A survey of North American equities heading in both directions
On the rise
Bank of Montreal (BMO-T) saw gains of 4.7 per cent after it posted higher first-quarter profit that topped analysts’ estimates as capital markets activity surged.
BMO earned $2.1-billion or $2.83 per share in the three months that ended Jan3 31. That compared with $1.3-billion or $1.73 per share in the same quarter last year.
Adjusted to exclude certain items, the bank said it earned $3.04 per share. That beat the $2.41 per share analysts expected, according to LSEG data.
“We delivered strong first quarter performance with broad-based revenue growth driving positive operating leverage in each of our operating groups,” BMO chief executive officer Darryl White said in a statement. “Provisions for credit losses declined from the prior quarter as expected, and we initiated our share buyback program.”
The bank kept its quarterly dividend unchanged at $1.59 per share.
BMO is the second major Canadian bank to report earnings for the fiscal first quarter. Bank of Nova Scotia reported earnings that beat analyst expectations earlier Tuesday. National Bank of Canada will post earnings on Wednesday. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will close out the week for major bank earnings on Thursday.
- Stefanie Marotta
Innergex Renewable Energy Inc. (INE-T) soared almost 55 per cent with the premarket announcement of a definitive agreement to be acquired by Caisse de dépôt et placement du Québec.
Under the agreement, CDPQ will pay $13.75 per share in cash for Innergex’s common shares and $25 per share for the company’s Series A and C preferred shares, plus accrued and unpaid dividends.
Innergex common shares closed at $8.71 on the Toronto Stock Exchange on Monday.
CDPQ is Innergex’s second-largest shareholder after Hydro-Quebec, which holds a 19.9 per cent stake in the company.
The Quebec power utility has said it will support the deal, which will require approval by shareholders.
Innergex, which owns and operates hydroelectric facilities, wind farms, solar farms and energy storage facilities, has operations in Canada, the United States, France and Chile.
Canadian trucking company TFI International Inc. (TFII-T) rose 2.5 per cent after revealing it has reversed plans to move its headquarters south after pressure from investors.
Less than a week after announcing that it intends to pursue redomiciliation and change the country where it is legally incorporated to the United States, the Montreal-based freight operator said in a statement Monday that it is dropping that effort. It said it made the decision “based on feedback from shareholders,” but gave no further details.
TFI chief executive Alain Bédard had said he wants to better align the company with its commercial presence and shareholder base, and that a move would allow TFI to be part of U.S. stock indexes. About 70 per cent of the company’s operations are currently in the U.S., together with just under half of its investors.
However, the proposal did not sit well with at least one major shareholder. Pension-fund manager Caisse de dépôt et placement du Québec, which owns a stake of about 4 per cent in TFI, had vowed to push back.
“We expressed our dissatisfaction” to the company, Caisse spokeswoman Kate Monfette said in an e-mail Monday.
That appears to have contributed to Mr. Bédard’s change of heart. The CEO did not immediately respond to a request for comment.
“Their decision to move wasn’t well received – in a number of circles in Quebec,” said Louis Hébert, a corporate-strategy specialist at Montreal’s HEC business school, adding he believes Mr. Bédard likely also received calls from the province’s political leaders.
- Nicolas Van Praet
Stantec Inc. (STN-T) was higher by 10 per cent following the premarket release of better-than-expected fourth-quarter results and 2025 guidance as well as a 7-per-cent dividend hike.
The Edmonton-based engineering firm reported quarterly revenue of $1.478-billion, up 19 per cent year-over-year and above the $1.426-billion estimate on the Street. Adjusted earnings per share of $1.11 was 11 cents higher than the consensus forecast, driven by double-digit organic revenue growth in the United States.
