MORNING NEWS CALL
REUTERS
U.S. Edition
Monday, November 10, 2014
INSIGHT
TOP NEWS
• Landmark Hong Kong-China stock trading scheme to start Nov. 17
A long-awaited trading link between Hong Kong and Shanghai will launch on
Nov. 17, a crucial step towards opening China's capital markets that will give
foreign and Chinese individual investors unprecedented access to each others'
stock exchanges.
• New rules proposed to put an end to "too big to fail" banks
Global regulators proposed new rules to ensure that bank creditors rather than
taxpayers pick up the bill when a big lender collapses.
• KKR prepares more Samson asset sales as oil prices plunge-sources
KKR & Co, which led the acquisition of oil and gas producer Samson Resources Corp for $7.2 billion in 2011 and has already sold almost half its acreage to cope with lower energy prices, plans to sell its North Dakota Bakken oil
deposit worth less than $500 million as part of an ongoing downsizing plan,
according to people familiar with the matter.
• J.C. Penney stock could fall 35 pct if sales growth missed -Barron's
A shortfall in projected sales growth for J.C. Penney Co Inc could help drive
the stock down 35 percent, according to the Nov. 10 edition of Barron's, which
notes the company's chances of reaching its long-term financial goals look
slim.
• Berkshire Q3 profit drops on investments, operating results gain
Warren Buffett's Berkshire Hathaway Inc said on Friday third-quarter profit fell
9 percent as it took a large writeoff on one of its investments, but operating
results easily topped forecasts on improvement in its insurance, energy and
railroad operations.
BEFORE THE BELL
A landmark deal to give global investors easier access to China's $3.9 trillion
stock market lifted world shares to their highest in over a month. The so-called
Stock Connect trading scheme, scheduled for November 17 launch, will at the
same time provide a channel for Chinese savers to start moving some of the
$8 trillion of private wealth currently in deposits into overseas stocks. U.S.
stock index futures pointed to a higher start on the first trading day of the
week, after the S&P 500 and Dow closed at record levels in the previous session. At 7.15 a.m. ET S&P 500 futures rose 3.25 points, Dow Jones industrial
average futures were up 28 points, Nasdaq 100 futures added 10.75 points.
The Swiss franc hit a two-year high against the euro, edging closer to the
Swiss National Bank's three-year old cap of 1.20 francs per euro. The U.S.
dollar's fall lifted the battered gold price from 4 1/2-year lows and oil prices
rose on renewed political tensions in the Middle East and Ukraine.
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STOCKS TO WATCH
Results
• Berkshire Hathaway Inc (BRKa). Warren Buffett's company said on Friday
third-quarter profit fell 9 percent as it took a large writeoff on one of its investments, but operating results easily topped forecasts on improvement in its insurance, energy and railroad operations. Net income slipped to $4.62 billion,
Wall St Week Ahead-Earnings outlook
might be less rosy than investors
think
By Caroline Valetkevitch
With the U.S. third-quarter earnings season almost at an end, many investors
are breathing a sigh of relief as more
companies surpassed profit expectations
than in any quarter since 2010.
But some analysts say investors may be
brushing off their worries about corporate
profits a little too soon.
While most Standard & Poor's 500 companies beat analysts' expectations for
third-quarter earnings, many just barely
topped estimates, said Pankaj Patel,
head of quantitative research at Evercore ISI in New York.
Of the S&P 500 companies that had reported results as of early this week, 66
percent exceeded expectations, according to Evercore's data analysis. But that
figure falls to just 43 percent after stripping away companies that beat expectations by 5 percent or less, Patel's research shows.
The figure excluding beats of 5 percent
or less is also well below the percentage
of beats according to data based on
Thomson Reuters I/B/E/S polls of analysts. On that data, 74 percent of S&P
500 companies so far have exceeded
analysts' expectations, which is the highest for any quarter since the second
quarter of 2010. Results have come in
from 88 percent of the S&P 500.
The results could mean that an increasing number of companies are trying to
"manage their beat rate," possibly to
mask profit weakness, Patel said, noting
that companies that exceed expectations
by 5 percent or less typically see their
share prices decline in the three days
following results.
"The beat rate is artificially high, but people still watch that percent," Patel said.
"They keep buying and the market goes
higher."
The S&P 500 has risen more than 3 percent since Oct. 8, roughly when this
earnings season began. The index is up
9.1 percent from its Oct. 15 low.
In addition, analysts' keep trimming their
profit forecasts. Estimates for fourthquarter earnings are down from the start
of the quarter, along with estimates for
the first part of 2015.
Earnings growth for the fourth quarter
MORNING NEWS CALL - U.S. EDITION
November 10, 2014
or $2,811 per Class A share in the third quarter, from $5.05 billion, or $3,074
per Class A share, a year earlier. Operating profit, however, rose 29 percent to
$4.72 billion, or $2,876 per Class A share, from $3.66 billion, or $2,228 per
Class A share.
