Market movers: Stocks that saw action on Friday – and why

On the rise

Shares of Vancouver-based Zymeworks Inc. (ZYME-N), a developer of antibody therapies for cancer, soared following news of an approach from investment firm All Blue Capital with a US$773-million acquisition offer.

In a regulatory filing late on Thursday, All Blue said it had made a non-binding offer for US$10.50 per share in cash, which represents a 116-per-cent premium to Wednesday’s closing price of US$4.86.

There is no certainty that Zymeworks, which carries roughly US$65-million of debt, will negotiate a deal, people familiar with the matter said. The company unsuccessfully engaged with potential buyers last year, the sources added, requesting anonymity.

Zymeworks confirmed in a release late Thursday it had received “an unsolicited, non-binding proposal,” but no formal offer yet from All Blue Falcons for US$10.50 per share in cash. The company said the board would “carefully review the proposal to determine the course of action that it believes is in the best interest of the company and all Zymeworks shareholders.”

The offer from Blue Falcons is one of the earliest examples of what many industry watchers predict will blossom into a full-blown trend later this year: private capital firms, which are sitting on record amounts of committed capital, offering to privatize publicly traded technology firms whose stocks have been beaten down in recent months.

In the filing, All Blue said it is currently in talks with potential co-investors and financing partners for the proposed acquisition.

Zymeworks develops antibody treatments for different types of cancer and is currently working on clinical trials for a number of its products. It has repeatedly missed earnings estimates over the past few quarters and its shares have lost about 84 per cent of their market value over the past 12 months.

– Sean Silcoff

Imperial Oil Ltd. (IMO-T) sat higher in volatile trading after reporting its first-quarter profit nearly tripled, as the Calgary-based oil major benefited from soaring oil prices.

During the quarter, global crude prices soared to their highest in nearly 14 years as sanctions on major oil exporter Russia over its invasion of Ukraine fueled concerns about already tight supplies.

Imperial, which is majority-owned by Exxon Mobil Corp, said its quarterly gross upstream production averaged 380,000 oil-equivalent barrels per day (boepd), down from 432,000 boepd a year earlier when it recorded its highest first-quarter production in 30 years.

The Canadian oil company said its production took a hit from extreme cold weather and unplanned downtime at Kearl, Imperial’s huge oil sands mine in northern Alberta.

Its refinery throughput rose 9.6 per cent to 399,000 barrels per day, boosted by higher demand for fuels and other refined products as pandemic restrictions started to ease late in the quarter.

Imperial posted net earnings of $1.17-billion, or $1.75 per share, from $392-million, or 53 cents per share, a year ago. The company said this was its highest first-quarter earnings in over 30 years.

The company also said it will launch a substantial issuer bid within the next two weeks to buy back up to $2.5 billion of its common shares.

Imperial’s results mirror those of its rival Cenovus Energy Inc. (CVE-T). Cenovus posted a seven-fold jump in quarterly profit that surpassed Wall Street estimates and nearly tripled its dividend.

Fairfax Financial Holdings Ltd. (FFH-T) turned positive in afternoon trading in the wake of reporting its net income attributable to shareholders plunged to US$125.5-million in the first quarter, in part due to a loss on investments.

The Toronto-based insurance company says it earned US$4.49 per diluted share, compared with US$28.91 per share or US$806-million a year earlier.

The results included US$214.4-million in losses on investments, compared with a gain of US$908.7-million in the first quarter of 2021. Fairfax says it had US$262.9-million in net gains on common stocks, but had US$494.1-million in unrealized losses on bonds due to rising interest rates.

Gross premiums written up increased 21.9 per cent to US$6.62-billion while net premiums rose 27.8 per cent to US$5.3-billion.

Revenues for the three months ended March 31 were US$5.98-billion, down from nearly US$6 billion in the year-ago period.

Fairfax was expected to earn US$3.96 per share on US$6.15-billion in revenues, according to financial data firm Refinitiv.

