>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • GNE -14.7%, VRA -14.2%, EXPR -11.9%,
  • ALQA -11.5%, (also initiated a process of identifying strategic alternatives for the contract manufacturing business )
  • ARA -10.9%, HYGS -8.9%, PQ -8.7%, URBN -6.7%, BOJA -6.1%, CIEN -3.9%, BOBE -3.6%
  • RGNX -2.6%, (also announces that the first patient in a Phase I/II clinical trial of REGENXBIO's investigational gene therapy RGX-501 for the treatment of homozygous familial hypercholesterolemia has been dosed)
  • KODK -2.5%, RRR -1.4%
Select metals/mining stocks trading lower:
  • GFI -3.5%, SBGL -3.4%, AG -2.6%, HMY -2.3%, BHP -1.9%, AUY -0.8%, ABX -0.7%
Select oil/gas related names showing early weakness:
  • RIG -1.4%, RDS.A -1.2%, MRO -1%, BP -0.8%, TOT -0.8%
Other news:
  • HIIQ -15% (launches a secondary underwritten public offering of shares of its Class A common stock )
  • GEO -6.3% (prices its previously announced public offering of 6,000,000 shares at $41.75/share)
  • LADR -4.8% (prices 3 mln common stock offering by selling stockholders for gross proceeds of approx. $42 mln)
  • FOXF -4.2% (announces secondary offering of 5,108,718 shares by one of its existing stockholders)
  • LAND -3.9% (to sell approx. 1.4 mln shares of its common stock in an underwritten public offering)
  • CAT -2.1% (NY Times report discussing allegations of tax fraud)
  • COTV -2% (prices offering of 8.42 mln shares of common stock, by certain stockholders at a $36.00 per share)
  • NVO -1.2% (Bloomberg details that Novo Nordisk (NVO) might miss its diabetics treatment targets)
Analyst comments:
  • GOLD -2.1% (downgraded to Underperform at RBC Capital Mkts)
  • BT -1.4% (downgraded to Neutral from Buy at Goldman)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • MFIN +35.1%, HH +31.7%, PRSS +19.2%, REXX +17.5%, BIOC +17.3%, EKSO +11.1%
  • AVAV +7.1%, YIN +7.1%, PLCE +6.8%, ZAGG +6.7%, SCMP +6.7%, CLNE +6.6%, HRB +6%
  • TLGT +3.8%, NCS +3.4%, REGI +2.8%, OPTT +2%, GTT +2%, AERI +1.8%,RIGL +1.5%
  • OA +1.4%, TISI +1%, CERS +0.8%, CBIO +0.7%
M&A news:
  • TSL +5.7% (still checking, potentially related to pending to "go private" soon)
  • RH +1.9% (UK Betaville blogger suggests Williams-Sonoma is 'stalking Restoration Hardware')
Select EU financial names showing strength:
  • ING +2%, CS +1.8%, DB +1.4%, LYG +1%
Other news:
  • PRKR +50.2% (continued strength following favorable patent ruling)
  • XTLB +14.4% (continued strength)
  • SHIP +12.6% (enters into a definitive agreement with one of its senior lenders for the early termination of a credit facility, which is expected to result into a material gain and equity accretion; the gain to the Company is estimated to be approximately $11.4 million after completion)
  • EXTR +7.4% ( to acquire Avaya's networking business for approximately $100 million )
  • NTLA +5.1% (presents updated data showing increased levels of genome editing efficiency in vivo and durability results with its CRISPR/Cas9 technology)
  • CLRB +4.5% (enters into a licensing agreement with the Wisconsin Alumni Research Foundation for intellectual property rights covering the method of use for CLR 131), TLGT +3.8% (receives approval of the Co's abbreviated new drug application from the FDA of Clobetasol Propionate Gel)
  • KERX +3.3% (FDA has accepted for review the supplemental New Drug Application for Auryxia)
  • OPK +2.8% (receives notification from the EC designating its oligonucleotide-based AntagoNAT)
  • FCSC +1.9% (Fibrocell Science entered into securities purchase agreement with existing investors for sale of $8.0 mln Series A Convertible Preferred Stock and accompanying warrants )
  • DKS +0.9% (slightly rebounding following yesterday's 9% decline, also several analysts defending stock this morning)
Analyst comments:
  • MIK +2.6% (upgraded to Buy from Neutral at BofA/Merrill)
  • IPXL +2.2% (upgraded to Buy from Hold at Deutsche Bank)
  • MWA +1.6% (initiated with a Buy at Goldman)
  • SWKS +1% (initiated with a Outperform at Wells Fargo)
  • AVB +1% (upgraded to Buy from Neutral at BofA/Merrill)

