(Raymond James) Hermes - M&A speculation could come back but capital is locked i

M&A speculation could come back but capital is locked in the short term: 
our analysis of the Family holdings (and the free float) and the increasing need for liquidity, lead us to believe M&A speculation could return in the mid-term (no official comment has been made about this), but this is not integrated in our current valuation.

Full note attached

>>> Apple: Color on Quarter (118.25)

Apple: Color on Quarter (118.25)
-->AAPL down 3% premarket after reporting third straight Y/Y sales decline; gross margins are declining and Q1 gross margin guidance was light. Investors are hoping for some innovation to create the next leg of growth. AAPL had risen 22% since its fiscal third quarter report in July.

  • Stifel downgraded to Hold from Buy as they believe shares of Apple could remain range bound ($105-120/share; 6-7x EV/EBITDA on C2018 estimates vs. 5-10x NTM historical 5-yr range) over the next 2-3 quarters until they/investors are able to garner greater insight into potential fundamental upside drivers. They move their target price to $115 from $130, or 7x EV/EBITDA. They were admittedly looking for a solid F4Q16 beat-and-raise; leading into clearer upside potential for F1Q17.
  • Cowen: While there could be some minor hand wringing over GMs, AAPL is tightly managing supply but still nicely threaded the needle on guidance. From here, investors can now really start to focus on iPhone 10 being the flame in C2017 that lights the "powder keg" that is forming in the installed base. Target remains $135, but even this is very conservative given their estimates and comp multiples.
  • Mizuho: Apple reported fourth quarter results that came in-line with expectations. Management noted strong product cycle and continued switching activity but called out current undersupply of 7+ models. Guidance implied iPhone units for DecQ inline with consensus, though expectations had risen into the print given recent Samsung news flow. They continue to favor the stock on potential upside to estimates, undemanding valuation and material upside based on LTVC analysis. Reiterate Buy rating and $130 PT.
  • RBC thinks the sell-off creates an attractive entry point for investors given fundamentals are largely intact and AAPL left room for upside in Dec-qtr. Sept-qtr results were largely in line with expectations and AAPL guided for modest upside to December revenue ($76-78B vs. Street at ~$75B). However, Dec-qtr gross margin outlook (38-38.5%) and implied EPS guide of $3.15 were slightly below expectations. iPhone units came in at 45.5M (while AAPL increased channel inventory by 2.5M) and their guide implies iPhone units improving by ~60-70% q/q to ~75-77M range for Dec-qtr and ASPs should improve materially in Dec-qtr (improved mix). Overall, they think results/guide mark a solid start to what they think will be a stable iPhone 7/7+ cycle. Maintain OP and $125 target.
  • Needham notes iPhone revenue rose $4.1B to $28.2B driven in part by Samsung's Galaxy Note 7 imploding in September. Forbes valued the Samsung brand at $83B before the Note 7 debacle and they estimate $10-$20B of brand value transfers to AAPL during the next adoption cycle owing to Samsung's poor handling of the replacement, recall and ultimate discontinuation of the Note 7. Services revenue was a bright spot, up 24% y/y to $6.3B in FY4Q16. Of the $350mm extra services revenue q/q, their channel checks indicate that Pokemon Go represented much of the growth. Software-based revenue growth underscores AAPL's platform value, and raises reported margins, lowers earnings volatility, and lowers risk compared to a hardware-only business model.
  • Maxim: Dec quarter guidance likely conservative given: Supply constraints that imply y/y growth will transpire on an apples-to-apples basis. Implied more iPhones in transit on a y/y basis, indicating production capacity is up y/y. China and India commentary that is consistent with why we are modelling for a 16% y/y sell-out increase in iPhone units in FY17E. Maintaining street-high estimates based on survey data and analysis, but lowering GM estimate as we triangulate guidance implies about 200bp of GM pressure on iPhone 7 cycle units. Their proprietary survey data point to AAPL being on the precipice of a multi-year investment upcycle; $173 tgt.
    • Mizuho: The lack of DecQ upside for AAPL, despite the 14th week, and Samsung's issues might be a near-term challenge for the RF component suppliers SWKS and QRVO. AAPL noted iPhone 7+ supply constraints and the much earlier launch in SepQ took down some of the DecQ upside, while China remains a headwind.