Pot producer Hexo Corp. (HEXO-T) rose after it named Charlie Bowman as its acting chief executive officer on Friday, replacing Scott Cooper who is stepping down after just six months into the job.

In February, the company had said it would refresh its board as part of a deal with activist shareholder Adam Arviv and his fund Kaos Capital.

Mr. Bowman had previously served as Hexo’s acting chief operating officer and general manager of the company’s U.S operations.

The company also appointed Julius Ivancsits as the acting Chief Financial Officer, effective May 16.

Mr. Cooper took the helm from Hexo’s co-founder Sebastien St-Louis in October last year, who, according to media reports, was ousted from his role after an investor alleged the company had “not acted in the best interest of its shareholders” under him.

On the decline

Calgary-based pipeline operator TC Energy Corp. (TRP-T) was down after it reported quarterly profit that narrowly beat estimates on Friday, helped by rising demand for its energy transport services as oil and gas prices surged after Russia’s invasion of Ukraine.

Canada is studying ways to increase pipeline utilization to boost crude exports as Europe seeks to reduce its dependence on Russian oil, the country’s natural resources minister said last month.

“The global environment continues to be complex, representing an urgent need to develop greater energy security. Now more than ever, we understand the importance of North America’s role in securing global energy supply,” François Poirier, chief executive officer of TC Energy, said in a statement.

The pipeline operator said its U.S. natural gas pipelines reached average flows of 30 billion cubic feet per day (bcfpd) in the quarter, up 5 per cent from last year, which include an all-time daily system delivery record of nearly 35 bcf in January.

Around a quarter of the U.S. LNG export volumes travel through company’s natural gas pipelines in the country, TC said.

The company’s liquids pipelines unit posted a profit of $272-million, compared with a year-ago loss of $2.51-billion, while earnings at its Canadian natural gas pipelines rose marginally.

Net income attributable to common shares stood at $358-million, or 36 cents per share, in the three months ended March 31, compared with a loss of $1.1-billion, or $1.1 per share, a year earlier.

In the year-ago quarter, TC took $2.2-billion in impairment charges related to the suspension of its Keystone XL pipeline project.

On comparable basis, the company posted a profit of $1.12 per share, compared with estimates of $1.11 per share, according to Refinitiv IBES.

TFI International Inc. (TFII-T) reversed course after it more than doubled its profits in its first quarter as surging demand for consumer items, raw materials and manufacturing components fuels growth across the shipping industry.

Alain Bedard, chairman and CEO of Canada’s largest trucking company, says TFI was able to seize on “favourable trends” across its segments, which range from logistics to courier service.

TFI says net income jumped 121 per cent to US$147.7-million in the quarter ended March 31 from $66.9-million in the same period a year earlier.

Revenue rose 91 per cent to US$2.19-billion from US$1.15-billion last year, bolstered by TFI’s US$800-million acquisition last April of TForce Freight, the massive transporter of smaller packages and cargo previously known as UPS Freight.

Adjusted diluted earnings jumped to US$1.68 per share last quarter from 77 US cents per share in 2021, blowing past analyst expectations of US$1.21 per share.

The improved earnings come despite a range of hurdles faced by the trucking sector including a dire labour shortage and high fuel prices.

West Fraser Timber Co. Ltd. (WFG-T) declined after saying its net profit soared 64 per cent from a year ago to US$1.09-billion in its latest quarter on higher revenues despite significant transportation and mill challenges in B.C.

David Berman: Forestry companies are set to report huge profits. Will their stock prices get spruced up?

The Vancouver-based company said it earned US$10.25 per diluted share in the first quarter, up from US$6.96 per share or US$665-million a year earlier.

Revenues for the three months ended March 31 were US$3.11-billion, up 33 per cent from US$2.3-billion in the first quarter of 2021.

West Fraser was expected to earn US$9.45 per share on US$2.93-billion of revenues, according to financial data firm Refinitiv.

