Author: Consultant

Canada’s second-largest insurer missed analysts’ expectations after its first-quarter earnings were hit by higher morbidity claims, the sale of its U.K. business and the end of the public-health emergency in the United States.

Sun Life Financial Inc. SLF-T -6.70%decrease reported “underlying” net income of $875-million, or $1.50 a share, for the first three months of the year, down from $895-million, or $1.52 a share, in the same period last year. Underlying net income strips out investment losses and makes other accounting adjustments. Analysts had expected income of $1.65 a share, according to LSEG data.

Shareholders drove Sun Life’s shares down almost 5 per cent on Friday morning trading to as low as $69.04 on the Toronto Stock Exchange.

Chief executive officer Kevin Strain attributed the missed earnings mostly to the higher number of morbidity claims in the United States – more individuals contracting certain illnesses – as well as lower sales in DentaQuest, a Sun Life subsidiary that is one of the largest providers of U.S. Medicaid dental benefits.

“Our U.S. dental business continued to experience negative impacts from the end of the public-health emergency driven by Medicaid member disenrollment and higher claims ratios on the remaining members,” Mr. Strain told analysts Friday.

During the pandemic, the government could not disenroll people from Medicaid. Individuals were automatically re-enrolled, even if they were no longer eligible. That came to an end in May, 2023. Since then, Sun Life has seen a bump in disenrollment in Medicaid membership across multiple states, affecting its overall DentaQuest business. Sun Life U.S. president Dan Fishbein told analysts the government’s disenrollment is expected to be complete by the end of June.

“That’s a 14-month process by regulation,” Mr. Fishbein said during an earnings call. “So, there likely are some additional membership declines still in progress and still ahead of us. The primary result that’s affecting our results is not just the membership itself, but the fact that those who were no longer eligible for coverage were utilizing care at a meaningfully lower rate than those who remained in the programs.”

The impact on earnings should lessen as individual states begin to adjust their Medicaid rates, which is mostly done on an annual basis, Mr. Fishbein added. Already, about 25 per cent of the contracts have new rates established, with the remaining 75 per cent to be done by the end of the year.

Mr. Strain said he expects dental results to return to prior levels of profitability and “be more consistent” with pricing targets. He expects income levels for dental to be about US$100-million for 2025, a target the insurer had originally wanted to hit in 2024.

Outside the U.S., the insurer also saw a drop in net income from individual insurance sales, down about $13-million overall for the quarter. The decline was driven by lower earnings after the sale of Sun Life UK in 2023, but offset by stronger sales in Asia, which were up $38-million for the quarter.

Sun Life Asia reported positive results for the quarter, with underlying net income of $177-million, up 26 per cent year-over-year. The region continues to see strong sales momentum for both wealth and insurance in Hong Kong after a period of prolonged pandemic lockdowns. Other regions such as Vietnam, Indonesia, China and India experienced slower insurance sales, but Mr. Strain said in an interview that he anticipates those markets to rebound.

“Vietnam and Indonesia are two regions that had the most negative impact for us this quarter,” he added. “But we are working our way through those and we feel long-term that those are both really good markets.”

Sun life’s results are in contrast with those of Canada’s largest insurer, Manulife Financial Corp., which on Wednesday reported a jump in its first quarter “core earnings” of $1.75-billion, or 94 cents a share, compared with $1.53-billion or 79 cents a share in the first quarter of 2023.

The boost in earnings, which beat analysts’ expectations of 91 cents per share, according to LSEG data, was largely owing to Manulife’s continued strength in Asia.

“We generated 44 per cent of earnings from the Asia region,” Manulife chief financial officer Colin Simpson said during a call Thursday. “As you can see, Asia continues to play a pivotal role in our earnings growth.”

 Sun Life Financial Inc. (SLF) on Thursday reported first-quarter net income of $621.6 million.

The Toronto-based company said it had net income of $1.04 per share. Earnings, adjusted for non-recurring costs, came to $1.11 per share.

The results did not meet Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $1.20 per share.

The financial services company posted revenue of $5.1 billion in the period.

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This story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research.

Access a Zacks stock report on SLF at https://www.zacks.com/ap/SLF

Gold prices climbed higher on Friday amid bets the Federal Reserve will cut interest rates in September, after data showed a bigger than expected increase in U.S. jobless claims last week.

The dollar index, which dropped to 105.14 around mid morning, swiftly rebounded to 105.40 before paring some gains. The index was last seen at 105.31, up marginally from the previous close.