>>> US Gapping Up

Gapping up
In reaction to strong earnings/guidance:
  • SCKT +24.6%, LOGI +13%, UIS +8.4%, VRTX +7.9%, (also, Vertex Pharma initiates two Phase 2 studies to evaluate the next-generation correctors VX-440 and VX-152 in triple combination regimens with tezacaftorand ivacaftor in people with cystic fibrosis), GRMN +7.1%, AKAM +6.7%, PNRA +5.5%, IRBT +4.9%,
  • JNPR +4.6%, NCR +3.5%, MRCY +3.1%, RRC +3.1%, OC +3%, BSX +2.5%, NOC +2.5%, CB +2.4%, NAP +2.1%, KO+1.8%, LEA +1.7%,
  • ESRX +1.6%, (also Express Scripts in 10-Q discloses recent receipt of civil investigative demand from the United States Attorney's Office & subpoena duces tecum from the DOJ and United States Attorney's Office)
  • BIIB +1.6%, MDR +1.5%, VNTV +1.4%, WM +1.4%, EXAS +1.3%, SAN +1.3%, EXC +1.3%, AOS +1.2%, BA +1.1%,CMCSA +0.7%, DGI +0.6%, CG +0.6%
  • M&A news: TWTR +3.1% (M&A blog Betaville discusses vague rumors that Disney (DIS) could again be looking at the company)
Other news:
  • OGXI +27% (announces positive survival results from the final analysis of the Phase 2 Borealis-2 trial)
  • LGCY +20.6% (executes a second lien term loan credit agreement with GSO Capital Partners LP to provide loans in an aggregate amount up to $300 million; adds additional director )
  • APRI +10.2% (announces that Greece has granted its commercialization partner, Recordati, market approval for Vitaros for erectile dysfunction)
  • FNBC +9.2% (First NBC Bank releases statement in response to 'unfounded assertions' and confirms it remains profitable)
  • DXPE +3.8% (downsizes and prices primary public offering of 2.16 mln shares of common stock at $19.70 per share)
  • CIEN +2.6% (JNPR sympathy)
  • DB +1.7% (report that DB is considering alternatives to bonus payment plans)
  • ARIA +1.5% (publication of preclinical data on brigatinib for the treatment of patients with anaplastic lymphoma kinase positive metastatic non-small cell lung cancer)
  • QGEN +1.2% (shareholders approve proposal to return approx. $250 mln in cash to shareholders through a synthetic share repurchase plan that combines a direct capital repayment with a reverse stock split)
  • CWEI +1% (following 25%+ move higher on Tuesday)

Analyst comments:
  • NSM +1.8% (initiated with a Buy at Nomura)
  • PHG +1.1% (upgraded to Buy from Hold at HSBC)
  • DEO +1% (upgraded to Buy from Hold at HSBC)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • FUEL -30.8%, (also names new CFO), NUVA -12.4%, EW -11.6%, WFT -10.7%, P -8.9%
  • COLL -8.4%, (sees Q3 revs of $400k vs $2.20 mln two analyst estimate; sees cash and cash equivalents of approximately $90.9 mln as of September 30; commences common stock offering), SIX -7.3%, LUV -6.7%, CHRW -6.5%, GLAD -4.8%, (to sell shares of its common stock in an underwritten public offering;)
  • RCKY -4.3%, ABAX -4%, CMG -3.9%, (also also approved the investment of up to an additional $100 million, exclusive of commissions, to repurchase shares of our common stock), USNA -3.9%, ( also approved a two-for-one stock split of the Company's common shares), CAB -3.4%, HT -3.2%, EBSB -3%
  • AAPL -2.8%, ALLY -2.8%, FCBC -2.7%, BLDP -2.3%, COF -1.9%, SLAB -1.7%, IR -1%
Select oil/gas related names showing early weakness: SDRL -1.8%, MRO -1.3%, RDS.A -1.1%, CHK -1%, RIG -0.9%, BP-0.9%, .

