After Hours Summary: FIVE +8%, PVH +7%, MLHR +5% higher following earnings, PENN +4% on S&P600 addition news, CPB +1% on buyback news... DX -7% on dividend cutAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: FIVE +8%, PVH +7%, MLHR +5%, CTAS +0.8%
Companies trading higher in after hours in reaction to news: HTGM +58.4% (obtains CE marking in the European Union for its HTG EdgeSeq ALKPlus Assay EU), DRWI +40.7% (announced the selection of the Harmony Enhanced MC backhaul solution by Corridor Communication), BEBE +9.8% (says exploring strategic alternatives), PENN +4.1% (will replace Cynosure in the S&P SmallCap 600), PRKR +2.2% (seeing continued strength in afterhours - confirms will report financial results on March 30), VNCE +2.1% (following late move higher), CPB +1.1% (announces $1.5 bln share repurchase program), VFC +0.6% (following PVH earnings)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: KDMN -10.7%
Companies trading lower in after hours in reaction to news: HTBX -13.5% (intends to offer for sale shares of its common stock in an underwritten public offering), DX -6.7% (reduces quarterly dividend), RARE -5.9% (announces topline data from the Phase 2 study of UX007 in glucose transporter type-1 deficiency syndrome patients with seizures; study did not meet the primary endpoint), KEM -5.1% (still checking), SHLD -5.1% (continued weakness), BLCM -4.7% (commences an underwritten public offering of 5,000,000 shares of its common stock), ENPH -3.2% (files for approx 12 mln share common stock offering by selling shareholder), CHMI -2.2% (commences 4.5 mln common stock offering),
The Senate could take the first step tonight to kill the FCC’s privacy rules
Sources say lawmakers could hold the first of two votes to kill the Obama administration’s protections.
Congress could take its first step as soon as Wednesday toward gutting the tough privacy rules imposed on Internet providers like AT&T, Comcast and Verizon last year during the Obama administration.
In October, the Federal Communications Commission — then under former Democratic Chairman Tom Wheeler — began mandating that ISPs obtain consumers’ permission before turning over their private data to third parties, like advertisers.
Internet providers obviously loathed the rules, lambasting them as unfair and burdensome — and Republicans in Congress have heard their cries. To that end, the Senate could try to hammer the first nail in the coffin with a vote Wednesday evening on the measure, called a resolution of disapproval, that would overturn the FCC’s privacy order, according to two sources familiar with the plan.
A spokesman for Sen. Jeff Flake, one of the lawmakers who spearheaded the effort, confirmed the hope is to advance it this evening. A spokesman for Senate Majority Leader Mitch McConnell declined to comment.
As always in the Senate, schedules can change. But if lawmakers there prevail — along with another, expected successful vote in the House in the coming weeks — the FCC’s privacy rules would be officially wiped from the books.
An end to the FCC’s efforts would amount to a major victory for the telecom industry — not the least because it would allow companies hungry for new revenue streams to gather and monetize more customer data. That includes the likes of Verizon, which sought to buy Yahoo (that cyber attack notwithstanding) to take advantage of the web company’s data and ad tools.
That’s why the leading trade groups for those telecom companies, like CTIA, which represents wireless firms, and U.S. Telecom, which works on behalf of the broader industry, wrote Congress in January, asking them to kill the FCC’s privacy rules. New FCC Chairman Ajit Pai also opposes the order and voted against it last year.
Consumer protections advocates, however, long have stressed that the FCC’s privacy rules are increasingly necessary. The Electronic Frontier Foundation, for example, said in February that Republicans’ efforts could “result in years of your private information being at the complete mercy of cable and telephone companies who would face no federal repercussions from monetizing and reselling your personal information without your permission and without your knowledge.”
Pay up or grandma’s photos of her grandkids are toast.
That’s the threat being laid down by a hacker or hackers who claim to have access to as many as 300 million iCloud and Apple email accounts.
The hackers, who call themselves “Turkish Crime Family,” want Apple to pay a ransom of $75,000 to $100,000 in exchange for not deleting the contents of the accounts.
“I just want my money and thought this would be an interesting report that a lot of Apple customers would be interested in reading and hearing,” one of the hackers told Motherboard, the Vice Media online magazine.
So far, Apple has told the hackers to take a hike — telling them in an email seen by Motherboard that the Cupertino, Calif., company does not “reward cyber criminals for breaking the law.”
The hackers are threatening to hit delete on April 7.
