>>> US After Hours Summary: FN +9%, QTNA +8%, TDOC / MAR / RGR +5% high


After Hours Summary: FN +9%, QTNA +8%, TDOC / MAR / RGR +5% higher following earnings/guidance, RAD +3.2% on M&A update... HTZ -17%, OTEX -10%, CBI -6% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: EGY +26.3%, FN +9.4%, QTNA +7.7%, SBRA +6.6% (ticking higher), AEZS +5.6%, TDOC +5.1%, NVAX +4.9%, BLDR +4.8%, MAR +4.6%, RGR +4.6% (also announces expansion of its stock repurchase program to $100 million), TCMD +4.3%, GPOR +2.9%, P +2.9% (also KKR invests $150 mln in convertible preferred stock; Board also forming independent committee to look for new Directors), BKD +2.8%, OAS +1.1% (also announces plans for an initial public offering of certain of its midstream assets), RBC +1% (light volume)

Companies trading higher in after hours in reaction to news: CLNT +40.7% (YSK 1860 disclosed 29.4% active stake pursuant to Share Purchase Agreement), ROKA +14.6% (thinly traded; enters 5-year non-exclusive distribution agreement with FoodChek Systems Inc. to distribute their lines of both proprietary Actero ELITE Enrichment Media and non-proprietary Actero UNIVERSAL Enrichment Media), ORIG +10.3% (announces the deadline for holders of term loans of Drillships Financing Holding and Drillships Ocean Ventures has been extended), DHXM +7.1% (continued strength following Sohn mention), RAD +3.2% (Rite Aid and Walgreens certify substantial compliance with second request), LNTH +3.2% (to join S&P SmallCap 600), XRAY +2.8% (ticking higher ahead of earnings tomorrow before the open), VVV +2.4% (to join S&P MidCap 400), NRG +2.4% (still checking), MXL +2% (to join S&P SmallCap 600), DPLO +1.6% (completes acquisition of WRB Communications for $24.5 million cash and $4.5 million of Diplomat common stock), DXC +1.3% (positive mention by Glenview Capital's Larry Robbins at Sohn)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SCYX -21.3% (also provided IV formulation development status update), HTZ -17.1%, ALIM -16.6%, NVRO -14.6%, OTEX -10.4%, MEET -9.7%, ARTX -7.6%, CBI -6.4%, ADUS -5.1%, PRCP -4.3% (light volume), JCOM -4.2%, POST -4%, PLOW -3.5%, AKAO -3.4% (also files mixed securities shelf offering), AFSI -1.7%, TSO -1.1%

Companies trading lower in after hours in reaction to news: CYTK -6.7% (commences $75 mln common stock offering), AHH -4.4% (commenced an underwritten public offering of 6,000,000 shares of its common stock), GAIN -4.2% (announces public common stock offering), APTS -3.9% (commences 2.75 mln common stock offering), FTR -3.9% (lower after Jericho Capital Asset Management's Josh Resnick cautious comments at Sohn conference), CAR -1.8% (HTZ sympathy), DSW -1.7% (downgraded at Buckingham)

