WSJ : Oil Prices Gain Ahead of Inventory Report

Oil Prices Gain Ahead of Inventory Report
U.S. Oil Supplies Fell Last Week, Industry Group Says

Oil prices ticked higher Wednesday after an industry group said that U.S. oil supplies unexpectedly fell last week.

U.S. crude supplies have risen six out of the last seven weeks on record, and analysts surveyed by The Wall Street Journal expect the U.S. Energy Information Administration to report that stocks rose by 600,000 barrels last week.

But the American Petroleum Institute, an industry group, reported late Tuesday that its data showed a 6.5-million-barrel drawdown in oil supplies as refineries ran at a higher rate than expected.

Light, sweet crude for January delivery rose 81 cents, or 1.2%, to $67.69 a barrel on the New York Mercantile Exchange.

Brent, the global benchmark, rose 55 cents, or 0.8%, to $71.09 a barrel on ICE Futures Europe.

The EIA is scheduled to release its inventory data for the week ended Nov. 28 at 10:30 a.m. EST.

“Even allowing for the likelihood that this morning’s EIA release will be indicating a significantly smaller crude draw than API, any decline at all will throw a wrench into our short-term U.S. fundamental model,” said Jim Ritterbusch , president of energy-advisory firm Ritterbusch & Associates, in a note.

Oil prices have slumped for months on concerns about a world-wide glut of oil, as supply growth has outpaced demand and global inventories have piled up. Prices fell to multiyear lows last week after the Organization of the Petroleum Exporting Countries decided to maintain its current production quota.

“Weekly shifts in crude or product stocks through the rest of this month are likely to be shrugged off in deference to the much larger pricing influence of an oversupplied global crude market that has been aggravated by OPEC’s decision to forego a production cut,” Mr. Ritterbusch said.

>>> Digitimes Research: PS4, Xbox One shipments estimated at 14 million, 11 mill

Digitimes Research: PS4, Xbox One shipments estimated at 14 million, 11 million respectively in 2015

There will be 14 million PlayStation 4 (PS4) consoles shipped globally in 2015 to reach cumulative shipments of 31.5 million units and 11 million Xbox One consoles to reach 23.7 million units, according to Digitimes Research.

Wii U shipments in 2015 will be two million units to reach cumulative shipments of 10.29 million falling behind those of PS4 and Xbox One.

Xbox One shipments have been less-than-expected and Microsoft is taking actions to drop pricing for the device as part of its strategy to compete.

PS4 meanwhile is extending its influence by offering PlayStation Vue services, of which Microsoft is showing signs of adopting similar services in the future, added Digitimes Research.

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: BV +9.5%, GIII +5%, ASNA +3.8%, GWRE +1.9%, HNNA +1.9%, MCHP +1.6%.

Select metals/mining stocks trading higher: RIO +2.1%, KGC +2%, ABX +1.2%, BHP +0.9%

Select Brazil related names trading higher: ABEV +2.1%, GOL +1.7%, CIG +1.5%, BBD +1.0%, PBR +1.0%

