A survey of North American equities heading in both directions
On the rise
Shares of Air Canada (AC-T) soared 13.99 per cent after it raised its annual core profit forecast and announced share buybacks, as the country’s largest carrier benefits from strong demand for international travel.
Major North American carriers with international operations are cashing in on booming demand for overseas travel and improved business bookings.
Air Canada is increasing its flights to China, while also adding capacity to other Asia-Pacific routes, even as it saw some pressure on transatlantic travel, the airline said.
Mark Galardo, Air Canada’s executive vice president for revenue and network planning, said the carrier is seeing early indications that transatlantic business will bounce back in 2025.
The Montreal-based carrier reported quarterly earnings ahead of analysts’ expectations for revenues and adjusted profits, despite seeing weeks of softer booking volumes due to labor uncertainty as its pilots negotiated a new contract.
Last month, Air Canada signed a new labour deal with its pilots, which would give the aviators a general four-year cumulative pay hike of about 42 per cent, generating about $1.9billion in additional value.
Air Canada is now monitoring how a weeks-long strike by more than 33,000 factory workers and a production crisis at U.S. planemaker Boeing would affect deliveries of the carrier’s remaining 12 737 MAX aircraft, Chief Financial Officer John Di Bert told analysts. Some deliveries are expected in 2025.
The airline also announced the repurchase of up to 35.78 million shares, its first buyback authorization since the COVID-19 pandemic. The repurchase aims to address the dilution that occurred due to its financing needs during the pandemic.
“The demand environment remains favorable. We have adjusted our full-year guidance and underlying assumptions to account for the evolution of the fuel price environment and for certain contract-related adjustments,” CEO Michael Rousseau said.
The carrier now expects its 2024 adjusted earnings before interest, taxes, depreciation and amortization of about $3.5-billion, compared with its previous forecast of $3.1-billion to $3.4-billion.
Air Canada posted an adjusted profit of $2.57 per share in the third quarter, compared with analysts’ average estimate of $1.58, according to data compiled by LSEG.
It reported a quarterly operating revenue of $6.12-billion in the three months ended Sept. 30, down 3.8 per cent over the year earlier, but beat analysts’ expectations of $6.06-billion.
The company lowered its expectation for average price of jet fuel to $1 per liter for 2024, from the previous estimate of $1.03.
In a research note, Citi analyst Stephen Trent called the results “robust” and said: “Air Canada’s adjuste 3Q’24 EPS came in at $2.57, vs. Yahoo consensus of $1.58. Overall, the results and guide looked very encouraging, with the quarter’s FCF generation of $282-milion up 109 per cent year-over-year, a full-year EBITDA guidance raise suggesting that our bookaway fears on a possible pilots’ strike were overblown, along with the announcement of a share repurchase program exhibiting support for the stock. All else equal, these results and guide could support Buy-rated Air Canada’s shares on Friday morning.”
Aurora, Ont.-based auto parts supplier Magna International (MG-T) jumped 6.5 per cent despite cutting its annual sales and profit forecasts on Friday against the backdrop of the automobile industry grappling with weak demand.
Magna had benefited from a healthy flow of orders, with automakers ramping up production over the years, however, that pace has slowed as companies readjust their inventory levels to match demand.
The company supplies parts and builds vehicles at its manufacturing unit for various automakers including BMW , Mazda and Ferrari.
Last month, auto industry consultants J.D. Power and GlobalData cut their expectations for 2024 global light-vehicle sales by 500,000 units to 88 million units.
Auto parts supplier Aptiv said on Thursday it took extra steps to boost profitability, after it cut its annual sales forecast. Peer BorgWarner also cut its annual sales expectations.
Magna now expects annual total sales between $42.2-billion and $43.2-billion, compared with its prior forecast range of $42.5-billion to $44.1-billion.
It forecast full-year adjusted profit of $1.45-billion to $1.55-billion, down from its previous expectation of $1.5-billion to $1.7-billion.
On an adjusted basis, Magna earned $1.28 per share in the third quarter, missing the average analyst estimate of $1.40, according to data compiled by LSEG.
The company reported sales of $10.28-billion, below expectations of $10.35-billion.
Enbridge (ENB-T) closed up 0.3 per cent after it posted a more than twofold jump in its third-quarter profit on Friday, as it benefited from incremental contributions from U.S. gas acquisitions, but narrowly missed estimates on higher financing costs related to the deals.
The Canadian pipeline operator had closed a $14-billion acquisition, including debt, of three Dominion Energy utilities — East Ohio Gas, Questar Gas and Public Service Co of North Carolina — by the third quarter.
