A survey of North American equities heading in both directions
On the rise
Shares of TMX Group Ltd. (X-T) were higher by 8.3 per cent on Tuesday following the release of better-than-anticipated fourth-quarter 2024 financial results and a 5-per-cent increase to its dividend.
The TSX parent reported adjusted earnings per share of 48 cents, topping the Street’s expectation by 4 cents as organic revenue surged 17 per cent year-over-year. The beat came despite higher-than-expected expenses (up 9 per cent from fiscal 2023).
“TMX’s Q4 results were a solid beat, with strong overall top-line growth offsetting higher expenses,” TD Cowen equity analyst Graham Ryding said. “Revenue came in ahead of expectations across all revenue lines, with capital formation the biggest surprise (higher-than-expected margin income).”
Quebec City-based insurance company iA Financial Corp. Inc. (IAG-T) gained 0.3 per cent after announcing it has acquired Global Warranty, a company that offers warranties for used cars and trucks in Canada.
Financial terms of the deal agreement were not immediately available.
Global Warranty was founded in 1987.
The company, which is based in London, Ont., works with a network of over 1,500 automotive dealerships and more than 400 repair centres across the country
Gwen Gareau, senior vice-president, iA Dealer Services and iA Auto Finance, says the deal will grow the company’s presence in the used vehicle warranty market.
Palantir (PLTR-Q) shares rallied 24 per cent after it forecast upbeat annual revenue fueled by strong demand for its software and data analytics services from businesses racing to adopt generative AI.
Palantir, which provides services to governments such as software that visualizes army positions, is set to gain about US$35-billion in market capitalization, at current share price levels of US$99.31.
“It’s yet another company to be riding the AI wave, benefiting from multiple industries pressing the button on big investment to improve their technological capabilities,” said Russ Mould, Investment Director at AJ Bell.
Co-founded by tech billionaire Peter Thiel, Palantir’s platform AIP, which is used to test, debug code and evaluate AI-related scenarios, has benefited from businesses that are looking to deploy generative AI technology.
“Palantir is the Michael Jordan of AI stocks right now, not only capturing investors’ imagination but delivering game-winning shots when it counts,” said Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown.
Meanwhile, the company’s Chief Revenue Officer Ryan Taylor said they would discourage commercial clients from using DeepSeek’s AI models, but if customers still choose to do so Palantir would continue to work with them.
White House press secretary Karoline Leavitt had said last week that U.S. officials were looking at the national security implications of DeepSeek.
With U.S. President Donald Trump imposing new tariffs, Taylor said it could also help drive demand for the company’s analytics services centered around supply chain and logistics management.
At least nine analysts raised their price targets on the stock, according to data compiled by LSEG, while Morgan Stanley raised its rating to ‘equalweight’ from ‘underweight’ and sees Palantir as ‘a powerful AI story’.
Spotify Technology (SPOT-N) reported its first annual profit and forecast quarterly earnings above Wall Street estimates, as the Swedish audio-streaming giant benefits from strong user growth, price hikes and a cost-cutting drive.
Shares of the company, which competes with Apple and Amazon’s music streaming offerings, rose 13.2 per cent in Tuesday trading.
The results mark the culmination of months-long efforts by Spotify to boost profitability through price increases and cost cuts, including layoffs, reduced marketing spend and a pullback from hefty investments in podcasting and audio.
Spotify said it expects operating income of 548 million euros (US$566.2-million) in the current quarter, above analysts’ estimate of 450.6 million euros, according to LSEG-compiled data.
Its quarterly monthly active users (MAU) forecast of 678 million was in line with an estimate of 679.4 million, while its prediction for a 2 million increase in premium subscribers to 265 million was above a Visible Alpha estimate of 263.2 million.
CEO Daniel Ek said in an interview that the company plans to experiment with more personalized offerings to attract subscribers, including a new premium tier called “superfans of music” that would come with additional features.
“For the next step in the music industry’s growth, we’re going to have not just one product for all people, but actually different types of products, different types of affinities, and one of those products is superfans of music,” he said.
Fourth-quarter revenue rose 16 per cent to 4.24 billion euros, beating an estimate of 4.19 billion euros, driven by subscriber gains and a 5-per-cent increase in average revenue per user. Spotify hiked prices in the U.S. in June last year.
