Today - Sunday, February 14, 2016
- Crude prices may be under pressure again after Iran sent its first cargo of oil to Europe since the end of international sanctions in January.
- Tehran is planning three initial shipments to the continent carrying 4M barrels of oil with 2M barrels going to Total (NYSE:TOT) and the rest to companies from Spain and Russia, said Roknoddin Javadi, managing director of the National Iranian Oil Company.
- More supplies are bound to add to the global crude glut, with the Islamic Republic planning to boost production and exports by 1M bpd in 2016.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DWTI, DBO, DTO, USL, DNO, OLO, SZO, OLEM
- Previously: Iran sets oil export volumes for Europe (Feb. 08 2016)
- Previously: WSJ: Iran to sign oil agreement with Total (Jan. 28 2016)
Saturday, February 13, 2016
- "If you sense a bit of confidence, then you’re reading it right," Mattel (NASDAQ:MAT) CEO Chris Sinclair told analysts at a meeting this week.
- Mattel has replaced close to half of its top managers since Sinclair took the reigns at the toy giant over a year ago and is making significant changes to its operations and retailer strategy.
- Shares of Mattel have outperformed the S&P 500 Index over Sinclair's tenure, but trail peer Hasbro by a wide margin.
- The company's plan to replace the +$400M revenue which will evaporate from the loss of the Disney princess license pivots on smaller brands and innovation.
- Retail sales rose 11% in China during the key Golden Week holiday period.
- The solid read backs up some indications from Macau gaming operators that Golden Week activity is strong this year despite the economic turmoil.
- "The mass component clearly looks a little stronger than in the past," noted Steve Wynn during the Wynn Resorts conference call (transcript) earlier this week. Other gaming companies have also claimed brisk Golden Week business.
- The gaming sector is at a crossroads with new capacity coming online shortly even with Macau gaming revenue showing negative growth for 20 straight months. More crackdowns from Beijing and Macau's local government could also be in the mix.
- "We recommend investors maintain patience until there are further policy announcements from the Macau government in addition to post-Chinese New Year trends," tips Macquarie Securities gaming analyst Chad Beynon.
- Macau casino stocks: Wynn Macau (OTCPK:WYNMF, OTCPK:WYNMY, WYNN), Sands China (OTCPK:SCHYY, OTCPK:SCHYF, LVS), MGM China (OTCPK:MCHVF, OTCPK:MCHVY, MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF, OTCPK:SJMHY).
- Related ETF: BJK.
- Related article: The World's Largest Gambling Center's Distress Continues (Feb. 5)
- Large energy companies will slash dividend payouts by a total of $12B this year, bringing global payouts down 9% Y/Y to $147B, according to Markit's dividend forecasting unit.
- Ten of the world's large-cap oil and gas companies are set to cut their dividend in 2016, Markit predicts, including ConocoPhillips (NYSE:COP), which already has slashed its payout for 2015 but likely will announce additional cuts by year-end.
- The other nine large-cap energy firms Markit sees cutting their dividend this year: Anadarko Petroleum (NYSE:APC), Ecopetrol (NYSE:EC), Eni (NYSE:E), Kinder Morgan (NYSE:KMI), Noble Energy (NYSE:NBL), Sinopec (NYSE:SNP), Cnooc (NYSE:CEO), PetroChina (NYSE:PTR) and Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY).
- Valero Energy's (NYSE:VLO) proposed crude-by-rail project at its 145K bbl/day Benicia refinery in northern California was rejected by local planners this week, the first such facility on the U.S. west coast to end a years-long wait for permits with a rejection.
- The Benicia Planning Commission late Thursday unanimously rejected VLO's request to build the rail facility following of four consecutive public hearings dominated by opponents, Reuters reports.
- VLO could still ask Benicia's city council to override the planning commission and approve a permit for the project.
- Several other west coast rail projects await decisions by local or state governments, including Tesoro's (NYSE:TSO) proposed 360K bbl/day railport in Washington state and Phillips 66's (NYSE:PSX) 25K bbl/day facility at its Santa Maria refinery in Arroyo Grande, Calif.
Friday, February 12, 2016
- Price is the sticking point in what have become exclusive talks between NTT Data (NYSE:NTT) and Dell over Dell's sale of Perot Systems -- a key piece of financing for Dell's blockbuster $67B purchase of EMC, Reuters reports.
- Earlier reports had NTT Data and India's Tata as the two suitors left for Perot, after the apparent leader, France's Atos (OTCPK:AEXAF), dropped out, along with previous overtures by Cognizant Technology Solutions (NASDAQ:CTSH).
- Dell's been seeking $5B for the unit, but if a bigger deal isn't available, NTT Data may want parts of Perot Systems. A source tells Reuters talks will continue for the rest of the month.
- Dell is sticking to its guns that the EMC deal will close by October (vs. paying a $4B breakup fee). It hoped to price $10B of debt on Wednesday, but roiling credit markets are forcing a delay on that piece as well.
- Previously: Dell/EMC deal hung up on financing (Feb. 11 2016)
- Previously: EMC insists Dell deal on track; VMware hit with downgrades due to guidance (Jan. 27 2016)
- Charter Communications (NASDAQ:CHTR) -- awaiting action from California on its buyout of Time Warner Cable and Bright House Networks -- has extended its contract with CEO Tom Rutledge for another year, to Feb. 13, 2017.
- Once upon a time, the company likely hoped that Rutledge would already be chief of the combined company. Charter has an agreement with the Advance/Newhouse Partnership where it will pursue its intention to offer Rutledge the positions of CEO and chairman in a new five-year employment deal.