Other news: TCCO +24.7% (announced a $3.3 mln contract from the Government of Egypt for the company's DSD 72A-SP military bulk encryption systems, training and support), SQNM +24.6% (Co and Illumina (ILMN) pool noninvasive prenatal testing intellectual property and end outstanding patent disputes), MOLG +11.8% (cont volatility), IDRA +8.4% (announced new preclinical data: IMO-2055 and ipilimumab demonstrated potent and systemic anti-tumor activity in multiple preclinical cancer models), WPRT +6.9% (acquired Netherlands based Prins Autogassystemen Holding B.V. for~$15.1 mln ), EC +4% (announces first hydrocarbon discovery in deep waters of the Colombian Caribbean), CPRX +4% (Point72 Asset Management reports 5.1% passive stake in 13G filing), OFG +3.7% (to replace THS in the S&P SmallCap 600), IPGP +2.9% (to replace CPWR in the S&P MidCap 400), IPGP +2.9% (to replace CPWR in the S&P MidCap 400), JD +2.3% (JD and Grameen China announced that they have reached an agreement on a strategic partnership in China), PRTA +1.9% (initiates NEOD001 global phase 3 registrational trial based on positive results in ongoing phase 1/2 study of NEOD001 in patients with AL Amyloidosis), ARMH +1.9% (may be trading in symp with MCHP), OAS +1.7% (may be in sympathy with SWN/WPX news), GOLD +1.6% (favorable commentary on Tuesday's Mad Money), SWN +1.3% (signed an agreement to sell oil and gas assets including ~46,700 net acres in northeast Pennsylvania to Southwestern Energy (SWN) for ~$300 mln), POT +1.3% (Bloomberg reporting that co is conducting strategic review of equity investments worth ~$4.5 bln), BMRN +1.3% (favorable commentary on Tuesday's Mad Money), WPX +1.2% (signed an agreement to sell oil and gas assets including ~46,700 net acres in northeast Pennsylvania to Southwestern Energy (SWN) for ~$300 mln), MU +1% (discloses planned expansion of clean room space to its fabrication facility in Singapore)

Analyst comments: SPN +3.9% (upgraded to Outperform from In-line at Imperial Capital), LOCO +3.3% (upgraded to Equal-Weight from Underweight at Morgan Stanley), NTLS +3.1% (upgraded to Mkt Perform at FBR Capital), VALE +2.5% (upgraded to Buy from Hold at Canaccord Genuity), THS +1.3% (upgraded to Outperform from Market Perform at BMO Capital Markets), HAL +0.7% (initiated with a Outperform at Oppenheimer), SLB +0.7% (initiated with a Outperform at Oppenheimer)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: OVTI -5.9%, BOBE -5%, ANF -5%, RY -1.3%, BF.B -0.6%.

Select Macau Gaming related names showing weakness: LVS -1.9%, MGM -1.7%, MPEL -1.6%, WYNN -1.5%

Select oil related names showing early weakness: CEO -2.6%, RDS.A -1.9%, TOT -1.7%

Other news: PBYI -17.3% (updates timeline for Filing New Drug Application for the approval of PB272 (neratinib); intends to delay its proposed timeline for filing the NDA until the first quarter of 2016), MPLX -4.6% (announces public offering of 3 mln common units representing limited partner interests), CDW -3.3% (prices 15 mln shares of common stock by selling stockholders at $33.28 per share), GES -2.9% (ANF peer, to release earnings after the close today), CCJ -1.8% (filed for a $1 bln mixed securities shelf offering yday afternoon), VGGL -1.4% (pulling back following yday's strong gains), TSLA -1.3% (WSJ Heard on the Street column out cautious), DGLY -1% (following 45% move higher yesterday), AEO -0.9% (in sympathy with ANF earnings)

Analyst comments: CBOE -5.9% (downgraded to Sell from Neutral at Citigroup - light volume), JCP -4.9% (downgraded to Sell from Neutral at Goldman), ICPT -3.8% (target lowered to $99 from $125 at FBR Capital), BURL -2.5% (downgraded to Neutral from Buy at Goldman), TASR -2.3% (downgraded to Neutral from Overweight at JP Morgan), STO -1.9% (downgraded to Equal Weight from Overweight at Barclays), ROST -0.9% (removed from Conviction Buy List at Goldman), ERF -0.9% (downgraded to Sector Perform from Sector Outperform at Scotia Capital)

>>> US Early premarket gappers

Early premarket gappers
Gapping up: MOLG +16.7%, TCCO +12.3%, BV +9.5%, WPRT +6.6%, IDRA +5.3%, GWRE +4.6%, OFG +3.7%, IPGP +2.9%, JD +2.3%, RIO +2.1%, KGC +2%, PRTA +1.9%, HNNA +1.9%, OAS +1.6%, MCHP +1.6%, SWN +1.3%, POT +1.3%, BHP +1.3%, AZN +1.3%, VALE +1.3%, WPX +1.2%, GOLD +1.2%, ARMH +1.2%, ALV +0.9%

