Author: Consultant

anadian National Railway Co. CNR-T -0.40%decrease issued a downbeat outlook for the economy, adding to a growing chorus of companies that are warning of deteriorating operations as rising interest rates weigh on activity.

“Our current volumes reflect that we are in a mild recession,” Tracy Robinson, CN’s chief executive officer, said during a call with analysts on Tuesday.

“We are uncertain about how deep or how long it will go on, but what we are modelling is negative North American industrial production for the full year,” Ms. Robinson added.

The gloomy outlook detracted from the railway’s strong first-quarter financial results, released after markets closed on Monday.

CN reported a profit of $1.82 a share, up 39 per cent from the first quarter of 2022 and well above analysts’ expectations for earnings of $1.72 a share. As well, revenue rose 16.3 per cent year-over-year.

The railway also dazzled on a number of metrics: Trains ran faster during the quarter and fuel efficiency improved. Its operating ratio – or expenses as a percentage of revenue, where a smaller number is better – declined to 61.5 per cent.

Yet the share price fell nearly 4 per cent in Toronto on Tuesday, to $161.63, suggesting that investors are putting little stock in past financial results amid evidence of a shifting economy.

Central banks have been raising their key interest rates aggressively in a battle against high inflation over the past year. While the latest readings on inflation show that it is subsiding, many commentators expect that recessionary risks are building, with the U.S. regional banking crisis contributing to the dour outlook.

The yield on the 10-year U.S. Treasury bond fell on Tuesday by a substantial 10 basis points.The yield is now about 60 basis points below a recent high at the start of March (there are 100 basis points in a percentage point), potentially reflecting a darker outlook for economic growth.

What’s more, financial markets now expect the Bank of Canada will cut its key rate by a quarter of a percentage point by October, marking a shift for the central bank from dampening economic growth with rate hikes to promoting it with cuts.

CN appeared to give an indication that it sees a good year unfolding by raising its outlook for 2023. Management now sees profit growth in the “mid-single digit range” in 2023, which is an improvement from previous guidance of “low-single digit” growth.

Yet, this outlook was really just a response to the strong first quarter, which raised growth for the full year without signalling an acceleration over the next eight months.

Steve Hansen, an analyst at Raymond James, expects the new outlook points to flat – or even declining – profit at CN for the remainder of the year against a backdrop of deteriorating traffic trends in April.

Rail traffic, which reflects demand for hauling commodities used by producers, has fallen 4.8 per cent in the second quarter, according to Mr. Hansen, who believes the trends suggests that the economy is already in a modest recession.

“While we continue to admire CN’s long-term outlook, we reiterate our neutral rating based upon our sustained macroeconomic concerns, deteriorating traffic growth and the company’s lofty relative valuation,” Mr. Hansen said in a note.

Canadian railway stocks have generally traded in line with the S&P 500 over the past five years, based on estimated price-to-earnings ratios.

But CN and Canadian Pacific Kansas City Ltd. CP-T -1.25%decrease – the new name for CP after it completed its merger with Kansas City Southern this month – currently trade at a considerable premium. CN’s P/E is 20.5, according to Bloomberg, compared with 18.4 for the diversified index of U.S. stocks.

Still, analysts expect CN can navigate the current headwinds.

Bank of Nova Scotia analyst Konark Gupta expects the share price will trade at $169 within 12 months, suggesting a modest gain from its price on Tuesday. Kevin Chiang at CIBC World Markets has a price target of $175, implying a gain of 8 per cent, but he maintained a neutral recommendation on the stock.

Teck Resources Ltd. TECK-B-T +4.43%increase is not proceeding with its planned split, after evidently not gathering enough votes to secure the transaction.

The development is a huge win for Glencore PLC which has been campaigning to stop Teck’s shareholders from voting for the split, and instead accept its hostile takeover offer.

Teck needed to secure two thirds of votes cast by both its super voting A and its regular voting B shareholders.

Vancouver-based Teck made the announcement just before the start of trading on Wednesday.

Teck said it will not engage with Glencore and instead propose an alternative transaction that may win the support of its shareholders.

Opinion: Teck’s ambitious break-up proposal crashes and burns. Mistakes were made that worked in Glencore’s favour

Teck CEO Jonathan Price said in a statement that Teck’s plan is to pursue another split of the company but a far cleaner one this time. Under the previous plan, Teck’s coal business would have had to pay 90 per cent of its cash flow to its metals business for about a decade.

