A survey of North American equities heading in both directions
On the rise
Shopify (SHOP-T) projected first-quarter profit below Wall Street estimates on Tuesday, but its shares rose 2.9 per cent despite worries that efforts to load its e-commerce platform with AI features were squeezing margins.
The weak forecast overshadowed robust holiday season sales that helped the Ottawa-base company post its best quarterly revenue growth in three years.
Shopify has been investing heavily in building out AI-based tools that help sellers on its platform with tasks ranging from image generation and inventory management to gathering customer and sales data.
The company currently offers its suite of AI features, called ‘Shopify Magic’, for free across all of its subscription tiers. It also expanded access to its AI assistant Sidekick.
Shopify’s AI initiatives have helped attract hundreds of merchants, but worries around margin growth are starting to creep up. Analysts note Shopify’s partnership with companies such as PayPal also pose a risk to profit margins.
The company expects gross profit dollars to grow at a low-twenties percentage rate in the current quarter, weaker than the 24.2-per-cent growth expected by analysts according to Visible Alpha.
“Investors may be pausing because of the profitability guidance... Shopify has been able to grow margins very substantially the last couple of years and investors want to make sure that there’s not any backsliding,” said D.A. Davidson analyst Gil Luria.
Shopify’s outlook for operating expense as a percentage of revenue to be 41 per cent to 42 per cent was also higher than expectations, Luria added.
The company’s revenue forecast for mid-twenties percentage growth was roughly in line with estimates for a 24.4-per-cent increase according to data compiled by LSEG.
Shopify posted a 31-per-cent increase from a year earlier in fourth-quarter revenue to US$2.81-billion, beating analysts’ average estimate of US$2.73-billion, according to LSEG.
Gross merchandise volume, a key metric representing the total value of orders facilitated through Shopify, jumped about 26 per cent to US$94.46-billion in the quarter ended December 31.
In a research note, Citi analyst Tyler Radke said: “Shopify saw strong top-line outperformance in Q4 – revenue growth beat consensus by almost 4pts. (more upside from MS segment than Subscription), accelerating 5pts. vs. Q3 as continued market share gains drove GMV growth to 26 per cent year-over-year (highest in 3 years), with a modest 3bps QoQ expansion in take rates. OpEx came in roughly in-line with expectations (vs. the prior two Qs where OpEx came in 5-6 per cent lighter than expectations), which combined with the top-line beat, drove a NG EBIT beat of $35M. Q1 FY25 revenue guidance came in at mid-20s (Q1 is a seasonally slower GMV quarter), while Q1 NG EBIT outlook came in weaker than expected, with OpEx slightly ahead (1 per cent) of consensus which was driving shares down ... We look for additional color on SHOP’s marketing investments, contribution mix between new merchant acquisition/existing merchants’ same-store-sales growth, and thoughts on the SMB environment/consumer backdrop post-elections.”
Coca-Cola (KO-N) posted a surprise rise in comparable revenue and topped estimates for fourth-quarter profit on Tuesday, helped by higher prices and resilient demand for its sodas, sending the company’s shares up 4.7 per cent.
The company has focused on capturing demand in emerging markets such as India and expanding its portfolio in North America to include brands such as the premium Fairlife milk label, as well as the sparkling water brand Topo Chico.
Partnerships with value meal deals at fast-food chains such as McDonald’s have also buoyed sales.
Quarterly volumes rose across Coca-Cola’s global markets for the first time in 2024, with North America posting a 1-per-cent growth in the fourth quarter.
At the same time, global prices rose 9 per cent in last three months of 2024, following a 10-per-cent jump in the third quarter.
Coca-Cola has benefited from robust demand for its sparkling soft drink brands such as Fanta and Sprite, with volumes rising 2 per cent in the segment. It accounts for about two-thirds of the company’s total volumes.
In contrast, rival PepsiCo (PEP-Q) last week reported a 3-per-cent drop in volume for its two biggest segments of North America beverages and Frito-Lay North America for the fourth quarter.
“That’s probably key difference versus Pepsi. Pepsi has been losing share in North America in sparkling beverages and Coca-Cola has been outperforming in no-sugar and sparkling in particular,” said Charlie Higgs, director of Consumer Staples Research at Redburn Atlantic.
Coca-Cola’s fourth-quarter comparable net revenue rose 4.2 per cent to US$11.40-billion, while analysts had expected it to drop 2.47 per cent to US$10.68-billion, according to data by LSEG.
The company’s profit of 55 US cents per share topped estimates of 52 US cents.
Coca-Cola expects organic revenue growth of 5 per cent to 6 per cent for 2025, compared with a 12-per-cent rise in 2024. The forecast is at the higher end of the company’s long-term organic revenue growth target of between 4 per cent and 6 per cent.
Apple (AAPL-Q) rose 2.2 per cent after The Information reported it is partnering with Alibaba (BABA-N) to develop and roll out AI features for iPhone users in China.
