A survey of North American equities heading in both directions
On the rise
Shares of Canadian Tire Corp. (CTC-A-T) gained almost 2 per cent after it reported reported its profits grew by 8.3 per cent in the third quarter, beating analyst expectations, even as a weak consumer environment led to continuing sales declines.
The Toronto-based retailer reported on Thursday that comparable sales – an important metric that tracks sales growth at existing stores that have been open for more than a year – fell by 1.5 per cent in the quarter ended Sept. 28.
While sales have been softer, Canadian Tire has been cutting costs across its retail operations, and profit margins have been improving. In a statement released on Thursday, president and chief executive officer Greg Hicks noted that sales trends are beginning to improve.
“We continue to control costs and manage margins carefully, in order to balance lingering consumer and economic headwinds,” Mr. Hicks said.
The company also announced a dividend increase, to $7.10 per share on an annualized basis, up from $7 per share previously.
At the flagship Canadian Tire store chain, declines in sales across categories such as gardening, toys and home décor led to a 2.2-per-cent decrease in comparable sales compared to the same period the year before. Over the past two years, the company has noted that discretionary purchases have been falling as people manage their budgets carefully, although they continue to spend on essential products and services, particularly in the automotive category.
Mark’s sales fell by 2.3 per cent. The stores saw growth in sales of men’s shorts and T-shirts, as well as children’s clothing – a new category at Mark’s. Those gains failed to make up for declines in sales of industrial wear.
At Sport Chek, by contrast, sales were up by 2.9 per cent, marking the first quarter of sales growth in more than a year. The company noted that product promotions and an improved experience at the stores helped to drive better sales in categories such as athletic footwear and hockey gear.
Revenue in the company’s financial services segment grew by 1.5 per cent to $399.1-million, but profits fell amid higher net write-offs and an increase in operating costs.
Canadian Tire reported its net income grew to $220.7-million or $3.59 per share, compared to normalized earnings of $203.8-million or $2.96 per share in the same period the previous year. The normalized figure excluded a $328-million charge in the previous year related to the company’s deal to buy back a minority stake in its financial services division from Bank of Nova Scotia. It also excluded a $96.4-million insurance recovery related to a fire in March of 2023 at one of its largest distribution centres.
The company’s total revenue fell by 1.4 per cent to $4.19-billion. Excluding petroleum sales, revenue was down by 0.4 per cent to $3.6-billion. Sales at the company’s fuel stations were affected by lower gas prices, and the volume of gas sold also decreased.
The results surpassed analyst expectations of $4.18-billion in revenue and $3.04 per share for normalized earnings.
“Overall, we would view the quarter as largely in line, with results reflecting ongoing pressures on consumer discretionary spending (albeit with sequential improvement in sales trends) and easing margin tailwinds. As interest rates continue to fall, we expect improvement in consumer spending to drive solid double-digit-percentage EPS growth in 2025, but visibility is low at this point,” said Desjardins Securities analyst Chris Li in a research note.
- Susan Krashinsky Robertson
Manulife Financial (MFC-T) was higher by 2.7 per cent after it posted a better-than-expected third-quarter profit on Wednesday, as the Canadian insurer benefited from a robust performance in its Asia and wealth management businesses.
Canada’s leading life insurers have increasingly focused on expansion in Asia, a key market for their growth and global exposure.
Core earnings from Manulife’s Asia business jumped 17 per cent to $453-million in the quarter compared to last year.
Reaction from the Street: Thursday's analyst upgrades and downgrades
The strong performance in the Asia unit was driven by higher insurance sales in Hong Kong, mainland China, Singapore and Japan, Manulife said.
Manulife’s annual premium equivalent (APE), an important sales metric used by life insurers, jumped 40 per cent during the quarter, powered by a 64-per-cent jump in its Asia unit.
The results mirror those of smaller rival Sun Life, which also beat expectations for quarterly profit, thanks to strong insurance sales.
Manulife’s wealth and asset management business was another bright spot, with core earnings from the unit jumping 37 per cent to a record $499-million.
The unit generated higher fee income, thanks to higher equity markets and strong net flows.
Manulife’s wealth and asset management saw net inflows of $5.2-billion, compared to net outflows of $0.8-billion a year earlier, driven by strong retail net flows.