Deals
• AT&T Inc (T). The company agreed to pay $1.7 billion to acquire Mexico's
third-largest wireless operator, Iusacell, as it seeks to grab a slice of a market
with lower cellular penetration than the United States and faster potential
growth. The deal, which is subject to approval by Mexican regulators, will occur after Iusacell's owner, billionaire businessman Ricardo Salinas' Grupo
Salinas, buys out its partner's 50 percent stake in Iusacell.
In Other News
• Apple Inc (AAPL). The company pulled a "bait and switch" move to force GT
Advanced Technologies into a money-losing deal to supply the iPhone maker
with sapphire, according to an affidavit by a senior executive at the company.
In documents unsealed on Friday by a U.S. Bankruptcy Court in Springfield,
GT Advanced COO Daniel Squiller says Apple offered what would have been
GT Advanced's largest sale ever and then changed the terms of the agreement after it was too late for the smaller company to pursue other opportunities.
• Bank of America Corp (BAC). The bank is still trying to get a penalty waiver
from the U.S. SEC over a $16.7 billion settlement involving bad mortgages,
Bloomberg reported on Friday, citing two people familiar with the matter. According to Bloomberg, BofA's lawyer, Gary Lynch, asked that additional sanctions tied to the settlement be waived. He argued the bank it is being unfairly
treated compared with other firms that were given waivers in similar cases.
• BlackBerry (BBRY). The company which has completed the first phase of its
two-year turnaround plan is now focused on profitability and will not spread
itself thin by attempting to launch too many new devices, its chief executive
said. "Once we turn this company to profitability again, I will do everything I
can to never lose money ever again," John Chen told Reuters in an interview
this week. "That is definitely something I am very focused on doing."
• Boeing Co (BA). Japan's SMBC Aviation Capital has bought 80 Boeing 737
Max planes, the largest order from an aircraft lessor for the upgraded variant
of the narrow-body jet. The deal is valued at more than $8.5 billion at list
prices, although buyers typically get significant discounts.
• Burger King Worldwide (BKW). The fast food chain will open about 12 outlets in India over the next 60-90 days, Rajeev Varman, chief executive of the
hamburger chain's India unit said on Saturday. "In the long run, India is going
to be one of the largest markets globally. Burger King most certainly sees India as one of the biggest opportunities in the future," Varman said ahead of the
chain's first store opening in New Delhi.
• Delta Air Lines (DAL). A decision by the U.S. aviation regulator has moved
forward plans by a small Georgia airport to begin commercial airline service,
despite strong opposition by the company and the city of Atlanta, the local
county authority said on Friday. The approval by the Federal Aviation Authority
clears the way for the environmental study that is seen as the last major step
before the FAA would decide on whether to allow commercial service at the
single-runway airport, located about 40 miles from Atlanta, county officials
said.
• Dow Chemical Co (DOW). Private equity firm Golden Gate Capital is in the
lead to acquire Angus Chemical Co, a specialty chemicals subsidiary of the
company, for more than $1 billion, according to three people familiar with the
matter. Golden Gate has so far outbid other buyout firms, including Onex Corp
and Metalmark Capital Holdings LLC, in the auction for Angus, the people
said. The negotiations are ongoing and the outcome could still change, the
people added.
• General Motors Co (GM). The company ordered half a million replacement
ignition switches almost two months before it alerted federal safety regulators
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now is estimated at 7.6 percent compared with an Oct. 1 forecast for 11.1
percent growth, Thomson Reuters data
showed. For the 2015 first quarter, profit
growth is seen at 8.8 percent, down from
an Oct. 1 forecast for 11.5 percent
growth.
Moreover, the magnitude by which fourth
-quarter estimates are falling has increased compared with the previous
quarter, said Nick Raich, chief executive
officer of The Earnings Scout, a Cleveland-based independent research firm
specializing in earnings trends.
In outlooks given by companies themselves - done by only a minority of companies - the news is not good. Negative
outlooks outnumber positive ones for the
fourth quarter so far by a ratio of 3.9 to 1,
up from the third quarter's ratio of 3.3 to
1, Thomson Reuters data showed.
"That's a worsening trend," Raich said.
"The outlooks have gotten a little bit
worse this quarter."
Outlooks could become even dimmer if
lackluster demand overseas translates
into weak results for the fourth quarter.
"The United States clearly is the bright
spot in the world," said Uri Landesman,
president of Platinum Partners in New
York. "The rest of the world isn't nearly
as strong, so demand coming from certain places is weaker, and the currency
is going to have an enormous impact
going forward."
MORNING NEWS CALL - U.S. EDITION
November 10, 2014
of the issues that prompted a recall of millions of vehicles, WSJ reported, citing email exchanges between the automaker and its supplier Delphi Automotive Plc (DLPH). The email exchanges, which took place in mid-December
2013 between a GM contract worker and Delphi, indicate GM placed an
"urgent" order for 500,000 replacement switches on Dec. 18, a day after a
meeting of senior executives, the newspaper said.
• J.C. Penney Co Inc (JCP). A shortfall in projected sales growth for the company could help drive the stock down 35 percent, according to the Nov. 10
edition of Barron's, which notes the company's chances of reaching its longterm financial goals look slim.
