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Apple CEO Tim Cook says company saw an 'uptick across the board' in late April thanks to stimulus and work from home – CNBC

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When Apple reported second-quarter earnings on Thursday, company executives didn’t provide financial guidance for the quarter ending in June.

CEO Tim Cook said in an interview with CNBC’s Josh Lipton that the company made that decision because “it’s hard to see out the windshield to know what the next 60 days look like.”

But both Cook and Apple CFO Luca Maestri gave quite a bit of color on a call with analysts about what they’ve seen economically in response to Covid-19 and how Apple has fared so far, as world economies brace for a lockdown-related slowdown and China starts to economically recover from its period of quarantine.

An ‘uptick across the board’

Apple executives discussed how the timing of lockdowns around the world affected demand for Apple products.

“If you look at what happened in China, we were having a really good January, the lockdown started there toward the end of January, as you know. February we saw steep decline in demand. We closed our stores in February. As the lockdown completed in mid-February, towards the second half of February, we began to open stores,” Cook said. 

Cook said store traffic in China was up from February but not to where it was before the lockdown started there. 

When the lockdowns started in the rest of the world in mid-March, Apple saw a sharp decline in demand outside of China, Cook said. But he struck an optimistic note about impending recovery, noting that things started looking a lot better in the second half of April. 

“The real thing for the rest of the world happened in March when the shelter in place orders went in and the work from home began. For those two, three-week period, at the end of the quarter we saw a sharp decline in demand,” Cook said. “If you now step out until April and look at that, early April started like the end of March, but in the second half of April we’ve seen an uptick across the board.”

Cook also gave two possible reasons why: Stimulus packages and a shift to working from home.

“A part of it is due to the stimulus programs taking effect in April. And then a part of it is probably the consumer behavior of knowing this is going to go on for a little while longer and getting some devices and so forth lined up to work at home more,” Cook said. 

iPads and laptops are in, headphones and iPhones will be hurt 

Some of Apple’s products will fare better in the marketplace than others during the pandemic, executives said.

Apple’s more powerful computers, which include the Mac and iPad lines, could have a strong quarter as people need computers at home.

“We believe that iPad and Mac are going to improve on a year-over-year basis during this quarter and that’s customers that are either taking online education or working remotely,” Cook said. 

However, sales of mobile devices like iPhones, headphones, and Apple Watches will likely take a hit, executives said. 

“On iPhone and Wearables, we expect a year-over-year revenue performance to worsen in the June quarter, relative to the March quarter,” Maestri said. 

“During the last three weeks of the quarter, as the virus spread globally and social distancing measures were put in place worldwide including the closure of all our retail stores outside of Greater China on March 13, and many channel partner sales around the world, we saw downward pressure on demand, particularly for iPhone and Wearables,” Cook said.

Maestri said that people were holding onto their older iPhones for longer. “While we did see a slight elongation in our replacement cycle towards the end of the quarter which we attribute to the widespread point of sale closures, our active installed base of iPhones has reached an all-time high.”

Cook said on the call he doesn’t see Apple’s customers trading down to less expensive devices with less storage or power.

Other product lines likely to be hurt by the pandemic include Apple’s warranty program, AppleCare, which is often sold at stores along with new computers and phone; and Apple’s relatively small ad business, which includes search ads in the Apple App Store, ads inside the Apple News App, and “third party agreements,” Maestri said.

Remote work and school could be big

Apple executives repeatedly talked up the company’s education and enterprise sales and software, suggesting that it sees significant opportunity as people around the world work and go to school from home.

“I think many people are finding that they can learn remotely and so I suspect that trend will accelerate some,” Cook said. “I think that’s probably also true about working remotely in some areas, in some jobs.”

Maestri discussed some of Apple’s enterprise clients like IBM and SAP and what they’ve done to enable work from home, including being able to manage company machines remotely and deploying new machines easily.

“We’ve seen countless examples of new products and deployments implemented in just a few hours. For instance worked with our New York teams. Peloton, for instance, worked with our New York teams to deploy an entire fleet of Macs overnight so their team could work remotely,” Maestri said. 