The Cupertino-based company and Alibaba have submitted the Chinese AI features it co-developed for approval by China’s cyberspace regulator, the report said.
Apple began testing different AI models from Chinese developers in 2023 and selected Baidu as the primary partner, according to the report, quoting two people with direct knowledge of the matter.
But the collaboration was later scrapped because Baidu’s progress in developing its models for Apple Intelligence fell short of the US company’s standards, the report said.
The iPhone-maker in recent months started to consider other options, assessing models developed by Tencent, ByteDance, Alibaba, as well as Deepseek, the report added.
Apple eventually passed over Deepseek’s models because the Deepseek team lacked the manpower and experience required to support a large customer like Apple, the report said.
DuPont de Nemours (DD-N) on Tuesday raised its 2025 profit forecast and beat quarterly earnings estimates on strong demand for electronics, sending shares of the industrial materials maker up almost 7 per cent.
A rapidly growing market for semiconductors used in artificial intelligence-based technology is benefiting DuPont, which supports advanced chip manufacturing, packaging and assembly processes.
DuPont’s electronics and industrial unit, the biggest in terms of turnover, reported a 10.6-per-cent jump in fourth-quarter net sales.
Meanwhile, its water and protection segment, which had been on a decline due to weak China demand, posted a 6.4-per-cent increase in sales, largely helped by higher volumes for medical packaging products in healthcare markets.
Earlier this year, the company said it had plans to split into three publicly traded companies to pursue focused growth, but has now decided against selling its water and protection unit, which manufactures water purification technologies and provides medical packaging, among other services.
DuPont now plans to spin off only its electronics business and expects to complete the transaction by November 1.
It said on Tuesday it would announce executive leadership and board members for the future electronics company, and expects to begin reporting under the new segment structure in the first quarter of 2025.
DuPont forecast full-year adjusted earnings between US$4.30 and US$4.40 per share for the whole company, higher than its forecast of US$3.70 to US$3.80 for 2024.
Analysts expect it to post adjusted earnings of US$4.33 per share for 2025.
The company forecast sales of US$12.8-billion to US$12.9-billion, also above its last year’s range.
For the fourth quarter, Dupont reported an adjusted profit of US$1.13 per share, beating analysts’ average expectation of 98 US cents.
U.S. oil refiner Phillips 66 (PSX-N) gained 4.7 per cent on news activist Elliott Investment Management has built an over US$2.5-billion stake and plans to push for operational changes to boost its stock.
Elliott plans to push Phillips 66 to sell or spin off its midstream business, according to a person familiar with the matter.
In March last year, Elliott accepted the performance improvement plan that Phillips 66 laid out to boost shareholder returns and share price, after the activist disclosed a US$1-billion stake in the company.
Phillips 66 had appointed Robert Pease, a veteran refining executive, as a director and said it was looking to add a second candidate. Elliott had asked the firm to add directors with refining experience that could address underperformance in refining and speed up cost-cutting efforts.
The company’s shares closed at US$163.34 apiece on March 28, 2024, days after Elliott accepted Phillips 66′s performance improvement plan. The stock closed at US$123.71 on Monday.
Elliott plans to seek a number of changes to simplify Phillips 66, the Wall Street Journal, which first reported the story, said on Monday.
The activist investor believes the firm has not yet fulfilled its commitment to further board changes, WSJ said, adding that Elliott’s new position makes it one of Phillips 66′s top five investors.
U.S.-listed shares of BP PLC (BP-N) closed higher after CEO Murray Auchincloss pledged on Tuesday to fundamentally reset the company’s strategy as it reported a 35-per-cent fall in annual profits, missing analysts’ expectations.
The drop in profit to US$8.9-billion follows weekend reports Elliott Investment Management has built a stake in the company, intensifying demands for strategic shifts.
Mr. Auchincloss declined to comment on Elliott’s reported involvement, in a call with Reuters on Tuesday.
The oil major also posted a 61-per-cent drop in fourth-quarter profits, year-on-year, to the weakest since the fourth quarter of 2020, when pandemic lockdowns shrank demand for oil.
BP joins other majors that have experienced a decline in earnings throughout 2024, following record earnings in the previous two years when consumption recovered from the pandemic retreat and the disruption caused by the Ukraine war led energy prices to spike.
But BP has underperformed its peers, piling pressure on Mr. Auchincloss to deliver change.
On Monday, it had rallied strongly on expectations Elliott’s acquisition of an undisclosed stake would enforce reform, possibly including board changes.
“We now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns,” Auchincloss said in a statement on Tuesday.
“Our oil and gas business is well-positioned and performing strongly... we are focused on improving performance in refining, have stopped projects that won’t compete for capital, and are restructuring our low-carbon business to grow, but in a more capital-light way.”
