After Hours Summary: SKX +11.7%, ILMN +10.2%, YUM +3.4%, GILD +2.5%, CREE -7.0%, ISRG -6.9%, VMW -5.9% following earnings/guidance
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: SMCI +17.2%, SKX +11.7%, SGOC +11.4%, XOOM +10.4%, ILMN +10.2%, SWKS +8.7%, SANM +8%, MANH +5.7%, YUM +3.4%, GILD +2.5%, PKG +2.2%, HTS +0.9%
Companies trading higher in after hours in reaction to news: ANV +4.8% (announced Hycroft mill expansion prefeasibility study results with 26.5% IRR and $1.7 bln NPV), BIOD +4.4% (announced collaboration agreement with HEC Pharm for development of ultra-rapid-acting insulin aspart formulation), UQM +2.5% (co and Kinetics Drive Solutions collaborate on electric drive systems for all-electric commercial vehicles)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings: ZHNE -15.9%, CREE -7%, ISRG -6.9%, VMW -5.9%, UIS -4.1%, VMI -3.1%, IRBT -2.9%, HLIT -2.9%, AMGN -2.1%, T -2.1%, IGT -1.9%, DFS -1.5%, VASC -1.5%, CVA -1.2%, TSS -0.8%, JNPR -0.8%
Companies trading lower in after hours in reaction to news: EDAP -10.4% (filed for $50 mln mixed securities shelf offering), PLUG -8.4% (filed mixed securities shelf offering; announced proposed public offering of common stock; size not disclosed), SRPT -4.4% (announced proposed $100 mln public offering of common stock), MCC -3.0% (announced offering of 6 mln shares of common stock), VASC -1.5% (entered into agreement with U.S. Army to develop freeze-dried plasma product), ICLD -0.9% (filed for ~1.71 mln share common stock offering by selling
BP to Sell Interests in Four Alaska North Slope Oil Fields to Hilcorp
Company to Focus on Prudhoe Bay Field and Alaska LNG Project
BP PLC said Tuesday it has agreed to sell its interests in four oil fields it operates on the North Slope of Alaska as it focuses operations on the Prudhoe Bay field and developing a liquefied natural gas project in the state.
The sale agreement with Hilcorp, a privately held oil and natural gas exploration and production company, includes all of BP's interests in the Endicott and Northstar oil fields, and 50% interest in the Liberty and Milne Point fields and associated pipelines and infrastructure.
Financial terms weren't disclosed.
The majority of the affected 250 employees are expected to be offered jobs with Hilcorp, BP said.
The sale, subject to state and federal regulatory approval, is expected to be completed by the end of the year.
"This agreement will allow us to play to two of our great strengths, managing giant fields and gas value chains," said Lamar McKay, BP's upstream chief executive.
BP said it plans to submit a development plan for Liberty by the end of the year.
As part of its plans at Prudhoe Bay, the largest oil field in North America, BP said it would add two drilling rigs—one in 2015 and a second in 2016—for an incremental $1 billion investment over five years.
The assets included in the sale represent approximately 19,700 barrels of oil equivalent a day of BP's net production, less than 15% of its total net production on the North Slope, the company said.
BP, one of the largest oil producers in Alaska, has about 20,000 workers in the U.S.
How Valeant Can Raise Its Bid for Botox maker
Valeant Pharmaceuticals has plenty of room to raise its bid for Allergan. The acquisition machine, working with hedge fund manager William A. Ackman, thinks it can cut at least $2.7 billion of costs from the Botox maker. At Valeant’s single-digit tax rate, that’s worth nearly $25 billion. And the potential benefits go on from there. The $45.6 billion deal would still add up with a much bigger premium.
Valeant’s strategy of buying smaller pharmaceutical companies and cast-off assets has paid off for investors, with its stock up about 10-fold since the M.&A. binge began in 2008. The thinking is that many drug makers spend too much on overhead and research and development. Valeant slashes costs after buying assets and, with its low tax rate, can achieve higher net margins than most of its peers.
The tax rate or research and development expenses could eventually rise, of course, and the company isn’t immune to the occasional clunker of a deal. So far, however, it’s making a hefty profit, with analysts expecting net income to equal about one-third of revenue over the next year. That’s a margin almost 10 percentage points bigger than the number-crunchers are projecting for Allergan.
The cost cuts proposed for Allergan after the acquisition are enormous, about three-quarters of what the company projected to spend this year on R.&D. and sales and administrative costs. They are not, however, out of line with past Valeant deals. The $2.7 billion in estimated annual savings, combined with a single-digit tax rate, are worth perhaps $25 billion today.