>>> US Early premarket gappers

Early premarket gappers
Gapping up: PRKR +61%, MFIN +35.1%, BIOC +19.5%, PRSS +19.2%, SHIP +15.8%,EKSO +11.1%, XTLB +10.7%, REXX +9.7%, AVAV +9%, YIN +8.2%, SCMP +8%,HRB +7.8%, CLNE +7%, EXTR +6.6%, ZAGG +6.6%, PLCE +6.6%, TSL +5.5%, SDRL+3.6%, NCS +3.4%, TLGT +3.1%, CCE +3%, NWL +3%, REGI +2.8%, OPTT +2%,REVG +1.8%, RIGL +1.5%, GTT +1.5%, RAD +1.4%, RIO +1.4%, OA +1.4%, MT+1.3%, STM +1%, TISI +1%, CBIO +0.9%, AMD +0.8%, AUY +0.8%, FCX +0.8%,CERS +0.8%

Gapping down: EXPR -17.6%, HIIQ -13.5%, ARA -10.9%, ALQA -10.3%, HYGS-8.9%, PQ -8.7%, GEO -6.3%, URBN -5.5%, BOJA -4.8%, EDIT -4.6%, CIEN -4.3%,LAND -3.8%, CAT -3.8%, FOXF -3.7%, BOBE -3.6%, LADR -3.4%, SBGL -3.4%, GFI-3.2%, AERI -2.6%, RGNX -2.6%, SHPG -2.5%, KODK -2.5%, FCSC -1.9%, GSK-1.7%, BHP -1.6%, GOLD -1.3%, AZN -1.3%, BUD -1.3%, APC -1.2%, VRX -1.2%,RDS.A -1.1%, RIG -0.6%, ABX -0.6%, TOT -0.6%, BP -0.6%, MRO -0.5

>>> David Tepper of Appaloosa Management discusses markets on CNBC; constructive

David Tepper of Appaloosa Management discusses markets on CNBC; constructive on market despite valuation
  • David Tepper (Appaloosa Management) is on CNBC discussing the markets...
  • Tepper notes the market isn't cheap but there is synchronized growth around the world, sugar is still being put on by the ECB, BOJ and Fed, and there will be less regulation, so it's hard to short.
  • Notes he was guarded about the market before due to trade friction with China, but believes we're past that now; notes the immigration policy has been watered down and hopefully will get trade tensions with Mexico figured out; all positives from a business perspective.
  • Believes the Fed is behind the ball and needs to raise rates faster.
  • Notes he is short bonds and long European equities

FT : Japanese investors swap French for German debt ahead of elections

Japanese investors sold off French government bonds for the third consecutive month at the start of the year, reflecting souring sentiment on the country’s debt ahead of its presidential election next month.

The latest figures from the Ministry of Finance show Japanese money market managers sold ¥34.9bn ($0.3bn) of French debt in January. That is a significant slowdown from the ¥232bn dumped at the start of the year, but marks the first three-month selling streak since 2011. Japanese investors hold around 7 per cent of outstanding French debt.

Investors have sold off debt from the eurozone’s second largest economy as they begin to price in the increasing chances of Marine Le Pen triumphing in elections concluding in May. The far-right National Front leader has promised to hold a referendum on France’s eurozone membership and rip up the country’s EU budget rules, representing the biggest threat to the bloc’s established order in 60 years.

“Although the flow [of selling] was moderate there is a risk that it rises further in the run-up to the French election if the perceived risk of a Le Pen victory remains high,” said Elsa Lignos at RBC Capital Markets.

French bond yields have come under sustained pressure since the start of the year, with yields on 10-year debt hitting an 18-month high of 1.1 per cent last month (yields rise when a bond’s price falls).

