>>> US Gapping downaze

Gapping down
In reaction to earnings/guidance:

  • APPN -15.1%, AUPH -13.2%, TDC -10.8%, BYND -8.5%, FROG -8.3%, SHAK -8.2%, YMAB -8.1%, STMP -7.6%, IBP -6.8%, SFM -5.2%, VIR -5.1%, OPRT -5.1%, GH -5%, ICUI -4.5%, SSP -4.3%, MNST -3.7%, QDEL -3.5%, TRIP -3.4%, OCGN -3.3%, WPRT -3%, POST -2.7%, ENV -2.4%, AGO -2.3%, PBA -2.3%, CRON -2.2%, CVNA -2.1%, ESNT -2%, FLR -2%, CLNE -1.9%, CVET -1.9%, CERT -1.6%, REZI -1.5% (also acquires Shoreview Distribution), USM -1.4%, PODD -1.2%, PFSI -1.1%, AIG -1.1%, PLNT -1% (also announces minority investment in iFIT), ALTR -1%

Other news:

  • PCT -11% (continued momentum lower; responds to Hindenburg Research short report)
  • CTOS -1.8% (stock offering)

Analyst comments:

  • HMPT -0.8% (downgraded to Neutral from Overweight at Piper Sandler)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • BILL +15.9% (also confirms acquisition of Divvy for $2.5 bln in cash and stock), GPRO +10.6%, ANGI +9.1%, ROKU +8.5%, CSOD +8.5%, DDOG +7.8% (also names new COO), GRPN +6.5%, NET +6.1%, PBYI +5.9%, EXPE +5.6% (also files for 8.4 mln share offering by selling shareholders), NTRA +5.6%, SVMK +5.5%, PTON +5.4%, FLGT +5.1%, ET +4.9%, ENDP +4.4%, QRTEA +4.4%, RVLV +4.3%, FND +4.2%, AXON +4%, FNKO +3.8%, CARG +3.6%, TSE +3.3%, AVLR +3.2%, MGI +3.2%, BCC +3.1%, GVA +3.1%, UI +3.1%, EOG +2.9%, YELP +2.7%, MCHP +2.7% (also increases dividend), SPB +2.7%, NKTR +2.6%, TWST +2.6%, SQ +2.5%, NWSA +2.5%, TRHC +2.5%, PTMN +2.5%, LXP +2.5%, DBX +2.4%, AMC +2.4%, EB +2.3%, EXEL +2.3%, IAC +2.3%, CABO +2.2%, RPD +2.2%, LYV +2.1%, MCK +2%, MP +1.8%, ZGNX +1.8%, TPIC +1.8%, SCOR +1.7%, IRTC +1.6%, MAIN +1.6%, MTZ +1.5%, CI +1.5%, TU +1.5%, DKNG +1.5%, WFG +1.4%, CNK +1.4%, SYNA +1.3%, RGA +1.2%, HE +1.2%, NFG +1.1%, ZIOP +1%, MSI +1%, CCJ +1%

Other news:

  • IBIO +31.9% (reports COVID-19 toxicology study results; announces next-gen COVID-19 vaccine program)
  • TTOO +14.7% (announces acceleration of development initiatives under BARDA contract)
  • NKTX +13.8% (CRSP and NKTX announce a strategic partnership)
  • DDOG +7.7% (names new COO)
  • BNTX +7% (Pfizer and BioNTech (BNTX) initiate rolling submission of Biologics License Application for U.S. FDA approval of their COVID-19 vaccine)
  • VYNE +5.6% (files for $200 mln mixed securities shelf offering)
  • AMSC +2.4% (acquires Neeltran, a supplier of rectifiers and transformers to industrial customers)
  • R +2.2% (names new CFO)
  • BCS +1.9% (Sherborne Investors Management disclosed it sold 6.01% stake in BCS)
  • STWO +1.7% (ESS Inc., a long-duration energy storage solutions company, to become a publicly listed company through merger with ACON S2 Acquisition Corp)
  • KSU +1.6% (Surface Transportation Board approves Voting Trust for CP's proposed acquisition of KSU)

Analyst comments:

  • VRAY +13% (upgraded to Buy from Neutral at Guggenheim)
  • AGS +6% (upgraded to Buy from Hold at Truist)
  • TUP +3.1% (upgraded to Buy from Neutral at Citigroup)
  • SCS +2.2% (upgraded to Buy from Hold at The Benchmark Company)
  • FOUR +1.8% (upgraded to Outperform from Peer Perform at Wolfe Research)
  • VIAC +1.2% (upgraded to Equal Weight from Underweight at Wells Fargo; upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • W +1% (upgraded to Hold from Sell at Stifel)

FT : Guns no roses for stock investors

Guns no roses for stock investors
Sector’s companies are reverting to type: low-tech metal benders with subnormal valuations

The US firearms industry’s economic significance is overestimated by both sides of the gun controls debate. Laws and regulations will be determined by the sentiments of the American political tribes, not gunmakers’ financial power.

