April 25, 2025

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Centuri Holdings (CTRI), GE Aerospace (GE), Intel (INTC), Paramount Global (PARA), SLB Ltd. (SLB) and UiPath (PATH).

Centuri Holdings (CTRI) remains a strong performer in light of the tariff backdrop and thanks also to recent award wins.

Strong earnings and a solid 2025 outlook were just reported by Agnico Eagle Mines (AEM) and GE Aerospace (GE).

Comments on Portfolio Holdings

[Note: Special thanks to Barron’s for quoting the Cabot Turnaround Letter in this week’s issue.]

Turning to the portfolio, Agnico Eagle Mines (AEM) reported Q1 earnings on Thursday that easily beat estimates on both the top and bottom lines. Revenue of $2.5 billion increased 35% year-on-year and earnings of $1.53 a share jumped 66%.

Other highlights of the quarter included payable gold production of 874,000 ounces at production costs per ounce of $879 an ounce, led by strong operational performances in all its key Canadian mines, as well as strong free cash flow and record quarterly net income of $815 million.

The top brass extolled the strong start to the year, stating that its performance has allowed Agnico to further strengthen its balance sheet while positioning it for strength for the remainder of the year. It further stated the company increased its cash position by $212 million, to $1.1 billion, and approached a zero net debt position.

Agnico reiterated its strategic focus cost controls, while continuing to expand operating margins and use other initiatives to benefit from the rising gold price environment. The company also plans to accelerate its exploration and the advancement of its five key pipeline projects, while further strengthening its financial position and increasing returns to shareholders. (To that end, a quarterly dividend of 40 cents per share was declared at a yield of 1.3%.)

Meanwhile, on the buyback front, Agnico plans to continue share repurchases in 2025. The firm intends to renew its normal course issuer bid (NCIB) for another year on substantially the same terms and increase the limit of purchases under the NCIB to $1 billion of common shares. Most recently, Agnico repurchased nearly 500,000 shares during the first quarter of 2025.

Looking ahead, the company said it’s well positioned to achieve its 2025 gold production guidance of approximately 3.5 million ounces, its 2025 total cash costs per ounce guidance of approximately $940 per ounce and its 2025 all-in sustaining cost (AISC) per ounce guidance of $1,275.

While I expect gold and gold mining stocks to pull back and consolidate during the next few weeks, I also expect the mining complex to continue its outperformance for much of 2025 and I remain bullish on Agnico. The stock retains a Hold rating in the portfolio.

Centuri Holdings (CTRI) was one of the stocks in the portfolio that managed to hold its own during the recent market sell-off, and a likely reason for that was revealed on Thursday: It has accrued nearly $400 million in customer awards for its gas infrastructure business.

The contracts involve bookings and options for multiple Master Service Agreement renewals, which broaden the company’s reach into new territories in the Northeast for a “significant” gas utility client, and which underscores Centuri’s role in the replacement and enhancement of aging natural gas infrastructure.

The company’s recent commercial successes include over $850 million in new awards announced earlier in April, which it says “reflect[s] the trust and confidence of its clients.” Centuri’s President and CEO, Christian Brown, emphasized the importance of these renewals as milestones in achieving profitable growth and as a testament to the company’s reliable delivery of projects.

I continue to remain bullish on CTRI after its show of relative strength during the market correction. After taking a one-quarter profit, Centuri remains a Hold in the portfolio.

On Tuesday, GE Aerospace (GE) released Q1 financial results that were given an optimistic reception by investors. While adjusted revenue of $9 billion fell short of the consensus, earnings of $1.49 a share increased 60% from a year ago and beat estimates by 17%, with total orders of $12 billion increasing 12%.

Management emphasized the company had a strong start to 2025 with orders and revenue up by double digits, driven by commercial services and improvements through its Flight Deck platform, which it said should enable GE to tackle supply chain constraints and accelerate deliveries throughout the rest of the year.

The company guided for low double-digit revenue for full-year 2025 and for earnings to increase nearly 20%. GE said it’s offsetting the effects of President Trump’s tariffs by cutting costs and adjusting prices, and while it cautioned that the “tariffs will result in additional cost for us and our suppliers,” it said it’s “optimizing operations and leveraging existing programs and strategies to reduce the impact from tariffs.”