Touting “consistent, high visibility growth ahead,” National Bank analyst Maxim Sytchev said: “Along with a solid quarterly print, Stantec released strong 2025 guidance as the business continues to grow at a consistent pace thanks to strong execution and exposure to numerous thematic tailwinds. All regions are expected to deliver mid-to-high single digit organic top-line growth this year, with broad based secular momentum across end-markets (aging infrastructure, water infrastructure, data centres and energy infrastructure in the U.S., Wastewater treatment, Civic and Healthcare, and Energy & Resources in Canada, and Buildings, Environmental Services and Energy & Resources in the Global segment noted as the key drivers). Management continues to execute on its three-year strategic plan, and we believe shareholders will be pleased by the magnitude and consistency of Stantec’s growth prospects, especially at today’s undemanding valuation. With leverage of 1.2 times inching towards the lower end of management’s target, the balance sheet also provides plenty of optionality for M&A. Lastly, the quarterly dividend was increased by 7.1 per cent to $0.225, suggesting a stable (and conservative — under 20-per-cent) payout ratio and signaling continued confidence in the underlying business”
“Sentiment on the group has been dampened as investors are trying to assess whether DOGE-like initiatives and generally slower macro growth could be impacting the space after several years of robust growth. Based on what we are seeing now, there is a clear bifurcation forming — companies with explicit and material U.S. Federal Government exposure are all under pressure (see charts of Tetra Tech (NASDAQ: TTEK; Not Rated) and Booz Allen Hamilton (NYSE: BAH; Not Rated)) while the likes of STN continue to execute well. Recall that STN’s exposure to U.S. Federal is only 5 per cent and the company’s guide certainly implies there is more than enough growth to go around. With an under-levered capital structure of only 1.2 times net debt to EBITDA and a relatively long time since a sizeable deal was executed, we believe STN is closer than others to capital deployment, if the right opportunity presents itself. STN is our preferred vehicle to play the consulting space at the moment given attractive valuation and solid execution.”
Maple Leaf Foods Inc. (MFI-T) jumped 10.6 per cent after it reported a profit of $53.5-million in its fourth quarter compared with a loss of $9.3-million a year earlier.
The company says the profit amounted to 43 cents per share for the quarter ended Dec. 31 compared with a loss of eight cents per share a year ago.
Sales for the quarter totalled $1.24-billion, up from $1.19-billion in the last three months of 2023.
The company says prepared foods sales rose 4.6 per cent, with prepared meats up 6.5 per cent and poultry up 1.8 per cent, offset in part by a 10.3 per cent drop in plant protein sales. Sales in the pork operating unit increased 3.5 per cent.
On an adjusted basis, Maple Leaf says it earned 38 cents per share in its latest quarter, up from an adjusted profit of eight cents per share a year earlier.
In its outlook for 2025, Maple Leaf says it expects revenue growth in the mid-single-digit range.
Shares of Exchange Income Corp. (EIF-T) gained 0.8 per cent on the late Monday announcement it has agreed to acquire Bradley Air Services Limited, operating as Canadian North for a purchase price of $205-million, including $10.0-milion in common shares.
Canadian North provides passenger and cargo services in Nunavut and the Northwest Territories as well as charter services in Western Canada.
“Canadian North’s asset base and regional service offering are complementary to EIF’s existing legacy passenger carriers which provide essential air service to remote locations,” said ATB Capital Markets analyst Chris Murray in a note. “While limited financial details were provided, management highlighted that it expects returns on the transaction to reach typical levels (i.e., 15.0 per cent) by the end of year two, which we believe reflects anticipated costs of maintenance capital for repairs and overheads in year one before synergies can be realized. We are constructive on the transaction given the complementary nature of the target’s business with EIF’s existing portfolio of essential air services. We expect to receive additional details on the transaction with EIF’s Q4/24 results on February 26, 2025.”
Home Depot Inc. (HD-N) forecast a surprise drop in 2025 profit and projected same-store sales growth below analysts’ estimates on Tuesday, as the company navigates cautious spending on big-ticket projects in a weak housing market.
Shares of the top U.S. home improvement chain rose 2.8 per cent, however after a strong holiday quarter.
The forecast comes as President Donald Trump’s tariff threats and deep cuts in federal government spending have fueled uncertainty. Walmart (WMT-N) last week forecast disappointing annual sales and profit, citing an uncertain geopolitical landscape.