- Previously: Report: California speeding up Charter-TWC review (Feb. 11 2016)
- Previously: Charter -3.3% as loss widens on merger costs (Feb. 04 2016)
- In an 8-K filing, Cablevision (NYSE:CVC) says it's settled litigation with Thomas C. Dolan -- a boardmember, and member of the owning Dolan family -- over compensation issues between 2005 and 2008.
- The company will pay Thomas Dolan $21M in the agreement, and Charles Dolan (chairman) and James Dolan (NYSE:CEO) will pay the company $6M in partial reimbursement if Cablevision's merger with Altice (OTCPK:ATCEY) isn't consummated.
- Thomas Dolan is executive VP of Strategy and Development at Cablevision, and was formerly CEO of Rainbow Media -- spun off from Cablevision to become AMC networks.
- Previously: New York City, State file objections to Altice-Cablevision deal (Feb. 05 2016)
- Previously: Union tells New York regulators to kill Altice-Cablevision deal (Jan. 27 2016)
- Demand Media (DMD +7.7%) has shuffled its board classes in order to comply with the law, and in connection with naming Mitchell Stern as a director.
- Stern -- previously CEO of Freedom Communications, and before that CEO of DirecTV -- will serve as a Class II director and as chairman of the audit committee, replacing Brian Regan, who's moving to be chairman of the nominating committee.
- Correspondingly, Victor Parker resigned his Class I seat and was re-elected as a Class II director who'll face re-election at the 2018 annual meeting. That move was to more evenly distribute directors among the company's three classes, as required by Delaware law.
- Shares moved up sharply today but are still just 20% over the company's 52-week low, hit last Sept. 29.
- Web.com (WEB +10.6%) had a very good day after beating Q4 estimates and announcing it's acquiring local online ad services firm Yodle for $342M. SunTrust reacted to the news by upgrading to Buy.
- SMB online services rival Wix.com (WIX +9%) also rose sharply. Wix is now up 20% since beating Q4 estimates and issuing strong 2016 guidance on Wednesday morning.
- On its earnings call (transcript), Web.com guided for 2016 revenue of $570M-$580M and EPS of $2.62-$2.76, in-line with a consensus of $577M and $2.70. Q1 guidance is for revenue of $138M-$140M and EPS of $0.61-$0.63, below a consensus of $142M and $0.66. Full-year free cash flow guidance is at $130M.
- The guidance doesn't take the Yodle deal into account. Web.com plans to revise its guidance after the deal's closing (expected by the end of Q1).
- CEO David L. Brown talked up the cross-selling opportunities provided by Yodle. "Web.com has 3.4 million customers who are potential candidates for Yodle's high-end solutions. The reverse is also true as Web.com has solutions which can be offered to Yodle's customer base." He also observed Yodle brings with it ~$50M worth of net operating loss carry-forwards (NOLs) - as it is, Web.com expects its existing NOLs to allow its cash taxes to "remain in the low single-digit range through 2017 with a gradual increase after that."
- In today's 13F filing, Daniel Loeb and his Third Point hedge fund indicated they took a new Q4 position of 3M shares in Morgan Stanley (NYSE:MS) -- stock that rose 6.4% today, but is down 27.4% YTD.
- Third Point raised its stake in Allergan (AGN +1.9%) by 47%, to 5.4M shares, and in Dow Chemical (DOW +2%) by 7%, to 25.2M shares.
- Another new position is in Axalta Coating Systems (AXTA -0.3%): 2.4M shares.
- Reuters notes that it saw a Loeb letter where he acknowledged that along with cutting stakes in companies exposed to China and commodity prices, Third Point raised its short positions to defend itself against tumbling markets.
- "A renewed focus on generating alpha on both sides of the portfolio has led us to increase single-name equity shorts by four-fold over the past year," Loeb wrote. "Our total equity short exposure is nearly $4.5 billion today."
- Jamie Dimon's purchase yesterday of 500K shares, or $26.6M worth, of JPMorgan Chase (NYSE:JPM) propelled the stock to an 8.2% jump and was taken as a big vote of confidence that the YTD selling of JPM - and perhaps bank stocks in general - has been overdone.
- "If you look at what Jamie Dimon did, certainly that has to imply some confidence" in the banking sector, says Brent Schutte, chief investment strategist of Northwestern Mutual Life’s wealth management unit.
- Barron's Teresa Rivas thinks JPM shares still look cheap below $60, and just 8.4x next year’s earnings and 0.9x book value, given that the bank is still expected to eke out earnings growth this year and return to high-single-digit Y/Y EPS growth in 2017 and beyond.
- But Deutsche Bank analysts say investors should not blindly follow Dimon's move, saying the purchase of his own bank's shares is roughly equivalent to an average 59-year old spending ~$4K of his or her own net worth in his employer; they say Dimon’s deal is equivalent to ~3% of his net worth - “Still, it is a whole year’s pay, not to be sniffed at.”
- Beaten-up Micron (MU +3.4%) made it back above $10 today after hosting its Winter Analyst Conference this morning. Cowen and Wells Fargo were among those to provide positive reactions.
- Following major 2015 DRAM price declines, Cowen's Tim Arcuri is pleased with Micron's DRAM outlook. "Forward industry commentary remained constructive on a combination of structural supply constraints and, we think, a more candid desire from Samsung to maintain memory profits now that mobile has imploded."