Chief executive Ray Ferris said the challenges that were exacerbated by Canadian winter weather were offset by continued strong demand.

However, the company said demand for new home construction and wood building products could be reduced by rising interest rates.

“While we continue to monitor rising mortgage rates and the potential risk to demand for new home construction and our wood building products, fundamentals for housing and repair and remodelling activity appear favourable,” he said in a news release.

Auto parts maker Magna International Inc. (MG-T) slid after it lowered its annual profit forecast on Friday as strict COVID-19 lockdowns in China, rising inflation and raw material costs are set to pressure vehicle sales.

Magna, which counts Toyota Motor Corp and General Motors Co as its customers, also cut its light vehicle production forecast for the year in North America and Europe as semiconductor worries continue to persist.

“Due to current geopolitical events and COVID-19 lockdowns in China, industry estimates for vehicle production have been lowered, and we are facing inflation and commodity headwinds,” Magna Chief Executive Officer Swamy Kotagiri said.

Fresh lockdowns in China as well as Russia’s invasion of Ukraine have reignited supply snarls that were easing over recent months.

Industrial firms including GE, chipmakers such SK Hynix and carmaker Mercedes Benz warned that China’s COVID-19 curbs were intensifying supply chain disruptions and raising uncertainty about the business outlook.

Magna said it expects 2022 net income attributable between US$1.3-billion and US$1.5-billion, down from its previous forecast of US$1.7-billion to US$1.9-billion.

Adjusted profit per share for the quarter through March was US$1.28, compared with average analysts’ expectation of US$1.10 per share.

The Aurora, Ont.-based manufacturer reported net sales of US$9.64-billion for the first quarter, beating analysts’ expectations of US$9.08-billion.

NFI Group Inc. (NFI-T) plummeted after it announced that it’s lowering its 2022 financial guidance for revenue and adjusted EBITDA, citing market conditions and supply chain disruptions, including shortages of critical parts.

The bus maker said revenue is expected to come in at US$2.3-billion from US$2.6-billion. The result is in line with expectations of US$2.5-billion. The guidance is down from expectations announced in its fourth-quarter report of US$2.5-billion to US$2.8-bilion.

Adjusted EBITDA is expected between US$15-million to US$45-million, compared to previous guidance of US$100-million to US$130-million.

The company said it was recently notified by a supplier that it will see shortages of critical microprocessor control modules for its North American transit buses during the second and third quarters of 2022.

– Brenda Bouw

Amazon.com Inc. (AMZN-Q) delivered a disappointing quarter and outlook on Thursday as the e-commerce giant was swamped by higher costs to run its warehouses and deliver packages to customers.

Shares fell on Friday.

After a long-running surge in sales during the COVID-19 pandemic, Amazon is facing a litany of challenges. The company’s expenses swelled as it offered higher pay to attract workers. A fulfillment centre in New York City voted to create Amazon’s first U.S. union, a result the retailer is contesting. And the higher price of fuel risks diminishing consumers’ disposable income just as it is making delivery more expensive for Amazon, the world’s biggest online retailer.

Amazon’s forecast shows hiking the price of its fast-shipping club Prime last quarter may not be enough to prop up its profit. The company expects to lose as much as US$1-billion in operating income this quarter, or make as much as US$3-billion. That’s down from an operating profit of US$7.7-billion in the same period last year.

“This was a tough quarter for Amazon with trends across every key area of the business heading in the wrong direction and a weak outlook for Q2,” said Insider Intelligence principal analyst Andrew Lipsman.

Still, there were bright spots, like Amazon Web Services, the division that new CEO Andy Jassy ran before taking the company’s top job last year. The unit increased revenue 37 per cent to US$18.4-billion, slightly ahead of analysts’ estimates.

The company has finally met its warehouse staffing and capacity needs, but it still has work to do in improving productivity.

“This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, he said in a press release. “We see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020.”

Net sales were US$116.4-billion in the first quarter, in line with analysts’ expectations, according to IBES data from Refinitiv.

