Futures lower, FedEx split, Nike tanks, BlackBerry profitable, wish list for BCE
Today is the last Before the Bell until 2025! I want to thank all of you for subscribing and being part of my new journey. And a special thank you to my husband for being the butt of all my jokes. I’ve been working on a new project and I can’t wait to share it with you in the new year. In the meantime, I hope you enjoy the holiday season and I’ll be back in your inbox January 6th, 2025!
Jitterbug: Futures are under pressure this morning as President-Elect Donald Trump threatens Europe with tariffs and has railroaded budget talks igniting the possibility of a US government shutdown tonight. And he’s not even President yet. The TSX has been no safe haven amidst this volatility and is on track for it’s worst losing streaking in 14 months. This morning we got the Fed’s preferred measure of inflation which came in slightly below expectation. However, on a headline basis it is running at 2.4% while core inflation is running at 2.8%. Still far from the Fed’s 2% inflation target. The selling pressure this morning is weighing on some of the biggest names in tech but overall they are still poised to be the big winners in 2024. While the Magnificent 7 has held up relatively better, the group may be welcoming a new member with the rally in Broadcom (up 100% in 2024 and now worth $1 trillion). This has traders floating around a new acronym: BAATMMAN (Broadcom, Apple, Amazon, Tesla, Microsoft, Meta, Alphabet, Nvidia). Will BAATMMAN fly again in 2025?
Just do it: Shares of Nike are plunging 7% in the pre-market as better than expected quarterly results are being offset by a weaker forecast. Nike is in the throes of a turnaround with new CEO Elliot Hill rejoining the company in October. Sales dropped 8% this quarter, which was not as much as feared, and profit came in better than expected. Nike is warning, however, that sales are going to fall by low double-digits in the next quarter and margins will be under significant pressure. Stifel says this kind of clean up is going to take many quarters and estimates have to come down. They don’t recommend buying the dips here. “Nike remains a ‘show me’ story, in our opinion,” wrote Rick Patel of Raymond James in a note to clients this morning, “Accelerating innovation and brand elevation are the right moves, but it’s unclear if/when revenue will inflect higher especially given historic tailwinds (Direct, China) remain under duress.” Nike shares are down 30% in 2024 and are poised to open at a 5-month low.
It’s not you, it’s me: FedEx is up 6.5% in the early trade after announcing it will break the company up into two parts. The shipper will split its freight trucking business from its core delivery operations. The plan is to spin off freight into a new publicly traded entity. Freight is one of the most profitable parts of FedEx’s business but with shares underperforming the market, the company didn’t feel it was getting properly valued because of a slowdown in other parts of the business. With freight out on its own, FedEx can now focus on better integrating its Ground and Express business which should improve margins and free cash flow. All the excitement about the changes afoot are overshadowing the fact that FedEx lowered its sales and profit forecast for the second time this year.
Inch by inch: Shares of BlackBerry are up slightly after reporting better than expected sales, profit and cashflow in the quarter. RBC calls the quarter “messy, but profitable.” Recall, a few days ago the stock surged because they were ditching their cybersecurity business, Cylance. “Due to the sale of Cylance and cost restructuring, BlackBerry is now profitable,” wrote Paul Treiber at RBC, “While there may be some variability quarter to quarter, we believe BlackBerry is likely to sustain profitability going forward.” However, the stock is being held back today by a weaker than expected outlook for the fourth quarter.
All I want for Christmas: Scotia’s Maher Yaghi is out with a note this morning writing down a wish list for BCE shareholders. The stock is trading around a 12-year low and has lost nearly 40% in value this year. Yaghi says this has not been totally self-inflicted, regulatory and competitive pressures have been a factor. Having said that, he listed 5 things the company could do to right the ship: “1) Immunize the balance sheet from cash outlays related to future fiber expansions both at Ziply and other possible US acquisitions. 2) Dispose of assets where the rent cost could be lower than the cost of ownership (wireless towers, satellite business, Canadian regulated rural networks). 3) Merge the media assets with Corus in a separate publicly listed company. 4) Cut the dividend in half and 5) Stop the (dividend reinvestment program). While this is a long wish list and some might not be quick (the media offload especially), taking action on points 1 and 2 and especially 4 & 5, could create a material shift in expectations and reposition the company to be on the Nice list next year,” he wrote. A lot of options. Some easy, some hard. Interestingly, none call for management changes.
Correction: The original post about BAATMMAN included Amazon twice. It should be Alphabet. I regret the error.
