TSX rises amid major pharmaceutical deal making, solid Canadian Pacific earnings
TORONTO - Strong earnings reports and major deal-making in the pharmaceutical sector pushed the Toronto stock market modestly higher Tuesday.
The S&P/TSX composite index gained 62.29 points to 14,555.97. The Canadian dollar closed down 0.11 of a cent to 90.68 cents US.
U.S. indexes were also positive with the Dow Jones industrials ahead 65.12 points to 16,514.37. The Nasdaq composite index climbed 39.91 points to 4,161.46 and the S&P 500 index was up 7.66 points at 1,879.55.
Canadian drug company Valeant Pharmaceutical International Inc. (TSX:VRX) (NYSE:VRX) has teamed with Bill Ackmanâ€™s Pershing Square Capital Management in a cash and stock bid worth about US$48 billion for Botox maker Allergan based on Valeant's closing chsre price of US$135.41 in New York. Valeant shares gained $10.62 or 7.65 per cent to close at C$149.38 on the Toronto Stock Exchange.
If the deal goes through, it would give Valeant an array of other cosmetic and eye drugs and add to a string of more than 50 acquisitions that have made it one of Canadaâ€™s largest drugmakers
But some analysts warn that this acquisition strategy could be more difficult to execute as the economic recovery continues to take hold.
"The later we move on into the recovery, the more of a premium companies will pay as a buyer because thereâ€™s more competition and more interest in doing that deal, and the company youâ€™re buying, generally their earnings per share have grown because of the fact that the economy is growing as well," said Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company.
On the earnings front, Canadian Pacific Railway (TSX:CP) had $254 million of net income in the first quarter, up from $217 million a year earlier. Net income per share increased 16 per cent year over year, rising to $1.44 from $1.24 in the first quarter of 2013. Revenue also increased, to $1.509 billion from $1.495 billion. Analysts on average had expected earnings of $1.41 per share on revenue of $1.51 billion. Its shares climbed $8.63 or 5.26 per cent to $172.62.
"In an environment where you could say we had bad weather they were able to continue to improve their bottom line and they did that by just being more efficient," Pashootan said.
"And the market likes that."
After the close, Canadian National Railways (TSX:CNR) posted adjusted net income of 66 cents a share, three cents better than estimates. Revenues grew nine per cent to $2.69 billion, beating estimates of $2.64 billion.
Teck Resources Ltd. (TSX:TCK.B) posted an adjusted profit of $105 million or 18 cents a share, down from $328 million or 56 cents per share in 2013. That was below the 24 cents per share that analysts expected. Revenue dropped to $2.084 billion from $2.33 billion and below the $2.098 billion that had been forecast. Teck said it plans to eliminate 600 positions, delay the restart of a B.C. coal mine and cut spending by five per cent. Its shares rose 57 cents to $24.58.
Rogers Communications Inc. (TSX:RCI.B) was a weight on the TSX as the telcom reported that quarterly net income dropped 13 per cent to $307 million or 57 cents per share. On an adjusted basis, the results missed analyst expectations, coming in at 66 cents per share, four cents below the average estimate and its shares shed $1.50 to $42.78.
The gold sector was up about 1.55 per cent even as June bullion fell $7.40 to US$1,281.10 an ounce.
May copper was up a cent at US$3.05 a pound and the mining sector was up 1.17 per cent.
The TSX energy sector was slightly higher while the June crude contract in New York was down $1.90 to US$101.75 a barrel.
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