The group doesn’t want the ransom in good old American greenbacks — perhaps knowing it would be too easy to trace.
They want either $75,000 in bitcoin or ethereum, another increasingly popular crypto-currency, or $100,000 worth of iTunes gift cards.
To prove they actually could carry out such a hack, the group uploaded a YouTube video of them allegedly logging into some of the stolen accounts, Motherboard reported.
The hacker appears to access an elderly woman’s iCloud account, which includes backed-up photos, and the ability to remotely wipe the device.
Apple did not reply to multiple attempts by Motherboard to get comment.
Fed's Kaplan sees three rate hikes in 2017, eyes balance sheet
With the U.S. workforce nearly fully employed and inflation heading toward 2 percent, the Federal Reserve should raise interest rates two more times this year and continue work on a plan to gradually trim its massive balance sheet, Dallas Federal Reserve Bank President Robert Kaplan said.
"I think we are moving toward a period where we should begin allowing the balance sheet to gradually and patiently run off," said Kaplan, a voter this year on the Fed's policy-setting panel, in an interview with Reuters late Tuesday. "But I think we have work to do, probably, to get to that point."
By "work to do," Kaplan was referring to further interest-rate hikes. Kaplan supported last week's interest-rate increase, only the Fed's third since the financial crisis, and said Tuesday the "country will be well-served" by the decision.
"Now that we’ve done it, I think that we’ve got the benefit of a little time here to see how the economy unfolds," he said. "I plan to take advantage of that to assess how the economy is unfolding and be prepared to make a judgment as we head toward the next meetings."
Over a Dr. Pepper and bagel after a morning of meetings at the San Francisco Fed, Kaplan reiterated his view that two more rate hikes this year is a "reasonable" base case, as long as labor market slack continues to decline and inflation continues to rise toward the Fed's 2-percent goal.
"We are still accommodative and I think it’s very appropriate for us to be accommodative," he said. If inflation rises above the Fed's 2-percent target for a brief period, it is not going trigger faster rate hikes as long as it is not a persistent trend, he said.
Though the current rate of U.S. unemployment, at 4.7 percent, is below the level historically thought to be consistent with full employment, Kaplan said he does not believe it will generate undue upward pressure on prices.
Kaplan also said he is "mindful" that some of the policies expected under President Donald Trump's new administration, including changes to immigration and trade policies and changes to health insurance, could slow economic growth or hurt consumer spending. He and his staff have been trying to figure out why some of the latest readings on consumer spending already suggest some sluggishness, and will keep a close eye on those figures going forward.
But, he said, he will not be factoring in impacts from Trump's new policies, including those like tax reform that may boost growth, until he is pretty sure they will be enacted.
BALANCE SHEET
Last week, in addition to raising rates, the Fed discussed what to do with its $4.5 trillion balance sheet, built up after years of bond-buying aimed at stimulating investment and hiring by pushing down long-term borrowing costs.
Now that the economy is in better shape, the Fed wants to eventually trim the balance sheet to a more normal size. So far Fed Chair Janet Yellen has given few details on the plan, and has said nothing has been decided yet.
Kaplan said he believes the discussion on what to do with the balance sheet should continue throughout the year, and that once rates are a bit higher, the plan should be published and put into effect soon after.
He declined to say when that should be, but said he would like rates to be high enough that there would be little chance of rates falling back to zero any time in the near future.
Kaplan said he would favor a plan to reduce the balance sheet in a way that would not "unduly affect" financial markets. "That for me means gradually," he said, adding that reductions should be kept to a "reasonably manageable" percentage of the daily volume of trading in mortgage-backed securities and Treasuries, among other factors.
Reuters - If healthcare vote fails, would jeopardize 'Trump trades' - Gundlach - http://reut.rs/2nSD8Ue
If the U.S. healthcare legislation overhaul is not passed, or is postponed, it will put "a lot of doubt" on the "Trump trades," which include higher U.S. equities and bond yields, DoubleLine Capital Chief Executive Jeffrey Gundlach said on Wednesday.
"Surveys show that people believe the (Obamacare) repeal is the most likely part of Trump’s agenda to be passed," said Gundlach, who oversees more than $101 billion in assets at DoubleLine, told Reuters. "So if you can’t pass the repeal, everything else is in doubt for sure."
Investors have been bracing for Thursday's floor vote scheduled in the U.S. House of Representatives, with safe-haven securities including Treasuries and gold seeing price gains on Wednesday. Trump and Republican congressional leaders appeared on Wednesday to be losing the battle to get enough support to pass the Obamacare rollback bill.