• KKR & Co (KKR). Shares in Club Med jumped after French media reported
that Italian tycoon Andrea Bonomi was considering a possible counteroffer for
the French holiday group backed by the company. Weekly economic newsletter La Lettre de L'Expansion reported on Sunday that Bonomi, whose previous
bid of 21 euros-a-share was trumped by Fosun, was considering a fresh counteroffer that would extend the battle for control of Club Med.
• Lockheed Martin Corp (LMT). Canada could take delivery of an initial four F
-35 fighter jets built by the company in 2017 under an agreement with the U.S.
military, although no final decision has been made, sources familiar with the
matter said on Friday.
• Rio Tinto (RIO). The global miner which gets 92 percent of its revenue from
iron ore is unfazed by the drop in ore prices and sticking to plans to raise output, chief executive Sam Walsh told Reuters in an interview. The miner is also
confident of increasing returns to shareholders at full-year results in February,
Walsh said, adding that it has no plans to cut its 2015 capital spending target
of $8 billion, announced last year.
• Time Warner Inc (TWX). The media giant has approached struggling Australian broadcaster Ten Network Holdings Ltd about a A$680 million takeover
bid, the Australian Financial Review reported. The indicative approach was
pitched at A$0.25 per share and "only intended to facilitate further discussions
with you", AFR reported, quoting an Oct. 6 letter from a Time Warner executive to Ten's advisers, Citigroup.
• Total (TOT). The oil company can withstand oil prices at $80 a barrel and the
French firm will continue its current investment projects, Total's president for
exploration and production said.
ANALYSTS' RECOMMENDATION
• Agilent Technologies (A). Leerink cuts target price to $45 from $67; rating
outperform on lowered estimates to reflect the exit of the Nuclear Magnetic
Resonance business in addition to currency headwinds.
• CF Industries (CF). Susquehanna cuts target price to $305 from $316; rating positive on reduced estimates after weak quarterly results.
• Target Corp (TGT). Stifel raises rating to buy from hold based on more optimistic near-term US and 2015 Canada inputs and ROIC inflection.
ECONOMIC EVENTS
10:00 Employment Trends: Prior 121.7
COMPANIES REPORTING RESULTS
• No major companies are scheduled to report results.
CORPORATE EVENTS
08:00 Transocean Ltd (RIG) Q3 earnings conference call
08:00 WhiteWave Foods Co (WWAV) Q3 earnings conference call
08:30 3D Systems Corp (DDD) Q3 earnings conference call
08:30 Gogo Inc (GOGO) Q3 earnings conference call
08:30 Karyopharm Therapeutics Inc (KPTI) Q3 earnings conference call
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MORNING NEWS CALL - U.S. EDITION
November 10, 2014
08:30 OPKO Health Inc (OPK) Q3 earnings conference call
08:30 Rayonier Inc (RYN) Q3 earnings conference call
08:30 Taro Pharmaceutical Industries Ltd (TARO) Q2 earnings conference call
09:00 AGL Resources Inc (GAS) Q3 earnings conference call
09:00 Dean Foods Co (DF) Q3 earnings conference call
09:00 EV Energy Partners LP (EVEP) Q3 earnings conference call
09:00 Sotheby's (BID) Q3 earnings conference call
09:00 Phibro Animal Health Corp (PAHC) Annual Shareholders Meeting
09:00 United States Cellular Corp (USM) Annual Shareholders Meeting
11:00 Balchem Corp (BCPC) Q3 earnings conference call
11:00 RSP Permian Inc (RSPP) Q3 earnings conference call
16:30 Caesars Entertainment Corp (CZR) Q3 earnings conference call
16:30 Halozyme Therapeutics Inc (HALO) Q3 earnings conference call
16:30 ICU Medical Inc (ICUI) Q3 earnings conference call
16:30 NPS Pharmaceuticals Inc (NPSP) Q3 earnings conference call
16:30 PDL BioPharma Inc (PDLI) Q3 earnings conference call
16:30 Portola Pharmaceuticals Inc (PTLA) Q3 earnings conference call
16:30 Rackspace Hosting Inc (RAX) Q3 earnings conference call
16:30 Woodward Inc (WWD) Q4 earnings conference call
17:00 ACADIA Pharmaceuticals Inc (ACAD) Q3 earnings conference call
17:00 Pra Group Inc (PRAA) Q3 earnings conference call
17:00 Premier Inc (PINC) Q1 earnings conference call
18:00 HFF Inc (HF) Q3 earnings conference call
EXDIVIDENDS
• American Campus Communities Inc. (ACC). Amount $0.38
• Amgen Inc. (AMGN). Amount $0.61
• Avon Products Inc. (AVP). Amount $0.06
• Boardwalk Pipeline Partners LP. (BWP). Amount $0.10
• Entergy Corp. (ETR). Amount $0.83
• Starbucks Corp. (SBUX). Amount $0.32
• TECO Energy Inc. (TE). Amount $0.22
• TJX Companies Inc. (TJX). Amount $0.18
(All analysts' estimates are according to Thomson Reuters I/B/E/S/)
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(Compiled by Samarendra Sahoo, Nikhil Kumar and Pradip Kakoti in
Bangalore)
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