Mr. Price said that Teck had “listened and heard the feedback that some shareholders would prefer a more direct approach to separation.”

Glencore has said that if the split proposal failed, it will be waiting in the wings with its US$22.5-billion takeover proposal, and that it is prepared to improve the terms.

Teck reiterated on Wednesday that Glencore’s approach is a “non-starter.”

Glencore has proposed acquiring Teck and subsequently splitting itself into one company holding its thermal coal and Teck’s metallurgical coal, and another company containing the metals mines of both companies, alongside Glencore’s energy trading business.

Teck has slammed that proposal as ruinous to shareholder value, arguing it would carry significant execution risk, degrade its ESG standing, and provide unwanted exposure to thermal coal.

A takeover of Teck by Glencore would be subject to a net benefit review and a national security review by Ottawa.

Any such review would be lengthy, and involve discussions with Canada’s allies, including the United States.

Ottawa has given early signs that it wants to keep Teck in Canadian hands.

“We need companies like Teck here in Canada – companies with a strong commitment to Canada,” Deputy Prime Minister Chrystia Freeland, Industry Minister François-Philippe Champagne and Natural Resources Minster Jonathan Wilkinson said in a Monday letter to the Greater Vancouver Board of Trade.

Teck will hold its annual meeting as planned on Wednesday afternoon in Vancouver, but the split proposal will not be on the ballot.

All other matters, including the election of directors, and whether to approve a sunset clause on the A shares will be voted on at the meeting.

Under the sunset clause, Teck’s A shareholders would convert their securities into B shares after six years.

The A shares are controlled by the Keevil family and Japan’s Sumitomo Metal Mining Co. and give them veto power over any proposed takeover transaction.

Norman B. Keevil, Teck’s chair emeritus and patriarch of the Keevil family told the Globe and Mail earlier this month that he would not exercise his veto power, if the board, management and the majority of B shareholders want to pursue a takeover of the company.

Teck shares were up by 4 per cent in early trading on the Toronto Stock Exchange, as investors wait for an expected bump in Glencore’s bid.

Glencore declined to comment for this story.

PUBLISHED TUE, APR 25 202310:07 PM EDT

Oil prices rose in early Asian trade on Wednesday after a U.S. trade group reported a significant draw in crude oil stocks ahead of the government’s data release.

https://www.cnbc.com/2023/04/26/oil-prices-rise-on-us-crude-fuel-stock-draws.html

• Microsoft surpassed expectations on the top and bottom lines and beat estimates on quarterly revenue guidance.
• Growth from Azure and other cloud services slowed to 27% from 31% in the prior quarter but was still faster than expected.

https://www.cnbc.com/2023/04/25/microsoft-msft-q3-earnings-report-2023.html

 Shareholders looking for an update on TD Bank Group’s US$13.4 billion takeover of First Horizon Corp. were left with few answers at the bank’s annual meeting Thursday.

Facing numerous questions about the deal after U.S. banking turmoil has pushed down the value of Tennessee-based First Horizon, chief executive Bharat Masrani stuck to a statement that they are in negotiations about a potential extension of the deal past the May 27 deadline.

It’s the same message he gave in a March earnings call when the bank disclosed that they don’t expect to secure regulatory approval of the deal by the deadline, without providing details on what might be causing the delay.

Since then, the collapse of Silicon Valley Bank and Signature Bank have put pressure on the U.S. banking sector and led to calls from some for TD to walk away from the deal that it first announced in February, 2022.

Pressed by shareholders, Masrani said he sees the benefits of the merger, but notably absent in his comments was his March statement that the bank was “fully committed to the transaction.”

Outside of the deal, the meeting saw several shareholder proposals go to a vote related to climate change as well as on executive pay ratios and the financialization of housing.

This report by The Canadian Press was first published April 20, 2023.

Business Wire – Mon Apr 17, 4:00PM CDT

Nutrien Ltd. (TSXandNYSE:NTR) has received notice of an unsolicited “mini-tender” offer made by TRC Capital Investment Corporation (“TRC Capital”) to purchase up to 1,000,000 Nutrien shares, or approximately 0.20% of Nutrien’s outstanding shares, at a price of C$93.89 per share. The offering price represents a discount of 4.49% and 4.40%, respectively, to the closing prices of Nutrien shares on the Toronto Stock Exchange and New York Stock Exchange on April 4, 2023, the last trading day before the mini-tender offer was commenced.

