Market movers: Stocks seeing action on Tuesday and why

May 16, 2023

A look at North American equities heading in both directions
On the rise
Shares of Capital One Financial Corp. (COF-N) rose in trading on Tuesday after billionaire investor Warren Buffett’s holding company disclosed it had taken a stake in the credit cards-focused bank.
In its quarterly disclosure after the bell on Monday, Berkshire Hathaway (BRK.B-N, BRK.A-N) said it had a 9.92 million share stake in the company. The stake would be worth $954 million, based on the closing price on March 31.
Warren Buffett’s Berkshire Hathaway Berkshire invests in Capital One, sheds four stocks
As of Monday, Capital One shares had lost around 8 per cent so far this month, as financial stocks felt the effects of First Republic Bank’s collapse.
Besides credit cards, the McLean, Virginia-based Capital One also has a huge auto lending and commercial banking business.
Contra Guys: Why we’re reluctant to buy more shares in Berkshire Hathaway
Vancouver-based Lithium Americas Corp. (LAC-T) jumped after reporting its loss in the first-quarter narrowed to 4 US cents per share from 35-US-cents during a same a year ago.
It attributed the decline to gains from General Motors Co.’s (GM-N) US$650-million investment in the company.
The miner also said mechanical construction in its Cauchari-Olaroz project in Argentina is complete, and it is targeting first lithium production in June 2023.
Concurrently, Lithium Americas announced approval for a reorganization that will separate its North American and Argentine business units into two independent public companies - Lithium Argentina and Lithium Americas.
Lithium Argentina will own Lithium Americas’ current interest in its Argentina lithium assets, including the 44.8-per-cent interest in Caucharí-Olaroz, the 100-per-cent-owned Pastos Grandes project and the 65%-per-cent interest in the Sal de la Puna project.
Lithium Americas will own the 100-per-cent-owned Thacker Pass lithium project in Humboldt County, Nevada, as well as the Company’s investments in Green Technology Metals Ltd. and Ascend Elements, Inc.
U.S.-listed shares of search engine giant Baidu Inc. (BIDU-Q) were up after it beat first-quarter revenue estimates on Tuesday as businesses spent more on advertising amid China’s economy recovery, after the country dropped most of its strict COVID curbs late last year.
Business momentum in China is building in the absence of lockdowns, with consumers and businesses reviving spending as the economy shows signs of stabilizing.
China’s economy grew at a faster-than-expected rate of 4.5 per cent year-on-year in the three months through March, according to the latest official data.
Revenue for Baidu rose 10 per cent to 31.14 billion yuan (US$4.54-billion) in the quarter to March 31, surpassing analysts’ estimates of 29.97 billion yuan, according to Refinitiv data.
Revenue from Baidu Core, which includes search-based ad sales, cloud offerings and its autonomous driving initiatives, grew 8 per cent to 23 billion yuan.
Of this, revenue from Baidu’s largest segment, online marketing, accounted for 16.6 billion yuan, rising 6 per cent in the reported quarter.
Revenue at its streaming service iQIYI rose 15 per cent to 8.3 billion yuan, driven by 28-per-cent growth in its subscriber base.
Baidu reported net income of 5.83 billion yuan, compared to net loss in the year-ago quarter. Excluding items, it earned 16.10 yuan per American Depository Share (ADS), higher than Wall Street’s estimate of 12.46 yuan.
The company’s much-touted rival to ChatGPT, Ernie bot, has yet to be officially launched, despite having been partially unveiled to the public in mid-March.
CEO Robin Li said in a press release on Tuesday that the company plans to “steadily incorporate” the generative AI-driven chatbot into all of the search engine giant’s businesses, without giving a specific timeline.
On the decline
Teck Resources Ltd. (TECK.B-T) dipped after Glencore CEO Gary Nagle told the Bank of America conference in Barcelona on Tuesday that buying the Canadian miner’s coal business as a standalone unit is a “distant second.”
Teck has rebuffed the Swiss miner and trader’s $22.5-billon offer to combine the two companies, instead pursuing plans to separate its copper and coal business.
Glencore’s bid for Teck spurs call for Canada pensions to up domestic equity stake
But the Canadian company in April had to scrap its initial business separation proposal after failing to secure enough shareholder support, going back to the drawing board to rework what it said would be a “simpler and more direct” split.
Glencore’s plan would combine and spin off its thermal coal unit and Teck’s steelmaking coal business.
“Doing the full deal is the best offer for both sets of shareholders, it creates the most value – buying their coal business standalone is a distant second in terms of potential benefits,” Mr. Nagle said in a fireside chat at the conference, according to a Bank of America note.
“If that is the route they go down I think it would be remiss of Teck in terms of value for shareholders to not include us in that process,” Mr. Nagle said.
