>>> Simon Properties beats by $0.03, reports revs in-line; guides FY17 FFO in-li

Simon Properties beats by $0.03, reports revs in-line; guides FY17 FFO in-line
  • Reports Q2 (Jun) funds from operations of $2.47 per share, $0.03 better than the Capital IQ Consensus of $2.44; revenues rose 3.5% year/year to $1.36 bln vs the $1.37 bln Capital IQ Consensus
    • Growth in comparable FFO per diluted share for the three months ended June 30, 2017 was 7.6%
    • Total portfolio NOI growth for the three months ended June 30, 2017 was 5.0% and was 5.3% for the six months ended June 30, 2017
  • Co issues in-line guidance for FY17, sees FFO of $11.14-11.22 vs. $11.21 Capital IQ Consensus Estimate

>>> Pandora Media: Color on Quarter --> -4.60% in Pre-Mkt @ 8.54 190k traded

Pandora Media: Color on Quarter (8.95)
  • RBC Capital Mkts lowers their P tgt to $10 from $15. Pandora posted a mixed Q2 with better than expected Revenue & EBITDA but weaker Key Metrics (Listeners, Hours, Paid Subs). Pandora lower its FY17 Revenue guide to reflect Ticketfly sale, closing of NZ/Australia ops, and a de-emphasis of Subscription revenue. Firm sees P in midst of a major product, mgmt, and strategy transition.
  • Stifel tgt cut to $12 to reflect a more modest near-term growth outlook, but maintain our Buy rating on Pandora shares. notes Pandora topped 2Q revenue / profitability forecasts but lowered the top end of its full-year revenue outlook as the co is taking a more measured approach to promoting its subscription products after rethinking its marketing strategy. Pandora confirmed the closure of its ad-supported businesses in Australia and New Zealand as the company tightens its focus on the valuable U.S. market. Pandora expects trends in its advertising business to improve in 2H:17, coinciding with its launch of (arguably long overdue) programmatic video/audio buying capabilities in 3Q/4Q.
  • FBR & Co notes Pandora is a transitional company. To that end, the 2Q17 transition was encouraging. Advertising, the new focus, delivered healthy upside. That offsets less subscription than we had assumed, as subscription is being de-emphasized.
  • Dougherty notes the strategic investment from SiriusXM (SIRI, Unrated) has led to a wholesale housecleaning of the mgmt team and likely shift in strategic direction away from On Demand and back toward the legacy Ad-supported business. It that vein, Q2 benefitted from 24% Y/Y growth in Ad RPM, which drove a revenue beat. However, the path to sustainable profitability remains clouded and until a new CEO is put in place and the strategy clarified they are going to remain on the sidelines.
  • Needham notes P reported 2Q17 revenue of $377mm, 8% above our estimate, and an Adjusted EPS loss of $0.21, much better than our Adjusted EPS loss projection of $0.31. However, it was a noisy quarter that included a $155mm write-off of goodwill and termination costs owing to of the closing of P's only 2 international markets (Australia and New Zealand) and the sale of Ticketfly. P's strategy pivots have proven very expensive for P shareholders. In 2Q17 Sirius XM purchased $480mm of Series A preferred stock, convertible into P's common shares at $10.50/share. The initial closing was for $158.6mm on June 9th, with the balance set to close in 4Q17, after regulatory approval. P sold Ticketfly to Eventbrite for $200mm ($150mm in cash plus a $50mm convertible note), that should close this month.
  • Canaccord Genuity tgt to $14 form $15; BAML tgt to $7.50

>>> Royal Caribbean beats by $0.04, reports revs in-line; guides Q3 EPS above co

Royal Caribbean beats by $0.04, reports revs in-line; guides Q3 EPS above consensus; guides FY17 EPS above consensus (113.08)
  • Reports Q2 (Jun) earnings of $1.71 per share, $0.04 better than the Capital IQ Consensus of $1.67 and above prior guidance of $1.60-1.65; revenues rose 4.3% year/year to $2.20 bln vs the $2.19 bln Capital IQ Consensus.
  • Co issues upside guidance for Q3, sees EPS of approx $3.45, excluding non-recurring items, vs. $3.30 Capital IQ Consensus Estimate.
  • Co issues upside guidance for FY17, sees EPS of approx $7.35-7.45, excluding non-recurring items, vs. $7.25 Capital IQ Consensus Estimate and vs prior guidance of $7.00-7.20.
  • "Our brands are executing beautifully, keeping the business in an exceptionally strong position...Strong close-in demand for cruise bolstered the quarter, and we see further uplift for the balance of the year, positioning us well for the Double-Double and beyond."
  • Gross Yields were up 10.2% on a Constant-Currency basis. Net Yields on a Constant-Currency basis increased 11.5%, exceeding prior guidance due to strong close-in demand driving higher pricing and occupancy.