Customers have stalled spending on expensive home-improvement projects such as flooring and kitchen renovations, which are often financed, as borrowing costs remain high while the U.S. Federal Reserve has paused its interest-rate cuts.
Many have instead turned to repair and maintenance activities around their existing homes.
Home Depot expects adjusted earnings-per-share for fiscal year 2025 to decline about 2 per cent, compared to expectations of a 4.6-per-cent growth, according to data compiled by LSEG.
Annual comparable sales is forecast to rise 1 per cent, lower than analysts’ average estimate of a 1.7-per-cent jump.
Customers across income groups have traded down as inflation remains elevated, prompting them to shop more at retailers such as Walmart and Costco (COST-Q) for lower-priced furniture and electronics.
Still, Home Depot posted a surprise rise in comparable sales in the all-important holiday quarter, driven by discounts.
“Our fourth quarter results exceeded our expectations as we saw greater engagement in home improvement spend, despite ongoing pressure on large remodeling projects,” CEO Ted Decker said in a statement.
Customer transactions jumped 7.6 per cent from last year during the quarter, while average ticket increased 0.3 per cent.
The company posted a 0.8-per-cent rise in same-store sales, after eight straight quarters of decline, compared with analysts’ average estimate of a 1.87-per-cent drop.
Customer visits to the company’s stores declined 3 per cent in the fourth quarter, compared with a 3.5-per-cent fall in the previous three months, Placer.ai data showed.
On the decline
Bank of Nova Scotia (BNS-T) was lower by 1.1 per cent after it posted first-quarter earnings that topped analyst expectations on lower-than-expected provisions for sour loans, even as profit slumped as the lender rejigged its international business.
Scotiabank earned $993-million or 66 cents per share in the three months that ended Jan. 31. That compared with $2.2-billion or $1.68 per share in the same quarter last year.
On an adjusted basis, including impairment costs related to the sale of certain banking operations in Latin America, the bank’s profit climbed 7 per cent to $2.4-billion from a year prior, or $1.76 per share. That edged out the $1.65 per share analysts expected, according to Refinitiv.
As part of its strategic turnaround plan, Scotiabank has been reallocating capital from its businesses in Latin America to Canada and the U.S. In January, the bank announced that it is selling its operations in Colombia, Costa Rica and Panama to Colombian bank Davivienda. The sale resulted in an impairment cost of $1.4-billion, which weighed on the bank’s reported net income.
The bank also completed its acquisition of a 14.9 per cent stake in U.S.-based bank KeyCorp in December.
“Our results this quarter demonstrate the value of our diversified franchise and continued focus on deepening relationships with clients across our footprint,” Scotiabank chief executive officer Scott Thomson said in a statement.
The bank kept its quarterly dividend unchanged at $1.06 per share.
- Stefanie Marotta
GFL Environmental Inc. (GFL-T) fell 4 per cent following the late Monday release of in-line fourth-quarter 2024 results and guidance for 2025 that was met positively by analysts.
The Vaughan, Ont.-based company reported revenue of US$1.99-billion, up 5.5 per cent year-over-year and narrowly ahead of the consensus forecast of US$1.98-billion. Adjusted EBITDA jumped 17.1 per cent to US$577.8-million, exceeding the US$572-million estimate on the Street.
Report on Business Magazine: Even under the gun, GFL’s founder Patrick Dovigi wins back investors
GFL’s management now expects revenue for the current fiscal year of US$8.425-billion, topping the analysts’ projection of US$8.39-billion, driven by a 5.25-5.5-per-cent rise in core pricing and flattish volume.
