A survey of North American equities heading in both directions
On the rise
Brookfield Asset Management Ltd. (BAM-T) rose 2.5 per cent on Monday reported rising third-quarter profits as its growing credit and insurance businesses brought in billions of dollars of new capital that generate fees.
The asset manager’s fee-related earnings were US$644-million in the three months that ended Sept. 30, up 14 per cent from a year earlier.
Brookfield’s distributable earnings rose 9 per cent to US$619-million, or 39 US cents per share, beating analysts’ consensus estimate of 36 US cents per share.
Brookfield confirms plans to move its head office to New York
Out of US$21-billion in new fundraising Brookfield brought in during the quarter, US$14-billion came from its credit group - a business underpinned by its majority stake in Oaktree Management LP. That business is being fed by assets collected through Brookfield’s burgeoning insurance arm, Brookfield Wealth Solutions, which focuses on annuities and insurance for retirees.
During the quarter, Brookfield also bought a 51-per-cent stake in private credit lender Castlelake LP.
Those investments helped boost Brookfield’s fee-bearing capital to US$539-billion, up 5 per cent or US$25-billion from the prior quarter, and an increase of US$100-billion or 23 per cent over the past year.
That underscores Brookfield’s increasing expansion into new business lines such as credit and insurance that generate steady streams of fees from the growing pool of capital Brookfield manages for its partners and investors.
Credit will be Brookfield’s fastest growing business over the next five years, chief executive officer Bruce Flatt and president Connor Teskey said a letter to shareholders.
“This growth will come through multiple avenues, which include expanding our flagship and complementary fund offerings and further building out solutions to meet the growing needs of our clients,” the two executives wrote.
- James Bradshaw
Fox Corp. (FOX-Q) beat Wall Street expectations for first-quarter revenue on Monday, as the media company benefited from higher political advertising ahead of the U.S. presidential election, sending its shares up 2.75 per cent.
A large number of people sought out traditional news and television programs for updates on the Nov. 5 U.S. presidential election, which boosted advertising spend at channels such as Fox News.
Fox chief executive Lachlan Murdoch pointed to record political advertising across the company and strong growth at its ad-supported streaming platform, Tubi.
Advertising revenue for the first quarter jumped around 11 per cent to US$1.33-billion, compared with analysts’ average estimate of US$1.13-billion, per data compiled by LSEG.
The company’s television segment reported revenue of US$1.95-billion, ahead of estimates of US$1.92-billion, driven by a jump in advertising owing to the broadcast of the “UEFA European championship” at Fox sports.
Media firms and news publishers have been trying to ramp up sports coverage in order to capitalize on the loyal fanbases and large viewership numbers.
Revenue at Fox’s Cable Network Programming came in at US$1.60-billion, compared with analysts’ estimate of US$1.41-billion.
The company reported total revenue of US$3.56-billion for the quarter, compared with estimates of US$3.37-billion.
On an adjusted basis, Fox earned US$1.45 per share, above estimates of US$1.11.
Boeing (BA-N) shares were narrowly higher as its unionized factory workers vote on whether to accept a contract offer or to continue their strike, which has lasted more than seven weeks and shut down production of most Boeing passenger planes.
A vote to ratify the contract would clear the way for the aerospace giant to resume airplane production and bring in much-needed cash. If members of the International Association of Machinists and Aerospace Workers vote for a third time to reject Boeing’s offer, it would plunge the company into further financial peril and uncertainty.
In its latest proposed contract, Boeing is offering pay raises of 38 per cent over four years, as well as ratification and productivity bonuses. IAM District 751, which represents Boeing workers in the Pacific Northwest, endorsed the proposal, which is slightly more generous than one the machinists voted down nearly two weeks ago.
“It is time for our members to lock in these gains and confidently declare victory,” the union district said in scheduling Monday’s vote. “We believe asking members to stay on strike longer wouldn’t be right as we have achieved so much success.”
Union officials said they think they have gotten all they can though negotiations and a strike, and that if the current proposal is rejected, future offers from Boeing might be worse. They expect to announce the result of the vote Monday night.
Boeing has adamantly rejected requests to restore traditional pensions that the company froze nearly a decade ago. Pensions were a key issue for workers who voted down previous offers in September and October.
If machinists ratify the latest offer, they would return to work by Nov. 12, according to the union.
On the decline
Bell Canada parent BCE Inc. (BCE-T) dropped 9.7 per cent on news it is expanding into the United States by acquiring internet provider Ziply Fiber for $5-billion, while also putting dividend hikes on hold in order to help fix its balance sheet.