(ZH) SocGen: "Low Vol Can Misprice High Yield By Up To 30%"

SocGen: "Low Vol Can Misprice High Yield By Up To 30%"

Yesterday it was Bank of America, today's it's SocGen's turn.
As we've repeatedly stated in the past, not a day seems to pass without some broker, investor, sellside analyst or pundit (this website certainly included) opining on i) how low the Vix has fallen, ii) how much lower it will fall, and iii) how the inevitable surge will lead to unpleasant consequences.
Today, that distinction goes to one of our favorite SocGen analysts, Andrew Lapthorne, who observes the recent run up in global stocks (the MSCI World is now higher for 8 months in a row, its best run since 2003 and 4th longest monthly winning streak on record), and points out that "these long positive runs are not actually harbingers of impending doom; of the five winning runs over seven months or more for MSCI World since 1969, returns were still positive a year later. So there is little to fear from a run of gains per se."
It's not all rainbows and unicorns though, because as Lapthorne points out, such ‘winning' streaks help suppress risks, while volatility, implied or realised - for whatever reason remains very low. As the chart below shows, realised 60-day volatility on both the index and at the individual stock level is bouncing around its historical lows. Realised volatility is 40% lower than its historical average, while volatility on average stocks is significantly lower than it has been historically. Asset price confidence, Lapthorne says, is therefore at record highs.
"So why does all this matter", the SocGen strategist asks rhetorically, and answers:


Well again, low price volatility in itself does not predict much, but it can create mispricing. In particular, high confidence as to what an asset is worth can lead to underestimating the potential downside risks, which happens almost mechanically in high yield debt markets where asset volatility informs part of the pricing model. The implication is that high yield credit could be 30%+ mispriced as and when volatility moves back to average.
Meanwhile, headwinds are emerging, most notably in Europe where the common currency has continued its strong move upwards, rising a further 3.4% during July, leaving the currency 12% higher this year. This is good news for owners of euro-denominated assets but harder for euro-based investors who have seen the MSCI World decline 5% from its end-March high. According to SocGen, the strong euro is yet to really impact the latest earnings season, though it should be "manna from heaven" for US companies with overseas earnings.


Still, it is starting to be factored in price-wise - Germany was a notable decliner during July, with the DAX30 now down c. 6% from its recent peak 30 trading days ago.
In retrospect, if this is the most severe warning that one of the market's most prominent skeptics can muster, it is perhaps not surprising why everyone is now officially rushing into stocks, and as Schwab reported on its latest conference call, "new accounts are at levels we have not seen since the Internet boom of the late 1990s, up 34% over the first half of last year... cash levels for our clients had fallen to about 11.5% of assets overall, now, that's a level that we've only seen one time since the market began its recovery in the spring of 2009."
Perhaps the old saying that it is only when nobody can see any risks, that the real risks emerge, will be proven true once again...

FT : Noble Group: third degree treatment

Noble Group: third degree treatment
The valuation of illiquid assets adds to the trading group’s woes

Investors are accustomed to the valuation problems exotic derivatives create in banks. It comes as more of a shock to find traders of commodities such as oil or iron, burdened with positions that are hard — some would say impossible — to value. Last week, Singapore’s Noble Group announced losses of $1.7bn for the second quarter and attributed the majority to impairments and reserves for so-called “Level 2 and Level 3” assets.

Simplistically, Level 1 assets have market prices, the worth of Level 2 assets can be extrapolated from those, while valuing Level 3 assets involves heavy guesswork. After the crisis, big banks had to add capital for Level 3 assets — or dump them. JPMorgan, for example, reduced Level 3 assets by four-fifths to $24bn in six years to the end of 2016. They now account for just 3.7 per cent of the bank’s total assets at fair values. The proportion at Noble was a quarter.

Last week’s loss included provisions for all $660m of its Level 3 assets. Critics have pointed to Noble’s accumulation of profits on commodity-based contracts in the five years to 2014. During that time, the company booked non-cash fair value gains of $4.6bn. Yet cumulative net income in the period was only $2.4bn. That may be because of large cash losses elsewhere. Another explanation could be that the non-cash gains were offset by losses on “readily marketable inventory”, as physical commodity stockpiles are known.

Cash outflows were a cumulative $1.5bn between 2009 and 2014. These were financed in part with new borrowings. Net debt was $2.7bn in March. Noble aims to cut that via the sale of the rest of its North American gas and power business. Moody’s says the group had $1.2bn of cash in March, but faces $2.1bn in debt maturity over 12 months.

The shares have fallen 96 per cent since 2014. Noble’s accounts are unclear and its finances are messy. Investments in Level 3 assets are implicated in the group’s problems. Regulation has reduced the financial complexity of banks only for it to balloon elsewhere. Noble is unlikely to be the last non-bank to struggle with the resulting woes.

