S&P Energy Index trading higher and outperforming the S&P 500
The S&P Energy Sector (+0.6%) is trading ahead of the broader market (flat). June crude oil is -0.1% at $95.96/barrel, June natural gas is +0.2% at $4.14/MMBtu, June RBOB is -0.4% at $2.90/gallon, and June heating oil is flat at $2.90/gallon. Trading higher following guidance: SXC (+0.1%); Trading lower: SXCP (-0.7%).
S&P Consumer Discretionary Index -0.2%
The consumer discretionary group is underperforming the broader market in early trade. The retail group is mixed with the Retail HOLDRS Trust (RTH) -0.3% and the SPDR S&P Retail ETF (XRT) 0.3%. Other notable mentions: Leaders: AVP 0.8% (Avon Appoints Pablo Munoz as Senior Vice President and President, North America), BKS 5.1% (Techcrunch reports Nook Simple Touch will be updated with a web browser and email)... Laggards: HST -1.2% (Names Gregory J. Larson Its Chief Financial Officer), EDMC -1.1% ( discloses it received a subpoena from the SEC) Analyst related: Upgrades: PCLN 2.7% (upgraded to Buy from Hold at Deutsche Bank), P 1.7% (upgraded to Equal Weight from Underweight at Barclays)... Downgrades: LOW -0.9% (downgraded to Perform from Outperform at Oppenheimer), DNKN -2% (downgraded to Neutral from Buy at Longbow), BBBY -2.2% (downgraded to Hold from Buy at Jefferies), PLCE -0.4% ( downgraded to Neutral from Positive at Susquehanna)... Misc: BBY 0.6% (Hearing positive comments at Janney related to store-within-a-store strategy), BYI 2.5% ( initiated with a Neutral at Credit Suisse)
Campbell shares little changed following beat on earnings
Campbell Soup (CBB) reported third quarter earnings of $0.62 per share, excluding non-recurring items, $0.06 better than the Capital IQ consensus of $0.56, while revenues rose 15.0% year/year to $2.09 billion versus the $2.05 bln consensus. The acquisition of Bolthouse Farms added 11% Volume and mix added 5%; Price and sales allowances added 1% Increased promotional spending subtracted 2%. Ex-restructuring-related charges, adjusted gross margin in the current quarter was 36.7% (38.8% last year). The decline in gross margin was mostly attributable to the acquisition of Bolthouse Farms, which operates with a lower gross margin structure. Co issues guidance for FY13, raises EPS to $2.58-2.62, excluding non-recurring items, benefitting from a favorable tax rate and the EBIT improvement, from $2.51-2.57 versus the $2.57 Capital IQ consensus and revenues at upper end of +10-12% guidance to approxmately $8.48-8.63 billion versus the $8.54 bln Capital IQ consensus. This guidance includes the estimated impact of the Bolthouse Farms business and excludes the impact of acquisition transaction costs and restructuring charges. In fiscal 2013, Campbell expects Bolthouse Farms to contribute approxmately $750 million to sales and add ~$0.06 to adjusted EPS, including the impact of the suspension of Campbell's strategic share repurchase program. "In U.S. Soup, our condensed, ready-to-serve soups and broth businesses delivered double-digit sales growth. Global Baking and Snacking also posted solid top-line growth across Pepperidge Farm crackers, cookies and bakery, as well as in Arnott's biscuits. At Bolthouse Farms, we delivered another quarter of strong results in super-premium beverages, carrots and salad dressings... Our International business was up 2% for the quarter... We are disappointed that certain parts of our portfolio did not perform well in the quarter. U.S. Beverages faced ongoing softness in the shelf-stable juice category and heightened competition. North America Foodservice continued to be challenged by the loss of a major restaurant customer and structural shifts in the food service sector."
Warner Chilcott shares rise 3% following acquisition by Actavis
Actavis (ACT) will acquire Warner Chilcott (WCRX) in a stock-for-stock transaction valued at approximately $8.5 billion. The transaction is expected to be more than 30% accretive to Actavis non-GAAP EPS in 2014, including anticipated synergies. Under the terms of the Transaction Agreement, at closing WCRX shareholders will receive 0.160 shares of New Actavis for each Warner Chilcott share they own, which equates to a value of $20.08 per Warner Chilcott share based on Actavis' closing share price of $125.50 on May 17, 2013. This represents a 43 % premium compared to Warner Chilcott's volume-weighted average trading price of $14.00 for the 30 day trading period ending on May 9, 2013 (the day before Warner Chilcott disclosed it was engaged in preliminary discussions with Actavis) and a 34 % premium to the Warner Chilcott closing share price on May 9, 2013 of $15.01. Based on the closing prices of Actavis shares and Warner Chilcott shares on May 9, 2013 of $106.81 and $15.01 each respectively, the value of the consideration payable per Warner Chilcott share would be $17.09 which would represent a premium of 14 % over the Warner Chilcott closing share price on such date. The transaction is expected to be tax-free, for U.S. federal income tax purposes, to Warner Chilcott shareholders.
