>>> Apple Fourth Quarter Conference Call Summary (118.25 +0.60)

Apple Fourth Quarter Conference Call Summary (118.25 +0.60)
  • Apple Pay with live in Japan yesterday; co expects rapid adoption in the country.
  • Apple Pay transactions higher by 500% YoY.
  • Co expects over 100 HomeKit products to soon be available on the market.
  • Company has invested in machine learning research and development and deals.
  • Co exited the quarter below targeted range for iPhone channel inventory.
  • Co expects December quarter China sales will be significant better than this quarter (as seasonally expected).
  • iPhone ASP's were above expectations.
  • Co expects iPhone ASP's to increase QoQ.
  • Mac install base reached all time high at the end of the September quarter.
  • iPad channel inventory exited the quarter below target range.
  • iPhone 7 Plus demand is outstripping supply.
  • Asked about iCar: Co said it does not comment on rumors; says car space is an area where alot of technologies will become available in the general industry.
  • Underlying demand on iPhone 7 and iPhone 7 Plus is 'strong'.
  • Co said that it is open to acquisitions of any size.
AAPL shares are trading lower by 3% after hours following earnings/guidance. See 17:23 for additional color. Apple suppliers include: CRUS, INVN, SWKS, QRVO, QCOM, NXPI, AVGO, TXN, KYO

>>> Apple beats by $0.01, reports revs in-line; guides Q1 revs above consensus,

Apple beats by $0.01, reports revs in-line; guides Q1 revs above consensus, gross margin below
  • Reports Q4 (Sep) earnings of $1.67 per share, $0.01 better than the Capital IQ Consensus of $1.66; revenues fell 9.0% year/year to $46.85 bln vs the $46.98 bln Capital IQ Consensus. Apple reports Q4 gross margins 38.0% vs 38% ests vs 39.9% last year.
  • iPhone shipments 45.5 mln vs 45.2 million ests and 48.05 million last year.
    • iPads 9.3 mln vs 9.3 million ests versus 9.9 million in Q4 of last year.
    • Macs 4.9 mln vs 5.2 million ests versus 5.7 million in Q4 of last year.
  • Co issues upside guidance for Q1, sees Q1 revs of $76-78 bln vs. $75.33 bln Capital IQ Consensus; gross margins of 38.0-38.5% vs 39% ests vs 40.1% last year; op-ex $6.9-7.0 bln;
  • "We are pleased to have generated $16.1 billion in operating cash flow, a new record for the September quarter."
  • Rev by geography: Americas -7%; Europe +3%, Greater China -30%; Japan +10%, Asia Pac. -1%.

>>> US Close Dow -0.30% S&P -0.38% Nasdaq -0.50% Russell -0.84%

Closing Market Summary: Averages End Lower as Mixed Earnings Weigh

The stock market ended the Tuesday affair on a modestly lower note as investors evaluated the latest batch of quarterly reports. Today's trade also featured a pullback in crude oil and increased volatility in the foreign exchange market. The Nasdaq Composite (-0.5%) settled behind the S&P 500 (-0.4%) and the Dow Jones Industrial Average (-0.3%).

The major averages inched lower at the start of the session, responding to mixed quarterly results from some market bellwethers. Dow components Procter & Gamble (PG 87.97, +2.87, +3.4%) and Merck (MRK 61.95, +1.20, +2.0%) finished at the top of the price-weighted average after reporting upbeat quarterly results. On the flipside, Dow members 3M (MMM 166.23, -5.04, -2.9%) and Caterpillar (CAT 84.48, -1.51, -1.8%) finished behind the index after cautious guidance stymied buying interest. 

Equities extended their losses after the opening hour as some strengthening in the U.S. Dollar Index (98.73, -0.02, -0.02%) flashed warning signs to the broader market. The move higher came on the heels of some fleeting depreciation in the British pound. Sterling plunged 1.3% against the dollar (1.2083) ahead of commentary from Bank of England Governor Mark Carney. However, remarks from Governor Carney proved to be rather innocuous and the currency pair narrowed its loss throughout the remainder of the session. The pound lost 0.5% against the dollar (1.2183).

Crude oil was also unable to find its bearings today as the energy component extended its losing streak. Participants remained unsettled after Iraq indicated in the prior session that it may seek an exemption from the previously discussed OPEC supply freeze agreement. WTI crude ended its session lower by 1.3% ($49.87/bbl; -$0.65), extending its weekly loss to 1.9%. The American Petroleum Institute is scheduled to release its weekly inventory report after today's close while the Department of Energy will report its more influential inventory data tomorrow at 10:30 ET.

