Today's Market: Earnings, Spin-Offs And Capital Raises Moving Markets

Includes: BCS, DDD, HLF, PFE, SOHU
by: Matthew Smith

This morning we are learning that British banks will need to raise capital once again to close funding gaps in their balance sheets. With the plans that we have read thus far, we also want readers to be aware that these names are probably not going to be able to distribute capital to shareholders via dividends and share buybacks in the near future. The American financial stocks are where investors should want to be at this time and then later down the road rotating into the British and European names.

Chart of the Day:

We are closely watching the latest round of media negotiations between the content providers and the content "pipers". We are sure that CBS shall get more for their properties, but how much more is the question.

(Click to enlarge)

Source: Yahoo Finance

We have economic news due out today and it is as follows:

  • Case-Shiller 20-City Index (9:00 a.m. ET): 10.5%
  • Consumer Confidence (10:00 a.m. ET): 81.6

Asian markets finished mostly higher today:

  • All Ordinaries -- down 0.03%
  • Shanghai Composite -- up 0.70%
  • Nikkei 225 -- up 1.53%
  • NZSE 50 -- down 0.61%
  • Seoul Composite -- up 0.90%

In Europe, markets are trading higher this morning:

  • CAC 40 -- up 0.41%
  • DAX -- up 0.18%
  • FTSE 100 -- down 0.18%
  • OSE -- down 0.18%


Early this morning British banking giant Barclays (NYSE:BCS) announced that they would need to close a funding gap of some $19.6 billion to appease regulators and meet the new capital requirements. The plan is to raise the capital via an equity offering of $8.9 billion which will dilute current shareholders. The shares closed at $19.04/share yesterday in US trading and this morning in pre-market trading the shares were quoted at $17.37/share and trading lower by $1.68, or 8.82%. The remaining shortfall will be cleared up via the company refraining from using debt to finance operations and keeping more of their earnings to fund the business. The latter part of that indicates that dividends will not be free flowing from the company and tells us that Barclays shall be a longer-term play than its American counterparts.


Pfizer (NYSE:PFE) has sent the past few years spinning off businesses and adjusting their capitalization structure and based off of their earnings release this morning that trend will continue. It appears that the company shall split into two companies at some point over the next two years or so and shall create a traditional pharma company focused on developing drugs while spinning off an entity which will focus on the lower margin generic drugs that the company makes. Supposedly this move will enable the company to better focus on developing drugs and not be sidetracked.

Regarding the company's earnings, they beat on the bottom line but missed on revenues - one of those recurring themes over the last few years for the market as a whole. Revenues were expected to be $13.01 billion but came in at $12.97 billion while the company reported EPS of $0.56 versus the $0.55 EPS figure which was the consensus of the Wall Street analysts.

Consumer Goods

We highlighted Herbalife (NYSE:HLF) as it broke out to new highs and wondered aloud how Ackman was doing as this name had rebounded from the lows set shortly after he revealed that his hedge fund had a large short position in the company. Well now he not only has to worry about what Carl Icahn is doing but also how the company's operations are doing because global operations are now driving results and the company reported strong numbers for their 2Q results. Worse still for Ackman is that the company raised their guidance for the year. The shares closed at $62.57/share yesterday but are currently quoted at $65.45/share in pre-market trading. Conaccord raised its price target to $77/share from $63/share while SunTrust upped their target to $72/share from $65/share this morning.

Ackman has to be feeling the heat on some level here and one has to wonder if he has covered any portion of his position at this point.

(Click to enlarge)

Source: Yahoo Finance


Yesterday we saw 3D Systems (NYSE:DDD) rise above $50/share and hit a new high of $51.45/share during the session. The move was in anticipation of today's earnings announcement which was just released (see press release here). At first glance the results look solid with an expansion of gross margins while the top and bottom lines grew at a solid pace and we also noticed that the company said they increased some discretionary spending in order to grow the business this quarter. The shares are trading a bit lower in pre-market trading right now but there is a conference call scheduled at 9:00 a.m. today. We will be listening to that and shall have more to report tomorrow.

Hopefully these numbers for the quarter are backed up by bullish comments during the conference call because the shares appeared poised for their next big step higher.

(Click to enlarge)

Source: Yahoo Finance

Investors were caught a bit off guard with the Chinese internet stocks yesterday as (NASDAQ:SOHU) disappointed investors with their comments on advertising. Readers should remember the good news set forth by Baidu (NASDAQ:BIDU)where mobile advertising was a strength. That was not the case with any of the companies which reported yesterday and was a reason why Sohu saw shares fall nearly 10% to close at $63.05/share on Monday. As we have stated before, those who learn how to monetize the mobile web shall have a leg up on the competition, and it appears that this shall hold worldwide and not simply apply to just the western world.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.