A roundup of some of the North American equities making moves in both directions today
On the rise
Tilray Inc. (TLRY-Q) jumped 3,7 per cent in mid-afternoon trading on Wednesday in New York following the pre-market announcement of a $419-million acquisition of FHF Holdings Ltd., known as Manitoba Harvest, from Compass Group Diversified Holdings LLC and other shareholders.
“Together, Tilray and Manitoba Harvest plan to grow both companies’ revenue while bringing nutritious hemp foods and supplements to more households across the U.S. and Canada,” the company said in a release. “The acquisition will expand Tilray’s product portfolio into the natural foods category and bring Manitoba Harvest expertise in working with cannabinoids, including cannabidiol (CBD).”
Hudbay Minerals Inc. (HBM-T; HBM-N) was up 3.8 per cent after reporting better-than-expected results for the fourth quarter. Revenue of $351.8-million exceeded the expectation on the Street of $306.8-million, despite dropping from $424.4-million a year ago.
“In the fourth quarter, we continued our trend of generating strong operating cash flow as we remained focused on our strategic priorities of developing and operating our portfolio of high-quality assets in mining friendly jurisdictions,” said Alan Hair, president and chief executive officer.
Bombardier Inc. (BBD-B-T) was up 0.4 per cent after chief financial officer John Di Bert told an investor conference on Wednesday, according to Reuters, it will deliver a handful of its new flagship Global 7500 business jet to customers during the first half of 2019, with the remaining 10-15 deliveries expected during the back half of the year. The company has forecast 15 to 20 deliveries of the long-range planes, which cost $73-million at list prices, in 2019. Deliveries are expected to rise to 35 to 40 aircraft in 2020.
Barrick Gold Corp. (ABX-T, ABX-N) was up 2.4 per cent after unveiling details of a deal with government of Tanzania to settle its disputes with Acacia Mining. The proposal includes a payment of US$300-million to resolve outstanding tax claims.
"Significant amounts of real value have been destroyed by this dispute and, in Barrick`s view, this proposal will allow the business to focus on rebuilding its mining operations in partnership with their respective stakeholders, and most importantly long suffering investors, including Barrick,” said president and chief executive Mark Bristow in a release.
Stelco Holdings Inc. (STLC-T) sat 8.2 per cent higher after reporting fourth-quarter revenue of $648-million, up 43 per cent year-over-year. The result did miss the expectation on the Street of $667.1-million.
“Stelco continued to deliver strong shipping volumes and financial results, including what we believe to be the North American steel industry’s leading adjusted EBITDA margin(1,2) of 22 per cent in the fourth quarter and for the full year 2018, demonstrating the benefits of the operational improvements we continue to make in the Company,” said executive chairman Alan Kestenbaum.
Crius Energy Trust (KWH-UN-T) jumped 18.4 per cent after the premarket announcement of a amendment to its existing agreement to be purchased by Vistra Energy Corp. (VST-N). Vistra has agreed to increase its acquisition price to $8.80 per trust unit, an increase of $1.23 from the previous deal.
"Vistra's decision to increase the purchase price for the Crius Energy portfolio came after a careful evaluation of the economics of the transaction," said Vistra president and chief executive officer Curt Morgan in a release. "At a purchase price of approximately 4 times EV/EBITDA, this transaction is still projected to be EBITDA and free cash flow accretive and to exceed Vistra's investment threshold of 500-600 basis points above our cost of capital, while not interfering with Vistra's previously announced capital allocation and deleveraging plans."
Shares of Irving, Tex.-based Vistra sat 0.4 per cent higher.
Devon Energy Corp. (DVN-N), an Oklahoma City-based natural gas, natural gas liquids, and petroleum exploration company, rose 8.9 per cent after reporting fourth-quarter results and announcing it plans to pursue the “separation” of its Canadian and Barnett Shale assets to “complete its transformation to a high-return U.S. oil growth business.”
Devon’s Jackfish thermal heavy oil operations are located in the Athabasca oil sands in northeast Alberta.
“Devon will evaluate multiple methods of separating the assets, including a potential sale or spin-off,” the company said in a release. “The separation will allow the company to focus on its top-tier, high-return U.S. oil assets and is aligned with Devon’s previously announced long-term strategic plan.”
It expects completion of the move by the end of 2019.
