A roundup of some of the North American equities making moves in both directions today
On the rise
Microsoft Corp. (MSFT-Q) rose 3.4 per cent on Thursday after it exceeded Wall Street estimates for quarterly results and predicted continued growth for its cloud computing business.
After a 23-per-cent rally in its shares this year, the software company toppled Apple Inc. (AAPL-Q) as the most valuable publicly listed U.S. company.
In a research note, RBC Dominion Securities analyst Ross MacMillan said: “F3Q19 results were strong across the board, with much of the upside driven by the highest gross margin segments (Windows/ Server Products). F4Q19 guidance was broadly in-line (a relief given tough comps in high GM segments) and the early read on FY20 for double-digit growth of revenue/ EBIT is an encouraging starting point.”
Ivanhoe Mines Ltd. (IVN-T) jumped 13 per cent after announcing on Thursday a unit of Chinese state-run conglomerate CITIC Ltd has agreed to invest an additional $612-million in the Canadian miner to speed up production at its projects in Southern Africa.
“CITIC Metal has been a shareholder in Ivanhoe Mines for eight months now, and in that time, CITIC has seen what we already know – that the Kamoa-Kakula Project is unquestionably the best copper development project in the world,” said Ivanhoe co-chair Robert Friedland.
“The investment announced today will comfortably provide Ivanhoe with the equity cushion required to fast-track Kamoa-Kakula’s 6 Mtpa Phase 1 mine to production. More importantly, it also is a profound vote of confidence in our management, in our key stakeholders and partners, and in the promising future of the Democratic Republic of Congo and South Africa. We look forward to hosting the DRC President at the Kamoa-Kakula and Kipushi projects later this year.”
After easily exceeding the Street’s profit expectation, Facebook Inc. (FB-Q) was up 5.7 per cent.
The jump came despite a warning from the tech giant that it expects to be fined up to US$5-billion by the Federal Trade Commission for privacy violations.
The company said Wednesday that its revenue increased 26 per cent in the first quarter to US$15-billion from a year earlier. Net income dropped 51 per cent from a year ago to US$2.4 billion because of the expected one-time charge related to the FTC investigation.
Credit Suisse analyst Stephen Ju said: “After a year of controversy, we welcome a straightforward quarter, as ad revenue grew 31 per cent on an FX Neutral basis driven by ongoing pricing and monetization strength on both core Facebook and Instagram. More importantly from a product/strategic perspective, these execution wins are affording management the luxury to de-prioritize monetization of Messenger and WhatsApp to focus on privacy. Although management called out the potential for regulatory activity to negatively affect its ability to improve targeting, we believe what impacts Facebook will do the same for other platforms as well. And given advertiser decisions to allocate budgets to one versus another outlet are made on a relative ROI basis, we believe Facebook remains well-equipped to capture as opposed to cede share. We maintain our Outperform rating as our thesis remains: 1) Facebook should be able to drive long term revenue growth without a material lift in ad loads with, near-to-medium-term growth drivers including Instagram and Marketplaces 2) Street models continue to underestimate the long-term monetization potential of other billion-user properties like Messenger and WhatsApp, 3) FCF growth recovery for 2020, which we expect the company to signal on the 3Q19 results (November).”
Kelowna-based Valens GroWorks Corp. (VGW-C) rose 11.3 per cent after it reported on Wednesday evening that first-quarter revenue increased to $2.2-million compared with nil in the same period in fiscal 2018. Analysts were expecting revenue of $2.1-million.
Gross profit increased to $850,525 or 38.3 per cent of revenue, for the first quarter of 2019 compared with nil in the same period in fiscal 2018.