Gold futures for May ended higher by $35.20 or about 1.51% at $2,367.30 an ounce. Gold’s gain today was the biggest single session gain in dollar as well as percentage terms in more than a month.

Gold futures gained nearly 3% in the week.

Silver futures for May ended higher by $0.143 or about 0.51% at $28.275 an ounce. Silver futures gained nearly 7% in the week.

Copper futures climbed to around $4.6600 per pound, gaining $0.0750 or about 1.6%.

There is renewed optimism for rate cuts after Sweden’s central bank lowered its key interest rate for the first time in more than eight years and Bank of England (BoE) Governor Andrew Bailey hinted at potential future rate cuts.

U.S. consumer and producer price inflation data due next week are now pivotal for the Federal Reserve’s higher-for-longer rate strategy.

Federal-funds futures currently show traders expect the Fed to start lowering its benchmark interest rate in November though there remains a chance of a cut in September.

In economic news today, a report released by the University of Michigan showed a substantial deterioration in U.S. consumer sentiment in the month of May.

The University of Michigan said its consumer sentiment index plunged to 67.4 in May from 77.2 in April. Economists had expected the index to edge down to 76.0.

With the much steeper than expected drop, the consumer sentiment index tumbled to its lowest level since hitting 61.3 last November.

Monday May 13

China CPI and PPI

(8:30 a.m. ET) Canadian building permits for March. Estimate is a month-over-month decline of 5.0 per cent.

Earnings include: Emera Inc.; K92 Mining Inc.; NGEx Minerals Ltd.; Premium Brands Holdings Corp.; Seabridge Gold Inc.

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Tuesday May 14

Japan machine tool orders

Germany CPI

(6 a.m. ET) U.S. NFIB Small Business Economic Trends survey for April.

(8:30 a.m. ET) Canadian wholesale trade for March. Estimate is a decline of 1.3 per cent from February.

(8:30 a.m. ET) Canada’s new motor vehicle sales for March. Estimate is a year-over-year increase of 9.0 per cent.

(8:30 a.m. ET) U.S. PPI for April. The Street expects a rise of 0.3 per cent from March and 2.2 per cent year-over-year.

(10 a.m. ET) U.S. Fed Chair Jerome Powell speaks to the Netherlands’ Foreign Bankers’ Association.

Earnings include: Calibre Mining Corp.; Centerra Gold Inc.; Home Depot Inc.; H&R REIT; Hudbay Minerals Inc.; Hydro One Ltd.; Keyera Corp.; Peyto Exploration & Development Corp.; Superior Plus Corp.

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Wednesday May 15

Euro zone GDP and industrial production

(8:15 a.m. ET) Canadian housing starts for April. An annualized rate rise of 3.2 per cent is expected.

(8:30 a.m. ET) Canadian manufacturing sales and new orders for

(8:30 a.m. ET) U.S. CPI for April. The Street is projecting a rise of 0.4 per cent from March and up 3.4 per cent year-over-year.

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for May.

(9 a.m. ET) Canada’s existing home sales and average prices for April. Estimates are year-over-year increases of 5.0 per cent and 2.0 per cent year-over-year, respectively.

(9 a.m. ET) Canadian MLS Home Price Index for April. Estimate is a decline of 0.5 per cent year-over-year.

(10 a.m. ET) U.S. NAHB Housing Price Index for May.

Earnings include: AtkinsRéalis; Birchcliff Energy Ltd.; Cisco Systems Inc.; Merck & Co Inc; Northland Power Inc.; Orla Mining Ltd.

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Thursday May 16

Japan GDP and industrial production

(8:30 a.m. ET) U.S. initial jobless claims for week of May 11. Estimate is 218,000, down 13,000 from the previous week.

(8:30 a.m. ET) U.S. housing starts for April. Estimate is an annualized rate rise of 8.6 per cent.

(8:30 a.m. ET) U.S. building permits for April. Estimate is a gain of 1.6 per cent on an annualized rate basis.

(8:30 a.m. ET) U.S. import prices for April. The Street is projecting a gain of 0.2 per cent from March and up 0.3 per cent year-over-year.

(8:30 a.m. ET) U.S. Philadelphia Fedd Index for May.

(9:15 a.m. ET) U.S. industrial production and capacity utilization for April.