The broader market finished in the bottom of today's trading range as nine S&P 500 sectors ended in negative territory. Consumer discretionary (-1.2%), materials (-1.0%), telecom services (-0.6%), and technology (-0.4%) rounded out the leaderboard. 

The consumer discretionary sector (-1.2%) bore the brunt of today's selling interest as the home retailer, apparel, and automobile sub-groups each moved lower following disappointing earnings and/or guidance. Lowe's (LOW 68.47, -2.51, -3.5%) and Home Depot (HD 123.34, -4.44, -3.5%) were under pressure after Sherwin-Williams (SHW 247.61, -30.27, -10.9%) missed quarterly earnings estimates and lowered its earnings outlook for the remainder of the year. Shares of Under Armour (UA 32.89, -5.01) tumbled 13.2% as below-consensus revenue guidance for the fourth quarter masked a bottom-line beat. Separately, General Motors (GM 31.60, -1.38) finished down 4.2% despite reporting a better-than-expected quarter.

In the technology sector (-0.5%), top-weighted Apple (AAPL 118.25, +0.60) finished higher by 0.5% ahead of its quarterly report. Meanwhile, Corning (GLW 22.97, -0.92) fell 3.9% despite reporting above-consensus quarterly results. The high-beta chipmakers finished slightly ahead of the broader sector as the PHLX Semiconductor Index slipped 0.2%.

The industrial group (-0.4%) settled in-line with the broader market as aerospace and defense names led. Lockheed Martin (LMT 249.26, +17.10, +7.4%) beat earnings estimates for the quarter and raised its full-year outlook. Separately, large caps Caterpillar (CAT 84.48, -1.51, -1.8%) and 3M (MMM 166.23, -5.04, -2.9%) each finished lower. 

Treasuries finished on a mixed note with the short end of the curve underperforming. The yield on the 2-yr note rose two basis points to 0.86% while the yield on the benchmark 10-yr note ended down one basis point at 1.76%.

Today's trading volume was below the average of 853 million as 819 million shares changed hands at the NYSE floor.

Today's economic data included the Case-Shiller 20-city Index for August, the FHFA Housing Price Index for August, and Consumer Confidence for October: 

  • The FHFA Housing Price Index for August rose 0.7%, which followed an increase of 0.5% in July.
  • The Case-Shiller 20-city Home Price Index for August rose 5.1%, which fell in-line with the consensus. This followed the previous month's unrevised reading of 5.0%.
  • The Conference Board's Consumer Confidence Index fell to 98.6 in October from a downwardly revised 103.5 (from 104.1) in September. The downturn in October followed back-to-back monthly gains in the Index.

Tomorrow's economic data will include the weekly MBA Mortgage Index and International Trade in Goods for September, which will be released at 7:00 ET and 8:30 ET, respectively. The day's data will be capped off with the 10:00 ET release of New Home Sales for September (consensus 610k). 

  • Russell 2000: +7.0% YTD
  • Nasdaq Composite: +5.5% YTD
  • S&P 500: +4.9% YTD
  • Dow Jones: +4.3% YTD

Germany’s ThyssenKrupp to Sell Brazilian Steel Plant to Ternium

Germany’s ThyssenKrupp to Sell Brazilian Steel Plant to Ternium
Latest step in German company’s unsuccessful investment push into the Americas

FRANKFURT—German engineering giant Thyssenkrupp AG is in talks with Ternium SA to sell its large steel plant in Brazil, a step that would finish unwinding the German company’s unsuccessful investment push in the Americas, according to people familiar with the matter.
The discussions are at an advanced stage and could be concluded by year-end, those people said, adding there is no guarantee a deal will take place. One significant potential stumbling block is the fact that Ternium would likely want to pay less than the plant’s current book value of roughly €2 billion ($2.17 billion).
Any deal below that value would hit ThyssenKrupp’s equity cushion, which is already thin, according to analysts. It was unclear whether other bidders are also eyeing the steel-slab plant, which cost Thyssenkrupp roughly $6.8 billion to build when finished in 2010. In 2013, Thyssenkrupp sold its U.S. steel plant to ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion.

