A survey of North American equities heading in both directions
On the rise
Shares of Crescent Point Energy Corp. (CPG-T) closed up 0.6 per cent in response to the late Monday announcement of the sale of its non-core assets in southwest Saskatchewan (Battrum) and southeast Saskatchewan (Flat Lake) to Saturn Oil & Gas Inc. (SOIL-T) for gross proceeds of $600-million with the intent to repay debt.
Calgary-based Crescent said production from the assets was expected to be 13,500 barrels of oil equivalent per day (950-per-cent oil and liquids) over the next 12 months, generating $210-million of net operating income at current strip commodity prices. The Company had allocated minimal development capital expenditures to the assets for the remainder of 2024.
With the transaction, it revised its 2024 annual average production guidance to a range of 191,000 to 199,000 boe/d, representing a reduction of 7,000 boe/d compared to the mid-point of its prior guidance range.
“One of the key attributes to successful investing in Oil & Gas is to recognize pivotal moments,” said BMO analyst Jeremy McCrea. “For E&Ps this typically involves a new play or improved field economics that ultimately result in a multiple expansion. As Crescent Point effectively completes its transformation with its asset sale for $600-million (slightly more than our expectations given AROs/3rd quartile inventory), its improved balance sheet and ROC metrics for the years ahead may make CPG a ‘premium name’. In time, a premium multiple should reflect this.”
Finning International Inc. (FTT-T) was higher by 3.5 per cent after raising its quarterly dividend by 10 per cent (to 27.5 cents), its 23rd consecutive year of increases.
The move came alongside the late Monday release of its first-quarter results, which saw adjusted earnings per share slid 6 per cent year-over-year to 84 cents, which was a penny below the Street’s expectation.
However, Finning announced more than $700-million in new equipment orders in April spread across the energy, mining, and data centre sectors, which Raymond James analyst Steve Hansen said implies “a hefty rebuild in 2Q24 backlog back toward peak levels.”
“Taken together, we believe this flurry of new orders not only points resilience in the new order cycle, but also reinforces FTT’s product support pipeline,” he said in a note.
“FTT reiterated its upbeat 2024 outlook where it still expects to “grow its business” by driving product support, unlocking invested capital, and delivering growth in used, rental, and power systems (see Ex. 3 for details). As described, the company’s impressive backlog and recent surge in orders across multiple end-markets goes a long way to supporting this objective, in our view. The one obvious wrinkle is product support growth, which has glaringly lagged, but still proven highly resilient (flattish). In this context, we’re drawn to management’s outlook commentary that indicates ‘our strategy will have an increasing impact through this year, with improving product support growth rates and substantial free cash flow generation.’ If management is able to provide convincing commentary to this effect, including specific reference to where & when this support acceleration is expected, we believe it will quickly draw in investors.”
Meg Energy Corp. (MEG-T) gained 0.1 per cent after saying it earned $98-million in its first quarter, up from $81-million during the same quarter last year.
Meg Energy CEO Darlene Gates says the additional pipeline capacity from the start-up of the Trans Mountain expansion is expected to narrow heavy oil differentials, reduce differential volatility and improve netbacks on the company’s production.
The Calgary-based company’s revenues totalled $1.4 billion, down from $1.5 billion a year earlier.
Diluted earnings per share were 36 cents, up from 28 cents.
Bitumen production averaged about 104,000 barrels per day during the period ended March 31.
Ms. Gates says the company repurchased 4.7 million shares during the first quarter.
“Overall, we view the event as neutral,” said ATB Capital Markets analyst Patrick O’Rourke in a note. “Q1/24 bitumen production of 104.1 mbbl/d was slightly below ATB estimate of 104.7 mbbl/d and in-line with consensus of 104.3 mbbl/d. Production was down 3 per cent year-over-year and 5 per cent quarter-over-quarter due to cold weather impacts, the timing of new wells coming onstream, and facility maintenance activities, while the Company’s SOR rose to 2.37 (from 2.25 in Q1/23, 2.27 in Q4/23). Total blend sales of 152.8 mbbl/d were modestly above both ATBe 151.7 mbbl/d and consensus of 150.6 mbbl/d. Q1/24 CF of $329.0-million ($1.19 per share) was in-line with both ATBe $334.8-million ($1.23 per share) and consensus of $329.0-million ($1.20 per share). MEG generated $217-million of FCF in the quarter, which was used to redeem $142-million of debt and return $217-million to shareholders through the repurchase of 4.7mm shares at an average cost of $26.94 per share. The Company finished Q1/24 with net debt of $930-million(US$687-million), relative to its US$600mm net debt goal that triggers a codified shift of ROC to 100 per cent of FCF (from 50 per cent), which MEG anticipates reaching in Q3/24, while also reiterating formal 2024 guidance (production of 102.0-108.0 mboe/d, capex of $550-million).”
