 to 85,000 boe/d but well short of its first quarter 2020 output of 97,200 boe/d.
The producer of oil and gas in North America, Europe and Australia says its financial results were buoyed by higher global oil prices and strong natural gas prices in Europe. A year ago, it recorded a $1.2-billion writedown on its oil and gas assets due to low commodity prices.
Vermilion says its North American operations averaged 56,780 boe/d in the first quarter, down three per cent from the fourth quarter mainly due to natural well declines and cold weather downtime during February.
Production in its international assets averaged 29,500 boe/d, up one per cent from the prior quarter thanks to higher production in Australia and Germany.
In a research note released before the bell, Raymond James equity analyst Jeremy McCrea said: “Our thesis on VET has historically been one of profitability. Much of this is due to their international diversification where ‘conventional’ style geology generally has better rates of return than shale/tight oil plays. This high return on capital historically allowed the company to have a higher dividend payout (which ultimately did jeopardize the balance sheet come 2020, however). With new management and a dedicated effort to lower leverage (vs. growth or to provide a dividend yield), there’s been a large turnover in the type of funds that own the company. Ultimately however, the assets haven’t changed and combined with both oil and European gas now rebounding, the leverage outlook is quickly improving (i.e., 1.8x 2022 D/EBITDA at strip). Although Q1 was mostly quiet, better production performance (despite outages in Canada due to cold weather) should help investors gain confidence in the name again. Overall, VET has plenty of torque and with the company’s profitable well results and line of sight to debt repayment, the share price should rebound meaningfully.”
AltaGas Ltd. (ALA-T) was higher after reporting better-than-anticipated second-quarter results before the bell, driven by a strong performance from its Midstream segment.
Concurrently, it raised its 2021 EBITDA guidance by 5 per cent to a range of $1.475-billion to $1.525-billion and its normalized earnings per share expectation by 17 per cent to $1.65 to $1.80.
ATB Capital Markets analyst Nate Heywood said: “Looking forward, we expect the business to continue its focus on stable rate base growth focused projects in the Utilities segment and its deleveraging efforts.”
Calgary-based Whitecap Resources Inc. (WCP-T) rose with the premarket release of quarterly production and financial results that topped the Street’s expectations.
“Overall, we view the event as neutral, with production, cash flow and capex all modestly ahead of street expectations for what we would consider a fairly noisy quarter, with significant M&A activity closing during the reported period (a trend which will continue with next quarter’s print),” said ATB Capital Markets analyst Patrick O’Rourke. “Despite the noise of the closing of the TORC acquisition, operations remain solid and in-line with expectations, with WCP focused on key elements that should screen well for investors: a reasonable leverage profile (ATB estimate 2021 1.5 times vs. peer average 1.9 times; $600-million in available credit liquidity), FCF and return of capital to shareholders (recent 6-per-cent dividend increase, to a current yield of 3.2 per cent), growth (ATB estimate 2022 4-per-cent production per share increase, double the peer group average of 2 per cent), and ESG (with the Company doing an exceptional job of highlighting its carbon sequestration projects/merits at both Weyburn and Joffre) -WCP continues to be one of our most favoured oily producers.”
See also: Whitecap Resources touts potential carbon-capture technology opportunities
Facebook Inc. (FB-Q) soared after beating Wall Street expectations for both quarterly revenue and profit on Wednesday but warned that growth later this year could “significantly” decline as new Apple Inc privacy policies will make it more difficult to target ads.
A surge in digital ad spending during the pandemic when consumers shopped online, along with higher ad prices, helped Facebook revenue surge 48 per cent. Looking ahead, the world’s largest social network said it will focus on building e-commerce features to expand beyond its ad business.
“We have a long way to go to build out a full-featured commerce platform ... but I am very committed to getting there,” Facebook Chief Executive Mark Zuckerberg told analysts on a conference call to discuss earnings.
Total revenue, which primarily consists of ad sales, hit US$26.17-billion in the first quarter ended March 31, beating analysts’ average estimate of US$23.67-billion, according to IBES data from Refinitiv.
The digital advertising industry has boomed during the pandemic, benefiting Facebook and others including Google, whose parent company Alphabet Inc reported record quarterly profit on Tuesday.
McDonald’s Corp. (MCD-N) gained after it beat Wall Street estimates for comparable sales and said it returned to pre-pandemic levels of growth, driven by eased COVID-19 restrictions in some markets and U.S. customers, flush with stimulus cash, craving new chicken meals.
First-quarter global comparable sales growth of 7.5 per cent surpassed pre-pandemic 2019 levels, Chief Executive Officer Chris Kempczinski said. That trounced the 4.71-per-cent growth expected by analysts polled by Refinitiv IBES data.
