A survey of North American equities heading in both directions
On the rise
Shares of Aurora Cannabis Inc. (ACB-T) soared 45 per cent on Wednesday after reporting record quarterly results before the bell.
Net revenue came in at $88.2-million, up 37 per cent year-over-year and well ahead of the Street’s forecast of $79.9-million. Adjusted EBITDA soared 316 per cent to $23.1-million, also easily topping the consensus estimate of $8.9-million.
“Record quarterly results that came in 10 per cent/160 per cent higher than consensus revenue/EBITDA estimates driven by international net revenue growth and margin expansion,” said TD Cowen analyst Derek Lessard in a note. “Increased sales in high-margin markets, cost reductions and improved efficiencies (e.g. shifting sourcing for Europe from Canada) were the main drivers of the significant margin expansion.”
“ACB shares are flat year-to-date, we believe mostly on delays around potential U.S. rescheduling. However, we continue to argue that these results show that ACB’s focus both outside of the U.S. and the less volatile international medical cannabis market (including a significant share of the Canadian market) is profitable. We expect the shares to be up significantly today on these results. Overall, we believe that these results support our view that ACB has turned over a proverbial new leaf following the reset in the cannabis industry, now with a focus on responsible growth. We believe that ACB’s current valuation presents compelling riskreward tradeoff despite lingering risks in the emerging cannabis industry, given 1) substantial disconnect between price and fundamentals (trading at a 6 times EV/EBITDA discount to Tilray despite stronger margins and financial position), 2) a unique and dominant position in the global medical cannabis industry, 3) ability to profitably achieve consistent quality and potency at scale, and 4) appears well positioned to gain market share and drive profitability.
Shares of Finning International Inc. (FTT-T) were higher by 12.6 per cent in the wake of a fourth-quarter earnings beat driven by strength in new equipment and product support revenue.
The Vancouver-based industrial equipment dealer reported net revenue of $2.58-billion after the bell on Tuesday, up 8 per cent year-over-year and topping the Street’s expectation of $2.49-billion. Adjusted earning per share of $1.02 topped the consensus forecast by 15 cents.
“The quarterly print was no doubt solid, especially with very strong FCF close to $400-million (up 43 per cent year-over-year) helping bring leverage down to 1.5 times (vs. 1.7 times last quarter and as at Q4/23),” said National Bank analyst Maxim Sytchev. “Looking forward, LatAm momentum remains solid given a steady construction outlook and mining demand on the back of supportive copper prices, growing volumes and a general client willingness to invest in greenfield and brownfield projects. Similarly, data centre demand continues to be healthy. This dynamic is moderated somewhat by a more challenging environment for hiring and retaining technicians. In Western Canada, spending by mining clients continues to be disciplined, compounded by the uncertainty of protectionist rhetoric in the U.S. Funding is expected to materialize for large construction projects as well, though this will likely take some time. As such, the near-term focus is on cost control and working capital management. In UK&I, expectations appear broadly similar to the last few quarters with slow GDP growth weighing on construction activity, offset by thematic backup power demand from the data centre market.”
Mr. Sytchev concluded in the results were “pretty good, especially given context of low expectations.”
“We have been fielding lots of mostly concerned questions heading into the quarter around Product Support (true, Canada is still tough, but LatAm is picking up the slack), tariffs (how that could change the behaviour of oil producers and whether industrial goods could be a category against which Canada could retaliate) and peak margins (we are already modeling an EPS decline in 2025E),” he addded. “FCF was very strong for the quarter and the year, bringing leverage down 20 basis points to 1.5 times; overall, this is solid. One point of contention remains the NCIB; $322-million of capital has been allocated towards this activity while the average repurchase price of $39.68 is higher vs. the current spot price. Not great. The cost-cutting opportunity remains compelling in our view, Argentina is a free option, and we are quite bullish on copper prospects. The oil sands backdrop will improve over time as producers get over the rebuild hump of several years ago. We are ok to wait.”
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Brookfield Asset Management Ltd. (BAM-T) turned higher and closed up 1 per cent after its UK entity, Brookfield Capital Partners Ltd., offered to match bids of A$3 billion (US$1.9-billion) for Australia’s Insignia Financial from Bain Capital and CC Capital Partners.
The offer from New York-headquartered, Toronto-listed Brookfield also allows for Insignia investors to take equity in its unlisted bid vehicle if they prefer.