Apple said that it’s delivering large orders of iPads to school systems, including 100,000 in Los Angles and 350,000 in New York. 

Cook says that as Apple works from home, some of his employees are more productive, but it’s not across the board. 

“Everybody’s getting used to the work at home,” Cook said. “In some areas of the company people may be even more productive, in some other areas they’re not as productive. So it’s mixed, depending upon what the roles are.”

Manufacturing in China is back at ‘typical levels’

Apple’s execs were clear on the call on Thursday: its supply chain is going back to normal, which has implications for new product launches through the end of the year, which Cook called the company’s “lifeblood.”

Apple’s devices are complicated computers with hundreds of different parts from different suppliers, many of whom are based in China. Apple’s final assembly is mostly done in China as well. 

While China shut down in January, cities have re-opened and people are going back to work. 

“While we felt some temporary supply constraints in February, our operations team, suppliers and manufacturing partners have been safely returning to work and production was back at typical levels toward the end of March,” Cook said on the call. 

Apple’s CFO said that he didn’t anticipate production or supply issues with the new products Apple has released during the pandemic, including a new low-cost iPhone and high-end iPad. 

“We are in a typical supply position including our usual ramp associated with new products recently launched,” Maestri said. 

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Laurentian Bank slashes dividend by 40 per cent as profits tumble – The Globe and Mail

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Laurentian Bank of Canada slashed its dividend by 40 per cent on Friday following a sharp drop in profit, becoming the first large Canadian bank to cut its dividend payout in nearly 30 years.

The Montreal-based bank reported a 79-per-cent drop in profit for the three months ended April 30, with net income falling to $8.9-million from $43.3-million in the same quarter last year. This was largely due to a spike in provisions for potential loan losses tied to weakening economic conditions caused by the COVID-19 pandemic.

Laurentian responded by cutting its dividend to 40 cents a share, down from 67 cents. This is the first time a large Canadian bank has cut back dividend payouts since National Bank of Canada did so in 1992, according to data from Refinitiv.

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“Although we believe that current earnings are not reflective of the future earnings power of the organization, we have reduced the dividend to $0.40 per share which improves operational flexibility until we reap the anticipated benefits of our strategic plan,” chief executive François Desjardins said in a press release.

Laurentian shares fell more than 9 per cent in trading Friday morning.

The bank’s earnings cap off a week of dismal results from Canadian banks, which saw profits eviscerated by a rise in loan loss provisions due to expectations of future defaults and weakening credit. Laurentian, a regional bank which focuses primarily on Quebec, managed to keep revenues flat on a year-over-year basis. But higher provisions slammed the bottom line.

Laurentian recorded $54.9-million in provisions for credit losses, compared to $9.2-million a year ago. Gross impaired loans, which are loans that the bank does not expect to be paid back in full, rose to $235-million, up 25.8 per cent year-over-year. The biggest increase in loan impairment came from the bank’s commercial loan book, where gross impaired loans rose 42 per cent year-over-year.

The results were worse than analysts had anticipated. The bank reported an adjusted earnings per share of $0.20, well below the $0.38 average that analysts had expected, according to Refinitiv data.

In a note to clients, National Bank analyst Gabriel Dechaine noted that the miss was driven by a combination of higher than expected provisions for credit losses and elevated expenses, which were partially offset by a lower-than-forecast tax rate.

“While necessary, a 40 per cent dividend cut may be viewed as insufficient, as pro forma payout ratios are still elevated,” Mr. Dechaine wrote.

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The bank’s capital position deteriorated slightly in the quarter, with the closely watched common equity tier 1 ratio falling to 8.8 per cent from 9 per cent.

“This level of capital provides the Bank with the flexibility to pursue organic growth, as well as to continue to invest in the implementation of our core banking system,” the bank said in a news release.

However it added that it expects “regulatory capital ratios will remain below the level observed over the recent quarters.”

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Alberta partners with fast-food chains to offer free masks at drive-thrus – CBC.ca

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Albertans will be able to pick up free non-medical masks from the drive-thrus of A&W, McDonald’s and Tim Hortons starting in early June.

