Norwegian Cruise goes upscale with its purchase of Prestige Cruises
Norwegian Cruise Line (NCLH) is jumping 12% today on news that it will acquire Prestige Cruises, which specializes in the upscale segment of the cruise industry. It's the parent company of Oceania Cruises and Regent Seven Seas Cruises. NCLH is paying $3.025 bln including the assumption of debt.
It's a pretty large deal. NCLH currently operates 13 ships and Prestige operates eight ships so this will be quite a step up in terms of capacity. Oceania Cruises is the market leader in the upper-premium cruise segment with five ships offering cruise vacations to more than 330 ports around the globe, gourmet culinary experiences, elegant accommodations and personalized service. Regent Seven Seas Cruises is the market leader in the luxury cruise segment and operates three ships, with an additional ship on order for delivery in summer 2016.
The deal helps Norwegian compete better against its two main rivals: Carnival (CCL) and Royal Caribbean (RCL). Both of them have luxury segments: Carnival owns Cunard and Princess while Royal Caribbean owns Celebrity Cruises. By having a luxury option, it allows Norwegian to upsell to customers who perhaps want a more upscale cruising experience. NCLH will now have three distinct brands, each serving a different market segment, under one umbrella. This allows the company to appeal to guests at every stage of their life cycle.
NCLH made its IPO debut in January 2013 and the stock has basically traded sideways for much of that time. The cruise industry has been impacted by some negative press over the past couple of years, including several instances of mechanical troubles at Carnival and the Costa Concordia disaster in Italy. This has dampened enthusiasm for cruising. Also, while consumers have been pulling back on spending recently, the deal makes sense for NCLH. They really did need a luxury component to better compete against CCL and RCL. In addition to upselling opportunities, the luxury segment has been the one area within the cruise industry that has been relatively stable in recent years.
FormFactor Up 13% After Raising Q3 Guidance On Broad Company Strength
FormFactor (FORM 7.92 +0.88) is trading higher today after raising third quarter revenue guidance. Overnight, the company raised its revenue forecast to $71-75 million, which tops current expectations, and is up from its prior outlook of $68-73 million.
Customer demand across all segments is the main driver for the increase to the company's expected revenue results. The company also raised the midpoint of its non-GAAP gross margin guidance, increasing the guidance range to be between 35% to 38%, higher than the company's previous gross margin guidance of 34% to 38%.
The company said that as it moves through the third quarter, it sees strong business momentum across all market segments.
The stock continues to trade near its high for the day, just below the $8/share level. It's also back above its 50-day moving average on a daily chart. Other levels the stock is trading above includes its 20, 100 and 200-day moving avg. It's 200-day is at $6.62/share currently.
Digital Ally Trading 57% Higher Following Guidance
Digital Ally (DGLY 29.21 +10.55) is trading notably higher this morning after disclosing in an 8-K late Friday guidance from CEO. Revenue is expected to approach $22.5 million in FY14 (there is no analyst coverage).
If the company hit its target of $22.5 million in revenue, this would be 26.2% over 2013 revenue ($17.826 mln).
As reported in Friday's 8-K, in an article in USA Today on Aug 28, 2014, Stanton Ross, Chairman, President and CEO of DGLY was quoted as stating that the Company's revenues in fiscal 2014 will approach $22.5 million. He stated that inquiries from potential customers regarding the Company's audio/video surveillance products had increased approximately fivefold in the period immediately following the events in Ferguson, MO.
The day before, the company reported positive news of a relatively big order for its products. The company reported the receipt of an order valued at more than $1.1 million from the State of Michigan.
This might not sound like a huge order, but this makes up 6% of the company's 2013 total revenue. Michigan has now extended and increased the size of the contract with the co to include the DVM-800, with a $2.0 million increase in funds appropriated for this purpose.
The value of the total contract awarded to the co is now approximately $6.5 million, which includes the original three-year contract plus the two extensions that are now in effect.
Conns Lowers FY2015 Guidance and Reports Lower Than Expected Earnings Citing 'Unexpected Headwinds'
Conns (CONN -12.97, 31.82) is selling off nearly 30% today after reporting a large EPS miss and guiding sharply lower for FY15 EPS. The company now sees $2.80-3.00, down from its $3.40-3.70 prior guidance. Also, it seems as though there is some credit deterioration. Unlike most retailers, CONN underwrites most of its credit offered to consumers. Therefore, any degradation is more harmful to CONN that it would be to other retailers.
In terms of the specifics, the worse than expected earnings are the lowest since 2Q13 and keep the lower Q2 earnings trend going. On the positive side, the company had better than expected revenues of $353.0 million, representing its sixth consecutive quarter with 25% or greater YoY revenue growth. Also, same store sales increased 11.7%, on top of an 18.4% increase a year ago.
