A survey of North American equities heading in both directions
On the rise
Air Canada (AC-T) rose 4.4 per cent after its pilots approved a collective agreement that provides raises of 42 per cent over four years.
The union that represents the 5,200 pilots, the Air Line Pilots Association, said on Thursday the contract was approved by a margin of 67 per cent.
The pilots will receive a 26-per-cent raise retroactive to September, 2023, when the previous contact expired, and then 4-per-cent raises in 2024, 2025 and 2026.
The contract – the first that Air Canada’s pilots negotiated under ALPA – follows a 10-year agreement with annual raises of 2 per cent.
Represented by a new union, the pilots pushed to narrow the pay gap with their U.S. counterparts, and win better scheduling provisions.
“This agreement helps restore what Air Canada pilots have lost over the past two decades and creates a strong foundation from which to build on,” said Charlene Hudy, chair of the Air Canada union.
- Eric Atkins
Brookfield Asset Management (BAM-T) was higher by over 1 per cent on news it will buy European logistics real estate firm Tritax EuroBox, the companies said on Thursday, the latest sign of booming investor interest in warehouses and distribution centers.
The deal, for 1.1 billion pounds (US$1.44-billion) including debt, could kick off a bidding war for Tritax EuroBox, which backed last month an all-share takeover deal by British warehouse owner Segro.
Tritax said on Thursday it planned to withdraw its backing for the Segro offer and support the Brookfield bid instead.
Segro said its all-stock offer would enable Tritax EuroBox shareholders to retain exposure to the European industrial and logistics sector, or later cash in on their holdings given the “significant liquidity” in the FTSE 100 company’s shares.
British-listed commercial real estate companies have witnessed a flurry of deals this year including the US$1.2-billion purchase of UK Commercial Property by Tritax Big Box, the UK-focused publicly traded fund of the Tritax group, and LondonMetric’s deal for LXI.
European logistics, including warehouses, have been a bright spot in a struggling commercial real estate market, as the boom in e-commerce creates demand for more space. Private equity giant Blackstone last month agreed to buy an 80-per-cent stake in a European warehouse portfolio run by landlord Burstone .
XO Logistics (GXO-N), a provider of logistics services with a market value of roughly US$6-billion, soared on reports it is exploring a potential sale after receiving takeover interest.
GXO, which was spun off from trucking company XPO (XPO-N) in 2021, is working with a financial advisor to field acquisition interest from suitors, which include rival logistics providers, a source told Reuters, requesting anonymity as the discussions are confidential.
It has not made a final decision to proceed with a sale, and it is possible that the talks may not result in a deal, the source added.
GXO is one of the world’ largest providers of supply chain management tools. Its services include AI-powered robotics, transportation, warehousing, and logistics for industries such as aerospace & defence, e-commerce, healthcare, and consumer packaged goods.
On the decline
Toronto-Dominion Bank (TD-T) was down after a top U.S. bank regulator imposed a $450-million fine and several non-monetary penalties for “egregious and unacceptable” gaps in the lender’s anti-money laundering (AML) compliance program.
The Office of the Comptroller of the Currency (OCC) said in a statement Thursday that the bank failed to develop and maintain an AML program that could monitor compliance with federal regulations. TD has set aside $4-billion to cover financial penalties from three different regulators and the U.S. Department of Justice, but analysts and investors have expressed concern over the long-term damages from non-monetary penalties, including a potential cap on the bank’s asset growth.
“TD Bank’s persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars The bank’s blatant risk management failures attracted illicit actors and are egregious and unacceptable,” said Acting Comptroller of the Currency Michael J. Hsu. “The OCC’s co-ordinated and comprehensive action, including the imposition of an asset cap, will ensure that the bank focuses on building proper controls commensurate with its risk profile.
The non-monetary penalties issued by the OCC include an asset cap, restrictions on opening new branches or launching new products, board certification prior to making dividend payments, a third-party assessment of the bank’s compliance and AML program, comprehensive corrective action and a suspicious activity review.
The cap on assets is one of the strictest penalties, hindering the bank’s growth avenues. The cap is rarely applied, and analysts and investors thought it was unlikely. The consent order also prohibits the bank from opening new branches or new business lines without approval.
The OCC said that the bank had “significant, systemic breakdowns in its transaction monitoring program.” TD processed hundreds of millions of dollars of transactions that were linked to suspicious activity, and failed to take immediate corrective action to address the suspicious activity and the corrective actions. The failure created “potential for significant money laundering, terrorist financing, or other illicit financial transactions.”