Valeant, not surprisingly, says the estimated savings are on the low side and it doesn’t account for the benefits of applying its favorable tax rate to Allergan earnings or the additional sales the combined companies will produce.
Allergan’s market capitalization was about $38 billion on Feb. 24, the day before Ackman began buying stock, arguably a reasonable undisturbed price to choose. That means the buyers are offering a 23 percent premium, or about $10 billion, to Allergan owners.
That’s giving away less than half the present value of the potential savings from the deal. Indeed, Allergan’s shares are trading well above the value of the bid. Mr. Ackman’s Pershing Square Capital Management, with some funds from Valeant, has amassed a 9.7 percent effective stake in Allergan, which may discourage rival bids. Even so, no one should be surprised if Allergan holds out for a bigger price.
Notable after hours earnings movers: SMCI +13.5%, XOOM +13.2%, SKX +12.8%, ZHNE -13.5%, CREE -8.7%, IRBT -4.2%
Companies trading higher after hours following earnings/guidance:
SMCI +13.5%, XOOM +13.2%, SKX +12.8%, SANM +6.9%, MANH +6.6%, ILMN +6.1%, SWKS +4.8%, WWD +5%, VMW +2.2%, CYT +1.7%, CVA +1.5%
Companies trading lower after hours following earnings/guidance:
ZHNE -13.5%, CREE -8.7%, IRBT -4.2%, TSS -4.1%, ISRG -3.5%, ZIXI -3.4%, AMGN -2.3%, AMSG -1.8%, CBST -1.8%, HA -1.4%, T -1.4%
Closing Market Summary: S&P 500 Posts Sixth Consecutive Gain
Equity indices strung together a daylong rally on Tuesday, giving the S&P 500 its sixth consecutive advance. Some selling during the final hour of action pressured the indices from their highs, but they still ended with the bulk of their gains. The benchmark index added 0.4% with eight sectors finishing in the green, while the Nasdaq (+1.0%) outperformed throughout the session.
Although the stock market began the day on a flat note, the major averages quickly took the lead from two heavily-weighted sectors—consumer discretionary (+0.8%) and health care (+1.0%)—that displayed strength out of the gate.
The health care sector spent the entire session in the lead due, in part, to the relative strength of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 234.72, +7.38) jumped 3.3% to post its third consecutive gain. M&A activity also contributed to the sector's outperformance as Allergan (AGN 163.65, +21.65) surged 15.3% after Valeant (VRX 135.41, +9.40) proposed a merger for $48.30 in cash and 0.83 shares of Valeant for each share of Allergan.
Elsewhere, the discretionary space was underpinned by a solid 7.0% gain in the shares of Netflix (NFLX 372.90, +24.41), which spiked in reaction to above-consensus earnings. The remainder of the sector held up nearly as well with homebuilders (ITB +0.8%) and retailers rallying (XRT +1.2%), while quick-service restaurants appeared unaffected by disappointing earnings from McDonald's (MCD 99.32, -0.35). The fast food giant reported bottom-line results $0.03 below the Capital IQ consensus estimate as comparable sales in the U.S. declined 1.7% during the first quarter.
Among other earnings of note, Dow components Travelers (TRV 86.89, +0.49) and United Technologies (UTX 119.19, +0.89) reported better than expected earnings, while their respective sectors ended in mixed fashion. Financials (+0.7%) settled among the leaders after lagging through the first half of action, whereas the industrial sector (+0.01%) kept pace with the S&P 500 during early afternoon action, but slumped into the close.
Even though the industrial sector ended well below its session high, that was not the case with transports as the Dow Jones Transportation Average advanced 0.6% to a fresh all-time high. Delta Air Lines (DAL 34.95, +1.01) gained 3.0% ahead of its quarterly report, which is expected ahead of Wednesday's opening bell.
On the downside, consumer staples (-0.1%) and energy (-0.2%) were the only two sectors ending in the red.
The Treasury market displayed gains overnight, but slumped shortly after the New York open, before reclaiming its losses into the close. The 10-yr yield ended at 2.72%.
Participation was on the light side as just over 665 million shares changed hands at the NYSE floor.
Today's economic data featured just two reports:
Existing home sales fell 0.2% in March to 4.59 million SAAR from an unrevised 4.60 million SAAR in February. The consensus expected existing home sales to remain at 4.60 million SAAR. Over the past three months, existing home sales have averaged only 4.603 million SAAR, down from an average of 4.94 million SAAR in Q4 2013. Initially, the decline in sales was attributed to extreme weather conditions at the beginning of 2014. However, weather conditions returned more or less to normal in March and sales failed to rebound. A more likely explanation for the recent downward trend is that rising prices combined with higher mortgage rates have caused affordability conditions to weaken. As a result, first-time home buyers, who are needed to drive stable growth, only accounted for 30% of total purchases. In March 2012, first time buyers accounted for 33% of total sales.