Apple (AAPL-Q) saw narrow gains after it introduced a new, larger consumer iPad model at a virtual event, putting a slightly newer chip in the device as analysts expected further upgrades to the company’s professional iPad lineup.
The iPad Air, the Cupertino, California-based company’s mid-priced model, will now come in a larger 13-inch screen size at US$800, as well as the 11-inch size it previously came in for $600. The models come with Apple’s M2 chip, which first came to market in Apple’s MacBooks in 2022.
The iPhone maker’s latest product launch event comes as the Silicon Valley heavyweight trails Big Tech rivals while they race to build AI into its products across their businesses and dominate the emerging technology.
Apple often introduces new iPads in May, a time when education customers are making purchasing decisions for the next academic year. But in recent years, Apple has started to transform its higher-priced models into devices for creative and business professionals with its iPad Pro models.
It is these tablets, which currently come with Apple-designed chips that earlier appeared in the company’s MacBook laptops, that could get an upgrade with a completely new processor optimized for AI work. But precisely what AI features the new chips could power might not become fully clear until Apple holds its annual software developer conference next month.
For now, many AI features - such as helping zoom in on a user during a video call and slightly altering the look of their eyes to make it look as though they are looking directly into the camera - are not likely to inspire a wave of upgrades, according to some analysts.
“Is it really enough for people to look into it and buy them? Probably not,” said Mikako Kitagawa, an analyst at Gartner. “It has to be some kind of remarkable experience.”
Instacart customers will now be able to use the grocery delivery platform’s app to order from hundreds of thousands of Uber Eats restaurant partners across the U.S., as part of a partnership between the two companies, they said on Tuesday.
Instacart, formally known as Maplebear, has been investing to improve its platform services and increasing its marketing spend to attract more customers amid stiff competition from DoorDash, Amazon.com and Walmart.
Shares of Instacart (CART-Q) and Uber Technologies (UBER-N) were up after the announcement. Shares of rival DoorDash (DASH-Q), the top U.S. food delivery player, were down.
“The new team will pose tough competition for some of the other food delivery companies like DoorDash, in what has already been a hyper competitive landscape,” said Art Hogan, chief market strategist at B. Riley Wealth.
Instacart said there would be a new tab on its app that would allow customers to choose from a selection of nearby restaurants, browse menus, place orders and track deliveries in real time.
Orders placed on its platform from restaurants would be delivered by Uber Eats and their workers, Instacart added.
Peloton (PTON-Q) soared 15.5 per cent after CNBC reported a number of private equity firms have been considering a buyout as the connected fitness company looks to refinance its debt and return to growth after 13 straight quarters of losses.
The New York-based company has had talks with at least one firm in recent months as it considers going private, the report said, citing people familiar with the matter.
“We do not comment on speculation or rumors,” a Peloton spokesperson said when contacted for comment on the report.
Last week, Peloton CEO Barry McCarthy quit and the company announced job cuts to reduce costs after posting weak results.
Dwindling demand for its stationary bikes and treadmills despite price cuts led to Peloton reporting a smaller-than-expected revenue for the third quarter and trimming its full-year forecast.
On the decline
George Weston Ltd. (WN-T) dipped 0.8 per cent after it raised its quarterly dividend as it reported its first-quarter profit fell compared with year ago as it was hit by one-time charges related to its large stake in Choice Properties Real Estate Investment Trust CHP-UN-T).
The company, which also holds a majority interest in Loblaw Cos. Ltd. (L-T)., says it will now pay a quarterly dividend of 82 cents per share, up from 71.3 cents per share.
The increased payment to shareholders came as George Weston says its profit attributable to common shareholders totalled $236-million or $1.73 per diluted share for the quarter ended March 23.
The result was down from a profit of $426-million or $3.01 per diluted share in the same quarter last year.
