International rig counts rise

Baker Hughes reports January international rig count up by 6 to 960 rigs

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Rig Counts Rise

Baker Hughes (BHGE) reported international rig count for January 2018 was 960, up 6 from the 954 counted in December 2017, and up 27 from the 933 counted in January 2017.

The international offshore rig count for January 2018 was 196, up 5 from the 191 counted in December 2017, and down 10 from the 206 counted in January 2017.

The average US rig count for January 2018 was 937, up 7 from the 930 counted in December 2017, and up 254 from the 683 counted in January 2017.

The average Canadian rig count for January 2018 was 278, up 73 from the 205 counted in December 2017, and down 24 from the 302 counted in January 2017.

The worldwide rig count for January 2018 was 2,175, up 86 from the 2,089 counted in December 2017, and up 257 from the 1,918 counted in January 2017.

WTI crude is down 33 cents to $63.06 pr barrel.


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Changes to S&P MidCap 400, S&P SmallCap 600 indices

Changes to S&P MidCap 400, S&P SmallCap 600 indices

Stocks to buy, stocks to watch, upgrades, downgrades, earnings
Changes to S&P MidCap 400, S&P SmallCap 600 indices

S&P Dow Jones Indices will make the following changes to the S&P MidCap 400 and S&P SmallCap 600:

S&P SmallCap 600 constituent Boyd Gaming (BYD) will replace CalAtlantic Group (CAA) in the S&P MidCap 400, and Ring Energy (REI) will replace Boyd Gaming in the S&P SmallCap 600 effective prior to the open of trading on Tuesday, February 13.

S&P 500 constituent Lennar (LEN) is acquiring CalAtlantic Group in a deal expected to be completed on or about February 12 pending final approvals.

James River Group Holdings (JRVR) will replace Barracuda Networks (CUDA) in the S&P SmallCap 600 effective prior to the open of trading on Monday, February 12.

Thoma Bravo is acquiring Barracuda Networks in a deal expected to be completed on or about that date pending final conditions.

EVERTEC (EVTC) will replace Sucampo Pharmaceuticals (SCMP) in the S&P SmallCap 600 effective prior to the open of trading on Wednesday, February 14.

S&P 500 constituent Mallinckrodt (MNK) is acquiring Sucampo Pharmaceuticals in a deal expected to be completed on or about that date pending final conditions.


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Lululemon CEO resigns over misconduct accusations

lululemon CEO Potdevin resigns over misconduct accusations 

Lululemon CEO resigns over misconduct accusations. Stockwinners.com
Lululemon CEO resigns over misconduct accusations

Shares of lululemon athletica (LULU) are in focus after the company announced the resignation of chief executive officer Laurent Potdevin for “conduct” issues.

CEO RESIGNATION

lululemon announced yesterday that Laurent Potdevin has resigned as CEO and member of the board of directors, effective immediately. Potdevin had served as CEO since January 2014.

lululemon expects all employees to exemplify the highest levels of integrity and respect for one another, and Potdevin “fell short of these standards of conduct,” the company said, adding that the board has begun a search for a new CEO.

“While this was a difficult and considered decision, the Board thanks Laurent for his work in strengthening the company and positioning it for the future,” said Glenn Murphy, executive chairman.

“Culture is at the core of lululemon, and it is the responsibility of leaders to set the right tone in our organization. Protecting the organization’s culture is one of the Board’s most important duties.”

Lululemon has promoted three members of its management team — Celeste Burgoyne, Stuart Haselden and Sun Choe — to oversee more day-to-day operations, marketing, e-commerce growth, product innovation and supply chain enhancements.

According to a Bloomberg report, Potdevin’s resignation was over misconduct that spanned a range of incidents involving multiple individuals. The misconduct was not related to finances or operations, the report noted.

GUIDANCE REAFFIRMED

In the wake of Potdevin’s resignation, lululemon looked to reassure investors by backing its fourth quarter guidance of earnings per share between $1.25-$1.27 and revenue of $905M-$915M, which compares to analysts’ estimates of $1.27 and $911.67M, respectively.

In addition, the company’s growth strategies remain on track to achieve $4B in revenue in 2020.

ANALYST COMMENTARY

Following the announcement, Jefferies analyst Randal Konik said the level of management turnover at lululemon during “this critical juncture in the company’s growth trajectory gives us some pause.”