Gross profit jumped 40 per cent thanks to a 16-per-cent decline in operating expenses. Gross profit margin increased to 32.2% from 31.1 per cent in the prior quarter.
Top U.S. refiner Marathon Petroleum (MPC-N) posted a 74-per-cent drop in fourth-quarter earnings but beat Wall Street estimates, as strength in its midstream and renewable diesel segments helped offset a steep decline in refining margins.
Shares were up 6.7 per cent in Tuesday trading.
U.S. refiner profits have been under pressure since late 2023 due to new refining capacity coming online and margins returning to normal levels, following two years of high profits driven by supply shortages from Russia’s invasion of Ukraine and post-pandemic recovery
The Findlay, Ohio-based company’s refining and marketing margin was at US$12.93 per barrel in the quarter, down 27.4 per cent from a year earlier.
Marathon’s refining segment’s quarterly core profit slumped to US$559-million, compared with US$2.25-billion a year earlier.
However, the company’s midstream segment reported an adjusted core profit of US$1.71-billion in the quarter, up 8.7 per cent from a year earlier, benefiting from higher rates and higher volumes of liquids transported through its system.
The segment was also helped by contributions from Utica shale assets, which were acquired by MPLX from pipeline operator Summit Midstream Partners for US$625-million last year.
MPLX is a limited partnership formed by Marathon Petroleum to focus on midstream and logistic infrastructure in key U.S. natgas basins.
On an adjusted basis, the company reported a profit of 77 US cents per share in the quarter, compared with the analysts’ average estimate of 2 US cents per share, according to data compiled by LSEG.
Luxury sports car maker Ferrari (RACE-N) was up 7.1 per cent after it said on Tuesday its revenue and core earnings would rise by at least 5 per cent this year, supported by strong product delivery and demand for personal touches to its vehicles, having met targets for 2024.
The Italian company said it saw its earnings before interest, tax, depreciation and amortization (EBITDA) growing to at least 2.68 billion euros (US$2.77-billion) in 2025, from 2.56 billion euros in full-year 2024.
Last year’s EBITDA result compares with Ferrari’s forecast for a result of at least 2.50 billion euros.
CEO Benedetto Vigna said a strong product mix and a growing demand for personalizations had driven the 2024 results.
“On these solid foundations, we expect further robust growth in 2025,” he said in a statement, adding this would allow Ferrari to meet one year in advance the high-end of most of its profitability targets set for 2026.
Personalizations refer to the finishing touches that Ferrari buyers add at extra cost to their cars, and mainly relate to paint, liveries and use of carbon.
On the decline
Drugmaker Pfizer (PFE-N) posted a better than expected fourth quarter profit, helped by cost cuts and a smaller-than-feared drop in sales of its COVID-19 vaccine.
“Our revenue volatility is largely in the past as COVID-related uncertainties have diminished,” Pfizer’s finance chief David Denton said in prepared remarks.
Pfizer’s shares closed down 1.3 per cent in Tuesday trading. The stock fell nearly 8 per cent last year, and trades at less than half its value at the peak of the COVID-19 pandemic.
Pfizer’s COVID product sales have fallen sharply from their highs of the pandemic, but are still a profit driver for Pfizer.
Revenue from COVID vaccine Comirnaty brought in sales of US$3.38-billion, while antiviral treatment Paxlovid was US$727-million for the quarter. Pfizer makes the Comirnaty vaccine with German partner BioNTech.
Analysts were expecting US$3.10-billion for Comirnaty and quarterly sales of US$794.33-million for Paxlovid, according to data compiled by LSEG.
Sales of its heart disease drug, sold as Vyndaqel and Vyndamax, came in at US$1.55-billion, above estimates of $1.48 billion.
The company is under scrutiny from investors who are eager to see profitable returns from its recent acquisitions, including its US$43-billion purchase of cancer drugmaker Seagen, and internal investments.
On an adjusted basis, Pfizer earned 63 US cents per share for the fourth quarter, compared with analysts’ estimates of 47 IUS cents per share.
Merck (MRK-N) said it will pause shipments of Gardasil to China through at least mid-year, as continued weak demand for the HPV vaccine there is expected to hurt 2025 revenue, but it still posted a strong fourth-quarter profit on sales of cancer drug Keytruda.