- Arcuri is worried about NAND oversupply as industry 3D NAND production ramps, but likes the competitiveness of Micron and Intel's 3D NAND offerings. "[P]er our estimates, [48-layer 3D NAND] is ~60-70% more bits/wafer than 1z planar [NAND] – which reeks of an over-shoot and one where we remain very bearish on the supply side ... Relative to MU’s own solution, our field work continues to suggest a very strong offering with a truly unique 3D NAND process and is the “dark horse” in the 3D NAND battle and the one about which Samsung is most concerned."
- Wells' David Wong: "In our view, the key takeaway from the presentations is that Micron’s upcoming DRAM and NAND technology transitions could help drive bit growth over the next two years, after several quarters in which bit growth paused, while also driving down cost per bit and helping Micron’s margins."
- Wong recapped Micron's near-term DRAM/NAND bit growth and cost/bit outlook: "The FY17 vs FY15 expected CAGR for DRAM bit shipments is 20-30%. NAND bit output is expected to continue drifting sideways through much of the rest of FY16, and then ramp steadily with a fairly steep slope through FY17, driven, we think, by ramping 3D NAND output. The FY17 vs FY15 expected CAGR for NAND bit shipments is 30-40% ... The 2 year CAGR, FY17 vs FY15, for average cost per bit is expected to be down 15-25% for DRAM and down 20-30% for NAND."
- In its conference slides (.pdf), Micron forecast DRAM and NAND bit demand will respectively see ~25% and ~40% CAGRs from 2016-2019, with the high-margin server/storage market delivering 40% and 60% CAGRs. PCs are expected to account for less than 20% of DRAM bit demand by 2019.
- On its list of 2016 operating priorities, Micron includes ramping 20nm DRAM and 3D NAND, and commercializing 3D XPoint. The company forecasts 3D NAND will account for over 50% of NAND output by the fall, and is aiming for 27% 3D XPoint penetration for targeted workloads - the list includes data mining and warehousing, virtual desktops, and transaction processing - by 2022.
- Move Inc. (NWS +3.5%, NWSA +3.4%), owner of Realtor.com, fired back at Zillow and its chief Spencer Rascoff, who said on CBNC today that Move owner News Corp. and Rupert Murdoch were acting "out of desperation" in litigation between the companies.
- Zillow's net GAAP loss of $25.7M was affected by $8.1M in costs over litigation with News Corp. In the conversation, which covered key earnings highlights, Rascoff was asked: When will the legal overhang stop?
- "You'd have to ask Rupert Murdoch that question," Rascoff said. "We're focused on innovating; News Corp. is focused on litigating. Unfortunately you see this all too often in business, where companies that lose on the business battlefield resort to the courtroom out of desperation ... It's vindictive, it's baseless."
- The litigation was filed by Move before News Corp. and Murdoch bought in, Move says, and notes that Zillow acknowledges a "reasonable possibility" it will lose the suit.
- "It's understandable why Mr. Rascoff said today of the litigation, he's 'tried to put it out of my mind,' " Move's statement reads. "Just last week, the judge ordered defendants to appear for a two-day evidentiary hearing on April 13 and 14 into Move's claims that important evidence has been destroyed by some or all of the defendants in this case."
- Digital real estate has become a business of key focus for News Corp. as it grows faster than legacy businesses.
- Previously: Realtor.com reports record growth year (Feb. 05 2016)
- Previously: News Corp. reports fourth straight quarter of revenue decline (Feb. 04 2016)
- Canadian Oil Sands' (OTCQX:COSWF) credit rating is downgraded by three notches to junk at Moody's, making it the first large Canadian oil producer to receive a junk rating in at least a decade.
- Moody's cites COSWF's very high cost base and the expectation of very high leverage and weak interest coverage in 2016 and 2017 amid continuing weak oil prices in dropping its debt rating to Ba3, down from the lowest level of investment-grade credit of Baa3.
- Moody's says COSWF's new status as an affiliate of Suncor (NYSE:SU) kept its credit two notches higher than its stand-alone assessment of the company, but the junk rating reflects SU’s decision not to guarantee ~$1.5B in outstanding debt.
- The ratings firm also cuts SU by one notch to Baa1 from A3; the ratings outlook for both companies is stable.
- In the biggest normalization development to date, U.S. officials will head to Havana Tuesday to sign a deal restarting scheduled commercial air traffic between Cuba and the United States for the first time in more than 50 years.
- The move will formalize an agreement on terms the two countries came to in December. Scheduled air traffic to Cuba from the U.S. ceased shortly after Cuba's revolution in 1959.
- Airlines will have 15 days to bid on routes for dozens of flights per day. But the deal allows for just 20 round trips per day overall between the U.S. and Havana, scarcity that could drive up bids substantially. Nine other international airports in Cuba can get 10 daily round trips.
- The Transportation Dept. will spend about a month collecting information and make a final determination on routes in the summer.
- U.S. air: DAL +0.7%, LUV +2.6%, JBLU +3.7%, UAL +2.9%, AAL +3.6%, VA +2.2%.
- With shares having gone into earnings just $1.17 above a 52-week low of $26.13, markets gave a thumbs-up to Brookfield Asset Management's (BAM +5.2%) Q4 FFO print of $0.97/share (up from $0.52 a year ago).
- The real estate owner is hiking its quarterly dividend by a penny (8%) to $0.13/share. That's good for a 1.8% forward yield. The next dividend is payable on March 31 to shareholders on record as of Feb. 29.