Insignia, formerly known as IOOF, managed some A$327 billion in client money as of December and is the third-largest player in Australia’s superannuation sector. It has granted Brookfield limited access to its books as it has done with the two other bidders.
Australia’s publicly traded wealth management firms are drawing interest from investors attracted to the country’s thriving pension system. Insignia is regarded as a prime target as its operations encompass both funds management and advisory services.
“With access to the A$4.1 trillion superannuation system in Australia, we can see why Brookfield are the latest entrant in the race for the Insignia takeover and possible privatization,” said Jesse Moors, portfolio manager at Spatium Capital.
Bain first bid for Insignia on Dec. 13, when the money manager had a market value of A$2.2 billion. Insignia rejected that offer, after which CC Capital made a proposal and a bidding war ensued.
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Shares of Montreal-based clothing retailer Groupe Dynamite Inc. (GRGD-T) surged 7 per cent after it announced better-than-anticipated preliminary results for its fourth quarter of 2024 on Tuesday after the bell.
It said comparable store sales increased by 9.5 per cent year-over-year, exceeding the Street’s expectation of 7.6 per cent. It also expects adjusted EBITDA margin to be higher from the same period a year ago versus analysts’ forecast of a mild decline.
“The company continued its expansion in the United States with the opening of two new locations,” said Stifel analyst Martin Landry. “Potential export tariffs on products shipped to the United States are not expected to have a material impact on operations according to management. Groupe Dynamite continues to generate healthy growth levels with comparable store sales growth above peer average, suggesting market share gains. Continued margin expansion is impressive given the company has the second-highest margins of a select group of peers. We believe that the recent share price weakness offers investors an appealing entry point.”
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Obesity drug maker Novo Nordisk (NVO-N) forecast slower growth this year after Wegovy sales more than doubled in the fourth quarter, with analysts and investors describing the results as “good enough” to ease nerves about stiff competition from rival Eli Lilly (LLY-N).
The Danish company said it expects sales growth in local currencies between 16 per cent and 24 per cent in 2025, less than the 26-per-cent growth seen in 2024 but in line with analysts expectations around 20%.
Its shares rose 3.8 per cent after fourth-quarter earnings beat forecasts on Wednesday.
Barclays analysts said in a note they were breathing a sigh of relief, describing the results and guidance as “good enough”.
Novo’s fourth-quarter operating profit jumped 37 per cent to 36.7 billion Danish crowns (US$5.12-billion), better than the 33.6 billion forecast by analysts in a company poll.
It predicted operating profit for 2025 would climb between 19 per cent and 27 per cent, compared to growth of 26 per cent last year.
Shares in Novo have risen roughly 60 per cent since it first launched Wegovy in the United States in June 2021, compared with a 20-per-cent rise in the pan-European STOXX 600 index.
But since their peak in June last year, shares have fallen some 40 per cent.
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Mattel (MAT-Q) shares surged 15.3 per cent on Wednesday after the Hot Wheels maker provided an upbeat annual profit forecast and hinted at stabilizing toy demand, despite tariff-related uncertainty.
The company also said it planned to increase product prices to soften the blow from the potential impact of recent tariffs imposed by U.S. President Donald Trump on imports from China, Canada and Mexico. While levies on Canada and Mexico have been paused for a month, those on imports from China have kicked in.
“Along with strong set of results for Q4, the biggest surprise from Mattel was guidance to earnings growth despite U.S. tariffs,” UBS analyst Arpine Kocharyan said in a client note.
Toymakers have taken proactive measures to reduce their China exposure by shifting production out of the region, reviewing their product lines and getting in inventory early.
By 2027, no country is expected to represent more than 25 per cent of global production, Mattel executives told investors on a post-earnings call, adding that it could be achieved by shutting down one plant in China.
China currently makes up about 40 per cent of global toy production for Mattel and 20 per cent specific to the U.S. business, which contributed to roughly half of global toy sales, analysts have estimated.
“This could arguably be a point of conservatism given the uncertainty around actual implementation (of tariffs), but we are also skeptical of the ability to pass through price increases in a category ... where demand remains weak,” Morgan Stanley analyst Megan Clapp said.
Mattel’s sales declined 1 per cent in 2024, but gross margins expanded 330 basis points, thanks to better-managed inventory, a nimble supply chain and cost savings.
The company’s fourth-quarter results exceeded expectations, benefiting from demand for its Hot Wheels vehicles and action figures, even as Barbie toy sales remained pressured.