Nutrien does not endorse TRC Capital’s unsolicited offer, has no association with TRC Capital or its offer, and does not recommend or endorse this unsolicited mini-tender offer. Shareholders are cautioned that TRC Capital’s offer has been made at a price below the current market price for the shares.

TRC Capital has made similar unsolicited mini-tender offers for shares of several other public companies. Mini-tender offers are designed to avoid many of the investor protections like disclosure and procedural protections applicable to most take-over bids and tender offers under Canadian and U.S. securities laws. Canadian securities regulatory authorities have expressed concerns about mini-tender offers, including the possibility that investors might tender to such offers without understanding the offer price relative to the actual market price of their securities. Comments from the Canadian securities regulatory authorities (the “CSA”) on mini tenders can be found in its notice at: http://www.osc.gov.on.ca/en/SecuritiesLaw_csa_19991210_61-301.jsp. The U.S. Securities and Exchange Commission (the “SEC”) has noted that some bidders make these offers at below-market prices “hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price”. The SEC’s advisory to investors can be found at: http://www.sec.gov/investor/pubs/minitend.htm.

Nutrien urges shareholders to obtain current market quotations for their shares, consult with their broker or financial advisor and exercise caution with respect to TRC Capital’s offer. Shareholders who have already tendered their shares should consider taking actions to withdraw them including reviewing the withdrawal procedures in TRC Capital’s offering documents.

Nutrien strongly encourages brokers, dealers and other market participants to exercise caution and review the letter regarding broker-dealer mini-tender offer dissemination and disclosures on the SEC website at: Letter to SIA re: Broker-Dealer Mini-Tender Offer Dissemination and Disclosures (sec.gov) and the relevant provisions in the CSA’s notice referenced above. Nutrien requests that a copy of this news release be included with all distributions of materials relating to TRC Capital’s mini-tender offer related to Nutrien shares.

About Nutrien

Nutrien is the world’s largest provider of crop inputs and services, helping to safely and sustainably feed a growing world. We operate a world-class network of production, distribution and retail facilities that positions us to efficiently serve the needs of growers. We focus on creating long-term value for all stakeholders by advancing our key environmental, social and governance priorities.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230417005854/en/

In the latest trading session, Canadian Imperial Bank (CM) closed at $42.38, marking a -0.66% move from the previous day. This change lagged the S&P 500’s 0.09% gain on the day. Meanwhile, the Dow gained 0.2%, and the Nasdaq, a tech-heavy index, lost 4.87%.

Coming into today, shares of the bank and financial services company had gained 3.24% in the past month. In that same time, the Finance sector gained 3.03%, while the S&P 500 gained 3.31%.

Wall Street will be looking for positivity from Canadian Imperial Bank as it approaches its next earnings report date. In that report, analysts expect Canadian Imperial Bank to post earnings of $1.34 per share. This would mark a year-over-year decline of 4.29%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $4.08 billion, down 3.93% from the year-ago period.

CM’s full-year Zacks Consensus Estimates are calling for earnings of $5.63 per share and revenue of $17.32 billion. These results would represent year-over-year changes of +1.62% and +1.11%, respectively.

Investors might also notice recent changes to analyst estimates for Canadian Imperial Bank. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. Canadian Imperial Bank is currently sporting a Zacks Rank of #1 (Strong Buy).

Digging into valuation, Canadian Imperial Bank currently has a Forward P/E ratio of 7.58. This valuation marks a premium compared to its industry’s average Forward P/E of 7.5.

Meanwhile, CM’s PEG ratio is currently 2.25. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. Banks – Foreign stocks are, on average, holding a PEG ratio of 0.92 based on yesterday’s closing prices.

The Banks – Foreign industry is part of the Finance sector. This group has a Zacks Industry Rank of 68, putting it in the top 27% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 

Canadian Imperial Bank of Commerce (CM) : Free Stock Analysis Report

PR Newswire – Tue Apr 25, 8:00AM CDT

CALGARY and PHOENIX, April 25, 2023 /PRNewswire/ – Canadian Pacific Kansas City (TSX:CP.TO) (NYSE:CP) (CPKC) and Knight-Swift Transportation Holdings Inc. (NYSE:KNX) announced today a new multi-year agreement to provide truckload intermodal transportation service on CPKC’s new single-line north-south corridor connecting Mexico, the United States and Canada. Knight-Swift is one of North America’s largest and most diversified freight transportation companies, providing multiple truckload transportation and logistics services.

