MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Wednesday, June 19
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8:09 PM Five Below (FIVE) sinks in the post session after announcing an 8.6M share secondary offering. All of the shares are being offered by selling shareholders, including certain members of Five Below's management team and Board of Directors. The underwriters are expected to have a 30-day option to purchase an additional 1.3M shares to cover over-allotments. FIVE won't receive any proceeds from the sale. Goldman Sachs, Barclays, Jefferies, Credit Suisse and Deutsche Bank are joint book-running managers. Shares -6% AH. Comment!
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6:33 PM For the first time in its 27-year history, the prestigious World Food Prize for enhancing the global food supply has gone to a creator of genetically modified crops, a top scientist at Monsanto (MON). The prize has some PR value for MON, potentially aiding the case for bio-engineered food and deflecting some criticism of one of the world's most controversial companies. Comment!
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6:17 PM Some S&P 600 changes: CalAmp (CAMP) is replacing Palomar Medical as of the June 24 close, WageWorks (WAGE) is replacing National Financial Partners as of the June 25 close, and Associated Estates (AEC) is replacing Websense as of the June 25 close. Palomar, NFP, and Websense are all being acquired.camp. CAMP +1.5% AH. WAGE +1.5%. AEC +3%. Comment!
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5:12 PM As the result of Safeway's (SWY) sale of its Canadian operations to Empire/Sobeys for C$5.8B in cash, strong 2013 free cash flow and the 2013 Blackhawk IPO, it plans to repay or retire a total of $2.8B in debt compared to debt balances at the end of fiscal 2012. The $2.8B price tag include $2B to be paid down as soon as practicable after the transaction closes, and approximately $0.8B from 2013 free cash flow and 2013 Blackhawk IPO proceeds. Comment!
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5:05 PM Microsoft (MSFT) does an about-face, dropping the Xbox One's Internet verification requirements and all of its used game restrictions. GameStop (GME) investors are very pleased, shares +7.8% AH. Microsoft's change-of-heart follows a major backlash from gamers (they were far from appeased by Redmond's initial response), and plenty of gamer enthusiasm being shown for the PlayStation 4 (SNE), both due to its lack of similar restrictions and its lower price. 11 Comments
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4:57 PM It seems likely that KeyBanc would view today's post-earnings sell-off in shares of La-Z-Boy (LZB) as a buying opportunity. Analyst Bradley Thomas has quite a few good things to say about the company including a positive take on revenue growth, market share gains, and margin expansion. In fact, the "under-appreciated" stock is one of the bank's "top picks for the year." Comment!
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3:08 PM Urban Outfitters (URBN -1.6%) continues to impress retail watchers with the steady growth of its direct-to-consumer channels (24% of total sales). Management's acumen at expanding online and catalog sales is one of the reasons the company's revenue and growth rates has beat peers Aeropostale, American Eagle Outfitters, Buckle, and Abercrombie & Fitch. Comment!
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2:46 PM Orchard Supply (OSH -59%) says the U.S. Bankruptcy Court has approved all of the First Day Motions related to its voluntary Chapter 11. The motions collectively will enable the company to continue operating its business as usual as it completes its Chapter 11 case. Comment!
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2:26 PM WatchESPN (DIS) and HBO Go (TWX) have been added to the Apple TV for paying subscribers in a move that will significantly increase the reach of the streaming services. The development also represents another small leak for the cable/satellite industry (CHTR, TWC, CMCSA, DTV, DISH) as it tries to keep its content dike in place. Comment!
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2:19 PM Shares of Sonic (SONC +1.8%) skate higher on the back of a Morgan Stanley upgrade to Equalweight from Underweight. Comment!
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2:03 PM Analysts weren't surprised by the when-issued trading in Australia of the new companies emerging from the split of News Corp. (NWS, NWSA). In their debut in Sydney, 21st Century Fox (Fox movie, pay TV and free TV busines, Sky Deutschland, Sky Italia, part of BskyB ) rose over 5% while the new News Corp. (Wall Street Journal, The Sun, Barron's, Australian media assets) dropped 3%. Comment!