Having said that, shares in the manufacturers of handguns, shotguns and “modern sporting rifles” such as the old AR-15 had a pretty good run from July 2020 to early this year. But now it looks like they are reverting to type: low-tech metal benders with subnormal valuations.

Many of the great American gun-making names, such as Remington, Winchester, Colt and Marlin, have had at least one trip to bankruptcy courts. The two pure play gunmakers left, Sturm, Ruger & Co and Smith & Wesson Brands, have underperformed the broader indices, even though their sales hit all-time records in January.

Both companies have, arguably, survived in their present form by cranking out minor variations on existing brands and avoiding high financial leverage. American defence companies such as Lockheed Martin or Raytheon are constantly working on product innovation, with both taxpayers’ and shareholders’ money.

But as Sturm, Ruger & Co says in its last 10-K filing, it “does not consider its business materially dependent on patent or trademark protection”. Research and development expenses at both companies just tick over year by year at less than 2 per cent of sales. And why should they bother? The government would not allow them to sell scientifically advanced weapons to the public.

Private equity managers have had their try at leveraging up gunmakers’ mature assets. The last one was Cerberus and its takeover of Remington Arms, which failed in 2018. Bankers and lenders may have become more fastidious, and the two public companies have been financially prudent.

And they should be. Boomlets such as last January’s 79 per cent year over year increase in US firearms sales are generally followed by quick declines. For example, after the production of almost 11.5m firearms in 2016, manufacturing fell back to 8.3m in 2017.

Production and sales were certainly much higher in 2020. Small Arms Analytics, a US-Canadian consultancy, estimated there were 23m “units” sold in 2020, which it said represented a 24 per cent increase over 2019. The National Shooting Sports Foundation, an industry trade association, said the “direct economic impact” of the industry was $25.5bn. That is not a material fraction of the $21tn US economy.

And however extensive the rights conferred by the US constitution’s Second Amendment, they do not include the right for gunmakers to earn a profit. In recent years, the process of natural selection has been working for Smith and Wesson and Sturm, Ruger & Co.

According to Sturm, Ruger & Co’s most recent SEC disclosures, on $56m of sales in 2020, the company earned net income of $90m, for a near-33 per cent return on equity. It would seem the company believes shareholders are better off getting that cash themselves, since it paid out higher dividends than it earned in profit, without taking on more debt.

Smith & Wesson is also inclined to pay out cash to its shareholders. In its third quarter, which ended on January 31, it earned a net income of $62m on sales of $257m, completed a $50m share buyback and paid out a dividend yield of a bit over 1 per cent.

They are probably using good judgment in letting the shareholders get cash now rather than later. Whatever the final outcome of the Biden administration’s gun control regulatory initiatives or Republican state legislators’ liberalisation of “private carry” laws, guns will be a tough business in the future.

To begin with, brand loyalty is not everything, as the former shareholders of Colt, Remington and Winchester could tell you. The proportion of Americans who are gun owners has been declining, even though the remaining customer base tends to own more firearms per capita.

The barriers to entry are not that high. The Bureau of Alcohol, Tobacco, Firearms and Explosives, which enforces federal firearms law, has licensed more than 13,000 firearms manufacturers and 1,900 ammunition manufacturers. By my calculations, you could set up a simple gun-making shop with less than $100,000 in (used) machinery.

With even moderate care, a gun can be perfectly functional for decades. So if gun-buying fever were to abate, the manufacturers could suffer. And then there is the attrition, natural or otherwise, of the customer base.