The February Housing Price Index from the FHFA increased 0.6%, which followed a revised uptick of 0.4% observed during the prior month.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET and New Home Sales for March (consensus 455K) will be reported at 10:00 ET.
S&P 500 +1.7% YTD
Dow Jones Industrial Average -0.4% YTD
Nasdaq Composite -0.4% YTD
Russell 2000 -0.6% YTD
Doomsayers risk a self-fulfilling prophecy
Warnings about outright deflation and the call for ECB action are misguided, writes Jürgen Stark
Is the eurozone entering a “lost decade” with a conjunction of low growth and deflation? The prospect is unsettling. But the current debate triggered by the International Monetary Fund’s recent World Economic Outlook lacks three important points: an in-depth analysis of the forces driving inflation down; a clear distinction between “benign disinflation” and “bad deflation”, with a spiral of decreasing prices, wages and output triggered by negative expectations; and a better understanding of the European Central Bank’s approach.
Inflation in the eurozone fell in 2013. Low inflation in the eurozone since late 2013 has been driven by falling energy and commodity prices, the fading impact of past tax rises in some countries, the appreciation of the euro and relative price adjustments in countries such as Greece, Ireland and Portugal seeking to regain price competitiveness.
Inflation projections for this year by most institutions range from 0.9 to 1.5 per cent; for 2015, from 1.2 to 1.4 per cent; and for 2016 from 1.5 to 1.8 per cent. Against the backdrop of an expected gradual economic recovery and rising domestic cost pressure, ECB staff project inflation of 1.7 per cent at the end of 2016.
Current inflation of 0.5 per cent is interpreted as far below the ECB’s “target”, and deflation is seen as an imminent danger. The IMF advises the ECB, even if deflation is avoided, to fight ultra-low inflation. The reasoning is that ultra-low inflation makes it harder for some eurozone members to regain competitiveness; and that it increases real interest rates with negative effects on growth and the real value of debt.
Yes, inflation is low in the eurozone. But is it too low? Indeed, has it even reached dangerously low levels that would justify widespread concern about imminent deflation? There are no signs of deflation at the eurozone level. Only a few members have experienced negative inflation rates, mainly because of the ongoing and unavoidable adjustment process in relative prices in these countries. According to the IMF, Greece alone will register an inflation rate that is slightly negative in 2014.
It is likely we are living in an extended period of price stability. This is good news. It boosts real disposable income and will eventually support private consumption. Inflation expectations are well anchored, and there is no evidence households and companies are delaying purchases because of negative expectations. Warnings about outright deflation and calls for ECB action are misguided and irresponsible. The longer this discussion continues, and the more intense it becomes, the more likely the risk of a self-fulfilling prophecy.
On the ECB’s “short-term reaction function”, misunderstanding of its strategy and “target” remains. The assumption of many analysts and commentators is that the ECB – like other central banks – is targeting inflation on a relatively short time horizon, and that its target is “below, but close to, 2 per cent”.
This is incorrect. The ECB has never subscribed to inflation targeting. Its strategy is forward looking and medium-term oriented, taking into account the time lag between a monetary policy decision and its economic impact. The ECB does not react mechanically to data like other central banks. It does not react directly to the change in relative prices. And it does not target inflation at a relatively short and fixed-term horizon.
This strategic approach is mirrored in the ECB’s definition of price stability. This has remained unchanged since 1998-99 as a year-on-year inflation rate of below 2 per cent. The ECB clarified in 2003 that, “within this definition”, it aims to keep inflation rates below, but close to, 2 per cent over the medium term.
With the economic recovery in the eurozone stabilising, and leading indicators pointing upwards, the most likely medium-term scenario is stable prices and a modest upturn over the next two years. No further action by the ECB is required.
Any further action would be of questionable impact, and would lead to an unjustified ultra-loose monetary policy stance for too long, with unintended medium-term consequences. Moreover, it would dramatically complicate the exit from low interest rate and liquidity-providing policies. To prevent a lost decade, structural reforms, sound fiscal policies and a strong and well-capitalised banking sector are crucial instead.
Allergan, Inc Confirmed receipt of unsolicited proposal from Valeant Pharmaceuticals International, Will carefully review VRX offer
- Allergan Board of Directors, in consultation with its financial and legal advisors, will carefully review and consider the Proposal and pursue the course of action that it believes is in the best interests of the Companys stockholders. The Companys stockholders do not need to take any action at this time.
Dillard"s Inc Hearing strength attributed to chatter that Marcato Capital has made positive comments at activist investor summit