As part of its proposal, Glencore has offered up to $8.2-billion in cash to Teck shareholders who may not want exposure to thermal coal, the most polluting fossil fuel.
Speaking separately at the same conference, Teck CEO Jonathan Price repeated that separation “is the path to create the greatest value” for shareholders and said “we haven’t heard anything further from Glencore with respect to changes to (their) proposal”.
Glencore said it is willing to increase its offer.
Shares of Onex Corp. (ONEX-T) were lower after pilots at its WestJet Group gave notice late Monday that could allow for strike action as early as May 19, raising the possibility of travel disruptions during Canada’s Victoria Day holiday next weekend.
“Today the WestJet Pilots MEC (Master Executive Council) issued a 72 hours strike notice. If no progress is made, we could withdraw our services at 0300 MT May 19th, 2023. Our negotiating committee remains available 24/7 to reach a deal,” the WestJet ALPA Pilots union said in a tweet.
WestJet has issued a lockout notice in response to the union’s strike notification, saying that a work stoppage could potentially occur on May 19, the date given by the union.
North American pilots are pressing for higher salaries and better scheduling after aviators made big gains in a recent deal with Delta Air Lines that delivers a 34% pay increase over four years. In Canada, pilots want better scheduling and to close the gap between their pay and higher amounts earned by their U.S. counterparts.
Calgary-based WestJet said the carrier wants an agreement that is competitive within Canada’s airline industry.
Home Depot Inc. (HD-N) on Tuesday cut its annual sales forecast and projected a steeper decline in profit than previously expected, signaling slumping demand for tools and building materials as inflation-wary Americans cut back on spending.
Shares of the largest U.S. home improvement chain tumbled, while those of smaller rival Lowe’s Cos Inc. (LOW-N) were also lower.
Home improvement retailers have now lost their pandemic-era sparkle as consumers shift away from home renovations and focus on travel, vacations and other services, driving quarterly transactions 4.8 per cent lower at Home Depot.
“It’s definitely a surprise. The speed and magnitude of the weakness is surprising relative to what we were thinking,” D.A. Davidson analyst Michael Baker said.
Home Depot kicks off a big week for U.S. retailers’ earnings, with Target Corp. (TGT-N) and Walmart Inc (WMT-N) scheduled to report on Wednesday and Thursday, respectively.
Focus shifts to retailers as U.S. quarterly results hit final leg
Data on Friday showed consumer sentiment slumped to a six-month low in May, while U.S. long-term inflation expectations jumped to the highest since 2011.
While Home Depot is grappling with a bigger slowdown in the home-related sector, the results signal retail sales will be soft across the board, Baker added.
An unusually wet and cold March across many parts of the U.S. further dented sales at a time when lumber prices have declined, while Home Depot finance chief Richard McPhail said demand was softening even further compared to the company’s expectations.
Home Depot now expects fiscal 2023 comparable sales to fall between 2 per cent and 5 per cent, compared to its prior outlook for nearly flat sales. Analysts were expecting a 0.9-per-cent decline, according to Refinitiv IBES data.
The company forecast earnings per share to decline between 7 per cent and 13 per cent, compared to a mid-single digits decline estimated previously.
Home Depot’s first-quarter comparable sales decreased 4.5 per cent, compared with estimates for a 1.74-per-cent drop.
The company posted a profit of US$3.82 per share, above estimates of US$3.80.
Horizon Therapeutics PLC (HZNP-Q) slid as the U.S. Federal Trade Commission is expected to file a lawsuit to block Amgen Inc.’s (AMGN-Q) US$27.8-billion deal to buy the company.
Amgen struck a deal last year to buy Horizon to strengthen its rare diseases drugs portfolio. The company has said it hopes to complete the acquisition in the first half of this year.
Amgen said on Monday it wasn’t aware of any decision made by the agency. “We will provide any appropriate updates when we have more information,” the company said in a statement.
U.S. Senator Elizabeth Warren, an outspoken critic of corporate consolidation, wrote to the FTC earlier this year expressing her concerns about pharmaceutical deals including the Amgen purchase of Horizon.
The Democratic Senator said both Amgen and Horizon Therapeutics “have engaged in brazen price increases,” including on Amgen’s Enbrel for arthritis and Horizon’s Krystexxa, a gout medication.
Amgen said it disagreed with Warren’s analysis of the deal.
It is unusual for the agency to sue to stop a pharmaceutical deal. In recent years, the agency has usually identified ailments where the merging companies made treatments, and required one of the two medicines to be divested.
With files from staff and wires

This data comes from MediaIntel.Asia's Media Intelligence and Media Monitoring Platform.

Original URL: Click here to visit original article