Archive for June, 2014

• Ford At Eight-Month High
  Eddy Elfenbein, June 25th, 2014 at 12:10 pm

  We’re waiting on the earnings report from Bed Bath & Beyond ($BBBY) which should come later today.

  Meanwhile, shares of Ford ($F) jumped to an eight-month high this morning. The shares have been as high as $17.26 today. The Q2 earnings report will be out in a month.

  

  CR Bard ($BCR) is up nicely today. The stock was actually downgraded by Barclays.

• Q1 GDP Revised Down to -2.9%
  Eddy Elfenbein, June 25th, 2014 at 11:12 am

  The government revised downward its report for Q1 GDP growth. Or shrinkage rather. The economy dropped by 2.9% annualized for the first three months of the year. That’s a very surprising number. This was the worst quarter for economic growth in five years.

  Two months ago, the initial report said the economy grew by a scant 0.1%. Then a month ago, that was revised lower to a 1% drop. Now it’s a drop of 2.9%. Personal Consumption Expenditures (PCE), which is the key part of GDP, was revised down from 3.1% to 1%.

  Over the last 13 quarters, the U.S. economy has grown by 5.9%, which is just 1.8% annualized. Officially, this is the recovery.

• Morning News: June 25, 2014
  Eddy Elfenbein, June 25th, 2014 at 6:50 am

  Grand Central: The Unreliable Nature of Forward Guidance

  Yellen May Be Poised to Rewrite Fed’s Rule Book on Wages, Inflation

  U.S. Ruling Loosens Four-Decade Ban On Oil Exports

  Shift in GOP Leadership Leaves Export-Import Bank at Risk of Closing

  What The Supreme Court’s Greenhouse Gas Ruling Should Mean For Obamacare

  BNP Said to Move Compliance Operations to U.S. as Settlement Nears

  Ghana Sends Plane With $3 Million to Calm World Cup Team

  French Government Sells 3.1% Stake in GDF Suez

  Etihad Agrees to Take 49% Stake in Alitalia

  Telefonica, Drillisch Sign Deal to Seal E-Plus Merger

  Norway’s $890 Billion Fund Gears Up to Expand in Real Assets

  A Hunt to Find the Next Generation of Financial Planners

  Chinese Tycoon Struggles to Give Away $100 to Suspicious New Yorkers

  Joshua Brown: “The stock market is a giant distraction to the business of investing.”

  Roger Nusbaum: Self-Sufficiency and Resourcefulness Over Complaining

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• Morning News: June 24, 2014
  Eddy Elfenbein, June 24th, 2014 at 6:39 am

  German Ifo Hits Stocks, Carney Knocks Sterling

  Carney Sees Scope to Absorb More Slack as BOE Assesses Data

  Japan Unveils Latest installment of ‘Third Arrow’ Reforms

  Norway’s $880 Billion Wealth Fund to Target Frontier Markets

  Iran Seeks to Resolve HSBC Freeze on Some Trade Financing

  EPA Extended Legal Victories for Climate Change Moves

  ‘Risky Business’ Report Aims to Frame Climate Change as Economic Issue

  Crude Palm Oil Futures Remain Higher on Firm Demand

  Immelt’s Alstom Push Crowned by Promise Under Chandelier

  Oracle Puts Micros on Menu as Restaurants Eat Up Software

  KKR Buys Stake in Spain’s Acciona Energy Arm For $567 Million

  Neil Barofsky, Old Foe of Bank Bailouts, a Monitor for Credit Suisse

  Realizing the American Apparel Chief Isn’t Wearing Any Clothes

  Cullen Roche: Let’s Worry About Inflation When Employment Starts to Inflate

  Joshua Brown: A Portfolio is Not a Plan

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• It’s Official: Oracle to Buy Micros for $5.3 Billion
  Eddy Elfenbein, June 23rd, 2014 at 9:42 am

  The news from this weekend is now official — Oracle ($ORCL) is buying Micros Systems ($MCRS) for $5.3 billion. Net of cash, the deal comes to $4.6 billion.

  The buyout price is $68 per share which is a modest premium over MCRS’s share price from Friday. However, the stock got a big move last week after the rumors came out. This is Oracle’s biggest deal since Sun Microsystems in 2010. In the past 10 years, Oracle has shelled out $50 billion to buy about 100 companies.

  In early 1988, shares of MCRS were worth 12.5 cents per share. This deal represents a gain of 544-fold in 26 years.

  Let me add a quick note about insider trading. It’s often hard to spot it, but here’s a good example. Check out the minute-by-minute chart below of MCRS for the last week.

  

  You can see when the news broke last Tuesday. But also, look at how the stock crept higher just before that — on Friday and Monday. Is that proof? I don’t know but it’s awfully suspicious.

• Morning News: June 23, 2014
  Eddy Elfenbein, June 23rd, 2014 at 6:46 am

  Draghi Says Unlimited Cash Through 2016 Is Rate Signal

  China’s Factories Lift Australian Shares

  BNP Said Close to $9 Billion Sanctions Accord With U.S.

  GE Deal ‘Victory’ for Role of the French State in Economy

  Banco Santander to Buy Nordic Units of GE Money

  Rising Oil Prices Can Pull Down Markets: Fact or Myth?

  In Yellen We Trust Is Bond Mantra as Inflation Threats Dismissed

  Ex-Im Bank Hits Hurdle in New GOP Leadership

  SEC Files Lawsuit to Enforce Subpoenas Issued to Congress

  Oracle Nears $5 Billion Deal for Micros Systems

  RadioShack is Now a Penny Stock

  An Employee Dies, and the Company Collects the Insurance

  American Apparel’s Charney Fighting Board

  Sober Look: Betting Against the FOMC Could End Badly

  Jeff Miller: Weighing the Week Ahead: Is the Fed Behind the Curve?