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1:33 PM Procter & Gamble (PG +0.2%) announces a new licensing agreement with Alexander McQueen. Under the terms of the deal, P&G will be able to immediately market fragrances under the Alexander McQueen brand name. What to watch: During last week's presentation (slides) at the Deutsche Bank Global Consumer Conference, execs said the company will increase its focus on making "value and performance" claims on its large stable of brands. On that note, a fragrance fit for a future queen could be an upcoming tag line. Comment!
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1:06 PM The mystery behind the ouster of Men's Wearhouse (MW -1.9%) founder George Zimmer lies behind the doors at the company where the exec had significant difficulty giving up control, according to Stifel Nicolaus. The investment firm backs its Buy rating on the retailer, noting current management including creator director Joseph Abboud are on the right track. Comment!
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12:59 PM The AMA officially endorses a policy to limit how caffeinated beverages are marketed to consumers under the age of 18 and calls for a temporary ban on youth marketing until more studies are completed. Shares of Monster Beverage (MNST -0.4%) are only off moderately with the risks of legislation on energy drink marketing already baked in. 1 Comment
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12:58 PM Lunch service is a good thing if you're a restaurant, something BofA analyst Joseph Buckley reinforces Wednesday, upping his price target on Bloomin' Brands (BLMN +1.9%) to $29 from $25, citing a positive outlook for the introduction of lunch service at Outback locations. "Weekday lunch … is expected to be in 34% of Outback restaurants by YE 2013 and eventually in 50%-60% of the chain," Buckley notes. Comment!
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12:45 PM Shares of Buffalo Wild Wings (BWLD +0.4%) cross into triple digits for the first time ever as investors continue to buy into the restaurant operator's growth potential. What to watch: The company's Q2 comparable-store sales and margins will be in focus to see the impact on results from an against-the-grain menu strategy to move to selling a quantity (small, medium, or large) of wings instead of letting consumers choose a specific number of wings. Comment!
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11:36 AM Smithfield Foods (SFD +0.3%) made an interesting disclosure yesterday in a SEC filing. The company was considering a "potentially significant acquisition" of a large business in the packaged meats sector. The speculation from dealReporter is that it was Hillshire Brands (HSH +1.5%) in the crossfires, an acquisition which makes sense and could be on the table again if regulators stop the Shuanghui International purchase of Smithfield. 1 Comment
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11:27 AM BTIG downgrades News Corp. (NWS, NWSA) to Neutral from Buy after doing a fresh sum-of-the-parts analysis on the company. The math on the new News Corp. suggests a when-issued trading price of around $15 per share ($3.72 per current NWS/NWSA share) which could drift to $20 if the newspaper business performs better than expected. (full research report) Comment!
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10:44 AM Winners and losers from Chrysler's (FIATY.PK) fight with the NTHSA: Though it capitulated and agreed to a recall, Chrysler scored a cheap fix (adding trailer hitches) to what could have been a more expensive issue and protected its brand in front of the planned buyout by Fiat and eventual IPO. The NHTSA saves itself what may have been a painful process of going through discovery - while General Motors (GM) and Ford (F) got a free look at how a battle with the agency goes down. Consumers with 1993-2004 Grand Cherokees and 2002-07 Libertys walk away with a little extra value due to the new trailer hitch, but might still be wondering about those rear-end collisions. 2 Comments
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10:31 AM Sony (SNE -2.9%) will not directly address Third Point's call for the company to spin off its entertainment business during its annual meeting tomorrow, according to sources. Loeb won't be in attendance, but the wide-open nature of annual meetings in Japan will give other shareholders plenty of chances to try to force Sony executives to make a statement on the proposal. Comment!
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10:03 AM Shares of Goodyear Tire (GT +2.9%) trade higher as industry factors such as the price of rubber and overall automobile demand stay in the company's favor. Goodyear is also in the midst of some labor negotiations with a steel workers union which could impact future costs. Comment!