At least three brokerages raised their price targets on the company. Jefferies upgraded the stock to “buy” from “hold,” citing the pipeline of movie releases in the current year.
Rival Hasbro is scheduled to report quarterly earnings on Feb. 20. Its shares were marginally higher premarket.
Mattel’s forward price-to-earnings ratio for the next 12 months, a common benchmark for valuing stocks, was 11.07, compared with 12.90 for Hasbro.
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On the decline
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Alphabet (GOOGL-Q) shares dropped 6.9 per cent on Wednesday as investors were disappointed by the company’s slowing cloud growth and concerned about its hefty investment to build artificial intelligence (AI) infrastructure.
Alphabet has been heavily investing in infrastructure to enhance AI research and integrate it into products like search and cloud services. But its plan to pump in US$75-billion towards these efforts this year was 29 per cent higher than Wall Street’s expectation of about US$58-billion, according to LSEG data.
“This is a significant increase, and it shows that Alphabet is throwing the kitchen sink at its AI plans,” said Kathleen Brooks, research director at trading platform XTB.
The recent emergence of China’s low-cost DeepSeek AI model, which is said to be on par or better than U.S. industry-leading models at a lower cost, has led to more pointed questions about the need for Big Tech to spend billions of dollars.
Last week, Microsoft (MSFT-Q) and Meta Platforms (META-Q) executives defended their hefty AI spending plans, saying they were crucial to staying ahead in the new field.
Google’s revenue from its cloud business increased 30 per cent to US$11.96-billion in the fourth quarter, less than the 35 per cent in the third quarter. It was also slower than bigger rival Microsoft’s 31-per-cent jump in the quarter, but more than the 19-per-cent increase that cloud market-leader Amazon is expected to post.
“The AI story remains strong, with surging demand for cloud-based AI training and solid growth in Gemini. This is good news not just for Alphabet’s cloud business but the broader AI market at large,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Alphabet’s ad business is grappling with fierce competition as advertisers increasingly flock to dynamic social media platforms such as Meta’s Facebook and Instagram, and ByteDance’s TikTok.
At least four brokerages cut their price target on Alphabet’s stock, bringing the median target to US$220, according to LSEG data.
Alphabet’s share price had risen 9 per cent this year through Tuesday, slightly more than Amazon’s 10.3-per-cent increase, while Microsoft has dropped 2.2 per cent.
Still, Alphabet’s shares are the cheapest of the trio, with a 12-month forward price-to-earnings ratio of 22.7. Amazon’s is nearly 39 and Microsoft’s is 29.
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Walt Disney (DIS-N) sharply outperformed Wall Street’s quarterly earnings estimates on Wednesday, with results buoyed by the strong holiday box office performance of animated sequel Moana 2 and higher profits at the company’s streaming business.
The strength in entertainment helped offset a decline at Disney’s domestic theme parks, which were impacted by hurricanes Helene and Milton in Florida. The parks-led Experiences group also incurred about US$75-million in expenses associated with the December launch of the Disney Treasure cruise ship.
Disney reported a 44-per-cent jump in adjusted per-share earnings of US$1.76 for the October-December quarter, exceeding the US$1.45 per-share earnings consensus estimate of 24 analysts surveyed by LSEG.
Revenue for the quarter rose 5 per cent to US$24.69-billion, slightly ahead of analysts’ projections of US$24.62-billion. Operating income rose 31 per cent from a year earlier to US$5.1-billion.
Shares of the company turned lower in volatile early Wednesday trading and closed down 2.4 per cent.
“Overall, this quarter proved to be a strong start to the fiscal year, and we remain confident in our strategy for continued growth,” Disney CEO Bob Iger said in a statement.
Disney forecast “high single digit” adjusted earnings-per-share growth in fiscal 2025 compared with the prior year and an increase of approximately US$875-million in operating income at the streaming entertainment unit.
The company said it would incur US$50-million in costs associated with exiting its Venu Sports joint venture with Warner Bros Discovery and Fox. The media companies abandoned their plans for a sports streaming service in January, after it ran into substantial legal opposition.
Operating income at Disney’s Entertainment unit, which includes film, television and streaming, increased to US$1.7-billion in the quarter, nearly double the results from a year earlier, thanks in part to the strong performance of Moana 2.