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• Oracle to Buy Micros for $5 Billion
  Eddy Elfenbein, June 23rd, 2014 at 12:14 am

  The deals have been heating up lately. The WSJ is reporting that Oracle ($ORCL) is prepared to buy Micros Systems ($MCRS) for about $5 billion. Expect an official announcement tomorrow.

  Micros sells Internet-connected cash registers, and the software and technical services to power them, to restaurants, retail shops, casinos and other companies.

  Analysts have said a purchase of Micros, which long has been a rumored acquisition target for Oracle, would be a sign the database giant is interested in grabbing a bigger foothold in the retail and hospitality industries. FBR Capital Markets said in a recent research note that Oracle, which has $39 billion in cash and marketable securities and a $190 billion market capitalization, needs to “go on the deal warpath” to expand into emerging areas of corporate technology where the company doesn’t currently generate much revenue.

• Barron’s on Express Scripts
  Eddy Elfenbein, June 22nd, 2014 at 11:22 pm

  Vito J. Racanelli at Barron’s has good things to say about Express Scripts ($ESRX):

  Express Scripts will continue to benefit from all the long-term tail winds we’ve noted in previous items about the company: good growth in generic drugs in response to brand drug inflation; an aging U.S. population; health-care reform, expanding health coverage, and ongoing drives to reduce drug costs.

  In particular, its mail and specialty pharma business is high margin and keeps growing well, adds Retzler. The firm has one of the best pharmacy-benefit management systems around, with all clients on a single information platform, making it easier to, for example, update for new rules, regulations, and formulas, he adds.

  It doesn’t hurt that Express Scripps happens to be a well-managed company with a good balance sheet, too, with $9.3 billion in net debt, and a debt to equity ratio of about 40%.

  Here’s a company getting good growth at a time when it seems only Internet stocks are showing that, Retzler notes. Mr. Market’s sell-off has rendered Express Scripts valuation reasonable again, he says. By various metrics, the stock is significantly cheaper than its long-term history. The price/earnings ratio of 16 is below the median of 22, and attractive given the company’s 2014 EPS guidance.

  Express Scripts is a solid business that should recover if the bull market continues and should also prove defensive should a bear market unexpectedly appear. The new worries should recede over the next two to four quarters. As that happens, a 10% rise from here over the next 12 months seems, well, fair.

  Q2 earnings are due out in another month. They had lowered full-year guidance, but as Racanelli notes, it’s still for EPS growth of 12%.

• The Economist: Medtronic’s deal with Covidien makes sense
  Eddy Elfenbein, June 20th, 2014 at 11:51 am

  From The Economist:

  As American hospital operators consolidate, medical-device companies can no longer woo individual doctors over filet mignon, but must present their wares to sceptical, centralised hospital bureaucracies.

  Medtronic, like many other device firms, is trying to respond to these changes. Last year it announced a new business to help hospitals become more efficient—it wants them to start seeing it as an ally, not an adversary. Its collaborations include running two catheter labs for Britain’s National Health Service. Medtronic is also seeking to develop not just slightly improved products, but much better ones. Its new implanted heart monitor, about the size of a paper clip, sends a patient’s data to his doctor and nurses, so they can immediately spot problems. And Medtronic has enthusiastically chased growth in emerging markets. In 2012 it spent more than $800 million buying Kanghui, a Chinese maker of replacement hips and knees.

  Covidien will help it do more. As in any merger between similar firms, there will be scope for cutting overlapping costs. Their product ranges are complementary: Medtronic excels at specialist gear for cardiology, neurology and diabetes; Covidien’s strengths include tools for general surgery. In rich countries, being able to offer bundles of kit will give the group a better negotiating position with governments and hospitals. And in emerging markets, Medtronic will be able to reach a broader set of patients, notes Matthew Dodds, an analyst at Citigroup. Medtronic’s sophisticated implants are well suited to upmarket urban hospitals in China, for example. But even less advanced hospitals are likely to buy Covidien’s sutures and staples, used in all kinds of surgery.

• Oracle’s Q1 Guidance
  Eddy Elfenbein, June 20th, 2014 at 10:51 am

  Here’s Safra Catz, Oracle’s President and CFO, on yesterday’s conference call:

  Now, let’s move to the guidance. Software and cloud revenue on a GAAP and non-GAAP basis which includes new software license, software support, SaaS and PaaS and IaaS is expected to grow 6% to 8% in U.S. dollars, 5% to 7% in constant currency.

  SaaS and PaaS, one of the line items on a non-GAAP basis is expected to grow 25% to 35% in U.S. dollars, 24% to 34% in constant currency. SaaS and PaaS on a GAAP basis is expected to grow 27% to 37% in U.S. dollars, 26% to 36% in constant currency.

  Next, another one at the line, cloud IaaS on a GAAP and non-GAAP basis is expected to grow 10% to 20% in U.S. dollars and 9% to 19% in constant currency. Hardware system revenues on a GAAP and non-GAAP basis, which includes hardware systems products and hardware system support is expected to be between negative one and positive three or negative two to positive two in constant currency.

  Total revenue on a GAAP and non-GAAP basis is expected to range from 4% to 6% in U.S. dollars and 3% to 5% in constant currency.

  Non-GAAP EPS is expected to be somewhere between $0.62 and $0.66 in U.S. dollars, $0.61 and $0.65 in constant currency. GAAP EPS is expected to be somewhere between $0.49 and $0.53 in U.S. dollars and $0.48 to $0.52 in constant currency. Now, this guidance assumes a GAAP tax rate of 22% and a non-GAAP tax rate of 23.5%. Of course it may end up being different and with that I’ll turn it over to Larry.