Amazon reported a loss of US$3.8-billion, or US$7.56 per share, compared with a profit of US$8.1-billion, or US$15.79 per share, a year earlier. That partly reflected a US$7.6-billion decline in the value of its stake in electric vehicle maker Rivian.

In North America, the company’s largest market, sales rose 8 per cent while operating expenses soared 16 per cent to US$71-billion.

Amazon projected net sales will be between US$116-billion and US$121-billion for the second quarter. Analysts were expecting US$125.5-billion, according to IBES data from Refinitiv.

Apple Inc. (AAPL-Q) on Thursday forecast bigger problems as COVID-19 lockdowns snarl production and demand in China, the war in Ukraine dents sales and growth slows in services, which the iPhone maker sees as its engine for expansion.

Shares was down after executives laid out their glum outlook on a conference call. The news outweighed record profit and sales for Apple’s fiscal second quarter, which ended in March.

Chief Financial Officer Luca Maestri warned in an interview that the war in Ukraine, which led Apple to stop sales in Russia, would cut sales more deeply in the fiscal third quarter.

He told analysts on the call that supply-chain issues would hurt sales in the quarter by US$4-billion to US$8-billion, “substantially larger” than the hit in the second quarter.

Supply problems were focused on a corridor in Shanghai, China and reflected COVID disruptions and chip shortages, he added. The pandemic was also affecting demand in China, he said.

Chief Executive Officer Tim Cook said that almost all of the Chinese factories doing final assembly of Apple products had restarted after recent COVID shutdowns, but the company is not forecasting when the chips shortage, mostly affecting older products, would end.

Mr. Cook said he hoped COVID issues would be “transitory” and “get better over time.”

At least one analyst said the outlook lacked clarity.

“We were all looking for just better guidance on what is really going on over there (China) … and that didn’t come out,” said Louis Navellier, chief investment officer for Navellier & Associates.

Kim Caughey Forrest, Chief Investment Officer at Bokeh Capital Partners, said that ongoing demand remained a big question, despite Apple’s management of supply chain in the March quarter.

Apple’s overall fiscal second-quarter revenue was US$97.3-billion, up 8.6 per cent from last year and higher than analysts’ average estimate of US$93.89-billion, according to Refinitiv data.

Worldwide phone sales revenue was US$50.6-billion, a 5.5-per-cent increase from a year ago, and services sales rose 17 per cent to US$19.8-billion, both ahead of analyst average forecasts.

Total profit was US$25-billion, or US$1.52 per share and easily topped analysts’ expectations of US$23.2-billion and US$1.43.

Apple also raised its dividend 5 per cent to 23 US cents per share and the board approved a buyback for an added US$90-billion in shares.

Chipmaker Intel Corp. (INTC-Q) dropped as it forecast second-quarter revenue and profit below Wall Street expectations on Thursday on worries of weak demand in its largest market, PCs, and increased supply-chain uncertainty due to COVID-19 lockdowns in China.

Rising inflation, resurgence of COVID-19 in China and uncertainties around the war in Ukraine have shifted consumer spending away from gadgets, hurting Intel. More than half of its revenue last year came from the segment selling processors for PCs.

“We are expecting that Shanghai does open up fairly soon, but that does moderate our outlook a little bit on Q2,” Intel Chief Executive Pat Gelsinger told Reuters. “It doesn’t change any perspective on the year, which we think as we go into the second half, you have more PC demand.”

The first quarter beats help Intel meet its full-year revenue outlook, he added.

As lockdowns in China continue, supply-chain bottlenecks are likely to hurt Intel’s customers, in turn affecting the chipmaker’s business.

“We think Intel still has to prove they can meet guidance targets before the stock receives full credit for a strong guide,” said Logan Purk, analyst at Edward Jones.

Analysts say the PC market is coming off of searing rates of growth over the last two years as remote working and learning triggered high demand during the pandemic.

