A look at North American equities heading in both directions
On the rise
Cameco Corp. (CCO-T) surged 4.6 per cent with the premarket release of better-than-expected fourth-quarter results and 2023 outlook.
The Saskatoon-based uranium company announced revenue of US$524-million, up 12.7 per cent year-over-year and above the Street’s forecast of US$465-million. Earnings per share of 9 US cents was 4 US cens higher than analysts’ projected.
“Our outlook for 2023 is beginning to reflect the transition of our cost structure back to a tier-one run rate, as we plan our production to satisfy the growing long-term commitments under our contract portfolio,” it said in a release.
Late Wednesday, Cameco said it has agreed on the commercial terms to supply nuclear fuel to Ukraine’s state-owned nuclear energy utility Energoatom.
Under the contract, expected to be finalized in the first quarter of 2023, Cameco would supply natural uranium hexafluoride to the Ukrainian company between 2024 and 2035.
The deal would see Cameco supply the total fuel required at nine nuclear reactors at Energoatom’s Rivne, Khmelnytskyy and South Ukraine nuclear power plants, the company said.
The contract will also contain an option for Cameco to supply up to 100 per cent of the fuel for six reactors at the Zaporizhzhya nuclear power plant, currently under Russian control, should it return to Energoatom.
Great-West Lifeco Inc. (GWO-T) rose 2.3 per cent on stronger-than-anticipated fourth-quarter 2022 results and a 6-per-cent increase to its quarterly dividend (to 52 cents per share).
Late Wednesday, the Toronto-based company reported net earnings per share of $1.10, up from 82 cents a year ago and exceeding the Street’s 88-cent forecast. It attributed the gain to higher new business growth in the Capital and Risk Solutions segment “as well as more favourable market-related impacts on liabilities and actuarial assumption changes.”
In a research report, Scotia Capital analyst Meny Grauman said: “After a disappointing Q3, GWO delivered a strong year-end result that saw base EPS beat the Street by 9 per cent and climb 8 per cent year-over-year. Although this beat was helped by very strong policyholder experience including a near doubling in the year-over-year benefit from yield enhancement, performance was solid even excluding that item, especially in Europe. Included in these results is updated IFRS 17 guidance which has the impact on base earnings at implementation down low-single digits which is unchanged from before, and the decrease in BVPS at 14 per cent which is at the upper end of the previous 10-15-per-cent range. Management also updated its estimate on the IFRS 17 impact on LICAT to approximately +10 points (previous guidance was positive but not quantified). On top of this, the company also provided 2023 base earnings guidance for Empower of 15-20 per cent, which assumes steady expense synergies, a dip in customer retention at Prudential from 94 per cent currently to the low-to-mid 80-per-cent range, and generally constructive equity markets. We do not expect this guidance to materially impact EPS growth expectations at the top of the house.”
Sun Life Financial Inc. (SLF-T) was higher by just over 1 per cent even though it said its net income in the fourth quarter of 2022 was $951-million, down 12 per cent from a year earlier.
Earnings per share were $1.62, down from $1.83 in the fourth quarter of 2021.
Earnings for the full year were $3.1-billion, down 22 per cent from 2021.
Sun Life says insurance sales were $1.8-billion in the fourth quarter, up from $1.6 billion a year earlier.
The company saw net income for its Canadian business segment grow three per cent to $367-million in the fourth quarter.
The company says its decrease in net income primarily reflected an unfavourable market as well as the costs of integrating DentaQuest, a recent acquisition.
In a research note released before the bell, Scotia Capital’s Menny Grauman said: “SLF delivered its third large core EPS beat in a row as non-market policyholder experience continued to come in well above forecasts. Earnings in Canada and the US beat expectations largely due to favorable morbidity, while Asset Management earnings also exceeded expectations even as a challenging market environment continued to pressure year-over-year results in that business. Asia was the only segment that missed expectations after a surprising beat in Q3. For a number of quarters now we have argued that lifeco earnings are more resilient than the market is giving credit for, and we believe that SLF’s Q4 performance bears that out for the group as a whole. On the subject of IFRS 17, the lifeco updated its guidance here with the key changes being a high-single-digit decline in underlying 2022 earnings (driven by higher investment gains) versus a mid-single-digit impact before, and a high-single-digit increase in SLF’s LICAT ratio versus previous guidance of just a few points increase. Overall, we think the capital change is a modest positive, while the earnings impact is really just a function of SLF realizing higher yields this year and not a deterioration in the underlying economics of the business.”
