>>> Teva Pharma beats by $0.02, misses on revs; reaffirms FY19 EPS, revs guidanc

Teva Pharma beats by $0.02, misses on revs; reaffirms FY19 EPS, revs guidance (15.23)
  • Reports Q1 (Mar) earnings of $0.60 per share, excluding non-recurring items, $0.02 better than the S&P Capital IQ Consensus of $0.58; revenues fell 15.2% year/year to $4.29 bln vs the $4.38 bln S&P Capital IQ Consensus.
    • Revenues decreased 15%, or 12% in local currency terms, compared to the first quarter of 2018, mainly due to generic competition to COPAXONE and a decline in revenues from the co's respiratory products and U.S. generics business.
  • "We faced the expected loss of exclusivities of key products COPAXONE® and ProAir® to generic competition. Our focus is on stabilizing our global generics business and ensuring the success of our long-term organic growth drivers, especially AJOVY® and AUSTEDO®. Both products continue to gain momentum since their initial launches and we are making the necessary investments to be able to bring them to markets outside of the U.S. as well as explore additional indications."
  • EBITDA (non-GAAP operating income, which excludes amortization and certain other items, as well as depreciation expenses) was $1,154 million in the first quarter of 2019, a decrease of 27% compared to $1,587 million in the first quarter of 2018.
  • Co reaffirms guidance for FY19, sees EPS of $2.20-2.50, excluding non-recurring items, vs. $2.40 S&P Capital IQ Consensus; sees FY19 revs of $17-17.4 bln vs. $17.31 bln S&P Capital IQ Consensus

>>> Under Armour beats by $0.05, beats on revs; guides FY19 EPS in-line, reaffir

Under Armour beats by $0.05, beats on revs; guides FY19 EPS in-line, reaffirms FY 19 revs guidance (22.04)
  • Reports Q1 (Mar) earnings of $0.05 per share, $0.05 better than the S&P Capital IQ Consensus of ($0.00); revenues rose 1.6% year/year to $1.2 bln vs the $1.18 bln S&P Capital IQ Consensus.
    • Wholesale revenue increased 5 percent to $818 million and direct-to-consumer revenue was down 6 percent to $331 million, representing 27 percent of total revenue.
    • North America revenue decreased 3 percent to $843 million and the international business increased 12 percent to $328 million (up 17 percent currency neutral), representing 27 percent of total revenue.
    • Gross margin increased 100 basis points to 45.2 percent compared to the prior year driven by product cost improvements, regional mix and prior period restructuring charges, offset by channel mix.
  • Co issues in-line guidance for FY19, sees EPS of $0.33-0.34 vs. $0.34 S&P Capital IQ Consensus.
    • Previous EPS guidance of $0.31-0.33
    • Revenue is expected to be up approximately 3 to 4 percent reflecting relatively flat results for North America and a low double-digit percentage rate increase in the international business.
    • Gross margin is now expected to increase approximately 110 to 130 basis points compared to 2018

>>> US Early premarket gappers

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WSJ : A Case for Lower Rates Still Lurks

A Case for Lower Rates Still Lurks
Innovation could depress inflation pressure, driving the Fed to pursue faster growth

Inflation can fall for many reasons, not all of which call for lower interest rates.

The Federal Reserve has concluded the latest drop doesn’t qualify because it reflects transient, technical factors.

Yet many similarly transient, technical factors could be lying in wait as inflation starts to reflect new technology, business models and statistical methods. If that happens, the case for lowering rates could become overwhelming.

So-called core inflation, as measured by the price index of personal-consumption expenditures excluding food and energy, plummeted to 1.6% in March from 2% in December, surprising the Fed and most economists.

Three broad forces usually explain inflation trends. One is spare economic capacity: Higher unemployment and weaker spending put downward pressure on wages and prices. A second is inflation expectations: If people expect prices to always rise 2%, they will set wages and prices accordingly and those expectations becomes self-fulfilling. A third includes random factors such as swings in commodity prices and measurement changes.

Slack hardly seems to explain this latest drop. In the first quarter, growth picked up to a 3.2% annual rate, job growth remained solid and stock markets, after a fourth-quarter swoon, hit new highs. This hardly suggests inflation fell because Fed policy was too tight.

Fed Chairman Jerome Powell on Wednesday blamed the miss on transient factors. Last year’s stock swoon translated into lower fund-management fees, while lower fuel prices dragged down airfares and new statistical methods slashed apparel prices. The first two factors are likely to reverse, and the third won’t be repeated. Thus, the Fed remains confident inflation will return to 2%. Private forecasters see that happening by next year.

