Today - Friday, May 29, 2015
- Deutsche Bank picks McDonald's (NYSE:MCD) and Darden Restaurants (NYSE:DRI) as its top two restaurants stocks.
- Turnaround plans at both companies will yield improved results for shareholders, according to DB.
- Analysts call the reorganization of brands and business groups at McDonald's and Darden a strategic move.
- The investment firm is cautious on the restaurant sector overall, with Hold ratings initiated on Sonic (NASDAQ:SONC), Zoe's Kitchen (NYSE:ZOES), Yum Brands (NYSE:YUM), Texas Roadhouse (NASDAQ:TXRH), Panera Bread (NASDAQ:PNRA), Bloomin' Brands (NASDAQ:BLMN).
- In a regulatory filing, Steris (STE +0.7%) discloses that it plans to contest the FTC's action to postpone its intended acquisition of Synergy Health pending a trial on the merits of the transaction, currently scheduled to begin on October 28.
- CEO Walt Rosebrough says, "It is unfortunate that we have come to this point with a transaction as strategic and geographically complimentary as ours. We have worked diligently to the address the FTC's concerns and to avoid litigation, but we will now focus our efforts on prevailing in court."
- Previously: FTC challenges Steris/Synergy Health merger on antitrust basis (May 29)
- Platinum miners betting on fuel cell vehicles to help boost demand and prices for the metal are in danger of having their hopes dashed, at least in the medium term, as electric and hybrid cars are taking a bigger share of the market, according to a Reuters analysis.
- The world's three largest platinum producers - Amplats (OTCPK:AGPPY, OTCPK:AGPPF), Impala Platinum (OTC:IMPUF, OTCQX:IMPUY) and Lonmin (OTC:LNMIF, OTCPK:LNMIY) - are all investing in projects related to fuel cell technologies, but analysts doubt growth in fuel cell vehicles will keep up with their electric counterparts, mostly because battery recharging stations are less costly and already more widespread than hydrogen refueling stations.
- Amplats CEO Chris Griffith, whose company has invested $35M in the last five years in companies developing new uses for platinum, mostly through fuel cell technology, says he does not want Amplats "to be a Kodak."
- Recapturing what was lost during the West Coast port strike, U.S. container traffic jumped 19.2% Y/Y in March and 6.6% Y/Y in April, notes SunTrust's Ki Bin Kim, still bullish on industrial fundaments, though seeing a potential slowdown in China as a risk.
- He sees Prologis (NYSE:PLD) as one of the cheapest blue-chip REITs and rates it a Buy with $50 price target. Also rated Buy is First Industrial Realty Trust (NYSE:FR). Rated at Neutral is DCT Industrial Trust (NYSE:DCT).
- Previously: SunTrust checks flood impact to Houston-exposed REITs (May 29)
11:44 AMMoody's dings Glaxo's credit rating outlook citing intense competition in U.S. and impact of restructuring activities
- Citing intense competition in the U.S. respiratory market that is depressing revenue growth and the execution of its restructuring programs, Moody's lowers its outlook on GlaxoSmithKline's (GSK -0.9%) A2 credit rating to negative from stable stating that these factors will make it difficult for the company to restore its credit metrics (CF Ops/debt > 30%) over the next 2 - 3 years.
- The company's credit profile has steadily deteriorated since Moody's downgraded it last July. For the 12-month period ended March 31, the CF Ops/debt ratio fell to 19.8% (excluding the Novartis put option) compared to 28% for the 12-month period ended June 30, 2014.
- The rating could be changed to positive (unlikely) if CF/debt were to move above 40% (above 30% including the put options) and cash/debt above 30% (above 25% including the puts) on a sustainable basis.
- Potash Corp. (POT -2.3%) is downgraded to Hold from Buy with a $35 price target, cut from $39, at TD Securities, which says global potash prices have been moving sideways at best so far this year despite a number of supply curtailments.
- The firm says it sees few catalysts to move POT’s share price higher.
- Comcast (NASDAQ:CMCSA) is redeeming nearly $2B in notes, it said in a statement.
- The company is redeeming the entirety of $750M outstanding of 5.85% senior notes due Nov. 15, along with all of $1B in 5.9% senior notes due next March 15.
- The redemptions will be funded by the company's recent $4B bond issuance.
- Total debt most recently was at $47.1B, and a total debt/equity ration of 91.5.
- After opening higher, Infoblox (BLOX -1.8%) has sold off in the wake of its FQ3 beat and strong FQ4 guidance. The DNS/IP address management hardware vendor forecasts FQ4 revenue of $79M-$81M and EPS of $0.09-$0.10 vs. a consensus of $78.4M and $0.09.
- Shares had more than doubled from their summer 2014 lows, leading to high expectations - they jumped in February following Infoblox's FQ2 beat. However, Infoblox remains well below an Oct. 2013 peak of $48.97.
- Needham and Piper have hiked their targets. Needham's Alex Henderson (Buy rating, $33 target) notes FQ3 op. margin (9.2%) was well above guidance of 5.5%-6.5%, and thinks guidance "looks overly conservative."
- On the CC (transcript), CEO Jesper Anderson talked up recent deal activity. "We ended the third quarter with approximately 8,100 customers, and year-to-date, we've averaged approximately 200 new customer additions each quarter. New customers in the third quarter included one of the most well-known social media companies ... we saw an increase in the number of deals that included our cloud and/or security products and we closed five seven-figure deals. Year-to-date [in FY15], we've closed 21 seven-figure deals."
- FQ3 results, PR
11:26 AM| Comment!
