After Hours Summary: BGFV +16%, WTW +10.5%, DAR +9% following earnings/guidance... PANW -20% following earnings/guidance/Investor Day delay is weighing on cyber security namesAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: BGFV +16%, WTW +10.5%, DAR +9.1%, LOGM +7.5%, EVH +5.1% (light volume), MIDD +4.5%, DPLO +4.2%, BLDR +3.9%
Companies trading higher in after hours in reaction to news: DVAX +26.7% (FDA has accepted for review its responses to the CRL issued by the FDA in November 2016 for the Biologics License Application for HEPLISAV-B; PDUFA action date of August 10, 2017), LXRX +5.4% (receives FDA approval for XERMELO), TIME +4.8% (Bloomberg reporting that five suitors were asked to submit bids next week), AKRX +4.5% (received FDA approval for its ANDA for Mycophenolate Mofetil for Injection USP 500 mg/vial), WLH +3.3% (will replace Arctic Cat in the S&P SmallCap 600)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: PANW -19.9%, ENPH -19%, SRPT -14.3%, CYBE -12.8%, EVHC -12.1% (also exploring strategic options for its American Medical Response business and Evolution Health population health management services), SSW -11.7% (also reduces quarterly dividend), NVDQ -7%, CLNS -6%, AMBA -5%, ETSY -4.4%, CHUY -3.3%, CRM -3%, ACAD -2.5%, VEEV -2.3%, TSRO -2.3%, PTLA -2%
Companies trading lower in after hours in reaction to news: IBKC -5.6% (IberiaBank to acquire Sabadell United Bank in a stock and cash transaction valued at $1.025 billion; to be accretive to EPS in 2018), INTC -1.2% (downgraded at Bernstein)
Palo Alto Networks (PANW -20%) earnings/guidance/Investor Day delay weighing on cyber security names: CYBR -3.1%, FTNT -2.8%, etf - HACK -2.3%, PFPT -1.7%, CHKP -1.6%, SYMC -1% (ticking lower), FEYE -0.5% (ticking lower)
Asia Mid-Session Market Update: Trump promises tax relief and $1T infrastructure investment; China manufacturing PMIs top estimates; Aussie GDP
***US Session Highlights***
- (US) Fed's Kaplan (moderate, voter): Should begin removing accommodation; path of rates more important than exact timing - CNBC
- (US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 1.9% V 2.1%E; PERSONAL CONSUMPTION: 3.0% V 2.6%E
- (US) JAN ADVANCE GOODS TRADE BALANCE: -$69.2B V -$66.0BE
- (US) Q4 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.2% V 1.3%E
- (US) DEC S&P / CASE-SHILLER 20-CITY M/M: 0.93% V 0.70%E; Y/Y: 5.58% V 5.40%E; HOUSE PRICE INDEX (HPI): 192.61 V 192.14 PRIOR
- (US) JAN PENDING HOME SALES M/M: -2.8% V +1.0%E; Y/Y: +2.7% V -2.0% PRIOR (falls to one-year low)
- (US) Feb Chicago Purchasing Manager Index: 57.4 v 53.5e (highest since Dec 2014); new orders 59.2 v 49.1 prior
- (US) FEB RICHMOND FED MANUFACTURING INDEX: 17 V 10E; Volume of new orders 24 v 15 prior
- (US) FEB CONSUMER CONFIDENCE: 114.8 V 111.0E (highest since 2001)
- (CO) Colombia Jan National Unemployment Rate: 11.7% v 8.7% prior; Urban Unemployment Rate: 13.4% v 11.4%e
- (US) Fed's Dudley: Case for raising rates "has become a lot more compelling"; animal spirits have been unleashed after the election - CNN international taped interview
- (US) Senior Trump officials reportedly disagree on border adjustment tax; said to still lack sufficient votes to pass the Senate - press