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9:54 AM Men's Wearhouse (MW -0.7%) narrows its premarket loss quite a bit as the news of the firing of its founder is digested. Though a termination - instead of a resignation - signals there's more to the story, some forward-looking investors are jumping in on the prospect that a change of direction will benefit the retailer. 1 Comment
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9:36 AM American Eagle Outfitters (AEO -0.9%) looks out of style to Citigroup which takes the company down to a Neutral rating from its previous perch of Buy. The retailer has trailed peers for the year with its comparable-store sales growth and its share price has trudged along accordingly. Comment!
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9:19 AM Shares of Jos. A Bank Clothiers (JOSB) could see some action with rival Men's Wearhouse (MW) taking the dramatic step of firing its founder. SA contributor Money Investor already made the case that Jos. A Bank looks undervalued compared to Men's Wearhouse and could attract a buyer due to its strong fundamentals. Premarket: MW -7.1% premarket, JOSB inactive. Comment!
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9:11 AM Men's Wearhouse (MW) fires George Zimmer from his position as executive chairman and says it will postpone its annual meeting as it seeks new director candidates. For those curious, Zimmer is the guy from the Men's Wearhouse commercials with the personal guarantee. MW -6.6% premarket. 18 Comments
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8:55 AM Orchard Supply (OSH) tells investors rather bluntly that it expects equity holders will experience a "complete loss" of their investment as a result of the pending bankruptcy. Shares were bid up early this week on speculation that the sale of assets to Lowe's would leave some value in the company. OSH -51.5% premarket. Comment!
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8:50 AM More on Wal-Mart (WMT) vs. Amazon (previous): As Wal-Mart pushes harder to compete with Amazon online, a giant albatross hangs around its head with complicated extra layers of distribution adding to its costs. The retailer's online shipping costs come to around $5 to $7 per parcel compared to the $3 to $4 Amazon sees. 3 Comments
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8:13 AM Jefferies reiterates its Buy rating and $66 price target on Starbucks (SBUX) after sizing up the company's presentation at the investment firm's consumer conference yesterday (recap). Analysts with the firm say Starbucks has the best visibility in the large-cap growth universe. 3 Comments
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8:10 AM BT Group (BT -3.1%) CEO Ian Livingston will leave the company in September to become the Minister of State for Trade & Investment in the U.K. government. Livingston will be replaced by Gavin Patterson, who has led BT Retail and served as a BT Board member since 2008. (PR) Comment!
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8:05 AM Honda (HMC) agrees to pay $580M to settle a lawsuit filed by the U.S. government over engines which allegedly violated emissions standards. Comment!
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7:56 AM In a blog post announcing a partial recall of Model S vehicles, Tesla Motors (TSLA) CEO Elon Musk notes the automaker hasn't received a single customer complaint on the issue of a potentially-weak mounting bracket. Maintaining its sense of style, the company will arrange to have recalled vehicles picked up from its owners to be fixed. TSLA -2.0% premarket to $101.30. 18 Comments
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7:43 AM More on FedEx's (FDX) FQ4: The firm says 3,600 employees will be leaving in phases under a voluntary employee separation program. As a result of more international customers selecting lower-rate services. FedEx says it will make capacity cuts for Express Shipping for its business between Asia and the U.S. FDX +0.8% premarket. (PR) Comment!
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7:37 AM More on FedEx's (FDX) FQ4: The company improved its operating margin during the quarter by 60 bps to 9.6%. The FedEx Express segment saw revenue increase 3% to $6.98B while sales at the FedEx Ground segment were up 12% to $2.78B. FedEx freight segment sales slipped 1% to $1.39B. For FY14 the company sees EPS growth of 7% to 13%. FDX +0.9% premarket. (PR) Comment!
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7:26 AM Hennes & Mauritz (HMRZF.PK) says sales in June are very strong as its new collections hit stores. CEO Karl-Johan Persson notes the strong month isn't due to promotions with most items selling at or near full-price. Comment!
