A roundup of some of the North American equities making moves in both directions today
On the rise
CAE Inc. (CAE-T) jumped 10.5 per cent in early afternoon trading on Friday after releasing better-than-anticipated fourth-quarter results before the bell.
The Montreal-based manufacturer of simulation technologies, modelling technologies and training services reported revenue and earnings per share of $1-billion and 46 cents, respectively, exceeding the Street's expectation of $945.2-million and 43 cents.
“We had a strong finish to fiscal year 2019, with fourth quarter revenue up 42 per cent and earnings per share up 55 per cent compared to last year; and for the year as a whole, CAE delivered a record performance, meeting our annual outlook, and further establishing itself as the worldwide leader in aviation training,” said president and chief executive officer Marc Parent. “Annual revenue grew 17 per cent and earnings per share grew 13 per cent compared to last year, and we generated strong free cash flow. I am especially pleased with our record $4 billion in annual orders and $9.5 billion order backlog. Our continued success winning our customers’ trust further validates our training strategy and adds to the highly recurring profile of CAE’s business."
Hewlett Packard Enterprise Co. (HPE-N) was up 1.8 per cent after announcing the acquisition of supercomputer manufacturer Cray Inc. (CRAY-Q) in a deal valued at about US$1.30-billion.
The US$35 per share value represents a premium of 17.4 per cent to Cray’s last close.
Hewlett Packard said the deal accelerates its "strategy to tackle customers' most data-intensive challenges by combining deep supercomputing talent and cutting-edge technologies" and "establishes the most comprehensive end-to-end portfolio across compute, storage, interconnect, software and services in the fast growing High Performance Computing and Artificial Intelligence segments."
As part of the deal, HPE expects to incur one-time integration costs that will be absorbed within its fiscal year 2020 free cash flow outlook of US$1.9-billion to US$2.1-billion that remains unchanged.
Shares of Cray were 19.2 per cent higher.
Nvidia Corp. (NVDA-Q) sat 0.1 per cent higher after its second-quarter revenue forecast topped Wall Street estimates.
It said Thursday after market close that its graphics chip business returned to growth.
The company forecasts revenue of US$2.55 billion, plus or minus 2 per cent, for the current quarter, largely above analysts’ expectations of US$2.53-billion.
Citi analyst Atif Malik said: “We view 2019 as a reset year on crypto, China, and 1H data center weakness and expect Nvidia to benefit from secular trends such as eSports, deep learning, AI, and autonomous driving long-term. We expect NVIDIA to maintain more than 70-per-cent GPU gaming and data center market share using its software moat. We view AMD as a second source in data center GPU market.”
SNC-Lavalin Group Inc. (SNC-T) was up 1.1 per cent after announcing Friday morning that it has cancelled the sale of part of its stake in 407 International Inc. to the OMERS pension plan.
SNC said the Canada Pension Plan Investment Board, which already owns a 40 per cent stake in 407 International Inc., has exercised its right of first refusal.
Cintra Global S.E., a Spanish company that owns a 43.23-per-cent stake in the toll highway, has also sought to exercise its right of first refusal, but SNC disputes its ability to do so under the circumstances.
In a research note, National Bank Financial analyst Maxim Sytchev said: "Shares have been in a freefall on the back of loss-making Q1/19 results. Stabilization of the balance sheet is step #1 and as we published multiple times in the past de-risking the business via shrunken resources / construction footprint is the only way to surface value over time (we strongly disagree with the notion of spinning off Atkins - based on some press speculation lately - … this is the future growth driver of the company – high-margin, capable and consulting in nature).
“We were getting the sense that the sale process would not be straightforward as we would have hoped for after reports surfaced that the other two major shareholders, CPPIB and Cintra (subsidiary of Ferroival), were weighing options to exercise respective ROFR agreements (commentary from Ferrovial on its Q1/19 conference call confirmed this). Investors are questioning why the shareholders did not initially bid on the asset but recall that the onus of price discovery is based on the initial sales process, and only after a price was set, could the ROFR be initiated, hence the timing of CPPIB and Cintra’s decisions. Notwithstanding the ~$80 mln break-fee SNC will now owe OMERS, getting cash into SNC’s coffers and deleveraging remains the most critical priority for the company. With expedited decision set for June 21, 2019, the timing has slipped but the sale should proceed shortly after and regardless of any court decisions as SNC’s agreement is now with CPPIB (CPPIB will have to wrangle with Cintra on any pro forma distributions of the shares). We don’t view the new timeline as outside of the comfort zone in terms of deleveraging and according to management the company will not need to amend any facilities to bridge the timeline. Post-Q1 guidance reiteration, we, and for the most part consensus, have brought down Q2/19 numbers to be more in line with company’s guide for a “modest” recovery of the E&C business relative to Q1 (we are at $0.15 while consensus is penciling in $0.19, although there remain some high outliers).”
On the decline
Iamgold Corp. (IMG-T) fell 0.6 per cent a day after a report emerged that it is exploring a possible sale of all or parts of the gold miner business.
According to Bloomberg, the Toronto-based company, which has four operating gold mines, is working with advisers and has been in talks with several potential buyers.
On Thursday, Iamgold shares jumped over 9 per cent on the news.
Deere & Co. (DE-N) dropped 6.4 per cent on Friday after it missed quarterly profit estimates for the fifth-straight quarter and cut its full-year outlook before the bell, as an escalating U.S.-China trade war threatens to further hit farm incomes and demand for Deere’s equipment.
“Ongoing concerns about export-market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases,”chief executive officer Samuel Allen said in a statement.
Deere, which gets nearly 60 per cent of its sales from the United States and Canada, said it now expects full year equipment sales to rise by 5 per cent, compared with a 7-per-cent rise, it had previously expected.
The company lowered its fiscal 2019 profit outlook to US$3.3-billion, from its prior forecast of US$3.6-billion.
Though its 2019 revenue expectation fell in line with the Street’s expectations, shares of Pinterest Inc. (PINS-N) plummeted 11.4 per cent after the guidance disappointed investors.
The online scrapbook company expects full-year revenue between US$1.055-billion and US$1.08-billion, the mid point of which is slightly above analysts’ estimate of US$1.06 billion.
Citi analyst Mark May said: “PINS reported its first quarter as a public company, although flash numbers had already been provided during the IPO roadshow. Revenues of $202-million were in-line and represented strong 54-per-cent year-over-year growth, and adj. EBITDA of a loss of $38-million was better than forecasted and represented a 15 percentage point year-over-year improvement in margin. Int’l segment MAUs and revs were slightly below forecasts, but Int’l growth was still robust and the company is quite early in its Int’l monetization rollout. The number of advertisers accelerated, which we view as a positive forward indicator. Managements CY19 guidance is in-line on revs and better on adj. EBITDA. We believe shares are down in the after-market due to 1) shares being up 62 per cent since the IPO, including 8 per cent [Thursday]; and 2) the Int’l segment performance in Q1. The bigger picture is that PINS has been well received by investors since the IPO and we believe the Q1 results reflect the strong momentum in the business and the opportunities to drive future growth in several areas (e.g., ARPU gains both in the U.S. and Int’l, expansion of ad and content categories, etc.).”
With files from staff and wires
David Leeder