- Tim Kiladze and Stefanie Marotta
Leamington, Ont.-based cannabis company Tilray Brands Inc. (TLRY-T) was lower after it reported a loss of US$34.7-million in its first quarter, compared with a loss of US$55.9-million in the same quarter last year, as its net revenue rose 13 per cent.
The company says the loss amounted to 4 US cents per diluted share for the quarter ended Aug. 31 compared with a loss of 10 US cents per diluted share a year earlier.
Net revenue totalled US$200.0-million for the three-month period, up from US$176.9-million in the same quarter last year.
The increase came as Tilray’s beverage alcohol business earned net revenue of US$56.0-million, up from US$24.2-million a year ago, while its cannabis business saw net revenue of US$61.2-million, down from US$70.3-million in the same quarter last year.
On an adjusted basis, Tilray says it lost a 1 US cent per share in its latest quarter compared with an adjusted loss of 4 US cents per share a year earlier.
Domino’s Pizza (DPZ-N) posted a smaller-than-expected rise in third-quarter U.S. same-store sales on Thursday as consumers curbed spending on dining out.
Shares of the pizza maker were lower.
Despite inflation easing in the U.S., menu prices that rose over the last two years have kept consumers wary of shelling out money in restaurants. They have instead responded to steep discounts and special offers.
As a result, competition has heated up in the fast-food industry with burger chains, including McDonald’s and Burger King, offering some meals at price points around $5.
The “burger wars”, as they have come to be known, could also be pressuring demand for Domino’s usually value-driven pizzas, analysts have noted.
Same-store sales in the U.S. grew 3 per cent in the quarter ended Sept. 8, compared with expectations of 3.6-per-cent rise, according to estimates compiled by LSEG.
Domino’s now expects annual global retail sales for 2024 to grow about 6 per cent, as against an earlier forecast of 7-per-cent growth. The company expects 2025 global retail sales growth to be roughly in-line with the current year.
For July through September, foot traffic at Domino’s grew 8.3 per cent on an average, compared with a year ago, slower than the average 10.7-per-cent growth in April-June, according to data from Placer.ai.
Fast food chains are also facing weak demand in some international markets. Domino’s reported international same-store sales growth of 0.8 per cent in the third quarter, compared with expectations of a 2.9-per-cent rise.
Third-quarter diluted earnings per share came in at US$4.19, compared with estimates of US$3.65.
Tesla Inc. (TSLA-Q) dipped ahead of the long-awaited unveiling of its robotaxi at a Hollywood studio Thursday night.
The company, which began selling software it calls “Full Self-Driving” nine years ago that still can’t drive itself, is expected to show off the so-called “Cybercab” vehicle, which may not have a steering wheel and pedals.
The unveiling comes as CEO Elon Musk tries to persuade investors that his company is more about artificial intelligence and robotics as it struggles to sell its core products, an aging lineup of electric vehicles.
Some analysts are predicting that it will be a historic day for the Austin, Texas, company as it takes a huge step toward a long-awaited robotaxi service powered by AI.
But others who track self-driving vehicles say Musk has yet to demonstrate Tesla’s system can travel safely without a human driver ready to step in to prevent crashes.
“I don’t know why the headlines continue to be `What will Tesla announce?’ rather than `Why does Tesla think we’re so stupid?”' said Bryant Walker Smith, a University of South Carolina law professor who studies autonomous vehicles.
He doesn’t see Tesla having the ability to show off software and hardware that can work without human supervision, even in a limited area that’s well-known to the driving system.
“We just haven’t seen any indication that that is what Tesla is working toward,” Mr. Walker Smith said. “If they were, they would be showcasing this not on a closed lot, but in an actual city or on an actual freeway.”
Without a clear breakthrough in autonomous technology, Tesla will just show off a vehicle with no pedals or steering wheel, which already has been done by numerous other companies, he said.
“The challenge is developing a combination of hardware and software plus the human and digital infrastructure to actually safely drive a vehicle even without a steering wheel on public roads in any conditions,” Mr., Walker Smith said. “Tesla has been giving us that demo every year, and it’s not reassuring us.”
Many industry analysts aren’t expecting much from the event either. While TD Cowen’s Jeff Osborne expects Mr. Musk to reveal the Cybercab and perhaps the Model 2, a lower-cost electric vehicle, he said he doesn’t expect much of a change on self-driving technology.
