WSJ : Boeing Defense Sales to Stay Flat

Boeing Defense Sales to Stay Flat
Company President Cites Headwind of Tight Military Budgets

Boeing Co. expects sales at its defense and space business to remain "roughly flat" for the next five years as it contends with the headwind of tight military budgets, a senior executive said on Thursday.

Dennis Muilenburg, president and chief operating officer, told a Wall Street conference that Boeing still intended to increase profit margins at the unit through aggressive cost cutting and productivity initiatives.

Boeing's defense and space unit generated $33.2 billion in sales last year, a 2% increase over the previous year, while most rivals registered modest declines. Boeing is the world's second-largest military contractor by sales.

Lockheed Martin Corp. LMT +1.48% Chief Executive Marillyn Hewson earlier said at the same event that the global market leader expected a slight decline in sales this year.

Boeing plans to end C-17 cargo aircraft production at its Long Beach, Calif., plant in 2015, while the St. Louis factory that makes F/A-18 and F-15 fighter jets could run out of business within five years unless the company can secure new orders from the Pentagon and international customers.

The budget pressures on the military business contrast with the booming fortunes of its commercial arm, where revenue rose 8% last year to $53 billion.

Two of the best growth prospects on the defense side are derivatives of commercial aircraft. Mr. Muilenburg expects that increasing production of its jetliner-based KC-46A Pegasus aerial refueling tankers and P-8A Poseidon maritime-surveillance aircraft will offset declines elsewhere in the portfolio. Both are built on its commercial-assembly lines in Washington state, offering significant cost savings for the company, he said.

Mr. Muilenburg, viewed as the likely successor to Chief Executive Jim McNerney who reaches the company's mandatory retirement age of 65 in August, is spearheading companywide initiatives for cost savings. Mr. McNerney said he has no plans to retire soon, but Mr. Muilenburg—whose public profile has been growing—was elevated in December to chief operating officer, a newly created position, as the clearest signal of Boeing's succession planning.

Boeing has aggressively renegotiated contracts with its suppliers, seeking as much as 15% to 20% reductions in the price of what it buys to produce its civilian- and defense-aerospace products. Heavily driven by reducing the unit costs of its 787 Dreamliner, Mr. Muilenburg said around 40% of its suppliers, which cover both its commercial and defense products, have agreed to new terms, in many cases receiving higher volume orders in exchange for reduced prices.

Another 30% are being completed, he added, and a final 30% that have resisted Boeing's effort and are farther out.

United Technologies Corp. UTX +0.34% Chief Executive Louis Chênevert, among the most vocal opponents of Boeing's cost-cutting effort, announced last week that it had reached a supplier agreement with Boeing, but didn't provide details.

Mr. Muilenburg said 60% to 70% of the company's costs come from what it purchases from suppliers. Its initiative, dubbed Partnering For Success, has expanded to some 500 companies since beginning the effort about two years ago.

Separately, Boeing announced it added 12 single-aisle 737 and two long-range 777s to its order book, increasing its net orders to 380.

>>> US Early premarket Gappers

Early premarket gappers

Gapping up: RTRX +25%, NBY +20%, OVTI +10.7%, BIG +6.3%, AVA +5%, SPEX +4.8%, NMBL +4%, VEEV +3.5%, AVGO +3.1%, CRM +2.4%, GTE +2.2%, AUY +2%, KGC +1.9%, SNN +1.5%, BBRY +1%, DDD +1%

Gapping down: BLOX -32%, BNNY -15.4%, EXPR -11.6%, PSUN -9.9%, SPLK -8.9%, GLUU -7.6%, LGF -6.7%, CRDS -5.6%, MDW -4.5%, GES -3.3%, RIO -2.9%, FWM -2.9%, VMEM -2.6%, BHP -1.8%, ESL -1.2%

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(BFW) Vivendi Exit From GVT Could Bring More Cash Returns: Liberum

Vivendi Exit From GVT Could Bring More Cash Returns: Liberum
2014-05-30 08:27:53.565 GMT


By Blanche Gatt
     May 30 (Bloomberg) -- Vivendi would be willing to
deconsolidate GVT if it obtained right price and/or structure,
Liberum says in e-mailed comments; reiterates buy, PT EU27.
  * Liberum notes Corriere Delle Comunicazioni.it report of
    possible tie-up between Vivendi’s GVT unit and Telecom
    Italia’s Brazilian assets, La Repubblica report of Telecom
    Italia CEO meeting with GVT management in Brazil
  * Liberum says would not rule out Vivendi exit, monetization
    of GVT; co. did seek to exit GVT previously, would do so for
    right price, structure as GVT doesn’t fit with strategy to
    become media, content co.
    * If it did exit or monetize some of its stake, possibly
      through a merger of the assets followed by an IPO, it
      could bring more cash returns, Liberum says
    * Values GVT in SOTP at EU7b
  * Shares little changed after faling 0.5% in early trading; up
    0.7% YTD
  * NOTE today: Vivendi’s 14% Beats Stake Value Doubled in 9
    Months, Kepler Says
  * NOTE May 22: Vivendi Confirms Sale of 41.5m Activision
    Blizzard Shares

