First Look With Surveillance: Fed Decides, Earnings
It’s no secret that energy stocks have been the star performers on the S&P/TSX Composite this year, and we’re getting plenty of reminders this morning about how much conditions have improved for names in that group.
- Suncor Energy saw its funds from operations nearly quintuple to $2.4 billion in a dramatically improved operating environment that allowed it to spend $643 million on share buybacks. But all is not well, specifically at the Fort Hills oil sands mine, where we already knew (thanks to Teck Resources) of setbacks that today forced Suncor to cut the project's production forecast and hike its cost outlook. One interesting tidbit that Suncor highlighted as having impacted Fort Hills: “access to additional contract equipment and labour [was] more constrained than expected.”
- Cenovus Energy has nudged up its production forecast while posting almost $1.4 billion in cash from operations in the second quarter. The company shaved almost $1 billion off its debt load in the period, and said it’s eyeing “further value accretive asset sales” to help it hit a $10-billion debt target.
- There’s also optimism at the global supermajor level, with Royal Dutch Shell today announcing a US$2-billion buyback program and a 38 per cent hike to the dividend.
All this to say, expect plenty of talk on the station today about the investing thesis for energy stocks.
POWELL THREADS THE NEEDLE
The chair of the U.S. Federal Reserve seemingly managed to soothe investors nerves yesterday after a policy statement that at first blush seemed hawkish, as the central bank highlighted progress on the goals it set as prerequisites to taper asset purchases. In the news conference, Powell made it clear that substantial progress still hasn’t been achieved and that the idea of raising interest rates isn’t even on the radar. On the subject of inflation, however, his commentary seemed akin to a shrug emoji. “The risks to inflation are probably to the upside. I have some confidence in the medium term that inflation will move back down; again, it's hard to say when that will be.”
ROBINHOOD GOES PUBLIC
Shares of the online trading platform that served as a launch pad for American retail investors driving the meme frenzy will make their debut today on the Nasdaq. The initial public offering failed to live up to the loftiest of expectations, as shares were priced at the bottom of range (US$38 apiece).
OTHER NOTABLE STORIES
- Some interesting M&A in Canada's energy sector: Spartan Delta announced after yesterday's closing bell that it's bulking up in the Montney with a $743.3-million purchase of Velvet Energy. If that name rings a bell, it might be because of Andrew McCreath's previous reporting about Russia’s interest in Canada’s oil patch.
- Canadian Pacific Railway reported record second-quarter revenue of $2.05 billion (albeit merely in line with estimates), and an adjusted profit that narrowly exceeded the average estimate. Looks like it was a mixed picture in its freight categories, with revenue falling or flat in several categories. The bigger picture here is about M&A, with CP waiting in the wings in case Canadian National's purchase of Kansas City Southern is stymied.
- Just like Alphabet, Facebook got a massive boost from advertising revenue in its latest quarter, as proceeds surged 56 per cent to almost US$29 billion, helping profit more than double in the quarter. But growth in active users slowed, and management warned of decelerating revenue growth, so we're left with FB shares down almost four per cent in pre-market trading.
- West Fraser Timber's second-quarter revenue more than quadrupled to $3.8 billion in a period that represents the first full quarter of Norbord's integration and also the period when lumber prices surged and subsequently collapsed. In the earnings release, West Fraser cautioned that it can't estimate the ultimate impact from the wildfires in Western Canada.
- Agnico Eagle Mines is standing by its forecasts for the year, including on costs. Which is notable considering the company flagged inflationary pressures that it's managing to contain thanks to what it calls "a number of collaborative efforts and initiatives." Hopefully we'll learn more about that when CEO Sean Boyd joins Jon in The Open.
- Equitable Group reported some mighty impressive growth for its second quarter, with deposits at the EQ Bank unit up 99 per cent year-over-year and a tripling of residential mortgage activity. Its bottom line also got a $2-billion boost from a reversal of loan loss provisions. We'll speak with CEO Andrew Moor this afternoon about all of this, and the company's plan to split its stock after seeing shares rally almost 43 per cent this year.
- Didi Global shares went on a wild ride this morning: at one point up almost 50 per cent after The Wall Street Journal reported a privatization was being considered amid China’s crackdown on the ride-hailing service. The stock subsequently gave up much of those gains after Didi refuted the speculation.
- Notable data: U.S. initial jobless claims, U.S. GDP (Q2)
- Notable earnings: TC Energy, Cenovus Energy, Arc Resources, Calfrac Well Services, Whitecap Resources, Canfor, Resolute Forest Products, Yamana Gold, Fairfax Financial, Fortis, Amazon, Mastercard, Merck, Molson Coors, Yum! Brands
- 10:30: Deputy Prime Minister and Finance Minister Chrystia Freeland makes announcement in Lakefield, Ont. (plus avail)
- 12:00: Infrastructure Minister Catherine McKenna makes announcement in Toronto alongside Toronto Region Board of Trade CEO Jan De Silva and Canada Infrastructure Bank Chair Tamara Vrooman
- 15:00: AMC Entertainment Holdings annual meeting