The deal, which made Enbridge the largest gas utility by volume in North America, had sparked investor concerns over its debt load on already-leveraged balance sheet.
Enbridge’s adjusted core profit from gas distribution and storage was up 92.6 per cent at $522-million in the quarter, helped by the acquisitions, which contributed $217-million.
Steady oil demand also boosted the company’s earnings, with its Mainline system transporting 2.96 million barrels per day in the quarter. Adjusted core profit of the pipeline network rose 3.2 per cent to $1.35-billion, helped by higher tolls.
“In liquids, demand for the Mainline remains strong and our volumes for 2024 are expected to exceed 3 million barrels per day,” said CEO Greg Ebel.
Mainline is North America’s largest crude oil pipeline network. It transports light and heavy crude oil, natural gas liquids and refined products from Edmonton, Alberta to various markets in Canada and the U.S. Midwest.
The company reported a profit of $1.29-billion for the quarter ended Sept. 30, compared with $532-million a year earlier.
Its adjusted profit of 55 cents per share, however, missed analysts’ estimate by one cent, according to data compiled by LSEG.
Amazon (AMZN-Q) posted third-quarter profit and sales above Wall Street estimates, helped by favorable retail sales, sending its shares up over 6 per cent.
The company indicated it expected healthy results in the holiday quarter, its largest of the year, thanks to its faster shipping times and a move to stock lower-costs items.
Amazon’s upbeat results could signal a better-than-feared holiday season for retailers, who have been bracing for the slowest pace of holiday sales growth in six years.
Three months ago, Amazon executives warned that consumers were “cautious with their spending” and seeking less-expensive options.
Amazon reported a 7-per-cent improvement in retail sales in the quarter ended Sept. 30 to US$61.4-billion.
“The most notable item in Amazon’s earnings was the surprising improvement in margins,” said Gil Luria, head of technology research at D.A. Davidson. “Investors were concerned about the ability of the retail business to maintain margins and Amazon was able to actually grow margins.”
The operating margin for Amazon’s international business jumped to 3.6 per cent in the third quarter from 0.9 per cent in the second quarter. The North America margin ticked up to 5.9 per cent from 5.6 per cent in the previous quarter.
The company faces heightened competition from discount retailers such as Shein and Temu, which sell a wide range of goods at bargain-basement prices sent directly from China.
Like its tech peers, Amazon said it expected higher capital expenditures for the foreseeable future to help develop artificial intelligence software. In a call with analysts, CEO Andy Jassy called AI “maybe once-in-a-lifetime type of opportunity” and that “we’re aggressively pursuing it.”
Capital expenditures are expected to rise to around US$75-billion this year from US$48.4-billion last year. Mr. Jassy said Amazon expects that will grow next year.
Amazon Web Services, the company’s cloud business, reported a 19-per-cent increase in sales to US$27.5-billion, in line with estimates, according to LSEG data. It was the quickest pace of growth in seven quarters for AWS, which accounts for a fifth of Amazon’s overall sales but roughly two-thirds of its revenue.
Net income was US$15.3-billion, up 55 per cent from 2023′s US$9.9-billion. Amazon reported earnings of US$1.43 per share, beating expectations of US$1.14 per share.
Intel’s (INTC-Q) gained 7.8 per cent after it expressed optimism on Thursday about the future of its PC and server businesses, forecasting current-quarter revenue above estimates but warning that it had “a lot of work to do.”
The company has largely missed out on a boom in investments in speedy, advanced AI chips for data centers as businesses double down on adopting generative AI technology - a market dominated by Nvidia, followed by rival AMD.
Intel reported third-quarter revenues above analysts’ estimates, but also posted a massive net loss as a result of impairment and restructuring charges.
In an interview with Reuters, Intel finance chief David Zinsner said the company was “making progress” on its profitability but that it had “a lot of work to do” to achieve the targets it had set.
Intel reported a third-quarter net loss of US$16.6-billion, excluding losses attributable to certain non-controlling interests. That compared with a net profit attributable to Intel of about US$300-million in the year-earlier period.
“Let’s be honest, expectations were quite low for the company and they beat those lowered expectations” said Ryan Detrick, chief market strategist of Carson Group.
As one of the largest makers of PC chips, Intel has benefited as the rollout of on-device AI features and a fresh Windows update cycle renewed demand for PCs after a years-long slump, helping the company surpass Wall Street’s low expectations.
