A survey of North American equities heading in both directions
On the rise
Toronto-Dominion Bank (TD-T) was higher by 0.7 per cent on Thursday after it posted slightly lower first-quarter profit, but topped analysts’ estimates as on higher capital markets and wealth management activity while provisions for loan losses were lower than anticipated.
TD’s net income fell by 1 per cent to $2.79-billion, or $1.55 per share, in the three months that ended January 31.
Adjusted to exclude certain items, including U.S. balance sheet restructuring, the bank said it earned $2.02 per share. That beat the $1.96 per share analysts expected.
“While expenses remain somewhat elevated, we delivered solid earnings, which positions us well as we begin the new fiscal year,” TD chief executive officer Raymond Chun said in a statement. “U.S. AML remediation remains our top priority and we continue to make consistent progress to strengthen the Bank.”
In October, TD pleaded guilty to conspiracy to commit money laundering after a lengthy investigation by U.S. regulators and the Department of Justice. The officials levied several severe penalties and remediation requirements, including an asset cap that restricts the bank’s growth in its U.S. retail division.
TD sold its stake in U.S.-based investment dealer Charles Schwab Corp. in February for about $20-billion, a major step in the bank’s strategic review to rejig its U.S. business.
The bank has been restructuring its U.S. balance sheet to free up capacity to provide products and services to its clients without exceeding the asset cap. In February, TD struck a deal to sell US$9-billion in U.S. residential mortgage loans as part of its plan to divest from portfolios it considers non-essential to its business.
TD has reduced its U.S. assets, but it could make further divestments from certain portfolios, including auto loans.
“There’s a lot of progress being made there, but we’re looking at the business mix, we’re looking at simplifying our portfolio, and if it meets those tasks, then we’re not shy to making the decision,” TD chief financial officer Kelvin Tran said in an interview.
In a research note, RBC Dominion Securities analyst Darko Mihelic said: “Overall, we have a favourable view of Q1/25 results. Adjusted EPS was better than we expected mainly due to revenue strength and lower than expected performing PCLs, and there were better than expected results in the Canada P&C and U.S. P&C segments. TD has a lot of moving parts, so stronger than expected numbers are likely to be greeted positively in our view.”
- Stefanie Marotta
Stella-Jones Inc. (SJ-T) shares were up 4 per cent following better-than-anticipated fourth-quarter 2024 results and a 11-per-cent increase to its dividend to $1.24 annually.
Before the bell, the Quebec-based manufacturer of pressure treated wood products reported revenue rose 6 per cent year-over-year to $730-million, exceeding the Street’s expectation of $693-million due to a strong performance from its ties business and residential volume. Adjusted earnings per share of 93 cents topped the consensus of 71 cents.
“Expectations were reset following a disappointing Q3/24 print, with a further 8 per cent decline in the share price on top of the 14-per-cent pullback that day,” said National Bank analyst Maxim Sytchev. “We believe this quarter should assuage investor concerns with a modest decline in poles limited to the non-contract business (with positive price realization), a rebound in ties (albeit timing-driven), and a long-awaited rebound in residential lumber as volumes and prices inflected following an extended period of decline following the initial post-COVID boom. Going forward, we expect a rebound CapEx spending by U.S. utilities will support pole volumes while tie demand should hold steady given the largely non-discretionary nature of railroads’ maintenance spend.”
“Bottom line – solid performance especially in light of heightened uncertainty around Poles; business diversification pays dividends as it was other divisions that surprised to the upside. After missing the de-rate on the back of expectations reset around Q3/24 guidance, we felt stuck, consoling ourselves with a thought that at least the valuation was not expensive, with pushback centering around further downside around Poles. This morning’s results are suggesting that Poles indeed are not as robust but other parts of the diversified platform are picking up the slack. Having stuck with the current recommendation, we are ok to accumulate the shares at these levels, especially in light of a 9.4 times EV/EBITDA multiple on 2025E; not everything is wildly expensive out there, after all. We rate SJ shares Outperform with an $93.00 target.”
Kinaxis Inc. (KXS-T) increased 5.2 per cent on a fourth-quarter earnings beat and a raise to its 2025 profit guidance.
After the bell on Thursday, the Ottawa-based supply chain management and sales and operation planning software company reported consolidated revenue of $123.9-million, up 10.7 per cent year-over-year but narrowly below the Street’s expectation of $125.4-million despite better-than-anticipated Software as a service (SaaS). However, adjusted EBITDA of $31.5-milion rose 59 per cent from the same period a year ago, beating the consensus forecast of $27.2-million.
