Today - Tuesday, January 27, 2015
- Payment-processing/telemetry services provider USA Technologies (USAT +7.3%) says it will support Apple Pay on ~200K "wireless acceptance points," by bringing the NFC-based payment platform to "owners and operators of coffee brewers, vending machines, kiosks, laundry equipment, parking pay stations and other self-serve appliances.."
- NFC reader maker On Track (OTIV +3.1%) is also rallying. Three months ago, On Track issued a PR declaring its Saturn 6500 NFC readers support Apple Pay when used with USA Technologies' ePort wireless payment services.
- This will be a year of adjustments amid uncertain commodity markets, but "we're not backing away from our objectives of reducing leverage, and going forward we're going to continue to prioritize debt reduction," Freeport McMoRan (FCX -5.9%) CEO Richard Adkerson says in today's earnings conference call.
- Copper's long-term fundamentals are strong, the CEO says, adding that FCX’s strength is its long-term reserves, and these will kick into high gear as prices rise, generating cash flows; FCX expects to produce 5.4B lbs. of copper in 2016, up from 4.3B lbs. this year.
- The company's expansion into energy exploration inflated FCX's debt to $19B at year-end 2014; with commodity prices at current levels, its debt target of $12B by year-end 2016 target is now unrealistic, Adkerson says.
- FCX is counting on Chinese demand for copper to grow ~5%/year while it could be only in the low single digits, Morningstar's Dan Rohr says; another risk for the company is that its two lowest cash-cost mines are in politically volatile Indonesia and the Democratic Republic of Congo.
- Earlier: Freeport McMoRan cuts 2015 capital budget by $2B
- “The investment bank is stagnating while the company’s other units are growing,” says an analyst with Bankhaus Metzler who rates the stock a Sell. “Scaling back the investment bank is an option, but you have to ask how they’re going to replace that earnings power.”
- As recently as Q3 of last year, the unit accounted for the largest share of Deutsche Bank's (DB -2.5%) earnings, but it's set to generate the least profit of any of the lender's four units in Q4. While Co-CEO Anshu Jain pledged to build the investment bank, he and his co-chief Juergen Fitschen may have no choice but to scale back even further when Deutsche updates on its strategic plan in Q2.
- There's plenty of upside if they get it right: Deutsche trades for just 0.6x tangible book value, the lowest of the top nine global investment banks.
- 'Investors have a lot of trouble believing that Deutsche Bank’s balance sheet is really going to be worth what they say it is,” says another analyst. “Even if fixed-income markets were to rebound, they’d still be short on capital and unable to reap the benefits.”
- Apparel retailers and manufacturers could see lower costs this year as a strong dollar goes a long way toward lowering manufacturing and purchasing expenses overseas.
- Companies which manufacture overseas or buy from global suppliers to sell largely in the U.S. are in the best position to boost their bottom lines.
- Cotton prices have also moved in the right direction for the sector.
- Another factor is the much cleaner inventory position many apparel retailers and department store chains find themselves in heading into the spring selling season.
- Apparel stocks: KATE, ANN, LULU, PVH, VNCE, CRI, UA, HBI, VFC, COLM, GIL, SQBG, JCP, KSS, DDS, M, JWN, ARO, AEO, ANF, WTSL, TLYS, CACH, ZUMZ, PSUN, EXPR, BKE, GIII, SQBG, HBI, VRA, ICON, SHOO, BWS, PERY, DXLG, BONT, GES, URBN.
- AK Steel (AKS +5.8%) beat Q4 expectations amid rebounding auto and construction industries, prompting S&P Capital to upgrade shares to Strong Buy from Hold with a $6 price target, encouraged by stronger-than-expected synergies from the Dearborn acquisition, lower input costs and energy costs, and a strong auto market that comprised half of AKS revenue in 2014.
- However, other analysts gave the beat a cooler reception; Citigroup's Brian Yu, for one, maintains a Sell rating and $2 price target, unconvinced by Q4's improved shipments of 2M tons and realized pricing of $987/ton vs. the firm's model of $980/ton.
- "FXCM (FXCM -2.5%) continues to operate in the normal course of business," says CEO Drew Niv, with volumes on pace to set a record this month. So far in January, customer trading volume is $406B, with average retail customer volume of $27B.
- Leucadia CEO Richard Handler and President Brian Freidman: "We view FXCM as our next opportunity to work with an investee company to create long-term value for all stakeholders."
- Source: Press release
- Gold miner (NYSEARCA:GDX) earnings reports are on the way, and Barclays analysts foresee Q4 earnings to come in lower across the board with margins under pressure as metals prices fall; for gold, they see producers’ margins falling ~12% Q/Q.
- Barclays believes lower gold prices also will mean writedowns of assets for many companies, while mining depletion will combine with limited exploration budgets to bring down reserves.
- Most senior and mid-tier gold producers will not see Y/Y production growth in 2015, the firm says; Goldcorp (GG +2.9%), Agnico Eagle Mines (AEM +4.6%), Yamana Gold (AUY +3.2%) and New Gold (NGD +4.2%) should enjoy production growth, while royalty companies Royal Gold (RGLD +1.8%) and Franco-Nevada (FNV +4.6%) should have revenue growth despite lower commodity pricing.