The country’s debt is the worst performing major asset class this year, with benchmark yields up 32 basis points while German bunds have gained around 14bps.

Amid swirling political uncertainty, Japanese investors have taken comfort in German bonds instead, according to the MoF data. They snapped up ¥594.1bn of German debt last month, marking the biggest three-monthly cumulative rise in holdings since late 2014.

Despite a widening in the polls between Mr Macron and Ms Le Pen, betting company Betfair is showing just a one in four chance of a far-right triumph in May.

Still, yields have eased in the past week as polls show a widening lead for centrist Emmanuel Macron over Ms Le Pen in the final round run-off after rival François Fillon vowed to stay in the race despite an escalating embezzlement scandal.

(Vox.com) A Trump hotel project seems to have involved a front for Iran's Revolu


A Trump hotel project seems to have involved a front for Iran's Revolutionary Guard
It wouldn’t be the first time Trump got into money-laundering trouble.

A lengthy new investigative story published by Adam Davidson in the New Yorker reveals that Donald Trump’s business dealings in Azerbaijan likely violated the Foreign and Corrupt Practices Act, and may have served as a conduit for money-laundering and other underhanded activities undertaken by the Iranian Revolutionary Guard.
It’s a very long New Yorker-y story that deserves your time and attention. But one of the main things it shows isn’t anything specific to Azerbaijan or Iran. It’s simply that we know very little overall about who Trump is in business with currently — and even less about who he has been in business with in the recent past.
The kind of exacting scrutiny that his finances would necessarily undergo in the event of a thorough investigation of Trump’s possible links to the Russian government would bring an enormous amount to light about a huge range of deals. That, in turn, might uncover illegal or scandalous activity that, like this story about Trump in Azerbaijan, has no apparent relationship at all with Vladimir Putin or Russian intelligence.
The key points:
  • The Trump Organization partnered with an Azerbaijani businessman to build Trump Tower Baku, a hotel project in the country’s capital that, for a variety of reasons related to location and macroeconomic conditions, seemed like a very dubious economic prospect.
  • The Trump Organization did not actually develop the project, but rather was paid to license the brand and for consulting services related to the hotel and the Trump brand — Trump people seem to have been fairly intimately involved as service providers.
  • “The Azerbaijanis behind the project were close relatives of Ziya Mammadov, the Transportation Minister and one of the country’s wealthiest and most powerful oligarchs.”
  • US diplomats have described Mammadov as “notoriously corrupt, even for Azerbaijan.”
  • The Mammadovs were also deeply in business with an Iranian-owned firm called Azarpassillo, and Davidson quotes an expert on Iran who says “It looks like Azarpassillo is a front organization for the Revolutionary Guard.”
The story raises two related legal issues.
One is whether Trump’s business ties to an extraordinarily corrupt Azerbaijani family involved violations of the Foreign Corrupt Practices Act, a law that Trump has been sharply critical of in public but which remains on the books and which Attorney General Jeff Sessions swore during his confirmation hearings he was committed to upholding.

The other is whether the Mammadov-Azarpassillo nexus violates US sanctions against Iran. The legal rules barring US firms from receiving funds that originated with a sanctioned Iranian entity, which certainly includes the Revolutionary Guard, are quite strict. You can’t simply say you didn’t know that the developer who was paying you for your licensing services was actually getting his money from a Revolutionary Guard front group. You need to do strict due diligence.
Davidson’s case is strictly circumstantial since he can’t subpoena the kind of internal corporate records that would demonstrate clearly what the Trump Organization knew — or didn’t want to know — about the Mammadovs or their Iranian friends. But Trump’s Atlantic City casinos paid $10 million in fines two years ago for noncompliance with federal rules about money laundering. The Trump SoHo project also seems to have been a front for money laundering, though Trump himself evades legal liability for that one on the grounds that he didn’t actually own the project.
To know whether there is really a prosecutable offense here (as there was with the Atlantic City money laundering) or just some ties to shady friends (as seems to be the case with Trump SoHo), you would need to take a close look at the financial details of the Trump Organization and other such matters. And the fact that there may be crimes associated with this deal — or with other deals that we don’t happen to have in-depth journalism on — is one reason that an independent inquiry into the Russia situation is dangerous for Trump.

