A roundup of some of the North American equities making moves in both directions today
On the rise
Auxly Cannabis Group Inc. (XLY-X) jumped 24.7 per cent after British tobacco giant Imperial Brands PLC announced it is investing $123-million in the Toronto-based company by way of convertible debentures that could give Imperial a 19.9-per-cent stake in Auxly if the debentures are converted.
As part of the deal, Auxly will gain rights to licence Imperial’s vaping technology and access to technology developed by Nerudia, a subsidiary of Imperial focused on e-cigarettes.
The deal is the first significant investment in a Canadian licensed producer by an international consumer products company since America tobacco firm Altria Group, Inc. invested $2.4-billion into Cronos Group Inc. last December. It comes amid a push by tobacco firms to diversify away from cigarettes and into vaping products.
In reaction to better-than-expected quarterly results, released Wednesday after market close, Mullen Group Ltd. (MTL-T) rose 8.6 per cent on Thursday.
Raymond James analyst Andrew Bradford said: “By way of review, our investment thesis can be summarized as follows: (1) ‘return-on’ metrics are structurally improving as OFS [oilfield services] EBITDA has been higher year-over-year for four sequential quarters and Trucking/Logistics EBITDA has been higher year-over-year for 7 consecutive quarters. (2) Mullen tends to grow through acquisitions; its acquisition metrics have averaged between 4 times and 5 times EBITDA‚ and; its recent $125-million convertible debenture offering is highly indicative of a company on the’acquisition warpath’”
On the decline
Suncor Energy Inc. (SU-T) dipped 2.7 per cent in the wake of reporting after the bell on Wednesday that its profit nearly tripled in the second quarter due to a deferred income tax gain of $1.12-billion.
Operating profit rose to $1.25-billion, or 80 cents per share, from $1.19-billion, or 73 cents a share, a year ago.
Net profit was $2.7-billion, or $1.74 per share, from $972-million, or 60 cents per share, a year earlier, due to the deferred gain.
Analyst Chris Cox of Raymond James said: “Quarter after quarter, Suncor continues to post solid results. Driven by its integrated model and operational flexibility across the asset base, Suncor is able to weather both the volatile commodity backdrop and lingering egress concerns while leading the peer group as a cash return story.”
Teck Resources Ltd. (TECK-B-T) was down 5.4 per cent after it reported a quarterly profit slightly below analysts’ estimates, hurt by lower copper and zinc prices.
The Vancouver-based company said adjusted profit fell to $459-million, or 81 cents per share, in the second quarter, from $653-million, or $1.12 per share, in the same period a year ago. The Street had projected 84 cents.
On the heels of the release of better-than-anticipated second-quarter results, shares of Precision Drilling Corp. (PD-T) fell 4 per cent on Thursday.
Before the bell, the Calgary-based company reported EBITDA of $81-million, exceeding the expectation on the Street of $77-million.
“PD remains our core drilling-oriented recommendation for investors,” said Raymond James analyst Andrew Bradford in a research note.
Facebook Inc. (FB-Q) dipped 1.9 per cent after reporting quarterly revenue that beat estimates after the bell on Thursday.
The social media giant warned new rules and product changes meant to protect user privacy would slow its revenue growth.
Canaccord Genuity analyst Maria Ripps said: “Facebook reported solid Q2 results, with stable user trends and accelerating advertising revenue growth which led to 2-per-cent upside to consensus. Stronger ad revenue was mainly on the heels of several ad product updates and a slower than anticipated impact from privacy changes. Management continues to expect revenue deceleration in 2H19 and into next year as ad-targeting related headwinds are likely to kick-in. With consensus already pricing in this slower revenue growth, we think that improving Stories monetization and ongoing strong execution could lead to upside to estimates.”
Husky Energy Inc. (HSE-T) dropped 6.1 per cent per cent despite reported a better-than-expected quarterly profit before the bell, as higher Canadian crude prices following Alberta government’s mandatory output cuts more than offset the company’s lower production and weak refining margins.
However, the Calgary-based company announced production of 268,000 barrels of oil equivalent per day, missing the low end of expectations on the Street (270-282,000) and representing a 6-per-cent decline from the previous quarter. Funds from operations of 80 cents per share also fell short of the consensus projection (96 cents).