Other news:
  • BLPH -18.9% (files for $24 mln mixed securities shelf offering)
  • RTTR -18.5% (prices 2,127,660 shares of its common stock at a price to the public of $2.35)
  • TNXP -16.1% (intends to offer shares of its common stock and warrants to purchase common stock in an underwritten public offering pursuant to a shelf registration statement on Form S-3 previously filed )
  • DPLO -6.5% (promotes Paul Urick to President effective November 1st)
  • DPLO -6.5% (CFO Sean Whelan to step down, Paul Urick has been promoted to Diplomat's president)
  • BLDP -2.3% (closes joint venture deal for local production of fuel cell stacks in China; expected to generate $170 mln minimum revenue over 5-years)
  • ADC -2.2% (commences underwritten public offering of 1,650,000 shares of its common stock)
  • RRR -2.2% (files for offering of 37.51 mln shares on behalf of selling shareholders)
  • ERIC -1.6% (appoints Borje Ekholm as President and CEO, effective Jan 16)
Analyst comments:
  • LOW -1.6% (downgraded to Neutral from Overweight at JP Morgan)
  • GM -1.2% (downgraded to Neutral from Buy at BofA/Merrill)

>>> Mondelez Int'l beats by $0.09, reports revs in-line; increases Adj-EPS outlo

--> MDLZ -> indicated +1.73% pre-open nothing traded yet

Mondelez Int'l beats by $0.09, reports revs in-line; increases Adj-EPS outlook, trims organic net revenue growth outlook
  • Reports Q3 (Sep) earnings of $0.52 per share, $0.09 better than the Capital IQ Consensus of $0.43; revenues fell 6.6% year/year to $6.4 bln vs the $6.44 bln Capital IQ Consensus.
  • Gross profit margin was 38.9 percent, a decrease of 10 basis points, driven primarily by higher Restructuring Program costs partially offset by the deconsolidation of the company's Venezuelan operations. Adjusted Gross Profit margin was 39.9 percent, an increase of 30 basis points. Strong net productivity and improved volume/mix was mostly offset by higher trade investments in a few key markets.
  • FY16 Outlook:
    • Organic Net Revenue Growth: The company now sees growth of ~1.6% (Prior +~2%)
    • Adjusted Operating Income Margin: Continues to see margins of 15-16%
    • Adj-EPS: Now sees growth of ~25% on a constant currency basis (Prior: Double digit growth)
    • FCF: Continues to see FCF of at least $1.4 bln
    • Based on foreign exchange rates as of Oct. 21, 2016, there would be a negative translation impact on full year net revenue growth of approximately 4 percentage points and on full year Adjusted EPS of approximately $0.093 (from approximately $0.08).

>>> Ariad Pharm announces the publication of preclinical data on brigatinib for

--> No pre-market yet

Ariad Pharm announces the publication of preclinical data on brigatinib for the treatment of patients with anaplastic lymphoma kinase positive metastatic non-small cell lung cancer
The design and preclinical characterization of brigatinib are described in an article titled, "The Potent ALK Inhibitor Brigatinib (AP26113) Overcomes Mechanisms of Resistance to First- and Second-Generation ALK Inhibitors in Preclinical Models," in the journal Clinical Cancer Research.
  • In the preclinical studies described in the paper, brigatinib was shown to be a highly potent and selective inhibitor of ALK, inhibiting ALK at lower concentrations than crizotinib, ceritinib, and alectinib.
  • Furthermore, in these studies, brigatinib was the only inhibitor that showed activity against all 17 tested ALK mutants that have been associated with preclinical or clinical resistance to existing ALK inhibitors, including G1202R.
  • In addition, compared to crizotinib, brigatinib was shown to significantly prolong survival of mice with ALK+ tumors in the brain. ARIAD has commenced the Phase 3 ALTA 1L clinical trial to compare brigatinib and crizotinib in ALK+ NSCLC patients who have not received prior ALK inhibitors.