Revenue for the quarter totalled $13.74-billion, up from $13.13-billion a year earlier.
On an adjusted basis, George Weston says it earned $2.30 per diluted share, up from an $1.99 per diluted share in the same quarter last year.
Ballard Power Systems (BLDP-T) closed 0.3 per cent lower with its first-quarter loss deepening compared with a year ago as its revenue rose nine per cent.
The Vancouver-based fuel cell maker says its loss from continuing operations amounted to US$41.1-million or 14 US cents per share for the quarter ended March 31.
The result compared with a loss of US$32.4-million or 11 US cents per share in the same quarter last year.
Revenue totalled US$14.5-million, up from US$13.2-million in the first quarter of 2023.
Ballard says its heavy duty mobility revenue totalled US$10.6-million, up from US$8.6-million a year ago as strength in its bus business was offset by weaker revenue in its rail and marine business.
Stationary revenue of US$3.7-million was up from US$2.5-million in the same quarter last year, while emerging and other markets revenue totalled US$200,000, down from US$2.1 million a year ago.
In a research note released late Tuesday morning, Citi analyst Vikram Bagri said: “BLDP reported 1Q24 revenues that missed street mean expectations, but adjusted EBITDA came in better than consensus due to lower operating expenses. Adjusted EBITDA of a loss of $36.6-million was slightly better than street consensus of a $38.4-million loss. Guidance for the year was maintained. However, the 38-per-cent increase in backlog through $64.5-million of new bookings in 1Q24 will likely be an area of investor focus. As previously disclosed, BLDP also obtained $94-million of government funding for the planned 3GW Rockwall facility. Relative to its peers, investors have appreciated BLDP’s disciplined capital allocation strategy with a focus on liquidity preservation and astute B/S management.”
Pet Valu Holdings Ltd. (PET-T) was lower by 3.5 per cent after it reported a first-quarter profit of $17.5-million, down from $18.7-million a year earlier, as its revenue rose four per cent.
The pet food retailer says its profit amounted to 24 cents per diluted share for the quarter ended March 30 compared with a profit of 26 cents per diluted share in the same quarter last year.
Revenue for the quarter totalled $260.8-million, up from $250.3-million a year earlier.
The overall increase came as retail sales revenue totalled $100.3-million for the quarter, down from $102.0-million a year earlier, while franchise and other revenue amounted to $160.5-million, up from $148.3-million a year ago.
Same-store sales rose 0.8 per cent in the quarter, boosted by a 3.2 per cent increase in same-store average spend per transaction, offset in part by a 2.3 per cent drop in same-store transactions.
On an adjusted basis, Pet Valu says it earned 35 cents per diluted share in its latest quarter, up from an adjusted profit of 32 cents per diluted share in the same quarter last year.
Disney’s (DIS-N) surprise profit in its streaming entertainment division was eclipsed by a drop in its traditional TV business and weaker box office, sending its shares down on Tuesday.
Like other media companies, Disney has been trying to adapt to consumer migration from cable television to streaming entertainment, and had promised Wall Street that its streaming operation would become profitable by September.
The division has been losing money since Disney+ debuted in 2019 in a major push by the company to compete with Netflix .
The direct-to-consumer entertainment division, which includes the Disney+ and Hulu streaming services, reported operating income of US$47-million for the January-March period, compared with a loss of US$587-million a year earlier.
But the combined streaming business with ESPN+ lost US$18-million. The division had lost US$659-million in the prior year.
Revenue from traditional television business declined 8 per cent to US$2.77-billion and operating profit fell 22 per cent from a year ago.
“Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company,” Chief Executive Bob Iger, who defeated board challenges from activist investors last month, said.
“The steps we are taking today lend themselves to solidifying Disney’s place as the preeminent creator of global content,” Mr. Iger said.
Mr. Iger, who came out of retirement to revamp Disney in November 2022, instituted cost cuts that are expected to reach at least US$7.5-billion by the end of September.
He also unveiled a 10-year, US$60-billion investment in theme parks and announced plans for a standalone ESPN streaming app, among other efforts.
The earlier-than-expected profit from streaming entertainment was driven by aggressive cost management, Chief Financial Officer Hugh Johnston said in an interview. A year ago, the streaming unit lost US$587-million.
Disney+ added more than 6 million customers during the quarter, and average revenue per user rose 44 US cents, outside of India. Disney offers a lower-priced plan in India that it counts separately.