“We expect the event to be light on details and appeal to the true long-term believers in Tesla,” Mr. Osborne wrote in a note. Musk’s claims on the readiness of Full Self Driving, though, will be crucial “given past delays and ongoing scrutiny” of the system and of Tesla’s less-sophisticated Autopilot driver-assist software.
GAdvanced Micro Devices (AMD-Q) was down after saying it planned to start mass production of a new version of its artificial-intelligence chip called the MI325X in the fourth quarter of the year, as it seeks to beef up its AI chips in a market dominated by Nvidia.
The announcements made on Thursday at an AMD event in San Francisco come as demand for AI processors from major technology firms, including Microsoft and Meta Platforms, far exceeds their availability. Santa Clara, California-based AMD said vendors such as Super Micro Computer would begin to ship its new AI chip to customers in the first quarter of 2025. The AMD design aims to compete with Nvidia’s Blackwell architecture.
The MI325X chip uses the same architecture as the already-available MI300X, which AMD launched last year. The new chip includes a new type of memory that AMD said will speed AI calculations.
AMD also announced several networking chips that help speed moving data between chips and systems inside data centres
The company announced the availability of a new version of its server central processing unit (CPU) design. The family of chips formerly codenamed Turin includes a version of one of them that is designed to keep the graphics processing units (GPUs) fed with data - which will speed AI processing.
Delta Air Lines (DAL-N) warned of a hit to its fourth-quarter revenue from a likely slowdown in U.S. travel demand in the days leading up to the presidential election, sending its shares lowered on Thursday.
The carrier expects fourth-quarter revenue between US$13.9-billion to US$14.2-billion, compared to average analysts’ estimate of US$14.22-billion.
“People like to be home during the election period,” CEO Ed Bastian said on CNBC, adding that the slowdown in discretionary spending will be not be limited to the airline industry.
The weak forecast sent shares of rivals United Airlines (UAL-Q), American Airlines (AAL-Q) and Southwest Airlines (LUV-N) lower.
The demand slowdown, however, is expected to be temporary, Mr. Bastian said, as the holiday season is expected to be “strong.”
The dull forecast comes as the airline industry is recovering from an excess supply of seats in the domestic market during the summer travel season, which forced carriers to discount fares to fill their planes.
Since then U.S. airlines have moderated capacity. Annual domestic seat growth has slowed to 1.5 per cent in October and November from 5.5 per cent in July, according to BofA analysts.
Delta said the steps taken by U.S. airlines to lower capacity improved its pricing power across regions in the third quarter. It expects the trend to continue in the December quarter.
The carrier forecast adjusted profit of US$1.60 to US$1.85 per share in the quarter through December, whose midpoint was above expectations of US$1.70.
Its overall revenue is estimated to be up 2 per cent to 4 per cent in the quarter from a year ago on the back of a 3-per-cent to 4-per-cent increase in capacity.
Jefferies analyst Sheila Kahyaoglu said the forecast implies a flat-to-one-percent drop in fourth-quarter total revenue per available seat mile, a proxy for pricing power.
Delta reported an adjusted profit of US$1.50 per share in the September quarter, lower than the US$1.52 estimated by analysts, mainly due to mass flight cancellations following a global cyber outage.
Pfizer (PFE-N) declined as its corporate clash with Starboard Value heated up on Thursday when the activist investment firm pressed the U.S. drugmaker to investigate actions by its board, after two former executives backed out of its campaign against the company.
Jeffrey Smith, who runs Starboard, pushed Pfizer’s board on Thursday to set up a special committee to probe potential “coercive conduct” that may have prompted the two executives who had planned on working with the hedge fund to change their minds.
Starboard built a roughly US$1-billion position in the company, which has a US$167-billion market capitalization, and said former chief executive Ian Read and former chief financial officer Frank D’Amelio were concerned about the company’s path and offered their assistance.
Starboard alleged the former executives reversed course because people within Pfizer or their representatives contacted Mr. Read and Mr. D’Amelio and “purportedly threatened to commence costly litigation against them.”
In a letter to the Pfizer board, Mr. Smith wrote he has been told of recent events that put Mr. Read and Mr. D’Amelio under pressure. If they did not publicly support Pfizer CEO Albert Bourla they could risk having previous compensation clawed back and the cancellation of unvested performance stock units, the letter said.
Hours earlier, Guggenheim Securities, Pfizer’s longtime banker, said Mr. Read and Mr. D’Amelio “decided not to be involved in the efforts of Starboard regarding Pfizer” adding that they fully support Mr. Bourla.
With files from staff and wires