(Bernstein) Shire-AbbVie Takeover confirmed, Minimal Risks to Transaction but could have broader Market Implications
see pdf attached#
IBM implications -- security, cloud, analytics & mobile data continue to shine - Oppenheimer
Oppenheimer's recent channel checks are consistent with IBM's positive security software commentary. CHKP, PANW, FTNT and FEYE are all beneficiaries. IBM's view could also explain some of IMPV's 1Q competitive headwinds as the former goes down-market to capture share. IBM invested in security through M&A (Q1Labs, Trusteer) -- they expect more to come.
General Electric on call says structure of Alstom (ALSMY) deal has been altered, but strategic rational remains the same; deal terms remains unchanged; sees 1-2 cent reduction in EPS accretion (28.61)
GE says ALSMY will be the investor but GE will have operational control. GE says the first JV is renewables it's made up of ALSMY's offshore win and leading hydro business as well as some of their new renewable technologies. GE and Alstom will each own 50% of this venture.
IBM: Color on Quarter
- Stifel notes, in sum, hardware was better, services were mixed, but in line, and software was lower than expected. Growth markets, particularly BRIC countries including China improved q/q, while major markets were mixed. They doubt the current quarter will have much impact on sentiment. Still, they continue to believe IBM represents one of the more attractive longer-term risk adjusted opportunities in our group as we believe the co can stabilize the hardware business in 2015, which combined with trend line growth in services and software can yield ~ 1-2% rev growth and sufficient leverage to generate high single-digit EPS growth and stable FCF; Buy.
- RBC notes IBM reported modest upside to expectations during the Jun-qtr on improved hardware sales and better stability within growth markets. That said, top-line growth remains elusive as secular and cyclical challenges within its end markets are offsetting IBM's initiatives to drive growth in key areas such as cloud (+50% YTD), business analytics (+7% YTD), mobile (+100% YTD), and security (+20% YTD). Although they expect IBM to achieve FY14 EPS guidance of "at least $18.00," it could be due to levers below the operating line (lower tax rate, restructuring savings, share buybacks) in the face of ongoing volume declines. They remain on the sidelines near-term until they see sustainable rev growth.
- ISI Group remains cautious; strategic imperatives will not be enough to offset pressure in core services and software franchises or for IBM to maintain account control among large enterprises. While no obvious fixes exist for an established ~$100bil revenue co, they continue to believe IBM should consider the following to help catalyze growth: 1) Suspend EPS guidance for ~1-2 years to lower expectations and focus on longer-term positioning, 2) Larger, bolder acquisitions to create leadership positions in new areas (vs. string-of-pearls approach), and3) Greater R&D spending on focused initiatives (vs. flattish R&D budget over the last ~10 years despite M&A activity).
- Oppenheimer IBM reported 2Q14 results (revenue of $24.4B, down 1% in constant currency) that indicate its increased focused on software-related growth areas while reducing its hardware focus. Results clearly point to the transformation process it is pursuing while dealing with macro headwinds. Its hardware revenue fell 11% Yo,Y but its blended software contribution rose 4%. BRIC contribution is still down 2% YoY but an improvement from double-digit declines of 2013. The AAPL partnership is likely to encompass areas such as enterprise mobility, security, big data, etc. They view it as an additional step by IBM to move away from hardware toward becoming a software-focused player.
- IBM is down 1% in the premarket after another unimpressive quarter; rev has declined nine straight quarters and efforts to manufacture EPS estimates/targets are disappointing some who are focused on the bigger picture.
Gapping down
In reaction to disappointing earnings/guidance: RP -23.9%, AMD -17.1%, CPHD -6.9%, ZHNE -3.3%, ROG -3%, BGS -2.7%, BK -1.1%, IBM -1%, VFC -1%, ALV -0.9%, STX -0.8%, SLB -0.6%.
M&A news: ABBV -1.5% (Shire plc and Abbvie (ABBV) announced that they have reached agreement on the terms of a recommended combination of Shire with AbbVie), SHPG.
Select metals/mining stocks trading lower: AU -1.1%, ABX -1.1%, ABX -1.1%, NEM -1%, SLV -0.9%, GLD -0.8%, RIO -0.6%, MT -0.6%.
Other news: NQ -17.7% (engages Marcum Bernstein & Pinchuk as its independent auditor), TGP -4.8% (files mixed securities shelf offering; announces public offering of 2.8 mln common units, which represent limited partner interests), PT -3.7% (pull back following recent strength), FNMA -2.2% (increased yields on risk sharing products, according to reports ), FDX -0.8% (disclosed and confirmed requests for info from DoJ in connection with investigation relating to transportation of packages for online pharmacies), WDC -0.7% (following STX earnings), WAG -0.7% (Pension adviser wants probe of WAG offshore moving meeting talks, according to reports), HPQ -0.4% (announces Meg Whitman, HP president and chief executive officer, has been appointed chairman of the board of directors).
