This Week in Markets: What Investors Need to Know - May 5, 2024

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

Oil sands producers await TMX price bump

The expanded Trans Mountain Pipeline began moving diluted bitumen on Wednesday. Even at a slow pace, it will take weeks for the crude to reach destination refineries, but the restart has renewed hopes that Canadian oil sands producers can narrow the price discount their heavy crude faces. Producers have long been disadvantaged by limited export capacity and regional pricing differentials; a larger pipeline could improve access to international markets and lift realized prices over time.

Oilsands earnings highlights

Two major oilsands firms reported first-quarter results this week:

Cenovus Energy (CVE/TSX): Reported adjusted earnings per share that beat expectations and posted revenues of about $13.4 billion. The company raised its base dividend by 29% and announced a variable dividend for the quarter. Quarterly production exceeded 800,000 barrels of oil equivalent per day, and the company reduced its overall debt level slightly.
Canadian Natural Resources (CNQ/TSX): Posted earnings per share modestly below estimates on revenues around $8.2 billion. Results were weighed down by lower realized prices and softer production, particularly in natural gas, with quarterly output near 1.33 million barrels of oil equivalent per day.

Cenovus’s stronger-than-expected performance, dividend increase and production growth suggest the company is both generating cash and returning more to shareholders. By contrast, Canadian Natural Resources faced headwinds from commodity price moves and production issues, underscoring how volatile energy sector results can be quarter to quarter.

Amazon, Apple still magnificent

Two technology giants—Amazon and Apple—reported first-quarter results that kept momentum in the large-cap tech group. Both companies posted quarterly earnings that beat consensus forecasts, driven by robust business services and steady consumer revenue streams.

U.S. earnings highlights

All amounts in U.S. dollars

Amazon (AMZN/NASDAQ): Reported adjusted earnings per share above estimates and revenue slightly ahead of consensus. Cloud services continued to be a primary growth driver, with companies entering longer-term contracts and spending on generative AI-related infrastructure and tools. Advertising revenue also remained resilient even as retail spending showed signs of consumer caution.
Apple (AAPL/NASDAQ): Posted earnings per share that exceeded expectations and saw modest revenue outperformance. The company announced a dividend increase and a large share buyback authorization. Services revenue grew and partially offset declines in hardware sales, while international markets showed mixed results.

Amazon’s mix of cloud growth and advertising strength helped its stock rise in the immediate aftermath of the results. Meanwhile, Apple’s combination of steady services revenue, shareholder returns and manageable revenue declines led analysts to raise expectations.

Tipping on fast food

Fast-food companies had mixed quarters as rising costs and cautious consumers reshaped performance across brands. Promotional activity and delivery partnerships helped some chains, while others saw softer traffic and international pressures.

Fast-food earnings highlights

All figures in U.S. dollars.

Restaurant Brands International (QSR/TSX): Reported slightly better-than-expected earnings per share driven by improved traffic across its flagship brands, with Burger King and Tim Hortons showing positive same-store sales.
Domino’s Pizza (DPZ/NYSE): Delivered solid results, with adjusted earnings per share and revenue ahead of expectations. U.S. same-store sales benefited from promotions and increased use of delivery platforms.
McDonald’s Corp. (MCD/NYSE): Missed consensus on earnings as menu price increases met consumer resistance, and international markets were affected by regional disruptions.
Starbucks (SBUX/NASDAQ): Reported weaker-than-expected adjusted earnings and revenue. Global comparable sales declined, with U.S. consumers reacting to price increases and a slower-than-expected recovery in China. The company also noted impacts from geopolitical tensions in some markets.

Restaurant Brands and Domino’s benefited from promotional strategies and rising off-premises demand. McDonald’s and Starbucks, however, faced slower traffic and international headwinds, illustrating how pricing power and regional exposure can strongly influence results in the quick-service segment. On the Canadian grocery front, Loblaw Companies reported profit growth and a higher quarterly dividend, highlighting continued resilience among domestic food retailers.

Cameco digs up low-grade earnings

Uranium miner Cameco Corp. reported a small loss for the quarter, attributing the result to charges tied to its acquisition of a significant stake in a nuclear services firm. Revenues and adjusted profit were down year over year, reflecting the company’s transitional expenses and the broader volatility in commodity markets.

Cameco remains one of the largest publicly traded uranium producers, but this quarter’s results serve as a reminder that commodity-related sectors can deliver uneven returns as companies invest in strategic transactions and face fluctuating market conditions.

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This Week in Markets: What Investors Need to Know – May 5, 2024