Additionally, GE is taking measures to control cost and implement pricing actions to mitigate the remaining impact. Management further said that its commercial services backlog of over $140 billion will enable GE to maintain its sanguine full-year guidance. Wall Street was pleased with the quarterly results and the stock is up over 20% from its correction low to date.

Also on Tuesday, GE further clarified its response to the White House’s tariffs by saying it’s increasing the use of foreign trade zones and implementing tools such as duty drawbacks to alleviate the burden. The company is also deploying cost-control measures and applying tariff surcharges to protect its profit margins.

According to Seeking Alpha, the top brass “raised the tariff issue” directly with President Donald Trump during a recent meeting, which said GE’s stance was “understood” by the administration.

A Reuters report this week notes that CEO Larry Culp has called for a revival of the 1979 Civil Aircraft Agreement’s tariff-free provisions, which he says once served as a key driver of U.S. aerospace dominance. GE also pointed out that the zero-duty regime helped the U.S. aerospace industry generate a trade surplus of $75 billion a year.

GE maintains a Hold rating in the portfolio.

Intel (INTC) announced Q1 earnings on Thursday that beat Wall Street’s expectations across the board. Although revenue of $12.7 million was unchanged from a year ago, it beat estimates by 3% while earnings of 13 cents beat estimates by 13 cents. The results were driven by “robust” Xeon sales and strong demand for its Raptor Lake products, with gross margin coming in at 39%.

The CEO called the first-quarter performance a “step in the right direction,” and while he emphasized that the “current macro environment is creating elevated uncertainty across the industry,” he said Intel is taking a disciplined and prudent approach to support continued investment in its core products and foundry businesses while maximizing operational cost savings and capital efficiency.

Additional strategic focuses include strengthening Intel’s engineering capabilities, revitalizing the talent pool and enhancing the company’s AI strategy through integrated solutions, with an aim to redefine its portfolio to address emerging workloads in AI and computing.

Intel further said it intends to find an additional $2 billion in savings to its growth CapEx, taking its target for this year to $18 billion. It’s also taking a closer look at its existing factory footprint to ensure the firm is making the most efficient use of its in-store capacity before committing to any additional spending. And the firm said it will continue to make needed investments to reignite innovation even as it reduces its overall expenses by minimizing projects and programs that have been taking attention away from its core client and server business.

INTC retains a Buy rating in the portfolio.

Nielsen’s latest Media Distributor Gauge report revealed that YouTube once again captured 12% of overall TV viewing and was the top reported media distributor in the U.S. in March.

Discovery won the largest monthly viewership increase among media distributors in March, but Paramount Global (PARA) came in third in the overall rankings with an 9% share of TV, helped by March Madness coverage on CBS, along with drama series Tracker and Matlock, which drew 11 million viewers and nine million viewers, respectively.

Also of note, a lawsuit between Paramount and President Donald Trump over a CBS “60 Minutes” interview last year is likely headed to mediation next week. Trump is seeking $20 billion in his suit against CBS, which alleges election interference over its handling of an interview with then-Vice President Kamala Harris. The president accused the network of aiding his election opponent through “deceptive editing” just weeks before the presidential election.

CBS’ parent company, Paramount Global, agreed to mediation, signaling their courtroom feud will result in a settlement. Earlier this week, a CNN analyst expressed the view that Paramount’s decision to enter mediation was likely based on Paramount protecting its forthcoming merger with Skydance Media, which has a target of July 7.

The stock has remained firm despite the mixed news headlines of late and is taking the headline volatility in stride—typically a sign that strong-handed investors have no interest in selling. Paramount retains a Buy rating in the portfolio.

SLB Ltd. (SLB) will release its Q1 earnings on Friday prior to the opening bell. Wall Street analysts expect top- and bottom-line losses of 1% and 3%, respectively, setting a low bar for an earnings beat. Seeking Alpha said SLB has beaten earnings estimates 100% of the time and revenue estimates 50% of the time, so we’ll see what happens.

SLB’s quarterly results are widely expected to provide a view into how one of the world’s top oilfield services companies is navigating the tariff-related uncertainty, along with recent oil price weakness.

