**February 19th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- JMRD Client Conference Call
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance
- Reads of the week
- Economic Calendar
- Earnings Reports
JMRD Client Conference Call
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JMRD Basket Corner
Emera (EMA) – EMA reported Q4 2015 adj. EBITDA of $279 mln versus NBF’s estimate of $263 mln on stronger than expected Energy trading and marketing contributions. Meanwhile, the company reported Q4 EPS (FD) of $0.74 (excl. non-recurring items) versus NBF estimate of $0.59 (consensus: $0.60). The company’s US$10.4 bln acquisition of TECO Energy remains on track to close in mid-2016, having recently received TECO shareholder, FERC and Hart-Scott-Rodino approvals. The New Mexico Public Regulation Commission has set a hearing to begin on May 23rd. (Full note attached)
Hydro One (H) – Hydro One Ltd. reported Q4 adj. EBITDA of $435 million, in line with NBF’s estimate of $437 million (consensus: $442-mln). Meanwhile, Q4 adj. EPS (excl. non-recurring IPO-related items) of $0.20 came in slightly ahead of NBF’s estimate and consensus of $0.18 on lower than expected interest expense. (Full note attached)
All-Cap Growth Basket
Constellation Software (CSU) – Constellation announced Q4 revenue of $512M (consensus $489 mln) was up 16% y/y. Constant currency organic revenue growth improved to 4% y/y compared to 1% in Q3, 2% in Q2 and ~4% prior to that for two years. The Public segment had ~5% constant currency organic growth. The revenue beat was mostly from recurring maintenance revenue (we believe partly from price increases at TSS) and hardware revenue related to various large projects in the transit vertical. Maintenance revenue was a record 64% of total revenue for the year.
Exco Technologies (XTC) – Exco announced on Tuesday that it has signed a conditional purchase agreement to acquire a group of private companies (the “Target”) organized under the laws of Mexico and Michigan, whereby a wholly-owned U.S. subsidiary of Exco intends to acquire all of the shares of the Target. Pursuant to the terms of the agreement, the transaction value, excluding assumed debt of US$4 million, totals approximately US$73 million. Assuming the transaction is completed, Exco intends to fund this amount with a combination of cash on hand, part of the proceeds from a new C$100M committed operating credit facility and notes payable to certain shareholders of the Target, which are due over the subsequent three years. The transaction will not require significant integration or restructuring charges and is expected to be immediately accretive to Exco’s earnings per share. The Target generated revenue of approximately C$115M (equivalent) in 2015. Founded in the 1990’s, the Target is a leading tier 2 supplier of interior trim components to a diversified group of North American automotive customers. Following the announcement, Exco traded higher by 15% this week.
U.S. Growth Basket
Six Flags Entertainment (SIX) – Six Flags announced on Thursday that Q4 results swung to an unexpected profit in the final quarter of the year as the top line saw more-than-expected growth on rising attendance at the company’s theme parks. The Grand Prairie, Texas-based company, with 18 parks in the U.S., Mexico and Canada, said attendance rose 22% from a year earlier to 5.2 million guests.
- RRSPs can reduce the squeeze of income tax” (Globe and Mail)
Week at a Glance
Full report attached.
Reads of the Week
- “The Trouble With Banks Is Contained, For Now” (Bloomberg)
- “Why Bear Markets Are So Painful” (A Wealth of Common Sense)
- “How to Manage Risk When the Market Owes You Nothing” (A Wealth of Common Sense)
- “Peter Tertzakian: World’s oil supply on the brink of being permanently damaged at these prices” (Financial Post)
- All of the World’s Stock Exchanges by Size (Visual Capitalist)
Monday February 22nd – US Manufacturing PMI
Tuesday February 23rd – US Consumer Confidence, US Existing Home Sale and US Home Price Index Change
Wednesday February 24th – US New Home Sales; US Services PMI
Thursday February 25th – US Initial Jobless Claims; US Durable Goods
Friday February 26th – US GDP, US Personal Spending, US Personal Income, U. of Michigan Consumer Confidence
Monday February 22nd – None
Tuesday February 23rd – BMO, National Bank, DH Corp.
Wednesday February 24th – Encana, Gildan Activewear, Innergex Renewable, Northland Power, Royal Bank, Progressive Waste, L Brands, Target
Thursday February 25th – Altagas, CIBC, CCL Industries, Loblaw Cos, Pason Systems, Pembina Pipeline Corp, Ritchie Brothers, Stantec, TD Bank, Best Buy, Kraft Heinz
Friday February 26th – Husky Energy, Magna
Have a good weekend!