Revenue at Intel’s Client Computing Group, which supplies PC makers and is the largest contributor to the company’s revenue, fell 13 per cent to US$9.3-billion in the first quarter.

The company expects current-quarter adjusted profit of 70 US cents per share on revenue of about US$18-billion, below analysts’ average estimate of 83 US cents per share on US$18.38-billion, according to IBES data from Refinitiv.

Adjusted revenue for the first quarter was US$18.4-billion, compared with analysts’ average estimate of US$18.31-billion.

On an adjusted basis, Intel earned 87 US cents per share, above expectations of 81 US cents.

Tesla Inc. (TSLA-Q) was lower as U.S. securities filings showed Chief Executive Officer Elon Musk sold US$8.5-billion worth of shares of the electric vehicle maker in sales likely aimed at helping finance his planned purchase of Twitter Inc. (TWTR-N).

Mr. Musk said in a tweet on Thursday that there are “no further TSLA sales planned after today”. He sold about 9.6 million shares this week, according to the filings on Thursday and Friday, equating to 5.6 per cent of his stake in the company.

The sale came after Mr. Musk on Monday clinched a deal to buy Twitter for US$44-billion cash in a transaction that will shift control of the social media platform populated by millions of users and global leaders to the world’s richest person. Mr. Musk’s net worth is US$268-billion, according to Forbes.

As part of the deal, Mr. Musk said he would provide a US$21-billion equity commitment.

It is not clear how he will cover the remaining US$17-billion of equity financing. Mr. Musk holds a 43.61-per-cent stake in unlisted rocket company SpaceX that is reportedly valued at US$100-billion.

Twitter deal could bolster lawsuit over Elon Musk’s $56-billion Tesla pay package

Exxon Mobil Corp. (XOM-N) was lower despite doubling its first-quarter per-share profit, as the results fell short of Wall Street estimates, even excluding a US$3.4-billion writedown from its withdrawal from Russia.

The top U.S. oil producer tripled the size of its buyback program, similar to other energy giants like TotalEnergies that are sending more cash back to shareholders. Exxon said it will repurchase up to US$30-billion in shares by the end of next year, compared with its earlier estimates for US$10-billion in repurchases.

Exxon reported net income of US$5.48-billion, or US$1.28 per share, in the three months ended March 31, compared with US$2.73-billion, or 64 US cents per share, last year.

The company’s adjusted earnings per share came to US$2.07, short of the Refinitiv consensus for US$2.12 a share, while revenue came in at US$90.5-billion, below the US$92.7 billion consensus.

U.S. oil majors were hurt by price volatility in fuel markets in the quarter, according to consultancy Palissy Advisors. Heavy market volatility caused both Chevron and Exxon had a negative effect on downstream results due to swift changes in prices between the time when feedstock was purchased and products were sold.

“The market is very volatile now,” said Anish Kapadia, energy director at Palissy. “You are also starting to see the cost of inflation” affecting companies, he said.

The results included a US$3.4-billion after-tax hit on the oil major’s Russia Sakhalin-1 operation, which it said it would exit on March 1, shortly after Moscow’s invasion of Ukraine on Feb. 24.

Exxon’s writedown follows others oil majors exiting Russia after the Ukraine invasion. BP PLC and Shell PLC have flagged up to US$25-billion and US$5-billion in writedowns from leaving their Russian businesses, respectively.

Exxon has been trying to boost output in its primary development areas, the U.S. Permian basin, and in Guyana, the tiny South American nation that has seen windfall oil discoveries in recent years and where Exxon has two major offshore developments.

Notably, the company’s refining division posted much weaker results from the previous quarter, with earnings of US$332-million, compared with US$1.5-billion in the fourth quarter. The company said the sharp rise in prices ended up costing US$1.3-billion of “negative timing impacts,” including US$760-million in mark-to-market effects on open derivatives positions.

The company said those losses will be unwound when it makes certain physical sales.