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7:16 AM The next auction at Sotheby's (BID) strikes rather close to home. The company says it's exploring options to lease or sell its headquarters in New York City. The prized building was purchased by Sotheby's in 2009 for $370M. Comment!
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7:02 AM Smog-infested Shijiazhuangn in China announces a plan to limit automobile sales of new vehicles to 100K this year and only allow households to to own at most two cars in an effort to improve air quality. Automobile analysts think more cities in China could be forced to limit the growth of automobiles due to worsening air pollution. The measures could put the brakes on some of the most ambitious plans of automakers (F, TM, FIATY.PK, HMC, NSANY.OB, VLKAY.PK, DDAIF.PK) for the country. 7 Comments
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6:58 AM Tesla Motors (TSLA) announces a partial recall of the Model S to address a potential defect with a mounting bracket in the second row seat. Vehicles manufactured between May 10, 2013 and June 8, 2013 are covered by the recall. 18 Comments
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6:50 AM General Motors (GM) sets a goal of increasing its market share of the luxury automobile market in China to 10% by 2020. In order to achieve the mark, GM will need to increase the number of Cadillacs it sells in the country to close to 250K per year from a current level of around 30K. The automaker has plans to introduce 10 new or upgraded models in China per year through 2016 2 Comments
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6:03 AM Liberty Global (LBTYA) is reportedly offering assets rather than cash in its €7.5B bid for Kabel Deutschland (KBDHY.OB) and would keep the latter's stock-market listing. The structure of the proposal is designed to assuage anti-trust concerns, as Liberty already owns Unitymedia, Germany’s second-largest cable operator. Liberty wouldn't have majority ownership of the combined entity at the holding company level, although it would have much influence. Comment!
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5:05 AM Shares in new News Corp. (NWS), which will hold the company's publishing assets when it splits on June 28, fell 3% to $14.55 on their trading debut in Sydney after opening at a lower-than-expected $15. The non-voting stock slumped over 8% to $14.30. Due to the split, shares in 21st Century Fox, the entertainment business that comprises the other half of News Corp and is still trading under the parent company's name for now, dropped 6.9% to $30.53. 1 Comment
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4:34 AM Verizon (VZ) is interested in acquiring Canadian peer Wind Mobile, the U.S company has said. Verizon has reportedly held talks for Wind, which is a relatively new entry into the Canadian market and is struggling. VimpelCom (VIP), Wind's largest owner, wants around $500M, although Verizon may then have to pump in another $1-2B for spectrum purchases, network upgrades and consolidation costs. RBC analyst Drew McReynolds is not sure the deal makes sense. 7 Comments
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3:55 AM As it seeks to play catch up with Amazon in online sales, Wal-Mart (WMT) has turned to its store employees to pack and mail items to customers, which the retailer reckons should help it save money and time. The method represents a further integration of Wal-Mart's brick & mortar operations with its Internet business. The latter is run separately and has suffered in the past from not being seen as enough of a priority across the whole company. Comment!
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3:28 AM As broadly expected, Alcatel-Lucent (ALU) intends to cut costs by €1B and sell another €1B of assets within two years as it looks to become cash-flow positive by 2015, at which point the telecom-equipment company will look to slash its debt by €2B by selling shares or through further asset sales. The changes are part of a recovery program called the "Shift Plan," which also includes Alcatel-Lucent focusing on IP networking and ultra-broadband access. Alcatel-Lucent is hiring a COO as well, while CFO Paul Tufano will leave. Shares are +6.7% in Paris. (PR) 10 Comments
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1:55 AM Facebook (FB) CEO Mark Zuckerberg has discussed potential partnerships with Samsung (SSNLF.PK) President Shin Jong Kyun as the U.S. company looks to boost advertising sales on mobile devices. The firms already seem to have a decent relationship, with Samsung being among the first device makers to feature Facebook's Home software on its handsets. Meanwhile, Facebook intends to invest more in Korea and serve as a platform for startups. 4 Comments
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