Archives for April 24, 2019

Oil prices help push up stocks, but strong earnings numbers helped too

The two best known stock indexes in Canada and the U.S. closed at record highs on Tuesday, as the price of oil pushes higher and U.S. companies posted strong profits.

The S&P/TSX Composite Index of the largest companies on the Toronto Stock Exchange closed up 93 points to 16,671.

That beats the previous all-time high the index hit last week, when it headed into the long weekend at 16,612.

The biggest thing driving Canadian stocks higher was the price of oil, as a barrel of West Texas Intermediate gained 77 cents to close at $66.32 US. Oil prices have risen for three trading days in a row now, buoyed by Monday’s news that the U.S. will extend sanction on Iranian oil to five more countries.

While the higher oil price was good for the TSX’s resource sector, “investors generally are responding favourably to earnings reports and that’s an overall positive thing,” said Colin Ciezinski, chief market strategist with SIA Wealth Management, in an interview.

He doesn’t see any major events on the horizon that could disrupt things, which is why strong corporate earnings will be key to setting the market’s direction. He sees the TSX trending higher into the summer, but Tuesday’s “breakout to a new high is significant and showing a lot of interest,” he said.

Stock markets gained even more south of the border, where the S&P 500 — an index of the 500 biggest public corporations in the U.S. — closed up 25 points to 29,33. That’s up from the previous closing high of 2,925 it hit last October.

Big companies including Hasbro, Lockheed Martin and Twitter all surprised Wall Street with strong profit and revenue. 

Twitter shares jump 16%

Twitter revealed that its advertising revenues doubled, and the social media company says its number of daily users increased by 11 per cent during the quarter. The stock gained 16 per cent, buoying the entire tech space.

“We’re getting a nice forward-looking picture from those companies,” said J.J. Kinahan, chief market strategist for TD Ameritrade.

Other big names such as Caterpillar, Boeing and Microsoft are all scheduled to post earnings on Wednesday, numbers which will be closely watched to see if the optimism can continue.

Cenovus Energy Inc. reported a profit of $110 million in its first quarter compared with a loss a year ago as it benefited from improved prices for western Canadian oil.

The company says the improvement in prices for western Canadian oil due to the Alberta government’s curtailment program more than offset the impact of reduced production and increased operating costs during the first quarter.

Cenovus says its profit amounted to nine cents per share for the three months ended March 31, compared with a loss of $654 million or 53 cents per share a year ago.

Gross sales totalled nearly $5.2 billion, up from $4.7 billion in the same quarter last year.

Cenovus reported first-quarter oil sands production of 342,980 barrels per day, down five per cent compared with a year ago, while operating costs rose to $9.06 per barrel compared with $8.78 a year ago.

Production from the company’s Deep Basin assets averaged 104,290 barrels of oil equivalent per day, down 18 per cent from a year ago due to the sale of its Pipestone business, lower capital investment, natural declines and weather-related outages.

Gains in the energy sector helped lift Canada’s main stock index in late-morning trading, while U.S. stock markets also surged higher.

The S&P/TSX composite index was up 47.39 points at 16,624.67.

In New York, the Dow Jones industrial average was up 107.23 points at 26,618.28. The S&P 500 index was up 17.15 points at 2,925.12, while the Nasdaq composite was up 64.23 points at 8,079.50.

The Canadian dollar traded for 74.58 cents US compared with an average of 74.89 cents US on Monday.

The June crude contract was up 94 cents at US$66.49 per barrel and the June natural gas contract down 6.1 cents at US$2.50 per mmBTU.

The June gold contract was down US$6.80 at US$1,270.80 an ounce and the May copper contract was down 2.10 cents at US$2.88 a pound.

Canadian Pacific Railway Ltd. missed expectations even though its profits surged 25 per cent during the winter quarter despite lower volumes caused by frigid temperatures and heavy snowfall.

“What happened to us in February, especially in the first two weeks of March, was extraordinary,” chief executive Keith Creel told investors on a conference call Tuesday.

Creel stressed “one of the toughest months and quarters in my railroading experience,” highlighting its lowest gross ton mileage — an industry metric measuring weight moved per mile — in eight years.

Chief financial officer Nadeem Velani said the railway’s momentum was interrupted as weather muted revenue growth and resulted in significant expenses.

Operating expenses rose nine per cent year over year to $1.22 billion in the quarter ended March 31, CP Rail said.

The operating ratio rose 180 basis points 69.3 per cent in an industry metric that where a lower ratio means more efficiency.

On an adjusted basis, year-over-year diluted earnings per share rose three per cent to $2.79 from $2.70 in the first quarter, far short of analyst expectations of $3.01, according to Thomson Reuters Eikon.

Marketing head John Brooks said rail network problems “hindered” grain volumes, though strong pricing allowed their revenues to ramp up.

Despite the weather trouble, the Calgary-based company saw profits jump last quarter as crude-by-rail revenues increased and fuel costs declined.

Net income rose 25 per cent to $434 million in the first quarter, compared to $348 million in the same period in 2018, CP Rail said.

Quarterly revenues jumped to $1.77 billion, up six per cent from $1.66 billion last year.

Revenues for energy, chemicals and plastics shot up 18 per cent to $315 million amid surging demand from Asian markets .

Grain revenues, which have broken company records recently, rose six per cent to $380 million, and container traffic and coal nudged up three per cent and four per cent to $380 million and $158 million, respectively.

The results were released after markets closed Tuesday.

Creel started the earnings call by acknowledging three rail workers who died after a freight train fell more than 60 metres from a bridge into the Kicking Horse River in Alberta on Feb. 4.

“There can never be a worse call than the one I received that morning to notify me of that tragic accident. It’s heartbreaking for the immediate family members obviously, as well as the CP family members that remain at work.”