Exxon’s output of crude and other liquids including bitumen and synthetic oil was 2.3 million barrels per day, a 5-per-cent drop from the previous quarter. Natural gas production fell by 1.5 per cent.

Chevron Corp. (CVX-N) slid despite its first-quarter profit nearly quadrupling from the same period a year ago, easily surpassing Wall Street’s forecasts as oil and gas prices surged following Russia’s invasion of Ukraine.

The second-largest U.S. oil producer on Friday posted adjusted earnings of US$6.5-billion, or US$3.36 per share, 8 US cents above Wall Street’s mean estimate of US$3.27, according to Refinitiv. Chevron earned US$1.7-billion, or 90 US cents per share, in the same quarter last year.

The world’s largest energy companies have profited handsomely on the back of rising oil and gas prices, which surged in February as Moscow planned its advance on Ukraine.

Chevron’s revenue rose 70 per cent to US$54.4-billion in the first quarter, above the Refinitiv consensus of US$47.9-billion.

The producer is using its massive profit to raise investments in production and in renewable fuels, return cash to shareholders and pay down debt.

The company’s U.S. oil and gas production rose by 10 per cent from the year-ago period. Russia’s output has dipped after the United States and allies imposed heavy sanctions on Moscow. The United States is the world’s largest crude oil producer, but output has grown slowly in 2022 even as prices have increased.

In the first quarter, Chevron pumped a record of 692,000 barrels of oil and gas per day (boed) in the Permian, the top U.S. unconventional basin, and boosted full-year guidance to a range of 700,000 to 750,000 boed.

“Chevron is doing its part to grow domestic supply,” Chevron’s Chief Executive Mike Wirth said in an earnings release.

The revenues from higher oil prices could be used to return cash to shareholders, expand Chevron’s low-carbon business and pay down debt, Chief Financial Officer Pierre Breber told Reuters.

“First is the dividend. The second is investing in the business. Third is maintaining a balanced strong balance sheet. And then the fourth is returning excess cash to shareholders,” he said.

Chevron earlier this year increased its dividend payments by 6 per cent to US$1.42 per share and increased its buyback program to $10 billion annually.

The company has the capacity to raise buybacks further but Chevron is aiming at a level it can maintain when the oil industry goes through a downturn, Mr. Breber said.

Shares in Robinhood Markets Inc. (HOOD-Q), the brokerage at the center of last year’s retail trading frenzy, were lower after it posted a 43-per-cent fall in first-quarter revenue and a decline in monthly active users.

“For most of our history, Robinhood has operated in a period of low interest rates, low inflation and rising markets. Our customers are now experiencing all three of these trends going in the opposite direction, perhaps for the first time in their lives,” said Robinhood Chief Executive Officer Vlad Tenev on a call with analysts.

Trading volumes have eased from last year’s frenetic pace when retail investors used the platform to pump money into shares of so-called meme stocks including GameStop (GME-N) and AMC Entertainment (AMC-N).

Robinhood said on Tuesday it was laying off about 9 per cent of its full-time employees, adding rapid headcount growth had led to some duplicate roles and job functions.

“We’re moving back to being a more lean company with a leaner operating model, starting with the reduction in force that we announced earlier this week,” said Chief Financial Officer Jason Warnick on a call with reporters.

High-growth technology stocks have come under pressure this year as the poor performance of shares and falling analyst confidence sours investor sentiment.

Common with other high-growth tech firms, Robinhood has yet to turn a profit since its market debut. The company reported a net loss of US$392-million or 45 US cents per share in the three months ended March. A year earlier, which was before its IPO, it company posted net loss of US$1.4-billion or US$6.26 per share.

Analysts on average had expected a net loss of 36 US cents per share, according to IBES data from Refinitiv.

Total net revenues decreased to US$299-million, compared with US$522-million a year earlier.

Robinhood’s monthly active users fell 10 per cent to 15.9 million for March 2022, compared with 17.7 million for March 2021. The company attributed the decline to users with lower balances.

With files from staff and wires