This week’s newsletter will carry on with the large amount of featured stocks we have here reporting earnings.
This is the most condensed few weeks of earnings we have ever witnessed, with over 25 companies featured here reporting in the last two weeks.
With that said, lets get to our commentary on some of them.
Of note, too many companies are reporting at once for us to include them all in the newsletter. Remember, we have all of our reports on full display over on our website. Just click here to log in and read them when you have time.
Foundational Stock Earnings
Canadian Natural Resources (TSE:CNQ)
Canadian Natural Resources reported first-quarter earnings that topped estimates on the top and bottom lines. Revenue came in at $8.63B versus $8.46B expected, and earnings per share of $1.69 were 6 cents higher than expectations.
On a year-over-year basis, both revenue and earnings are down. However, this is to be expected as the company is currently realizing much lower prices per barrel. In March of 2022, the benchmark WTI price was $94.38. As of this most recent quarter, benchmark prices sat at $76.11. Overall production was strong, coming in at 1.319 million barrels per day and the company produced over $1.4B in free cash flow on the quarter.
Canadian Natural also repurchased 8.9 million shares for cancellation at an average price of $76.96 per share and raised the dividend by 6%. This marks the 23rd consecutive year the company has raised dividends, and the combination of dividend increases and share buybacks highlights the fact the company is dedicated to returning capital to shareholders.
The company currently has $11.9B in debt and just over $6B in liquidity. As per the company’s free cash flow policy, when debt is between $10-$15B, it will return 50% of free cash flow back to shareholders. When that debt level hits $10B or less, that allocation policy shifts to 100% of free cash flow being returned to investors. We expect Canadian Natural to hit this mark at some point in the near future, and shareholders should benefit.
Granite REIT (TSE:GRT.UN)
It was another good start to the year for Granite REIT, which topped estimates. The company reported funds from operations per unit of $1.25 per share, beating estimates by $0.05 per share and representing 18% year-over-year growth.
The company also increased net operating income by 5.4% which for the moment, is slightly below Fiscal 2023 guidance for NOI growth of +6.5%-7.5%. However, we’re not too worried at this point as it is likely timing related.
Occupancy dropped by 1.8% quarter over quarter to 97.8%. While this might raise some red flags, it was strictly due to vacancy from acquisitions in the US and recently completed developments.
Book value per unit come in at $94.11, down 1% from $94.68 last quarter. While the company’s BV continues to trend downwards, the flattish nature is a positive step and is likely a sign that REITs are booking fewer net fair value losses on their properties.
Circling back to solid cash flow growth, the company’s payout ratio against AFFO dropped to 68%, down materially from the 77% it posted in Q1 of Fiscal 2022. The company exited the quarter with a debt to EBITDA ratio of 8.1 and $1.1B of liquidity. Magna accounted for 26% of revenue which was down 3% YoY. Granite has renewed 97% of 2023 lease expiries and closed on two properties totaling 1M square feet for total proceeds of $106.8M.
Disney (DIS)
It was a decent mixed Q1 for Disney. Earnings of $0.93 per share missed by a penny, while revenue of $21.82B was inline with estimates. Leading the way again, the Parks segment posted strong 17% year over year growth on strong margins. It remains a lone bright spot as the company’s other segments are dealing with some headwinds.
Last quarter, we talked about the fundamental shift in the company’s streaming strategy. Management talked about this yet again, and re-iterated the fact it intends on opting for quality over quantity.
It also plans on taking a goodwill charge on some of their programming as it seeks to clean up its offerings. For the second consecutive quarter, Disney+ subscribers posted negative growth (-2%) following price hikes implemented mid-way through last year. On the bright side, the drop was offset by a higher average revenue per user on Disney+, which increased to $4.44 from $3.93 (+13%).
This helped the company narrow its net-loss in the direct-to-consumer segment by 26% as it inches toward profitability.
Overall, investors will have to exercise patience with Disney. While it has unrivaled IP and the Parks segment has been booming, the company’s media and DTC segments are still faced with plenty of headwinds.
Bull List Earnings
OpenText (TSE:OTEX)
In the company’s first quarter since the Micro Focus (MF) acquisition, Open Text delivered yet another double-beat. Of note, it is a little confusing with this company as it is already in Q3 of Fiscal 2023, ahead of most companies due to the timing of their Fiscal results. As a reminder, the numbers are in USD unless otherwise stated.
Earnings of $0.73 per share beat estimates by $0.28, and revenue of $1.245B beat by $61M. Since the quarter includes the MF acquisition, year-over-year numbers are skewed somewhat. That said, it posted better-than-expected organic revenue growth of 2.5% (vs 1.8% last year).
As expected, the company’s leverage ratio ballooned to 3.3x, and it once again reiterated that it plans to be below 3.0x within the next 8 quarters. That said, only 46% of the company’s debt load is fixed, so it is subject to interest rate volatility.
All eyes were on the integration of MF, which drove higher license and customer support revenue. Management is proving yet again that it is more than capable of delivering on expected synergies. As of the end of Q3, OTEX is “well advanced and ahead of schedule on (their) Micro Focus milestones as (they) have completed (their) talent integration and cloud roadmap.”