Analyst comments: NUS -3.8% (downgraded to Underperform from Neutral at BofA/Merrill), SQM -1.5% (downgraded to Neutral from Overweight at JP Morgan), MAT -1.4% (downgraded to Hold from Buy at Needham), DNKN -1.1% (downgraded to Neutral from Buy at Janney), ORLY -1.1% (downgraded to Hold from Buy at Stifel), APC -0.8% (downgraded to Mkt Perform from Outperform at Bernstein), AZO -0.6% (downgraded to Hold from Buy at Stifel)
.
In reaction to disappointing earnings/guidance: RP -23.9%, AMD -17.1%, CPHD -6.9%, ZHNE -3.3%, ROG -3%, BGS -2.7%, BK -1.1%, IBM -1%, VFC -1%, ALV -0.9%, STX -0.8%, SLB -0.6%.
M&A news: ABBV -1.5% (Shire plc and Abbvie (ABBV) announced that they have reached agreement on the terms of a recommended combination of Shire with AbbVie), SHPG.
Select metals/mining stocks trading lower: AU -1.1%, ABX -1.1%, ABX -1.1%, NEM -1%, SLV -0.9%, GLD -0.8%, RIO -0.6%, MT -0.6%.
Other news: NQ -17.7% (engages Marcum Bernstein & Pinchuk as its independent auditor), TGP -4.8% (files mixed securities shelf offering; announces public offering of 2.8 mln common units, which represent limited partner interests), PT -3.7% (pull back following recent strength), FNMA -2.2% (increased yields on risk sharing products, according to reports ), FDX -0.8% (disclosed and confirmed requests for info from DoJ in connection with investigation relating to transportation of packages for online pharmacies), WDC -0.7% (following STX earnings), WAG -0.7% (Pension adviser wants probe of WAG offshore moving meeting talks, according to reports), HPQ -0.4% (announces Meg Whitman, HP president and chief executive officer, has been appointed chairman of the board of directors).
Analyst comments: NUS -3.8% (downgraded to Underperform from Neutral at BofA/Merrill), SQM -1.5% (downgraded to Neutral from Overweight at JP Morgan), MAT -1.4% (downgraded to Hold from Buy at Needham), DNKN -1.1% (downgraded to Neutral from Buy at Janney), ORLY -1.1% (downgraded to Hold from Buy at Stifel), APC -0.8% (downgraded to Mkt Perform from Outperform at Bernstein), AZO -0.6% (downgraded to Hold from Buy at Stifel)
.
Shire/AbbVie Counterbid Unlikely at This Stage, Bernstein Says
2014-07-18 12:12:27.655 GMT
By Gaurav Panchal
July 18 (Bloomberg) -- Another bidder may enter the party,
is very unlikely at this stage, Bernstein’s Aaron Gal says in
note following confirmation of deal.
* As a risk to deal sees, AbbVie unable to re-domicile Humira,
which accounts for over 50% of current company’s topline;
likely main asset whose tax rate is reduced
* Deal puts more pressure on remaining U.S. drug companies to
re-domicile overseas or at least supports the drive to
change laws in U.S.: Gal
* Orphan drug and other novel science companies could benefit:
Gal
* Says deal values Shire at 24x 2015 EPS, on EV/last 12M
EBITDA; could put prices of companies with novel science
and/or rare disease capabilities higher
* Rates Shire marketperform, PT raised to 5,300p vs 3,700p
* Deal Tearsheet: {NSN N8WJ2S6JTSEA<Go>}
* July 14: AbbVie Chases Shire, Peers May Seek M&A Overseas
War Chest Use {NSN N8PV4I6KLVS1<Go>}
Link to Company News:{SHP LN <Equity> CN <GO>}
Link to Company News:{ABBV US <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the reporter on this story:
Gaurav Panchal in London at +44-20-7392-0511 or
gpanchal2@bloomberg.net
To contact the editor responsible for this story:
Brian Lysaght at +44-20-7330-7908 or
blysaght@bloomberg.net
2014-07-18 12:12:27.655 GMT
By Gaurav Panchal
July 18 (Bloomberg) -- Another bidder may enter the party,
is very unlikely at this stage, Bernstein’s Aaron Gal says in
note following confirmation of deal.
