In the Money: 5 Things to Know
Canada & tariffs, 3M pops, DR Horton rallies, Apple downgraded, Teck cuts
What do tariffs mean for Canada’s energy sector? We’ve got a timely episode of In the Money with Amber Kanwar featuring Eric Nuttall of Ninepoint Partners, one of Canada’s top energy investors. We talk about what tariffs mean for the energy sector, what he's buying, and what he sold (including two stocks he hasn't talked about yet!) You can listen on Apple, Spotify or here. Later today the video will drop on YouTube.
Fugue state: The Canadian dollar went from cheerleading a report that said we won’t be hit by tariffs on Day 1 to a dose of reality when US President Donald Trump said they could start by February 1st. You can see the rollercoaster on the loonie in the chart below. Unsurprisingly, TSX futures are indicating a negative open this morning while US futures are pointing to a higher open. To be sure, there is still uncertainty around that February 1st date. It also remains unclear if there are measures Canada could take to avoid tariffs by then. I’ll watch how energy stocks react this morning, Eric Nuttall views it as a buying opportunity. There is also the Bank of Canada to consider. This morning we got a read of inflation that showed headline inflation growth cooled to 1.8% which was less than the 1.9% expected. However, this number is distorted by the GST holiday which Stats Can estimates affects about 10% of the CPI basket. Without the GST holiday, Stats Can says inflation would be have been 2.3% which would be the biggest pickup since July. This may water down enthusiasm for rate cuts at the Bank of Canada, but you have to balance that with the prospect of tariffs. “…If tariffs become a reality, the Bank will ease much more aggressively than the 75 bps we currently expect this year,” wrote Sal Guatieri of BMO. Aside from that, it is earning season in the US with Netflix expected after the bell. Below are some of the big movers in the pre-market on the back of earnings. I suspect that “AI” will be replaced by “tariffs” as the most common topic on conference calls this quarter.
Mmm: Shares of 3M are up nearly 4% in the pre-market after beating profit expectations and forecasting sales growth for 2025. The maker of of Post-It notes and Scotch tape said growth for 2025 will be 0.5% to 1.5%. Hardly gangbusters, but better than the 2% drop Wall Street analysts were forecasting and the first year of annual sales growth since 2021. The pre-market rally is sending the stock to a 3-year high as its turnaround efforts payoff. 3M was in hot water over several lawsuits about its role in leaching forever chemicals into the water supply and making defective earplugs for combat. With these issues behind the company, it is focused on growth under a new CEO and Chair. It will be interesting if the stock can withstand the rhetoric/reality of tariffs. Half of the company’s imports come from Canada and Mexico, while a little under 10% come from China. “We're watching it very, very carefully, but we have a lot of operational levers that we can pull," said the CEO in an interview with the Wall Street Journal, “We have a lot of factories in the U.S. and we can flex them and maybe bring some of that product back to the U.S.” Music to Trump’s ears.
Build back better: Shares of DR Horton are popping 2.3% after better than expected profit and revenue. It also boosted its buyback for 2025. Profit is down from last year as the homebuilder sees tepid demand in the face of elevated mortgage rates in the United States. However, investors took comfort that discounting wasn’t as bad as feared with gross margins coming in better than expected. The company says it is pushing smaller homes to deal with the affordability issue. The stock has been walloped, down 30% since September and has recently started to trend higher. Always interested in how a stock moves when things aren’t as bad as feared.
Teck check: Teck Resources is up about 2% in the pre-market after copper production in 2024 surged 50% driven by record production at one of its key mines (Quebrada Blanca). However, the base metal miner cut its outlook for 2025 production due in part to lower production outlook at its key Quebrada Blanca mine. Even though the shares are up right now, TD warns we could see underperformance today. “We believe the 2025 guidance cut could outweigh the strong improvement in Q4 results, and we expect shares could slightly underperform today,” wrote Craig Hutchison of TD.
Notable calls: Apple is down 2% in the pre-market after another report warns iPhone sales in China fell 18% in Q4 and two analysts downgraded the stock. Jefferies cut Apple to underperform saying they expect the company to miss its 5% sales growth forecast in the first quarter and water down growth expectations for the upcoming quarters. Loop Capital has also downgraded the stock to a hold echoing concerns about demand. The analyst says supply chain checks point to a “material” reduction in iPhone demand. Shares of General Motors are getting a lift after Deutsche Bank upgraded the stock, noting he thinks it will continue to outperform Ford. He likes the company’s restructuring efforts in China and with its EV business as well as a ramp up in share buybacks. Barrick Gold was downgraded at Scotiabank this morning as part of a broader note on the gold sector. The analyst prefers to play the streamers instead of the operators. Transcontiential is getting a new bull with TD starting to cover the stock with a buy. The provider of printing and packaging is poised to see strong growth after a growth-by-acqusiition spree. “We believe TCL is undervalued given an exceptional FCF profile (expected average annual yield of 16.2% in 2025/26),” wrote Sean Steuart of TD Cowen.