***US markets on close: Dow -0.1%, S&P500 -0.3%, Nasdaq -0.6%***
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Consumer Discretionary
- Biggest gainers: ALB +9.8%, PCLN +5.6%, ADM +3.5%, AES +3.5%, ENDP +2.7%
- Biggest losers: SIG -12.8%, TGT -12.2%, PRGO -11.7%, FTR -10.9%, ETFC -7.2%
- At the close: VIX 12.9 (+0.8pts); Treasuries: 2-yr 1.30% (+10bps), 10-yr 2.36% (-1bp), 30-yr 2.97% (-2bps)
***US movers afterhours***
- BGFV: Reports Q4 $0.35 v $0.32e, R$266M v $266Me- Guides Q1 $0.12-0.18 v $0.05e; Guides Q1 SSS "positive mid-single-digit range"; +16.0% afterhours
- WTW: Reports Q4 $0.20 v $0.18e, R$267.4M v $271Me; Guides initial FY17 $1.30-1.40 v $1.12e; +10.5% afterhours
- LOGM: Reports Q4 $0.62 v $0.59e, R$88.0M v $87.3Me; Guides Q1 $0.72-0.76 v $0.60e; +7.5% afterhours
- ROST: Reports Q4 $0.77 v $0.75e, R$3.51B v $3.45Be; Launches $1.75B share repurchase program (~6.5% of market cap); -0.8% afterhours
- CRM: Reports Q4 $0.28 v $0.25e, R$2.29B v $2.27Be; -3.0% afterhours
- CHUY: Reports Q4 $0.18 v $0.17e, R$79.1M v $81.4Me- Guides initial FY17 $1.11-1.15 v $1.19e; SSS +1-2%; -3.3% afterhours
- EVHC: Reports Q4 $1.15 v $1.24e, R$1.39B v $1.40Be; Guides Q1 $0.75-0.81 v $0.99e; -12.1% afterhours
- SRPT: Reports Q4 -$0.71 v -$1.26e, R$5.4M v $5.0Me; -14.3% afterhours
- PANW: Reports Q2 $0.63 v $0.62e, R$422.6M v $430Me; Adds $500M to buyback plan; Guides Q3 $0.54-0.56 v $0.71e, R$406-416M v $453Me; -20.0% afterhours
***Politics***
- (US) US President Trump: To provide massive tax relief for middle class; To seek $1T infrastructure investment program financed through public and private capital - speech to Congress
- (US) Pres Trump said to be open to a legal pathway for undocumented immigrants - NY Times
- (IQ) President Trump's new Executive Order on immigration will reportedly drop Iraq from the list of nations facing a travel bank - US press
***Asia Key economic data:***
- (CN) CHINA FEB CAIXIN MANUFACTURING PMI: 51.7 V 50.8E (8th consecutive expansion)
- (CN) CHINA FEB MANUFACTURING PMI (GOVT OFFICIAL): 51.6 V 51.2E; NON-MANUFACTURING PMI: 54.2 (4-month low) V 54.6 PRIOR
- (JP) JAPAN FEB FINAL PMI MANUFACTURING: 53.3 V 53.5 PRELIM
- (JP) JAPAN Q4 CAPITAL SPENDING Y/Y: 3.8% V 0.8%E; EX-SOFTWARE Y/Y: 3.3% V 1.1%E
- (JP) JAPAN FEB DOMESTIC VEHICLE SALES Y/Y: 13.4% V 8.6% PRIOR
- (AU) AUSTRALIA Q4 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 2.4% V 2.0%E
- (AU) AUSTRALIA FEB AIG MANUFACTURING INDEX: 59.3 v 51.2 PRIOR; 15-year high; 5th month of expansion
- (AU) AUSTRALIA FEB CORELOGIC RPDATA HOUSE PRICES M/M: 1.4% V 0.7% PRIOR
- (KR) SOUTH KOREA FEB TRADE BALANCE: $7.2B V $4.9BE
- (HK) Macau Feb Gaming Rev MOP22.99B v MOP21.5Be; y/y: +17.8% v +10%e
***Asia Session Notable Observations, Speakers and Press***
- Asia tracking slightly firmer, with Nikkei225 a clear outperformer on weaker JPY; USD/JPY has added to gains with the case for March Fed rate hike growing rapidly in the wake of stronger economic data (Richmond Fed index and Chicago PMI today) and notably more hawkish Fed-speak (typically a dove, New York's Dudley said case for March is more compelling). Rates on the short end of the curve spiked higher, while the Vix closed at its highest level of 2017.