In particular, investors are expected to focus less on the Q1 results and more on the guidance of the top brass as to how they plan to navigate the murky environment. In the words of Citi Research energy analyst Scott Gruber, “All eyes are really turning to the future to assess where the oil service markets go from here.”

Earlier this week, industry peer Halliburton (HAL) reported disappointing quarterly results, with CEO Jeff Miller commenting: “Many of our customers are in the midst of evaluating their activity scenarios and plans for 2025 activity reductions could mean higher than normal white space for committed fleets and in some cases, the retirement or export of fleets to international markets.” (White spaces refer to gaps in the calendar when the company does not have work lined up for its equipment.)

By contrast, competitor Baker Hughes (BKR) on Wednesday highlighted strong Q1 results, including record levels of revenue and EBITDA margins, supported by strong performance in its Industrial & Energy Technology segment. Moreover, the company said it’s targeting $1.6 billion in new energy orders for 2025 on the back of liquified natural gas (LNG) and data center orders.

SLB remains a Buy in the portfolio.

On Thursday, Redis, which bills itself as the “world’s fastest data platform,” and enterprise automation software specialist UiPath (PATH) announced the expansion of their collaboration toward furthering agentic automation solutions for customers.

As a UiPath technology alliance partner, Redis has played a crucial role in increasing the speed and efficiency of UiPath’s Automation Suite. Redis powers UiPath Orchestrator’s high-availability add-on (HAA), an on-premises offering that improves the performance of robotic process automation applications at scale. Together, Redis and UiPath deliver over 1,000 enterprise-grade on-premises deployments of Automation Suite.

By extending their partnership, Redis and UiPath will explore ways to leverage the Redis vector database, Semantic Caching, and Semantic Routing to support UiPath Agent Builder, while also allowing UiPath agents to leverage the best large language model provider depending on the use-case which the customer is trying to solve.

PATH maintains a Buy rating in the portfolio.

RATINGS CHANGES: We sold our remaining three-quarters position in Teladoc (TDOC) earlier this week. SELL

NEW POSITIONS: None this week.

Friday, April 25, 2025 Subscribers-Only Podcast:

Covering recent news and analysis for our portfolio companies and other topics relevant to value/contrarian investors.

Today’s podcast is about 20 minutes and covers:

• Stocks got a boost from short covering driven by a softening of the White House’s tariff and Federal Reserve stance.
• Expect further near-term leading signals for stocks from the bitcoin market.
• Packaged food retailers like Kraft Heinz (KHC) should outperform in the current environment.
• Final note
  
  • Other consumer staples like Dollar General (DG) have strong rebound potential.

Market Outlook

A softening of the White House’s stance on tariffs and its posture toward the Fed provided the catalyst to this week’s relief rally. The Trump administration’s decision to pause reciprocal tariffs earlier this month provided the respite from the selling pressure the market was seeing, but further relief was provided as short sellers began covering positions this week en masse.

An additional trigger to the rally was provided by a statement earlier this week by Treasury Secretary Scott Bessent, who told investors at a closed-door J.P. Morgan summit that he expected “the tariff situation with China to de-escalate” while describing the standoff as “unsustainable.”

That was on Tuesday. By Wednesday, however, President Trump suggested that he may re-impose tariffs as soon as soon as “two or three weeks” from now if trade deals aren’t reached, which calls into question the previous announcement of a 90-day tariff pause. Regardless, the market took it in stride and continues to act well as of this writing, so hopefully we’ll have at least a couple more weeks before any potential trade war turmoil is reintroduced into the market.

Internally, the market has shown drastic improvement in the last few days, with new 52-week lows on the NYSE shrinking to their lowest levels since January. This is a dynamic that was missing for some of the market’s last few rally attempts and shows that, at least for now, internal selling pressure isn’t an issue. This in turn will make it easier for stocks to make further strides as the bears continue to unwind their short positions.

Another welcome sign has been the notable outperformance in the crypto market as bitcoin prices rallied ahead of the equity market in the last several days. The “heads-up” signal provided by one of my favorite broad market leading indicators, the Grayscale Bitcoin Trust ETF (GBTC), once again proved its merit when the rally in this crypto tracker let us know in advance that informed traders were once again developing an appetite for risk while most investors were still in defensive mode.