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • IBIO +27.5%, TTOO +18.1%, EB +16.9%, BILL +15.7%, NKTX +13.8%, GPRO +9.3%, ANGI +9.1%, ROKU +9%, CSOD +8.5%, DDOG +7.9%, RVLV +7.2%, NET +7.1%, GRPN +6%, PBYI +5.9%, NTRA +5.6%, FLGT +5.5%, SVMK +5.5%, ET +5.3%, PTON +5%, EXPE +4.9%, TSE +4.8%, ZGNX +4.8%, BNTX +4.6%, MP +4.4%, MTZ +4.3%, FND +4.2%, WFG +4.2%, AMC +4%, AXON +4%, FNKO +3.7%, MD +3.6%, MAIN +3.2%, SQ +3.2%, AVLR +3.2%, MCHP +3.1%, CARG +3%, DBX +2.9%, EOG +2.9%, YELP +2.7%, MCK +2.6%, NKTR +2.6%, TWST +2.6%, BCC +2.6%, OUST +2.5%, NWSA +2.5%, TRHC +2.5%, PTMN +2.5%, STWO +2.3%, EXEL +2.3%, IAC +2.3%, CABO +2.2%, RPD +2.2%, BCS +2.1%, LYV +2.1%, CVE +1.9%, TWTR +1.8%, AMSC +1.8%, SCOR +1.7%, COUR +1.6%, KSU +1.6%, CRSP +1.5%, SYNA +1.4%, ELAN +1.4%, CORT +1.3%, ENDP +1.3%, LOKB +1.2%, RGA +1.2%, HE +1.2%, VYNE +1.1%, NFG +1.1%, ZIOP +1%, MSI +1%
  • Gapping down:
    • AUPH -15.7%, APPN -14.1%, FROG -10.2%, SHAK -8.2%, YMAB -8.1%, STMP -6.9%, BYND -6.7%, TDC -5.9%, MNST -5.3%, VIR -5.1%, AL -5.1%, GH -5%, ICUI -4.5%, PFSI -4.4%, CLNE -4.2%, SFM -4.1%, CVET -3.9%, QDEL -3.8%, PLNT -3.2%, AMRX -2.9%, POST -2.7%, MRTX -2.5%, TRIP -2.3%, AGO -2.3%, MGI -2.1%, CTOS -1.8%, CERT -1.6%, REZI -1.5%, USM -1.4%, PCT -1.2%, AIG -1.1%, ALTR -1%

FT : Blackstone makes £1.2bn offer for St Modwen

Blackstone makes £1.2bn offer for St Modwen
Private equity firm swoops on UK property developer with warehouse space potential

Blackstone has made a £1.2bn approach to buy a logistics and housing developer as the private equity firm aims to bump up its exposure to sectors that have boomed during the pandemic. 

The offer for St Modwen Properties, announced on Friday, values the company at around £1.2bn, a 21 per cent premium to Thursday’s closing share price of 448p and a 2 per cent premium to pre-coronavirus highs. 

Shares in St Modwen rose 20 per cent to 535p when the market opened on Friday.

The FTSE 250 company has three business lines, including a logistics development and management business with enough land to develop 19m square feet of new warehouse space in the next few years. 

The logistics sector has been one of the winners from the pandemic, and a major target for Blackstone in recent years. 

Delivery and storage networks have been called into action as a huge number of shoppers have moved online, and bidding for new sites has been competitive as investors increase their exposure to a sector seen as a relatively safe source of long-term income.

Through its subsidiary Mileway, Blackstone has snapped up warehouses across Europe in the past two years. James Seppala, head of Blackstone real estate in Europe, has described logistics as “one of our highest conviction, long-term investment themes”.

While landlords in other property sectors — most notably retail and hospitality — have been pummeled by the virus and faced significant rent falls, owners of warehouses have recouped almost all they are owed. 

St Modwen has housebuilding and regeneration divisions, but the company’s extensive logistics development pipeline is likely to have interested Blackstone, said Miranda Cockburn, an analyst at Panmure Gordon. 

“Any company with the ability to develop into the strength of demand [for warehousing] will do well in the next few years,” she said. “Pulling together a land bank is not easy and land values for industrial land have gone up massively in the past few years.”

It is the latest in a series of bets on the UK by Blackstone, which is banking on a recovery as Britain emerges from the turmoil caused by Brexit and the pandemic. The buyout group’s global head of infrastructure Sean Klimczak told the Financial Times last year that it was “quite bullish” on the UK, which it saw as “undervalued” and a “significant opportunity”. 

Other UK deals include buying Bourne Leisure, which runs the Butlin’s and Haven holiday parks, and IQ Student Accommodation, which it acquired last year for £4.7bn. It has made plans to use money from a $14bn Saudi-backed infrastructure fund, much of which was originally due to target the US, for UK investments. 

>>> Europe : Brokers Upgrades & Downgrades - 7th of May 2021 V2(+)

>>> Up
* Boule Diagnostics Raised to Buy at Pareto Securities (+)
* Deutsche Bank Raised to Equal-Weight at Morgan Stanley
* Europcar Raised to Buy at SocGen; PT 39 euro cents (+)
* FACC Raised to Hold at Berenberg; PT 8.50 euros
* Fastighets AB Trianon Raised to Hold at Carnegie; PT 150 kronor
* Genel Raised to Buy at Renaissance Capital; PT 205 pence
* Hugo Boss Raised to Buy at Baader Helvea; PT 50 euros
* Infineon Raised to Buy at SocGen; PT 41.50 euros
* Kone Raised to Equal-Weight at Morgan Stanley; PT 58 euros
* Legrand Raised to Equal-Weight at Morgan Stanley; PT 74 euros
* New Work Raised to Buy at Hauck & Aufhaeuser; PT 325 euros (+)
* Nokia Raised to Overweight at Morgan Stanley; PT 5 euros
* Zalando Raised to Buy at Hauck & Aufhaeuser; PT 100 euros (+)

