>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • CSPI +15.5%, NWY +14.6%, AMAT +5.1%, MENT +4.5%, FL +4.2%, DE +3.8%, SPWH +2.8%, CRMT +2.8%, XGTI+2.8%, ROST +2.7%, CCIH +1.5%
M&A news:
  • RDUS +2.8% (amid renewed, vague M&A chatter with Shire (SHPG) mentioned)
  • EMMS +2.5% (Emmis Comms receives non-binding proposal to be acquired for $4.10/share in cash )
Other news:
  • SHLM +12.6% ( Chairman Joseph Gingo has been named CEO and president, effective immediately; to initiate comprehensive review of business plan and global end markets in light of fiscal 2016 performance)
  • CXW +9.2% (following 35% decline after DOJ said it will phase out use of private prisons; Corrections Corp comments on Inspector General's report; says findings simply don't match up to the numerous independent studies)
  • GEO +7.1% (after closing 40% lower on the day; released statement after the close on DoJ announcement regarding contracted prisons for Federal Bureau of Prison; will host conference call Friday August 18 at 11am ET)
  • JONE +6.5% (prices previously announced underwritten public offerings of 21 mln shares of its Class A common stock at $2.77/share)
  • MCEP +4.2% (light volume, Director disclosed purchase of 40000 shares, worth total of $101.6K), SQ +2.5% (Point72 Asset Management discloses 5.4% passive stake), MU +2.5% (following AMAT results)
  • BLDP +1.9% (Ballard Power announced that a $28.3 mln strategic equity investment made by Zhongshan Broad-Ocean Motor; enters strategic collaboration framework agreement)
  • TRN +1.3% (Trinity Industries receives confirmation from the U.S. Attorney for the District of Massachusetts that it has closed its investigation into the Company's ET 2000 and ET Plus guardrail end-terminal products without taking enforcement action)
  • LRCX +0.9% (following AMAT results)
Analyst comments:
  • RH +6.3% (upgraded/added to Conviction Buy List at Goldman)
  • ANGI +2% (upgraded to Outperform from Mkt Perform at Raymond James)
  • VG +1.9% (Craig Hallum raises tgt to $10 from $8.50)
  • AGN +0.8% (upgraded to Buy from Neutral at Mizuho)

>>> Deere beats by $0.61, misses on revs; guides Q4 revs in-line; raises FY16 ne

Deere beats by $0.61, misses on revs; guides Q4 revs in-line; raises FY16 net income guidance
  • Reports Q3 (Jul) earnings of $1.55 per share, $0.61 better than the Capital IQ Consensus of $0.94; net slaes of equipment operations fell 14.3% year/year to $5.86 bln vs the $6.03 bln Capital IQ Consensus.
    • Sales included price realization of 2% for the quarter and year to date. Additionally, sales included an unfavorable FX effect of 2% for both the quarter and nine months. Equipment net sales in the United States and Canada decreased 16% for the quarter and 13% year to date. Outside the U.S. and Canada, net sales decreased 12% for the quarter and 7% for the first nine months, with unfavorable currency-translation effects of 4% and 6% for the respective periods.
    • Operating profit improvement for the quarter was primarily driven by price realization, lower (+4% to $625 mln) production costs and a decrease in selling, administrative and general expenses, partially offset by reduced shipment volumes and the unfavorable effects of foreign-currency exchange.
  • Co issues in-line guidance for Q4, sees Q4 revs of -8% to $5.46 bln vs. $5.44 bln Capital IQ Consensus Estimate.
  • Co raises FY16 net income to $1.35 bln from $1.2 bln; lowers sales to down 10% from down 9%.
  • "John Deere's performance in the third quarter reflected the continuing impact of the global farm recession as well as difficult conditions in construction equipment markets," said Samuel R. Allen, chairman and chief executive officer. "All of Deere's businesses remained profitable with the Agriculture & Turf division reporting higher operating profit than last year
Deere guidance follow-up for agriculture/turf, construction/forestry, & financial services segments
Agriculture/Turf:
  • Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 8% for fiscal-year 2016, including a negative currency-translation effect of about 2%.
  • Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 15 to 20% for 2016. The decline, reflecting the impact of low commodity prices and weak farm incomes, has been most pronounced in the sale of higher-horsepower models.
  • Full-year 2016 industry sales in the EU28 are forecast to be flat to down 5%, with the decline attributable to low commodity prices and farm incomes, including continued pressure on the dairy sector.
  • In South America, industry sales of tractors and combines are projected to be down 15 to 20% largely as a result of economic and political concerns in Brazil. Asian sales are projected to be flat to down slightly, due in part to weakness in China. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5% for 2016. Deere sales are benefiting from new products and general economic growth.
Construction & Forestry:
  • Deere's worldwide sales of construction and forestry equipment are forecast to be down about 18 % for 2016, including a negative currency-translation effect of about 1 %. The forecast decline in sales largely reflects the impact of weak conditions in North America. In forestry, global industry sales are expected to be down 5 to 10 % from last year's strong levels.
Financial Services:
  • Fiscal-year 2016 net income attributable to Deere & Company for the financial services operations is expected to be approximately $480 million. The outlook reflects less-favorable financing spreads, higher losses on lease residual values and an increased provision for credit losses. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.