Shares of the U.S. drugmaker fell 9.1 per cent in Tuesday trading.
The company said it expects 2025 revenue in the range of US$64.1-billion to US$65.6-billion. Analysts, on average, had forecast revenue of US$67.3-billion for the year, according to LSEG data.
It expects 2025 earnings per share in the range of US$8.88 to US$9.03 a share compared with an average analyst estimate of US$9.03 a share.
Gardasil, which prevents cancers caused by the human papillomavirus, has been one of Merck’s top growth drivers aside from Keytruda, and much of its international growth had come from China before sales of the shot slowed significantly there beginning in the second quarter of 2024.
Merck said the pause in Gardasil shipments to China began this month. The company has blamed economic issues in the country for pushing down demand as well as China’s anti-bribery and anti-corruption drive that has also hurt sales. Beijing has been running a campaign targeting bribery of doctors that has disrupted business and scuttled hospital deals with international pharmaceutical companies.
Merck shares closed at US$99.97 on Monday, more than 20 per cent below the levels they were trading at in July.
PepsiCo (PEP-Q) forecast annual profit below expectations and missed quarterly revenue estimates, as the Doritos maker faces weakening demand for its sodas and snacks such as Lay’s in the United States, its largest market.
Shares of PepsiCo fell 4.5 per cent in Tuesday trading.
Americans are still paring back spending on soft drinks and salty treats to save their dollars for essential purchases, forcing PepsiCo to tap promotions for volume growth after several quarters of slowdown wrought by price hikes.
The target is to offer multi-packs and mini canisters to bring back consumers leaning towards smaller pack sizes or picking up cheaper alternatives from retail aisles.
PepsiCo also promised heavy investments into overhauling its existing products and introducing new items such as ethnic-inspired flavor offerings through its Sabritas, Marias and Natu Chip brands to spur demand.
“We expect our North America performance to gradually improve as the year progresses, and our commercial activities take hold,” executives said in the company’s prepared remarks.
PepsiCo’s North America beverages and Frito-Lay North America, its two biggest segments, reported a 3-per-cent volume decline in the fourth quarter.
The company’s total organic volume slipped 1% for the quarter ended Dec. 28, while average prices jumped 3 per cent.
“Frito-Lay business is still finding its footing as elevated prices weigh on snacking trends ... beverage business also continues to lose share, and we believe PepsiCo is reaching its pain threshold,” said RBC Capital Markets analyst Nik Modi.
PepsiCo expects a low-single digit increase for fiscal 2025 core earnings per share, compared with analysts’ estimates of a 4.73-per-cent rise to US$8.53 per share, according to data compiled by LSEG.
Its quarterly net revenue fell 0.2 per cent to US$27.78-billion, missing estimates of US$27.89-billion. Excluding items, PepsiCo earned US$1.96 per share, above expectations of US$1.94.
PayPal (PYPL-Q) shares fell 13.2 per cent on Tuesday after the digital payments giant’s operating margin shrank in the fourth quarter, raising concerns over the possibility of a sluggish recovery and overshadowing a strong profit forecast for 2025.
Investors have been worried about challenges to the company’s profit margins, which benefited for years from a first-mover advantage in the digital payments industry but had fallen behind following the pandemic amid slowing spending and rising competition.
Technology behemoths such as Apple and Alphabet’s Google have emerged as new entrants into PayPal’s core market, while traditional card networks - Visa and Mastercard - have also expanded their digital payments footprint in recent years.
Since taking over in late 2023, PayPal CEO Alex Chriss has focused on high-margin products and touted ‘profitable growth’ as the company’s new strategy. PayPal has since pushed to revitalize growth in branded products, improve pricing and sharpen cost-cutting efforts.
The company has also worked to defend its dominant position with new products, including a “one-click” checkout feature called Fastlane, and forged lucrative partnerships with companies such as Global Payments and Fiserv.
While PayPal’s adjusted operating margins contracted by 34 basis points to 18 per cent in the fourth quarter, efforts toward profitable growth helped the company close the year with margins expanding 116 basis points to 18.4 per cent.