The problem with this rationale is that these are only the latest of several such transient, technical surprises, all of which go in the same direction: downward. In 2017, cellphone-plan prices fell sharply because the Bureau of Labor Statistics revamped how it measures the plans’ quality and carriers began offering unlimited data. Prescription-drug prices also plummeted. Indeed, overall health care has become a less persistent source of inflation pressure, which might reflect restraint on government payments and the Food and Drug Administration’s stepped-up generic-drug approvals.

Arguably, these represent positive “supply side” shocks: Businesses and government have found ways to deliver the same, or better, products at a lower price.

They are unlikely to be the last. Spencer Hill, an economist at Goldman Sachs, notes federal statistical agencies are seeking to better measure quality in the price of health care, such as treating specific diseases, which could exercise a large impact given health care’s significant weight in consumer spending.

He also notes the agencies plan to broaden the sources of price data for airfares, gasoline, new vehicles, home telephone service, wireless phones and medical services over the next three years. In principle, that need not raise or lower inflation. Yet in March, the adoption of a new data source led to a sizable drop in clothing prices.

If this simply reflects the statistics catching up with reality, inflation won’t necessarily remain low, so the Fed need not alter its policy. But it might be the early signs of an innovation-driven supply-side upswing, in which innovation leads to less inflation pressure and higher output—as happened during the 1990s dot-com boom.

This is a far more pleasant reason for inflation to drop than plunging demand. Yet the Fed cannot ignore it. If repeated supply-side surprises keep inflation below 2%, expected inflation will also eventually slip. This makes it harder for the Fed to get inflation back to 2%. It might thus need to lower interest rates so that growth speeds up, unemployment falls further and inflation returns to target.

FT : Elliott’s $718m claim against South Korea poses risk for Moon Hedge fund se

Elliott’s $718m claim against South Korea poses risk for Moon
Hedge fund seeks compensation over Seoul’s intervention in Samsung C&T-Cheil merger

Elliott Management has detailed its $718m claim against South Korea over losses from the 2015 merger of two Samsung units in a case that returns to the spotlight allegations of the cosy relationship between the chaebol, the country’s powerful conglomerates, and the government in Seoul.

The US activist hedge fund and the South Korean government are locked in what is expected to be a years-long arbitration over the fund’s damages claim stemming from the former administration’s intervention in an $8bn deal to merge Samsung C&T and Cheil Industries.

According to the 149-page statement of claims, submitted to the Permanent Court of Arbitration in The Hague and seen by the Financial Times, Elliott has sought damages of $581.3m and, as at the end of March, a further $136.7m in interest.

The claims relate to the political and business scandal that gripped South Korea after erupting in 2016 and sparked a series of trials that led to prison sentences handed down to former president Park Geun-hye, Samsung vice-chairman Lee Jae-yong and former health minister and chair of the National Pension Service Moon Hyung-pyo, among others.

But the arbitration proceedings, launched last year and expected to run for about two more years, now threaten to entangle President Moon Jae-in’s administration, despite Mr Moon’s sweeping anti-corruption drive since taking office in 2017.

According to people with close knowledge of the case, officials in Seoul have in recent weeks sought to limit what information in Elliott’s statement could be made public, a move, they say, that highlights sensitivity about the case within the Moon administration.

South Korea’s justice ministry did not immediately respond to questions.

“The Moon administration has been fighting to redact as much of [Elliott’s statement of claims] as possible, to prevent the Korean public from looking at the facts,” a person familiar with the case said.

“There is a general belief that everything that can be said about [the scandal] probably has been said about it . . . but the arbitration is bringing a number of new issues to the forefront,” the person added. 

The final version released by the court on Thursday omits the names of the president, senior officials and Samsung executives, but retains their titles, meaning they are still easily identifiable.

In the statement, billionaire Paul Singer’s New York fund details claims of a multi-layered process whereby government officials acted to ensure the state-owned National Pension Service, a key Samsung shareholder, approved the merger that was opposed by Elliott. 

The events, Elliott claims, saw interventions by former president Park, the presidential office, known as the Blue House, the health ministry and the NPS, and were the result of corruption and bias in favour of “a domestic corporate chaebol family over an unpopular foreign investor”.

The statement draws on witnesses in attendance at the numerous court hearings related to the scandal and sheds new light on the role played by Park’s longtime confidante Choi Soon-sil, who has also been jailed, and high-ranking government officials.

Another person familiar with the case said that while many aspects of the scandal had previously been reported as speculation, the Elliott statement “pulls all the pieces together”.

The court-filed claim “for the first time paints the full picture of how Samsung and the government were working together to corruptly and improperly effectuate the 2015 merger of Cheil and Samsung C&T, over the objections of Elliott and other shareholders, by pressuring the National Pension Service to cast the deciding vote in the merger”, the person said.