- On the earnings call, CEO Bruce Flatt said Brookfield is looking to take advantage of a strong dollar, weak commodity prices, and a dearth of emerging markets capital to go acquisition-hunting. "The same themes exist today as they had over the past few years, except they’re much more significantly accentuated today ... Probably the biggest one that has changed is the oil and gas markets ... Everything in the high-yield market has gapped out."
- With the help of acquisitions, Q4 property FFO rose to $566M from $259M a year ago. Asset management FFO rose to $158M from $103M, P-E and other to $247M from $154M, and infrastructure to $63M from $55M. Renewable energy was flat at $38M. For the whole of 2015, FFO rose to $2.56B ($2.49/share) from $2.16B ($2.11/share) in 2014.
- Interest expense and operating costs fell by $7M Y/Y to $85M. Brookfield says it currently holds "approximately $5.7 billion of core liquidity across our business and an additional $9.3 billion of capital to invest for clients, with a further $10-$15 billion to come in the next few quarters."
- Brookfield's Q4 results, earnings release
- United Technologies (UTX +1.5%) has priced an offering of senior notes coming to €2.2B in aggregate.
- The company priced €950M in principal of 1.125% senior notes maturing in December 2021, €500M of 1.875% senior notes maturing February 2026, and €750M of senior floating-rate notes maturing in February 2018.
- It expects to close the offering Feb. 22 and use proceeds for general purposes. The company had $20.4B in total debt at last report, and $7.1B in cash.
- Shares are 0.9% lower after hours.
- Bank of America (NYSE:BAC) Chairman/CEO Brian Moynihan received a pay package worth $16M for 2015, according to an SEC filing, a 23% increase from the previous year, when he earned $13M.
- Moynihan received $14.5M in stock grants for 2015 and left his salary unchanged at $1.5M.
- BAC shares fell 5.9% in 2015, trailing the 3.5% drop in the 90-company S&P Financials Index.
- Hi-fi headphones maker Koss Corp. (KOSS -3.5%) has settled litigation between it and American Express that was pending in an Arizona court.
- All claims were released in the settlement, and Koss will receive $3M gross (to be offset by some attorneys' fees).
- Shares in Koss have fallen 23% over the past six months.
- Standard & Poor's downgrades Freeport McMoRan's (NYSE:FCX) credit rating by two notches to junk at BB from BBB- with a negative outlook, citing lower metals prices and the company's debt levels.
- S&P says FCX closed FY 2015 fiscal year with credit measures that were weaker than anticipated, including estimated adjusted debt to EBITDA of ~5.5x, and released an updated operating plan that will not bring credit measures in line with its former rating until H2 2017.
- S&P also lowered its copper price assumptions for 2016 by 12.5% to $2.10/lb., and has cut its gold and oil and gas price assumptions for the year.
- The FCC today approved Gray Television's (GTN +3.1%) plan to purchase 15 Schurz Communications TV stations, the last hurdle in Gray's $442.5M purchase of Schurz.
- The agency issued a complicated decision that will call for the unwinding of some joint sales agreements, and for a Georgia NBC affiliate to remain on the air during the broadcast incentive auction despite duopoly rule concerns.
- The approval follows an even more complicated set of transactions Gray has been undertaking to pull its megadeal off. It's swapped some stations with Sinclair Broadcast Group and decided to divest all the radio stations in the deal.
- In addition, the Justice Department gave the deal a conditional antitrust approval so long as Gray sold off WSBT in South Bend, Ind., and KAKE in Wichita, Kan.
- In Augusta, Ga., Gray owns CBS affiliate WRDW and Schurz owns NBC affiliate WAGT. Gray wants to offer WAGT's spectrum in the incentive auction and take it off the air after the deal's approval. The FCC approved a temporary waiver of its duopoly rule but decided that the public interest called for WAGT to stay on the air.
- Gray will have to terminate a JSA with Media General as a condition to the deal.
- Previously: Gray Television paying $442.5M for Schurz TV, radio stations (Sep. 14 2015)
- VeriSign (VRSN +3.8%) closed near $77 after beating Q4 estimates and reporting it added 4.6M net new domain names - up from Q3's 1.68M and Q4 2014's 0.59M, and bringing the total base to 139.8M (+6.3% Y/Y).
- The company also disclosed it has upped its buyback authorization by $611M, raising its available funds to $1B; that's good for repurchasing over 11% of shares at current levels. $150M was spent on buybacks in Q4, and $622M over the whole of 2015.
- A slightly soft 2016 outlook is being brushed off: On the earnings call (transcript), VeriSign guided for 2016 revenue of $1.11B-$1.135B (+5-7% Y/Y) vs. a $1.14B consensus. Op. margin is expected to rise to 62.5%-63.5% from 2015's 61.5%, and the capex budget has been set at $40M-$50M.
- 12.2M new domain names were processed vs. 9.2M in Q3 and 8.2M a year ago. CEO James Bidzos attributed the Q4 domain name strength to Chinese/Asia-Pac demand - Chinese domain name investment/speculation has surged in recent months. Bidzos: "While we believe China and the Asia-Pacific region will continue to perform well, we expect these markets to return to more normal levels in 2016."
- Non-GAAP operating expenses fell by $1M Y/Y to $103M. For the whole of 2015, free cash flow rose 11% to $629M (well above net income of $405M). VeriSign ended 2015 with $1.9B in cash ($753M in the U.S.) and over $1.2B in debt.
- VeriSign's Q4 results, earnings release
- Transocean (NYSE:RIG) rose nearly 3% in today's trade following its release late yesterday of its quarterly fleet status report that included some new short-term drilling contracts and extensions that will keep many of its rigs working but at lower dayrates.