>>> Pandora Media beats by $0.13, reports revs in-line; guides Q2 revs below con

Pandora Media beats by $0.13, reports revs in-line; guides Q2 revs below consensus; lowers FY17 rev guidance; KKR (KKR) invests $150 mln in convertible preferred stock, get Board seat; Board also forming independent committee to look for new Directors (10.40)
  • Reports Q1 (Mar) loss of $0.20 per share, $0.13 better than the Capital IQ Consensus of ($0.33); revenues rose 6.3% year/year to $316 mln vs the $318.15 mln Capital IQ Consensus. Advertising revenue was $223.3 million, a 1% year-over-year increase, during our seasonally weakest advertising quarter. Total subscribers increased from 3.93 million in Q1 2016 to 4.71 million in Q1 2017, growing ~20% year-over-year. Subscription and other revenue was $64.9 million, a 19% year-over-year increase. Adj. EBITDA ($71.3) mln vs. ($70-80) mnln guidance
  • Co issues downside guidance for Q2, sees Q2 revs of $360-375 mln vs. $390.79 mln Capital IQ Consensus Estimate; EBITDA loss $50-65 mln.
  • Co issues in-line guidance for FY17, sees FY17 revs of $1.50-1.65 bln from $ vs. $1.62 bln Capital IQ Consensus Estimate.
  • Pandora successfully launched its on-demand subscription product, Pandora Premium, during the quarter. ~1.3 million trials were started in the last seven weeks, including more than 500 thousand Premium trial starts. Total subscribers increased approximately 20% year-over-year. To date, more than 80% of new trial subscribers were acquired on-platform—virtually free of acquisition costs—again demonstrating our marketplace strategy in action. Nearly half of Premium trial listeners used Pandora daily during their first week, significantly higher than non-Premium listeners. Research tells us that more than 30% of our ad-supported and paid radio listeners are strong candidates for an on-demand tier.
  • entered into an agreement for a $150 million strategic investment from KKR. In connection with the investment, Richard Sarnoff, KKR's Head of Media & Communications Private Equity investing in the Americas, will join Pandora's Board of Directors. KKR will purchase an aggregate of $150 million in a new designated Series A convertible preferred stock of Pandora. Pandora will pay dividends to the holders of the preferred stock quarterly at an annualized rate of 7.5% if paid in cash or 8% if paid in kind, at its option. The Series A preferred stock is convertible into common stock, cash or a combination thereof at a conversion price of $13.50 per share. The offering may be upsized to a total of $250 million should the Company determine to issue additional shares.
  • Company is implementing certain governance changes. James M. P. Feuille and Peter Gotcher will resign from the Board of Directors, and the Board is forming an independent committee, to be chaired by Timothy Leiweke, an independent director, to identify and appoint new directors who will provide additional expertise and leadership as the Company moves forward. In addition, at the upcoming 2017 annual meeting of stockholders, the Board will recommend that its stockholders approve a resolution to declassify the Board and provide for the annual election of directors in the future

NYT : Forget Taxes, Warren Buffett Says. The Real Problem Is Health Care.

Forget Taxes, Warren Buffett Says. The Real Problem Is Health Care.

OMAHA — “The tax system is not crippling our business around the world.”

That was Warren E. Buffett, the chairman and chief executive of Berkshire Hathaway, over the weekend at the company’s annual meeting, known as the “Woodstock of capitalism.”

Mr. Buffett, in a remarkably blunt and pointed remark, implicitly rebuked his fellow chief executives, who have been lobbying the Trump administration and Washington lawmakers to lower corporate taxes.

In truth, Mr. Buffett said, a specter much more sinister than corporate taxes is looming over American businesses: health care costs. And chief executives who have been maniacally focused on seeking relief from their tax bills would be smart to shift their attention to these costs, which are swelling and swallowing their profits.

It was clarifying to hear Mr. Buffett frame things this way. The need for corporate tax relief has become the lodestar of the corner office, with C.E.O.s rhapsodizing over President Trump’s plan to try to stimulate growth by cutting tax rates for businesses.

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But as Mr. Buffett pointed out, these chief executives are missing the bigger issue — the one that should be their Holy Grail. As a percentage of our gross domestic product, the cost of maintaining our American health care system — hospitals, H.M.O.s, doctor visits, prescription drugs, medical devices, insurance companies, Medicare, Medicaid — is rising at an alarming rate. And Corporate America pays a big (and growing) chunk of the bill.

We’re not talking about the cost of health insurance, which is a fraction of the overall cost.

Today’s corporate tax rates, Mr. Buffett seemed to suggest, are a distraction, not a true impediment to growth.

“If you go back to 1960 or thereabouts, corporate taxes were about 4 percent of G.D.P.,” Mr. Buffett said. “I mean, they bounced around some. And now, they’re about 2 percent of G.D.P.”

By contrast, he said, while tax rates have fallen as a share of gross domestic product, health care costs have ballooned. About 50 years ago, he said, “health care was 5 percent of G.D.P., and now it’s about 17 percent.”

His is one of the most cogent arguments for renewing attention on the underlying costs of our health care system — an issue far beyond the debate around the Affordable Care Act and what it is going to look like if it is repealed and replaced.

Mr. Buffett said our global competitiveness had fallen largely because our businesses were paying far more for health care — a tax by another name — than those in other countries.

At his annual shareholders’ conference, which drew tens of thousands of people to Omaha, he gave a virtual seminar on the economics of health care that chief executives and lawmakers would be helped by hearing. He demonstrated in stark terms that the constant refrain from the business community about taxes should probably be redirected toward trying to bend the cost curve of health care.