>>> Sprint beats by $0.10, reports revs in-line; raises profit guidance (7.98)

Sprint beats by $0.10, reports revs in-line; raises profit guidance (7.98)
  • Reports Q1 (Jun) earnings of $0.05 per share, $0.10 better than the Capital IQ Consensus of ($0.05); revenues rose 1.8% year/year to $8.16 bln vs the $8.14 bln Capital IQ Consensus, its fourth consecutive quarter of year-over-year growth, and 88,000 postpaid phone net additions, its eighth consecutive quarter of net additions. Postpaid phone gross additions also grew year-over-year for the sixth consecutive quarter and were the highest first-quarter result in five years. "Sprint reached an important milestone this quarter by returning to profitability for the first time in three years," said Sprint CEO Marcelo Claure. "This represents the progress of a turnaround journey that has delivered improvements in postpaid phone and prepaid customer growth, a return to top-line growth, and a significantly transformed cost structure."
  • Sprint continued to make progress on its multiyear plan to transform the way it does business and improve its cost structure. The company delivered nearly $370 million of combined year-over-year reductions in cost of services and SG&A expenses in the quarter, bringing the total reduction during the last nine quarters to nearly $4 billion. The ongoing cost-reduction program contributed to a return to profitability this quarter, as the company reported net income for the first time in three years. Excluding the after-tax benefit of non-recurring items in the quarter, Sprint would have reported net income of more than $150 million, demonstrating the improved underlying trends of the business. Sprint expects an additional $1.3 billion to $1.5 billion of year-over-year net reductions in cost of services and SG&A expenses in fiscal year 2017. Although the gross reductions are expected to be higher, the company plans to reinvest some of the savings into future growth initiatives.
  • The company is increasing the low end of its previous Adjusted EBITDA* expectations and now expects $10.8 billion to $11.2 billion for fiscal year 2017. The previous expectation was $10.7 billion to $11.2 billion. The company is increasing the low end of its previous operating income expectations and now expects operating income of $2.1 billion to $2.5 billion. The previous expectation was $2 billion to $2.5 billion. The company continues to expect cash capital expenditures, excluding devices leased through indirect channels, of $3.5 billion to $4 billion.

>>> Mosaic beats by $0.06, reports revs in-line (24.14)

Mosaic beats by $0.06, reports revs in-line (24.14)
  • Reports Q2 (Jun) earnings of $0.29 per share, excluding $0.01 in non-recurring items, $0.06 better than the Capital IQ Consensus of $0.23; revenues rose 4.7% year/year to $1.75 bln vs the $1.75 bln Capital IQ Consensus.
  • Guidance: Total sales volumes for the Phosphates segment are expected to range from 2.2 to 2.5 mln tonnes for the third quarter of 2017, compared to 2.5 mln tonnes last year. Total sales volumes for the Potash segment are expected to range from 1.9 to 2.2 mln tonnes for the third quarter of 2017, compared to 2.2 mln tonnes last year. For calendar 2017, Mosaic now expects: Canadian resource taxes to range from $90 to $110 mln, narrowed from previous guidance of $85 to $135 mln. Brine management costs to range from $150 to $160 mln, down from $160 to $180 mln. Capital expenditures in the range of $800 to $850 mln down from a range of $800 to $900 mln. Potash sales volumes in the range of 8.1 to 8.6 mln tonnes, narrowed from 8.0 to 8.75 mln tonnes. Phosphates sales volumes in the range of 9.5 to 10 mln tonnes, narrowed from 9.5 to 10.25 mln tonnes. International Distribution sales volumes in the range of 6.75 to 7.25 mln tonnes, down from 7.0 to 7.5 mln tonnes.

>>> Emerson reports EPS in-line, beats on revs; raises FY17 guidance (59.61)

Emerson reports EPS in-line, beats on revs; raises FY17 guidance (59.61)
  • Reports Q3 (Jun) earnings of $0.68 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.68; revenues rose 9.9% year/year to $4.04 bln vs the $3.99 bln Capital IQ Consensus.
  • Pretax margin of 15.4 percent and EBIT margin of 16.3 percent decreased 240 and 280 basis points, respectively, driven by dilution from the Valves & Controls acquisition. Excluding Valves & Controls, total segment margin increased 80 basis points to 20.9 percent.
  • Co raises guidance for FY17, sees EPS of $2.58-2.62 (Prior $2.50-2.60), excluding non-recurring items, vs. $2.60 Capital IQ Consensus Estimate; Full-year net sales are expected to be up approximately 5 percent, with underlying sales up 1 percent excluding an impact from acquisitions of 4 percent.