Despite the positive revenue growth, the company cited the less than satisfactory results as a product of "unexpected headwinds." In spite of tighter underwriting, the company's delinquency unexpectedly deteriorated across all credit quality levels, a combined 90 basis points in July and August. The company does not expect the trend to continue, though, and now sees 60 plus-day delinquencies increasing to levels above historic highs in the third and fourth quarters of fiscal 2015.
The stock is gapping down 30%, near its 52-week low of $31.17.
1-800 Flowers to acquire gourmet fruit gift supplier
1-800-FLOWERS.COM (FLWS) is gapping up about 7% today, albeit on light volume. The company announced it will acquire Harry & David Holdings for $142.5 mln in cash. Harry & David is a retailer of branded premium gift-quality fruit, gourmet food products and other gifts marketed under the Harry & David, Wolferman's and Cushman's brands.
Signature Harry & David products include its flagship Royal Riviera pears, Fruit-of-the-Month Club products, Tower of Treats gifts, Moose Munch caramel and chocolate popcorn snacks while its Wolferman's segment sells English muffins and other breakfast products. Cushman's focuses on citrus gifts. Harry & David is based in Oregon with a warehouse and distribution facility in Ohio. There are 47 Harry & David retail stores located throughout the country.
Usually when one company announces it is buying another company, the acquiring company usually sells off for a number of potential reasons: investors do not like the strategic fit, the price is too high, integration risks, it may hurt earnings etc. However, FLWS is higher on this announcement. There are some good thing here. Harry & David has steadily grown its top and bottom-line for the past several years since exiting bankruptcy in 2011. The company posted nearly $400 mln in revenue in its most recent fiscal year. The combined company should post revenue north of $1 bln.
The rationale for FLWS is to bolster its gift offering in the growing Gourmet Food and Gift Baskets space. The acquisition also provides FLWS with 1) a large customer database consisting of both consumers and corporate accounts, 2) a website with significant and growing customer traffic, 3) a unique collection of proprietary gift products and brands and 4) a strong operational infrastructure.
This deal follows the July 30 announcement from its rival FTD companies (FTD) that it will acquire Liberty's (LINTA) Provide Commerce floral and gifting businesses. It seems that getting larger is the best the way to offset what has been a somewhat sluggish consumer spending environment. This has been a nice turnaround for Harry & David considering they filed for bankruptcy in 2011, but they have been experiencing a nice turnaround the past few years.
Exelixis shares plunge 50% as COMET-1 Phase 3 pivotal trial did not meet the primary endpoint
Exelixis (EXEL $2.01 -2.13) shares are plunging in pre-market trading by over 50% following news that the company's COMET-1 Phase 3 pivotal trial did not meet the primary endpoint of demonstrating a statistically significant increase in overall survival for patients treated with cabozantinib as compared to prednisone.
As a result of the outcome of COMET-1, Exelixis will initiate a significant workforce reduction to enable the company to focus its financial resources on the late-stage clinical trials of cabozantinib in metastatic renal cell carcinoma (the METEOR trial) and advanced hepatocellular carcinoma (the CELESTIAL trial).
The company will reduce its workforce by approximately 70 percent, or approximately 160 employees, resulting in approximately 70 remaining employees.
Exelixis anticipates the one-time restructuring charge associated with the workforce reduction to be approximately $6 million - $8 million, with the majority to be completed by the end of the fourth quarter of 2014. As a result of this and other cost-saving measures contemplated, the company anticipates that it has sufficient cash to support its operations through the release of top-line results of the METEOR trial next year.
More financial details will be provided by the company in its third quarter 2014 financial report.
Family Dollar shares little changed following raised Dollar General
Family Dollar (FDO $80.50 +0.67) shares are seeing a limited reaction higher today following news that Dollar General (DG) has raised its bid for Family Dollar to $80/share and it has offered to divest up to 1,500 stores if required by the FTC.
Dollar General (DG) also increased the number of stores that it would be willing to agree to divest to 1,500 if ordered by the FTC and, as further evidence of its confidence in its ability to obtain antitrust approval.The company's agreed to pay a $500 mln reverse break-up fee to Family Dollar relating to antitrust matters. All other terms and conditions of the proposal remain unchanged.
For some background, As of 8/18 Dollar General (DG) announced it had bid for FDO for $78.50/share. Family Dollar (FDO) rejected the bid, and supported the Dollar Tree (DLTR) bid ( $59.60 in cash and $14.90 equivalent in Dollar Tree shares for each common share of Family Dollar owned).
Dollar General (DG) shares are seeing the largest gains, higher by 1.7% so far in pre-market trading. DG shares are also trading near all time highs. Dollar Tree (DLTR) shares are seeing a limited reaction so far in early pre-market trading.