The demand for investment products rose amid an equity market recovery, resulting in strong retail net flows, Manulife said.
The company’s core earnings increased to $1.83-billion, or $1.00 per share, in the three months ended Sept. 30, from $1.74 billion, or 92 cents per share, a year ago.
Analysts, on average, had expected Manulife to earn 94 cents per share, according to estimates compiled by LSEG.
TC Energy (TRP-T) reported a third-quarter profit ahead of analysts’ estimates on Thursday as it transported more natural gas through its pipelines in the United States, sending the company’s shares up 2.2 per cent.
The U.S. Energy Information Administration said gas consumption in the United States would rise from a record 89.1 billion cubic feet per day (bcfd) in 2023 to 90.1 bcfd in 2024.
TC Energy said the increase in North America’s natural gas demand was due to higher LNG exports, coal plants being retired as well as emerging demand from data centers associated with artificial intelligence operations.
Earnings from TC Energy’s U.S. natural gas pipelines, its biggest segment, rose to $1.33-billion from $782-million a year earlier.
“We feel that natural gas-fired power generation is going to be the broad solution to meet their (data centers’) electricity requirements. There are only so many nuclear plants that you can de-mothball, and they need the reliability that natural gas provides,” a company executive said on a post-earnings call.
TC Energy reported overall revenue of $4.08-billion in the third quarter, beating the average analyst estimate of $3.97-billion, according to data compiled by LSEG.
Last month, the company completed the spin-off of its liquids pipeline business as it looked to focus on natural gas and reduce debt.
South Bow, the spun off entity, is trading as a separate company and has TC Energy’s crude oil assets, the most important of which is the Keystone pipeline.
On an adjusted basis, TC Energy earned $1.03 per share in the quarter, compared with estimates of 95 cents.
Lightspeed Commerce Inc. (LSPD-T) stock jumped Thursday after it surpassed financial forecasts in its second quarter results and increased its earnings outlook for the year. The company also cancelled a capital markets day with analysts and investors set for Nov. 20, fueling speculation that an ongoing strategic review could be progressing toward a sale of the company.
The Montreal point-of-sale software vendor said Thursday that it booked US$277.2-million of revenue in the quarter ended Sept 30, up 20 per cent from the same period a year earlier. That was above the company’s predicted range of US$270-million to US$275-million and higher than consensus analyst estimates within that range. Adjusted earnings before tax, interest, depreciation and amortization (EBITDA) came in at US$14-million or $2-million above the company’s forecast.
Lightspeed, which sells transaction software to retailers, restaurants, golf clubs and hotels, narrowed its net loss to US$29.7-million from US$42.5-million a year earlier and also cut the level of cash flows used in operating activities to US$11.3-million from US$24.8-million a year earlier. Chief financial officer Asha Bakshani said on a conference call cash flows would have been positive but for its growing level of cash advances to merchants through its fast-growing business that contributed US$9.3-million in revenue, up 121 per cent year-over-year.
Despite posting higher revenue, Lightspeed is still not profitable. It has, however, in the past five quarters generated positive adjusted EBITDA, a non-GAAP measure that is followed more closely by analysts. Lightspeed in May forecast it would generate US$40-million of adjusted EBTIDA this fiscal year, and raised that goal Thursday to US$50-million, while reiterating its forecast of 20 per cent revenue growth for the year.
The company has also sharpened its operational focus, starting with efforts to zero in on serving larger customers with US$500,000-plus in annual revenues. That resulted in Lightspeed shedding many smaller customers – and the subscription revenue they generated using its software. That has weighed on overall subscription revenue for several quarters, including an anemic 6 per cent gain in the second quarter. Meanwhile, the number of customers with US$500,000 or more in annual revenues increased by 1 per cent.
Company leaders highlighted efforts under way that they said would bring up subscription growth to between 8 per cent and 10 per cent over the second half. Lightspeed had focused sales efforts on moving customers to using its payments processing offering, which helped boost average revenue per customer to US$527 in the quarter from US$425 a year earlier. Gross payments volume accounted for 37 per cent of total merchant transactions through its platform in the quarter, and the company expects that to surpass 40 per cent by year-end.