- RIG said it secured short-term incremental work for six rigs and that it had won $500M in new contracts since late October; Raymond James analyst Praveen Narra says the fleet status update shows management’s effectiveness in streamlining the active fleet and keeping rigs working despite difficult market conditions.
- "RIG's marketing team deserves kudos for winning ~40% of YTD floater days contracted,” Credit Suisse's Gregory Lewis says, even as he maintains his Underperform rating and $10 price target.
- Also, the newbuild ultra-deepwater drillship Thalassa commenced operations on its 10-year contract in the Gulf of Mexico at a dayrate of $519K, and is expected to generate cash flow, with ~$125M projected in annual EBITDA.
- The long-delayed merger of Exelon (NYSE:EXC) and Pepco Holdings (NYSE:POM) appears headed for clearance by the D.C. Public Service Commission by the end of this month, according to a report by CTFN.
- The PSC issued a surprise rejection of the $6.8B deal nearly six months ago but is poised for a revote that is much more likely to gain approval, according to Robert Burns of the National Regulatory Institute.
- EXC and POM negotiated a settlement with the D.C. mayor's office and several opposing groups, promising tens of millions of dollars in concessions that will go far in satisfying the PSC's statutory requirement that the merger benefit ratepayers, a far stiffer standard than required by most state electric power regulators, Burns says.
- Earlier: Investors remain optimistic that Exelon-Pepco deal gets done (Feb. 10)
- Black Box (BBOX +3.7%) is up 13% over the last two days amid disclosed purchases from director John Heller, EVP Ronald Basso, and departing CEO Mike McAndrew.
- Heller bought 5K shares on Wednesday at $8.20. McAndrew bought 12K on Wednesday at $8.49. Basso bought 2K yesterday at $9.06. (source: InsiderInsights.com)
- The purchases came with the IT infrastructure hardware provider down over 50% from a 52-week high of $22.70 (set last February). Shares fell last month after mixed FQ3 results were posted.
- CBS finsihed the day down 0.9%, swimming against broader market gains after a quite positive earnings report after the bell yesterday.
- BMO Capital's Daniel Salmon took the opportunity to reaffirm the broadcaster as his top media pick. He's keeping a $58 price target -- 10 times 2016 OIBDA, 14.5 times 2016 EPS, and an implied upside of 34%.
- Solid results might not drive a gain in the current market, he acknowledges, but it should outperform peers in the future "as investors continue to reassess the health of the pay TV ecosystem and better appreciate CBS’ limited exposure to the cable bundle."
- Among keys to his bullishness: resilient broadcast advertising and catalysts ahead, reiterated guidance on retrans and reverse retrans revenue, and strength at Showtime and at the CBS and Showtime over-the-top products.
- In a tough market for media stocks, CBS is down 14.3% over the past three months.
- Previously: CBS call: Even stronger times ahead with advertising, streaming (Feb. 11 2016)
- Previously: CBS beats on revenue, meets on profits for Q4 (Feb. 11 2016)
- FireEye (FEYE -3.3%) made fresh post-IPO lows today after posting nearly in-line Q4 results and providing a mixed bag of sales, EPS, and billings guidance. Several firms lowered their targets, but none downgraded.
- 2016 billings guidance of $975M-$1.055B implies ~20% Y/Y organic growth, in-line with FireEye's January remarks. On the earnings call (transcript), CFO Mike Barry stated recent acquisitions iSIGHT (threat intelligence) and Invotas (security orchestration/automation software) are expected to deliver 2016 billings of $60M-$65M between them. He also disclosed FireEye paid $30M for Invotas - $19M in cash and the rest in stock.
- The company asserts deal activity remains strong - 47 $1M+ transactions were closed in Q4 vs. 43 a year ago, with 85% of them featuring multiple products. Nonetheless, product (hardware/software) revenue fell 2% Y/Y. Product subscriptions (+56%), support (+57%, driven by past deals), and professional services (+60%, boosted by Mandiant) were stronger.
- Barry forecasts FireEye will "keep a good portion of our operating costs basically flat during 2016 as we move more resources to more high-growth areas." $70M-$80M in op. cash flow is expected in 2016. GAAP operating expense srose 20% Y/Y in Q4 to $245.1M, a slower growth rate than in recent quarters. $135.4M was spent on sales/marketing, $71.7M on R&D, and $38M on G&A.
- CEO Dave DeWalt insists FireEye's European sales team "bounced back very nicely" in Q4 following a rough Q3. "I feel like the organization's taking better shape. We have new leadership there."
- Oppenheimer's Shaul Eyal (Outperform rating, target cut by $4 to $35): "We remain attracted to FEYE given: 1. strength in recurring subscription and support billings (+~30% YoY); 2. improvement in EMEA/APAC; 3. an accelerated path to profitability; 4. eventual take-out candidate; and 5. compelling valuation levels of 1.5X EV/FY17 revenue."
- FireEye's results/guidance, earnings release
- Ultrapetrol (NASDAQ:ULTR) says it received notice from the Nasdaq Stock Exchange that it is not in compliance with the continued listing standard requiring a minimum market value of publicly held shares of $5M for the preceding 30 consecutive business days.
- ULTR says it intends to regain compliance within the prescribed six-month timeframe and will consider a range of available options to ensure compliance.
- Stocks rallied to snap a five-session slump in the S&P 500, as crude oil futures surged 12%, their biggest one-day gain in seven years, but few traders expect the bounce to last.