The analyst sees better opportunities elsewhere given lululemon’s “high” valuation and “less plentiful” margin opportunity. He maintained a Hold rating on lululemon with a $72 price target.

Meanwhile, Deutsche Bank analyst Paul Trussell said that while he finds the circumstances of Potdevin’s resignation unfortunate, he has confidence in the remainder of lululemon’s management team, particularly Glenn Murphy.

The analyst recommended using any pullback in the shares as a buying opportunity and reiterated a Buy rating with a $95 price target. Citi analyst Paul Lejuez said he views the resignation as more of a positive for lululemon.

It presents the company with an opportunity to bring in a seasoned executive to take lululemon “to the next level,” the analyst said.

Lejeuz kept a Neutral rating on the shares with an $88 price target.

Additionally, KeyBanc analyst Edward Yruma said he views the departure negatively, and notes it comes after creative director Lee Holman’s departed in November.

The analyst believes Potdevin has been an integral part of the company’s stabilized performance in recent quarters.

Canaccord analyst Camilo Lyon said he does not see the departure as a major setback, but notes there is a level of uncertainty until the position is filled. Lyon reiterated his Hold rating and $75 price target.

Furthermore, Morgan Stanley analyst Kimberly Greenberger said it is likely that investors will speculate the top two contenders for the job are Murphy, executive chairman and ex-CEO of The Gap (GPS), and Stefan Larsson, the ex-CEO Ralph Lauren (RL). If lululemon picks either, Greenberger would expect the stock to react positively.

The analyst kept an Equal Weight rating and $73 price target on lululemon.

PRICE ACTION

lululemon is down 0.75% to $76.85.


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8point3 Energy sold for $977 million

8point3 Energy to be acquired by Capital Dynamics for $977M in equity value 

8point3 Energy sold for $977 million. Stockwinners.com
8point3 Energy sold for $977 million 

8point3 Energy Partners (CAFD) announced it has entered into an Agreement and Plan of Merger and Purchase Agreement with CD Clean Energy and Infrastructure V JV, LLC, an investment fund managed by Capital Dynamics, Inc., and certain other co-investors – collectively, “Capital Dynamics” – pursuant to which Capital Dynamics will acquire 8point3 through an acquisition of 8point3 General Partner, LLC, the general partner of the Partnership, all of the outstanding Class A shares in the Partnership and all of the outstanding common and subordinated units and incentive distribution rights in 8point3 Operating Company, LLC, the Partnership’s operating company.

Pursuant to the Proposed Transactions, the Partnership’s Class A shareholders and First Solar, Inc. ( FSLR) and SunPower Corporation (SPWR), as holders of common and subordinated units in OpCo, will receive $12.35 per share or per unit in cash, plus a preset daily amount representing cash expected to be generated from December 1, 2017 through closing less any distributions received after the execution of the Merger Agreement and prior to closing.

No consideration will be received by the Sponsors for the incentive distribution rights and the GP Transfer.

CAFD closed at $13.83.


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Midstates Petroleum proposes merger with SandRidge Energy

Midstates Petroleum proposes all-stock combination with SandRidge Energy

Midstates Petroleum calls for merger with SandRidge Energy. Stockwinners.com
Midstates Petroleum calls for merger with SandRidge Energy

Midstates Petroleum Company (MPO) announced that it has proposed to combine with SandRidge Energy (SD) in an all-stock merger that would create the leading exploration and production company in the Mississippian Lime play.

Earlier today, Midstates sent a letter to the Board of Directors of SandRidge detailing the merger proposal and its strong desire to negotiate a friendly transaction.

Given the highly complementary nature of the businesses, significant shareholder overlap, and the substantial operational synergies, Midstates believes that the proposed combination is attractive strategically and financially for the shareholders of both companies.

Under the terms of the proposal, SandRidge shareholders would own approximately 60% of the combined company and Midstates shareholders would own 40%.

David J. Sambrooks, Midstates President and Chief Executive Officer, stated, “We are ready to move forward immediately to negotiate a merger agreement to form a stronger, more formidable company.

The combined company will have zero net debt, strong liquidity, and forecasted free cash flow generation of up to $480 million over the next five years.”

Sambrooks continued, “Combining these two businesses in an at-market merger would bring undeniable benefits to shareholders of both companies.

The strategic fit and geographic overlap of both companies’ assets in the Miss Lime and NW STACK builds critical mass, creates significant synergies, and generates superior, risk-adjusted returns.”

