Feb 22, 2019
The Daily Chase: RBC kicks off bank earnings; Barrick mulls Newmont bid
By Noah Zivitz
Royal Bank of Canada has kicked off bank earnings season by meeting profit estimates and raising its dividend. Fiscal first quarter net income rose five per cent to $3.2 billion, with adjusted profit climbing to $2.19/share. The bank is blaming a sharp drop in Capital Markets profit and a flat performance in Wealth Management on "challenging market conditions." Meanwhile, profit in the core Personal & Commercial banking unit rose three per cent. We'll delve into the challenges that held back RBC in Q1.
SNC CUTS DIVIDEND
SNC-Lavalin has delivered pretty much the quarter it telegraphed after two recent profit warnings, with full-year adjusted E&C profit at $0.25/share. The real news today is SNC’s decision to slash its quarterly dividend to $0.10/share from $0.287. The company also says it’s continuing to evaluate the potential sale of some of its stake in the Highway 407 toll road. And, in a statement, Chairman Kevin Lynch says the board is reiterating its confidence in SNC’s management team.
BARRICK MULLS NEWMONT BID
Barrick Gold confirmed in a short statement this morning that it has “reviewed the opportunity to merge” with Newmont in what would be an all-share, no premium deal. This comes after Bloomberg and The Globe earlier reported Barrick had considered taking a run at its rival.
CRUCIAL DAY FOR TRANS MOUNTAIN
…and by consequence, it's a crucial day for the federal government and the energy sector, with the National Energy Board poised to release its "reconsideration report" on the controversial expansion project. Recall the regulator was directed to take another stab at the file after the Federal Court of Appeal quashed the federal government's approval of the expansion, citing the NEB's "critical error" of not considering the impact of TMEP-related tanker traffic. We’ll have reaction from the likes of Hal Kvisle, Gwyn Morgan, and John Manley.
CHINA-U.S. TRADE TALKS
Futures are pointing to a higher open in New York as trade negotiations continue between China and the United States. U.S. President Donald Trump will meet with China’s vice premier this afternoon, with the March 1 tariff standstill deadline looming a week from today.
NOW WHAT, SNC?
After two profit warnings that crushed its stock, this morning we’ll find out if SNC-Lavalin has any other surprises for investors when it reports year-end results. And, for the first time since the political fireworks over alleged interference in the company’s corruption case, we’ll hear from SNC in its own words when management addresses analysts on a conference call at 1:30 p.m. ET.
SAPUTO BUYS INTO U.K.
Brexit uncertainty is evidently no match for Saputo. The Montreal-based dairy producer has agreed to purchase Dairy Crest for $1.7 billion, touting the deal as an opportunity to enter the United Kingdom and expand its global presence. Dairy Crest has approximately 1,100 employees and it generated almost $800 million in revenue in the year ending Mar. 31, 2018.
OTHER NOTABLE STORIES
-Alimentation Couche-Tard is tip-toeing into the pot market, unveiling a strategic partnership with Canopy Growth. The arrangement involves trademark licensing with an Ontario retail lottery winner. Canopy co-CEO Mark Zekulin says Couche-Tard will "advise and assist" the Tweed-branded store in London, Ont. -- with an eye toward "future international opportunities."
-Kraft Heinz shares are cratering in pre-market trading (down ~20 per cent) after disclosing a US$15.4-billion writedown, an SEC subpoena, and a dividend cut. Let’s keep in mind Berkshire Hathaway is the company’s largest shareholder. This adds extra intrigue to Warren Buffett’s annual letter, which is scheduled for release tomorrow.
-Freshii reported a 6.1 per cent drop in fourth-quarter same-store sales late yesterday. CEO Matt Corrin said in a statement his company has “a lot of important work to do in 2019.” It also announced a partnership up with Walmart Canada.
-More pain for Canadian retail workers after HBC announced it will shutter its Home Outfitters chain, with 700 jobs affected (though HBC says it will attempt to transfer as many of them as possible).
-Magna International is raising its quarterly dividend to US$0.365/share after reporting record fourth-quarter sales and adjusted profit that were essentially in line with estimates.
-And a tip of the hat to Tara Weber for her reporting late yesterday on cuts underway at Encana, fresh on the heels of the company’s Newfield Exploration deal.
NOTABLE RELEASES/EVENTS
-Notable earnings: Royal Bank of Canada, SNC-Lavalin, Magna International, Home Capital Group, Cott, Centerra Gold
-Notable data: Canadian retail sales
-8:30 a.m. ET: Premiers Doug Ford, Scott Moe and Blaine Higgs participate in panel hosted by Politico in D.C.
-9:00 a.m. ET: Prime Minister Justin Trudeau delivers remarks at Memorial University of Newfoundland (plus avail)
-11:00 a.m. ET: Premiers Ford, Moe, Higgs hold media avail in D.C.
-11:25 a.m. ET: Finance Minister Bill Morneau holds media avail in Toronto after meeting with private sector economists
-12:00 p.m. ET: National Energy Board releases report on Trans Mountain pipeline expansion (news conference starts in Calgary immediately after report is released)
-1:30: SNC holds conference call with analysts
-2:30 p.m. ET: U.S. President Donald Trump meets with China Vice Premier Liu He in Oval Office
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