Earnings include: Applied Materials Inc.; Canada Goose Holdings Inc.; Deere & Co.; Lightspeed Commerce Inc.; Take-Two Interactive Software Inc.; Walmart Inc.

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Friday May 17

China industrial production, retail sales and fixed asset investment

Euro zone CPI

(8:30 a.m. ET) Canada’s construction investment for March.

(8:30 a.m. ET) Canadian international securities transactions for March.

(8:30 a.m. ET) Canadian household and mortgage credit for March.

(10 a.m. ET) U.S. leading indicator for April.

 Published: 5/10/2024 3:11 PM ET | 

Crude oil prices fell on Friday, weighed down by concerns the Federal Reserve may keep interest rates higher for a longer period, and some uncertainty about the outlook for oil demand due to signs of weakening economic growth.

West Texas Intermediate Crude oil futures for June ended down by $1.00 at $78.26 a barrel.

Brent crude futures were down $1.06 or about 1.25% at $82.82 a barrel a little while ago.

A slightly stronger dollar weighed on oil prices. The greenback moved higher against its major counterparts in the New York session, as investors awaited the release of U.S. inflation data for April next week, which will guide the outlook for Fed rate cuts.

The consumer price index is forecast to rise 0.3% on the month and 3.4% annually, down from 0.4% and 3.5%, respectively in March.

Federal-funds futures currently show traders expect the Fed to start lowering its benchmark interest rate in November though there remains a chance of a cut in September.

A report from Baker Hughes said, the oil rig count in the U.S. dropped by two to 603 in the week to May 10, the lowest since January 2022.

Baker Hughes said oil rigs fell three to 496 this week, their lowest since November, while gas rigs rose one to 103.

 Published: 5/10/2024

After opening higher and holding in positive territory till late morning, Canadian stocks retreated on Friday to eventually end the day’s session on a weak note.

Investors largely made their moves, reacting to quarterly earnings reports.

The benchmark S&P/TSX Composite Index, which climbed to a record intra-day high of 22,470.27 in early trades, ended the day with a loss of 66.90 points or 0.3% at 22,308.93, slightly off the session’s low of 22,298.67. The index gained about 1.7% in the week.

Docebo Inc (DCBO.TO) tanked 23.3%. Shopify Inc (SHOP.TO) ended 5.6% down. BlackBerry (BB.TO) ended lower by 3.4%. Constellation Software (CSU.TO), Quarterhill (QTRH.TO) and Lightspeed Commerce (LSPD.TO) also ended sharply lower.

Energy stock Baytex Energy (BTE.TO) ended down 8%. Precision Drilling Corporation (PD.TO), Tourmaline Oil Corp (TOU.TO), Vermilion Energy (VET.TO), Parex Resources (PXT.TO), MEG Energy (MEG.TO), Paramount Resources (POU.TO) and Canadian Natural Resources (CNQ.TO) also ended sharply lower.

Consumer staples shares Jamieson Wellness (JWEL.TO) and Metro Inc (MRU.TO) gained 4.2% and 1.9%, respectively.

Data from Statistics Canada showed employment in Canada rose by 90,400 jobs in April 2024, the most in 15 months, following a 2,200 decrease in March.

The unemployment rate in Canada was at 6.1% in April of 2024, unchanged from the two-year high recorded in the previous month.

Average Hourly Earnings in Canada increased by C$1.64 from the previous year to C$35.77 in April 2024, following a 5% increase in March, a separate data from Statistics Canada showed.

Technology and energy stocks are among the notable losers. Consumer staples, healthcare and consumer discretionary stocks are finding some support.

Algonquin Power & Utilities Corp. (AQN.TO) declined sharply after reporting a first quarter net loss to shareholders of $89.1 million compared to profit of $270.1 million, last year. Loss per share was $0.13 compared to profit of $0.39.

Enbridge Inc (ENB.TO) gained 1%. The company reported adjusted earnings of $2.0 billion or $0.92 per common share, for the first quarter of 2024, an increase of 8% per share, compared with $1.7 billion or $0.85 per common share in 2023.

Onex Corporation (ONEX.TO) drifted down 4.7%. The company reported a net profit of US$10 million for the first-quarter of this year, compared to net loss of $232 million in the year-ago quarter.

Crescent Point Energy (CPG.TO) ended down by 0.8% after reporting a net loss of $411.7 million for the quarter ended March 31, 2024 , compared to net profit of $216.7 million a year ago.