>>> Volvo Construction Equipment could attract range of interest if up for sale

Volvo Construction Equipment could attract range of interest if up for sale – bankers - Merger Market

* Management might try to wait out China downturn before move
* Sale would follow IT, Aero divests; Volvo Penta also a candidate
* Activist Cevian bought stake in 2006, discussed corporate structure

AB Volvo’s [STO:VOLV-B] Construction Equipment business should attract a range of strategic interest if management were to explore a sale of the unit, several sector bankers said.

Strategics based in China, North America and Europe would likely take interest, they said. However, management might try and wait for profitability to improve at the company’s Construction Equipment arm before considering any move. This would include waiting out a downturn in the Chinese construction market, the bankers said.

A report in January 2016 suggested Volvo shareholders may step up efforts pushing for a split of the group if profitability did not improve. The company has long been considered a break-up candidate after activist shareholder Cevian Capital bought into the stock in 2006 and discussed structural changes with management.

A slim-down would allow Volvo to better focus on its core Trucks business, one of the bankers said. A case could be made for Volvo to continue with exits of all its non-Trucks operations, a sector analyst noted. It could make sense to sell or spin-off Construction Equipment due to it having higher end-market volatility than Volvo’s other businesses, the analyst said. Volvo declined to comment.

Since Cevian entered, Volvo has sold its IT and Aero divisions. As reported, it was rumoured to have considered selling its Buses division, with 7% of group sales, earlier this year. Marine engines business Volvo Penta, with 3% of group sales, is another clear divestment candidate, a banker said.

The size of Volvo’s construction equipment business has made it the main focal point for break-up proponents. The division accounted for 16% of group net revenues in 2015. Both a sale and spin-off of the unit have been suggested in recent years.

If Volvo does go down the sale route, it should not see a shortage of interested parties for the construction equipment division, bankers said. It is the market leader in China, although placed fourth or fifth in Europe and the US, meaning consolidation might be required for the unit, the analyst said.

The construction sector is at a low point, meaning companies will be cautious with large scale buys, one of the bankers said. However, the Volvo brand name remains attractive, he added. An Asian player interested in entering the European market might be more likely to pay a premium, the analyst suggested.

China’s Zoomlion [SHE:000157] and Illinois, US-headquartered Caterpillar [NYSE:CAT] are examples of industry players that might show interest, several bankers said. Sany [SHA:600031] is another potential buyer in the sector, one added.

Japanese players such as Komatsu [TYO:6301] and Hitachi [TYO:6501] also operate in the sector and could be potential buyers, two bankers said. Netherlands-based CNH Industrial [NYSE:CNHI] could also show interest, two other bankers suggested.

A spin-off is another option mooted in the past. Construction Equipment would have an EV of around SEK 25bn (EUR 2.64bn), making it big enough to trade well as a separate company on the stock exchange, the analyst said. Multiples in the sector are currently around 9x EBITDA, one banker said.