Thyssenkrupp said in an emailed statement that the company is seeking to dispose of Companhia Siderúrgica do Atlântico, or CSA, adding it was a normal course of business to hold talks with potential buyers.
A Ternium investor-relations official declined to speak with The Wall Street Journal. The company’s press office didn’t immediately respond to an email.
Ternium is a Luxembourg-based producer of flat and long steel products with a strong presence in Latin America.
CSA has an annual production capacity of 5 million tons. The plant swing to a €39 million operating profit in the third quarter of the fiscal year ending Sept. 30, up from a €25 million loss in the same quarter last year.
Selling the Brazilian steel unit would help ThyssenKrupp Chief Executive Heinrich Hiesinger’s effort to shift the company away from steel operations.
Steel prices in Europe have come under pressure in recent years, due to anemic steel demand growth and ​a sudden flood of steel shipments from China, where shrinking demand led to a glut in steel production. Large steel producers in Europe such as ThyssenKrupp, ArcelorMittal and Tata Steel ​Ltd ​have responded to the supply glut over the years by ​shutting loss-making production capacity, laying off thousands of workers and/or disposing assets.
ThyssenKrupp, whose roots trace back more than 200 years and at some point gained notoriety for its weapons including the giant World War I-era howitzer known as Big Bertha, has also said it is in talks to transfer its European steel operations into a joint venture with Tata Steel Ltd.​
The talks with Tata appeared to have been cast into doubt on Monday, however, when India-based conglomerate Tata Group, the founder and owner of Tata Steel, ousted its group chairman Cyrus Mistry in a surprise move.

Mr. Mistry, also chairman of Tata Steel, was a key supporter of talks to combine Tata’s remaining European steel operations with those of ThyssenKrupp. Analysts at Kepler Chevreux said it was still too early to draw conclusions but “we think the risks for a JV between Tata Steel Europe and Thyssenkrupp Steel Europe have increased.”
They added the joint venture might be delayed by at least six months “at the very least” given growing risk of resistance to the deal from Thyssen’s union and works council.
Additionally, the shape such a joint venture would take is currently also unclear. While ThyssenKrupp’s management prefers to tie-up its German steel plants with Tata’s large mill in the Dutch city of Ijmuiden, Tata appears willing to include its U.K. plant called Port Talbot into the joint venture, people familiar with the matter said.
That could be an unattractive alternative for ThyssenKrupp because Port Talbot has suffered hefty losses over the years and has substantial pension liabilities.

DJ Germany's ThyssenKrupp to Sell Brazilian Steel Plant to Ternium

DJ Germany's ThyssenKrupp to Sell Brazilian Steel Plant to Ternium
By Eyk Henning
FRANKFURT--German engineering giant ThyssenKrupp AG is in talks with Ternium SA to sell its large steel plant in Brazil, a step that would finish unwinding the German company's unsuccessful investment push in the Americas, according to people familiar with the matter.
The discussions are at an advanced stage and could be concluded by year-end, those people said, adding there is no guarantee a deal will take place. One significant potential stumbling block is the fact that Ternium would likely want to pay less than the plant's current book value of roughly EUR2 billion ($2.17 billion).
Any deal below that value would hit ThyssenKrupp's equity cushion, which is already thin, according to analysts. It was unclear whether other bidders are also eyeing the steel-slab plant, which cost ThyssenKrupp roughly $6.8 billion to build when finished in 2010. In 2013, ThyssenKrupp sold its U.S. steel plant to ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion.
ThyssenKrupp said in an emailed statement that the company is seeking to dispose of CSA, adding it was a normal course of business to hold talks with potential buyers.
A Ternium investor-relations official declined to speak with The Wall Street Journal. The company's press office didn't immediately respond to an email.
Ternium is a Luxembourg-based producer of flat and long steel products with a strong presence in Latin America.

>>> Zodiac Pool Solutions to be acquired by Rhone from Carlyle Group

Zodiac Pool Solutions to be acquired by Rhone from Carlyle Group
Not Zodiac but Carlyle