CI Financial Corp (CIX.TO) tanked more than 12%. The company reported adjusted net income of $132.8 million for the first quarter of 2024, compared to $136.8 million in the first quarter of 2023.

Enbridge Inc. reported its first-quarter profit fell compared with a year ago as it recorded a non-cash, net unrealized derivative fair value loss as well as costs related to job cuts announced in February.

The pipeline company says its profit attributable to common shareholders amounted to $1.42 billion or 67 cents per share for the quarter ended March 31.

The result was down from a profit of $1.73 billion or 86 cents per share in the same quarter last year.

On an adjusted basis, Enbridge says it earned 92 cents per share in its latest quarter, up from an adjusted profit of 85 cents per share in the first quarter of 2023.

Analysts on average had expected a profit of 81 cents per share for the quarter, according to LSEG Data & Analytics.

Enbridge chief executive Greg Ebel says strong operational performance and execution drove record financial results in the quarter.

This report by The Canadian Press was first published May 10, 2024.

The Canadian labour market rebounded in April by adding a whopping number of new positions, a result that potentially muddies the picture as the Bank of Canada considers whether to lower interest rates in June.

The economy added roughly 90,000 jobs in April after a slight decline in March, Statistics Canada said Friday in a report. Financial analysts were expecting a gain of 20,000 positions. It was the strongest month of job creation since January, 2023.

Despite those gains, the unemployment rate held steady at 6.1 per cent, because the country’s population is growing at a feverish pace. The jobless rate has risen by more than a percentage point since the summer of 2022.

The results suggest employers are willing and able to take on more workers, despite the financial pressures resulting from higher interest rates.

Friday’s report was the final Labour Force Survey before the Bank of Canada’s next rate decision on June 5. Analysts are roughly split over whether the central bank will cut rates then, or wait until late July to make the first move.

“Today’s showy headline jobs increase will give the Bank of Canada some pause, since it reinforces the point that the economy is clearly not rolling over,” Bank of Montreal chief economist Doug Porter said in a client note. “Still, the reality is that economic slack is still rising,” he added, pointing to a higher number of unemployed people.

In April, employers mostly added part-time positions, which rose by about 50,000. The private sector accounted for most of the employment growth, although there were strong gains in the public sector, as well.

The total number of hours worked across the economy jumped by 0.8 per cent in April, which portends well for growth in the second quarter.

Still, there are ample signs of a weakening economy. As of April, there were 1.3 million unemployed people in Canada, an increase of 256,000 or 23.7 per cent from a year earlier.

The Bank of Canada will be encouraged that wage growth – an upside risk for inflation – is calming down. Average hourly wages grew at an annual pace of 4.7 per cent in April, down from 5.1 per cent in March.

After Friday’s report, investors pared back their bets for an imminent rate cut. Markets are now pricing in a roughly 50-50 chance that the Bank of Canada trims its policy rate by a quarter-point next month, according to Refinitiv Eikon data. In recent days, those odds were higher than 70 per cent.

Over a series of moves, the Bank of Canada hiked its benchmark interest rate to 5 per cent from pandemic lows of 0.25 per cent, a process that started in early 2022. Through higher interest rates, the central bank is trying to curb demand and bring inflation back to its 2-per-cent target.

Tighter monetary policy is having wide-ranging effects on the economy, including higher debt-servicing costs for governments and households. Many homeowners are facing the prospect of sharply higher payments when they renew their mortgages in the coming years, the extent of which depends on the path of interest rates.

Whether the Bank of Canada cuts rates in June or July, it is likely to do so before the Federal Reserve. The U.S. economy is frequently posting strong results, and thus investors don’t expect the Fed to cut before November. This divergent path for interest rates would put downward pressure on the Canadian dollar – a helpful scenario for exporters, but adding to costs for imported goods.

Statscan will release its next inflation report on May 21. Annual consumer price index growth has slowed to just under 3 per cent. Bank of Canada officials have said they’re encouraged by this progress, but want to ensure they don’t cut rates too early and cause prices to flare up again.

“The unemployment rate has risen more in Canada than in most other advanced economies in the wake of higher interest rates, and wage growth is showing further signs of moderating,” Nathan Janzen, assistant chief economist at Royal Bank of Canada, said in a client note.

“Labour markets have softened enough to lower inflation risks going forward and justify a pivot to interest rate cuts from the Bank of Canada – but the bottom also still hasn’t fallen out in a way that is forcing the central bank to act urgently.”