- Today's big gains were not enough to wipe out losses on the week; as the S&P ended the week 0.8% lower, the Dow booked a 1.4% weekly loss, and the Nasdaq lost 0.6% for the week.
- WTI crude settled 12.3% higher at $29.44/bbl and the energy sector rose 2.6% after the UAE energy minister said OPEC was ready to cooperate on production cuts, yet many analysts remain skeptical of an agreement actually being reached.
- Financial stocks (+4%), among the worst performers in 2016, also gained; JPMorgan Chase jumped 8.2% after CEO Jamie DImon bought 500K of the bank's shares.
- Stocks enjoyed a boost at the open following gains in Europe, and the positive sentiment was echoed by Deutsche Bank, which said it would buy back more than $5B worth of its senior debt.
- Investor participation was heavier than the recent average, with 1.12B shares changing hands at the NYSE floor ahead of the three-day weekend.
- A positive U.S. retail sales report contributed to a rally in the dollar, which advanced vs. the yen and euro.
- The U.S. Treasury market posted the biggest one-day price drop since December, a day after government bonds logged their biggest one-day price rally since 2011; selling in the 10-year note sent its yield higher by 9 bps to 1.75%.
- CTC Media (CTCM +2.2%) said today it's gotten the last tranche of the price for its sale of 75% to the firm to UTH Russia.
- The company had planned to comply with a Russian Mass Media Law that went into effect Jan. 1 with a sale of a 75% stake to UTH, the vehicle of billionaire Alisher Usmanov, for $200M. The deal was approved in December.
- Of the $200M, $50M was held back and subject to adjustment depending on H2 2015 performance. CTC received $42.5M after a reduction, bringing the total consideration to $193.1M.
- The company's awaiting a license from the U.S. Treasury to authorize the transaction, and expects the merger will finally close a month after it gets that license.
- As for per-share amount going to stockholders, CTC says it's "unable to estimate" but it expects it will be "at the lower end of the upper half of the range approved by stockholders of $1.77 to $2.19 per share." CTC Media's trading at $1.89 on Nasdaq.
4:11 PM| 4:11 PM
- Investors are responding positively to an earnings miss at AIG (AIG +5.1%), considering the company has capitulated to Carl Icahn in their battle and avoided (for the moment) a proxy fight by naming his rep to its board.
- The company added Samuel Merksamer, a managing director at Icahn Capital, along with John Paulson in expanding its board to 16 seats. Icahn has threatened a proxy fight with a push to split the insurance giant into three smaller companies. ""We continue to believe that smaller and simpler is better," Icahn says.
- It may not be the end of the backroom fighting, though. Analyst Meyer Shields calls Icahn's strategy "incredibly difficult to achieve." Meanwhile, Sandler O'Neill's Paul Newsome says there's more tussling ahead: "If anything, it will continue behind the scenes rather than in public."
- The company said today it plans to move about half of an $11B investment out of hedge fund investments -- mainly into investment-grade bonds and commercial mortgage loans.
- The company doesn't have staff that deals in equities, so hedge funds with stock-based approaches are mostly likely to be the ones standing after the company relocates billions in investment.
- After hitting a 52-week low of $50.38 yesterday, shares are up 5.1% today.
- Previously: AIG misses earnings with bigger loss; boosts dividend, buyback (Feb. 11 2016)
- Previously: AIG nominates Paulson, Icahn's Merksamer to board (Feb. 11 2016)
- Taseko Mines (TGB +3%) is suing Canada's government in B.C. Supreme Court and seeking unspecified compensation for a 2014 decision that blocked development of the proposed $1.5B New Prosperity gold and copper deposit.
- TGB claims the government failed to meet its legal duties to the company when blocking the project, and that its property was effectively expropriated without compensation when a federal cabinet decision made its mineral rights essentially worthless.
- The suit is announced three days before TGB and the federal government are scheduled to face off in Vancouver with a related dispute before the Federal Court of Canada over a project the company had promoted as a major economic driver in B.C.'s Cariboo region.
- McClatchy (MNI +3.8%) today said it's contributed company-owned real estate to its defined-benefit pension plan.
- The package includes six properties -- land and buildings in North Carolina, Mississippi, Florida and California where it operates newspapers and offices -- valued at about $47.1M in aggregate.
- The company will lease back the property from the pension plan for an 11-year term, paying total annual rent of about $3.5M.
- McClatchy figures the contribution will more than satisfy a "nominal" required pension contribution. It's a "win-win" for the plan and the company, says CFO Elaine Lintecum, as the company will preserve cash to repay debt.
- Previously: McClatchy up 3.6% on Q4 revenue beat (Feb. 10 2016)
- Vonage Holdings (NYSE:VG) is up 0.4% today after a "messy" quarter, according to Oppenheimer, which cut its price target to $6.50 from a previous $8.
- The company had initially dropped off heavily, as much as 11.2% yesterday, after it supplied light forward guidance in its Q4 earnings report. But shares recovered to finish with a 1.5% gain.
- The acquisition of Icore and termination of Basic Talk hurt the guidance, says analyst Timothy Horan, but "We believe the results mask the underlying strength of the business. Business bookings in the quarter were strong, and VG is exiting unprofitable consumer products, which we believe is the correct strategy."
- The company can use free cash flow to keep making accretive acquisitions, he writes, and the company trades at a big discount to pure-play business peers.
- Shares are trading at $4.74, implying 37% upside in Oppenheimer's target. Meanwhile, FBN Securities upgraded the shares to Outperform.