The arbitration proceedings come against a backdrop of a slowing South Korean economy, with the country’s major technology exporters hit by slowing global growth and the US-China trade war.

Lee Won-il, head of Zebra Investment Management, a hedge fund, said that given the country’s economic dependence on the chaebol, the Moon administration could no longer be seen politically as positioned against companies such as Samsung.

“The Moon government will take a patriotic stance for the time being. Koreans are taking [the case] as a matter of ‘us or them’,” said Mr Lee.

WSJ : Tighter Iranian Oil Sanctions Set Stage for U.S.-Saudi Showdown Kingdom pl

Tighter Iranian Oil Sanctions Set Stage for U.S.-Saudi Showdown
Kingdom plays down need to increase output as Washington’s new curbs take hold

Saudi Arabia has pledged to boost oil output if needed, as the Trump administration starts banning all Iran oil exports on Thursday.

But behind the scenes, Riyadh and Washington face a potentially weekslong showdown over the number of extra barrels the kingdom would supply to global markets to keep crude prices stable.

The U.S. is pushing to restart production in a field shared by the kingdom and Kuwait that could unlock half a million barrels a day, people familiar with the matter said.

But at the same time, Saudi Arabia—in need of higher oil prices to keep its state budget balanced—is lobbying within the Organization of the Petroleum Exporting Countries to change the way the cartel calculates whether the market is adequately supplied as a way to show the U.S. that no more oil is needed, people familiar with the matter said.

The Trump administration on April 22 said it would end the exemptions it granted to Iran’s oil buyers, aiming to bring its exports to zero.

The move comes after oil prices posted their strongest first quarter in decades, rising about 30%. Oil prices hit a six-month high last week as the U.S. manages an embargo on Venezuelan oil shipments and a rebel general’s offensive in Libya risks jeopardizing that country’s production.

Saudi Arabia is set to debate with other producers how much extra oil it should pump at a technical meeting in its economic capital Jeddah on May 19. But by hosting the gathering, “they fear Trump will be fixated by the meeting,” a person familiar with the kingdom’s thinking said.

Seeking new oil sources to avoid tensions in the market, State Department officials have prodded Saudi Arabia and Kuwait to resolve a dispute with Saudi Arabia over the jointly held oil field in the so-called Partitioned Neutral Zone, an area that straddles onshore and offshore fields to the north of the Persian Gulf, as a way to boost global supplies.

Three years ago, the countries shut the field, citing disputes about land and environmental permits.

The return of production there would help ease oil prices, as it would add to existing production potential rather than drawing down on spare capacity.

The countries have struggled to reach an understanding, however. A summit in September between Saudi Crown Prince Mohammed Bin Salman and Kuwaiti ruler Sheikh Sabah Al Ahmad Al Sabah ended in bitterness, people familiar with the matter said.

At stake is whether Saudi Arabia will act on its late-April commitment to boost output when needed. In a tweet on Friday, President Trump said he “spoke to Saudi Arabia and others about increasing oil flow. All are in agreement.” Saudi Arabia is set to increase output, a person familiar with its policies said, but has made no promises specifying how much extra oil it could bring to markets and when.

Saudi Arabia’s production will remain below 10 million barrels a day until at least the end of May, Saudi Energy Minister Khalid al-Falih told Russian state news agency RIA Novosti last week.

Any decision on future production would depend on oil “stocks—whether they are above normal levels or below,” Mr. Falih told RIA Novosti.


Meanwhile, the Saudi energy minister is trying to change the measurement of those stock levels to justify maintaining most of OPEC’s current production curbs, people familiar with the matter said. Saudi representatives at OPEC have “returned to their antics on metrics to evaluate market balance,” one of these people said.

OPEC currently uses a five-year average of oil inventories in industrialized nations to determine if it needs to cut its production.

In November 2016, the cartel decided to reduce output by 1.2 million barrels a day after estimating inventories had surpassed their optimal level by 271 million barrels. The surplus has now shrunk to 7.5 million barrels—putting the market virtually in balance.

The Saudis are reluctant to boost production again as they seek higher prices. They need the revenue to cover domestic spending that includes a generous welfare state and a war in Yemen. After Washington said it would end exemptions on Iran’s oil exports, prices recently rose to $75 a barrel—nearing the $80 a barrel the kingdom’s economists say will cover most of its spending.

The need for higher prices prompted the kingdom to reignite an OPEC debate over the accuracy of its market measurements, according to OPEC officials said. The Saudis “have been desperately trying to play down or even discredit the five-year-average” metric, the officials said.

