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WHAT'S ON TAP
Unemployment rate rises to 6.8%
TVK keeps the roll-up strategy rolling
Aritzia’s U.S. momentum is building
AFN runs on contained Brazil risk
HOT OFF THE PRESS
Unemployment picks up
The unemployment rate moved higher to 6.8% in December, above estimates of 6.6% and up from 6.5% in November…
… despite 50K full-time adds, which more than offset a 42K decline in part-time employment (carried results in the prior two months). So, a net 8K gain on an absolute basis…
… that was outpaced by a 30 bps rise in workforce participation, driving the unemployment rate higher.
At the industry level results were mixed - but health care, construction, and manufacturing showed continued strength…
… which we highlighted as likely after the Ivey PMI print. With the imbalance between job seekers and vacancies persisting…
… the labour market is on shaky ground.
ON OUR RADAR
GAINERS & LOSERS
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TerraVest (TVK) ran 7% on the back of its $90M acquisition of KBK Industries, representing 5.6x LTM EBITDA - well below where TVK currently trades…
… which should result in a highly accretive deal, even if small. The transaction builds on a series of compressed gas and storage acquisitions in recent years…
… which diversify TVK’s end markets and benefit post-close from the company’s broader sales reach. With receptive equity markets and $1.2B of debt capacity, TerraVest has a lot of rope to keep executing its roll-up strategy.
Aritzia (ATZ) added 5% in Friday’s session after another big quarter, with revenue and EPS beating estimates by 11% and 24%, respectively. Results were driven by a continued acceleration in U.S. growth…
… which now has a larger physical footprint than in Canada and a lot of runway left. That’s translating to better margins and FCF conversion…
… but at this point, it’s tough to imagine that’s not priced. Trading at its peak multiple on forward EBITDA, it’s likely that future returns will be more a function of fundamentals than a re-rate.
INSIDER TRANSACTIONS
| Insider | Company | Value |
|---|---|---|
| Brian Lawson | Brookfield (BAM) | $1.9M |
| Jean-Francois Poulin | Great-West (GWO) | $689K |
| John Giamatteo | Blackberry (BB) | $565K |
| Tavis Carlson | Peyto (PEY) | $511K |
| Michael Collens | Peyto (PEY) | $327K |
| Patrick Dussault | BRP Inc. (DOO) | $1.4M |
| Joshua Kobza | Restaurant Brands (QSR) | $232K |
| Dean Swanberg | Zedcor (ZDC) | $471K |
Flagging the buying at Zedcor (ZDC), which brings the insider total to $728K this week. Clearly, they’re not too worried about Amazon’s entry into the market.
EARNINGS
FRIDAY’S EARNINGS
| Company | Actual | Consensus |
|---|---|---|
| 🇨🇦 Ag Growth (AFN) | 1.31 | 1.02 |
Ag Growth International (AFN) jumped 22% after reporting its Q3 results, which beat estimates on continued strength in the commercial segment…
… specifically in Brazil and EMEA. The former is the reason for the gap up…
… as the cause for the filing delay turned out to be nothing sinister (weak internal controls). With AFN’s valuation returning to pre-delay levels…
… a discount to the long-term average should persist until those issues are resolved.
ECONOMIC DATA
FRIDAY’S ECONOMIC RELEASES
| Release | Actual | Consensus |
|---|---|---|
| 🇨🇦 Unemployment Rate | 6.8% | 6.6% |
| 🇨🇦 Employment Change | 8K | -5K |
| 🇺🇸 Unemployment Rate | 4.4% | 4.5% |
| 🇺🇸 Non Farm Payrolls | 50K | 60K |
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