- Sean Silcoff
Saskatoon’s Cameco Corp. (CCO-T) surged 3.8 per cent after it increased its annual dividend as it reported a third-quarter profit attributable to equity holders of $7-million, down from $148-million a year ago.
The uranium miner says it will now pay an annual dividend of 16 cents per share, up from 12 cents per share.
Cameco chief executive Tim Gitzel also said the company has recommended to its board that it continue to grow the dividend to at least 24 cents per share over the fiscal periods 2024 through 2026, subject to annual consideration.
The increased payment to shareholders came as Cameo said its third-quarter profit amounted to two cents per diluted share compared with a profit of 34 cents per diluted share a year ago.
Revenue for the quarter totalled $721-million, up from $575-million in the same quarter last year.
On an adjusted basis, Cameco says it lost a penny per diluted share in its latest quarter compared with an adjusted profit of 32 cents per share a year earlier.
Canada Goose Holdings (GOOS-T) posted a surprise quarterly profit and topped Wall Street estimates for revenue on Thursday, as the luxury parka maker benefits from a demand recovery in China, as well as its tight cost controls.
Its shares finished narrowly higher with its robust performance in China contrasting with comments from bigger luxury brands such as Gucci-owner Kering and LVMH .
Revenue rose 5.7 per cent in Greater China in the second quarter, Canada Goose said.
Canada Goose, whose parkas can retail for more than $1,000, has also diversified by entering the non-winter category to include rain and warm weather clothing.
Excluding one-off items, Canada Goose posted a profit of 5 cents per share, compared with estimates for a loss of 5 cents.
Selling, general and administrative expenses fell about 8 per cent to $162.5-million due to a cost-saving program that involved job cuts.
“Our second-quarter performance reflected steady progress across our operating priorities, as we navigated an increasingly challenging macro environment that affected consumer sentiment,” CEO Dani Reiss said.
Still, the Ontario-based company tempered its fiscal 2025 revenue expectations due to weak spending on luxury goods in the U.S.
It now expects fiscal 2025 revenue to range from a low-single-digit decline to a low-single-digit increase, compared to its previous forecast of low-single-digit growth.
Revenue in North America declined 2.4 per cent in the reported quarter, compared to a 2.9-per-cent fall in the previous quarter.
Revenue in North America declined 3 per cent in the reported quarter, compared to a 0.4-per-cent rise in the previous quarter.
Canada Goose said second-quarter revenue fell to $267.8-million from $281.1-million, a year earlier.
Analysts on average had expected revenue of $260.2-million, according to data compiled by LSEG.
Algonquin Power & Utilities Corp. (AQN-T) closed up 0.8 per cent after it reported a loss of US$1.31-billion in its third quarter.
On a per-share basis, the Oakville, Ont.-based company said it had a loss of US$1.71. Earnings, adjusted to account for discontinued operations and non-recurring costs, were 8 US cents per share.
The results missed Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of 9 US cents per share.
The utility operator posted revenue of US$573.2-million in the period.
Molson Coors (TAP-N) was higher by 0.3 per cent despite forecasting lower full-year sales and missing Wall Street estimates for quarterly revenue as the Coors Light beer maker grapples with a hit to volumes in the United States amid higher prices.
The company, like its peer Constellation Brands, has had to rely on higher pricing to offset an increase in costs faced by the industry against the backdrop of sticky inflation.
“The U.S. was challenged with the macroeconomic environment along with anticipated unfavorable shipment timing and the wind down of a contract brewing agreement,” Molson Coors said.
The company now expects 2024 net sales to be down about 1 per cent, compared with its prior forecast of a low single-digit percentage increase.
While customers stretched their budgets to purchase the company’s products up until recently, the downbeat sales forecast indicates inflation is still weighing on consumers.
Molson Coors posted a 5.4-per-cent fall in Americas brand volumes during the third quarter, primarily driven by a drop in volumes of its higher-priced brands.
The company’s quarterly net sales fell 7.8 per cent to US$3.04-billion, compared with the average analyst estimate of US$3.13-billion, according to data compiled by LSEG.
On an adjusted basis, Molson Coors earned US$1.80 per share, beating estimates of US$1.67 per share. The company’s shares were up 1%.