On the decline
Shares of Algoma Steel Group Inc. (ASTL-T) and Tree Island Steel Ltd. (TSL-T) declined after U.S. President Donald Trump announced 25-per-cent tariffs on all steel and aluminum imports, including from Canada, reigniting a trade conflict that could have serious consequences for Canada’s export-oriented metal producers.
Mr. Trump’s orders reinstate the tariffs he put in place on millions of tonnes of steel and aluminum imports during his first presidency, with a higher 25-per-cent levy on aluminum this time around. The tariffs will come into effect on March 4.
Five charts that explain Canada’s $35-billion steel and aluminum trade with the U.S.
“It’s 25 per cent without exceptions or exemptions, and that’s all countries, no matter where it comes from,” Mr. Trump told reporters on Monday as he signed the executive orders in the White House.
“We don’t need it from another country. As an example, Canada. If we make it in the United States, we don’t need it to be made in Canada. We’ll have the jobs. That’s why Canada should be our 51st state,” he said, repeating a refrain of his in recent weeks questioning Canada’s sovereignty.
Prime Minister Justin Trudeau said on Tuesday that Canada would seek to highlight the negative impact of the United States’ steel and aluminium tariffs and that - if needed - the response from Canada would be firm and clear.
“Canadians will stand up strongly and firmly if we need to,” Trudeau said at the sidelines of the Paris artificial intelligence summit.
South of the border, Cleveland-Cliffs Inc. (CLF-N), which acquired Canada’s Stelco Holdings for roughly $3.85-billion last year, and U.S. Steel Corp. (X-N) enjoyed gains.
Cineplex Inc. (CGX-T) slid after reporting profit and revenue results for its fourth quarter of fiscal 2024 that fell short of expectations.
Before the bell, the Toronto-based company repotred net income of $3.3-million, or 5 cents per share, rising from a loss of $9-million, or 14 cents per share, during the same period a year ago.
Adjusted earnings also came in at 5 cents, falling 6 cents below the Street’s projection.
Box office revenue per patron for the quarter amounted to $13.26, up from $12.90 in the same quarter last year, while concession revenue per patron was $9.41, up from $9.28.
Cineplex also said its box office revenue for January this year totalled $37.5-million compared with $37.6-million in January 2024.
Revenue rose by 15 per cent to $362.7-million, which came in below analysts’ consensus forecast of $367.2-million. CGX Energy Inc. (OYL-X) dropped and Frontera Energy Corp. (FEC-T) rose after Guyana’s government gave a 30-day notice for cancellation of their joint venture’s license for the Corentyne block.
While the companies did not mention why the government issued the notice, the South American nation has earlier expressed a lack of confidence in the firms being able to find a financial partner for their project.
The government plans to cancel the petroleum agreement with the joint venture along with the license and said in the letter that it saw no “reasonable grounds” to grant any extensions.
However, the letter asked the joint venture to submit representations to the government before February 22 for them to reconsider whether to not cancel any license.
The license will cease to have effect on March 10, unless the representations are favorably considered by the government, the letter said.
Guyana’s oil industry is currently dominated by a consortium led by Exxon Mobil, and development of the Corentyne field has been as an attempt to diversify the country’s dependence on the U.S. major.
It is also the only area Frontera and CGX have left in Guyana after they returned two other blocks earlier.
Frontera and CGX Energy said their license for the Corentyne block remain in place and the petroleum agreement had not been terminated.
“Notwithstanding the foregoing, the joint venture is assessing all legal options available to it to assert its rights and will respond to the Government,” they said.
Hotel operator Marriott International (MAR-Q) declined after it forecast slower net room growth and 2025 profit below Wall Street estimates on Tuesday, hurt by poor performance at its hotels in Greater China.
Marriott forecast a full-year adjusted profit of US$9.82 to US$10.19 per share, below analysts’ expectations of US$10.65 per share, according to data compiled by LSEG.
Domestic travel demand in China has weakened as people tighten their purse strings due to poor macroeconomic conditions in the world’s second-largest economy and worries over wage and job security. During the fourth quarter, systemwide room revenue in Greater China declined 1.7 per cent.
Marriott expects global net rooms growth in 2025 to be in a range of 4 per cent to 5 per cent, lower than its 2024 growth of 6.8 per cent.
However, the hotel chain’s adjusted profit of US$2.45 per share for the quarter beat estimates by 7 US cents.
Despite the better-than-expected quarter, the softer net rooms growth guidance for 2025 should be modestly negative for the shares, Jefferies analyst David Katz said.
Meanwhile, outbound travel from China to other Asian countries, particularly Southeast Asian, remained strong and was driven by high-income Chinese consumers.
The Bethesda, Maryland-based hotel chain’s systemwide quarterly room revenue in the Asia-Pacific region, excluding China, rose 12.5 per cent.
Marriott posted a quarterly revenue of US$6.43-billion, compared with analysts’ average estimate of US$6.38-billion, according to data compiled by LSEG
With files from staff and wires