Futures higher, BlackBerry surprise, FedEx cuts (again), General Mills warns, Parkland vote
I’d like to mark myself safe after the power was knocked out for several hours during bedtime and 31 degree heat. What could have been a sweaty disaster turned into a beautiful summer evening with the kids and neighbourhood friends spraying each other with the hose. The eldest took the soap from our bathroom and offered it up to her friends while assuring them she would just put it back without her parents noticing.
Watch the full episode: Would you trust AI to pick your stocks? On this episode of In the Money with Amber Kanwar we sit down with Noah Solomon, CEO of Outcome Metric Asset Management, to unpack how he developed an artificial intelligence program to systematically pick Canadian dividend-paying stocks. With a track record of beating the index by 2,500 basis points net of fees, Noah breaks down what makes his model so effective and how “paranoia built into the algorithm” has helped him weather market storms.
Vibes: Futures are once again indicating a higher open with the S&P 500 sitting less than 1% from an all-time high and the TSX hitting fresh records. The rally isn’t so much about what is driving the markets higher, it’s about what isn’t derailing them. Less-than-perfect truce in the Middle East? Works for us! No trade deals announced ahead of July 9 deadline? That’s a tomorrow problem! Rates remaining elevated in the United States? ZIRP doesn’t mean ZIP! High valuations? They’ve been higher! In summary, the vibes are immaculate. BMO’s Brian Belski just reinstated his S&P 500 price target to 6,700 implying 10% upside from here. “We believe performance is broadening, reactions from daily rhetoric are calming, and actual corporate guidance will increase coming out of the 2Q earnings reporting period,” he wrote in a note to clients. He also reinstated his TSX target implying 7% return from here. In case you missed our interview with bullish Brian Belski you can watch here.
Fruitful: Shares of BlackBerry are popping 7% after reporting a surprise profit and boosting its full-year sales forecast. As I wrote in my Globe & Mail column this week, it may not be the most widely held stock anymore, but if you catch it at the right time it can be a homerun. BlackBerry more than doubled from November to its peak in February. It then lost half of its value in the next three months. But since the April low it is up nearly 50%. BlackBerry’s quarter was better than feared on most metrics: lower drop in sales than anticipated, less cash burn, better performance in autos. Investors have been concerned that it’s QNX business (technology that enables internet-of-things) would struggle because of its exposure to autos. It’s not secret the sector has been hard-hit by tariffs. BlackBerry boosted its sales forecast, but isn’t giving the all-clear in the auto sector wrote RBC’s Paul Treiber. “…The outlook is conservative and still assumes an uncertain auto/macro environment,” he wrote in a note to clients.
Tracking number: Shares of FedEx are losing ground after cutting it’s profit outlook yet again and declining to give a forecast beyond a quarter. Citing an “uncertain global demand environment” FedEx declined to give its usual full-year forecasts, for the only time in the last 13 years. It is tough for a global package shipping company to have blinders on when it comes to tariffs and the subsequent demand disruption. FedEx has been trying to control the controllables, mainly cost. There are signs that is working with profit coming in well ahead of expectations in this quarter. “Management noted the significant operating leverage and earnings growth it expects to realize upon resolution of tariff uncertainty and improvement in macro conditions, but investors seem unwilling to wait given its track-record of mixed results,” wrote Citi’s Ariel Rosa in a note to clients.
Soggy: General Mills is falling after its profit outlook was lower than expected. The maker of Cheerios and Lucky Charms is warning that profit could fall as much as 15% as a cautious consumer pulls back on spending. Changing habits could also be a factor as people opt for less pre-prepared foods. Shares of General Mills are languishing at lowest level since April 2020 and are down 40% from the 2023 peak.
Thumbs up: Parkland shareholders voted to sell the company to Sunoco in a meeting yesterday. For years Parkland has been locked in a battle with activist investors and a few months ago was on the verge of losing that battle. Before it could, it struck a deal with US-based Sunoco to be sold. It had a lot of people upset (recall, Ross Healy said on the show that Parkland was being “stolen”), but in the end shareholders decided it wasn’t worth the fuss and took the premium. It’s still not quite a done deal, points out ATB’s Nate Heywood. “The only hurdles remaining will revolve around the regulatory approval side and assessment on benefits to Canada,” he wrote in a note to clients. He is optimistic the deal will go through despite tensions between Canada and the US right now. But there is still a healthy spread between the offer price and where the stock is trading. “PKI shares continue to trade at a discount of ~8.7% to the implied cash/equity offer value of ~$41.14 per share ($44.00 at time of transaction announcement),” wrote Heywood. We will get the full low-down on the Parkland saga in an upcoming episode of In the Money with Amber Kanwar with one of the activist investors, John Ewing of Ewing Morris, joining us.