The unit has seen declining sales and profitability in the last few years. Net sales of SEK 63.5bn (EUR 6.7bn) with an operating margin of 10.7% in 2011 fell to net sales of SEK 51.0bn (EUR 5.4bn) with an operating margin of 4.1% in 2015. However, profitability has risen since its low point in 2014, when the unit’s operating margin was 2.3% with net sales of SEK 52.9bn.

Volvo introduced a series of cost reduction measures for the Construction Equipment unit in 2015 as it faced up to a 48% decline in its Chinese market. Changes also included a new corporate governance structure for the business and a new sales approach.

>>> US Early premarket gappers

Early premarket gappers

Gapping up: CSPI +15.5%, NWY +13.7%, SHLM +12.6%, CXW +9.8%, VG +9.7%, AMAT +6.6%, GEO +6.2%, RH +5%, JONE+4.7%, MCEP +4.2%, MENT +3.8%, SQ +3.7%, FL +3.4%, SPWH +2.8%, CRMT +2.8%, ROST +2.6%, EMMS +2.5%, HIBB+2.5%, DE +2%, MU +1.5%, WDC +1.4%, TRN +1.3%, CHK +1.1%, LRCX +0.9%, BLDP +0.9%, CERU +0.8%, PNR +0.6%,CMCM +0.6%

Gapping down: CCIH -12.4%, STEM -6.6%, FXCM -5.1%, GPS -5%, SBGL -4.5%, JRJC -3.9%, DRD -3.4%, AG -3.2%, DB -3.1%,MUX -2.5%, SAN -2.4%, CSIQ -2.4%, BBVA -2.2%, PUK -2.2%, ING -1.6%, EMR -1.5%, SLV -1.5%, BHP -1.4%, ABB -1.4%,GFI -1.4%, AU -1.4%, BBL -1.4%, BCS -1.3%, XGTI -1.3%, ENDP -1.1%, RIO -1.1%, NEM -1%, GDX -1%, HSBC -1%, ABX-0.9%, TWLO -0.7%, CAT -0.5%

>>> Medivation suitor AstraZeneca withdraws from auction; Celgene, Merck, Pfizer

Medivation suitor AstraZeneca withdraws from auction; Celgene, Merck, Pfizer and Sanofi bidding - market report
AstraZeneca [LON:AZN], an FTSE-100 pharmaceuticals group, was said to have withdrawn from the auction of Kenilworth, New Jersey-based Medivation [NASDAQ:MDVN], The Daily Mail reported. The newspaper’s market report section did not cite a source for the rumour.

As reported by Reuters on Wednesday, 17 August, rival pharmaceutical companies Celgene [NASDAQ:CELG], Merck [NYSE:MRK], Pfizer [NYSE:PFE] Gilead [NASDAQ:GILD] and Sanofi [NYSE:SNY] are have indicated interest in bidding for Medivation.

Medivation’s share price closed USD 0.71 up at USD 67.19 in New York on Thursday, valuing the company at USD 11.14bn.

Daily Mail, previously reported intelligence

>>> Lancashire Holdings receives bid approach from Ontario Teachers' Pension Pla

Lancashire Holdings receives bid approach from Ontario Teachers' Pension Plan 

Lancashire Holdings [LON:LRE], an FTSE-250 property insurance company, was said to have received a bid approach from Ontario Teachers’ Pension Plan (OTPP), The Daily Mail reported. The newspaper said OTPP is believed to have approached Lancashire Holdings prior to the UK’s “Brexit” referendum about an offer at 618p per share, but did not cite a source for the speculation. An offer at that level would value Lancashire Holdings at about GBP 1.3bn (EUR 1.50bn).

It is not known whether discussions between OTPP and Lancashire are still active, the item said.

The report went on to cite reliable sources who suggested that Lancashire has attracted interest from other parties.

Lancashire Holdings’ share price closed 4.5p up at 610.0p in London on Thursday, 18 August, valuing the UK-based company at GBP 1.21bn.


Link to original source


Source Daily Mail