An independent prosecutor looking into Russia matters would want to see those documents. And once you pry into the documents, there’s no telling what you’ll find. Trump has been paying a political price for nondisclosure of his finances since long before the Russia story started dominating the headlines. The reason for that could have something to do with Moscow. But it might be something else entirely.

NYT : Can 3G Capital Keep Thriving on Acquisitions and Cost Cutting?

Can 3G Capital Keep Thriving on Acquisitions and Cost Cutting?

The investment firm 3G Capital, the driving force behind Kraft Heinz and the company that owns the Burger King and Tim Hortons chains, seems to have found the secret sauce of deal-making.

But could that sauce now be nearing its expiration date?

Until recently, 3G looked unstoppable. Founded in 2004 by Jorge Paulo Lemann and four other Brazilian deal makers, the firm made its name by relentlessly crossing the globe to buy companies and ultimately form the world’s biggest beer maker, Anheuser-Busch InBev. Since then, 3G has built up empires in food through bold and aggressive acquisitions.

But last month, 3G’s Kraft Heinz retreated on a $143 billion takeover offer for the British-Dutch conglomerate Unilever, the maker of Hellmann’s mayonnaise and Lipton tea, as well as Dove soap and other personal products, after facing opposition from the target company and European politicians.

Still, 3G is not likely to shut down its insatiable acquisition drive after being thwarted over Unilever. Its recent setback provides an opportunity to reflect on what makes this firm different.

The 3G machine has two main profit drivers. First, there is the tried-and-true merger play of becoming more profitable through consolidation and expansion into new markets. Then, the scalpels come out and the combined company creates value by cutting costs.

And, boy, does it cut. The firm has developed a laserlike focus on the expense side with something called zero-based budgeting.

Each year, costs for every item at its portfolio companies are reassessed. Everything is on the table as the budget is recalculated annually.

Printers are gotten rid of, trash collection reduced and overhead slashed in what has been referred to as “brutal” cost-cutting.

At the Tim Hortons chain, for example, the company was able to grow margins 6 percent by firing most senior executives and reducing capital expenditures by 75 percent.

For every $1 on the menu at outlets of the parent company, Restaurant Brands, the company stands to reap a profit of 45 cents — a figure that is double the industry average.

Acquisitions take the place of product development.

At the companies that 3G controls, it puts into place young yet experienced managers who implement their cost-cutting agenda.

Restaurant Brands is led by Daniel Schwartz, a 3G executive who at 35 is steeped in the company’s ways.

The chief executive of Kraft Heinz, Bernardo Hees, also is a partner in 3G and was promoted from his job successfully running Burger King. The firm is known for a focus on talent and also on awarding lots of incentive compensation.

The focus on margins is not pretty, though. When 3G bought Heinz it fired 11 of 12 top executives almost immediately, and about a quarter of the headquarters staff.

The 3G cost-cutting machine is such a legend that its recent announcement that it bought Popeye’s Louisiana Fried Chicken resulted in Restaurant Brands’ stock price increasing more than 7 percent.

The reason was that investors were in essence betting that the 3G magic could produce that value through cuts and possibly foreign expansion for the largely domestic Popeye’s.

Restaurant Brands’ overhead is 1.3 percent of systemwide sales, compared with 2.8 percent for Popeye’s; that will no doubt be brought into line.

The chief executive of Popeye’s, Cheryl A. Bachelder, has already announced that she will be leaving, no doubt to be replaced by a 3G Capital disciple.

The company’s obsessive efforts to cut back on costs can almost make other private equity firms look like spendthrifts in comparison.

The success of 3G has been so great that one has to wonder why others don’t simply copy it. After all, there is no complex secret formula in cutting printers and other costs.

One way that 3G is different than other investment and private equity firms is its partnership with Warren E. Buffett’s Berkshire Hathaway.

Mr. Buffett backed the firm when it merged Heinz with Kraft, providing financing for a nice fat rate of interest on a preferred stock.

The two have also joined forces to profit from the fast-food industry. 3G bought Burger King, then took the company public by merging it with an investment vehicle controlled by William A. Ackman’s Pershing Square Capital Management.

The renamed Restaurant Brands then bought Tim Hortons with $3 billion of capital put in by Berkshire Hathaway.