As a result of their strong showing, management upped Fiscal 2023 guidance. The company now expects to achieve 30-32% revenue growth (up+2% from previous guidance), and the mid-point of free cash flow (FCF) was also raised to $600M (+50M).
OpenText is up over 55% since its summer 2022 lows. Despite this, we still feel it provides strong value today.
You can read our report on OpenText here
Brookfield Asset Management (TSE:BAM)
For the first time since the spinoff, BAM had quarterly analyst estimates. In Q1 ’23, distributable earnings of $0.34 beat by a penny, and revenue of $966M missed expectations for $1.142B.
That said, we aren’t going to put too much stock in estimates right now since we are still in the very early stages of analysts covering the company.
Fee-related earnings (FRE) increased by 11% to $0.33 per share, representing strong year-over-year (YoY) growth. Fee-bearing capital also delivered double-digit growth and came in at $423B (+14% YoY).
In Q1, the company raised $13B in capital (and another $6B subsequent to quarter end) as all of their Flagship funds are in fundraising mode. Despite the reduced credit availability in the market, all signs point to “another strong year for fundraising”
It is near closing for its fifth infrastructure fund ($24B today) and sixth flagship equity fund ($9B today). The company also made several investments (to the tune of $17B), including upping the company’s stake in Oaktree from 64% to 68% for $174M.
All in all, the company’s ability to raise capital in a very difficult environment is a testament to the strong management team and strong brand name, and it is a very strong option for those looking for income.
You can click here to read our full report on Brookfield Asset Management
Goeasy Ltd (TSE:GSY)
It was another strong quarter for Goeasy, which beat on the top and bottom lines. Earnings of $3.10 (+14% year-over-year) beat by $0.21, and revenue of $287M (+24% year-over-year) beat by $12.25 million.
Despite fears of an economic slowdown, the company is witnessing strong loan originations. During the quarter, loan originations came to $477M, a 29% increase from Q1 of Fiscal 2022. This led to loan growth of $196M, ending the year with $2.99B in gross consumer loans receivable (+39%).
Net charge-offs – a metric that will be heavily scrutinized moving forward as it is a highlight of loans it expects to go unpaid – came in at 8.9%, which was slightly lower than last quarter (0.1%) and in line with Fiscal 2022 guidance of 8.5-10.5%.
All eyes were on the company’s response to the impending budgetary changes, including a decision by the Feds to lower the maximum allowable interest rate to 35%. Once this announcement was made, analysts slashed the company estimates. They lowered prices out of fear that it would materially impact the company.
We’ve highlighted the company’s response to this situation in our report, which you can read in full here.
Pembina Pipeline (TSE:PPL)
It was a mixed start to the year for Pembina Pipeline. Earnings of $0.66 missed by $0.01 and revenue of $2.297B missed by $124M. On the flip side, adjusted EBITDA beat, coming in at $947M(-6%) versus the $905.8M expected.
Adjusted funds from operations (AFFO) came 9% lower year-over-year (YoY) as the Northern Pipeline has only resumed partial operations as of February 23.
In the quarter, volumes remained consistent YoY with rising industry activity offsetting volume loss from the Northern Pipeline shutdown. That said, it expects 4-6% volume growth on the conventional pipelines in Fiscal 2023 as volume continues to build from here on out.
The company also reaffirmed Fiscal 2023 adjusted EBITDA guidance which calls for a range of $3.5-3.8B. This includes a higher-than-expected negative impact from the Northern Pipeline leak in mid-January.
Whereas it was previously stated that they were looking at ~$30M impact this past quarter, it came in a -$54M as it required more work than expected. It also announced that it expects $25-$30M next quarter. The fact guidance remained untouched despite higher-than-anticipated costs means the underlying performance of their assets is quite strong.
You can read our full updated report on Pembina Pipeline here
Boyd Group Services (TSE:BYD)
Boyd reported yet another strong quarter and continues to be one of the best performing stocks in the country over the last year.
Most of the company’s business comes from the US, so it reports in USD. However, estimates are in Canadian dollars. The company reported revenue of $714.9M and EPS of $0.97 when estimates called for $917 CAD and $1.11 CAD in earnings per share.
After currency conversions, this is a strong beat on both the top and bottom lines. The company also reported adjusted EBITDA of $84.6M USD, slightly above expectations. The company has opened and acquired a total of 30 stores thus far in 2023 and has maintained its goal that was set back in 2019, which was to double the size of its business by 2025.
While results continue to improve, for shareholders of Boyd, all eyes will be on the forward-looking outlook (aside from 2019 goals). And for that, investors should temper expectations.
The company is still having difficulty meeting demand, primarily resulting from labour headwinds. The company has to increase wages to attract talent. Thus far, the company has not been able to increase prices enough to offset those rising wages. It has confidence it will be able to do so over time. However, in the meantime, it is taking a cautious approach to providing commentary outside of its 2019 goal, as mentioned above.
