Martinrea plunges after revealing more problems lower guidance

Shares of auto parts maker Martinrea International Inc. (TSX:MRE) tumbled 20 per cent as market players reacted to the company’s warning that it will likely fall short of its financial guidance.“We believe that Martinrea will be valued at a discount to the other Canadian auto parts companies,” BMO Capital Markets analyst Peter Sklar wrote in a note to clients.Sklar downgraded Martinrea’s stock to “underperform” from “market perform” and cut his price target on the stock to $9 from $12.50.The stock was down 20 per cent or $1.92 at $7.50 late Thursday afternoon, with more than five million shares traded, making Martinrea the most active issue on the Toronto Stock Exchange.Last month, the company said it expected to earn a profit in the range of 23 cents to 28 cents per share. Martinrea did not say what it now expects to earn for the quarter but said it will likely be lower than that.The company said Wednesday after markets closed that problems at its Hopkinsville factory in Kentucky, including equipment failures, have meant increased costs and could result in a write down of assets at the plant.In addition, the company warned that one of its Canadian factories has been overstating its financial results for several years. The company said a review was ongoing, but estimated its earnings may have been overstated by a total of $10 million to $18 million during 2005 to 2012.Martinrea also said some of the legal costs related to a lawsuit filed against the company by Nat Rea, a former executive and major shareholder in the company, are not covered by insurance and were not included in the guidance.Rea filed a lawsuit in September accused directors and senior executives at the company of breaching their fiduciary duties to in connection with a series of related party transactions involving certain suppliers and customers. The allegations have not been proven in court.Martinrea, which said the claims are without merit, said a special committee of independent directors Scott Balfour and Fred Olson has been assigned to oversee the case. The special committee is authorized to supervise the investigation of the allegations and make recommendations to the board as to any required steps.Rea parted ways with the company earlier this year when he stepped down as vice-chairman and a director of the company. As part of a separation agreement, he was paid $5.2 million.Martinrea said Rea first raised concerns with the company in 2011 while he was still an executive and director. The company said the issues were reviewed by the head of the audit committee, who presented his findings to the board.At the time, Martinrea said Rea “indicated in writing that all his concerns had been addressed” and the board determined no further action was required.“After consecutive record quarters from a financial and performance perspective, we are dealing with some legal and operational issues,” Martinrea executive chairman Rob Wildeboer said in a statement.“We have faced many challenges over the years as we grew this company from scratch, and have always met every challenge head on with conviction and a desire to do the right thing for all our stakeholders.”Sklar noted the problems at Hopkinsville follow problems at Martinrea’s operations in Shelbyville, Ky., last year.“Our concern is that there may be a pattern of operational issues and equipment failures out of the norm,” he wrote in a note to clients.Sklar also raised concerns that the costs related to the Rea lawsuit are likely to continue for some time.“As we have indicated previously, in respect of the litigation initiated by Nat Rea, we are unable to assess the relative merits of each party’s assertions; and, we believe there may be a considerable period of time until these allegations are resolved,” he wrote.“In the interim, we believe the uncertainty will weigh on Martinrea’s valuation, and we note that the public release of legal documents pertaining to the case can result in a significant amount of volatility in the stock price.” read more

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Energy issues push TSX higher NY markets soar on strong earnings news

TORONTO – Better than expected corporate earnings reports in the U.S. and positive economic news from China helped North American markets close higher Monday as they rebounded from Friday’s sell-off.The S&P/TSX composite index gained 52.05 points to 15,412.60, while the Canadian dollar was 0.01 of a U.S. cent lower at 81.77 cents.In the U.S., the Dow industrials surged 208.63 points to 18,034.93, while the Nasdaq jumped 62.79 points to 4,994.60 and the S&P 500 index added 19.22 points to 2,100.40.The gains come after some hefty losses, with the Dow plunging nearly 300 points on Friday.“U.S. stocks are bouncing today given the fact that we had a pretty oversold situation over the weekend, plus you had monetary policy, even more doveish, out of China,” said Brian Belski, chief investment strategist at BMO Capital Markets.“It was just one of those classic bargain shopping sprees . . . in America, where people decided to jump back in.”The stock market gains follow a weekend decision by China’s central bank to cut the required reserve ratio for banks by one percentage point. The move is expected to free up roughly $200 billion for lending to stimulate the Chinese economy.China is a major consumer of oil and metals, both heavily weighted sectors on the TSX.It’s a big week for earnings in the United States with close to one-third of the companies on the S&P 500 reporting first-quarter results. Most analysts have predicted that overall earnings will be lower in the quarter, the first time that has happened since 2009.But several big companies, including toy maker Hasbro, banker Morgan Stanley and oil services firm Halliburton all reported earnings Monday that beat estimates.“Corporate America continues to under promise and over deliver,” said Belski, adding that the sharp decline in energy prices is weighing on U.S. earnings.“If you would have taken out energy from the fourth-quarter earnings, earnings would have been up 10 per cent in America. If you take out energy in the first quarter, earnings would have been up five per cent. So I think a lot of what’s going on here is energy. I’m not going to blame energy in totality. But at the end of the day this correction in commodities is really shocking a lot of people.”North of the border, Rogers Communications Inc. (TSX:RCI.B) reported after markets closed that first-quarter net income fell 17 per cent, with adjusted earnings of 53 cents per share falling 10 cents short of analyst estimates.Canadian National Railway (TSX:CNR), also reporting after markets closed, increased its net profits by 13 per cent to $704 million or 86 cents per share in the first quarter, beating estimates by a penny per share.On the commodity markets, the May crude contract up 64 cents at US$56.38 a barrel, while the June gold contract was down $9.40 at US$1,193.70 an ounce. May copper was off four cents at US$2.73 a pound. by Alexandra Posadzki, The Canadian Press Posted Apr 20, 2015 5:28 am MDT Energy issues push TSX higher; N.Y. markets soar on strong earnings news AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email read more

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