Gapping down: PBYI -18.4%, DGLY -9%, MPLX -4.4%, TASR -3.9%, JCP -3.8%, OVTI -3.8%, CCJ -3.5%, CDW -3.2%, LVS -3%, GFI -2.3%, RDS.A -2.2%, TOT -2%, HMY -1.7%, STO -1.6%, SYT -1.6%, SAP -1.5%, BOBE -1.5%, MGM -1.4%, WYNN -1%

>>> Brown-Forman misses by $0.07, misses on revs; lowers FY15 EPS below consensu

Brown-Forman misses by $0.07, misses on revs; lowers FY15 EPS below consensus (96.00)
Reports Q2 (Oct) earnings of $0.97 per share, $0.07 worse than the Capital IQ Consensus Estimate of $1.04; revenues rose 5.2% year/year to $1.14 bln vs the $1.15 bln consensus.

Co issues downside guidance for FY15, lowers EPS to $3.15-3.35 from $3.25-3.45 vs. $3.35 Capital IQ Consensus, which incorporates an anticipated negative impact from foreign exchange of ~$0.15 per share compared to the first quarter outlook for a $0.06 per share negative impact from foreign exchange.
  • After considering current spot rates versus the prior year rates, as well as the company's hedge positions, the company anticipates a mid-single digit currency headwind on reported operating income growth for the full year.
  • The geopolitical environment remains fragile, particularly in Russia.
  • Assuming no further deterioration in current global market conditions, the co is reaffirming its underlying growth outlook for fiscal 2015, including 6-8% growth in underlying net sales, and 9-11% growth in underlying operating income.
  • After a favorable consumer and trade response to Jack Daniel's Tennessee Fire in its limited test, the company is announcing the nation-wide roll-out of the brand in the United States during 4Q15.
  • ~

>>> China expresses interest in EU's €300B fund

China expresses interest in EU's €300B fund

EU President Juncker is expected to unveil a new three-year €300B infrastructure program by the European Investment Bank (EIB) that will be administered by local governments. Europe may actually only invest €20-30B in first-loss capital with the goal of attracting the rest of the money from private investors.

(GS) Nestle - Dwg to Sell - A model of lower growth and deflation;

* Source of opportunity
2014 is likely to be the second successive year that Nestle fails to deliver the
Nestle model of 5%-6% organic growth owing to weak consumer demand
and adverse category exposure. Staples inputs have fallen 15% since July
and we expect this to further constrain growth without benefiting EBIT
margins. We expect 2015 to be worse than 2014 forcing the company to
recalibrate the Nestle model at a lower level of growth. We reduce our EPS
estimates 9%/13%/16% over 2015/16/17E and are now 3%/3%/6% below
I/B/E/S consensus. Nestle is European Staples in a microcosm: expensive,
slowing and due for a de-rating. We reduce our rating to Sell (from Neutral).

* Catalyst
Further deflation in commodity prices and increased concerns surrounding
a deflationary macro environment across DMs will further increase pressure
on Nestle pricing. Nestle is due to report FY results on February 19, 2015,
when the company is likely to give an update on its commodity basket and
deliver guidance for FY15. In the past this has consisted of repeating the
Nestle growth model of 5%-6% organic sales growth, however we expect
4.2% growth in FY15, and believe that outlook could be lowered to 4%-5%.

* Valuation
Nestle trades on a 2015E P/E of 20.4x, a 6% premium to the Staples sector,
at the same time as offering below average growth: 8% average EPS growth
over 2015-17E vs. European Staples at 10%. Our 12 month price target of
SFr65 (from SFr70) is based on our unchanged P/E methodology applying
16.8x to 2016E, to reflect our organic EBIT growth expectations, consistent
across our Staples universe.

* Key risks
Risks include: an improvement in commodity prices helping to alleviate
deflationary pressures; underlying improvement in one of Nestlé’s key
markets; and favourable M&A.