Kinaxis now projects to fiscal 2025 adjused EBITDA margins of 23-25 per cent, implying $123-137-million adjusted EBITDA. The mid-point of that range is slightly above the consensus estimate of $128-million.
Shares in Veren Inc. (VRN-T) jumped as the oil and gas producer said it finished 2024 with improved performance out of its wells in northwestern Alberta and would take a breather from big asset deals.
Veren, which changed its name from Crescent Point Energy last year, saw its share price rise 9.4 per cent to $7.57 per share on Thursday.
Chief executive Craig Bryksa told analysts on a conference call that the company expects to generate excess cash flow of between $625-million and $825-million this year based on West Texas Intermediate oil at US$70 to US$75 a barrel and Alberta natural gas prices at $2.25 per mmBTU.
“We are confident about our 2025 outlook and remain focused on operational execution, strengthening our balance sheet and returning capital back to our shareholders,” he said.
Average daily production during the last three months of 2024 amounted to 188,721 barrels of oil equivalent per day, up from 162,269 a year earlier. More than three quarters of that came from Veren’s key operations in the Alberta Montney and Kaybob Duvernay areas, where production grew 10 per cent from the first quarter.
Veren brought two multi-well pads on stream late last year in the Karr South area of the Alberta Montney and two more in the Kaybob Duvernay. In their first 30 days of production, the Montney wells bested average production in the region by 30 per cent and in the Duvernay, they exceeded the average by 25 per cent.
It also increased capacity from its Gold Creek West Facility in the Montney to accommodate future production and has worked to minimize future disruptions by investing in connections to gas plants.
In a research note, RBC analyst Michael Harvey said: “Veren’s Q4/24 AFFO results were slightly ahead of street expectations. The 2025 budget remains intact, focused on continued returns to shareholders combined with ongoing Montney and Duvernay development. Of note, a new 7-well pad at Gold Creek will be brought on stream in March, completed with the updated SPE technique.”
Ovintiv Inc. (OVV-T) was higher by 3.7 per cent after the late Wednesday release of fourth-quarter results that topped analyst expectations.
The Denver-based energy company reported adjusted earnings of US$1.35 per share for the quarter ended Dec. 31, lower than US$2.35 during the same period a year ago but above the mean estimate on the Street of US$1.16 per share.
Revenue fell 30.9 per cent to US$2.19-billion from a year ago, topping the consensus forecast of US$2.14-billion.
Greg Pardy, RBC’s Head of Global Energy Research, said: “Ovintiv reported solid fourth-quarter result punctuated by 5 per cent higher CFPS and broadly in-line equivalent production and capital spending vis-à-vis Street consensus. The company’s results also included a non-cash ceiling test impairment charge of $350-million after tax related to Canadian natural gas reserves due to lower AECO pricing, which appears to have resulted in lower cash taxes contributing to a large portion of the CFPS beat. Ovintiv’s total debt of $5.45 billion at December 31 was down about 7 per cent ($424 million) from September 30.
“Alongside its fourth-quarter results, the company released its 2025 guidance which pointed toward 2 per cent lower mid-point total production of 605,000 boe/d amid in-line mid-point capital spending of $2.2 billion vis-à-vis our estimates.”
On the decline
Shares of Royal Bank of Canada (RY-T) closed down 2.9 per cent after it posted a jump in first-quarter profit that beat analysts’ estimates on a boost from its takeover of HSBC Bank Canada and a surge in capital markets activity.
RBC’s net income climbed 43 per cent to $5.1-billion, or $3.54 per share, in the three months that ended Jan. 31.
Adjusted to exclude certain items, including transaction and integration costs related to the lender’s acquisition of HSBC Bank Canada, the bank said it earned $3.62 per share. That topped the $3.25 per share analysts expected, according to Refinitiv.
A breakdown of the big banks’ first-quarter earnings
“In Q1, we delivered strong results and client-driven growth across our businesses, while prudently managing risk and making investments in technology and talent to position the bank for the future,” RBC chief executive officer Dave McKay said in a statement.
In the second quarter of last year, RBC closed its deal to takeover HSBC Bank Canada, which was Canada’s seventh-largest lender. This year’s first quarter results include a boost from the inclusion of HSBC, which increased net income by $214-million.