With the acquisition, announced Monday, Canada’s largest telecommunications company will operate in four U.S. states in the Pacific Northwest – Washington, Oregon, Montana and Idaho – and provide fiber internet services to 1.3 million residential and business locations. BCE hopes to upgrade more of Ziply’s copper wire network to faster fiber over the next four years, bringing its total fiber connections to three million.
BCE chief executive officer Mirko Bibic said in an interview that the acquisition shows the company is on its “front foot.” But the deal is also a gamble, considering investors have worried about BCE’s ability to afford its dividend and pay down debt. Because there is so much financial uncertainty, BCE’s shares have lost 10.8 per cent, including dividends, over the last year, while the S&P/TSX Composite Index has delivered a 25.7-per-cent total return.
Ziply is currently owned by a group of private equity funds led by Searchlight Capital, and to fund its purchase, Montreal-based BCE will use $4.2-billion of cash generated from the sale of its 37.5-per-cent stake in Maple Leaf Sports & Entertainment, the owner of Toronto’s professional hockey, basketball, soccer and football teams. In doing so, BCE is swapping an asset it treated as an equity investment – which meant MLSE’s cash flows did not flow through to BCE’s bottom line – for an operating business whose revenues and profits will merge with BCE’s.
The integration matters because investors tend to judge the riskiness of a company’s debt load by comparing it to annual cash flows: “This is a great trade, in sports terms,” Mr. Bibic said.
- Andrew Willis and Tim Kiladze
Apple (AAPL-Q) was lower by 0.4 per cent in the wake of Berkshire Hathaway Inc. (BRK.B-N) revealing in its quarterly report on Saturday that it sold about 100 million, or 25 per cent, of its shares over the summer, ending with about 300 million.
Berkshire has now sold more than 600 million of the iPhone maker’s shares in 2024, though Apple remained its largest stock holding, at US$69.9-billion.
It sold US$36.1-billion of stock overall, including several billion dollars of Bank of America (BAC-N) shares, and bought just US$1.5-billion.
That made the quarter the eighth straight where Berkshire was a net seller of stocks.
The Omaha, Nebraska-based conglomerate also conducted no stock buybacks for the first time since the second quarter of 2018, and did not repurchase stock in the first three weeks of October.
“Berkshire is a microcosm of the broader economy,” said Cathy Seifert, an analyst at CFRA Research in New York. “Its hoarding cash suggests a ‘risk-off’ mindset, and investors may worry what it means for the economy and markets.”
Warren Buffett’s Berkshire also dipped, ending down 2.2 per cent, after its quarterly operating profit declined 6 per cent to US$10.09-billion, or about US$7,019 per Class A share, missing analyst estimates of US$7,611 per share according to LSEG IBES.
The decline stemmed largely from underwriting losses on older insurance policies, insurance claims related to Hurricane Helene in September, and currency losses from a strengthening U.S. dollar.
These offset improved profitability at the Geico car insurer, where accident claims fell. Profit also rose at the BNSF railroad, which shipped more consumer goods, and Berkshire Hathaway Energy, where operating expenses declined.
Cathy Seifert, an analyst at CFRA Research in New York, said Berkshire has long benefited from its diversification but suffered “multi-pronged” weakness in the quarter.
This included a 19-per-cent revenue decline at the Pilot truck stop chain, where fuel prices and marketing volumes fell. Berkshire also said “almost all” of its retail businesses, including its more than 80 car dealerships, are seeing revenue declines.
Net income totaled US$26.25-billion, compared with a year-earlier US$12.77-billion loss, reflecting unrealized gains and losses in stock investments such as Apple.
This adds volatility to net results that Mr. Buffett urges investors to ignore, and instead focus on operating performance.
Intel (INTC-Q) was down 2.9 per cent in response to the news it will be replaced by Nvidia (NVDA-Q) on the blue-chip Dow Jones Industrial Average index after a 25-year run, underscoring the shift in the chipmaking market and marking another setback for the struggling semiconductor firm.
Nvidia will join the index next week along with paint-maker Sherwin-Williams (SHW-N), which will replace Dow (DOW-N), S&P Dow Jones Indices said on Friday.
Once the dominant force in chipmaking, Intel has in recent years ceded its manufacturing edge to rival TSMC and missed out on the generative artificial intelligence boom after missteps including passing on an investment in ChatGPT-owner OpenAI.
Intel’s shares have declined 54 per cent this year, making the company the worst performer on the index and leaving it with the lowest stock price on the price-weighted Dow.