- Reaction to US President Trump's first address before the joint session of Congress (first year's equivalent to State of the Union) has been largely positive among the pundits and initial surveys, though critics would point to lack of substantive policy proposals; Most notably, Trump called for $1T public-private investment in infrastructure, reiterated intent to repeal/replace Obamacare, and again pledged massive tax relief for middle class.
- China PMI data were mostly positive, particularly on the Manufacturing front; Official manuf print was a beat at 51.6 V 51.2E as key components such as New Export Orders and Employment hit multi-month highs; Caixin PMI also improved and is now in expansion for 8 months, with resident economist noting fastest increase in new export business since September 2014, post-Lunar New Year employment demand, and sharp rise in input costs.
- Australia Q4 GDP was also a beat after a surprising q/q contraction in Q3. Terms of Trade component jumped 9.1% v 4.5% prior thanks to higher commodity prices, consumption improved to +0.7% v +0.3% prior, and capital investment rose a solid +2.6% v -2.7% prior.
China
- (CN) China Labor Minister: Expect employment to remain relatively stable in 2017 despite complex situation - press
Japan
- (JP) Japan Coast Guard claims 3 China Coast Guard vessels entered its waters - financial press
- (JP) Japan Fin Min Aso: Economic growth is more important than fiscal balance
- (JP) BOJ Gov Kuroda: Fiscal policy and BOJ easing can have synergy effects - press
Australia
- (AU) Australia Treasurer Morrison: GDP data confirms Australia's successful change in economy
***Asian Equity Indices/Futures (00:30ET)***
- Nikkei +1.5%, Hang Seng +0.1%, Shanghai Composite +0.5%, ASX200 -0.1%, Kospi +0.3%
- Equity Futures: S&P500 +0.2%; Nasdaq +0.2%; Dax +0.2%; FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.0550-1.0590; JPY 112.75-113.60; AUD 0.7635-0.7700; NZD 0.7130-0.7190
- Apr Gold -0.8% at $1,244/oz; Apr Crude Oil +0.1% at $54.07/brl; May Copper +0.9% at $2.74/lb
- (US) Weekly API Oil Inventories: Crude: +2.5M v -0.9M prior (5th build in the past 6 weeks)
- USD/CNY PBOC SETS YUAN MID POINT AT 6.8798 V 6.8750 PRIOR
- (CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos
- (CN) China MoF sells 1-yr bonds at 2.73% v 2.71%e, bid-to-cover 1.67x and 10-yr bonds at 3.26% v 3.26%e, bid-to-cover 2.87x
- (JP) BOJ To buy ¥320B (prior ¥400B) in 1-3yr JGBs
***Asia equities / Notables / movers by sector***
- Consumer discretionary: 880.HK SJM Holdings -3.1% (FY16 result); HVN.AU Harvey Norman -5.8% (Macquarie cuts rating); PRR.AU Prima BioMed +9.1% (confirms granted US patent); 9603.JP HIS -3.5% (Q1 result); 1928.hk Sands China +4.2%, 1128.HK Wynn Macau +3.9% (Macau gaming rev)
- Financials: 535.HK Gemdale Properties and Investment Corp +2.0% (profit alert); 27.HK Galaxy Entertainment Group +4.7% (FY16 result)
- Industrials: 2343.HK Pacific Basin Shipping +7.1% (FY16 result)
- Technology: ACX.AU Aconex +0.3% (signs pact); 6502.JP Toshiba Corporation +1.0% (seeks bids for chip unit)
- Materials: DRM.AU Doray Minerals +1.5% (H1 result); RSG.AU Resolute Mining -4.0% (Baillieu Holst cuts rating)
- Utilities: 6370.JP Kurita Water Industries +6.9% (first buyback in 2 years)
Iberiabank (IBKC) to Acquire Sabadell United in $1.03B Deal
February 28, 2017 5:44 pm
IBERIABANK Corporation (NASDAQ: IBKC) ("IBKC"), holding company of the 129-year-old IBERIABANK (www.iberiabank.com) announced today the signing of a definitive agreement under which IBKC will acquire Sabadell United Bank, N.A. ("Sabadell United") from Banco de Sabadell, S.A. ("Banco Sabadell") in a stock and cash transaction valued at $1.025 billion. The proposed acquisition of Sabadell United by IBKC has been approved by the Board of Directors of IBKC and Banco Sabadell, and is expected to close in the second half of 2017. Upon completion of the acquisition, Sabadell United will be merged with and into IBERIABANK. Completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals.