And just as the bitcoin ETF peaked out ahead of the S&P 500 Index and commenced a sell-off ahead of the stock market earlier this year, I expect GBTC will again serve as a bellwether and provide us with another heads-up warning signal ahead of the next market top.

Anytime the market experiences a serious correction, it usually pays to take note of the areas of the market that outperforming during the sell-off. And in the wake of the market’s recent bout of selling pressure, two of the 11 S&P sectors that especially caught my attention were the Consumer Staples and the Communication Services sectors, with a handful of industries outside those sectors also showing unusual strength.

One reason why it’s important to observe which sectors and industries outperform during a volatile market environment is that a conspicuous show of relative strength typically denotes informed buying. That is, it suggests the presence of serious buyers who are presumably immune to the panicked impulses of the average investor during a sell-off.

These are buyers who take advantage of an unstable broad market to pick up fundamentally attractive stocks that were dumped by smaller investors who need to raise cash in a hurry. Hedge funds and institutional investors are two such examples of participants in the informed category that often operate as buyers while the rest of the market is selling.

Informed buying, as it’s often phrased, isn’t difficult to spot during a market panic since it almost always manifests as a stock chart that makes a higher low—or even vigorously rallies—while most stocks are making lower lows while being dumped.

Indeed, the tell-tale higher low can, in most cases, be safely assumed to denote the presence of informed buyers since the average small participant is rarely interested in buying when the general market is falling. Moreover, it requires substantial funds to cause a higher low to be made in an actively traded stock when the broad market trend is down.

With this in mind, let’s drill down and examine in closer detail the relative strength that was recently evident in one of the aforementioned stock groups, namely Consumer Staples. Specifically, the grocery and discount stores and packaged food provider sub-categories within this sector stood out as clear relative strength outliers, and it’s not hard to fathom why: In the present inflationary environment—and with recession fears mounting—discount store price points are attractive for cost-conscious shoppers.

On this score, I reiterate my recent observation concerning the strength Dollar General (DG) has lately shown, which particular stands out in light of the weak market backdrop. What’s more, unlike many of its retail sales competitors, Dollar General is well positioned to thrive in the current tariff regime. It sources most of its goods domestically, and its sales items are focused on non-discretionary consumer staples, which mean the tariffs are adversely impacting the firm’s competitors that heavily rely on imports much more so than Dollar General. This should consequently allow the firm to expand its market share and improve its competitive positioning going forward at the expense of its competition. On that score, Wall Street sees several years of 10% to 15% bottom line growth ahead for the firm.

In terms of packaged food providers, a standout during the recent correction was Kraft Heinz (KHC), the third-largest food and beverage company in North America and the fifth-largest in the world with annual sales of $26 billion. The company fell out of Wall Street’s good graces several years ago and has struggled with declining volume and a failure to adapt to recent shifts in consumer tastes.

Moreover, the stock price has been hurt by the firm’s overreliance on cost-cutting initiatives, a massive brand writedown and other accounting troubles, as well as overall weak market growth. The turnaround for Kraft Heinz is still ongoing, but there are reasons as to why the stock has rebound potential despite some of the challenges that remain.

To combat these problems and improve profitability, the company has lately focused on cost management, strategic investments in innovation, product development and marketing. The company has also adjusted its pricing and promotion strategies and is growing its distribution network in the emerging markets in which it operates.

Kraft Heinz also stands to benefit if the economy slows, as consumers would be likely to shift away from expensive organic foods towards cheaper, packaged foods like the kinds the company provides (as was seen during the brief recession of 2020).

Wall Street sees revenue and earnings turning the corner in the next couple of quarters, with both metrics improving considerably in 2026. A 5.4% dividend yield is an added attraction. KHC remains a focal point of my current watch list and I’ll likely have more to say about it later on.

Please know that while I don’t yet personally own shares of all Cabot Turnaround Letter recommended stocks, this will materially change in the coming weeks as I become fully integrated as your new chief analyst.

Please feel free to share your ideas and suggestions for the podcast and the letter with an email to either me at cdroke@cabotwealth.com or to our friendly customer support team at support@cabotwealth.com. Due to the time and space limits we may not be able to cover every topic, but we will work to cover as much as possible or respond by email.

Portfolio

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