Today - Thursday, December 12, 2013
12:47 PMEU to reportedly give Telefonica/KPN deal close scrutiny
- Reuters reports the E.C. will "open an in-depth probe" into Telefonica's (TEF -0.9%) $11.9B cash/stock purchase of KPN's (KKPNF) German unit on Friday, and will reject a German proposal to handle regulatory scrutiny of the deal.
- Many expected the E.C. to closely scrutinize the acquisition, which stands to lower the number of German mobile carriers from four to three (Telefonica/KPN, Deutsche Telekom, and Vodafone). Citi has estimated the deal could produce €4B ($5.5B) in annual synergies.
12:41 PMCIBC: Thompson Creek needs 30% higher metal prices to avoid restructure
- Thompson Creek (TC -3.6%) needs metal prices to rise ~30% to avoid some form of restructuring, CIBC warns, but the miner "has time in its favor."
- However, the firm says TC is making positive progress at the Mt. Milligan copper and gold project, does not foresee near-term liquidity issues and considers the recent share price pullback as a buying opportunity for risk-tolerant investors.
- The firm notes that molybdenum currently accounts for 100% of TC sales but is forecast to fall to 40% next year.
12:30 PMGoldman remains bullish on private MI operators
- "Management recognizes that no private mortgage insurer has sustained 25%+ market share for an extended period in the past," says Goldman's Eric Beardsley, reiterating his Buy on both Radian (RDN +1.1%) and MGIC Investment (MTG +0.6%) following presentations from both at this week's Goldman financial services conference.
- Previous coverage of Radian's presentation
- Transcript of MGIC's presentation
- Though the FHA's retreat from the mortgage insurance market should leave plenty of business for the private operators, there are a couple of well-capitalized new players - NMI Holdings (NMIH +2.5%) and Essent Group (ESNT +1%). Beardsley sees - but isn't worried by - Radian's market share falling from 27% to 24% over the next few years.
12:28 PMFast and furious action in Vera Bradley| Comment!
12:19 PMU.S. should lift domestic oil export restrictions, Exxon says
- Exxon's (XOM) annual energy outlook this year has a stark message: We are entering an era of abundance, and it’s time the U.S. started exporting oil.
- "We are not dealing with an era of scarcity" as was the case during the 1973 Arab oil embargo when the U.S. imposed restrictions on exporting domestic oil; "we need to rethink the regulatory scheme and the statutory scheme on the books."
- XOM is increasingly optimistic about how much oil can be recovered with today’s technology, predicting 65% of the world’s crude will be untapped by 2040.
- XOM forecasts global demand for gas will rise by 65% by 2040, with natural gas on track to supply 25% of global energy requirements; demand for coal will rise until 2025, but coal’s share of the global energy mix will fall from 25% today to below 20%.
12:13 PMTelus receives approval for $500M 2014 buyback
- The Toronto Stock Exchange has signed off on a Telus (TU -1.2%) proposal to buy back $500M worth of shares in 2014. (PR)
- The buyback is good for repurchasing 2.6% of the Canadian carrier's shares at current levels. Telus has already bought back $1B worth of shares this year at a weighted average purchase price of $32.07.
12:09 PMBAML: Investors should own Citi
- "At this mid-stage of recovery, investors should own the U.S.-based, globally exposed bank stock trading below tangible book that has plenty of capital and is also a 'self help' story," says BofA's Erika Najarian, attempting to distill the bull case on Citigroup (C -0.4%) down to one line.
- Citi's had a nice year - up 28% - but that's less than the 30% for the KBW Bank Index, and the shares trade at 0.9x tangible book value, 9.4x consensus 2014 EPS, and 8.5x 2015 estimates.
- The bank should have the biggest "incremental change" in capital returns this year, says Najarian, who expects no issues with Citi paying out $9B in dividends and share buybacks. She boosts her price target to $61 from $58.
12:08 PMGiddy days for airline stocks
- Airline stocks shoot higher as the sector continues to see the pieces fall into place for higher profits (Previous: IATA forecast).
- Lower fuel costs and higher fares are lining up just as the industry looks settled for a period of tight capacity discipline. It's already been a banner year for a number of airline stocks which have put in audacious gains.
- Advancers: JetBlue (JBLU) +3.8%, Southwest Airlines (LUV) +3.5%, Republic Airways (RJET) +2.1%, United Continental (UAL) +1.9%, Delta Air Lines (DAL) +1.8%. Spirit Airlines (SAVE) +1.7%, Hawaiian Holdings (HA) +1.6%.
12:00 PMOn the hour
- Dow -0.55%.
- 10-yr -0.25%.
- Euro -0.23% vs. dollar.
- Crude +0.09% to $97.53.
- Gold -2.38% to $1227.4.
11:58 AMFortum to sell Finnish power distribution grid for $3.5B
- Finnish utility Fortum (FOJCY, FOJCF]]) agrees to sell its local power distribution grid to a group of institutional investors led by First State Investments and Borealis Infrastructure for €2.55B ($3.5B).
- The deal is the latest in a series of regulated grid sales made by large energy firms wanting to cut debt and focus on their power generation businesses instead, while highlighting the rising popularity of established infrastructure assets for pension funds and other institutional investors seeking safe returns in a low interest rate world.
11:55 AMSapiens International climbs on William Blair initiation
- Sapiens International (SPNS +3.6%) climbs after William Blair initiates coverage on the Israeli insurance industry software maker at Outperform, helping the stock notch fresh 52-week highs.
- Blair is the third firm out of 3 to issue bullish coverage on the name, the other 2 being Barclays and Needham.
11:51 AMCisco lowers growth outlook, peers/suppliers fall in sympathy
- Cisco (CSCO -2.3%) is now targeting annual revenue growth of 3%-6% over the next 3-5 years, down from a prior 5%-7%, says CFO Frank Calderoni states at the networking giant's analyst meeting. In addition, Calderoni says Cisco's FY14 (ends July '14) revenue growth outlook is "basically" in-line with a Street forecast for a 4% decline.
- Cisco is now aiming for services revenue growth of 7%-10% over the next 3-5 years, down from 9%-11%; services accounted for 22% of Cisco's Oct. quarter revenue. Businesses related to "enabling the cloud" (a somewhat nebulous term) are expected to show a 12%-18% growth rate.
- Cisco, already pressured by John Chambers' macro comments, continues to trade lower. Many networking equipment peers and component/chip suppliers are also selling off; in addition to Cisco, Ciena's mixed FQ4 results and slightly soft FQ1 guidance could be playing a role here.
- Notable networking equipment/component/chip decliners: JNPR -3.1%. BRCM -2.5%. PKT -2.8%. FFIV -2.2%. ERIC -2.1%. JDSU -1.9% (getting pulled from the S&P 500). AFOP -5.5%. CAVM -1.7%. AMCC -1.8%. BRCD -1.8%. MRVL -1.6%. ARUN -1.7%. CALX -1.7%.
11:49 AMJim Cramer touts Marathon Oil as undervalued
- Marathon Oil (MRO +0.6%) shares barely moved yesterday despite positive news from the company's analyst day - in fact, they've been flat for a month - but Jim Cramer thinks bargain hunters may have a deal in MRO at ~$36/share.
- MRO said it plans to raise its rig count in the Bakken and the Eagle Ford by 20%, and they're doubling their rig count in Oklahoma's Woodford shale, areas Cramer believes will transform the oil industry and the nation.
- Cramer likes MRO's plan to sell off cash cow North Sea assets to raise cash and simplify its holdings and calls the increased share buyback "very meaningful," yet the stock is selling for just 11.8x next year's earnings estimates.