“When American business talks about strangling our competitiveness, or that sort of thing, they’re talking about something that as a percentage of G.D.P. has gone down,” Mr. Buffett said. “While medical costs, which are borne to a great extent by business,” have swelled.

He is right: In 1960, corporate taxes in the United States were about 4 percent of G.D.P., which is probably the best way to measure the burden on businesses. Then the percentage fell steadily, reaching its bottom in 1983 before rising slightly over the last several decades. Today, it is 1.9 percent.

In the meantime, health care costs as a percent of G.D.P. have skyrocketed, significantly diverging with those of other industrial countries. Our health care costs stand at 17.1 percent of G.D.P., up from 13.1 percent in 1995.

The figure in Germany is only 11.3 percent, up from 9.4 percent during the same period. Japan’s is 10.2 percent, up from 6.6 percent. Britain’s health care costs are 9.1 percent of G.D.P., up from 6.7 percent in 1995. And China’s is only at 5.5 percent, up from 3.5 percent.

That puts the United States at a material disadvantage far beyond the tax differential. And it harms American companies in particular, since they bear such a big share of those costs. Corporations spend $12,591 on average for coverage of a family of four, up 54 percent since 2005, according to a study by the Kaiser Family Foundation.

“Medical costs are the tapeworm of American economic competitiveness,” Mr. Buffett said, using a metaphor he has employed in the past to describe the insidious and parasitic costs of our health care system.

Mr. Buffett is a Democrat, but his business partner, Charles T. Munger, is a Republican — and a rare one who has advocated a single-payer health care system. Under his plan, which Mr. Buffett agrees with, the United States would enact a sort of universal type of coverage for all citizens — perhaps along the lines of the Medicaid system — with an opt-out provision that would allow the wealthy to still get concierge medicine.

Our bloated health care system, Mr. Buffett asserted, is the true barrier to America’s world competitiveness as well as “the single biggest variable where we keep getting more and more out of whack with the rest of the world.”

But people don’t talk about it enough. “It’s very tough for political parties to attack it, but it’s basically a political subject,” Mr. Buffett said in reply to a question I had posed. (I was one of three journalists and three analysts who, along with shareholders, peppered Mr. Buffett and Mr. Munger with questions during the meeting.)

That’s not to say corporate tax reform won’t help, but it is tiny relative to fixing health care.

Indeed, Mr. Buffett said, even if Washington put in place a tax credit for capital investment, he did not think that BNSF — the railroad company he owns, which spends billions on fixing rail tracks — would do its job faster or better because of the potential tax credit.

“I can’t recall sending anything out to our managers saying, ‘Let’s do this because the tax law is going to change,’” Mr. Buffett said.

Mr. Munger, the vice chairman of Berkshire Hathaway, added: “We’re not going to change anything at the railroad just for some little tax jiggle.”

Neither man, however, is expecting the bigger tax — health care — to be fixed anytime soon.

“On this issue, both parties hate each other so much that neither one can think rationally, and I don’t think that helps, either,” Mr. Munger said.

>>> US Close Dow +0.03% S&P +0.0% Nasdaq +0.03% Russell -0.38%

Closing Market Summary: Equities Open the Week Flat

After settling at fresh record highs on Friday, the S&P 500 (unch) and the Nasdaq (unch) each eked out another record close on Monday. The Dow (unch) also finished just above its unchanged mark while the Russell 2000 (-0.4%) lagged.

The final round of the French presidential election went as expected on Sunday with Emmanuel Macron easily defeating Marine Le Pen. Mr. Macron's victory has been seen as a positive for the European Union, and global equity markets, as it lays to rest Ms. Le Pen's call for a French referendum on EU membership. France's CAC settled lower by 0.9% after hitting its best level in a decade ahead of the vote. Meanwhile, the euro (1.0932) lost 0.6% against the U.S. dollar.

Back in the U.S., seven of eleven sectors opened the week in negative territory. The materials (-0.9%), real estate (-0.5%), and health care (-0.6%) spaces finished solidly lower, but the remaining laggards finished with losses of no more than 0.3%. The health care group, which comprises around 14.0% of the broader market alone, suffered the most notable loss of the day at the hand of the biotechnology industry; the iShares Nasdaq Biotechnology ETF (IBB 289.45, -6.42) declined 2.2%.

