MP Market Review – November 04, 2022

Earnings Releases

Last week, there were seven earnings reports from companies on ‘The List’. Let’s get started with Canadian industrial company Toromont Industries.

Toromont Industries (TIH-T) released its third-quarter 2022 results on Tuesday, November 1, 2022, after markets closed.

“The team delivered solid operating and financial performance in the third quarter. The persistent supply constraint pressures, market and economic variables continue to contribute to a fluid and complex operating environment,” stated Scott J. Medhurst, President and Chief Executive Officer of Toromont Industries Ltd. “The Equipment Group reported good utilization activity in rental and positive product support demand, while uncertainties persist in timing of equipment and parts deliveries. CIMCO revenues improved in the quarter on project construction and higher product support activity. Across the organization, we remain committed to our operating disciplines, after-market strategies and customer solutions, as we manage through these uncertain conditions.”

– Chief Executive Officer, Scott Medhurst

Highlights:

• Revenues increased $142.4 million or 14% in the third quarter. Equipment sales were up 11% compared to prior year, with the Equipment Group up 10% and CIMCO package revenues up 19%, however both groups continue to experience delays in project construction and deliveries due to supply chain constraints in the current year. Product support revenues were 19% higher on increased demand, while rental revenues grew 13% on a larger fleet and higher utilization.
• Revenues increased $150.1 million (5%) to $3.1 billion for the year-to-date period, as the improved activity in rentals (up 19%) and product support (up 14%) offset reductions in equipment and package revenues (down 5%) against a tough comparable last year, coupled with continuing supply chain issues.
• Operating income increased 26% in the quarter on higher revenues, a favourable sales mix (higher percentage of rentals and product support revenues to total revenues) and improved gross margins. Expense levels were up 13% reflecting planned increases and higher activity levels, as well as certain inflationary impacts.
• Operating income increased 26% in the year-to-date period, and was 13.4% of revenues compared to 11.2% in the similar period last year, reflecting the continued favourable sales mix and improved gross margins, offset by a higher expense ratio.
• Net earnings increased $29.4 million or 31% in the quarter versus a year ago to $123.1 million or $1.50 EPS (basic).
• For the year-to-date period, net earnings increased $67.2 million or 30% to $294.3 million, or $3.57 EPS (basic).
• Bookings for the third quarter decreased 23% compared to last year and decreased 24% on a year‑to‑date basis. Both the Equipment Group and CIMCO reported strong bookings in 2021, after a period of lower activity stemming from pandemic restrictions.
• Backlogs were $1.4 billion at September 30, 2022, compared to $1.1 billion at September 30, 2021, reflecting strong order activity over the past year coupled with ongoing supply constraints.

Outlook:

“Activity remained sound with favourable backlog levels, but supply chains continue to be challenged. Pandemic challenges remain and we continue to measure inflationary pressures and supply-demand dynamics as the economic environment continues to evolve and change.”

– Chief Executive Officer, Scott Medhurst

 See the full Earnings Release here

Brookfield Infrastructure Partners (BIP-N) released its third-quarter 2022 results on Wednesday, November 2, 2022, before markets opened.

“Brookfield Infrastructure had record quarterly results as a function of our high quality asset base, proven risk management approach and execution of our asset rotation strategy. Our strategic and financial principles provide a basis to capitalize on deep value investments when these opportunities arise.”

– Chief Executive Officer, Sam Pollock

Highlights:

• Brookfield Infrastructure reported net income of $113 million for the three-month period ended September 30, 2022 compared to $413 million in the prior year. Current year results benefited from recent acquisitions and organic growth across our base business, as well as mark-to-market gains on our foreign currency hedging program. Prior year results included a gain of approximately $425 million recognized on the sale of our U.S. district energy business. After removing the impact of disposition gains, net income increased by $125 million relative to the prior year.
• Funds from operations (FFO) for the third quarter was $525 million, increasing 24% relative to the comparable period. Organic growth for the quarter was robust at 10%, reflecting the benefits of elevated inflation levels impacting tariffs and the commissioning of approximately $1.2 billion of capital projects in the last 12 months. Additionally, approximately $2 billion of capital was deployed in acquisitions over the same period that contributed to results.

Outlook:

“In August, we announced a partnership with Intel Corporation to invest in a $30 billion semiconductor foundry in Arizona. Brookfield will be providing approximately $15 billion over the construction period for a 49% interest in the facility. The majority of our capital commitment has been sourced from non-recourse debt, with base interest rate exposure fully hedged concurrent with signing. Moreover, the majority of the Brookfield’s approximately $2 billion equity investment ($500 million net to BIP) is back-end weighted closer to the operational phase of the project.

This investment is structured to achieve an attractive risk-adjusted return. We draw parallels to other data investments such as hyperscale data centers that are generally contracted on a long-term basis, with highly creditworthy counterparties, where we do not assume technological risk. In this instance, we view Intel to be a creditworthy and market-leading partner. The transaction is expected to close by the end of 2022 and is thematically an example of the large-scale capital required to support the onshoring of critical supply chains.

For the balance of the year, our focus will be on closing the remaining two announced transactions, HomeServe and DFMG, in Q4 2022 and Q1 2023, respectively. Once closed, we will transition our focus to the execution of our growth plans in both businesses.