Midstates is making this proposal public to inform both Midstates and SandRidge shareholders of the compelling value creation potential of the combination and to encourage SandRidge’s board to move towards a negotiated transaction.

MPO closed at $15.45. SD closed at $16.50.


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Kroger sells convenience store business for $2.15B

Kroger to sell convenience store business unit to EG Group for $2.15B

Kroger to sell convenience store business unit for $2.15B. Stockwinners.com
Kroger to sell convenience store business unit for $2.15B 

Kroger (KR) and EG Group, a privately-held petrol forecourt convenience store retailer based in Blackburn, Lancashire, United Kingdom, announced a definitive agreement for the sale of Kroger’s convenience store business unit to EG Group for $2.15B.

Kroger’s convenience store business generated revenue of $4B, including selling 1.2 billion gallons of fuel, in 2016. Kroger’s supermarket fuel centers and its Turkey Hill Dairy are not included in the sale.

Kroger announced in October 2017 its intention to explore strategic alternatives for its convenience store business, including a potential sale, in conjunction with the “Restock Kroger” plan.

The company expects the transaction to close quickly as EG Group has no U.S. presence today. The companies expect to close the transaction during the first quarter of Kroger’s fiscal year.

As part of the agreement, EG Group will establish their North American headquarters in Cincinnati, Ohio and continue to operate stores under their established banner names.

Kroger plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio.


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Corcept sinks after Teva submits application to sell Korlym

Corcept sinks after Teva submits application to sell Korlym in U.S. 

Corcept sinks after Teva submits application to sell Korlym. Stockwinners.com
Corcept sinks after Teva submits application to sell Korlym

Corcept Therapeutics (CORT) announced in a regulatory filing that it received a Paragraph IV Notice Letter advising that Teva Pharmaceuticals (TEVA) submitted an Abbreviated New Drug Application to the FDA seeking authorization to manufacture, use or sell a generic version of Korlym in the United States.

KORLYM is a prescription medicine used to treat high blood sugar (hyperglycemia) caused by high cortisol levels in the blood (hypercortisolism) in adults with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or cannot have surgery.

Korlym is a glucocorticoid receptor antagonist that is indicated to control hyperglycemia associated with Cushing’s syndrome, a rare, debilitating endocrine disorder. Cushing’s syndrome is caused by prolonged exposure to elevated levels of glucocorticoids (hypercortisolism). The potent metabolic effects of excess cortisol influence many tissues and body systems, and patients often have many problems, including diabetes, obesity, muscle wasting, depression, cognitive difficulties, and psychosis.

The Notice Letter contains Paragraph IV certifications against certain of Corcept’s patents related to Korlym, the company points out. The Notice Letter also alleges that the Korlym patents, the ‘348 patent with an expiration date in August 2028 and the ‘495 patent with an expiration date in August 2036, will not be infringed by Teva’s proposed product, are invalid and/or are unenforceable.

“The Company intends to vigorously defend its extensive intellectual property rights related to Korlym,” Corcept stated.


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Broadcom raises bid for Qualcomm

Broadcom raises bid for Qualcomm to ‘best and final’ offer of $82 per share

Broadcom proposes to buy Qualcomm for $82 per share

Broadcom Limited (AVGO) announced that it has made a “best and final” offer to acquire all of the outstanding shares of common stock of Qualcomm Incorporated (QCOM).

Under the terms of the offer, Qualcomm stockholders would receive an aggregate of $82.00 per each Qualcomm share, consisting of $60.00 in cash and the remainder in Broadcom shares.

Broadcom’s improved offer is premised on either Qualcomm acquiring NXP Semiconductors N.V. (NXPI) on the currently disclosed terms of $110 per NXP share or the transaction being terminated and is also premised on Qualcomm not delaying or adjourning its annual meeting past March 6, 2018.

Broadcom remains confident that the proposed transaction would be completed within approximately 12 months following the signing of a definitive agreement.

“The significantly improved offer, which has been unanimously approved by the Board of Directors of Broadcom, represents a 50% premium over the closing price of Qualcomm common stock on November 2, 2017, the last unaffected trading day prior to media speculation regarding a potential transaction, and a premium of 56% to Qualcomm’s unaffected 30-day volume-weighted average price…Broadcom believes this offer is vastly superior to Qualcomm’s standalone prospects, with or without the closing of the NXP transaction, and remains hopeful the Qualcomm board of directors will act responsibly on behalf of Qualcomm stockholders and engage with Broadcom on this offer without further delay,” Broadcom stated.