The Chicago-based burger chain also raised its 2021 systemwide sales outlook to the mid-teens from the low double-digits.
An intense vaccination drive and the distribution of relief checks encouraged more people in the United States to eat out.
Fast-food chains have managed to weather pandemic restrictions much better than others in the industry, given their drive-thrus, delivery networks and competitive pricing.
McDonald’s also rolled out its crispy chicken sandwiches earlier this year in the United States, looking to tap into a frenzy kicked off by privately owned Chick-fil-A and Restaurant Brands International Inc’s Popeyes in 2019.
Those factors, combined with celebrity marketing campaigns, helped power a 13.6-per-cent jump in sales at restaurants open for more than a year, trouncing expectations of 9.25 per cent, according to the analysts.
Sales were driven in part by higher checks, with traffic lower across all segments.
McDonald’s also showed strong growth in its international markets, with the UK, Australia and Canada recording a rise in sales.
Net income rose to US$1.54-billion, or US$2.05 per share, for the first quarter, from US$1.11-billion, or US$1.47 per share, a year earlier.
Revenue increased 9 per cent to US$5.12-billion, above estimates of $5.03 billion.
Excluding one-time items, the company earned US$1.92 per share, well above the expectation of US$1.81.
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On the decline
Newmont Corp. (NGT-T) lost ground after it posted quarterly profit below expectations on Thursday, as coronavirus restrictions and a sale of a Canadian asset dented production for the world’s largest gold miner.
Although massive stimulus measures and pandemic-led uncertainties have boosted prices of gold, COVID-19 curbs and increased costs related to ramping up sites have affected Newmont’s bottomline.
Average realized price for gold jumped 10 per cent to US$1,751 per ounce in the quarter, as production fell 1.4 per cent to 1.46 million ounces due to the sale of its Red Lake mine in Ontario and virus-related disruptions at its Cerro Negro mine in Argentina.
The Cerro Negro site now continues to ramp up after being put on care and maintenance last year, Newmont said. Argentina tightened movement restrictions this month as the country struggles with a second wave of the novel coronavirus.
Newmont, which also mines copper, silver, zinc and lead, said it expects output to increase toward the second half of the year and maintained its prior gold production outlook of 6.5 million ounces.
Adjusted profit rose to US$594-million, or 74 US cents per share, for the three months to March 31, while analysts on average expected 77 US cents per share, according to Refinitiv IBES data.
Revenue jumped 11 per cent to US$2.87-billion for the quarter, but missed a consensus estimate of US$3.21-billion due to lower sales volumes.
Canfor Corp. (CFP-T) slid after it reported a first-quarter profit of $427.8-million compared with a loss a year ago before the bell, boosted by record results in its lumber business and improved results in its pulp and paper operations.
The Vancouver-based company says the strength in global lumber market fundamentals has pushed benchmark lumber prices to new highs.
It says the unprecedented pricing substantially outweighed higher market-related log costs in Western Canada, combined with moderately lower North American shipment volumes.
Canfor says its profit amounted to $3.42 per diluted share for the quarter ended March 31 compared with a loss of $70.0-million or 56 cents per share in the same quarter last year.
Sales totalled $1.94-billion, up from $1.1- billion in the first three months of 2020.
On an adjusted basis, Canfor says it earned $3.47 per diluted share in its most recent quarter compared with an adjusted loss of 45 cents per share a year earlier.
Apple Inc. (AAPL-Q) closed narrowly lower after it posted sales and profits ahead of Wall Street expectations fueled by 5G iPhone upgrades but warned a global chip shortage could dent iPads and Mac sales by several billion dollars.
Fiscal second-quarter sales to China nearly doubled and results topped analyst targets in every category, led by US$6.5-billion more in iPhone sales than predicted and Mac sales about a third higher than estimates.
Apple Chief Executive Tim Cook said on an investor call that Apple avoided a chip shortage in the fiscal second quarter by burning through supply buffers.
In a research note released Thursday, Wedbush analyst Dan Ives said: “We have seen many blow out quarters in our many years covering Apple, although last night’s March quarter we would characterize as one for the record books in Cupertino. Apple absolutely crushed rising Street expectations heading into the print across the board, with iPhone revenues beating by 17 per cent plus in a jaw dropping performance as the iPhone 12 supercycle is playing out before our (and the Street’s eyes). China remains the fuel in the iPhone 12 cycle which based on our recent Asian supply chain checks and supported by Apple’s high level outlook for the June quarter are showing no signs of slowing down. Of course chip shortages will have a headwind for the next few quarters (roughly $3 billion to $4 billion headwind in the June quarter) for Apple like every technology/automotive player, but the reality is this product cycle is enabling Cook & Co. to achieve its next level of growth and monetization looking ahead.”