Gundlach repeated his recommendation that investors would do better selling U.S. equities into any kind of stock rally and diversifying into emerging markets. He noted that the iShares MSCI Emerging Markets ETF has outperformed the Standard & Poor's Index by over 4 percentage points since early March.
Gundlach said Tuesday's stock-market slump illustrated how "investors are questioning whether the pro-growth U.S. policies are really going to happen."
PVH beats by $0.05, reports revs in-line; guides Q1 EPS and rev just above consensus; guides FY18 EPS and rev just above consensus; adds $750 mln to buyback
- Reports Q4 (Jan) earnings of $1.23 per share, excluding non-recurring items, $0.05 better than the Capital IQ Consensus of $1.18; revenues fell 0.2% year/year to $2.11 bln vs the $2.09 bln Capital IQ Consensus.
- CK rev -1%; TH rev +3%
- Co issues upside guidance for Q1, sees EPS of $1.58-1.60, excluding non-recurring items, vs. $1.56 Capital IQ Consensus Estimate; sees Q1 revs +2% to ~$1.96 bln vs. $1.92 bln Capital IQ Consensus; +4% ex-FX. Negatively impacting revenue in the first quarter of 2017 as compared to the prior year period is a reduction in revenue resulting from the Mexico deconsolidation and the G-III license, partially offset by an increase in revenue from the Tommy Hilfiger China business, which was acquired in April 2016, as the first quarter of 2017 will include a full quarter of revenue, while the first quarter of 2016 included less than one month of revenue. Revenue for the Calvin Klein business in the first quarter is projected to increase ~3% (increase ~5% on a constant currency basis), which includes the negative impact of the Mexico deconsolidation. Revenue for the Tommy Hilfiger business in the first quarter is projected to increase ~4% (increase ~8% on a constant currency basis), which includes an increase in revenue from the Tommy Hilfiger China business, partially offset by the negative impact of the G-III license. Revenue for the Heritage Brands business in the first quarter is projected to decrease ~3%.
- Co issues upside guidance for FY18, sees EPS of $7.30-7.40, excluding non-recurring items, vs. $7.26 Capital IQ Consensus Estimate; sees FY18 revs +2% to ~$8.37 bln vs. $8.35 bln Capital IQ Consensus Estimate; +4% ex-FX. Negatively impacting revenue in 2017 as compared to 2016 is a decrease due to the Mexico deconsolidation, which resulted in the Company no longer recognizing revenues from a directly operated business in Mexico, and a decrease due to the G-III license, which resulted in the discontinuation of the Company's directly operated womenswear wholesale business in the U.S. and Canada in the fourth quarter of 2016. Revenue for the Calvin Klein business is projected to increase ~5% (increase ~7% on a constant currency basis), which includes the negative impact of the Mexico deconsolidation. Revenue for the Tommy Hilfiger business is projected to increase ~1% (increase ~4% on a constant currency basis), which includes the negative impact of the G-III license. Revenue for the Heritage Brands business is projected to decrease ~1%.
- On March 21, 2017, the Board of Directors authorized a $750 million increase to the program and extended it to June 3, 2020.
- Marriot's (MAR) Amy McPherson was appointed to its Board of Directors
bebe stores says exploring strategic alternatives (3.86 +0.29)
The co announced that its Board of Directors is exploring strategic alternatives for the company. bebe has retained B. Riley & Co. as its financial advisor and has also engaged a real estate advisor to assist with options related to its lease holdings. bebe said that there is no assurance that this process will result in any specific transaction, and it does not expect to disclose further developments during this process unless and until the Board of Directors has approved a specific transaction or otherwise determined that disclosure is appropriate.
Closing Market Summary: Investors Wrangled Financials to Push Stocks Higher on WednesdayWednesday's session was full of ambiguity as investors digested the stock market's Tuesday defeat, which was the steepest decline since October. Stocks ultimately put together a decent performance, but the win didn't feel secure until the closing bell as the financial sector (-0.2%) acted in a seesaw fashion that weighed on the sentiment of the broader market. The S&P 500 (+0.2%) and the Nasdaq (+0.5%) settled with modest gains while the Dow finished flat. Meanwhile, the small-cap Russell 2000 (-0.2%) underperformed.