CIBC World Markets analyst John Morrison said: “Overall, we believe that Devon’s Canadian assets are likely to receive a value in the $3.5 billion-$5.0 billion range, with something in the $4.0 billion-$4.5 billion range being the most likely outcome in the context of current market conditions. Although we believe the asset base is attractive and provides a large base of concentrated production with a long resource tail, this is a challenging market to divest Canadian oil assets given the combination of: 1) the current forced Alberta curtailments; and 2) the opaqueness and unknowns due to the lack of visible long-term pipeline takeaway capacity. In addition, considering that the market just witnessed a public process where Husky pursued a hostile takeover of MEG, which didn’t end up getting completed and no public interlopers emerged, we view the chances of a highly competitive process for Jackfish being a low-case probability, despite the strong operating track record of the asset.”
IMAX Corp. (IMAX-N) shares were up 3.3 per cent after MKM Partners analyst Eric Handler suggested Sony Corp. (SNE-N) might want to think about purchasing the Mississauga-based entertainment technology company. As it enters the Premium Large Format theater business,Mr. Handler said Sony may be better off acquiring the industry leader, rather than building up its own product.
On the decline
Shares of Bausch Health Companies Inc. (BHC-T, BHC-N) dropped 8.6 per cent despite reporting better-than-anticipated fourth-quarter results.
On Wednesday before market open, Bausch, formerly known as Valeant Pharmaceuticals International Inc., reported revenue and earnings per share of $2.12-billion and $1.05, respectively, exceeding the consensus expectations on the Street of $2.08-billion and 88 cents. It also revealed higher-than-projected 2019 revenue and adjusted EBITDA guidance of $8.3 billion-$8.5 billion and $3.35 billion-$3.50 billion, respectively.
Uni-Select Inc. (UNS-T) plummeted 21.5 per cent after its fourth-quarter results fell short of expectations. The Quebec-based distributor of automotive products, and paint and related products for motor vehicle announced adjusted earnings per share of 13 cents, missing the consensus on the Street by 5 cents.
The company’s 2019 guidance also disappointed.
Laurentian Bank Securities’ analyst Elizabeth Johnston feels it points to further EBITDA margin contraction, noting: “With the Q4/18 results, UNS has provided selected 2019 guidance which includes EBITDA margin of 5.75-6.75 per cent and organic growth of 1.25-3.25 per cent. This margin guidance is lower than results for 2018 and is indicated to be driven by FinishMaster. This is below both our EBITDA margin forecast and consensus for 2019 (we currently forecast 7.2-per-cent EBITDA margin).”
Tesla Inc. (TSLA-Q) was down 1.4 per cent on Wednesday on news its general counsel Dane Butswinkas is leaving after just two months in the position. Mr. Butswinkas, who joined electric carmaker in December, will return to his previous role as its outside counsel at law firm Williams & Connolly. Jonathan Chang, the company’s current vice-president of legal, will take over the position. The move is the latest in a string of top-level departures.
Savaria Corp. (SIS-T) dipped 9.1 per cent after its 2018 adjusted EBITDA fell short of expectations. The Laval, Que.-based manufacturer of wheelchair lifts, stairlifts, home elevators and accessible vans blamed “challenging operating environment in Europe for the Garaventa Lift group and significant cost inflation within the Span segment.”
“While we are satisfied with the revenue result in 2018, we are disappointed that we could not achieve our full year adjusted EBITDA guidance,” said president and chief executive Marcel Bourassa.
Shares of Aritzia Inc. (ATZ-T), a Vancouver-based women’s clothing company, were down 8.2 per cent after it announced a $330-miillion secondary offering of subordinate voting shares and concurrent share repurchase of $107-million of subordinate voting shares and multiple voting shares from Berkshire Partners LLC on Tuesday after market close.
“The repurchase of shares from Berkshire Partners represents a compelling opportunity to deploy Aritzia’s capital in a manner that is accretive to shareholders,” said chief executive officer and chairman Brian Hill in a release. “Aritzia maintains ample financial flexibility to continue to invest in and execute on our strategic growth initiatives."
Southwest Airlines Co. (LUV-N) slipped 4.6 per cent after the U.S. airline cut its forecast for first-quarter revenue per seat mile late Tuesday, pointing to weak passenger demand and a US$60-million hit from the partial U.S. government shutdown.
On Wednesday, Goldman Sachs downgraded its rating for the stock to “sell” from “neutral.”
Analyst Catherine O’Brien said: “We expect its relative margin underperformance combined with multiple compression will translate to share price underperformance. With the delay in Southwest’s ability to announce its Hawaii flights and begin selling tickets, we think the shortened selling window for its initial flights will create the need for the company to discount fares more heavily than we initially expected."
With files from staff and wires
David Leeder