The bank kept its quarterly dividend unchanged at $1.48 per share.
RBC is the fifth major Canadian bank to report earnings for the fiscal first quarter. Bank of Nova Scotia, Bank of Montreal and National Bank of Canada reported earnings earlier in the week. Canadian Imperial Bank of Commerce and Toronto-Dominion Bank also release earnings Thursday.
In the quarter, RBC set aside $1.05-billion in provisions for credit losses – the funds banks reserve to cover loans that may default. That was higher than analysts anticipated, and included $985-million against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.
In the same quarter last year, RBC reserved $813-million in provisions.
In a research note, TD Cowen analyst Mario Mendonca said: “RY beat estimates on trading, NII, and insurance (better balance than most peers). Impaired PCLs were higher than expected, but this was offset by the release (for the same credit) from performing. No mention of tariffs in building performing. New formations were very high (over $3-billion) in a variety of sectors. We expect market to focus on credit. CNB earnings improving but loan growth remains soft.”
- Stefanie Marotta
Canadian Imperial Bank of Commerce (CM-T) slid 0.4 per cent on Thursday after it reported a 26-per-cent rise in quarterly profit that was higher than analysts expected and kept a lid on provisions against losses on loans even as the threat of tariffs looms over the bank’s cross-border business.
The Toronto-based bank reported profit of $2.17-billion, or $2.19 per share, in the fiscal first quarter that ended January 31. That compared with $1.73-billion, or $1.77 per share, in the same quarter last year.
After adjusting to exclude certain costs, CIBC said it earned $2.20 per share, well ahead of the consensus estimate of $1.96 per share among analysts, as calculated by the London Stock Exchange Group.
The bank earmarked $573-million of provisions for credit losses, which is the money set aside to cover potential losses on loans that may not be repaid. That was 2 per cent lower than a year ago, as delinquent loans in commercial banking and wealth management declined.
Of that total, however, the bank set aside $127-million against loans that are still being repaid, which was more than a year ago. CIBC cited “a worsening in our economic outlook including with respect to the uncertainty that tariffs could be imposed by the U.S. government.”
In a prepared statement, chief executive officer Victor Dodig said CIBC is prepared to provide “support for our clients as we navigate the expected volatility in the cross-border business environment.”
The bank kept its quarterly dividend unchanged at 97 cents per share.
RBC analyst Darko Mihelic said: “Overall, we have a positive view on Q1/25 results as results were solid relative to our forecast, with solid revenue results. Performing PCLs were lower than our forecast, in line with the trend we have seen so far this quarter, but impaired PCLs were also lower than we expected which we view positively.”
- James Bradshaw
WSP Global Inc. (WSP-T) lost 1.5 per cent after saying its earnings attributable to shareholders were $166.9-million in the fourth quarter, up from $130.6 million during the same quarter last year.
CEO Alexandre L’Heureux says he’s “feeling extremely good” about the engineering giant’s prospects in the United States despite the Trump administration’s professed aversion to spending on big projects hatched in recent years.
Speaking to analysts on a conference call Thursday, Mr. L’Heureux said infrastructure remains a bipartisan concern in a polarized America, drawing support from Democrats and Republicans.
However, U.S. President Donald Trump last month ordered a freeze on infrastructure spending approved under the previous administration, which had allocated billions of dollars to states and cities for everything from highway expansions to water system upgrades.
WSP relies on infrastructure projects for a large chunk of its North American revenue.
Mr. L’Heureux, who has led a streak of acquisitions over the past few years, qualified that instability can breed hesitation around mergers in general, but said transactions will likely pick up again “in the coming years.”
The Montreal-based company boosted fourth-quarter net earnings 28 per cent year-over-year to $166.9-million and increased revenue 25 per cent to $4.66 billion, beating earnings expectations for the 10th quarter in a row.