Colliers International Group Inc. (CIGI-T) rose 6.7 per cent as investors applauded an optimistic outlook despite reporting a decline in fourth-quarter profit as its Capital Markets segment missed expectations.
The Toronto-based company reported net earnings of US$62-million (or 51 cents a share), falling from US$99.7-million (92 US cents) during the same period a year ago. Adjusted earnings per share of US$2.31, a penny above the expectation on the Street.
Revenue revenue fell 9.1 per cent to US$1.22-billion (from US$1.35-billion), below the Street’s expectation of US$1.31-billion.
However, National Bank Financial analyst Maxim Sytchev called Colliers’ outlook “solid” despite capital markets weakness.
“Strong growth in the high-margin IM vertical more than offset the soft activity in Capital Markets as EBITDA increased 6 per cent year-over-year despite a 9-per-cent drop in total revenues,” he said. “CIGI’s goal of achieving 65 per cent of pro forma adjusted EBITDA (currently 58 per cent ) from recurring sources – IM and O&A [[Investment Management and Outsouring & Advisory] – remains in sight. Following Q3/22 results, CIGI acquired a majority stake in Belgium-based professional services and investment management firm BelSquare SRL, adding 70 employees to its headcount and capping off a record year for capital deployment.
“CIGI also released 2023 guidance, though with less granularity than in the prior year. While expected softness in Capital Markets is expected to persist through H1/23, management’s guidance is significantly above consensus, especially on the bottom line. Growth will be buoyed by ongoing strength in IM and O&A, while Leasing is expected to hold steady. Management expects CapEx of US$90-million to US$100-million for 2023, up 40 per cent at the midpoint from 2022 levels. Leverage remains manageable; net debt to pro forma adjusted EBITDA came in at 1.8 times at Q4/22, up from 0.3 times in Q4/21 on record 2022 acquisitions of US$1.2-billion. In the quarter, the company took advantage of share price weakness by repurchasing US$39.4-million of stock.
PepsiCo Inc. (PEP-Q) increased as it beat analysts’ estimates for fourth-quarter revenue and profit, benefiting from price hikes for its sodas and snacks to tackle rising costs.
A near duopoly in the carbonated drinks market with Coca-Cola Co. (KO-N) helped PepsiCo raise prices over the last few quarters with little pushback as it battles higher freight, commodity and labor costs, as well as the impact of a stronger dollar on international revenue.
PepsiCo expects inflationary pressures to persist in 2023 and even though it sees resilient consumer demand, the company said it was keeping an eye out for a shift in consumer spending.
The Frito-Lay maker forecast annual profit below Wall Street estimates, signaling multiple price hikes were likely to dampen demand for its sodas and snacks amid a cost-of-living crisis.
PepsiCo’s shares rose after it also raised its annualized dividend by 10% to $5.06 per share.
The company’s North America beverages unit, which houses brands such as Mirinda, 7UP, and Gatorade, posted an organic revenue growth of 10% in the fourth quarter on steady demand.
On an adjusted basis, the company earned US$1.67 per share in the fourth quarter, beating estimates of US$1.65, according to Refinitiv data.
PepsiCo reported net revenue of about US$28-billion, compared with estimates of US$26.84-billion.
The company’s average prices jumped 16 per cent, while organic volume slipped 2 per cent.
PepsiCo said it expects fiscal 2023 core constant currency earnings of US$7.20 per share, compared with estimates of US$7.28.
Shares of solar-tracking business Nextracker Inc. (NXT-Q) soared in their U.S. market debut on Thursday, signaling a gradual recovery in IPO markets after a prolonged lull caused by high interest rates and an economic downturn.
Nextracker, a unit of Singapore’s Flex Ltd, saw its stock open at US$30.31, above the company’s upsized initial public offering (IPO) price of YS$24 a share.
“It’s yet another sign that the 2023 IPO market is thawing. So it’s a breath of fresh air,” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital.
“But for activity to pick up, we need to see a string of successful listings. Nextracker looks like one of them.”
Since the start of the year, oilfield services firm Atlas Energy, Chinese sensor maker Hesai Group and restaurant chain Cava are among the companies that have filed for U.S. IPOs.
Within the clean energy space, DESRI Inc and REV Renewables Inc are in the pipeline.
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On the decline
Cannabis producer Canopy Growth Corp. (WEED-T) said on Thursday it would shed assets in Canada and reduce its workforce by about 60 per cent as part of the pot producer’s efforts to reduce costs and turn profitable.