This development comes a day after Intel expressed optimism about the future of its PC and server businesses, projecting current-quarter revenue above estimates but warning that it had “a lot of work to do.”
“Losing the status of Dow Jones inclusion would be another reputational blow for Intel, as it grapples with a painful transformation and loss of confidence,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“It would also mean that Intel is not included in exchange-traded funds (ETFs) which track the index, which could impact the share price further.”
Marriott International (MAR-Q) declined 1.6 per cent after it cut its annual profit forecast on Monday as weak domestic travel in China overshadows strong group and international demand.
Hotel operators have signaled demand remained flat during the reported quarter in the U.S. and soft in China, despite U.S. consumer spending increasing at its fastest pace in 1-1/2 years and as wealthy Chinese preferred to travel abroad.
The company now expects full-year adjusted profit of between US$9.19 and US$9.27 per share, compared with the US$9.23 to US$9.40 it had previously forecast.
System-wide revenue per available room (RevPAR), or room revenue, an important metric in the hospitality industry, fell 7.9 per cent in Greater China in the third quarter. It was flat in the U.S. and Canada.
“Group remained the standout customer segment, with global group RevPAR rising 10 percent in the quarter and on pace to rise 8 percent for full year 2024,” said CEO Anthony Capuano in a statement.
Leisure room revenue remained flat year-over-year.
The Ritz-Carlton hotel operator expects fourth-quarter room revenue growth of 2 per cent to 3 per cent and its 2024 full-year guidance remain unchanged at 3 per cent to 4 per cent.
Marriott said that 220,000 rooms were under construction in the third quarter, a drop from 238,000 rooms during the same period last year.
“We expect upside if, like Hilton, Marriott can give a confident message on net unit growth for full-year 2025, however a drop in rooms under construction year-over-year makes that less likely than we previously expected,” wrote Richard Clarke, analyst at Bernstein.
Adjusted profit was US$2.26 per share for the quarter ended Sept. 30, compared with analysts’ average expectation of US$2.31
Total quarterly revenue came in at US$6.26-billion, compared with estimates of US$6.27-billion, according to data compiled by LSEG.
New York Times (NYT-N) lost ground after it posted fewer-than-expected digital subscribers for the third quarter as readers cut back on spending in an uncertain economy, offsetting strong growth in advertising sales.
The company added 260,000 digital-only subscribers, compared with 300,000 additions in the previous quarter. Analysts expected the company to add 280,200 subscribers, according to Visible Alpha.
Heightened political advertising in the lead up to the 2024 U.S. presidential election helped the company’s ad revenue of US$118.4-million beat analysts’ estimates of US$116.93-million, according to data compiled by LSEG.
It reported total revenue of US$640.2 million, compared with estimates of US$640.8 million.
New York Times forecast subscription revenues to grow by 7 per cent to 9 per cent in the fourth quarter, slightly below expectations for 8.2-per-cent growth.
Revenue from sports news site The Athletic, purchased by New York Times in 2022, jumped 29.8 per cent to US$44.7-million from US$34.4-million a year ago.
Electric utility Constellation Energy (CEG-Q) raised its full-year profit forecast and beat Wall Street estimates for third-quarter earnings on Monday, helped by higher power demand.
The U.S. Energy Information Administration estimates that power consumption will reach record highs in 2024 and 2025, driven by growing demand from the use of artificial intelligence, data-center expansion, residential and commercial consumers.
Power supply in the U.S. is expected to increase 3% this year from 2023 to meet rising demand, with solar and natural gas-fired power leading the bulk of new electricity generation.
Constellation forecast its 2024 adjusted profit per share to be between US$8.00 and US$8.40, the midpoint of which is higher than its previous range of US$7.60 to US$8.40. Analysts were expecting US$8.43 per share, according to data compiled by LSEG.
But the company’s shares were fell on Monday after the Federal Energy Regulatory Commission on Friday rejected an amended interconnection agreement for an Amazon data centre connected directly to rival Talen Energy’s (TLN-Q) nuclear power plant in Pennsylvania.
Constellation, which operates 21 nuclear power plants in the U.S., had signed a deal with Microsoft in September to help restart a unit of its Three Mile Island nuclear power plant, now renamed as Crane Clean Energy Center, in Pennsylvania.
Nuclear power creates electricity without carbon emissions, which appeals to tech giants such as Microsoft that have committed to environmental goals.
The Baltimore, Maryland-based company posted an adjusted profit of US$2.74 per share for the three months ended Sept. 30, versus analysts’ average estimate of US$2.64 per share, according to data compiled by LSEG.
With files from staff and wires