As they have throughout the post-election rally, most sectors looked to the financial sector for leadership on Wednesday. This resulted in the market moving in tandem with the financial group, but unlike yesterday, the top-weighted technology sector (+0.8%) watered down financials' impact. The tech group propped up the broader market at times with gains from top components like Apple (AAPL 141.42, +1.58), Microsoft (MSFT 65.03, +0.82), and Facebook (FB 139.59, +1.08). Chipmakers also contributed to the cause, pushing the PHLX Semiconductor Index 1.1% higher along the way.
The technology group's bullish sentiment was persistent; at times, the sector was one of few to trade in the green. However, the persistence paid off in the final stretch as all but the financials (-0.2%), telecom services (-1.0%), consumer staples (-0.1%), and energy (-0.1%) sectors joined the technology group in positive territory.
The energy sector very narrowly missed positive territory despite spending much of the trading day with a solid loss. Crude oil influenced the sector's struggle, slipping in response to a bearish EIA inventory report. However, the commodity was able to largely shake off the bigger than expected build (+5.0 million vs +2.8 million consensus) to close 0.5% lower at $48.05/bbl.
In corporate news, Nike (NKE 53.92, -4.09) reported upbeat earnings per share, but investors were disappointed in the company's lackluster worldwide futures orders. Conversely, future guidance is what saved FedEx (FDX 195.92, +4.08) from suffering the consequences of its earnings miss. The companies' respective sectors--consumer discretionary and industrials-- finished with modest gains of 0.1% and 0.4%, respectively.
In the Treasury market, U.S. sovereign debt capitalized on investors' cautious attitude to post its fourth consecutive advance. The benchmark 10-yr yield settled two basis points lower at 2.40%.
On the data front, investors received a handful of economic reports, including February Existing Home Sales, January FHFA Housing Price Index, and the weekly MBA Mortgage Applications Index:
- Existing home sales for February decreased 3.7% from January to an annualized rate of 5.48 million units while the consensus expected a reading of 5.54 million.
- The key takeaway from the report is that limited supply and weakening affordability conditions are preventing more robust selling activity in the market for existing homes.
- The FHFA Housing Price Index for January was unchanged, which followed an unrevised increase of 0.4% in December.
- The weekly MBA Mortgage Applications Index decreased 2.7% to follow last week's 3.1% uptick.
On Thursday, investors will receive Initial Claims (consensus 239,000) at 8:30 ET and February Existing Home Sales (consensus 560,000) at 10:00 ET.
- Nasdaq Composite +8.2% YTD
- S&P 500 +4.9% YTD
- Dow Jones Industrial Average +4.6% YTD
- Russell 2000 -0.9% YTD
Akzo Nobel shareholders urge takeover talks with rival PPG
Call follows Dutch company rejecting revised €22.4bn bid from rival US group
Three large shareholders in Akzo Nobel have urged the company to enter into talks with rival PPG Industries after the Dutch paints and chemicals group rejected a revised €22.4bn takeover attempt from its US rival.
The latest unsolicited bid from PPG represented a €1.5bn improvement on an earlier offer, made on March 9, but Akzo Nobel’s two boards again rejected it unanimously.
Akzo Nobel’s instant rebuff goes against the tide of large-scale consolidation sweeping the broader chemicals sector and drew criticism from several investors, with one warning that the management was “losing credibility”.
The maker of Dulux paint said the second offer, worth €88.72 per share and made on March 20, undervalued the company and its prospects. It also said the proposal did not address “the significant uncertainties and risks for shareholders and other stakeholders” and warned a tie-up would lead to substantial divestitures on competition grounds, as well as job cuts.
Combining the groups would be likely to attract stiff scrutiny from antitrust regulators because it would create a dominant group in the $130bn global paints and coatings market.
Activist investor Elliott Advisors, a top five shareholder with more than 3 per cent of the stock, said that while the offer price was inadequate, it provided a “credible basis for engagement”.
The hedge fund urged Akzo Nobel’s management “to engage with PPG immediately” to determine whether the US group was prepared to bid higher and address all relevant stakeholder considerations.
Two other top-20 shareholders echoed Elliott’s position, suggesting that Akzo Nobel’s chief executive, Ton Büchner, faces rising investor dissent as he attempts to see off a hostile buyout of one of Europe’s oldest industrial companies.
“We see strong logic in a combination of Akzo Nobel and PPG and the potential benefits this offers all stakeholders. Akzo needs to recognise this and engage,” said David Dudding, portfolio manager at Columbia Threadneedle.