Under the terms of the agreement, IBKC will purchase Sabadell United for $803 million in cash and approximately 2.61 million IBKC shares, valued at $222 million based on a 10-day VWAP through February 24, 2017. IBKC expects to finance the cash portion of the transaction, in part, through a public common stock offering of approximately $500 million, to be launched concurrently with this announcement. In addition, IBKC plans to use the $280 million net proceeds of the December 2016 common equity sale to support the acquisition. Banco Sabadell will own approximately 4.9 percent of IBKC common stock at transaction close.
Daryl G. Byrd, President and Chief Executive Officer of IBKC, commented, "We are very pleased to have the opportunity to bolster our South Florida franchise by joining forces with the exceptional team at Sabadell United. With a population of over six million people, the greater Miami area is a dynamic market with a strong concentration of commercial and industrial clients that are particularly attractive to us. Sabadell United's deep commercial and retail lending base, combined with strong core deposit funding and quality credit underwriting, provides an excellent fit with our unique culture and business model. Sabadell United delivers compelling long-term strategic value to IBERIABANK by complementing our existing Florida franchise. With this acquisition, our Company will have a meaningful presence in each of the five largest markets in the Southeast, further solidifying our status as a premier Southeastern banking franchise."
Fernando Pérez-Hickman, Chairman of Sabadell United, commented, "We are very excited about this combination and look forward to partnering with IBERIABANK. Sabadell United and IBERIABANK share a common belief that success is driven by people and relationships at the local level. We are proud to partner with an organization that mirrors our client relationship-focused approach to business and values local decision-making and community involvement."
On a pro forma basis including the common stock offering announced today, the transaction is expected to be approximately 6% and 10% accretive to IBKC's consensus fully diluted earnings per share ("EPS") in 2018 and 2019, respectively, expected to be neutral to IBKC's capital ratios, and to be approximately 2% dilutive to tangible book value per share on a pro forma basis at closing, excluding the impact of the common equity raise completed in December 2016. The tangible book value dilution is anticipated to be earned back in approximately 3.5 years, excluding the impact of the common equity raise completed in December 2016. The estimated internal rate of return for the transaction is expected to be approximately 19%, and, therefore, well in excess of IBKC's cost of capital.
Closing Market Summary: Stock Market Closes Lower Ahead of Trump AddressInvestors took some money off the table after a strong month and ahead of President Trump's first prime-time address to Congress, which is scheduled for tonight at 9:00 pm ET. The S&P 500 (-0.3%) and the Dow (-0.1%) held slim losses throughout the day's session, while the Nasdaq's (-0.6%) slip was a bit more substantial. Meanwhile, the Russell 2000 finished with a sizable loss of 1.4%. For the month, the Dow gained 4.8% while the Nasdaq and S&P 500 added 3.8% and 3.7%, respectively.
President Trump is expected to touch on variety of topics in his speech, including tax reform, infrastructure spending, health care, military spending, and border security, but it is unclear if Mr. Trump will share any specific details on anything other than his defense budget.
Nonetheless, investors will be watching carefully, looking for any clues as to the timing and the final form of the President's pro-growth promises that have sent the benchmark index nearly 10.5% higher since the November 8 election.