Separately, the company also said it was buying a majority stake in ZOA Energy - a drinks company co-founded by Hollywood actor Dwayne “The Rock” Johnson - as Molson Coors looks to expand its drinks portfolio beyond alcoholic beverages
Citi analyst Filippo Falorni said: “TAP reported a 3Q’24 large topline miss and EPS beat, lowering 2024 topline while reiterating profit and narrowing EPS at the high-end of the range. TAP 3Q’24 underlying EPS of $1.80 was above our $1.63 estimate and consensus’ $1.67. Local currency sales growth of negative 7.8 per cent was below our negative 4.5-per-cent estimate & negative 4.1-per-cent consensus, largely on the reversal of 1H’24′s shipment timing benefit in the Americas offset by higher price/mix, while Americas depletions of negative 5.4 per cent were above consensus of negative 6.3 per cent (including negative 6.2 per cent in the U.S.). Gross margin came in above the Street, with the EPS beat also driven by lower MG&A. We expect a modest negative reaction today to the sales miss and 2024 topline guidance cut with scanner data suggesting topline challenges in the US are continuing into 4Q’24.”
On the decline
BCE Inc. (BCE-T) posted a net loss of $1.2-billion in its third quarter, as heightened competition in wireless and a $2.1-billion writedown of its television and radio properties added to the telecom giant’s recent woes.
BCE shares tumbled nearly 10 per cent Monday when the company announced it was acquiring internet provider Ziply Fiber for $5-billion, while also putting dividend hikes on hold to help fix its balance sheet. The stock was down another 2.8 per cent in trading Thursday to about $38.94 per share, the lowest point since the fall of 2011, pushing its dividend yield well above 10 per cent.
BCE on Thursday revised its 2024 revenue guidance downwards to reflect sustained competitive wireless pricing pressures. The company said it now expects revenue to decline 1.5 per cent, compared with previously anticipated growth of 0 to 4 per cent.
The Ziply deal triggered concerns about heavy capital spending and less of a focus on reducing debt. But on an call with analysts Thursday morning, BCE chief executive officer Mirko Bibic emphasized the potential for long-term returns, and underscored the company’s openness to exploring more opportunities in the U.S. He noted that fibre buildout there is much less expansive than in Canada and that the company would consider assets that could blend with Ziply Fiber’s existing buildout.
“It’s a great growth opportunity that’s right in our swim lane,” he said. “If there are other opportunities where we can turbocharge the already high Ziply Fiber growth, we’ll take a look.”
Meanwhile, although analysts had anticipated a slowdown on BCE’s new subscriber growth, the company still fell short of those already tempered expectations.
The telecom industry overall is being pressured by heightened competitive activity and slower growth, as federal visa caps have slowed immigration, a major source of new subscribers.
Average revenue per user and wireless revenue were both down, while churn – the percentage of customers who cancelled or did not renew subscriptions during the quarter – was up a “concerning” level, said Scotiabank analyst Maher Yaghi, reflecting the “significant destabilization” that Quebecor’s Freedom Mobile is exerting on the market.
- Irene Galea
Quebecor Inc. (QBR.B-T) dropped 2.8 per cent after it reported its third-quarter profit and revenue edged lower compared with a year ago.
The company said its net income attributable to shareholders amounted to $189-million or 81 cents per share for the quarter ended Sept. 30.
The result compared with a profit of $209.3-million or 91 cents per share in the same quarter last year.
Quebecor said its adjusted income from operating activities amounted to 82 cents per share, down from 88 cents per share in the same quarter last year.
Revenue for the quarter totalled $1.39-billion, down from $1.42-billion a year earlier.
During the quarter, the company said it added 132,100 mobile phone subscriptions, compared with an increase of 88,700 in the same period of 2023 — an increase of 3.4 per cent and what it called the best quarterly growth in its history.
Quebecor said it now has a total of more than four million wireless connections under its Videotron, Freedom Mobile and Fizz brands.
Chief executive Pierre Karl Peladeau called it an “important milestone” for Quebecor.
“With wireless growth of more than 132,000 connections in the third quarter and nearly 352,000 connections over the past 12 months, the corporation continues to demonstrate its ability to gain market share across its service area and solidify its position as Canada’s fourth major telecommunications provider,” he said in a press release on Thursday.