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China’s antitrust regulator is preparing for a possible investigation into Apple’s (AAPL-Q) policies and App Store fees, Bloomberg News reported on Wednesday, citing people familiar with the matter.
The development comes a day after China announced measures targeting U.S. businesses including Google, farm equipment makers and the owner of fashion brand Calvin Klein, minutes after new U.S. tariffs on Chinese goods took effect.
The country’s State Administration for Market Regulation is reviewing Apple’s policies, including its commission of up to 30 per cent on in-app purchases and restrictions on external payment services and App Stores, the report said.
Shares of Apple were narrowly down in Wednesday trading.
Chinese regulators have been in discussions with Apple executives and app developers since last year, as per the report.
The regulator said on Tuesday that Google (GOOGL-Q) was suspected of violating the country’s anti-monopoly law. It did not provide further details on the investigation or on what it alleged Google had done to breach the law.
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Advanced Micro Devices (AMD-Q) failed to impress investors waiting for the chipmaker to gain ground against AI heavyweight Nvidia (NVDA-Q), even as its quarterly results and revenue outlook exceeded analyst estimates on Tuesday.
Shares of the Santa Clara, California-based company dropped over 6 per cent on Wednesday. AMD’s shares fell about 18 per cent last year, in contrast to larger rival Nvidia’s rise of more than 171 per cent.
AMD has been fighting to increase its share of the market for sophisticated AI processors sold mostly by Nvidia to heavyweight tech customers including Amazon and Microsoft.
AMD reported fourth-quarter data center revenue of US$3.9-billion, which missed the consensus estimate of US$4.15-billion. The company’s data center segment is a proxy for its AI revenue as it contains revenue from its line of processors that compete with Nvidia’s chips.
For 2024, AMD said it generated more than US$5-billion of AI chip revenue.
During a conference call with analysts, AMD Chief Executive Lisa Su said the company’s data centresales in the current quarter will be down about 7 per cent from the just-ended quarter, in line with an overall expected decline in AMD’s revenue.
Ms. Su declined to give a forecast for the company’s AI chips, but said AMD expects “tens of billions” of dollars in sales “in the next couple of years.”
Summit Insight analyst Kinngai Chan said: “AMD’s AI GPU is probably not tracking to investors’ expectations. We continue to believe Nvidia is opening a gap against AMD in AI GPU performance and value.”
AMD’s forecast comes as tech giants including Microsoft and Meta increasingly dedicate resources to developing their own silicon for processing large data volumes required by GenAI.
The company expects revenue of about US$7.1-billion, plus or minus US$300-million in the first quarter, compared with analysts’ average estimate of US$6.99-billion, according to data compiled by LSEG.
AMD - one of the largest providers of personal computer chips - is also likely to benefit from improving demand from a wave of consumers and businesses buying new PCs that can handle generative AI tasks, after a prolonged slump.
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Uber Technologies (UBER-N) on Wednesday reported a lower-than-expected profit in the October-December period on rising costs, and forecast first-quarter bookings short of estimates due to a strong dollar, sending its shares down 7.6 per cent.
The forecast overshadowed the San Francisco-based company’s fourth-quarter revenue beat, helped by stable ride-hailing demand for office commutes and its delivery business benefited from a strong holiday-season.
Already the dominant ride-hailing service in North America, Uber has been trying to convince investors that it has more room for growth by attracting more businesses and teens to its platform, as well as expanding to less saturated markets.
Its business-focused service reported a 50-per-cent surge in bookings for the last three months of 2024, thanks to return-to-office mandates, while Uber for Teens posted a similar jump, and is now available in about 50 countries.
Adjusted profit in the last three months of 2024 was 23 US cents per share, lower than estimates of a profit of 50 US cents, according to data compiled by LSEG.
Overall, the company’s ride-hailing revenue jumped 25 per cent and delivery revenue rose 21 per cent, both above estimates. It’s total revenue of US$11.96-billion surpassed analysts’ average estimate of US$11.77-billion.
Meanwhile, total costs and expenses rose 20.5 per cent to US$11.19-billion, resulting in operating income of US$770-million missing estimates of US$1.22-billion.
CEO Dara Khosrowshahi said Uber planned to drive growth in 2025 by offering customers better rates, in part by slowing hikes in insurance charges, a major expense for ride-hailing firms in the past couple of years.
“To maximize demand, we remain committed to keeping prices as low as possible, passing through only the insurance cost increases to consumers,” he said in prepared remarks, adding that he expected U.S. UberX prices to be up marginally in 2025.