“GFL delivered solid Q4/24 results, highlighted by better-than-expected price-led growth and easing commodity price pressures, which supported 270 basis point in year-over-year margin expansion in solid waste,” said ATB Capital Markets analyst Chris Murray. “GFL guided to low double-digit EBITDA growth in solid waste in 2025, reflecting expectations for more than 5.0-per-cent price-led growth and margin expansion, with M&A offering potential upside. Management expects year-over-year growth and a $3.0-billion debt reduction following the sale of Environment Services (ES) to reduce leverage levels to 2.9 times by Q4/24, with deleveraging supportive of potential credit upgrades in 2025. FCF guidance for $700-$725-million (in solid waste) excludes $325-million in growth CapEx for RNG/EPR projects. We expect to receive more detail around the pending ES sale, price/volume trends in 2025, and M&A/RNG opportunities on the conference call ... While GFL delivered a solid quarter and guidance for 2025, the overall numbers and outlook were in-line with consensus, therefore we expect a neutral response from the market.”
Toronto-based toymaker Spin Master Corp. (TOY-T) slipped 10.4 per cent with Monday’s post-market release of weaker-than-anticipated fourth-quarter 2024 results and the introduction of a 2025 outlook that also disappointed.
It reported earnings per share of 55 cents, falling 5 cents below the Street’s estimate due, in part, to higher-than-expected expenses. Revenue of $649-million was an increase of 29 per cent year-over-year, but it also fell below the consensus forecast of $660-million.
“For the full year, the company missed its revenue and EBITDA margin guidance,” said Stifel analyst Martin Landry in a note. “Global POS decreased by 6 per cent year-over-year in Q4/24, a continuation of the decline seen throughout 2024. Management introduced a 2025 outlook calling for revenue growth of 4 per cent to 6 per cent year-over-year, in-line with our expectations of 5-per-cent growth. The guidance calls for adjusted EBITDA margin of 20-21 per cent (vs. our expectation of 21.4 per cent), which suggests an EBITDA range of $471-504 million, lower than our expectations of $511 million and consensus of $509 million. There is no mention of tariff impacts on the 2025 guidance. We believe that Spin Master’s shares will be weaker [Tuesday] due to the lower EBITDA guidance than expected.”
On Tuesday, Spin Master Corp.’s CEO says he has an eye on numerous points of “volatility” the toy maker could face this year.
Max Rangel says the Toronto-based company stands to be impacted by 10-per-cent tariffs U.S. President Donald Trump has levied on goods entering his country from China.
He says Spin Master’s financial performance may also be hindered by consumers continuing to be careful with spending on discretionary items.
To deal with both, Spin Master is reviewing its supply chain options and pricing to mitigate the impact.
Mr. Rangel says it is also offering a Paw Patrol line of toys at lower price points.
A day after its shares jumped 29.4 per cent, Dye & Durham (DND-T) declined 10.6 per cent as a major shareholder proposed to take the take Toronto-based legal software company private, a deal that would pay a significant premium to the company’s closing price last week.
Plantro Ltd., controlled by former Dye & Durham chief executive officer Matthew Proud, says it’s prepared to offer $20 a share, which would be 70 per cent higher than the company’s closing price of $11.75 on Friday.
However, CIBC analyst Scott Fletcher and associate Erin Kyle pointed out in a note to shareholders Monday evening that the potential offer is only 0.5 per cent higher than Dye & Durham’s closing price on Dec. 17, the day a proxy battle began at the company.
Dye & Durham’s shares shot up by about 25 per cent on Monday after news of the proposal was reported by Bloomberg.
In a letter outlining the proposal, addressed to Dye and Durham’s board of directors, Plantro director Amanda J. Lashley makes it clear the shareholder’s intentions are simply to communicate its “non-binding interest in a possible transaction.”
Dye & Durham days earlier had again shook up its board, after the election of a board slate put forward by its main dissident shareholder, Engine Capital LP, in December. A batch of departures followed the shareholder vote on the overhaul that month, including chief operating officer Martha Vallance, the company’s global vice-president of operations and marketing, and the vice-president in charge of Canadian sales.
Dye & Durham’s fiscal second-quarter results came in below expectations earlier this month, owing to one-off costs related to the proxy fight, including $10.8-million in “CEO separation costs” related to Mr. Proud’s departure.