Despite minimal movement on the macro level, micro motion was alive and well, especially on the earnings front. Target (TGT 58.77, -8.14) plunged 12.2% after the company missed earnings estimates and issued weak guidance.
Retailers responded to Target's misstep with a tumble of their own, pushing the SPDR S&P 500 Retail ETF (XRT 42.99, -1.04) lower by 2.4% and leaving the consumer discretionary sector with a loss of 0.7%.
Surprisingly, consumer staples (+0.2%) left Tuesday relatively unscathed, countering losses from retailers like Wal-Mart (WMT 70.93, -0.81) and Costco (COST 177.18, -0.44) with a bounceback performance from multinational food giants like Mondelez International (MDLZ 43.92, +0.15), Kraft-Heinz (KHC 91.50, +0.89), and General Mills (GIS 60.37, +0.43) following their sell-off on Monday.
The financial sector (-0.2%) outpaced the benchmark index on Tuesday despite a slide in discount brokers, who fell in reaction to the decreased earnings prospects linked to Fidelity's decision to reduce the price of its online trading commission. The move was seen as shot fired in the price war that is developing within the industry.
Energy (-0.2%) closed Tuesday's session slightly lower, ticking up in the final minutes following an afternoon spike in crude oil. The energy component finished just below its flat line, down 0.1% at $54.01/bbl, after recouping almost all of its large early-morning loss. An afternoon rally ensued in the wake of a Reuters report that OPEC members have achieved 94.0% compliance with supply cuts that were agreed to in February.
The top-weighted technology sector (-0.4%) also finished the day lower, burdened by a poor showing from chipmakers; the PHLX Semiconductor Index finished Tuesday with a loss of 1.3%.
The U.S. Treasury yield curve flattened today as selling pressure in shorter-dated issues left the 2yr-yield three basis points higher at 1.23%. Meanwhile, the benchmark 10-yr yield finished its trading day unchanged at 2.36%.
Today's economic data included the second estimate of fourth quarter GDP, February Chicago PMI, February Consumer Confidence, January International Trade in Goods, and January Case-Shiller 20-city Home Price Index:
- The second reading of fourth quarter GDP pointed to an expansion of 1.9%, while the consensus expected a reading of 2.1%. The second estimate of fourth quarter GDP Deflator came in at 2.0%, while the consensus expected a reading of 2.1%.
- The key takeaway from the report is that soft business spending continues to act as a drag on GDP growth.
- Chicago PMI for February increased to 57.4 from 50.3 in January while the consensus expected a reading of 53.0.
- The key takeaway from the report is that the prices paid component hits its highest level (68.6) in about two and a half years, which speaks to building inflationary pressures for manufacturers in the Chicago Fed region.
- The consumer confidence reading for February rose to 114.8 from the prior month's revised reading of 111.6 (from 111.8). The consensus expected the survey to hit 111.5.
- The key takeaway from the report is that consumers are feeling better about current business and labor market conditions than they did in January; accordingly, they expect the economy to continue to expand in the months ahead.
- The Advance report for International Trade in Goods for January showed a deficit of $69.2 billion, up from a revised deficit of $64.4 billion for December (from $65.0 billion). The Advance report for January Wholesale Inventories decreased 0.1%. The prior month's reading was revised to 0.9% from 1.0%.
- The Case-Shiller 20-city Home Price Index for January rose 5.6%. This followed the previous month's unrevised reading of 5.6%.
Tomorrow's economic data will include the MBA Mortgage Applications Index at 7:00 ET, January Personal Income (consensus 0.4%) at 8:30 ET, January Construction Spending consensus 0.6%) and February ISM Index (consensus 56.1%) at 10:00 ET, and the Fed's Beige Book for March at 14:00 ET.
Also of note, February Auto and Truck sales will be released throughout the day on Wednesday.
- Nasdaq Composite +8.2% YTD
- S&P 500 +5.6% YTD
- Dow Jones Industrial Average +5.3% YTD
- Russell 2000 +2.2% YTD