Because of costs to stream cricket, streaming entertainment will likely report a loss for the current quarter but swing back to a profit the following period, Mr. Johnston said.
The combined streaming unit should generate a fiscal fourth-quarter profit and become a “meaningful future growth driver for the company, with further improvements in profitability for fiscal 2025,” Disney said in its statement.
During the second quarter, Disney posted diluted earnings per share, excluding certain items, of US$1.21, above of analysts’ estimate of US$1.10, according to LSEG data. Quarterly revenue rose to US$22.1-billion, in line with expectations.
Nvidia Corp. (NVDA-Q) fell after the Wall Street Journal reported that Apple was developing its own chip to run artificial intelligence (AI) software in data centers.
The project, internally codenamed as Project ACDC (Apple Chips in Data Center), aims to leverage Apple’s chip design expertise for its server infrastructure, the report said.
Apple has emerged as a major chip designer in recent years, thanks to the success of its semiconductors that are used in the iPhone, iPads and Mac laptops.
Apple’s server chip will likely be focused on running AI models, also known as inference, rather than in training AI models, where Nvidia is dominant, the WSJ report said.
Data analytics firm Palantir Technologies (PLTR-N) raised its annual revenue forecast on Monday, riding on strong demand for its services that help businesses deploy artificial intelligence applications.
However, its shares fell as the raised revenue forecast was below analysts’ expectations.
The company, co-founded by billionaire Peter Thiel, raised the mid-point of its expectations for annual revenue to US$2.68-billion, which fell short of an average estimate of 17 analysts of US$2.71-billion, according to LSEG data.
“(The share reaction was) probably a result of investors expecting a far greater beat and raise versus what Palantir delivered,” said Morningstar analyst Malik Ahmed Khan.
Palantir has benefited from the generative AI boom thanks to its artificial intelligence platform (AIP), which, among other uses, tests and debugs code and helps evaluate AI-related scenarios.
“AIP is driving a huge part of both our new customers and growth within existing customers, and it’s having a huge impact on our business,” chief revenue officer Ryan Taylor told Reuters.
Mr. Taylor said businesses were signing “seven-figure deals shortly” after completing its AI boot camps, which give potential clients access to its platform for up to five days and have been credited with driving rapid customer additions.
Palantir reported first-quarter revenue of US$634.3-million which beat analyst expectations and its largest quarterly profit, according to a CEO letter.
Much of the focus has been on the company’s attempts to diversify its revenue to reduce its reliance on government spending. Palantir works closely with governments, providing software for visualizing army positions, among other things.
Revenue growth in the U.S. commercial business, which accounts for sales to businesses in the country, slowed to 40 per cent year-over-year in the first quarter, compared to 70 per cent in the prior quarter.
This deceleration was never going to be received well, said RBC Capital Markets analyst Rishi Jaluria.
The Denver, Col.-based company, however, raised its 2024 U.S. commercial revenue forecast to above US$661-million from its earlier expectations of about US$640-million.
Nikola (NKLA-Q) missed Wall Street expectations for first-quarter revenue on Tuesday, as the electric truck maker delivered fewer hydrogen fuel cell trucks amid an uncertain macroeconomic outlook and reduced spending by customers.
The company reported revenue of US$7.5-million, missing expectations of US$15.8-million, according to LSEG data. Its shares fell on the release.
It delivered 75 of its hydrogen fuel cell trucks in the first two quarters of production and completed the delivery of its reworked battery truck at the end of the first quarter.
The company, however, delayed its delivery timeline for its reworked battery trucks to 2024 end from its earlier plan to complete it by the end of the second quarter or early third quarter.
Nikola is finding it tough to sell its hydrogen big rigs as consumers and businesses curb spending on relatively pricer electric vehicles amid high borrowing costs and turn to cheaper hybrid alternatives.
Revenue from the company’s trucks fell 26 per cent to US$7.4-million, despite ramping up production for its hydrogen big rigs.
Its net loss stood at US$147.7-million, smaller than US$169.1-million a year ago, helped by a 15-per-cent reduction in operating expenses.
Nikola’s cash and cash equivalents at the end of the first quarter stood at US$345.6-million, down from US$464.7-million, in the prior three months.
The company said it opened refueling stations in California and Alberta for its hydrogen trucks in March.
With files from staff and wires
David Leeder