Shares of Canopy tumbled 16.6 per cent after the company also reported a bigger quarterly loss.
The company has been cutting costs through layoffs, exit from some international markets, store closures and divestiture of its retail business across Canada.
“The right-sizing of our Canadian business is expected to significantly reduce our cash costs,” Chief Financial Officer Judy Hong said in a statement.
Hong said the company expects to deliver at least quarterly breakeven adjusted EBITDA in its Canadian cannabis business in fiscal 2024.
In Canada, Canopy is exiting cannabis flower cultivation in Ontario, ceasing the sourcing of cannabis flower from the Quebec facility, and moving to a third-party sourcing model for cannabis beverages, edibles, vapes, and extracts.
The headcount reduction will affect 800 positions, of which 40 per cent immediately, the company said.
The company sees saving $140-million to $160-million over the next 12 months from its latest cost-cutting measures. It also expects to record related pretax charges of $425-million to $525-million in the current quarter and the first half of fiscal 2024.
The Ontario-based company’s adjusted core loss widened to $87.5-million in the quarter ended Dec. 31, from $67.4-million a year earlier.
Bombardier Inc. (BBD-B-T) was lower by 11.8 per cent despite predicting sharply higher financial results on several key metrics for the coming year as the Canadian luxury jet maker continues to pull in wealthy customers who are shrugging off recession fears.
The Montreal-based plane maker released fourth quarter and annual earnings Thursday morning that confirmed the preliminary results it reported last month. It also published a bullish new forecast for the year, saying it expects to boost adjusted earnings before interest, taxes, depreciation and amortization by 21 per cent over 2022 while growing revenue by 10 per cent year-over-year.
Revenue for fiscal 2023 should be at least US$7.6-billion as the company ships out a minimum of 138 jets, Bombardier said. The corporation has significantly expanded its jet maintenance and service business, which should also drive sales. Bombardier delivered 123 planes in 2022.
After years of turmoil at Bombardier that saw it teeter on the verge of bankruptcy, chief executive Éric Martel is trying to stage a recovery for the industrial giant that hinges on a slimmed-down business model focused solely on selling and servicing private jets. The company is tapping a strong trend toward private plane travel that took off during the COVID-19 pandemic.
Bombardier said its adjusted EBITDA for the coming year should be greater than US$1.1-billion compared to last year’s US$930-million. It said the gain will be fuelled by positive tailwinds from its Global 7500 jet (list price: US$75-million) and the near completion of its cost-cutting effort.
- Nicolas Van Praet
Thomson Reuters Corp. (TRI-T) slipped 1.9 per cent after reporting higher-than-expected earnings in the fourth quarter, helped by cost cuts and gains on divestitures, but said a weakening global economic environment was a concern.
The news and information company reported adjusted earnings of 73 US cents per share, ahead of analyst forecasts for 65 US cents, according to estimates from Refinitiv.
Thomson Reuters, which owns the Westlaw legal database and the Checkpoint tax and accounting service, said “many signs” pointed to a weakening global economic environment amid rising interest rates, high inflation, and geopolitical risks.
It expects first-quarter organic sales growth at the lower end of its full-year target of 5.5-6.0 per cent. That organic sales range matches the forecast made in November.
“As our results and guidance shows, we’re proving to be every bit as resilient as we indicated and have traditionally been,” CEO Steve Hasker told Reuters in an interview.
Total revenues rose 3 per cent in the fourth quarter to US$1.765-billion, slightly ahead of expectations of US$1.760-billion, according to Refinitiv. Exchange rate moves reduced the sales growth by 2 percentage points, and divestitures by 1 point.
Four of the company’s five business segments showed higher sales and operating profit, but those were lower in the Global Print business.
The Reuters News division showed total sales up 7 per cent, primarily driven by the Reuters Events business and the company’s news agreement with the Data & Analytics business of LSEG. As of Jan. 31, Thomson Reuters owned about US$5.6-billion worth of LSEG shares.
The company completed its two-year Change program to save on costs. After it completes a US$2-billion share repurchase program in the second quarter, the company said it planned to return US$2-billion in capital to shareholders and possibly conduct a share stock split. It raised its dividend for the 30th straight year.
During the fourth quarter, Thomson Reuters said it would buy SurePrep LLC, a U.S.-based provider of tax automation software and services, for US$500-million in cash. That deal was completed at the start of January.
Mr. Hasker said the company had about US$11-billion in capacity for deals and expected to pursue a couple this year, including adding more to its artificial intelligence capabilities.