And Restaurant Brands is about to get even bigger with an agreement to buy Popeye’s and its 2,600 locations for $1.8 billion.

But the larger question about 3G is whether it is possible to keep creating value by acquisition. At some point, you might think, the music stops playing.

Were that to happen, it would become clear how much long-term value is actually being created, and how much of the gains are short-term lifts from acquisitions and cost cuts. Restaurant Brands, for example, has reduced costs but revenue has remained relatively flat. Last quarter, Kraft Heinz’s revenue fell 3.7 percent.

In other words, with flat revenue, income has to come from somewhere, and you can only slash so much.

It’s a model that private equity firms don’t follow. To be sure, they also cut costs, but private equity also prides itself on revenue expansion and innovation. And the reason is simple: If the merger and acquisition pipeline dries up, so does the growth.

Indeed, Anheuser-Busch InBev is hurting now that it is too big to acquire other companies of significant scale. Its profits fell last quarter. The solution it offered: more cost-cutting.

The 3G deal makers have their supporters, of course. Mr. Buffett, who reaps great benefits financing their deals, has praised the 3G founders. “Jorge Paulo and his associates could not be better partners,” Mr. Buffett has written.

In similar ways, Pershing Square has profited greatly from its partnership with 3G and Mr. Ackman has praised its methods.

These prominent investors will continue to do so, as long as the acquisition machine can continue.

And the managers at 3G are certainly smart and have made many improvements to both companies.

But one has to wonder if a firm can succeed simply by cutting. To be sure there will be some gains and value made from the cuts, but eventually part of running a business means actually building something.

Like it or not, that will require spending on new products and the business itself, something 3G’s managers appear to hate above all else, as opposed to simply acquiring more companies.

>>> Europe Pre-MArket indications

MS CALLS
COMPANY INDICATION COMMENT
ADS GY +4% FY16 INLINE; FY17 GUIDANCE IMPLIES MID-HIGH SINGLE DIGIT UPGRADES TO CONS (THOUGH SUSPECT WHISPER HIGHER).
AF FP UNCH FEB TRAFFIC WEAKER BUT BALANCED BY MORE POSITIVE YIELD COMMENTARY
AM FP -3% WEAKER NUMBERS BUT FORECASTS HIGHER 2017 SALES / DIV 12.1EUR EST WAS 12.5EUR
CNE LN UNCH CAIRN ENERGY FY LOSS/SHR 16.56C VS BLOOMVERG EST LOSS 12.24C,GY OP LOSS $148.2M,SAYS CATCHERE,KRAKEN ON TRACK FOR FIRST OIL FROM 2017
DEQ FY -3% DEUTSCHE EUROSHOP BOUGHT A SHOPPING CENTER FOR 382M EUR AND DECIDED TO RAISE CAP EX SUBSCIPTION RIGHTS / UP TO 4.7M SHS / 8.7% OF CAP / REPORTED NUMBERS ARE A TOUCH BETTER
DPW GY -1% UNDERLYING EBIT SMALL MISS AND 2017 GUIDANCE BELOW CONS.; DIVI TOUCH ABOVE; LIKELY TO SEE SOME PROFIT TAKING
ELE SM +3% PRESS REPORTS CHAIRMAN HAS BEEN APPROACHED OVER TAKEOVER
GFS LN +3% G4S FY16 ADJ REV GBP6.82B VS BLOOMBERG CONS GBP6.81B,FY16 DIV/SHR 5.82P
HILS LN +2% HILL & SMITH FY REV GBP 540.1M,FY ADJ OP PFT GBP 70.6M
ISAT LN +2% INMARSAT FY16 REV $1.33B VS BLOOMBERG EST $1.31BLN,OUTLOOK CONTINUES TO BE DIFFICULT TO PREDICT
LGEN LN -1% UNEXCITING UPDATE - NO.S BROADLY IN LINE - DIV INLINE, THERE WERE SOME HOPES OF AN INCREASE
PAGE LN +2% PAGEGROUP FY REV GBP1.20B VS BLOOMBERG CONS GBP 1.21B,FY SPECIAL DIV / SHR 6.46P
PBB GY +2% GOOD SET OF NUMBERS / DIV EUR 1.05 / KEPT FY17 OUTLOOK