For Related News and Information:
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First Word newswire: NH BFW<GO>

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Blanche Gatt in London at +44-20-7392-0351 or
bgatt@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

(BFW) Vivendi’s 14% Beats Stake Value Doubled in 9 Months, Kepler Says

Vivendi’s 14% Beats Stake Value Doubled in 9 Months, Kepler Says
2014-05-30 07:35:23.968 GMT


By Blanche Gatt
     May 30 (Bloomberg) -- Value of Vivendi’s Universal Music
Group’s 14% stake in Beats, the headphone maker, music streaming
service acquired by Apple for $3b, has doubled since last
valuation of $214m in September, Kepler Cheuvreux says in note.
  * Kepler Cheuvreux says sees “very limited” positive SOP
    effect from deal of EU0.1/shr
    * Says deal coming too early in music streaming industry
    * There’s been talk about deal for past month, valuation
      slightly lower than $3.2b that was expected
    * Reiterates hold on Vivendi, PT EU20
  * Shares down 0.5% in early trading; up 0.2% YTD
  * NOTE yday: Apple to Acquire Beats for $3b in Biggest-Ever
    Deal

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James Cone

(BofA-ML) The Flow Show : Slow Capitulation into Bonds

- Both bonds (+$92bn YTD) and stocks (+$47bn YTD) continue to see inflows but flows into bonds stronger than stocks since Mar’14
- Our Fund Manager Survey shows that rate expectations still playing catch-up with decline in government bond yields (Chart 2). And with no outsized weekly jump in bond flows cannot say capitulation into bonds complete (Chart 3).
- Following a record 48 straight weeks of inflows and big outperformance, European equity funds see first week of outflows ($0.2bn)
- Watch our Bull & Bear Index of investor sentiment, which has jumped to 7.6 from 4.3 in March, driven primarily by end of big redemptions from HY, EM debt & EM equity funds

>>> Asset Class Flows
- Equities: $1.0bn inflows (note divergence between $3.1bn into ETF’s and $2.1bn out of long-only funds)
- Bonds: $6.3bn inflows (12 straight weeks) (Table 1)
- Commodities: flat

>>> Equity Flows
- First outflows ($0.2bn) from European equity funds in 48 weeks! (Chart 4)
- EM ekes out $0.4bn inflows (inflows in 8 out of past 9 weeks) (Table 2)
- Small inflows to Japan vs small outflows from US equity funds
- Outflows from US growth funds slow to $0.6bn; US value funds see third straight week of modest inflows ($0.2bn)
- By sector, inflows to infrastructure funds ($0.2bn) and outflows from financials ($0.2bn)

>>> Fixed Income Flows
- 23 straight weeks of inflows to IG bond funds ($9.2bn) (caveat: $7bn due to inflows to one fund)
- $5.1bn outflows from Govt/Tsy funds (caveat: $5bn due to outflows from one fund)
- 16 straight weeks of inflows to HY bond funds ($0.6bn)
- 9 straight weeks of inflows to EM debt funds ($1.1bn) (largest in 7 weeks)
- 6 straight weeks of inflows to Muni bond funds
- 7 straight weeks of redemptions ($0.4bn) from floating-rate debt funds (following 94 straight weeks of inflows)

(BFW) Underweight Investors Shld Add to EM Stock Positions, Pimco Says

 BN 05/30 07:03 *RUSSIA, CHINA ISSUES MOSTLY PRICED IN, PIMCO'S MAISONNEUVE SAYS
 BN 05/30 07:01 *UNDERWEIGHT INVESTORS SHLD ADD TO EM STOCK POSITIONS: PIMCO
 BN 05/30 06:59 *EMERGING STOCK VALUATIONS ARE INEXPENSIVE, PIMCO SAYS
Underweight Investors Shld Add to EM Stock Positions, Pimco Says
2014-05-30 07:18:02.194 GMT


By Weiyi Lim
     May 30 (Bloomberg) -- Valuations are inexpensive, while
difficulties in Russia and China’s steep slowdown in growth are
mostly priced in, PIMCO deputy CIO Virginie Maisonneuve writes
in May report.
  * ’New Neutral’ outlook may help reverse some of concerns
    about tapering and policy in developing nations
  * Key differentiator in EM performance will be country ability
    to use interest rates to manage economies and limit upward
    pressure on currencies
  * Expect bouts of volatility surges that coincide with
    unexpected pressures given world has delicate economic and
    geopolitical balance


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