“The first quarter of 2019 was a key inflection point for Valens as we accelerated our ramp up into commercial production, generating revenues of $2.2 million compared with $nil in the same period of fiscal 2018,” said chief executive officer Tyler Robson. “This initial momentum was driven by contracts signed late in 2018 to provide cannabis extraction services to leading licensed producers, including Canopy Growth and Harvest One. The growth in the size and frequency of shipments from these contracts increased throughout the quarter and into the second quarter of fiscal 2019, while at the same time we also secured a number of new, large scale contracts with other leading licensed producers including with Organigram, Tilray, and The Green Organic Dutchman. We believe our success in securing these large scale contracts with industry leading customers validates our business model and the quality of the service we are able to provide. Further, they necessitated our recent capacity expansion to 240,000 KG of dried cannabis and hemp annually, which has made us the largest extraction company in Canada, with an unparalleled breadth of service encompassing all the major extraction methodologies, as well as formulation, product development and analytical testing solutions.”
Gilead Sciences Inc. (GILD-Q) reversed early losses and sat up 2.1 per cent after announcing its experimental drug to treat scarring of tissue due to nonalcoholic steatohepatitis (NASH) did not meet main goal of a late stage trial.
NASH is a fatty liver disease where fat accumulation and inflammation can lead to scarring, or fibrosis, that impairs liver function
Analysts have projected the market for NASH treatments to reach US$20-billion to US$35-billion.
“While we had hoped for different outcomes from the STELLAR program, we remain focused and committed to developing highly effective treatments for patients living with advanced fibrosis due to NASH. We are actively exploring the STELLAR data and will work with external collaborators like PathAI and insitro, to further our understanding of this complex disease and advance our development programs. We thank the patients and their physicians who participated in the STELLAR program for contributing to these efforts,” said the company’s chief scientific officer and head of research and development John McHutchison.
On the decline
Bombardier Inc. (BBD-B-T) was down 15.1 per cent after reducing its full-year profit and revenue forecast. It’s now expecting a “soft” first-quarter due to to “timing of aircraft deliveries, slower project ramp up at Transportation, and unfavourable currency translation.”
The Montreal-based company cut its 2019 revenue estimates by $1-billion to $17-billion. Adjusted core earnings is expected to be in the range of $1.50-billion to $1.65-billion, falling from its prior expectation of $1.65-billion to $1.8-billion.
“We expect to recover and meet our aircraft delivery and financial performance targets for the year in our aerospace businesses,” said president and chief executive officer Alain Bellemare. At Transportation, we are adjusting our 2019 guidance to reflect both changes to our production ramp up and cost pressure from a few challenging legacy projects as we continue to drive our transformation.”
Citi analyst Stephen Trent said: “Canadian plane and train manufacturer Bombardier’s revelation this morning on weaker, expected transport revenue, came as a negative surprise to the market. Although the company’s transport segment has been relatively stable in recent years, it would be unreasonable to dismiss the possibility of addition volatility from this segment, especially considering f/x trends. Still, 2019 estimated FCF generation is set to improve materially year-over-year, excluding 2Q’18s ca. $622-million asset sale, while expected 2019 dollar EBITDA growth of 22 per cent is a very good number, for a company that remains largely unloved by the market.”
Celestica Inc. (CLS-T) dropped 15.9 per cent after its first-quarter results fell short of the Street’s forecast.
The Toronto-based electronics manufacturing services company reported revenue and earnings per share of $1.43-billion and 12 cents, missing the consensus projections of $1.5-billion and 16 cents.
“Celestica’s first quarter results reflect the near-term challenges we are seeing in some of our key end markets” said president and CEO Rob Mionis in a release. "Despite this, we improved cash generation and aggressively executed on our share repurchases. During this lower revenue period, we will continue to implement our productivity initiatives in order to more efficiently align cost to current volumes, and to improve the stability and profitability of our business.”
Hudbay Minerals Inc. (HBM-T) fell 3.8 per cent after issuing a release after markets closed on Wednesday to respond “to the announcement by dissident shareholder Waterton Global Resource Management, Inc. that its board nominee Michael Anglin has withdrawn from Waterton’s slate of nominees in order to join the board of directors of a different company."