CS:

Adidas +2-3% Numbers better, guidance ahead, divi better
Admiral UNCH EPS 2% beat, overall dividend light, growth still strong
Agfa Gevaert +2-3% FY revs slightly ahead, guidance ahead
Allianz -1% Regulator rejected purchase of life insurance portfolio
Assa Abloy +0.5% Investor day after close, targets cautiously conservative
Azimut -1-2% Announced that its CFO is leaving the business
Bossard UNCH FY16 EBIT 1.5% ahead, Net income 3% ahead, outlook inline
Boskalis +2% Revs 2.6b cons 2.551b, EBITDA 660m cons 600.5m
Cairn Energy M/P Net loss slightly worse but cash slightly ahead
Credit Ag +1% Said to weigh $2.4B Saudi Bank Stake
Deut Post -2% FY revs €57.3b vs cons 56.37b, EBIT slightly light
Deut Pfand +2-3% FY Pre-tax ahead, dividend better
Dorma Kaba M/P H1 Sales inline, EBITDA 1% ahead, confirms objectives
Endesa +3% Chairman said approached over takeover
Foxtons -2-3% Numbers light and guidance cautious, UK budget today
GFS +2-3% Revs £6.82bn vs cons £6.81bn, cash flow better
Hochschild -1% Revenues 1.5% light, Adjusted EBITDA 2.5% light
Inmarsat +2-3% 4Q revenues, EBITDA better, market challenging
L&G -1-2% Op profit 1.5% below cons, EPS slightly light
Miners UNCH Copper +0.55%, Brent -0.65%, Iron Ore +1.00%, China -0.20%
Novo Nord -1-2% Expects to falls short of 2020 goal of 40m patients
Oils -0.5% US API showed a build of 11.6m barrels. WTI -85bps
Page Group M/P FY 16 operating profit slightly ahead, nothing on guidance
SAS M/P Q1 pretax loss SEK697m, cons loss SEK651.5m
Schaeffler +1-2% EBIT margin at 12.7% (est 12.3) and guidance inline
Unite Group +0.5% Exchanged contracts for the disposal of Woburn Place
Verbund UNCH FY16 EBITDA small ahead, divi inline, guidance light

MF
*ADIDAS-Q4 GM 48.8%(46.6),Rev 4.69b(4.67),E-Comm 4b by '20(2).........+3.5%
*CREDIT AGRICOLE-Considers selling $2/4b Saudi stake sale(31%)........+0.5%
*DEUT POST-Q4 Ebit 1.11b(1.12),FY Ebit 3.49b(3.5),Rev 57.3b(56)... ...-0.5%
*SAP-Growth in Asia remains strong,lwed by Emerging markets...........+0.25%
*ONTEX-FY Rev 1.99b(1.99),Q4 Rev 520.2m(516),Ebitda 62.2m(61.5).......+1%
*BOSKALIS-FY Rev 2.6b(2.55),Ebitda 660m(600.5),'17 Capex 250m.........+1%
*IMCD-FY Rev 1.71b(1.72),Gross Inc 381.6m,Ebita 147.8m(142),DPS 55c...+1%
*POPULAR-Asks AGM permission for possible Capital Increase............-0.5%
*ENDESA-Chairman said approached over takeover - Confidencial.........+1%
*DORMA-H1 Ebitda 175.4m(173),Rev 1.17b(1.17),Confirms FY tgts.........+0.5%
*DSM/EVONIK-To invest €200m in Omega 3 plant - Telegraaf..............-0.3%
*BEIERSDORF-FY Rev/OG known,Ebit 1.015m(1.015),NI 709m(684),o/l gd....+0.5%
*DT PF&BRIEF-Q4 PT 55m(40),NI 10m(0),NII 112m(105),o/look +ve.........+1.5%
*DASSAULT AVIATION-FY Net 384m(427),Div 12.1(12.5),Ord intake dwn.....-3%
*AIR FRANCE-Feb traffic +2.9%,6.5m passengers,Transavia +30%..........+1%
*SCHAEFFLER-All know,Rev 13.3b,Ebit Margin 12.7%,Div increase.........U/C