- Pippa Norman
Zoom Communications (ZM-Q) forecast revenue for the full year and the first quarter below Wall Street estimates on Monday as the company navigates an environment where employers are gradually moving away from hybrid work models.
The company’s shares were down in Tuesday trading.
Zoom had seen rapid growth in users and subscribers during the pandemic-induced lockdowns, but doubts have been raised over the sustainability of the current demand for video conferencing.
In January, U.S. President Donald Trump ordered federal workers to return to the office five days a week.
Big firms such as JPMorgan Chase, Amazon and AT&T have also asked employees to return to office five days a week.
Zoom CEO Eric Yuan said he has no concerns about companies bringing employees back to the office on a post-earnings call.
The company’s “overall growth remains sluggish compared to peers, and five years after becoming a household name, it still feels more defined by its pandemic-era surge than a compelling vision for the future,” said Jeremy Goldman, senior director of briefings at Emarketer.
Zoom expects fiscal 2026 revenue between US$4.79-billion and US$4.80-billion, compared with the average analyst estimate of US$4.81-billion, according to data compiled by LSEG.
The integration of AI into its tools “was supposed to be Zoom’s lifeline, but so far, it’s more of an expensive experiment than a game-changer,” Goldman added.
The company will launch an upgraded version of its AI companion in April, to automate workplace tasks through custom agents.
Zoom, which also faces stiff competition from Microsoft’s collaboration software Teams, forecast first-quarter revenue in the range of US$1.16-billion to US$1.17-billion, below estimates of US$1.18-billion.
Revenue for the fourth quarter ended January 31 was US$1.18-billion, in line with estimates.
On an adjusted basis, Zoom earned US$1.41 per share, compared with estimates of US$1.30.
U.S.-listed shares of British multinational consumer packaged goods giant Unilever PLC (UL-N) fell after it surprised investors on Tuesday by ousting chief executive Hein Schumacher and replacing him with finance chief Fernando Fernandez, who will take over the tough task of reviving the consumer group’s performance.
The management change was made after a board meeting on Monday, a source familiar with the matter told Reuters. The board concluded that Mr. Fernandez, who has been with Unilever for more than 30 years, was the right person to execute the company’s strategy, the source said.
Unilever, which gave no specific reason for the change, is facing pressure from investors to revitalize its fortunes and the top management upheaval comes just weeks after Unilever announced underwhelming full-year earnings.
The consumer goods industry has had a difficult couple of years coping with a supply chain crunch triggered by the COVID-19 pandemic, plus sky-high commodities prices and an energy crisis after Russia invaded Ukraine.
Profit margins have been squeezed and sales volumes hit by consumers switching to cheaper options.
Nestle CEO Mark Schneider was ousted last year after several quarters of weak sales volume growth.
Schumacher’s appointment and strategic changes had been welcomed by billionaire activist investor Nelson Peltz, who built a stake in the company in 2022 and sits on Unilever’s board.
Peltz’s Trian Fund declined to comment on the change.
“We are gobsmacked at the news that Unilever’s very highly regarded CEO Hein Schumacher is to step down after a very successful 18 months in charge,” RBC Capital analyst James Edwardes Jones said in a note.
When Mr. Schumacher became CEO, analysts and investors had applauded Unilever’s decision to choose an external candidate as CEO.
“It has to be something to do with his style of managing the company. We felt that the job needed an outsider, but maybe this was not the view of a meaningful proportion of Unilever’s employees,” Mr. Jones said.
Schumacher reset the group’s strategy to address years of underperformance and laid out cost cuts last year, including separating its ice cream division and cutting thousands of jobs.
But Chairman Ian Meakins said the Board was impressed by Mr. Fernandez’s “decisive and results-oriented approach,” and had given him the task of executing the growth strategy.
Unilever, which owns Hellmann’s mayonnaise, Dove soap and Ben & Jerry’s ice cream, said there was no change to its 2025 outlook or medium-term forecast and that the board was committed to “further accelerating” Mr. Schumacher’s growth plan.
With files from staff and wires