At the opposite end of the leaderboard, the energy sector (+0.7%) rallied after morning headlines that the OPEC/non-OPEC production cut agreement, which is currently scheduled to end in June, may be extended for nine months or longer. Saudi Arabia's oil minister went as far as saying that oil producers would do "whatever it takes" to end the global glut. WTI crude ended pit trade 0.4% higher at $46.63/bbl.

Like energy, the top-weighted technology sector (+0.4%) finished ahead of the broader market. Apple (AAPL 153.01, +4.05) climbed to another fresh record high, extending its already impressive 2017 advance by 2.7%. The tech giant currently holds a year-to-date gain of 32.1%. Elsewhere in the tech group, chipmakers underperformed, pushing the PHLX Semiconductor Index lower by 0.4%.

The consumer discretionary (+0.3%) and telecom services (+0.2%) sectors also closed in positive territory. Coach (COH 44.71, +2.05) contributed to the consumer discretionary sector's positive performance, jumping 4.8%, after acquiring Kate Spade (KATE 18.38, +1.41) for $18.50/share, in cash. The purchase price represents a 27.5% premium to KATE's stock price seen in late December when takeover speculation surfaced in the media.

Outside of the stock market, U.S. Treasuries settled lower across the board, signaling a possible uptick in investor sentiment; the benchmark 10-yr yield (2.38%) added three basis points. Even more notably, the CBOE Volatility Index (VIX 9.72, -0.85, -8.0%) settled at one of its lowest levels on record, pointing to increased complacency.

Investors didn't receive any economic data on Monday. Tomorrow, market participants will receive March JOLTS and March Wholesale Inventories (consensus -0.1%). The two reports will both cross the wires at 10:00 ET.

  • Nasdaq Composite +13.4% YTD
  • S&P 500 +7.2% YTD
  • Dow Jones Industrial Average +6.3% YTD
  • Russell 2000 +2.5% YTD

>>>HTZ; Hertz Global misses by $0.77, misses on revs

Hertz Global misses by $0.77, misses on revs (14.91   -0.07)

  • Reports Q1 (Mar) loss of $1.61 per share, excluding non-recurring items, $0.77 worse than the Capital IQ Consensus of ($0.84); revenues fell 3.4% year/year to $1.92 bln vs the $1.94 bln Capital IQ Consensus.
  • U.S. Segment
    • Total U.S. RAC revenues were $1.4 billion in the first quarter 2017, a decrease of 4%, versus the same period last year.
    • Pricing, as measured by Total RPD, decreased by 3% in the quarter, impacted by an unfavorable customer mix, which the Company is currently addressing as part of its long-term improvement plan.
    • First quarter 2017 Adjusted Corporate EBITDA for U.S. RAC was a negative $104 million, a $130 million decline versus the same period last year.
  • International
    • The Company's International RAC segment revenues were $411 million in first quarter 2017, a decrease of 5% from the first quarter 2016. The decline in the International RAC revenues reflect a tougher year-over-year comparison due to the additional Leap day in 2016, the Easter shift to second quarter in 2017, as well as the termination of certain contracts in the third quarter of 2016. First quarter 2017 Adjusted Corporate EBITDA for International RAC was $3 million.

FT : Algebris head Serra says shorting gilts safest fixed income bet

Algebris head Serra says shorting gilts safest fixed income bet
Divorcing from the EU will cost the UK £140bn, or 7.5 per cent of gross domestic product, the head of the London-based Algebris hedge fund said on Monday, as he suggested betting against the country’s debt.

Davide Serra said at the annual Sohn Conference that the “safest fixed income bet globally” is shorting gilts.

Here are a few reasons he cited:

* Trade pacts historically take six to seven years to forge.
* The country’s “weak public finances”.
* “Stagnant productivity” in the labour market.
* “Growing social imbalances”.
* “High household leverage”.
* The more than 2 percentage point spread between the 10-year gilt yield, and 10-year inflation expectation.
The 10-year gilt yield, which trades in the opposite direction of the price, was up by 0.03 percentage point to 1.145 per cent on Monday. It traded at 1.311 per cent the day before the Brexit vote last June.