- From outside the top ten previously, Jefferies (NYSE:LUK) jumped all the way to fifth in the rankings for underwriting buyout loans last year, according to Dealogic. Bloomberg data show since the start of 2014, Jefferies has managed more than $10B in loans for P-E sponsors which previously had relationships with other banks.
- What gives? Unlike most of this country's large commercial banks, Jefferies' hands aren't tied by post-financial crisis regulatory guidelines on leveraged loans.
- The banks aren't happy, and a large group have complained to regulators that deals they deem as too risky are getting done by Jefferies.
- "The rules are not fair to the regulated banks," says one money manager. "Markets adjust to what’s going on and participants like Jefferies step in to fill a void.”
- The U.S. Federal Trade Commission issues a complaint charging that Steris's (STE -0.5%) proposed $1.9B acquisition of UK-based Synergy Health plc (OTC:SYHEF) would violate antitrust laws by significantly reducing future competition in regional markets for the sterilization of products using radiation, particularly gamma or x-ray radiation.
- The Commission will seek a temporary restraining order and preliminary injunction in federal court to postpone the transaction pending an administrative trial on the merits of the deal, which is scheduled for October 28.
- Previously: Steris to buy Britain's Synergy for $1.9B (Oct. 13, 2014)
- Ethanol companies rise while refiners are off session highs after the EPA announces its renewables fuels mandate.
- The EPA proposes requiring 15.93B gallons of total renewable fuel in 2014, 16.3B gallons in 2015, and 17.4B gallons in 2016, but the proposal for the total renewable fuel requirement falls short of levels Congress mandated, which were 20.5B gallons in 2015 and 22.5B gallons in 2016.
- Also, the EPA cuts 2016 corn-ethanol quota to 14B gallons; U.S. law required 15B gallons of ethanol for 2016.
- Ethanol exposed companies are mostly higher: ADM +0.7%, GPRE +4.2%, PEIX +4.1%, REX +1%, DAR +2%, CZZ -2.2%.
- Among refiners: HFC +0.3%, TSO +1.3%, VLO +0.8%, WNR +1.9%, PBF -1%.
- Biofuel related stocks: GEVO -8.3%, SZYM -2.7%, CDTI -1%, REGI -0.7%.
- Shake Shack (SHAK +6.7%) has posted an open job for a Culinary Research & Development Manager.
- The position requires building out new "innovative" menu items and moving new concepts to commercialization.
- In an interview this week, founder Danny Meyer and CEO Randy Garutti were coy about the development of a chicken shack concept.
- "Stay tuned. We don't have anything to announce today," teased Garutti.
- SHAK +76.3% YTD.
- Believing the company is unlikely to unload its money-losing mobile baseband chip unit (as sought by many on the sell-side), Citi's Atif Malik has launched coverage on Marvell (MRVL -1.9%) with a Sell rating and $13 target.
- Malik: "We do not view MRVL as a viable long-term cellular baseband provider in 4G handset market given fierce pricing competition… and weak positioning at flagship handset makers." He forecasts slow growth in 2015/2016. "After outgrowing the chip industry over? the last ten years by 5 percent, we model MRVL's revenue growth to decelerate and underperform the industry by 3 percent in the next 2-3 years."
- The upgrade arrives 8 days after Marvell provided light FQ2 guidance, and 3 days after Morgan Stanley went contrarian and upgraded to Overweight. Among other things, MS cited optimism about Marvell's Final-Level Cache (FLC) tech, which the company hopes to apply to its mobile processors (among other products).
- Shares joined other chip stocks in rallying this week on hopes Marvell rival Broadcom's merger with Avago will spark more industry M&A.
- As expected, Equinix's (NASDAQ:EQIX) €2.35B deal for Telecity (OTCPK:TLEIY), creating the key player in European data centers, has blown up Telecity's $2.2B deal for InterXion (NYSE:INXN).
- In a statement, InterXion confirmed the companies have terminated their agreement and used the opportunity to reaffirm 2015 guidance for revenues of €375M–€388M, adjusted EBITDA of €162M–€172M and capex of €180M–€200M.
- Analysts expect 2015 revenues of €383.6M and EBITDA of €168.6M.
- The closure of the Equinix-Telecity deal will leave that combination with a 9.03% European market share (by operational square feet) vs. InterXion's 3.5%.
- Talks between Eni (E -0.2%) and potential buyers of a stake of ~15% in the company's prized Mozambique gas field are dragging on due to differences over price, Reuters reports.
- Eni has been looking to sell down its 50% stake in Mozambique's Area 4 field, but sharply lower oil prices combined with an upcoming surge in global liquefied natural gas export capacity and slowing demand has hurt buyers' enthusiasm while Eni has been reluctant to budge on price, according to the report.
- One analyst calculates that a 15% stake in the Mozambique field would be worth just $1.5B at today's oil prices, meaning Eni "could end up selling down its Congo acreage first since that is all oil, easy to extract and very fast to get to market."
- The WisdomTree (NASDAQ:WETF) Japan Dividend Growth Fund (JDG) offers exposure to dividend-paying stocks with growth characteristics in Japan. The fund's net expense ratio is 0.43%.
- WisdomTree now has ten Japan-focused ETFs, and this new fund is one of just two that are not currency-hedged.
- Source: Press Release
- United Rentals (URI -6.4%) trades lower for a second consecutive day as sentiment crumbles late in the week.
- Bank of America Merrill Lynch has downgraded shares to Underperform due to its view the rental market may see pricing pressure with supply levels elevated.
- Execs with United Rentals gave a soft read on the level of business activity for the company during an investors presentation yesterday.
- Previously: United Rentals plunges on indications of weak May sales (May. 28 2015)
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