Rival Lyft has been aggressively working on luring customers away from Uber through competitive pricing and new features, such as Price Lock that offers daily commuters guaranteed prices.
Uber expects first-quarter gross bookings between US$42 billion and US$43.5 billion, including an estimated 5.5 percentage point impact from a strong greenback. Analysts, meanwhile, expect US$43.42-billion in bookings.
The midpoint of its first-quarter adjusted core profit forecast of US$1.79-billion to US$1.89-billion was also slightly lower than analysts’ estimates of $1.85 billion.
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Chipotle Mexican Grill (CMG-N) said on Tuesday that if President Donald Trump’s proposed tariffs on Mexico go into full effect, the burrito maker would see a roughly 60-basis-point impact on its raw material costs this year.
The forecast from the popular eatery — while yet a small hit — is among the first from companies that are rushing to assess any hit from these proposed tariffs. Chipotle also forecast tepid annual comparable sales growth on Tuesday, a sign that it was bracing for a hit from inflation to hurt demand for its premium burritos and bowls.
Its shares fell 2.6 per cent on Wednesday trading.
Chipotle, like other restaurants and fast food chains that rely on supplies from Mexico, could be handed higher costs of raw materials — including avocados — if President Trump’s proposed tariffs take effect. Trump announced, and then paused for a month, tariffs on Mexico.
The country accounted for about half of avocados that Chipotle serves, executives said on a post-earnings call on Tuesday.
Chipotle forecast annual comparable sales growth at low to mid-single digits, which was below analysts’ expectations of a 5.2-per-cent growth, according to data compiled by LSEG.
The company has seen higher costs of commodities such as avocado and beef, as it looks to reinvigorate its menu by adding popular limited-time offers, including the smoked brisket and its honey chicken, in order to keep consumers interested.
This is the first quarter with Scott Boatwright at Chipotle’s helm. Boatwright officially became CEO in November but had been operating as interim CEO since mid-August, when Starbucks poached Brian Niccol with one of corporate America’s most lucrative contracts.
Chipotle’s operating margin in the reported quarter ended Dec. 31 was 14.6 per cent, compared with 16.9 per cent in the preceding quarter.
“I think most restaurants right now are very reluctant to take any price. But if inflation continues, I don’t know that they’re going to have much of a choice,” said Peter Saleh, analyst at BTIG.
“(Chipotle has) taken a fair amount of price over the past four or five years and they haven’t really seen pushback on demand. I still think they’re a good value for play for the consumer,” he added.
Fourth-quarter comparable sales grew 5.4 per cent, below estimates of a 5.6-per-cent growth, while its adjusted earnings per share of 25 US cents beat estimates by 1 US cent.
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The New York Times (NYT-N) forecast first-quarter subscription revenue growth below estimates on Wednesday, signaling intense competition for new readers in what will be a busy year for the media industry, sending its shares down 11.9 per cent.
The forecast followed weaker-than-expected growth in digital-only subscribers in the fourth quarter of 2024, a crucial period for the news sector because of the Nov. 5 U.S. presidential election, which typically boosts media engagement.
Long the beacon for news organizations in the digital age, the Times has started facing more competition in recent months after major media outlets including CNN and The Verge rolled out paid subscriptions in a crowded market.
NYT expects subscription revenue growth of 7 per cent to 10 per cent in the current quarter, the midpoint of which was below analysts’ estimate of 9.9 per cent, according to Visible Alpha.
But its quarterly forecast for growth in digital-only subscription revenues of 14 per cent to 17 per cent was above estimates of 13.6 per cent, a sign that ongoing weakness in print subscriptions was a big drag on the overall forecast.
Sticky inflation has also made it harder for NYT to drive growth through a strategy of bundling its core news offerings with lifestyle-focused products such as Wirecutter, sports website The Athletic and games including Wordle.
To make up for that, the Times has a pipeline of new content including shows, games and features that it will launch this year to woo users, CEO Meredith Kopit Levien said. “We’ll focus on making each of our products more valuable to more people.”
The Times added 350,000 digital-only subscribers in the quarter, higher than the 260,000 in the prior quarter, but below Visible Alpha estimates of 417,500 additions.
It had 11.43 million total subscribers as of end-2024.
Adjusted profit per share of 80 US cents beat an estimate of 74 US cents.
With files from staff and wires