Revenue in Intel’s Client Computing Group - which includes its PC chips for desktop and laptop computers - fell 7 per cent to US$7.3-billion. Analysts had estimated the client segment would shrink to US$7.38-billion.
The company expects revenue of US$13.3-billion to US$14.3-billion for the current quarter, the midpoint of which is above analysts’ average estimate of US$13.66-billion, according to data compiled by LSEG.
Analysts also expect demand for traditional server chips made by Intel - its mainstay data-center semiconductors - to pick up in the second half of 2024 after several quarters of soft demand as investment is funneled to AI chips.
Boeing (BA-N) was up 3.5 per cent on news that striking workers will vote on Monday on an improved contract offer that includes a 38-per-cent pay rise over four years, a larger signing bonus and carries the endorsement of their union, which told members it had extracted all it could from the planemaker.
The latest offer, presented on Thursday, comes at a critical moment for Boeing, which this week announced it would raise up to US$24.3-billion to shore up its battered finances as a seven-week strike by more than 33,000 U.S. West Coast factory workers worsens its cash burn.
“In every negotiation and strike, there is a point where we have extracted everything that we can in bargaining and by withholding our labor. We are at that point now and risk a regressive or lesser offer in the future,” the International Association of Machinists and Aerospace Workers (IAM) said.
Members rejected two earlier offers from Boeing.
Talks between the two sides were held this week with the assistance of Acting U.S. Secretary of Labor Julie Su, who praised the union and Boeing for their hard work in negotiating the deal.
The union vote will come the day before the U.S. presidential poll, which is a dead heat between Democrat Kamala Harris, who would be expected to continue the Biden administration’s pro-union policies, and Republican Donald Trump.
President Joe Biden congratulated the union and Boeing’s leadership on negotiating a new contract proposal, a White House spokesperson said, adding Mr. Biden “believes Machinists at Boeing have sacrificed over the years and deserve a strong contract.”
Chevron Corp. (CVX-N) beat Wall Street estimates for third-quarter profit on Friday, helped by higher oil and gas output, but its earnings fell from a year ago.
The U.S. company, whose proposed US$53-billion takeover of Hess has been delayed due to a challenge by rivals Exxon Mobil and CNOOC Ltd, reported an adjusted profit of US$4.53-billion, compared to US$5.72-billion a year ago.
Shares rose 2.9 per cent in Friday trading.
Oil industry profits have sagged this year due to softer crude prices and weaker fuel demand growth. Oil futures in the quarter ended Sept. 30 averaged 17 per cent below the prior quarter, and global fuel margins have suffered from slowing demand growth and excess supplies.
Chevron said it earned US$2.51 per share for the quarter on an adjusted basis, compared to analysts’ estimates of US$2.42 according to LSEG data, helped by a 7-per-cent year-over-year increase in oil and gas volumes and operating cost cuts. Year-ago adjusted profit was US$3.05 per share.
“We also are taking steps to optimize our portfolio and reduce operating costs to deliver superior long-term value to shareholders,” CEO Michael Wirth said in a statement.
Up to US$3-billion in cost savings are planned through 2026 from leveraging technology, asset sales and changing how and where work is performed, the company said.
Chevron has said it will move its headquarters to Texas from California, and open a new, nearly US$1-billion engineering centre in India
Savings are needed to boost returns. This year, share buybacks and dividends have outstripped earnings. The third quarter’s US$4.5-billion profit was less than the US$7.7-billion spent on shareholder returns.
Pending sales of oil properties in Canada, Alaska and Congo will generate about US$8-billion in pre-tax proceeds. All three sales are expected to close this quarter, the company said.
Operating profits were down compared to a year ago in both its major units. Earnings from pumping oil and gas fell 20 per cent to US$4.59-billion while profit from refining oil into gasoline and diesel tumbled 65 per cent, to US$595-million.
On the decline
Imperial Oil (IMO-T) reported a third-quarter profit ahead of analysts’ estimates as higher production offset weakness in its refining business, but its shares turned lower and finished down 5.1 per cent.
Integrated oil companies have been grappling with weakness in their refining segments on worries about weaker-than-expected oil demand from China, with companies such as BP and TotalEnergies posting sharply lower quarterly results.
However in the United States, higher output countered weakness in the pricing environment as well as refining margins, with both Exxon, Imperial’s majority shareholder, and Chevron reporting a profit beat earlier in the day.
In July, U.S. imports of crude oil from Canada jumped to their highest on record, data from the Energy Information Administration showed.
Imperial Oil’s overall production averaged 447,000 barrels of oil equivalent per day (boepd) in the third quarter, up from 423,000 boepd, helped by higher output at the company’s Cold Lake and Syncrude oil sands sites in Alberta.