Rhône, a private equity firm, will acquire Zodiac Pool Solutions SAS, a French residential pool and spa business, fromtheCarlyle Group, a private equity firm. No financial terms were revealed.
The transaction is expected to close promptly. In March, the Carlyle Group hired Credit Suisse to shop the business and reportedly hoped to sell it for around USD 800m, according to a newswire report.
Zodiac, in business for more than 100 years, makes equipment and solutions for in-ground residential swimming pools and spas. The company, with 1,300 employees worldwide, has grown over the past three years by acquiring in-ground residential swimming pool companies.
Press release:
The Carlyle Group has accepted an offer from investment funds affiliated with Rhône to acquire Zodiac Pool Solutions SAS and its global residential pool and spa business, including its family of premium brands and all 1,300 employees worldwide, the companies announced today. Financial terms of the agreement were not disclosed. The transaction, subject to regulatory approvals, is expected to close promptly.
With its global headquarters in Paris, France and operational headquarters in Vista, Calif., Zodiac is a global manufacturer of premium residential pool equipment and automation solutions. The acquisition will include the Zodiac leadership team and its high-profile brand portfolio including Zodiac® Pool, Jandy® Pro Series, Polaris®, iAquaLink®, Cover-Pools®, MagnaPool, CaretakerTM, SAVI and Nature2®.
Rhône, established in 1996, is a global asset management firm with a focus on investments in market leading businesses with a pan-European or transatlantic presence and expansion prospects. Rhône has offices in London and New York and currently holds investments in a diversified portfolio of companies, including investments in the business services, chemicals, consumer products, industrial products, food, packaging, specialty materials and transportation sectors.
Zodiac has established itself as one of the global pool and spa industry's major players. Over the past three years, Zodiac has grown its premium brands through a strategic focus on its core global in-ground residential swimming pool business and an emphasis on customer-driven technological innovation across its product portfolio. This focus positioned Zodiac well during the pool construction market's recovery.
Recent strategic acquisitions by Zodiac include SAVI, a U.S. pool and spa lighting company, in 2014; Pool Resources, an Australian distributer of pool chemicals; Two10, a South African producer of pool chemicals; MagnaPool, an Australian company specializing in pool mineral water systems; and SET, a German company specializing in heating systems for swimming pools. Pool Resources, Two10, Magnapool and SET were acquired in 2013. Additionally, Cover-Pools, a U.S. manufacturer of automated pool covers, was acquired in 2008.
The Carlyle Group acquired Jandy in 2006 and Zodiac in 2007. The Zodiac brand was first registered in 1909.
"Based on our strong financial performance and growth over the past three years, culminating in a record year in 2016, the timing was right for new investment from a new partner," said Bruce Brooks, Zodiac's CEO since 2011. "We are proud of our company's achievements working with Carlyle, and we are excited about building on our accomplishments with Rhône. Rhône is great partner for Zodiac, and this is excellent news for our employees, customers, vendors and the pool and spa industry. We look forward to building on Zodiac's heritage of excellence to drive ever greater technological innovation and quality as we work to grow Zodiac's market share across all of its premium brands."

>>> US Gapping down:

Gapping down:

In reaction to disappointing earnings/guidance:
  • UA -15%, SONC -13.0%, NLSN -7.4%, EAT -6.3%, PII -6.3.%. WHR -6.1%, JBLU -3.7%, CAT -2.5%, NVS -2.3%, WAT-1.7%, LLY -1.5%, MMM -1.3%.
Other news:
  • DPRX -85.5% (announces that the OneStep-1 and OneStep-2 Phase 3 clinical trials of Locilex in patients with mild infections of diabetic foot ulcers did not meet the primary clinical endpoint standardized wound care),
  • FCEL -16.2% (discloses its Beacon Falls Energy Park project was not selected for contract negotiations under the The New England Clean Energy Request for Proposals),
  • PLG -10.5% (will raise $40 mln through bought deal financing of 22,230,000 common shares at $1.80/share),
  • MTL -10.4% (following Monday's 35% move higher),
  • BPL -5.2% (priced upsized offering of 7.75 mln limited partnership units (from 7.5 mln) at $66.05 per LP Unit),
  • LULU -3.2% (moving lower on UA comments),
  • CRZO -2.0% (prices upsized underwritten public offering of 6 mln shares (from 5 mln) of its common stock for total gross proceeds of approximately $225 mln),
  • NKE -1.7% (moving lower on UA comments),
  • SKX -1.3% (moving lower on UA comments).
Analyst comments:
  • CALA -20.3% (initiated with a Sell at Citigroup),
  • SPN -8.4% (downgraded to Neutral from Buy at Citigroup),
  • CLVS -7.7% (initiated with a Sell at Chardan Capital Markets; tgt $15),
  • VFC -1.5% (downgraded to Hold from Buy at Deutsche Bank, downgraded to Neutral from Buy at Citigroup, VFC target lowered to $68 at Telsey Advisory Group following yesterday morning's Q3 earnings).