We're #25! Industrials power modest Q3 gain for the TSX - BNN | Canada News Media
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We're #25! Industrials power modest Q3 gain for the TSX – BNN

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The S&P/TSX Composite Index rose 3.91 per cent in the third quarter, with gains moderating after a blowout Q2 as equity markets digested the shocks from the COVID-19 pandemic, prospects for continued economic shutdowns and the impact of lower-for-longer interest rates.

Those gains have the Toronto benchmark ranked 25th out of 92 global peers, sandwiched between Romania’s Bucharest BET Index and Germany’s DAX Index, and comfortably lagging the performance of the U.S. broad-market S&P 500 and the blue-chip Dow Jones Industrial Average.

In all, nine of the 11 TSX subgroups were in positive territory for the quarter, indicating a degree of breadth to the gains.

Below, BNN Bloomberg takes a look at the TSX leaders and laggards for the quarter that was.

Sector leaders:

Industrials: +13.22 per cent

Utilities: +9.88 per cent

Materials: +8.76 per cent

Industrials led the way for the TSX, as investors looked to parse the impact on Canada’s economic reopening on the nation’s transport, construction and equipment makers. Utilities, which typically perform well in a low-rate environment due to their need to borrow capital to fund expansions and have a habit of paying steady dividends, took second spot with a nearly 10 per cent gain. The materials subgroup took third sport with a nearly nine per cent gain, with gold prices holding near a multi-year high due to global economic uncertainty. But it wasn’t just the precious metal that helped the subgroup, with some strength in copper lifting base metals producers amid speculation Chinese industrial activity was beginning to recover from the pandemic-induced demand destruction.

Lead gainers:

Trillium Therapeutics Inc.: +72.45 per cent

Pretium Resources: +50.00 per cent

Ritchie Bros. Auctioneers: +42.88 per cent

Trillium Therapeutics:

Trillium hasn’t just been a standout performer in the third quarter, it’s been the top performer on the TSX Composite Index so far this year, rising more than 1,000 per cent. The company, which develops cancer treatments for conditions including lymphoma, has seen encouraging results for some of it’s treatments, buoying investor enthusiasm. Trillium’s efforts haven’t gone unnoticed by some of the heavy hitters in the pharma industry, with Pfizer Inc. taking a US$25 million equity stake in the firm during the quarter. Trillium also raised $150 million in Q3 through a share offering.

Pretium Resources:

The rising price of gold lifted all boats, but none more than single-mine operator Pretium. The company, which operates its Brucejack mine in north-west British Columbia, surged past analyst expectations in its most recent quarter. The rising price of bullion prompted Pretium to raise its full-year free cash flow expectations, based on an average gold price of US$1,800 per ounce. However, Pretium also warned that COVID-19 measures would raise costs as it looks to protect its workers and operations from the ravages of the virus. Pretium’s Brucejack mine is a sprawling claim with difficult geological hurdles and is seen as a potential acquisition target, with Barrick Gold Chief Executive Officer Mark Bristow having been reluctant to say the mining giant wouldn’t take a look at a potential tie-up.

Ritchie Bros Auctioneers:

Canada’s preeminent dealer of used industrial, farming and construction equipment has thus far weathered the pandemic-induced slowdown. Net income decreased a paltry two per cent in the company’s most recent quarter, even in the face of lockdowns and a drop in overall economic activity. There is, however, a degree of counter-cyclicality to Ritchie Bros results. As a middleman for the sale of second-hand equipment, the firm often benefits from customers seeking out deals on the second-hand market rather than shelling out for brand new equipment.

Sector laggards:

Health care: -14.44 per cent

Energy: -9.39 per cent

Communications services: +0.79 per cent

Trillium’s outsized gains weren’t enough to spare the health care sector from posting the weakest performance of the composite’s 11 subgroups in the quarter. Health care was hammered by some noticeable weakness in the cannabis sector as pot stocks continue to be punished for rocky performances. Energy’s rough ride continued, albeit with a disconnect from underlying energy prices. While individual stocks have been under pressure, crude oil prices have largely been in a holding pattern, with North American benchmark West Texas Intermediate hovering around US$40 per barrel as investors assess how the pandemic and subsequent economic reopenings impact the demand picture. Communications services has seen a bit of a mixed bag through the quarter, as Canada’s Big Three telcos spar with new entrants over wholesale network access rates and Cogeco battles a takeover offer from Altice USA and Roger Communications, which muddies the picture when it comes to overall performance.

Lead laggards:

Aurora Cannabis Inc: -63.07 per cent

Vermilion Energy Inc: -48.51 per cent

Enerplus Corp: -36.13 per cent

Aurora Cannabis:

Aurora’s stock has been demolished amid persistent cannabis oversupply concerns. Shares in the company plunged more than 25 per cent in one trading session alone after the company disappointed investors with its fourth-quarter results as growing pains persist in the cannabis market. The firm was also chastised by MKM Partners, with their analyst calling on Aurora to stop growing so much cannabis as the market remains out of balance with consumer demand. The company says it expects to reach positive EBITDA (earnings before interest, taxes, depreciation, and amortization) by the second quarter of 2021, about 18 months later than earlier projected.

Vermilion Energy:

The geographically-diversified energy company, which operates not only in North American but also off the coast of Ireland and France, has seen its share price swing with the vagaries of international energy markets. Fund flows from operations, a key metric in the energy sector, plunged 52 per cent in the company’s most recent quarter as concerns over global energy demand mounted. Vermilion has also been hampered by price impacts from internal squabbling over production quotas for OPEC members and suspended its dividend in April.

Enerplus:

The energy price pressures also took a toll on Enerplus in the third quarter. The company, which operates in Western Canada, North Dakota, Montana and Pennsylvania, posted a 13 per cent decline year-over-year in its most recent quarter, reflecting a troubled picture for overall consumer demand. Enerplus also booked significant impairment charges in the quarter, further hampering results.
 

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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