Last June, Mr. Falih, the Saudi energy minister, failed to persuade fellow members to shorten the average period of reference OPEC uses. This would have made it easier to justify production cuts as the new time frame would have included lower oil stocks. Now, as the Trump administration asks Saudi Arabia to replace Iranian oil, Mr. Falih is making another push to lower the bar on OPEC’s glut measurement.

Mr. Trump “may be disappointed if he wants to another surge of one million barrels a day,” said Helima Croft, chief commodities strategist at Canadian broker RBC Capital.

WSJ : In College Admissions Scandal, Family Paid $6.5 Million to Get Their Daugh

In College Admissions Scandal, Family Paid $6.5 Million to Get Their Daughter Into Stanford
Family from China met college counselor William ‘Rick’ Singer through a Morgan Stanley employee

The family of a Chinese student paid a college counselor $6.5 million for help securing a spot at Stanford University after being connected to the counselor by a Morgan Stanley financial adviser, a person familiar with the matter said.

The involvement of Morgan Stanley illustrates how William “Rick” Singer, the Newport Beach, Calif., college consultant who has admitted to masterminding the college-admissions cheating scheme, infiltrated wealthy networks to pitch his services.

Morgan Stanley said it fired Michael Wu, the Pasadena, Calif.,-based adviser, for not cooperating with the company’s internal investigation into the college-admissions matter. The company said it is cooperating with authorities. Mr. Wu didn’t respond to phone messages seeking comment.

The $6.5 million payment to the college counselor has been of particular interest since it was the highest payment cited by the U.S. Attorney’s Office in Massachusetts when prosecutors made public the admissions-fraud case in March. The family who made the payment hasn’t been charged in the case.

Chinese families were among Mr. Singer’s alleged top clients. Another Chinese family paid him $1.2 million for help getting a young woman into Yale University, connecting with Mr. Singer through an employee at Oppenheimer & Co.’s Summa Group.

Prominent financial firms helped give Mr. Singer credibility by bringing him in to speak at employee and client events, or referring him to existing or potential clients. Affluent families rely on the firms for guidance not only on managing wealth, but also on related issues like college planning and philanthropy.

Morgan Stanley’s website previously listed Mr. Wu as being a managing director and international client adviser.

Morgan Stanley has said it at one time included Mr. Singer’s college-counseling business on its list of referral organizations. A person familiar with the referral arrangement said referrals could be passed to clients, and that Mr. Singer’s company was off the list after 2015. Mr. Singer could have maintained contact with some Morgan Stanley employees after he was no longer an official referral, the person said.

In March, federal authorities charged 50 people, including 33 parents, for their involvement in a sprawling college admissions cheating scheme directed by Mr. Singer, who admitted to fraudulently boosting teens’ college-entrance exam scores or paying college coaches to designate the children as recruited athletes, all but guaranteeing their admission to the elite schools. Twenty people have pleaded guilty or agreed to plead guilty.

In the matter of the woman admitted to Yale, Oppenheimer said an employee met her father socially and served as a translator, an activity outside her Oppenheimer job. During that activity, the firm said, the father sought a recommendation for a college counselor. Oppenheimer said the employee introduced the family to Mr. Singer. The firm said the family has never been a client of the firm. Mr. Singer was a board member of Summa’s philanthropic foundation as recently as January, according to the charity’s website.

Prosecutors have said their investigation into college admissions-fraud continues. They traveled to Los Angeles in April, according to a court filing. Assistant U.S. Attorney Eric Rosen said the government’s evidence included emails referencing some parents who haven’t been named, including “some who plotted with Singer and withdrew for a variety of reasons.”

The woman admitted to Stanford got in after her family paid Mr. Singer $6.5 million in 2017, according to the person familiar with the matter.

Mr. Rosen was referring to her when he said in court in March, according to this person, that Mr. Singer brought an applicant to then-Stanford’s sailing coach and created a falsified sailing athletic profile for the prospective student.

“This candidate was ultimately accepted to Stanford partly due to the fact that she had fabricated sailing credentials,” Mr. Rosen said.


After she was admitted, Mr. Rosen said, Mr. Singer paid the then-sailing coach $500,000 from his Key Worldwide Foundation charity, which was sent to the Stanford Sailing Program. A Stanford spokesman said the payment came months after the student was admitted, and the school received a total of $770,000 from the charity.

Stanford has said that it rescinded the admission of one student this spring after determining some material on that student’s application was false. The student hadn’t received recommendations from any athletic coaches and wasn’t affiliated with the sailing team. It didn’t name the individual. A Stanford spokesman declined to identify the student, citing federal privacy laws, or comment further on the case.

