Mar 23, 2023
The Daily Chase: Markets point to a positive open; Bombardier forecasts increased 2025 revenue
First Look With Surveillance: Fed Hike, SNB & BOE Decide
North American equity markets are making a break for positive territory after yesterday’s topsy-turvy session left major indices firmly in the red. Futures for all three major indices south of the border are pointing to gains at the open, most significantly on the Nasdaq, where futures are indicating a near-one per cent gain. Back to that topsy-turvy session for a moment – yesterday it was all about the U.S. Federal Reserve’s latest rate decision and more importantly, the commentary that followed. The longer Fed Chair Jay Powell talked, the worse things got – after an initial bump during his presser to discuss the Fed’s quarter-point hike, things quickly went downhill, leading the S&P, Dow Jones Industrial Average and Nasdaq Composite Index to losses in the 1.6 per cent range.
PARKLAND ENLISTS AN ALLY, BUT AT A COST
It appears Parkland Corp. has a heavyweight in its corner as it looks to fend off activist investor Engine Capital. The company has announced an agreement with Simpson Oil – its largest shareholder, owner of about 19 per cent of shares outstanding – that “furthers the longstanding and successful relationship” between the two firms. As always, there’s no such thing as a free lunch – as part of the agreement, Simpson has the right to nominate up to two nominees to the board. For what it’s worth, Parkland said it won’t comment on the “coincidental timing” of the announcement, which came less than 24 hours after Engine Capital penned a letter calling for a breakup of the company in order to make Parkland a pure-play gas station and convenience store operator, so take that as you will. On that note, Parkland did say it’s examining opportunities for dispositions (ie, asset sales) if it finds a deal that creates shareholder value.
BOMBARDIER STRIKES OPTIMISTIC TONE FOR 2025
Bombardier is raising a slate of financial forecasts for 2025 as the company’s business-jet-only strategy gains traction. The company now sees revenue for the year coming in at about US$9 billion – up US$1.5 billion from its earlier forecast – the free cash flow view has nearly double to US$900 million, and the company expects leverage to fall closer to the two to 2.5 times range, lower than previously forecast. The company says all of its strategic priorities are either on track or running ahead of schedule, a far cry from the messy situation a few years ago that helped prompt it to offload its commercial aircraft and rail divisions to focus on becoming a pure-play jet-maker.
RECREATIONAL VEHICLE-MAKER BRP POSTS RECORD QUARTER
Staying Bombardier-adjacent, recreational vehicle-maker BRP (a past spin-out from the company) posted record revenues in its fourth quarter, up 31 per cent from a year ago to hit nearly $3.1 billion. The company – known for ATVs and Sea-doos, but also side-by-side off-road vehicles in recent years – says strong consumer demand helped drive that record revenue in the quarter. While that 31 per cent figure is eye-popping, things are expected to moderate this year, with BRP forecasting revenue growth in the nine to12 per cent range for its fiscal 2024. It’s worth noting quickly that it’s also boosting its quarterly dividend by 13 per cent to $0.18 per share as well. It’s been interesting times for BRP – the company was something of a pandemic darling, as social distancing requirements and a build-up in household savings helped drive demand for off-road vehicles, which by their very nature keep you away from others, but that demand doesn’t seem to have waned too badly in spite of the world getting back to some semblance of normalcy. And stay tuned for Bloomberg Markets – we’ll hear more from BRP CEO José Boisjoli just after 1 p.m. EDT.
OTHER NOTABLE STORIES
- It’s budget day in Ontario, with Finance Minister Peter Bethlenfalvy set to unveil the province’s fiscal plan as economic clouds form on the horizon. Be interesting to see if there are similarities to Quebec, where the province cut some income taxes and diverted funds away from a debt repayment fund in order to plan for a rainy day.
- Our Bloomberg News partners are reporting Apple plans to spend US$1-billion per year (citing sources) to produce movies that will be released in cinemas, rather than direct-to-streaming.
- The Bank of England has raised interest rates by a quarter of a per cent, as expected, predicting the British economy will avoid a recession for now and that the fight against inflation remains the greater threat.
- Notable data: U.S. Initial Jobless Claims, U.S. New Home Sales
- Notable earnings: BRP Inc., General Mills, Darden Restaurants
- Ontario Budget
- Nova Scotia Budget
- U.S. President Joe Biden’s first in-person visit to Canada since becoming president, meets with PM Trudeau