Toronto, Ontario -- July 29, 2019 -- In this week's Tuesday Ticker: Axalta's investors unmoved by acquisition rumours, Canada's auto sector looks unlikely to repeat last month's spectacular performance, and LKQ shares jump after beefy quarterly results are released.
Underestimation of Axalta?
Last week's rumours that two or more businesses are interested in purchasing Axalta Coating Systems did not spur a jump in stock value, as is typical.
Last Monday, after Bloomberg reported that another Pennsylvanian auto paint giant, PPG, and Japanese firm Kansai Paint were interested in acquiring Axalta, the would-be acquisition saw its share price drop about 1.7 percent, to $29.64.
The news comes shortly after Axalta launched the newest iteration of Acquire EFX spectrophotometry system, a top-mounted touchscreen system offering many next-generation features for collision facility owners.
Like similar systems from Axalta's competitors, the cutting-edge spectrophotometry suite speeds colour-matching procedures for those businesses using Axalta's paints. The latest iteration of the Quantum EFX suite has made breakthroughs on major spectrophotometry barriers--including a sharp improvement to its ability to interpret metallic pearl coatings and effect colours.
While Axalta's system is making waves for its technological breakthroughs, collision facilities do not tend to switch paint providers quickly, and, usually, wait until existing paint supplies dwindle before making a transition.
It is unclear how widely understood the subtleties of auto repair business paint transitions are understood by would-be investors.
Auto Sector boom likely over, as Canada's trade surplus comes to an end
Obstructions to free trade between Canada and the United States may have caused Canada's import-verses-export ratio to swing in favour of imports, Bloomberg analysts predict.
According to the business publication, soon-to-be-released June numbers for Canada's economy will likely show that the country paid more for foreign goods than in made selling goods abroad--by about $300 million.
In May, Canada's economy bucked expectations by posting higher export than import numbers. The burst was fuelled by a rise in exports from Canada's automakers and auto parts producers. Despite the elimination of some tariffs coming into place at the very end of May, Bloomberg's analysts do not expect the auto sector's boom to continue.
The low Canadian dollar should, theoretically, make it more attractive for U.S. businesses and consumers to buy Canadian-made parts and manufactured goods--including automobiles--but, as prices inflate in Canada, this benefit begins to diminish.
Canadians have, traditionally, been the victims of paying higher prices on imported goods. In 2011, as the Canadian dollar briefly rose above parity with the U.S. dollar, many products, from books to auto parts and vehicles, were still sold with a marked-up price.
LKQ Surges Through
Rumours of LKQ's high performance in Q2 accurately depicted the parts giant's success.
In Q2 of 2019, LKQ saw seven percent growth over the same period in 2018, it also saw revenue grow by $3.25 billion over the same period of 2018.
Last Tuesday, the stock was trading at $24.95. Following the release of the Q2 report, it jumped above $27.00. At the time of publication, it is trading at $27.22--or a nine percent spike in value for investors brave enough to listen to the rumours.
Over the past 18 months, LKQ's stock prices have dropped precipitously. The stock saw a brief resurgence this spring, cresting above $30 before falling again.
From a record high of $43.47 in early 2018, trading dipped below $24 by the end of the year.