“We set out at the beginning of 2024 to narrow our focus, improve execution, and reposition the business,” Mr. Chriss said.
“The improvements we made to branded checkout, peer-to-peer, and Venmo, plus the progress we made on our price-to-value strategy, are beginning to show up in our results. "
PayPal expects full-year adjusted profit to grow between US$4.95 and US$5.10 per share, surpassing Wall Street views of US$4.90 according to estimates compiled by LSEG.
Transaction margin dollars, a key measure of the profitability of its core business, increased 7 per cent for the full year. It expects to grow TMD between 4 per cent and 5 per cent in 2025.
For the first quarter, PayPal expects to post an adjusted profit in the range US$1.15 to US$1.17 per share, above expectations of US$1.14.
PayPal’s net revenue increased 4 per cent to US$8.4-billion in the quarter ended Dec. 31, while total payment volume climbed 7 per cent.
It posted a fourth-quarter adjusted profit of US$1.19, topping estimates of US$1.12.
PayPal’s shares surged nearly 40 per cent in 2024, outperforming broader markets and ending three years of consecutive annual declines.
U.S.-listed shares of UBS Group AG (UBS-N) shares sank 7.2 per cent on Tuesday after its CEO warned again about the negative impact of new Swiss capital rules and the bank said its buyback plans hinged on no major changes to them.
Shares in Switzerland’s largest bank initially rose after its fourth quarter profit beat forecasts, but then fell by as much as 6 per cent in Europe as other bank stock prices rose, putting them on course for their biggest one-day drop in six months.
Analysts said considerable expectation was built into the price of UBS shares, which are up by more than 80 per cent since it bought its rival Credit Suisse in a 2023 emergency takeover.
UBS, which has made progress in integrating its former rival, said it plans to buy back US$1-billion of shares in the first half of 2025 and up to US$2-billion in the second, if there are no “material and immediate changes” to Swiss capital rules.
Swiss authorities have pledged to draw up stricter banking regulations, at the center of which are plans to make UBS hold more capital, to prevent a repeat of Credit Suisse’s meltdown.
With a government proposal to be published in May, it is not yet clear how much that will be.
UBS says existing capital requirements are appropriate and its CEO Sergio Ermotti urged Switzerland not to saddle the bank with capital requirements that could hurt shareholder returns.
“Offsetting the consequences of higher requirements would make us uncompetitive domestically and abroad, hamper our ability to help clients grow, and importantly, make banking services more expensive for Swiss families and enterprises in the long run,” he said during a call with analysts.
Estee Lauder (EL-N) forecast third-quarter profit well below estimates, citing persistent weak demand at airports and travel destinations such as Korea and China, while also expanding its restructuring plan to include up to 7,000 job cuts.
Shares of the company fell 16.1 per cent in Tuesday trading.
Estee Lauder expects to take restructuring and other charges of between US$1.2-billion and US$1.6-billion.
The company estimates a net reduction of 5,800 to 7,000 jobs by the end of fiscal 2026 as part of an expanded plan to help the cosmetics giant return to sales growth and restore a solid double-digit adjusted operating margin over the next few years.
As of June 30, 2024, the New York-based company had about 62,000 employees worldwide.
Estee Lauder said the plan aims to “manage external volatility, such as potential tariff increases globally.”
For the third quarter, Estee Lauder expects adjusted earnings per share between 24 US cents and 34 US cents, below analysts’ estimates of 63 US cents per share, according to data compiled by LSEG.
“For the third quarter, we expect overall soft retail trends to persist in Asia travel retail, significantly pressuring our organic net sales,” new CEO Stephane de La Faverie, who took over at the start of the year, said in a statement on Tuesday.
In October, the parent company of Clinique and MAC lipstick withdrew its annual sales and profit forecasts while reducing its dividend as part of a planned turnaround after facing declining sales.
Ongoing challenges in Asia’s travel retail sector, decreased demand in China, and strong competition from newer beauty and skincare brands targeting younger consumers have negatively impacted Estee and severely affected its stock prices.
In the second quarter ended Dec. 31, sales fell 6 per cent to US$4-billion, compared with analysts’ estimates of US$3.97-billion. On an adjusted basis, the company earned 62 US cents, beating estimates.
With files from staff and wires