The school said it came across the student after conducting a review of people potentially tied to Mr. Singer’s scheme. Stanford’s former sailing coach, John Vandemoer, has pleaded guilty to racketeering conspiracy and admitted to taking bribes in exchange for giving athletic recommendations to two other applicants. Neither of those applicants attended the school. Mr. Vandemoer has been fired from Stanford.

WSJ :Qualcomm to Get at Least $4.5 Billion in Apple Settlement Payment is one pa

Qualcomm to Get at Least $4.5 Billion in Apple Settlement
Payment is one part of three-pronged deal between the companies last month

 Qualcomm Inc. will receive at least $4.5 billion as part of a legal settlement with Apple Inc. that ended more than two years of wrangling over the chip maker’s patent-licensing fees, the company said Wednesday.

The payment—part of a three-pronged settlement between the companies last month—would range from $4.5 billion to $4.7 billion, based on how the accounting ultimately works out, Qualcomm Chief Executive Steve Mollenkopf said in an interview with The Wall Street Journal.

The payment was a crucial element of a deal with Apple that settled a dispute threatening to upend Qualcomm’s business model, which combines a chip-making arm and a patent-licensing division that collects royalties from companies that use its technology. The payment also was to settle prior disputes with Apple’s contract manufacturers, a group of largely Taiwan-based companies that build iPhones, Qualcomm said.

In forging the agreement, the companies settled on a six-year licensing deal and a multiyear agreement for Qualcomm to supply Apple with modem chips—tiny wafers of silicon that handle communications with cell towers.

Qualcomm got another piece of good news right after the agreement, when Apple’s current modem supplier, Intel Corp. , suddenly said it would bow out of the race to make 5G modems—something Mr. Mollenkopf said he hadn’t expected.

“We really were surprised by that as much as anybody else,” he said. “We really focus on what we can control, and as you know, this is probably the most competitive chip industry in the world and everyone’s trying to get a piece.”

Resolving the dispute with Apple bought Qualcomm goodwill with investors, who sent its shares soaring by more than 50% in the agreement’s aftermath. But the chip maker’s fiscal second-quarter results, despite coming in ahead of what Wall Street analysts had expected, included a revenue decline and a gloomy outlook for its cellular phone system-on-chip business.

Qualcomm estimated it would ship between 150 million and 170 million of those chips in its third quarter, a decrease of as much as 25% compared with the same period last year. Analysts had expected almost 180 million chip shipments for the period, according to a FactSet survey.

During their call with analysts, Qualcomm executives blamed the dimmer outlook on economic weakness in China and a slower-than-expected rollout of next-generation wireless technology. They said, however, that the introduction of 5G networks was now proceeding quickly after a pause, and that would boost Qualcomm’s overall business in the future.

Qualcomm’s stock, which inched higher to $86.37 during 4 p.m. ET trading, pitched lower by more than 4% after the results were announced. But the shares came back a bit, recently down about 3.4%.

For the second quarter, Qualcomm reported $4.88 billion in adjusted revenue, compared with the $4.8 billion analysts surveyed by FactSet had expected. Total revenue came to $4.98 billion, down 4.6% from the same period a year ago.

Net income more than doubled to $663 million. Qualcomm said adjusted profit came to 77 cents a share, compared with the 71 cents analysts had projected.

With the addition of revenue from the Apple settlement, Qualcomm expects revenue in the current third quarter to jump to between $9.2 billion to $10.2 billion. In the same quarter a year ago, total revenue was $5.6 billion.

The deal opens the door for Apple to add next-generation cellular technology to future phones via Qualcomm, which already produces 5G modems for Android phones. Most analysts don’t expect Apple to introduce a 5G phone until 2020.

Before the agreement, investors and analysts had worried courts might effectively outlaw Qualcomm’s unique setup, combining an arm that produces and sells advanced chips for mobile phones with one that makes money by selling access to its intellectual property.

The burden of that uncertainty mostly has been lifted. Qualcomm still faces one major source of uncertainty: a lawsuit by the Federal Trade Commission that went to trial in January, alleging the company’s practice of refusing to supply chips to customers who didn’t have licenses for its patents gave it unfair leverage to get better licensing terms. A decision there could come at any moment.

Mr. Mollenkopf said discussions with the FTC were ongoing, but wouldn’t say whether it was closing in on a resolution.

While the scale of the Apple settlement’s financial impact isn’t yet clear, Qualcomm said last month it would eventually add $2 to its annual per-share earnings, as the licensing agreement brought in fresh cash and the chip-supply deal ramped up. None of that impact showed up in the second-quarter results.