>>> Down
* Carmila Cut to Sell at SocGen; PT 12.20 euros
* DNO Cut to Hold at Renaissance Capital; PT 10.50 kroner
* Ericsson Cut to Equal-Weight at Morgan Stanley; PT 135 kronor
* Fasadgruppen Group Cut to Hold at Carnegie; PT 136 kronor
* Hammerson Cut to Hold at SocGen; PT 38 pence
* John Laing Group Cut to Hold at Liberum; PT 380 pence
* Klepierre Cut to Sell at SocGen; PT 19.80 euros
* Outokumpu Cut to Hold at Deutsche Bank; PT 5.70 euros
* Outokumpu Cut to Reduce at Inderes; PT 5.50 euros
* RSA Cut to Hold at Peel Hunt (+)
* Sonova’s Sennheiser Deal Is Positive, Fair Price Paid: Vontobel (+)
* TAG Immobilien Cut to Hold at SocGen; PT 28 euros
* Takkt Cut to Hold at LBBW; PT 14.20 euros
* Veidekke Cut to Hold at SEB Equities; PT 130 kroner
* Veidekke Cut to Hold at Handelsbanken; PT 130 kroner

>>> Initiation
* Desenio Group Rated New Buy at Carnegie; PT 120 kronor
* FDJ Rated New Equal-Weight at Morgan Stanley; PT 43 euros
* Genmab Reinstated Buy at Deutsche Bank; PT 2,750 kroner
* Hill & Smith Rated New Buy at Jefferies; PT 1,750 pence
* Nimbus Group Rated New Hold at Carnegie; PT 64 kronor
* Pierce Group Rated New Hold at Carnegie; PT 90 kronor
* Rational Rated New Underperform at Oddo BHF; PT 585 euros
* THG PLC Rated New Outperform at Davy
* TT Electronics Rated New Overweight at Barclays; PT 280 pence
* Wickes Group Rated New Buy at Citi; PT 282 pence

>>> Call
* Adidas Results Seen Well Received After Recent Weakness: RBC (+)
* Amadeus Results in Line, Volumes Increasing: Jefferies (+)
* BMW’s 1Q Has ‘High Quality in the Details,’ Jefferies Says (+)
* Credit Agricole Reports ‘Good Set of Results,’ RBC Says (+)
* Deutsche Bank’s Momentum Undervalued, Morgan Stanley Upgrades (+)
* Enel 1Q a ‘Mixed Bag’ With Underlying Softness, Analysts Say (+)
* Intercontinental Set For Recovery, Already Priced In: Jefferies (+)
* Kone Resilience, Limited Downside Prompt MS Upgrade of Stock
* Nokia Improves Faster Than Expected, Preferred Over Ericsson: MS
* Outokumpu Cut at Deutsche Bank, Inderes Following 160% Gain (+)
* Siemens Beat-and-Raise Should Be Well-Recieved, RBC Says (+)
* SocGen Consensus Seen Rising, Jefferies Raises Street-High PT (+)
* Wickes Group Has ‘Winning Model,’ Citi Initiates With Buy Rating (+)
* S&P Earnings Calls Point to EPS Growth, Buyback Bonanza: Goldman (+)

>>> Stoxx 600 Pre-Market Indications

  • Adidas (ADS TH) +4.9%
    • Adidas Upgrades 2021 Sales Forecast
  • Galapagos (GXE TH) +2.4%
    • Galapagos 1Q Revenue Misses Estimates
  • Reckitt (3RB TH) +2.3%
  • Glaxo (GS7 TH) +2.2%
  • Infineon (IFX TH) +1.4%
  • MorphoSys (MOR TH) +1.4%
  • Rio Tinto (RIO1 TH) +1.4%
    • New Copper Record, Aperam Beat: EMEA Materials Premarket
  • Siemens (SIE TH) +1.3%
    • Siemens Raises Guidance as China-led Recovery Gains Momentum
  • Carnival Plc (POH1 TH) +1.3%
  • Deutsche Bank (DBK TH) +1.3%
    • Deutsche Bank Raised to Equal-Weight at Morgan Stanley
  • Rational (RAA TH) -1%
  • BMW (BMW TH) -1.1%
    • BMW Expects to Hit High End of Margin Goal Despite Rising Costs
  • Rolls-Royce (RRU TH) -1.4%
  • Mowi (PND TH) -1.9%