- Previously: Vonage down 7.3% after guiding to lighter full-year revenues (Feb. 11 2016)
- Previously: Vonage Holdings beats by $0.01, beats on revenue (Feb. 11 2016)
- Boeing (BA +0.2%) pokes into the green, stabilizing after yesterday's 9% loss that followed a report that the SEC was investigating the company's accounting practices.
- Boeing fell further at the open after J.P. Morgan's Seth Seifman downgraded shares to Neutral from Overweight, saying that the primary risk from the probe is that it will cause expectations for cash flows from the 787 to become "impaired."
- RBC analyst Robert Stallard, who rates the shares at Sector Perform, explains that if Boeing's forecasts are accurate, the company "must generate $29B of cash on the 787 on the current program block to justify the scale of the asset on the balance sheet, and the profit booking rate in the P&L... We imagine the SEC is taking a close look at that forecast."
- However, Sterne Agee CRT keeps its Buy rating and $196 price target, saying the SEC probe will not hurt Boeing, as the company has been using the same accounting practices "for decades," is "highly audited," and it is too early in the 787's life cycle to accuse the company of misstating its costs.
- Deutsche Bank's Myles Walton also reiterates his Buy rating, seeing management's assumptions for implied profitability of the 747 and 787 as too optimistic but that "there is enough information for the market to make its own judgement through adequate disclosures."
- Thomson Reuters (NYSE:TRI) has amended its normal course issuer bid, in connection with a plan to buy back an additional $1.5B in shares.
- The amendment increases common shares that the company can repurchase by another 9.2M. That means up to 39.2M common shares (about 5% of issued and outstanding shares as of last May) can now be repurchased until May 27, 2016.
- Under the current NCIB, the company bought back about 25.64M shares between May 28 of last year and this Tuesday, for about $982.8M (averaging $38.34/share).
- Shares are up 3.6% today, to $35.85.
- Calpine (CPN -6.6%) is sharply lower after reporting a Q4 loss of $0.13/share on $1.44B in revenues, down 26% Y/Y but better than analyst expectations.
- CPN said it benefited from energy hedging but was hurt by lower power prices and lower profit spread from lower natural gas prices; it also took a $36M hit from having part of its Geysers geothermal power complex offline from California wildfires.
- CPN said its total amount of energy generated increased 3.6% in Q4, driven by an 11% increase in its Texas segment.
- CPN also reaffirmed its previous guidance for the year for adjusted EBITDA of $1.8B-$1.95B.
- Considering the weak overall market for power generation companies, CPN enjoyed a relatively strong year with a good advantage going forward, said analysts at Tudor Pickering Holt.
- Time Warner (TWX -0.2%) is wrapping up its earnings week down 10.3% over the past five days. The media giant posted disappointing revenues Wednesday morning and then joined in a sell-off afflicting a number of earnings-reporting media firms.
- It's received price target cuts in kind now from some analysts. Barrington Research maintained its Outperform rating while cutting its price target to $78. Wedbush (also Outperform) trimmed to a bit higher, $82.
- Meanwhile, Jefferies cut its target to $75, from $82, following a "sloppy" quarter, but reiterated its Buy rating as well.
- Shares are currently trading at $62.19, implying upsides of 21%-32% in those targets from today's price.
- Previously: Albert Fried still bullish on Time Warner with key films ahead (Feb. 10 2016)
- Previously: Media stocks caught in downdraft with earnings coming in (Feb. 10 2016)
- Previously: Time Warner call: HBO Now has 800K subs with more catalysts ahead (Feb. 10 2016)
- Previously: Time Warner -7.6% after movie results drive revenue miss (Feb. 10 2016)
- Primark (OTCPK:ASBFF, OTCPK:ASBFY) plans to open six stores in the U.S. this year.
- The Irish clothing retailer will focus on the Northeast in this phase of its expansion.
- Primark saw a bump in sales in the last nine weeks of 2015 after hitting a rough patch due to the late start to the cold weather season in Europe.
- USA Technologies (USAT +13%) is near a 52-week high of $3.71 after posting an FQ2 beat. The mobile payments/telemetry services firm is once more reiterating FY16 (ends June '16) guidance for revenue of $69M-$71M and 75K+ net new connection adds; the FY16 revenue consensus is at $71.5M.
- Metrics: 20K net new connections were added in FQ2 vs. 16K in FQ1 and 12K a year ago, bringing the total base to 369K. 350 new customers were added vs. 675 in FQ1 and 550 a year ago, increasing the base to 10,625. Transaction volume rose 9% Q/Q and 22% Y/Y to $138M.
- Financials: Free cash flow improved to $507K from $362K in FQ1 and -$3M a year ago. License/transaction fee revenue rose 30% Y/Y to $13.7M, and equipment sales 106% to $4.8M; gross margins for both businesses rose. GAAP operating expenses rose 31% Y/Y to $9.8M. USAT ended 2015 with $14.8M in cash, $7M in credit line debt, and $2.1M in long-term debt.
- USA Technologies' FQ2 results, earnings release
- Last month: USAT buys assets of vending payment tech firm for $5.6M
- Verizon (VZ +1.3%) is shuttering two cloud services it offers to the public, consolidating more customers in its other offerings.
- The carrier is closing Verizon Public Cloud Reserved Performance and Marketplace. Verizon Cloud Storage users won't be affected.
- It's encouraging bumped users to move to a similar offering, its Virtual Private Cloud, before April 12 or data will be "irrecoverably deleted."