- The Nikkei reports Sony (SNE -1.1%) plans to cut another 1K smartphone jobs, mostly in China and Europe. Smartphone layoffs of similar size were announced in October, and 1.5K Japanese job cuts (for various divisions) were announced last week.
- The paper adds Sony's mobile unit will see its workforce cut by ~30% by March 2016, to 5K. The cuts are expected to be announced during the conglomerate's Feb. 4 FQ3 report.
- With Sony facing tough high-end competition from Apple in Japan, and intensifying mid-range competition from Chinese OEMs elsewhere, the company's mobile revenue only rose 1.2% Y/Y in FQ2 to $2.83B. Its FY15 (ends March '15) smartphone unit forecast has been gradually cut to 41M from 50M.
- Randgold Resources (GOLD +2.3%) CEO Mark Bristow says the Kibali gold mine in Zaire is now well advanced into the second and final phase which will take it to full production by 2018.
- With the final commissioning of the metallurgical plant and the first of three hydropower plants, Kibali is operating at design with the ramp-up having delivered against plan, the CEO says.
- GOLD is developing and operating the mine, which it owns in partnership with AngloGold Ashanti (AU +5.9%) and a Congolese state-run firm.
- The SEC has informed BNY Mellon (BK -0.7%) of its likely intention to file charges over alleged violations of the Foreign Corrupt Practices Act in what would be the first formal case from the long-running investigation into the bank's dealings with sovereign wealth funds.
- Mellon says it's cooperating with the probe and does not believe the outcome will materially affect its business or its finances.
- The SEC had sent a similar Wells notice in Q3 of 2014 to current and former employees.
- Citing the big rally shares have seen over the last month, Raymond James has downgraded Procera (NASDAQ:PKT) to Market Perform.
- Shares are now up only 3% from where they traded before TheDeal reported on Friday Procera had hired advisors to explore a potential sale. They're still up 27% from their last trade prior to a Jan. 7 guidance hike.
- Lockheed Martin (LMT -2.2%) expects to return to growth in 2016 even if lawmakers fail to reverse budget cuts that would cut Defense Department spending over the next two years, LMT exec say in today's earnings conference call.
- LMT’s organic sales have fallen over the past three years and are expected to decline again in 2015 as the impact of Pentagon cuts continues, but CFO Bruce Tanner says recent acquisitions would add ~$750M to sales this year while higher production of the F-35 fighter jet would help the return to organic growth in 2016 and beyond.
- CEO Marillyn Hewson says a recent visit to the Middle East indicated that customers for its missile defense systems and fighter jets did not plan to cut spending, despite the sharp fall in oil prices.
- Earlier: Lockheed Martin lower on downbeat profit outlook
- Lexmark (LXK +2.9%) is guiding for Q1 revenue to be down 3%-5% Y/Y and EPS to be in a $0.70-$0.80 range; that's below a consensus for a 1.3% revenue drop and EPS of $0.90.
- Full-year guidance is for a 3%-5% revenue drop and EPS of $3.60-$3.80. That's below a consensus for a 2.1% drop and EPS of $3.85.
- Q4 top-line numbers are healthy. Hardware revenue rose 3% Y/Y in Q4 to $236M, software/other revenue (excluding acquisition-related adjustments) rose 23% to $150M. Inkjet exit supplies revenue fell 42% to $58M, but laser supplies rose 5% to $589M.
- Gross margin fell to 38.9% from 41.4% a year earlier (hurt EPS). Operating expenses fell 5% Y/Y to $291M. $22M was spent on buybacks in Q4, and $80M over the whole of 2014.
- Q4 results, PR
- Online restaurant food delivery leader GrubHub (NYSE:GRUB) -- owner of the Seamless service -- is off 2.6% today on standard volume.
- A ban on "non-essential" vehicle traffic as winter storm Juno moved into the Northeast led GrubHub to suspend service Monday in Greater New York, New Jersey, Rhode Island, Connecticut and Boston. (Service is now beginning to resume in NY, NJ and Connecticut.)
- “Nothing that has to do with leisure or convenience or takeout food or going to the movies — we’re not doing that," said New York Mayor Bill de Blasio.
- In contrast, though, Citigroup analysts note GrubHub's search volumes have remained seasonally consistent throughout various winter storms. "We did have orders last night," CEO Matt Maloney said today.
- Off sharply AH yesterday after providing soft Q1/2015 guidance to go with mixed Q4 results and a buyback announcement, Rambus (NASDAQ:RMBS) is singing a very different tune today.
- Possibly helping: On the CC (transcript), CEO Ron Black stated a major architectural memory IP first disclosed last June is "proceeding exceedingly well," and is expected to yield "significant revenue in 2016."
- With Rambus having signed an MOU for the project with one major client and having received interest from another, Black asserts "the project is not custom, but broadly applicable to the [memory] industry." He adds Rambus is "trying to help the industry solve the enormous problems in the data center around latency and capacity for memory."
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