National Bank analyst Maxim Sytchev said: ‘Revenues exceeded expectations by a significant delta, though the “beat” on EBITDA and EPS was much more modest. While market weakness in Asia had previously been telegraphed, the 1.3-per-cent year-over-year organic revenue decline was also compounded by softness in New Zealand. As a result, the 530 basis points year-over-year decline in APAC margins weighed on earnings in the quarter, despite the business’ smaller size. In addition, while U.S. disaster relief work added a significant 5 per cent to the Americas region’s impressive growth rate, segment margins fell by 100 basis points year-over-year given the significantly lower margin nature of the work. On the call, we will be looking for additional colour on the softer-than-expected backlog growth, notably in Canada which saw a 8.3-per-cent year-over-year organic decline (we suspect it’s timing-related ). That said, we see little reason to change our highly favourable view on WSP’s growth ‘story’ given exposure to thematic megatrends, a strong track record of capital allocation (especially M&A) and clear visibility for consistent margin expansion of 30 basis points to 50 basis points annually over the next several years. Looking ahead, the company is well positioned for the next phase of growth, as outlined in the 2025-2027 strategic plan.”
“We did not move the numbers on the back of 2025E guidance and [Wednesday’s] print suggests that was the right move. We still believe there is a lot of scope for growth in 2025E and beyond, but objectively, it was hard to move the numbers higher post the Strategic Plan / 2025E guidance update. Margin performance in APAC was disappointing, bringing down the consolidated metric. We are confident that this geography will once again rebalance given the upward trajectory in combined margin as telegraphed by management’s 2025E guide. With shares being up 2.3 per cent year-to-date (vs. the TSX at up 2.4 per cent), we have to remind ourselves (and investors) that 2024 was a big year for WSP — closing a large transformative deal for Power Engineers, continuing to drive organic growth, etc. — all attributes that were reflected in the 22-per-cent LTM [last 12-month] share price advance (TSX at up 19 per cent). We suspect investors will need either a deal or a more meaningful beat for the stock to resume its upward (and more meaningful) trajectory. Long-term growth, however, still remains material given the market’s fragmentation, WSP’s M&A and operational track record and, of course, those ambitions of doubling the size of the company at potentially 22-per-cent EBITDA margin. We rate WSP shares Outperform rating with a $286.00 price target.”
Montreal’s Quebecor Inc. (QBR.B-T) slipped 0.7 per cent after it reported its fourth-quarter profit rose compared with a year ago.
The telecommunications and media company says its net income attributable to shareholders totalled $177.7-million or 76 cents per share for the quarter ended Dec. 31. The result compared with a profit of $146.2-million or 63 cents per share in the last three months of 2023.
Revenue for the quarter totalled $1.50-billion, relatively flat year-over-year.
On an adjusted basis, Quebecor says its income from operating activities amounted to 80 cents per share, up from an adjusted profit of 73 cents per share in the fourth quarter of 2023. The Street had expected 74 cents.
Quebecor chief executive Pierre Karl Peladeau says the company remains firmly committed to pursuing its cross-Canada expansion in the wireless segment, driving competition, and diversifying its products.
In a research note, RBC analyst Drew McReynolds said: “Q4/24 financial results were ahead of our forecast with Telecommunications RGUs slightly lower. Given the early progress towards striking a better balance of growth and profitability, we view the results as neutral to modestly positive for the shares at current levels.”
Nvidia Corp. (NVDA-Q) shares fell 8.5 per cent on Thursday after the artificial intelligence chip giant’s upbeat quarterly forecasts pointed to booming demand but also signaled a hit from a complex rollout of its latest processor.
“The muted response is a balance of strong revenue and lower gross margins,” said Gil Luria, analyst at D.A. Davidson.
“Gross margins are under pressure because of the transition to the new Blackwell products set. New semiconductor products tend to start off at lower margins and ramp over time.”
The world’s second-most valuable company has been the top beneficiary of an AI-driven spending spree by big technology companies over the past two years, with its shares gaining more than 400% in that period.
The magnitude of its revenue beats, however, has been narrowing as the company faces tough comparisons from robust year-ago growth rates. That has weighed on the market reaction after its results over the past two quarters.
“It’s yet another typical Nvidia report where they beat and raise expectations,” said Ken Mahoney, CEO of Mahoney Asset Management. “For them to have this track record of doing that every time, in some way almost works against them as the market is not impressed unless it is a blow-out beat and raise.”
Investor worries over the need for heavy investments in AI infrastructure, including chips, had been fanned by the launch of low-cost AI models from Chinese startup DeepSeek and, more recently, by an analyst report that Microsoft had cut back on data-center leases.
Nvidia CEO Jensen Huang allayed some of those fears on Wednesday, saying demand for the company’s latest Blackwell chip was “amazing” and that it had already pulled in around $11 billion in revenue related to the processor in the fourth quarter.
With files from staff and wires