>>> Pandora Media color on qtr; misses on revs, guides Q4 lower than expectation

--> Shares of P slide lower in the premarket, indicated about -8.9% on light volume, approaching mid-June lows near the $11-level
Pandora Media color on qtr; misses on revs, guides Q4 lower than expectations and cuts FY16 rev guidance
  • FBR & Co. lowered their rating on P to Market Perform from Outperform and cut their tgt to $12 from $16 following earnings as they were particularly bearish on the ad slowdown and higher spending guidance. Firm had thought that the guide for $120 million of spending for the on-demand launch in 2016 captured the opex impact. But P said there is an additional $24 million per quarter of spending starting mainly in 4Q16. This appears to be tied in part to the cost of administering complicated licensing contracts with labels. Firm had already captured the additional $22 million per quarter in costs from the higher licensing fees for the direct deals with labels. They assume P comes in shy of its 2020 ad targets but hits the subscription goals. But higher costs and slower ad growth make the 2017 guide disappointing, and prompt firm to hike the risk premium on the 2020 goals, taking their SOTP price target down $4 to $12. The slower ad trend also could lessen the value of Pandora to Sirius, weakening the argument for downside support in a potential takeout.
  • RBC Capital Mkts raised their tgt on P to $14 from $13 following earnings as they felt that similar to Q2, P posted a Miss & Lower Q3, with the company seeing weakness in its core Advertising segment. P hosted an analyst day to accompany the earnings release, with management focusing on the upcoming (Dec. 6th) launch of the Pandora Premium On-demand product.Firm is incrementally more cautious on the name.
  • Mizuho lowered their tgt to $12 from $13 on P noting they would highlight two things: 1) they agree that Pandora has a big and unique opportunity to drive new and meaningful revenue from subscriptions products, but it will take time; and 2) investments will continue to be significant into 4Q and possibly through 2017. While they like the LT opportunity of subscription, proof will be in execution over the next few quarters. With continued weakness in ad revenue, flat user growth and increased investments, they still remain on the sidelines.
  • Needham held onto their Buy, $16 tgt on P following earnings noting what they liked most was the promise of higher transparency and extra metrics in 2017, to help Wall Street track execution. They believe investors in P are hedged because they see several potential acquirers if P stumbles, including the record labels because P should represent 11% of total US music industry revenue in 2017 (i.e., too big to fail, in their view).
  • Wedbush too held onto their rating of Outperform, $15 tgt following the report noting they expect losses to persist into early 2017 as Pandora invests in on-demand music and international expansion. In addition to its new live events venture, its on-demand service and international expansion are Pandora's strategic priorities. Further, they believe that Pandora can convert 2 million Pandora One subscribers to on-demand, can attract 1 -- 2 million new U.S. on-demand subscribers, and can sign up 1 -- 2 million international on-demand subscribers in 2017, if it is successful in launching on time with a competitive offering.
  • Dougherty & Company notes P is on a mission, aggressively investing to expand the functionality of its legacy business, as well as on the development of a new On-Demand service, and into international markets, all with the goal of creating the go-to platform for music discovery. This vision doesn't come cheap, especially in a business where the company has yet to sustain any meaningful margin leverage. Making matters worse, the company stumbled in Q3 and guided down for Q4. The company now faces a steep climb to profitability and until they have more confidence that the new product launches can drive sustainable profitability, firm is going to remain on the sidelines.

Boeing reports Q3 (Sep) results, beats on revs; reaffirms FY16 EP ex-tax benefit

Boeing reports Q3 (Sep) results, beats on revs; reaffirms FY16 EP ex-tax benefit; raises rev on higher commercial deliveries
  • Reports Q3 (Sep) earnings of $3.51 per share, including $.98 in favorable tax items, may not be comparable to the Capital IQ Consensus of $2.62; revenues fell 7.5% year/year to $23.9 bln vs the $23.6 bln Capital IQ Consensus.
  • Co issues reaffirms guidance for FY16, sees EPS of $6.10-6.30 ex-$0.70 favorable tax adjustment vs. $6.29 Capital IQ Consensus Estimate; raises FY16 revs $500 mln to $93.5-95.5 bln vs. $94.04 bln Capital IQ Consensus on higher commercial deliveries: to 745-750 from 740-745.
  • "Solid operating performance across our commercial and defense and space businesses in the third quarter again generated strong cash flow for Boeing, which continues to fuel investments in our future and enable us to deliver compelling returns to our shareholders," said Chairman, President and Chief Executive Officer Dennis Muilenburg. "We also captured key orders, reinforcing the strength of our large and diverse order backlog

>>> Hess beats by $0.12, misses on revs

HES - Flat Pre open

Hess beats by $0.12, misses on revs

  • Reports Q3 (Sep) loss of $1.12 per share, excluding non-recurring items, $0.12 better than the Capital IQ Consensus of ($1.24); revenues fell 29.2% year/year to $1.20 bln vs the $1.21 bln Capital IQ Consensus.
  • Reduced E&P capital and exploratory expenditures by 49% to $435 mln from $849 mln in the prior-year quarter.
  • Oil & gas production was 314,000 boepd; Bakken net production was 107,000 boepd.
  • "Our company continues to take steps to maintain a strong balance sheet and materially reduce our spending...We also are investing in growth projects including the world-class Liza oil discovery in Guyana that we believe will create significant value for our shareholders. Based on the positive results of the Liza-3 well, we now expect Liza to be at the upper end of the previously announced estimated recoverable resources range of 800 million to 1.4 billion barrels of oil equivalent."