READ BELOW

https://www.prnewswire.com/news-releases/cpkc-and-knight-swift-announce-multi-year-agreement-301806142.html

Glencore’s ambition to take over Teck Resources has morphed into a protracted industry saga, and the Swiss commodities giant is now scrambling to win over the Canadian miner’s shareholders with promises of a third bid for the company.

Its initial two offerings for Teck – the first totalling £19bn and the second including a £6.6bn cash sweetener – were knocked back by the miner’s senior leadership, including top shareholder Norman Keevil.
Now, Glencore has gone to extreme measures, urging Teck shareholders in a public letter to reject the company’s own plans to spin off its critical minerals business from its coal operations at a crunch demerger vote this week.

The FTSE 100 company’s offer for Teck, which represented a 20 per cent premium on both its share classes, would have seen the both parties merge their minerals businesses and separately spin off their combined coal assets into a new listed company.

Glencore’s shareholders would own 76 per cent of the combined entity whereas Teck incumbent investors would hold the remaining 24 per cent.

Theoretically, Glencore is the perfect suitor for Teck.

It’s takeover attempt is a cool, rational attempt to diversify its business and shift towards future-facing minerals, which will be in high demand for wind turbines, solar panels and electric vehicle batteries as the world moves towards a greener future.

As Teck has vast copper resources and zinc deposits in the Americas, it’s a credible target for Glencore – and its bid follows rival BHP Group’s imminent £5.2bn takeover of Aussie copper producer Oz Minerals.

Meanwhile, Teck could benefit from Glencore’s sheer size and leading position in the commodities market.

Last year, Teck made £3.92bn earnings with shareholders clawing back £3.28bn.

By contrast, Glencore posted pre-tax profits of £28bn over the same period, and handed almost £6bn to shareholders amid widespread volatility in the economy and soaring fossil fuel prices.

However, Teck has proposals of its own to turn its business into two publicly listed companies.

This would include Teck Metals, focused on metals production, and Elk Valley Resources, built around its steelmaking coal assets.

Teck predicts its proposals could see its shares trade at a 55 per cent premium on its latest closing price.
Yet, the debate is not solely around contrasting valuations – a matter that would typically come to a resolution, with Glencore’s bigger size and revenue streams enabling it to present a figure that would finally appeal to Teck’s shareholders.

Instead, investors are highly divided over the proposed deal, because the true nature of the impasse is not finances, but coal.

Coal’s role causes shareholders headaches

Climate conscious Legal and General Investment Management (LGIM) has lent its support to Teck’s proposals, alongside Bluebell Capital Partners and Norway’s sovereign wealth fund.

Meanwhile, Glass Lewis has urged shareholders to support Glencore’s bid, and ISS has raised concerns over Teck’s break-up plans but stopped short of backing the Swiss firm’s proposed takeover.

Coal giants raked in massive profits last year, with the world’s top 20 companies raking in £77.8bn of collective earnings – but there are concerns with the long-term sustainability of such bumper numbers.

After all, this was an outcome driven by the pandemic and Russia’s invasion of Ukraine, with the International Energy Agency still expecting coal consumption to plateau around 2025.

Coal is also the world’s dirtiest fossil fuel, and with companies looking to divest to achieve net zero targets, it appears Teck’s board and many of its shareholders have seen the scale of Glencore’s large thermal coal business and oil trading businesses and opted against any negotiations.

Glencore has pledged to shift away from coal but its massive earnings last year included £7.6bn from its coal producing units – with the company mining 103.3m tons of coal through its industrial business.

The company faces scrutiny not just from Teck shareholders, but also its own investors over its climate ambitions.

Shareholders will vote at Glencore’s annual meeting next month on a resolution urging the company to explain how its thermal coal business aligns with efforts to limit the increase in global temperatures to 1.5 degrees Celsius, in line with the Paris Agreement.

HSBC Asset Management and LGIM are among signatories to the document.

While the company has previously pledged to cap coal production at 2019 levels and reach net zero emissions by 2050, banking group Credit Suisse does not expect a material decrease in Glencore’s coal production until 2036.

Coal is not the only headwind Glencore has to navigate in its bid to buy Teck.

The Canadian miner maintains a byzantine dual-shareholder structure – dominated by its A-shareholders.

This means Glencore will also have to coax the Keevil family, the company’s primary A-shareholders, into changing their mind over a deal.

With their dominant position in Teck’s corporate composition, doing this may be enough to push through a deal for Glencore.

However, with increasingly climate conscious B-shareholders, Glencore is going to need to resolve investor concerns over coal, unless it wants every push for growth to be a painful battle.