- Chesapeake Energy (CHK -7.3%) remains sharply lower even after a Bloomberg report that it is is planning to pay $500M of debt maturing in March, using a combination of cash on hand and other liquidity that may include its credit line.
- CHK also is considering selling assets to shore up its capital so it can address more than $1B of debt coming due in 2017, according to the report.
- Creditors are gearing up for negotiations over how to reorganize CHK's ~$10B debt load, and at least one group of unsecured bondholders is said to have hired advisers to help evaluate the company’s assets in the U.S.
- Ten days after reporting Apple plans to unveil a new 4" iPhone (called the 5se) and the iPad Air 3 on March 15, 9to5 Mac reports Apple (AAPL +0.2%) plans to begin selling the devices online and in retail stores on Friday, March 18. Pre-orders are said to be "unlikely."
- The 5se, which could appeal to those partial to smaller iPhones, has been rumored to sport an A9 CPU and M9 motion co-processor, an 8MP rear camera and 1.2MP front camera, and Bluetooth 4.2, 802.11ac Wi-Fi, and NFC radios. Air 3 rumors have mentioned a smart connector along with an improved display, speakers, and battery life. Apple disclosed on its FQ1 call 60% of iPhone owners haven't yet upgraded to the 6/6+ or 6S/6S+.
- Separately, sources tell The Hollywood Reporter Beats co-founder Dr. Dre is starring in and producing a six-episode TV series called Vital Signs that's being bankrolled by Apple.
- The magazine adds Dre's series will likely be distributed via Apple Music (now has over 11M paid subscribers), and that it's not clear if distribution will occur via other platforms such as Apple TV and the iTunes store. The show is said to be a semi-autobiographical "dark drama with no shortage of violence and sex."
- Variety reported in September Apple has held initial talks with Hollywood execs about financing original content - a field where Netflix and Amazon have made huge investments. Multiple sites have reported Apple has hatched and (for now) suspended plans to launch an online TV service.
- Whiting Petroleum (WLL -8.9%) may have received the toughest treatment from Moody's, but the ratings agency downgrades a total of eight of companies as part of a sweeping re-examination of oil and gas producers.
- The ratings affected companies rated Ba, or the first tier of debt Moody’s considers risky enough to be a speculative investment.
- While Moody's cut WLL's debt rating by five notches, SM Energy (SM -1.2%) and WPX Energy (WPX +3.5%) both fell four notches to B2 from Ba1, and cites the likelihood of a "dramatic increase in financial leverage in 2017” with SM's cut.
- QEP Resources (QEP -0.5%) and Energen (EGN -11.6%) fell three notches to B1 from Ba1.
- Unit Corp. (UNT +2%) fell two notches to B2 from Ba3, which Range Resources (RRC +0.7%) and Newfield Exploration (NFX +2.7%) both slipped to Ba3 from Ba1.
- Ratings for Antero Resources (AR +2.7%) and Concho Resources (CXO +2.2%) were confirmed at Ba2 and Ba1, respectively.
- Linn Energy (LINE +1.8%) and LinnCo (LNCO -3.1%) are downgraded to Sell from Neutral at Citigroup, where oil and gas analyst Faisel Khan believes Linn likely will file for Chapter 11 bankruptcy after the next round of borrowing base redetermination and/or post a covenant breach.
- Citi says Linn’s hedges protecting cash flows against the steep declines in oil are starting to roll off, and that cash flows could turn negative next year.
- Khan adds that recoveries in bankruptcy for unsecured bondholders likely will be low, which is reflected in the company’s bond prices that are trading at pennies to a dollar.
- Sirius XM (NASDAQ:SIRI) is up 1.2% today, following news that its affiliate Sirius XM Canada said it was approached for a potential deal.
- The Canadian unit is in early stage talks, and Sirius XM owns about 32% of it. Meanwhile, The Globe and Mail says that top shareholders were examining a go-private deal that could value it at C$750M (about $538M).
- That's about C$4.25/share; Sirius XM Canada jumped 15.8% in Toronto to C$4.26.
- Ellie Mae's (ELLI +17.6%) big Q4 beat is accompanied by guidance for 2016 revenue of $317M-$321M and EPS of $1.79-$1.86, above a consensus of $306.6M and $1.72. Reported 2015 revenue and EPS was respectively $253.9M and $1.69.
- Q1 guidance is in-line: Revenue of $67.5M-$68.5M and EPS of $0.29-$0.31 vs. a consensus of $68M and $0.31.
- Active users of Ellie Mae's Encompass mortgage origination software rose 25% Y/Y in Q4 to 136,167, with SaaS Encompass active users rising 43% to 121,406. Revenue per average active Encompass user rose 10% to $475.
- GAAP operating expenses rose 30% Y/Y to $36.4M (compares with 39% revenue growth). Ellie Mae ended 2015 with $85M in cash and no debt.
- CEO Jonathan Corr: "We have built a powerful all-in-one mortgage management platform and network that provides one system of record for lenders to originate and fund mortgages, is deeply integrated with a broad array of vendors, investors and agencies, and allows lenders to achieve loan quality, regulatory compliance and operating efficiency." He declares his company's 2016 new business pipeline to remain "very robust."
- Ellie Mae's Q4 results, earnings release
- Kohl's (KSS +2.2%) eliminated three top positions as part of a reorganization.
- The company removed the positions of Chief Digital Officer, senior VP of store environment/development, and senior VP of communications/PR.
- The tightening comes amid dissatisfaction from activist shareholders on the performance of Kohl's.
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