• At HomeServe, we are splitting the company’s U.S. and European operations to integrate them with existing portfolio businesses in each geography. We plan to accelerate growth by expanding our residential infrastructure product and service offering to a wider customer base.
• At DFMG, we are acquiring a marquee portfolio of 36,000 towers in Germany and Austria that also includes a greenfield development portfolio of an additional 5,200 build-to-suit towers. These additional towers are to be constructed over the next five-years and underpinned by the credit quality of Deutsche Telekom. In addition to the built-in organic growth, we plan to use this business as a platform for follow-on opportunities in the fragmented European telecom tower market.

On the capital recycling front, earlier this year, we signed agreements to sell three mature businesses for approximately $600 million of proceeds. These sales were in addition to the sale of our U.S. container terminal that closed earlier this year for approximately $350 million. Of the three secured sales, our New Zealand telecom tower portfolio sale closed November 1st, our Brazilian electricity transmission lines are expected to close in November and the Indian toll roads are on track to close by year end. In addition, several sales processes are underway that, combined, are expected to generate approximately $1.5 billion of proceeds.”

See the full Earnings Release here

Waste Connections (WCN-N) released its third-quarter 2022 results on Wednesday, November 2, 2022, after markets closed.

“Strong execution once again provided for better than expected results, driven in the third quarter by continued acceleration of solid waste pricing to 10.1% and higher E&P waste activity, along with acquisitions closed during the period. Most notably, we overcame 50 basis points in incremental headwinds, primarily from the precipitous decline in recycled commodity values in September, to beat our outlook and expand adjusted EBITDA margin both sequentially and on a year-over-year basis, excluding the dilutive impact from acquisitions completed since the year ago period,” said Worthing F. Jackman, President and Chief Executive Officer.

– President and Chief Executive  Officer, Worthing F. Jackman

Highlights:

• Increasing solid waste pricing growth, E&P waste activity and acquisition contribution once again drive better than expected quarterly results
• Revenue of $1.880 billion, up 17.7%
• Net income of $236.9 million, and adjusted EBITDA(b) of $588.1 million, up 16.3%
• Adjusted EBITDA margin of 31.3% of revenue, above outlook and up 20 basis points year over year, excluding acquisitions
• Net income of $0.92 per share, and adjusted net income(b) of $1.10 per share
• Year to date net cash provided by operating activities of $1.500 billion and adjusted free cash flow of $929.0 million, or 17.4% of revenue
• Year to date signed or closed acquisitions with approximately $570 million of total annualized revenue
• Increases regular quarterly dividend by 10.9%

Outlook:

• Revenue is estimated to be approximately $7.190 billion, as compared to our previously revised revenue outlook of approximately $7.125 billion.
• Net income is estimated to be approximately $836.7 million, and adjusted EBITDA is estimated to be approximately $2.210 billion, or about 30.7% of revenue, as compared to our previously revised adjusted EBITDA outlook of $2.190 billion or 30.7% of revenue.
• Capital expenditures are estimated to be approximately $850 million, in line with our original outlook.
• Net cash provided by operating activities is estimated to be approximately $1.963 billion, and adjusted free cash flow(b) is estimated at approximately $1.160 billion, or about 16.1% of revenue, as compared to our previously revised adjusted free cash flow outlook of $1.160 billion or 16.3% of revenue.

See the full Earnings Release here

Bell Canada (BCE-T) released its third-quarter 2022 results on Thursday, November 3, 2022, before markets opened.

“The Bell team’s continued excellence in executing on our strategy and customer-centric approach, combined with our leading networks has delivered strong results this quarter, firmly placing Bell in a solid competitive position as we head into the end of the year.

We’re seeing clear demand from Canadians for differentiated fibre Internet services and fast, reliable wireless networks. We experienced over 400,000 net activations across our wireline and wireless networks, with our highest-ever number of total mobile phone net additions, and we also gained a significant share of Internet subscriber growth with over 95,000 new net fibre-to-the-home customers this past quarter, up 33% over last year and our best-ever result.”

– President and Chief Executive Officer, Mirko Bibic

Highlights:

• Leading advanced mobile and fibre networks delivered record 401,132 total broadband net customer activations — 224,343 mobile phone, 49,044 mobile connected devices; 89,652 retail Internet and 38,093 IPTV — up 50.3% y/y
• 2% consolidated revenue growth delivered 1.2% higher adjusted EBITDA1 as $38 million in storm and inflationary cost pressures2 absorbed in the quarter
• Net earnings of $771 million, down 5.2%, with net earnings attributable to common shareholders of $715 million, or $0.78 per common share, down 6.0%; adjusted net earnings1 of $801 million generated adjusted EPS1 of $0.88, up 7.3%
• Excellent wireless operating results: strong revenue and adjusted EBITDA growth of 7.4% and 7.8%, respectively; best-ever mobile phone net subscriber activations of 224,343, up 64.4%; lowest Q3 postpaid churn3 rate of 0.90%; and 2.2% higher mobile phone blended ARPU4
• Highest retail Internet net activations in 17 years, up 36.3% to 89,652, drove 8% residential Internet revenue growth; on track to complete 80% of broadband Internet buildout plan by end of 2022
• Bell Media digital revenue5 up 40% contributing to stable total media revenue as advertiser spending slows due to macroeconomic conditions
• Reconfirming all 2022 financial guidance targets

Outlook:

BCE confirmed its financial guidance targets for 2022, as provided on February 3, 2022, as follows: