Catalent Reasonable Take-Out Price $35/Shr: William Blair
Fed's Lockhart (moderate, non-voter): inflation is lagging behind Fed's target; Fed has more work to do - radio interview - reiterates that a patient approach to policy makes sense
Early premarket gappers
Gapping up: SUNE +56.7%, RPRX +16.4%, FMCC +8.9%, DDD +7.2%, KOPN+6.5%, LUB +5.4%, CTIC +4%, WYNN +2.9%, TRXC +2.8%, CMG +2.5%, SDRL+2.3%, MNKD +1.7%, LUV +1.4%, BBL +1.3%, BHP +1.3%, VRX +1.1%, DAL +1%
Gapping down: EXXI -75.4%, STX -8%, DDC -6.1%, ERIC -4.4%, STM -3.4%,TSM -3.2%, PIR -2.6%, MRO -2.2%, ARMH -2.1%, BCS -2%, DB -2%, SUM -1.9%,CS -1.7%, MOS -1.5%, BP -1.3%, PEP -1%, RIO -0.9%, PNC -0.8%, BAC -0.6%
Gapping down: EXXI -75.4%, STX -8%, DDC -6.1%, ERIC -4.4%, STM -3.4%,TSM -3.2%, PIR -2.6%, MRO -2.2%, ARMH -2.1%, BCS -2%, DB -2%, SUM -1.9%,CS -1.7%, MOS -1.5%, BP -1.3%, PEP -1%, RIO -0.9%, PNC -0.8%, BAC -0.6%
--> DAL US +1.94% Pre open 4k shares traded
Delta Air Lines beats by $0.03, reports revs in-line; sees Q2 PRASM down 2.5-4.5%
- Reports Q1 (Mar) earnings of $1.32 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $1.29; revenues fell 1.5% year/year to $9.25 bln vs the $9.27 bln Capital IQ Consensus, driven by $125 million in foreign currency pressures and a $5 million impact from the recent events in Brussels.
- Passenger unit revenues declined 4.6 percent, including 2 points of impact from foreign currency, on a 2.7 percent increase in capacity.
- Co sees Q2 PRASM down 2.5-4.5%; operating margin 21-23%; capacity up 2-3%.
- "While this is an improvement over our March quarter performance, we are focused on getting unit revenues back to a positive trajectory and we will make adjustments to our fall capacity levels if we are not making sufficient progress over the coming months."
- For the March quarter, the company returned $882 million to shareholders, comprised of $107 million of dividends and $775 million of share repurchases.
--> BAC US -0.95% Pre open 140k shares traded
Bank of America reports EPS in-line, misses on revs
- Reports Q1 (Mar) earnings of $0.21 per share, in-line with the Capital IQ Consensus of $0.21; revenues fell 8.0% year/year to $19.7 bln vs the $20.32 bln Capital IQ Consensus.
- Total Loans $901 bln compared to $897 mln in Q4.
- Tangible Common Equity Ratio 7.9%
- Tangible BVPS $16.17; BVPS $23.12
- Return on average assets 0.50%; return on average common equity 3.8%; return on average tangible common equity 5.4%
-
Credit Costs
- Provision for credit losses of $997 million, compared to $765 million; net charge-offs declined to $1.1 billion from $1.2 billion. Provision for credit losses increased to $997 million, due to increased reserves in the commercial portfolio due to energy sector exposure Net reserve release was $71 million, compared to $429 million, as reserve releases in consumer were mostly offset by increased commercial reserves.
-
Global Markets
- Revenue down $240 million to $4.0 billion; excluding net DVA, revenue decreased $795 million to $3.8 billion, driven by lower sales and trading results and lower investment banking fees; Sales and trading revenue down $48 million to $3.4 billion.
- FICC decreased 17%, reflecting a weak trading environment for credit-related products and lower revenues in currencies compared with a strong year-ago quarter, partially offset by an improved performance in rates and client financing
- Equities down 11%, reflecting a weaker trading performance in a challenging market environment.
- The net charge-off ratio decreased to 0.48% from 0.56%; excluding the items noted above, the net charge-off ratio was 0.46% in Q1-16, down from 0.47%
-
Energy Exposure
- Utilized energy exposure of $21.8 billion decreased $0.3 billion from Q1-15
- Higher risk subsectors of Exploration & Production (E&P) and Oil Field Services (OFS) decreased $0.6 billion from Q4-15 and $0.3 billion from Q1-15 to $7.7 billion, representing less than 1% of total corporation loans
- Energy reserves increased $525 million from Q4-15 to $1.0 billion, primarily driven by increased allowance coverage for the higher risk subsectors (E&P and OFS)
SunEdison discloses completion of investigation by Audit Committee and Independent Directors
Findings of the Independent Directors: The Independent Directors have determined that as of the date of the independent counsel report, there were no identified material misstatements in the historical financial statements as well as no substantial evidence to support a finding of fraud or willful misconduct of management, other than with respect to the conduct of one former non-executive employee as described below. However, the independent counsel materials identified issues with the overly optimistic culture and its tone at the top. The Independent Directors also identified several specific issues regarding the cash forecasting and liquidity management practices, including that:
- the cash forecasting efforts lack sufficient controls and processes;
- certain assumptions underlying the cash forecasts provided to the Board by management were overly optimistic and a more fulsome discussion of risks and adjustments with the Board was warranted;
- the management has not responded appropriately when forecasted targets were not met; and
- the Company lacked sufficient controls and processes regarding the Company's managing of cash flows, including extensions of accounts payable and the use of cash committed for projects, and related disclosures to the Board were not comprehensive or made on a timely basis. As noted above, the Independent Directors also identified wrongdoing by a former non-executive employee of the Company in connection with negotiations over the termination of the Vivint Solar, Inc. acquisition. The Company terminated the employee promptly after the Company became aware of the wrongdoing.
Remedies Adopted by the Independent Directors:
- With respect to the cash forecasting and liquidity management, the Independent Directors will require the implementation of improved cash forecasting systems with the requisite controls to manage, monitor and fully communicate changes in outlook directly to the Board. The Independent Directors will also require management to provide the Board with more transparency regarding cash management practices, including corporate and project-level covenant compliance and handling and tracking of accounts payable, and to ensure assumptions and estimates are made with a reasonable basis and include a detailed discussion of risks and top-down adjustments. The Independent Directors have further determined that the recent hiring of a chief financial officer designee will act as a remedy, and the Independent Directors recognized the importance of such designee to the evaluation of capabilities and skill sets relevant to forecasting and related matters, including when determining changes in the finance organization. The Independent Directors have also determined to review and alter the Board's delegations of authority to management, as appropriate, to remedy the above issues. The Independent Directors have determined to emphasize comprehensive training and communications programs as well.
- Finally, the Independent Directors have determined to strengthen internal controls at both the enterprise and project level to enhance visibility and control over project status and cash availability, as well as to strengthen legal groups, restructure and strengthen the Company's financial planning and analysis group, and to replace a departure in its internal audit group.
April 14, 2016
MAKOR - Tech view: Euro Stoxx 50, Dax30, S&P500, AUD/USD, AUD/NZD & NOK/SEK.
In Short: One thing standing out over the last few days is the out performance of Europe, Japan, China and Emerging markets verusus the US market. The fact that the entire world seemed to correct lower over the past few weeks and the US market remiand strong made us believe that global equities will play catch up with the US market instead of the opposite. Given the impulissvness of the move in Europe, Japan, China and Emerging markets we continue to believe that the uptrend has more legs. In the FX market we continue to favor the commodity linked currencies such as AUD, NZD, CAD & NOK. Given the break in Crude Oil above its 200dma (40.87) we are also adding a long NOK/SEK idea which also fits with our FX playbook for Q2 published outlook published at the end of March.
Euro Stoxx 50 Index (3034 last) – Bullish base above 2860, target 3217 & 3316
The Index broke back above the 55dma which is a bullish sign. The move higher looks impulsive and therefore while above the 55dma which stands at 2950 we expect to see another leg higher towards the 200dma at 3217 & then 3310
Strategy: Wrok a GTC order to buy 1 unit at 2952, target 3310 with a stop at 2845
Support: 2950, 2846-60 & 2780
Resistance: 3128, 3217 & 3313
Daily chart
Dax Index (10,033 last) – above 10,112 would argue for 10,700 / 10,800.
The Index managed to hold the path of higher lows established on the chart since the 8699 low. The recent higher low is 9498 and as long as the Index trades above it further range trading seems to be the case. A break out above 10112 will argue for a 600 point move towards 10,700 / 10,800 which is the upper boundary of the declining channel.
Support: 9498, 9125 & 8699
Resistance: 10,112 & 10,299 (200dma) & 10,700 /10,800
Daily Chart
S&P 500 Index (2082 last) – bullish base above 2033, target 2,100 & possibly 2116 & 2134
Despite the overbought technical conditions the Index is managing to consolidate at the highs which is by no doubt a sign of strength. The Index continues to hold the path of higher highs and higher lows with the recent higher low standing at 2033. While above 2033 a move higher towards 2100 and then towards 2116-2134 should be on the cards. A break below 2033 would be negative.
Support: 2,033, 2,016-2,022 & 1,969
Resistance: 2,100, 2,116 & 2,134
Daily chart
AUD/USD (0.7666 last) – bullish base above 0.7492, target 0.7850 & 0.8164
A move above 0.7723 would argue for a move to 0.7850 and above the later towards 0.8164 which is our medium term target. The recent higher low stands at 0.7492 and while above it the trend remains clearly to the upside. A break below 0.7492 would be negative but it will take a move below 0.7350-0.7400 to argue against the up trend.
Strategy: Long 1 unit from 0.7564, target 0.7850 and 0.8150 with a stop loss at 0.7475.
Daily chart
AUD/NZD (1.1180 last) – structure favors a minimum move to 1.1898
The CCY pair broke out from the declining trend line connecting the highs since 2011 (see weekly chart below), this it-self is a major development which argues for a move higher. From an Elliot wave perspective, the CCY pair has completed a 5 wave move lower which should be followed by an A,B,C correction higher. The CCY pair seems like is completed corrective wave A & B and one should now expect wave C to move higher towards 1.1898 were corrective wave A will equal corrective wave C. Today’s price action makes the 1.1035 the new pivot level and price should hold above it to keep the trend clearly higher.
Strategy: Long 1 unit from 1.0978, target 1.1890 with a stop loss at 1.0965.
Support: 1.1035, 1.0969Resistance: 1.1202 & 1.1334
Daily chart
Weekly Chart
NOK/SEK (0.9880 last) – structure favors a move higher
The CCY pair broke out from a bullish wedge pattern, the pattern argues for a move to 1.0650-1.0680. in order to keep this view the CCY pair needs to hold above the cycle low at 0.9487. Since this level is too far from market price we will use the recent higher low at 0.9669. A move above 1.003 would be bullish as it will not only take out the short term cycle high but will also argue for a move above the 200dma which is bullish.
Strategy: Long 1 unit from 1mkt price, target 1.0650 with a stop loss on at close below 0.9665.
Support: 0.9843 (55dma) & 0.9669
Resistance: 1.000-1.003, 1.0281 & 1.0650-1.0680.
Daily chart
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PayPal Credit expands to the UK with an interest-free option for purchases over £150
After separating from eBay, PayPal has been on a march to grow both its international business and transactions beyond basic e-commerce. Today it is taking a step to do both, with the U.K. launch of PayPal Credit — a service that lets consumers use their PayPal accounts to spread out online payments for goods as a replacement for traditional credit cards.
It will give consumers online the option of buying with PayPal Credit across all PayPal-enabled sites, with purchases over £150 ($212) offered at 0 percent interest to sweeten the deal, and agreements with select retailers for special interest rates on their sites. Interestingly, as a point of comparison, PayPal offers an interest-free option in the U.S. at less than half that price, $99.
This is the first market for PayPal Credit outside of the U.S., where it launched in 2014 (as a rebranded and expanded Bill Me Later) along with a PayPal Extras MasterCard physical credit card, issued by Synchrony, and a money transfer service. The U.K. service for now has no plans for a physical card or money transfer service, the company tells me. If you’re wondering why it’s taken so long to expand outside the U.S., PayPal Credit has actually been lingering around in a limited U.K. pilot since 2014, when PayPal announced its intention to take the Credit service international.
Customers apply for PayPal Credit via PayPal’s site; after they are approved, their digital wallets essentially have an added credit option on them. The basic service comes in two tiers: those who spend more than £150 on any purchase via PayPal Credit are charged 0 percent interest for four months. (After this, those balances accrue interest at the standard variable rate, which is currently 17.9 percent interest p.a., PayPal says.)
On top of this, PayPal Credit is working with select retailers — Blacks, Chain Reaction Cycles, Dyson, Millets, Samsung, Simply Games and Ultimate Outdoors — to set up promotional interest rates around payment installment plans over periods longer than four months. These might also include 0 percent interest rates, although the terms vary by store.
The move to expand into credit services is an obvious move for PayPal as it looks to expand its brand as a go-to place for all things to do with financial services, and to make its platform more appealing to retailers, who now have a range of competing options when it comes to giving their customers ways to pay for goods.
“Today’s announcement is another example of how PayPal is so much more than a button on a website,” said Cameron McLean, Managing Director of PayPal U.K., in a statement. “We are using technology to reimagine money. For consumers, it’s about giving them more choice and convenience when shopping online. For businesses, we are enabling them to grow and offer their customers greater payment flexibility. It’s a sign of things to come. As a newly independent company, we will continue to partner with retailers to find new, improved ways for people to pay.”
The U.K. — a big market for PayPal and its former owner eBay — is a regular first-stop for PayPal when it expands new services outside of the U.S. Other products it has launched here to expand its payments business include Working Capital cash advances and — in a bid to grow its point-of-sale physical transaction business — PayPal Here (the first market where it introduced an EMV card reader that is now replacing the mag-stripe in the U.S.).