Meanwhile, the company’s refinery throughput volumes fell to 389,000 barrels per day (bpd) from 416,000 bpd, reflecting the impact of turnaround activities at the Nanticoke and Strathcona refineries.
The company’s refinery utilization in the third quarter fell to 90 per cent from 96 per cent.
Imperial Oil earned $2.33 per share, beating the average analyst estimate of $2.04, according to data compiled by LSEG.
Apple (AAPL-Q) AI-enhanced iPhone made a strong start, pushing quarterly sales ahead of Wall Street expectations, but a modest revenue forecast raised questions about whether that momentum will hold over the holiday sales season.
A decline in China sales during the fourth quarter also concerned some analysts and investors, helping send shares down 1.3 per cent, despite surprisingly large overall profit and revenue in that period.
Chief Financial Officer Luca Maestri told analysts during a conference call that Apple expects overall revenue to “grow low to mid single digits” during its fiscal first quarter, which ends in December. Analysts had expected revenue growth of 6.65 per cent to US$127.53-billion during the quarter, according to LSEG data.
Apple did say it expects double-digit growth in its services business in its first quarter, leading some analysts to ask executives during a call if overall hardware revenue might decline.
Executives did not address that question, or give any indication of how the iPhone might fare, including in China, where Apple’s new AI features are not available. Apple has not said when they will be available.
Prior to management’s call with analysts, Tom Forte, an analyst at Maxim Group, attributed Apple’s share drop to fourth-quarter China sales coming in below expectations.
“We see the potential for sustained weakness in China,” he said. Apple said overall fourth-quarter sales were US$94.93-billion, ahead of Wall Street targets of US$94.58-billion, according to LSEG. Earnings of US$1.64 per share, excluding a massive one-time tax charge in the European Union, topped analyst expectations of US$1.60 per share.
Fourth-quarter sales of Apple’s iPhone, the company’s main product, were up 5.5 per cent to US$46.22-billion, compared with analyst estimates of US$45.47-billion. Other product lines missed expectations.
Apple’s fourth quarter ended Sept. 28, meaning it reflects only a few days of sales of its iPhone 16 series that went on sale Sept. 20. Apple Chief Executive Tim Cook told Reuters that iPhone 16 sales grew faster than iPhone 15 sales did a year earlier, with both phones on sale for the same number of days in the fourth quarter.
Exxon Mobil (XOM-N) declined 1.6 per cent after it beat Wall Street’s third quarter profit estimate, boosted by strong oil output in its first full quarter that includes volumes from U.S. shale producer Pioneer Natural Resources.
Oil industry earnings have been squeezed this year by slowing demand and weak margins on gasoline and diesel. But Exxon’s year-over-year profit fell 5 per cent, a much smaller drop than at rivals BP and TotalEnergies, which posted sharply lower quarterly results.
The top U.S. oil producer reported income of US$8.61-billion, down from US$9.07-billion a year ago. Its US$1.92 per share profit topped Wall Street’s outlook of US$1.88 per share, on higher oil and gas production and spending constraints.
“We had a number of production records” in the quarter, said finance chief Kathryn Mikells, citing an increase of about 25 per cent year-on-year in oil and gas output to 4.6 million barrels per day.
Exxon earlier this month flagged operating profit had likely decreased, leading Wall Street analysts to shave their quarterly per share earnings outlook by nearly a dime.
The results included Exxon’s first full quarter of production following its acquisition in May of Pioneer Natural Resources.
The US$60-billion deal drove production in the top U.S. shale basin to nearly 1.4 million barrels per day of oil and gas, helping overcome a 17-per-cent decline in average oil prices in the quarter ended Sept. 30.
The company expects full year output to average about 4.3 million barrels of oil equivalent per day (boepd), including eight months of Pioneer’s contributions.
Exxon said it plans to issue a revised production forecast next month. The company noted that scheduled well maintenance will lower oil and gas output by about 30,000 boepd in the fourth quarter.
The market is worried about oil supply outrunning demand next year, with exporter group OPEC reviewing plans to add 180,000 barrels per day (bpd) of additional oil supply from December. Oil prices slumped over the summer and remain about 12% below June’s average.
Exxon disclosed it raised its quarterly dividend by 4 per cent after generating free cash flow of US$11.3-billion, well above analysts’ estimates. Rivals Saudi Aramco and Chevron have had to borrow this year to cover shareholder returns after boosting dividends and buybacks to attract investors.
With files from staff and wires