* As a risk to deal sees, AbbVie unable to re-domicile Humira,
which accounts for over 50% of current company’s topline;
likely main asset whose tax rate is reduced
* Deal puts more pressure on remaining U.S. drug companies to
re-domicile overseas or at least supports the drive to
change laws in U.S.: Gal
* Orphan drug and other novel science companies could benefit:
Gal
* Says deal values Shire at 24x 2015 EPS, on EV/last 12M
EBITDA; could put prices of companies with novel science
and/or rare disease capabilities higher
* Rates Shire marketperform, PT raised to 5,300p vs 3,700p
* Deal Tearsheet: {NSN N8WJ2S6JTSEA<Go>}
* July 14: AbbVie Chases Shire, Peers May Seek M&A Overseas
War Chest Use {NSN N8PV4I6KLVS1<Go>}
Link to Company News:{SHP LN <Equity> CN <GO>}
Link to Company News:{ABBV US <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the reporter on this story:
Gaurav Panchal in London at +44-20-7392-0511 or
gpanchal2@bloomberg.net
To contact the editor responsible for this story:
Brian Lysaght at +44-20-7330-7908 or
blysaght@bloomberg.net
Gapping up
In reaction to strong earnings/guidance: SWKS +8.9%, ERIC +7.6%, RECN +3.6%, WAL +2.8%, GOOG +2.5%, CE +2.4%, FHN +1.5%, MATW +1.1%, IPG +1.1%, GE +0.8%, LH +0.8%, GRT +0.7%.
M&A news: GTIV +10.9% (Gentiva Health Svcs Board of Directors unanimously rejects Kindred's amended partial tender offer; Announces receipt of alternative proposal at $17.25 per share).
Other news: USU +7.5% (light volume following 22%+ move higher yesterday), ALU +5.4% (related to ERIC earnings), PBR +4% (extending yesterday afternoon's move higher), PRAN +2.8% (provides update on its clinical development program for Alzheimer's disease; confirmed the top line finding that there is a very promising trend towards the preservation of brain volume (as measured by MRI) in PBT2 treated patients compared to placebo patients), RFMD +2.6% (following SWKS results), NOK +2.6% (related to ERIC earnings), AZN +1.3% (may be attributed to SHPG/ABBV deal announced), SWC +1.2% (reported production of palladium and platinum from the Company's Montana mine operations totaled 126,400 ounces in Q2 compared with total mine production of 131,500 in the same period of 2013), TOT +1.1% (recent strength in oil), ABG +1% (increased total share repurchase authorization to $100 mln), AMZN +0.6% (introduces Kindle Unlimited which offers unlimited reading and listening on any device for $9.99 a month), SYY +0.5% (settled with the State of California all claims related to its past use of drop sites in the state for $19.4 mln), AAPL +0.5% (iPhone 6 to start mass production this month, according to reports), .
Analyst comments: BX +2.4% (target raised to $41 at RBC Capital Mkts), AMH +1.1% (upgraded to Strong Buy from Outperform at Raymond James), KONA +0.9% (initiated with a Outperform at Wedbush), ANDE +0.7% (upgraded to Buy from Hold at BB&T Capital Mkts
)
In reaction to strong earnings/guidance: SWKS +8.9%, ERIC +7.6%, RECN +3.6%, WAL +2.8%, GOOG +2.5%, CE +2.4%, FHN +1.5%, MATW +1.1%, IPG +1.1%, GE +0.8%, LH +0.8%, GRT +0.7%.
M&A news: GTIV +10.9% (Gentiva Health Svcs Board of Directors unanimously rejects Kindred's amended partial tender offer; Announces receipt of alternative proposal at $17.25 per share).
Other news: USU +7.5% (light volume following 22%+ move higher yesterday), ALU +5.4% (related to ERIC earnings), PBR +4% (extending yesterday afternoon's move higher), PRAN +2.8% (provides update on its clinical development program for Alzheimer's disease; confirmed the top line finding that there is a very promising trend towards the preservation of brain volume (as measured by MRI) in PBT2 treated patients compared to placebo patients), RFMD +2.6% (following SWKS results), NOK +2.6% (related to ERIC earnings), AZN +1.3% (may be attributed to SHPG/ABBV deal announced), SWC +1.2% (reported production of palladium and platinum from the Company's Montana mine operations totaled 126,400 ounces in Q2 compared with total mine production of 131,500 in the same period of 2013), TOT +1.1% (recent strength in oil), ABG +1% (increased total share repurchase authorization to $100 mln), AMZN +0.6% (introduces Kindle Unlimited which offers unlimited reading and listening on any device for $9.99 a month), SYY +0.5% (settled with the State of California all claims related to its past use of drop sites in the state for $19.4 mln), AAPL +0.5% (iPhone 6 to start mass production this month, according to reports), .
Analyst comments: BX +2.4% (target raised to $41 at RBC Capital Mkts), AMH +1.1% (upgraded to Strong Buy from Outperform at Raymond James), KONA +0.9% (initiated with a Outperform at Wedbush), ANDE +0.7% (upgraded to Buy from Hold at BB&T Capital Mkts
)
Closed Ukraine Airspace Handled 350 Daily Flights: Eurocontrol
2014-07-18 11:57:56.785 GMT
By Jonathan Stearns
July 18 (Bloomberg) -- About 350 flights a day passed
through the eastern Ukrainian airspace now closed to commercial
airlines as a result of the country’s conflict with pro-Russian
separatists, says an official from Eurocontrol.
