Markets This Week: What Moved on Oct 13, 2024

Michael McCullough is a contributing editor to MoneySense and a financial writer and editor in Duncan, B.C.

Canadian Natural Resources doubles down on Canada

Canadian Natural Resources (CNQ/TSX) surprised some investors by moving decisively to expand its Canadian portfolio. The company agreed to purchase Alberta upstream assets from Chevron Corp. (CVX/NYSE) for USD 6.5 billion in cash. The market reacted positively: CNQ shares rose after the announcement, reflecting investor approval of a deal focused on domestic oil and gas production.

The transaction includes a 20% interest in the Athabasca Oil Sands Project and a 70% interest in the Kaybob Duvernay shale play. Canadian Natural expects these acquisitions to add roughly 122,500 barrels of oil equivalent per day to its production in 2025. Alongside the deal, the company announced a 7% increase to its quarterly dividend, raising it to 56.25 Canadian cents per share effective January.

Chevron framed the sale as a move to free up capital for U.S. shale opportunities and select international projects, including holdings in Kazakhstan, which the company views as offering stronger long-term returns. The deal underscores differing strategic priorities between a major international oil company and a Canadian producer focused on domestic upstream assets.

Nvidia moves up to number 2 in market cap

Nvidia (NVDA/Nasdaq) continued its remarkable run as shares climbed above $130, lifting the company past Microsoft to become the world’s second-largest firm by market capitalization, at about $3.19 trillion. Only Apple, at roughly $3.4 trillion, remains larger. The stock has surged 26% over the past month, far outpacing the S&P 500’s roughly 6% gain in the same period.

The chipmaker’s market value has expanded dramatically in recent years, growing roughly tenfold in two years. This week’s momentum followed a positive sales update from Super Micro Computer, a major server supplier, which reported stronger-than-expected demand for liquid cooling systems used with Nvidia graphics processing units (GPUs). Analysts are optimistic: estimated adjusted EBITDA for Nvidia for the current quarter sits near $21.9 billion.

Pepsi earnings leave a sour taste

PepsiCo posted a second consecutive disappointing quarter and trimmed its full-year outlook for organic revenue excluding acquisitions. The results were weighed down by the recall of certain Quaker Foods products over potential salmonella contamination, weaker demand in the U.S. and operational disruptions in some international markets, including parts of the Middle East.

In North America, beverage volumes declined about 3% year-over-year, largely because of softer energy drink sales. The Frito-Lay snacks division also reported a drop in volume, down around 1.5%. Company executives noted that salty and savory snacks, which had outperformed previously, have lagged so far this year. As a result, PepsiCo revised its 2024 sales growth projection from about 4% to a lower, low-single-digit pace.

PepsiCo Q3 earnings

PepsiCo (PEP/Nasdaq): Adjusted earnings per share were $2.31 (consensus $2.29). Revenue was $23.32 billion (consensus $23.76 billion). All figures in U.S. dollars.

Delta earnings grow with stronger pricing

Delta Air Lines (DAL/NYSE) posted higher revenue and profit in the third quarter, helped by a continued pullback in the pace of new seat capacity across U.S. carriers. That slower capacity growth helped fares firm up and supported margins, despite lingering travel disruptions tied to a July software update from a third-party vendor.

Delta reported a 15% year-over-year increase in net income for the quarter ended September 30, with net income around $1.27 billion. The airline expects adjusted earnings per share in the fourth quarter of $1.60 to $1.85, a range broadly in line with analyst forecasts. Summer capacity increased about 5.5%, according to industry analysis, before new seat additions slowed to roughly 1.5%. Lower fuel costs—jet fuel prices are down about 25% year-to-date—have also supported industry profitability and contributed to a notable rise in airline shares over recent months.

Delta Q3 earnings

Delta Air Lines (DAL/NYSE): Adjusted earnings per share were $1.50 (consensus $1.52). Revenue was $14.59 billion (consensus $14.67 billion). All figures in U.S. dollars.

Couche-Tard ups ante on 7-Eleven owner

Alimentation Couche-Tard (ATD/TSX) raised the stakes in its bid for Seven & i Holdings, the Japan-based parent company of 7-Eleven. Reports indicate that a revised proposal valuing Seven & i at about $47 billion was delivered to the company, roughly 22% higher than Couche-Tard’s earlier $38.5 billion bid. Seven & i acknowledged receipt of a revised offer, and its shares jumped on the news before settling higher on the day.

If the deal were to move forward, it would face significant regulatory scrutiny and other hurdles, but it would also rank among the largest foreign takeovers of a Japanese firm. The transaction remains a developing story with important strategic and regulatory implications for both companies.

Book your spot for the Canadian Financial Summit

Registration remains open for the 2024 Canadian Financial Summit, a free online event taking place October 23 to 26. Attendance is limited and offered on a first-come, first-served basis. MoneySense contributors, including Lisa Hannam, Jonathan Chevreau, Jaclyn Law and Michael McCullough, are among the more than 30 personal finance experts scheduled to present. The summit covers practical advice on investing, saving and managing money.