Day: June 13, 2017

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Brookdale Senior Living is For Sale!

Brookdale entered exclusive talks with China’s Zhonghong Zhuoye Group

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Zhonghong Zhuoye Group, which acquired a stake in SeaWorld Entertainment (SEAS) last month, is in discussions to acquire Brookdale Senior Living (BKD), Reuters reports, citing people familiar with the matter.

The deal would be the largest takeover by a Chinese group in the U.S. senior care sector, and a test of the U.S. government’s openness to Chinese investments in healthcare services sectors, the report says.

Brookdale Senior Living Inc. owns and operates senior living communities in the United States. It operates through five segments: Retirement Centers, Assisted Living, CCRCs Rental, Brookdale Ancillary Services, and Management Services.

Brookdale entered exclusive talks with Zhonghong after the real estate and leisure group submitted a bid of roughly $3B, and after Brookdale drew offers from other parties that valued it at substantially below that, the report notes.

Brookdale has entered exclusive negotiations with Zhonghong after it made an offer of around $3 billion after receiving offers from other parties that valued it substantially below that, the people said on Tuesday.

BKD last traded at $14.49.

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Buy McDonald’s, Sell Sonic

Merrill Lynch raised McDonald’s price target to $175

Merrill Lynch downgraded Sonic two notches

 

Noting fast-food stocks have recently had a “strong run,” citing factors including fund flows out of retail stocks and into restaurants and positive sales trends in the category, Bank of America Merrill Lynch analyst Gregory #Francfort raised price targets across the space.

However, he downgraded Sonic (SONC) to a sell-equivalent rating, citing the increasing aggressiveness of McDonald’s (MCD), which the analyst still views as a top pick.

SELL SONIC

Francfort downgraded Sonic two notches to Underperform from Buy but raised its price target to $30 from $27. The analyst said the downgrade is not a call on the quarter, as the company reports on June 22, and he sees limited downside to Q3 and Q4.

However, he notes shares are up 29% since March 21 and Francfort is concerned about 2018 earnings as McDonald’s is becoming more aggressive. He believes shares should trade at a discount to peers due to slower unit growth and higher capital intensity.

TOP PICK

Francfort continues to view McDonald’s as a top pick and sees further upside from aggressive value plans slated for early 2018 and unit economics.

The fast-food chain announced a 55% reimage contribution to support a value menu based around $1, $2 and $3 price points, which could encourage franchisees to co-invest in price aggressiveness, Francfort writes.

The analyst said McDonald’s is one of the few restaurant companies that can increase franchisee economics through lower price points and can get more aggressive than peers due to higher margins.

He added while unit growth for the chain is now negative, McDonald’s continues “to screen cheap” on a relative basis compared to other highly franchised restaurant stocks.

Francfort raised McDonald’s price target to $175 from $165 based on FY18 earnings and reiterated his Buy rating.

OTHERS TO WATCH

Other notable stocks in the fast-food space include Domino’s Pizza (DPS), Dunkin’ Brands (DNKN), Jack in the Box (JACK), Restaurant Brands International (QSR), Wendy’s (WEN) and Yum! Brands (YUM).

PRICE ACTION

Sonic rose 0.3% to $29.38, while McDonald’s gained 0.8% to $149.65.

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Mallinckrodt is In Play

Mallinckrodt continues to look at a range of strategic options to deliver shareholder value

Management detailed Mallinckrodt’s relationship with Express Scripts and explained that it is not strained

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After hosting Mallinckrodt’s CEO Mark Trudeau for an open Q&A session, Wells Fargo analyst David Maris says Mallinckrodt (MNK) continues to look at a range of strategic options to deliver shareholder value, and that all options, including going private, are on the table.

Mallinckrodt develops, manufactures, markets, and distributes branded and generic specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally.

Management did an “excellent job” in correcting the record following “erroneous” short-seller presentations, Maris tells investors in a research note.

Management detailed Mallinckrodt’s relationship with Express Scripts (ESRX) and explained that it is not strained, Maris writes.

The analyst notes Trudeau spoke with Express Scripts CEO Timothy Wentworth a week ago about the relationship and that it seems “solid and mutually positive,” despite recent negative comments about Acthar from the pharmacy benefit manager’s Chief Medical Officer.

Maris has an Outperform rating on Mallinckrodt with an $83.50 price target.

As the Wall Street Journal’s Charley Grant points out on Twitter, Mallinckrodt said last month at a conference that it is exploring options to drive shareholder value.

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Apple is building an autonomous car system

Apple CEO Tim Cook said the company is focusing on developing an autonomous car system

The iPhone maker had hired more than 1,000 engineers to work on Project Titan

 

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Apple (AAPL) CEO Tim Cook said the company is focusing on developing an autonomous car system in his most detailed comments on the tech giant’s automotive plans after hiring roughly 1,000 engineers to work on ‘Project Titan,’ in 2014, Bloomberg reports, citing an interview with Cook.

The company, which originally sought to build its own self-driving car, is shifting its focus to the underlying technology as Alphabet’s (GOOG, GOOGL) Waymo unit has partnered with Fiat Chrysler Automobiles (FCAU) and Lyft to develop the technology and automakers from BMW (BMWYY) to General Motors (GM) seek to acquire autonomous vehicle startups.

The iPhone maker had hired more than 1,000 engineers to work on Project Titan, as the car team is known internally, after it started in 2014.  Apple secured a permit from the California Department of Motor Vehicles in April to test three self-driving sports-utility vehicles, photos of which emerged several weeks later.

A half-dozen vehicles had been surreptitiously testing the autonomous technology on public roads in and around the San Francisco Bay area for at least a year, according to someone familiar with Project Titan.

In December, Steve Kenner, Apple’s director of product integrity, wrote a letter to the National Highway Traffic Safety Administration revealing the company’s interest in automotive technology. In the letter, Kenner wrote about the company’s excitement surrounding the potential for automated systems in fields like transportation.

Stocks to Watch

Shares to watch include: GOOG, TSLA, AAPL, INTC, and NVDA.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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