Actavis shareholders will receive one share of New Actavis for each Actavis share they own upon closing. The transaction will be taxable, for U.S. federal income tax purposes, to Actavis shareholders. Immediately after the close of the transaction, Warner Chilcott shareholders are expected to own ~23 % of New Actavis. Shares of New Actavis are expected to trade on the NYSE under the ticker symbol ACT. At the close of the transaction, which is expected by year-end 2013, Actavis and Warner Chilcott will be combined under a new co incorporated in Ireland, where Warner Chilcott is currently incorporated. The newly created co, which is expected to be called Actavis plc will be led by the current Actavis leadership team. The combination of Actavis and Warner Chilcott will result in Specialty Brand sales comprising ~25 % of total combined company 2013 revenues, when compared to approximately 7 % for standalone Actavis. More than $400 mln in after-tax operational synergies and related cost reductions and tax savings are anticipated. The majority of savings are expected to be realized in 2014, with full effect during 2015. The majority of these are operational and this estimate excludes any revenue, manufacturing or interest rate synergies or savings. The combination is expected to generate strong operating cash flow which would further enable the combined company to rapidly deliver the balance sheet to below 3.0x debt to adjusted EBITDA at close. If successfully completed, the transaction will create a leading global specialty pharma co with approximately $11 billion in combined annual rev, and the third-largest U.S. specialty pharmaceutical co with ~$3 billion in annual revenues focused on core therapeutic categories of Women's Health, Gastroenterology, Urology and Dermatology. The proposed transaction has been unanimously approved by the Boards of Directors of Actavis, Inc. and Warner Chilcott plc, and is supported by the mgmt teams of both companies.
JA Solar shares rise 5% following beat on EPS and revenues
JA Solar (JASO $5.92 +0.31) reported first quarter loss per ADS of $0.85 per share, $0.35 better than the Capital IQ consensus of ($1.20), while revenues rose 6.1% year/year to $270.03 million versus the $209.1 million consensus. (The company also reported net loss of ($0.17). Total shipments in the first quarter of 2013 were 442.7 MW, consisting of 248.0 MW of modules, 189.5 MW of cells, and 5.2 MW of module and cell tolling, above the Company's previously provided guidance of 410 MW to 430 MW. Gross margin was positive 6.0% in the first quarter of 2013, compared with negative 4.6% in the fourth quarter of 2012 and positive 2.1% in the first quarter of 2012. As of March 31, 2013, the Company had cash and cash equivalents of RMB 2.8 bln ($454.9 mln), and total working capital of RMB 278.4 mln ($44.8 mln). For the second quarter of 2013, the Company expects total shipments to be between 410 MW and 430 MW. The Company's full year guidance of 1.7 GW to 1.9 GW remains unchanged. "Shipments exceeded the high end of guidance in the first quarter thanks to solid sales across our key markets, particularly in regions with higher ASPs, resulting in improved gross margins and a significant reduction in net loss...Having successfully repaid $119 mln of our convertible notes in May, we are continuously evaluating our financing options to ensure we have the cash needed to solidify our market-leading position, while maintaining a healthy balance sheet. Going forward, JA Solar's combination of superior product offerings and prudent financial management will continue to help us further expand our global footprint and customer base."
Qihoo Tech shares rise 6% following better than expected earnings
Qihoo 360 Tech (QIHU $43.75 +2.70) reported first quarter earnings of $0.14 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.13; revenues rose 58.6% year/year to $109.9 mililon versus the $105.89 mln consensus. The company issued upside guidance for the second quarter with revenues of $142-144 milion versus $121.19 million consensus. First Quarter Operating Metrics Total monthly active users of Qihoo 360's products and services reached a record 457 mln in March 2013, compared to 411 mln in March 2012. User penetration of Qihoo 360's products was 95.8% in March 2013, compared to 93.4% in March 2012. Total smartphone users of Qihoo 360's primary mobile security product reached ~275 mln in March 2013, compared to 74 mln in March 2012. Monthly active users of Qihoo 360's browsers reached a record 332 mln in March 2013, compared to 273 mln in March 2012. User penetration of Qihoo 360's browsers reached a record 69.6% in March 2013, compared to 62% in March 2012. Average daily unique visitors to the 360 Personal Start-up Page and its sub-pages were 94 mln in the first quarter of 2013, compared to 77 mln in the first quarter of 2012. Average daily clicks on Qihoo 360's Personal Start-up Page and its sub-pages were ~489 mln in the first quarter of 2013, compared to 295 mln in the first quarter of 2012. Paying users of Qihoo 360's web game platform were ~281,000 in March 2013, compared to 139,000 in March 2012.
Acquity Group shares soar 113% following acquisition for $13/share by Accenture
Accenture (ACN $82.24 +0.00) and Acquity Group Ltd. (AQ $12.70 +6.74) have entered into a definitive agreement under which Accenture will acquire Acquity Group. Accenture has agreed to pay $13.00 per outstanding American Depositary Share, each of which represents two ordinary shares ($6.50 per ordinary share), or a total of approximately $316 million, in cash for Acquity Group. The acquisition is subject to Acquity Group shareholder approval as well as other customary closing conditions.