The Alberta government is distributing 20 million masks meant to help limit the spread of COVID-19, said Health Minister Tyler Shandro during a press conference Friday.

The masks are for situations where physical distancing is difficult to maintain, such as on public transit or while shopping, Shandro said.

“We recognize that as the province relaunches and we all adapt to our new normal, we all may sometimes find ourselves in a situation where physical distancing may not be possible.”

The province is distributing the masks through the three restaurant chains because they provide an ease of access, said the province’s health minister.

“We chose this method, quite honestly, because these partners have access through these 600 sites to about 95 per cent of our population,” Shandro said. “These three partners are doing it without expense to the Alberta taxpayer.”

Each Albertan is allowed one package of four masks, while supplies last. The masks also come with instructions on how to wear and dispose of them. No purchase is necessary.

“This is not meant to provide Albertans with an unlimited supply,” Shandro said. “We’re encouraging people to source their own masks on an ongoing basis.”

The province will also look at other ways to distribute the masks, like at high-risk transmission areas such as transit and places of worship, for people who can’t access one of the drive-thru locations.

A budget of $350,000 has been set aside to fill the gap in distribution, Shandro said.

The province is also working with municipalities, First Nations communities, Métis settlements and local agencies to distribute the non-medical masks to those who need them.

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Canadian Stocks to Buy With Wide Moats – The Motley Fool Canada

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Investing in companies with wide moats is one of the best ways to build a portfolio of high-quality companies. In times of significant volatility, finding Canadian stocks to buy with a strong competitive advantage can protect against considerable downside.

If you take a quick glance at the list, you will find some of the best blue-chip companies in the country. Outside of those in the financial sector, most have outperformed the S&P/TSX Index during this pandemic. The odds are that they will continue to outperform in the event the country sees a second wave and more economic hardship. 

With that in mind, I consider them the top Canadian stocks to buy to protect your portfolio against considerable losses. 

A top utility

Despite poor earnings, pulled guidance, and increasing uncertainty, the markets are showing strength. Over the past month, the S&P/TSX Index is up by 5.05%. In contrast, utilities are showing weakness. Case in point, Fortis (TSX:FTS)(NYSE:FTS) is now down by approximately 3% over the same period.  

Despite the recent underperformance, Fortis is holding up quite well during this pandemic. The stock price is only down 3.66% year to date, far outperforming the 11.66% loss of the Index. 

The company remains one of the best defensive stocks on the TSX and is a top Canadian stock to buy. This has proven to be true regardless of economic condition. We are in an era of low interest rates, which is a positive for utilities. It means lowering borrowing costs and higher profitability. 

Fortis has consistently outperformed the TSX. Over the past decade, it has more than tripled the returns of the index. The company also has an attractive yield (3.71%) and the second-longest dividend-growth streak in the country (46 years). It expects to grow the dividend by 6% annually through 2024. 

Analysts have a one-year price target of $59.45, which implies 14.5% upside from today’s price of $51.91 per share. It is trading at only 13.82 times earnings, well below historical and industry averages. 

Fortis is a top Canadian stock to buy. It provides reliable income and steady growth at reasonable valuations. 

A top-performing Canadian stock to buy

When it comes to recent and yearly performance, one of the top companies has been Canadian Pacific Railway (TSX:CP)(NYSE:CP). As one of the two largest railways in Canada, it is easy to quantify and understand CP Rail’s considerable moat. 

Year to date, the company’s stock price is up by 3.98%, and it has a one-year return of 14.95%. Over the past decade, shareholders have seen their investment handily beat the market, with total gains of 507%. 

Despite a slowdown in economic activity, analysts still expect the company to post positive earnings growth in 2020. Looking beyond this year, the expectation is for earnings growth in the low teens. This makes it one of the fastest-growing blue-chip companies on the TSX Index. 

As of writing, the company is trading in line with the estimating one-year target of $345 per share. It is also trading in line with its historical valuations. However, the company rarely trades at a big discount. This makes CP Rail a rare Canadian stock to buy at any point in time.

Are you looking for more ideas to protect against your portfolio against a second wave of the pandemic? Then consider signing up to unlock this basket of stocks.

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