After weeks of wondering how Corporate Canada fared in the early days of the COVID-19 pandemic, investors finally got a good idea under the hood.
Senior management talked about the impact. Some have described the future as too difficult to predict. Others have attempted to identify parallels and differences with the financial crisis.
By withdrawing their forecasts for 2020, many Canadian companies have expressed their lack of confidence as to when the economy will reopen and how consumers will behave when it does. Profit expectations have dropped to levels not seen in four years, according to data compiled by Bloomberg.
Despite this, stocks continued to recover. The S & P / TSX Composite Index rose daily this week and rose seven consecutive weeks, its longest winning streak in 14 months.
With more than 65% of the companies in the index having published quarterly results in the past three weeks, here are some figures and the future state.
A is for airlines
Air Canada has been the best performing company in the index for the decade ending December 31, 2019. It now has one of the darkest prospects. The airline expects the impact of the virus to last at least three years and has planned major layoffs as it collapses to survive “the darkest period in history” Of the industry. Air Canada has lost 65% this year.
He declined to give an update on his plans to buy his little rival Transat A.T. Inc. until it receives regulatory approval. But the market has a view: Transat shares ended the week at $ 8.30, well below the buyout price of $ 18.
The sorrow of one enterprise is the hope of another. With fewer commercial aircraft carrying cargo and more consumers shopping online, Cargojet Inc. experienced increased volumes for all of its segments. First quarter adjusted EBITDA jumped approximately 25% to $ 40.2 million and revenues increased 11% to $ 123 million. Its shares have increased by 35% this year.
Good like gold
Gold miners benefited from a strong recovery in the last quarter, with investors seeking refuge in the precious metal.
Agnico Eagle Mines Ltd. CEO Sean Boyd wants to channel much of the windfall of cash to shareholders, even as the industry faces temporary production cuts due to the spread of the coronavirus . In the midst of the suspension of mining operations at most sites, Boyd noted: “In 35 years, it has been the busiest seven or eight weeks I have ever had.”
Prices rebounded 6.9% in April (after rising 3% in the last quarter), reaching US $ 1,747.36 per ounce. Investors love gold as a hedge against negative bond yields.
The second largest gold miner in the world said the coronavirus epidemic had little impact on its production. Barrick Gold Corp. CEO Mark Bristow said he was able to stock supplies and was able to transfer orders for key products from country to country as the virus spreads. was propagating. “Our supply chains are fully open,” said Bristow in an interview with Bloomberg on May 6.
From t-shirts to masks
Like many businesses around the world, Gildan Activewear Inc. has decided to manufacture hard-to-find personal protective equipment and is now considering making the business temporary permanent.
Gildan, which makes t-shirts, underwear and other basic clothing, announced on April 8 that it would start producing non-medical face masks and isolation gowns at its inactive factories in Honduras after have been hit hard by the virus crisis. First quarter sales fell 26% and Gildan predicted a “significant loss of revenue” for the current quarter.
Surf online shopping
Shopify Inc. experienced a blowout in the first quarter, with revenues exceeding analyst estimates as it helped put more businesses online. This briefly made the company the most valuable company on the Canadian stock market, surpassing Royal Bank of Canada on Wednesday.
Then, the software company announced a sale of shares to raise US $ 1.3 billion to strengthen its balance sheet and fund growth. This cooled the action, which fell 4.4% from Thursday and Friday. The company also announced a partnership with Pinterest, with merchants able to tap into 350 million Pinterest users.
Retail giant Canadian Tire Corp. reported a net loss in the first quarter as same store sales at Canadian Tire stores increased only 0.7% and revenue from its SportChek banner decreased. He withdrew his three-year financial “aspirations” forecast due to the uncertainty and severity of the health crisis.
The venerable Canadian retailer has entered the e-commerce bandwagon, with digital sales increasing 44% in the past three months.
While we await news from the six major Canadian banks, which account for approximately 19% of the TSX Composite, insurers have already started to report.
Sun Life Financial Inc. Recorded a 7.4% increase in its underlying profit, which exceeded analysts’ estimates. Still, it experienced its biggest drop in net income since 2017, with a 37% drop that CEO Dean Connor attributed to market declines brought on by the pandemic.
Silver lining: Connor expects more buyout opportunities will arise as a result of the coronavirus pandemic. Sun Life will use additional stress test criteria to assess any potential takeover, beyond what it would normally have used, he said.
Manulife Financial CEO Roy Gori sees a more difficult road to take. The insurer recorded its largest profit decline in more than seven years and the second quarter “may be more difficult than even the first quarter, and the operating and macroeconomic environments are obviously incredibly difficult and difficult to predict,” a said Gori in an interview.
On REITs and rents
Rents and deferred carryovers have wreaked havoc in the Canadian real estate sector.
RioCan Real Estate Investment Trust is freezing new projects at an early stage to cut costs during the coronavirus pandemic, as more renters have not paid their April rent. Toronto REIT said it received 55% of its rent during the month. The company expects 28% to still be received and has accepted deferrals for 17% of its tenants. RioCan withdrew its forecast last month.
Canadian energy companies are in liquidity conservation mode, announcing plans to reduce capital spending by up to $ 11.4 billion, Suncor Energy Inc. and Canadian Natural Resources Ltd. each unveiling their second set of discounts this week.
Canadian Natural surprised the market by maintaining its quarterly dividend of 42.5 cents per share after Suncor cut its payment by 55%.
Here’s a positive: the results of the pipeline giant Enbridge Inc. have been welcomed by analysts as the company reaffirmed its forecasts for 2020 regarding distributable cash flow. Enbridge also chose to cut jobs, reduce executive compensation and defer certain capital expenditures.