American Science & Engineering Updates Q2 Guidance, Expects Net Loss and 10% Workforce Reduction
American Science & Engineering (ASEI 49.89, -5.49) is trading down nearly 10% in early trading following downside guidance that included an expected net loss for the next quarter. The company produces and sells X-ray inspection and other detection products for homeland security, force protection, public safety and other critical defense and security applications.
The company also announced it will reduce workforce by approximately 10%, and has implemented additional targeted cost reductions to further reduce its operating expenses.
The company attributed the weaker performance and downsizing to continued global volatility impacting its markets. The company said that the volatility negatively impacted results in regards to shipment delays for orders already recorded in the backlog. The company added that the opportunity pipeline remains robust, and that the reductions in the quarter are simply measures that are designed to manage the variability in the industry.
The company did not give prior guidance for the second quarter, but analysts expected a profitable Q2, so the warning for a loss is disappointing. The company expects to realize the benefits of the cost cutting measures beginning in the third quarter of FY15.
Angie's List Said to Be Considering Strategic Alternatives
Shares of Angie's List (ANGI 7.69, +1.32) are trading 21% higher in pre-market action on no news -- well, no confirmed news that is. According to the Financial Times, the company is exploring strategic alternatives that include a sale of the company.
The FT article has been acknowledged by other media outlets and it has even played a role in Northland Capital upgrading the stock today to Market Perform from Underperform.
As an aside, the underperformance of ANGI has been an understatement. Shares of ANGI are down 58% year-to-date, having been plagued by disappointing operating results.
The company went public at $13 a share in 2011. It climbed as high as $28.32 in July 2013, yet Angie's List has been pretty much on investors' blacklist ever since due to a string of quarterly losses. In August Angie's List said it let go 97 employees, most of which were in its sales organization.
According to Yahoo! Finance, 50.5% of the company's float was sold short as of August 29, underscoring investors' lack of confidence in the company's prospects. The idea that Angie's List may be exploring strategic alternatives is undoubtedly driving some short covering interest that is helping to push the stock price materially higher.
Angie's List itself has not commented on the FT report, but with the move its stock is making, it may be just a matter of time before it does.
WestPort shares plunge 17% following lowered guidance
Westport Innovations (WPRT $8.72 -1.79) shares are trading sharply lower by 17% in pre-market trading after the company lowered its fiscal year 2014 revenue guidance to $130-140 million from $175-185 million prior which is below estimates.
The company said it will not expect its three operating business units combined to be positive Adjusted EBITDA for this year. Looking ahead, the Company reiterates its stated goal of reporting consolidated positive Adjusted EBITDA by the end of 2015, which will be driven by matching investments and expenses with the pace of market adoption, contributions from Westport's operating business units, Westport's share of net income (loss) from the joint ventures, and service revenue earned from Westport's development partners.
The company announced an update to its Westport high pressure direct injection second generation or "HPDI 2.0" development program and identified plans to further refine investment programs to align with its original equipment manufacturer customers and the global pace of natural gas vehicle adoption and related infrastructure build out.
Westport is changing its revenue outlook for the year ended December 31, 2014 based on three primary factors.
First, continued market uncertainty in Westport's primary markets-Europe, Russia and China-have impacted revenue in the Applied Technologies business in the second half of 2014.
Second, key OEM development partners are moving to the newly co-developed Westport HPDI 2.0 injectors, which are expected to lower the cost of the system and provide benefits noted above, but the revised development schedule will defer related service revenue milestone payments in the near term. Westport will, however, be able to reduce its overall program expenses, offsetting the reduction in service revenue; and synergies across multiple customer programs are expected to allow better long-term returns.
Third, a Westport customer who placed a significant order for Westport iCE PACK LNG Tank Systems has been unable to provide sufficient comfort to Westport that it will be able to meet its obligations and requirements in respect of such orders, and as such Westport does not intend to ship product to this customer until such comfort has been received.
WPRT shares have vastly underperformed the S&P 500 so far this year and are trading near mulit-year lows.
Endo International Pays Up to Settle Mesh Litigation Claims
Last month Dublin-based Endo International (ENDP 68.34) made news with its unsolicited proposal to acquire Auxilium Pharmaceuticals (AUXL 29.85) for roughly $2.2 billion or $28.10 per share in cash and stock. Today Endo is back in the news, but for reasons unrelated to that buyout offer, which Auxilium subsequently rejected.
According to Endo, it has reached a master settlement agreement with several of the remaining leading plaintiffs' law firms to resolve claims relating to vaginal mesh products sold by the company's subsidiary, American Medical Systems ("AMS").
Endo had previously established a pre-tax product liability reserve of approximately $1.2 billion to deal with the claims, but with the latest agreement, it has bumped up its accrual for all known, pending, and estimated future claims to approximately $1.6 billion.
The company's press release stated that the settlements are expected to resolve substantially all of the AMS U.S. vaginal mesh-related claims.
An article published by Bloomberg last night covering the news of the settlement cited people familiar with matter as suggesting Endo still faces close to 5,000 suits over the mesh implants. The latter is likely one reason why Endo was careful to say the aforementioned agreement was entered into by way of compromise and was not in any way an admission of liability or fault.
AMS expects to fund all settlement payments in 2014, 2015, 2016, and 2017.
Tekmira and Others Rally on Ebola Scare, Airlines Slip
The Centers for Disease Control and Prevention ("CDC") confirmed on Tuesday the first case of Ebola to be diagnosed in the U.S. This news was reported after the close of trading and it led to knee-jerk reactions in a number of airline stocks, as well as stocks looked upon as "Ebola treatment" stocks.
The main beneficiary of this news appears to be Tekmira Pharmaceuticals (TKMR 21.14). Its stock is trading 26% higher in pre-market action as traders are cognizant that the FDA has authorized the use of the company's TKM-Ebola in patients confirmed to have, or are suspected to have, Ebola virus infections.
Other stocks gaining on the Ebola treatment trade include Sarepta Therapeutics (SRPT 21.10), New Link Genetics (NLNK 21.42), and BioCryst Pharmaceuticals (BCRX 9.78). GlaxoSmithKline (GSK 45.97) started human trials of its Ebola vaccine last month, yet its stock is actually trading modestly lower in pre-market action.
Similarly, several airline stocks traded down on the news on concerns that people will hold off on flying due to angst about potentially contracting the disease unknowingly from a fellow passenger.
The individual with Ebola traveled from Liberia to Dallas, TX. He reportedly did not exhibit symptoms of Ebola during the flight and the CDC is not recommending that people on the same commercial flight undergo monitoring. Ebola is only contagious, the CDC noted, if the person is experiencing active symptoms. It wasn't until four days after the person arrived in the U.S. that he developed symptoms.
The initial weakness after hours in shares of American (AAL 35.48), JetBlue (JBLU 10.62), Southwest (LUV 33.77), Delta (DAL 36.15), and United (UAL 46.79) to name a few is likely not warranted.