* Of this total, about 150 flights a day were by western and
central European carriers on Asian routes, Brian Flynn, a
senior manager at the European air-navigation agency, tells
reporters in Brussels
* Those 150 flights would have crossed eastern Ukraine at a
height of more than 32,000 feet, the level above which the
airspace was open until yesterday, says Flynn
* Ukraine on July 1 closed its eastern airspace up to 26,000
feet and on July 14 raised the ceiling to 32,000 feet before
shutting the whole zone because of yesterday’s crash of a
Malaysian Airline System Bhd. plane, he says
* Past civil conflicts including those in Kosovo and Libya
provoked partial airspace closures, according to Flynn
* “It’s not very common, but it’s not that unusual, to have
different degrees of restriction,” he says
* With Ukraine saying pro-Russian militants fired a missile
that knocked the Boeing Co. 777 aircraft traveling from
Amsterdam to Kuala Lumpur out of the sky 50 kilometers (30
miles) from the Russian border, Flynn says: “We have no
reason whatsoever to believe there was anything wrong with
the flight before it disappeared from radar”
* NOTE: Russia and Ukraine Trade Accusations on Downing of
Malaysia Jet {NSN N8WLZV6S9736 <GO>}
* NOTE: July 17: Eurocontrol Says It Rejects Flight Plans Over
Eastern Ukraine {NSN N8VGSK6TTDSA <GO>}
Link to Company News:{BA US <Equity> CN <GO>}
Link to Company News:{MAS MK <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the reporter on this story:
Jonathan Stearns in Brussels at +32-2-285-4306 or
jstearns2@bloomberg.net
To contact the editor responsible for this story:
Ian Wishart at +32-2-237-4344 or
iwishart@bloomberg.net
2014-07-18 11:57:56.785 GMT
By Jonathan Stearns
July 18 (Bloomberg) -- About 350 flights a day passed
through the eastern Ukrainian airspace now closed to commercial
airlines as a result of the country’s conflict with pro-Russian
separatists, says an official from Eurocontrol.
* Of this total, about 150 flights a day were by western and
central European carriers on Asian routes, Brian Flynn, a
senior manager at the European air-navigation agency, tells
reporters in Brussels
* Those 150 flights would have crossed eastern Ukraine at a
height of more than 32,000 feet, the level above which the
airspace was open until yesterday, says Flynn
* Ukraine on July 1 closed its eastern airspace up to 26,000
feet and on July 14 raised the ceiling to 32,000 feet before
shutting the whole zone because of yesterday’s crash of a
Malaysian Airline System Bhd. plane, he says
* Past civil conflicts including those in Kosovo and Libya
provoked partial airspace closures, according to Flynn
* “It’s not very common, but it’s not that unusual, to have
different degrees of restriction,” he says
* With Ukraine saying pro-Russian militants fired a missile
that knocked the Boeing Co. 777 aircraft traveling from
Amsterdam to Kuala Lumpur out of the sky 50 kilometers (30
miles) from the Russian border, Flynn says: “We have no
reason whatsoever to believe there was anything wrong with
the flight before it disappeared from radar”
* NOTE: Russia and Ukraine Trade Accusations on Downing of
Malaysia Jet {NSN N8WLZV6S9736 <GO>}
* NOTE: July 17: Eurocontrol Says It Rejects Flight Plans Over
Eastern Ukraine {NSN N8VGSK6TTDSA <GO>}
Link to Company News:{BA US <Equity> CN <GO>}
Link to Company News:{MAS MK <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the reporter on this story:
Jonathan Stearns in Brussels at +32-2-285-4306 or
jstearns2@bloomberg.net
To contact the editor responsible for this story:
Ian Wishart at +32-2-237-4344 or
iwishart@bloomberg.net
Reaffirms FY14 rev flat to up 5% - conf call slides - FY14 industrial segment +4-7% with Capital falt to -5%
Starbucks: Still prefer SBUX over MCD
Oppenheimer continues to favor SBUX (Outperform) over MCD (Perform) into next week's results and beyond. While MCD contains limited valuation risk, the Street's sales/earnings estimates through '15 appear too optimistic which could keep the shares restrained. SBUX still has significantly more slack in its model with new internal drivers, fewer external risks and "lower-than-usual" sales/earnings expectations through '15—which gives investors a better opportunity for upside. While SBUX's 24x forward P/E is richer, firm believes comps will remain above average and the stock will continue to grow into its expanding EPS skin.
- SBUX is set to report 7/24 after the close
- MCD is set to report 7/22 before the open