Quebecor reported its mobile phone average revenue per user was $35.31 in the third quarter, down $2.29, or 6.2 per cent, from the third quarter of the prior year.
It said that was mainly due to higher promotional discounts, lower overage revenues and a change in the customer mix, including the dilutive effect of Freedom’s and Fizz’s prepaid services.
“QBR reported 3Q24 consolidated results which we characterize as slightly negative—the top line was weaker than expected, notably in Internet and media,” said Desjardins Securities analyst Jerome Dubreuil in a note. “We also note the 2-per-cent headline EBITDA miss, although this was largely due to higher stock-based compensation. On the positive side, telecom subscriber numbers were robust, with strong wireless net adds; this has been a focus for investors of late. During the quarter, QBR repurchased and cancelled 1.26m shares for $41.1-million and reduced consolidated net debt by more than $170-million. Although we like QBR’s long growth runway in wireless, the company is not spared from the impact of strong competition.”
Bombardier’s (BBD.B-T) declined 6.8 per cent despite third-quarter revenue that beat analysts’ estimates on Thursday, helped by strong demand for business jet parts and repairs.
Business jet makers are increasing their order backlogs as they benefit from a wave of interest from wealthy travelers that has continued since the COVID-19 pandemic.
Despite an 18-day strike in July at one of its Canadian facilities, Bombardier delivered 30 jets during the third quarter ending September, compared with 31 aircraft a year earlier.
The Challenger jet maker reported cash burn, a metric closely watched by investors, of US$127-million during the quarter, compared with a positive cash flow of US$80-million in the same period last year.
Bombardier maintained its full year forecast for jet deliveries of 150 to 155 aircraft.
Revenue from the company’s services business rose 28 per cent in the third quarter to US$528-million.
Montreal-based Bombardier’s total revenue for the quarter was US$2.07-billion, compared with the average analyst estimate of US$1.79-billion, according to data compiled by LSEG.
On an adjusted basis, the company earned 74 US cents per share, compared with estimates of 73 US cents.
In a research note released before the bell, Citi analyst Stephen Trent said: “Bombardier’s adj 3Q’24 EPS came in at $0.74, vs Bloomberg consensus of $0.75. Overall, the results look marginally positive, with book to bill stable at 1 times, the firm order backlog softening ever so slightly sequentially, but stable year-over-year at $14.7-billlion, and mild FCF usage of negative $127-million. Assuming risk-neutral market conditions, these results could lead Buy-rated Bombardier’s shares to trade range-bound on Thursday morning.”
Canada’s Barrick Gold (ABX-T) was lower by 0.4 per cent in the wake of missing Wall Street estimates for third-quarter profit on Thursday, weighed down by higher costs and lower production at its Nevada mines.
Total gold output at Nevada Gold Mines fell to 385,000 ounces in the July-to-September quarter, compared with 401,000 ounces in the preceding three months, the company reported in October.
Meanwhile, all-in sustaining costs (AISC) for gold, an industry metric reflecting total expenses, rose to US$1,507 per ounce in the quarter, from $1,255 per ounce last year.
Copper AISC rose 10.5 per cent year-over-year, even as it declined quarter-over-quarter.
Newmont (NGT-T), the world’s biggest gold miner, also reported a rise in costs in the third quarter due to higher contractual labor costs.
Toronto-based Barrick said it was on track for an improved performance in the fourth quarter and expected to reach its 2024 annual production forecast in the range of 3.9 million ounces to 4.3 million ounces.
“The low end of guidance is within reach, in our view, however, heavy lifting required in Q4,” TD Cowen analysts said in a note.
Barrick’s realized price for gold rose 29.4 per cent to US$2,494 per ounce during the quarter, tracking a rally in bullion prices following a 50-basis-point rate cut by the U.S. Federal Reserve as well as safe haven demand due to the conflict in the Middle East.
Barrick said full-year production at its Loulo-Gounkoto project in Mali - where it is currently locked in a dispute with the government - would be at the top end of its forecast.
On an adjusted basis, the world’s second-largest gold miner reported a profit of 30 US cents per share for the quarter ended Sept. 30, compared to analysts’ average estimate of 31 US cents, according to data compiled by LSEG.
With files from staff and wires