“We’ve made significant investments over the last couple of years in AI. It powers many of our products,” he said.
Mullen Group Ltd. (MTL-T) lost ground after it reported its fourth-quarter profit of $61.5-million, up from $20.2-million in the same quarter a year earlier, as its revenue for the quarter rose more than 10 per cent.
The trucking and logistics company says the profit amounted to 62 cents per diluted share for the quarter ended Dec. 31 compared with a profit of 21 cents per diluted share a year earlier.
Revenue totalled $502.7-million, up from $441.9-million in the final three months of 2021.
On an adjusted basis, Mullen Group says it earned 58 cents per share in its most recent quarter compared with an adjusted profit of 22 cents per share a year earlier.
For the full year, Mullen Group says it earned $158.6-million or $1.62 per diluted share, up from $72.4-million or 75 cents per diluted share in 2021.
Revenue for 2022 totalled $2.0-billion, up from $1.5-billion the previous year.
Telus Corp. (T-T) slid 3.8 per cent after it reported its fourth-quarter profit fell compared with a year ago as its revenue climbed higher.
The company says its net income attributable to common shares totalled $248-million or 17 cents per share for the quarter ended Dec. 31, down from $644-million or 47 cents per share a year earlier.
Operating revenue and other revenue for the quarter totalled $5.1-billion, up from $4.9-billion in the last three months of 2021.
On an adjusted basis, Telus says it earned 23 cents per share in its fourth quarter, the same as a year earlier.
Analysts on average had expected a profit of 28 cents per share, according to estimates compiled by financial markets data firm Refinitiv.
In its outlook for 2023, Telus says it expects operating revenue to grow 11 to 14 per cent.
Precision Drilling Corp. (PD-T) plummeted over 14 per cent following the premarket announcement of fourth-quarter earnings that fell shy of estimates.
The Calgary-based company reported revenue of $511-million, up 19 per cent sequentially and well above the Street’s expectation of $484.9-million. However, EBITDA of $91.1-million missed the consensus forecast of $148.5-million.
ATB Capital Markets analyst Waqar Syed said: “PD’s results had positives and negatives. Operationally, the quarter was stronger than expected, with good margin strength in the US and Canada. Also, strong FCF in Q4/22, above-target debt reduction in 2022, and management’s raising of the 2022-2025 debt reduction target were also positive. However, share-based compensation was well above forecast and will likely be negatively received by the market. PD’s stock has recently lagged, and some of the negative news may already be priced in.”
Walt Disney Co. (DIS-N) finished lower in the wake of announcing a sweeping restructuring under recently reinstated CEO Bob Iger, cutting 7,000 jobs as part of an effort to save US$5.50-billion in costs and make its streaming business profitable.
The layoffs represent an estimated 3.6 per cent of Disney’s global workforce.
Activist investor Nelson Peltz on Thursday ended his quest for a board seat at Mr. Iger laid out plans to fix the home of Mickey Mouse.
“The proxy fight is over. This is a win for all shareholders,” a spokesperson for Peltz’s Trian Fund Management said on Thursday.
Under a plan to cut costs and return power to creative executives, the company will restructure into three segments: an entertainment unit that encompasses film, television and streaming; a sports-focused ESPN unit; and Disney parks, experiences and products.
“This reorganization will result in a more cost-effective, coordinated approach to our operations,” Mr. Iger told analysts on a conference call. “We are committed to running efficiently, especially in a challenging environment.”
Mr. Iger said streaming remained Disney’s top priority.
He said the company would “focus even more on our core brands and franchises” and “aggressively curate our general entertainment content.”
Disney said it planned to cut US$2.5-billion in sales and general administrative expenses and other operating costs, an effort that is already under way. Another US$3-billion in savings would come from reductions in non-sports content, including the layoffs.
For the fiscal first quarter that ended on Dec. 31, Disney reported adjusted earnings per share of 99 US cents, ahead of the average analyst estimate of 78 US cents, according to Refinitiv data.
Net income came in at US$1.279-billion, below analyst estimates. Revenue hit US$23.512-billion, ahead of Wall Street estimates of US$23.4-billion.
This marks Disney’s third restructuring in five years. It reorganized its business in 2018 to accelerate the growth of its streaming business, and again in 2020, to further spur streaming’s growth.
The last time Disney made cuts was during the height of the pandemic, when it announced in November 2020 that it would lay off 32,000 workers, primarily at its theme parks. The cuts took place in the first half of fiscal 2021.
With files from staff and wires