Waterton first announced Mr. Anglin as one of its director nominees on January 16, Hudbay stated. “After careful consideration of his qualifications, on April 5, Hudbay recommended that shareholders vote for Mr. Anglin. Just over a week ago, on April 15, Waterton also recommended that shareholders vote for Mr. Anglin. The company is therefore surprised by Waterton’s sudden withdrawal of one of its director nominees, as board nominations generally involve a rigorous process aimed at ensuring, among other things, that nominees will be available to serve if elected. In any event, Hudbay is disappointed that Mr. Anglin has chosen to pursue a different opportunity but respects his decision and wishes him well.”
Precision Drilling Corp. (PD-T) dipped 4.8 per cent despite reporting its first-quarter financial results exceeded expectations on the Street.
Before market open, the Calgary-based company reported revenue and earnings per share of $434-million and 0 cents, respectively, beating the consensus projections of $408.6-million and a 5-cent loss.
“During the quarter, Precision delivered significant progress on our 2019 strategic priorities with announced debt repayments, strong financial results and technology commercialization progress,” said president and chief executive officer Kevin Neveau. “Revenue and Adjusted EBITDA increased year-over-year by 8 per cent and 11 per cent, respectively and we ended the quarter with an undrawn revolver and over $100 million of cash. We continue to deliver significant free cash flow across all geographies and reporting segments.”
Tesla Inc. (TSLA-Q) was down 4.3 per cent after announcing after the bell on Wednesday that it lost US$700-million in the first quarter. The electric carmaker also predicted it will return to a profit in the third quarter as it cuts costs and improves delivery after facing issues ramping up shipments outside the United States.
Tesla reported net loss attributable to common shareholders of US$702.1-million, or US$4.10 per share, in the first quarter, compared with a loss of US$709.6-million, or US$4.19 per share, a year earlier.
Excluding some items, Tesla lost US$1.77 per share, compared with Wall Street expectations of a loss of 69 US cents.
On Thursday, Wedbush analyst Daniel Ives downgraded Tesla shares saying: “We no longer can look investors in the eye and recommend buying this stock at current levels until Tesla starts to take its medicine and focus on reality around demand issues which is the core focus of investors."
Mr. Ives added: “In our 20 years of covering tech stocks on the Street we view this quarter as one of top debacles we have ever seen while Musk & Co. in an episode out of the Twilight Zone act as if demand and profitability will magically return to the Tesla story.”
3M Co. (MMM-N) plummeted 12.9 per cent in wake of announcing it would lay off 2,000 workers globally as it reported a lower-than-expected quarterly profit and cut its 2019 earnings forecast.
3M now expects 2019 adjusted earnings between US$9.25 and US$9.75 a share, versus its prior forecast of US$10.45 to US$10.90 per share.
“The first quarter was a disappointing start to the year for 3M,” said chief executive officer Mike Roman in a release. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves. As a result, we have stepped up additional actions – including restructuring – to drive productivity, reduce costs, and increase cash flow as we manage through challenges in some of our end markets.
Chipotle Mexican Grill Inc. (CMG-N) dropped 4.5 per cent after receiving another subpoena from U.S. federal prosecutors, seeking information related to an outbreak that left hundreds of people sick last year in one of its Ohio restaurant.
“Its not a new incident but (the subpoena) is enough to shake off some of the more skittish bulls on the story,” said Maxim Group analyst Stephen Anderson.
Freeport-McMoRan Inc. (FCX-N), the world’s largest publicly traded copper producer, dropped 10.2 per cent after reporting a lower-than-expected quarterly profit, due largely to slipping production and rising costs.
The Phoenix-based company posted first quarter net income of US$310-million, or 2 US cents per share, compared with net income of US$692-million, or 48 US cents per share, in the year-ago quarter.
Excluding onetime items, Freeport earned 5 US cents per share. Analysts were expecting earnings of 7 US cents per share.
With files from staff and wires
David Leeder