Raymond James analyst Chris Cox said: “While the headline results are a noticeable miss, most of the variance can be explained away by one-time items and the impact of a concentrated quarter of turnaround activity across the company. However, we believe that a slower than expected ramp-up at White Rose coupled with lingering uncertainty on the sale of the retail fuel business and Prince George refinery will likely weigh on the shares, alongside a FCF profile over the next couple of years that remains below-average in the Canadian large cap energy space.”
Cenovus Energy Inc. (CVE-T) sat 1.8 per cent lower after its quarterly profit fell short of expectations on the Street, due in part to Alberta’s mandated production cuts and higher crude prices affecting refining margins.
Excluding items, it earned 22 cents per share, well below analysts’ estimates of 34 cents.
AltaCorp Capital analyst Nick Lupick said: “Overall we view the release as being slightly positive as financial and operational results were largely in line with expectation with management continuing to be very focused on lowering debt, generating $772-million in FCF in the quarter (after dividend payments)."
Cameco Corp. (CCO-T) lost 7.7 per cent after releasing largely in-line second-quarter results before the bell.
The uranium producer reported an adjusted loss of 4 cents per share, meeting the Street’s projection and a 3-cent improvement from a year earlier.
For 2019, the company is now projecting uranium sales to be between 30 million and 32 million pounds, an increase from the previous target of 28 million to 30 million pounds.
“Our results reflect the outlook we provided for 2019 and the normal quarterly variations in contract deliveries, which are weighted to the second half of the year,” said president and CEO Tim Gitzel in a press release.
Newmont Goldcorp Corp. (NGT-T) fell 2.5 per cent after its quarterly profit fell well short of expectations.
Before the bell on Thursday, the miner announced net income attributable to shareholders from continuing operations sank to just $1-million, or zero cents a share, in the three months ended June 30, from $274-million, or 51 cents a share, a year earlier. Analysts had expected $188.58-million, or 23 cents a share.
Shares of Tesla Inc. (TSLA-Q) plummeted 13.6 per cent after the electric automaker missed financial targets in its second quarter despite record deliveries of its electric vehicles, adding that the carmaker will break even this quarter, rather than post a profit.
As well, chief executive Elon Musk announced J.B. Straubel, would step down from his chief technology role to become a senior adviser. Mr. Straubel is the executive behind Tesla’s battery and has been at Tesla since its founding.
Credit Suisse analyst Dan Levy said: “Tesla’s 2Q19 EPS miss, with a miss both in revenue and gross margin, reinforces the case for our Underperform rating .... Tesla has an opportunity for continued growth, and is well ahead of other OEMs in electrification and software. Yet for Tesla to be more than niche, one of the core challenges will be for Tesla to improve its gross margin profile. The 2Q print showed us that while the Tesla’s growth outlook is unchanged, there are nevertheless challenges along the way.”
American Airlines Group Inc. (AAL-Q) was down 8.5 per cent after raising its full-year estimate for costs related to cancellations from Boeing MAX grounding to US$400-million.
The No.1 U.S. airline by passenger traffic said net income rose 19 per cent to US$662-million, or US$1.49 per share, in the second quarter ended June 30 from a year earlier.
American’s had earlier said its full-year pre-tax profit would be hit by US$350-million. The company said its pre-tax income in the quarter took an about US$175-million hit due to 737 MAX cancellations.
In reaction to weaker-than-anticipated quarterly results, Lundin Mining Corp. (LUN-T) lost 3 per cent.
Credit Suisse analyst Fahad Tariq said: “While refreshed production guidance was in-line with our expectations, LUN’s cost outlook at Neves-Corvo and Chapada were slightly higher than expected, in addition to further delays and capex increases at the Zinc Expansion Project."
Celestica Inc. (CLS-T) lost 1.5 per cent in the wake of the release of its second-quarter results after market close on Wednesday.
BMO Nesbitt Burns analyst Thanos Moschopoulos said: “We remain Market Perform on Celestica and have reduced our estimates and target price, as Q3/19 guidance came in below consensus, primarily due to a weaker-than-expected outlook for the capital equipment business.”
“While the stock’s valuation is potentially attractive, the ongoing lack of visibility (and uncertain timing of a recovery) in this segment keeps us on the sidelines.”
With files from Mark Rendell, staff and wires
David Leeder