John Bennett, head of European equities at Henderson Global Investors, said Akzo Nobel should “hear out” PPG on its proposal. “If you don’t think it’s right, present a recommendation to the board and shareholders [to vote on].”
“The management team is rapidly losing credibility,” he added.
VEB, an influential Dutch shareholder group, also called for the company to consider the deal. “They can’t just shut the door. I can understand them saying it is too low. But when a second bid comes in from a serious player, then you should talk to each other,” said Paul Koster, its director.
PPG’s new cash and stock offer was worth a total of €88.72 per share. Of this, €56.22 was in cash and 0.331 in PPG shares. Shares in Akzo Nobel fell 1.1 per cent to €75.75 on Wednesday.
However, there was some confusion over the actual value of the bid. PPG put the offer at €90 per share including a dividend, for a total value of €22.70, but Akzo Nobel said that included a payout which shareholders would receive regardless.
PPG’s advance has attracted criticism from politicians in the Netherlands, who are worried about job losses and the country’s corporate champions being picked off by larger rivals.
Their response was especially fierce as PPG’s first bid came during an election campaign and just weeks after Kraft-Heinz’s failed bid for Unilever, the Anglo-Dutch consumer group. Dismissing the new bid on Wednesday, Akzo Nobel’s management complained that there was a “significant culture gap” between the two companies.
In his defence, Mr Büchner said the company had “listened carefully” to shareholders and taken their views into consideration when arriving at the decision.
Analysts were doubtful whether PPG would return with a third offer.
Jeremy Redenius, analyst at Bernstein, said that a survey of investors carried out by the brokerage found investors had been hoping for €95 a share.
“We think PPG knew they needed a second bid in the €90s to get engagement from Akzo (eg, opportunity to do due diligence) and elected to not be aggressive enough, which calls into question their desire to return with a yet higher offer,” he wrote in a note.
Even so, the latest bid will pile pressure on Mr Büchner to explain his plans for the company, which is planning to sell or float its speciality chemicals business to focus on paints and industrial coatings.
During five years at the helm of the group, which traces its roots to Swedish inventor Alfred Nobel, Mr Büchner has concentrated on making Akzo Nobel a more efficient operation.
But analysts say the company’s stock trades at an earnings multiple discount to its peers, a situation that can make it more susceptible to takeover attempts.
If PPG returns with a higher bid, the Dutch group’s corporate governance has a decades-old provision that creates a foundation with priority shares, which acts as a poison pill to protect the incumbent board and prevent a hostile takeover.
But Elliott suggested it might attempt to convene an extraordinary general meeting, at which members of the management and supervisory boards can be voted out, should Akzo Nobel not accede to the shareholders’ requests for engagement.
FT : General Electric: target on his back
Activist investor starts clock ticking on Immelt’s tenure at head of conglomerate“Transformation Underway . . . but Nobody Cares.” That was how activist investor Trian Partners described General Electric’s pivot from financial services to industry in 2015, when it revealed a $2.5bn stake in the group. Not much has changed. The shares have risen only 15 per cent since. But Jeff Immelt, GE’s boss, is now officially on notice.
On Wednesday, GE said it would aim to reduce overheads in its core industrial business from $25bn to $23bn between 2016 and 2018, and hit a profit target of $17bn in 2017. To motivate management, existing cash bonus figures will rise 20 per cent if both targets are hit. If both are missed, bonuses will be cut 20 per cent. Hit one out of the two, and the status quo prevails.
While GE’s shift from financial services towards infrastructure has been celebrated, the financial results have been slow to materialise because of the fall in commodity prices and the strong dollar. Organic revenue growth for 2016 came in essentially flat, rather than at the 2-4 per cent that had been predicted at the end of 2015.
In its 2015 slides, Trian said GE shares should trade over $40 by the end of 2017, a target that seems implausible with the shares under $30. The figure that matters most now is $2.00 — the earnings per share that the Mr Immelt has pledged to reach in 2018.
GE’s new profit and cost targets delineate the path to hit that figure. Such reverse engineering to meet an arbitrary yardstick is part of the hustle of being a public company. That GE can simply find another $1bn of fat to cut as revenue growth stagnates only underscores the farce.
Mr Immelt’s tenure, now at a lengthy 15 years, has, overall, been a disappointment for shareholders. Recent reports suggest Trian has become frustrated with him. On Wednesday it voiced support for the new targets and pay plan. It cares deeply about how the next nine months proceed. The GE boss needs to show similar commitment if he wants to stick around.