Ford Motor Co. (F-N) plummeted in the wake of saying late Wednesday it expects a global semiconductor shortage could ease this summer but may not be fully resolved until 2022, as the automaker reported a strong first-quarter profit but said the shortage may slash second-quarter production by half.
Ford said the ongoing chip shortage would cost it about US$2.5-billion and about 1.1 million units of lost production in 2021.
The No. 2 U.S. automaker handily beat Wall Street’s profit estimate for the quarter, earning 81 US cents a share, compared with the consensus 21 US cents, according to Refinitiv IBES data. In last year’s first quarter, the company lost 50 US cents a share.
Ford Chief Executive Jim Farley told analysts: “There are more whitewater moments ahead for us that we have to navigate. The semiconductor shortage and the impact to production will get worse before it gets better. In fact, we believe our second quarter will be the trough for this year.”
Chief Financial Officer John Lawler said Ford’s outlook was driven largely by a factory fire suffered by Japanese chipmaker Renesas. The flow of chips from Renesas is expected to be restored in July, but the global shortage of automotive semiconductors may not be fully resolved until next year, Mr. Lawler said.
Merck & Co Inc. (MRK-N) fell short of first-quarter profit estimates on Thursday and forecast a bigger-than-anticipated hit to 2021 sales as the COVID-19 pandemic hurt demand for drugs that need to be administered at a doctor’s office.
Shares fell as the health crisis also led to a roughly US$600-million drop in first-quarter sales.
Merck has said two-thirds of its treatments and vaccines need to be administered by a doctor, leading to a larger impact from the pandemic-induced restrictions. Full-year sales are now expected to take a hit of 3 per cent, from 2 per cent previously.
The company is also struggling with a decline in the use of vaccines to treat other diseases besides COVID-19, echoing an impact disclosed by Britain’s GlaxoSmithKline on its vaccines business on Wednesday.
Sales of Merck’s Gardasil, a vaccine to prevent cancers caused by the human papillomavirus virus, tumbled 16.4 per cent to US$917-million in the first quarter, hurt by lower demand in the United States and Europe.
The company expects the impact to vaccine sales to persist during the first half of 2021, and will allocate doses of Gardasil to markets outside the United States to soften the blow.
Heavy equipment maker Caterpillar Inc. (CAT-N) was down after it reported quarterly earnings that exceeded analyst estimates on Thursday, as demand for its machines was propelled by the fastest global economic growth since the 1970s.
The Illinois-based manufacturer of heavy machinery, however, did not provide an earnings forecast for this year.
In an interview, Chief Financial Officer Andrew Bonfield said while the company’s expectations for the year were “very positive”, supply chain bottlenecks were making it tougher to keep up with increasing equipment demand.
He pointed to a global shortage of semiconductor chips, which has forced forcing automakers to shut down production.
Mr. Bonfield said the shortages did not impede production in the first quarter, but the supply situation remained “dynamic and very fluid” and could have an impact later this year.
“We may not be able to satisfy all the end-user demand out there,” he told Reuters. “And that’s the challenge which we are trying to manage.”
Caterpillar is also adjusting prices in response to higher steel costs. Mr. Bonfield, however, said a run-up in commodity prices was a positive for the company as it was generating demand for its machines from iron-ore miners.
Adjusted profit for the first quarter came in at US$2.87 per share, up from US$1.65 per share a year earlier. Analysts surveyed by Refinitiv, on average, expected earnings of US$1.94 per share.
Royal Caribbean Group (RCL-N) turned lower after it said on Thursday it was aiming to restart its U.S. cruises in July after the U.S. Centers for Disease Control and Prevention (CDC) issued new measures to speed up approvals.
Late on Wednesday, the CDC made public a letter to the cruise industry that said it was “committed” to the resumption of passenger operations in the United States by mid-summer.
It followed a lawsuit from Alaska and Florida that sought to overturn the health agency’s year-long ban on the cruise industry’s operations due to the COVID-19 pandemic.
A ship may skip simulated voyages and directly start open water sailing if it attests that 98 per cent of its crew and 95 per cent passengers are fully vaccinated, the CDC said on Wednesday.
The agency also said it would respond within five days to applications for simulated voyages, down from an anticipated 60 days.
However, there are still many concerns that need to be resolved, Royal Caribbean Chief Executive Officer Richard Fain said, adding the company is hopeful they could be settled quickly.
“It could be possible to restart cruising by mid-July... the restart does not mean that we will immediately go into full operation. While we are hopeful about restarting, that restart will be gradual and deliberate,” Mr. Fain said on a call with analysts.
Royal Caribbean on Thursday reported an adjusted loss of US$1.1-billion for the first quarter ended March 31, compared with a loss of US$310.4-million a year earlier.
With files from staff and wires