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Barron’s is bullish on Danaher and GM

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:  

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS:

Danaher among more reliable stocks– Danaher’s (DHR) results were met with cries of sell even though they were stellar as ever, sending the shares into negative territory on Monday, Ben Levisohn writes in this week’s edition of Barron’s. Fast-forward to Friday, the stock market was in freefall but the stock weathered the blast, he notes, adding that there is something to be said for Danaher’s consistency. While it will never be the fastest grower, it has grown sales at 4%-5%, quarter after quarter, while cutting costs and improving efficiency to grow earnings, making it one of the more reliable stocks out there, the report says.

General Motors shares could rise more than 35% – General Motors (GM) has been turning in strong profits, which have helped it fund research into autonomous and electric cars, Jack Hough writes in this week’s edition of Barron’s. When Tesla’s (TSLA) stock-market value surpassed General Motors last year, it was big news, but recently the latter has edged back into the top spot, he adds. Selling at just seven times forward earnings, General Motors shares have room to rise more than 35% in the year ahead, Hough contends.

Cisco, Oracle among stocks with rising dividend estimates – Some of the large-cap companies whose dividend estimates for their current fiscal year have increased by at least 2% since July include Cisco (CSCO), Texas Instruments (TXN), UnitedHealth (UNH), Oracle (ORCL), Comcast (CMCSA), 3M (MMM), AbbVie (ABBV), Boeing (BA), Union Pacific (UNP), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC) and JPMorgan (JPM), Lawrence Strauss writes in this week’s edition of Barron’s.

TD Ameritrade adding round-the-clock trading – TD Ameritrade  (AMTD) is offering customers more social media capabilities and has added round-the-clock trading in 12 exchange-traded funds, from Sunday evening through Friday evening using its thinkorswim trading platform or TD Ameritrade Mobile Trader app, Theresa Carey writes in this week’s edition of Barron’s.

Apple, Facebook facing challenges, shares still holding up well – Considering the challenges they face, both Apple (AAPL) and Facebook (FB) shares held up well, Tiernan Ray writes in this week’s edition of Barron’s. Apple offered a forecast for its March quarter that missed expectations, and Wall Street now thinks that the company is reaching a bit too far in pricing the iPhone X at $999-$1150, he notes. Nonetheless, Apple is still an empire very much in control of its destiny, Ray contends. Meanwhile, Facebook said people are spending less time than before on the site, but Mark Zuckerberg calmly assured the Street that he thinks it is a good thing, the report points out.

Cisco, Salesforce among most sustainable companies – Cisco (CSCO) tops Barron’s first annual list of most sustainable companies, followed by Salesforce (CRM), Best Buy (BBY), Intuit (INTU), HP Inc. (HPQ), Texas Instruments (TXN), Microsoft (MSFT), Oshkosh (OSK), Clorox (CLX) and Xylem (XYL).

Spirit Air offers plenty of potential upside – Following a steep decline, shares of Spirit Airlines (SAVE) now trade for less than 12 times forward earnings estimates, a good value or growth play, Brett Arends writes in this week’s edition of Barron’s. Long-term investors may need to be patient because short-term headwinds pop up so frequently for airline stocks, but in return for its risks, Spirit offers reasonable valuations and plenty of potential upside, he argues

BEARISH  MENTIONS:

Musk new compensation package sets wrong targets – Tesla’s  (TSLA) new 10-year compensation package, which considers that Elon Musk could grow the company’s market capitalization from the current $58B to $650B in 2028, is not shareholder-friendly as it emphasizes market cap goals, not sustainable profits, Vito Racanelli writes in this week’s edition of Barron’s.


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January Jobs Report

In January 200K jobs were created

Harvey, August Job Report Delay Another Rate Hike. See Stockwinners.com Market Radar
In January 200K jobs were created

The U.S. jobs report revealed a solid 200k January payroll gain, following annual revisions that raised the level of December payrolls by 230k, which both exceeded market assumptions, and hourly earnings rose 0.3% to leave a cycle-high 2.9% y/y climb.

Yet, hours-worked posted a January drop-back from upwardly-revised prior levels thanks to a drop in the workweek to 34.3 hours with weakness skewed toward the goods sector that was maybe weather-induced.

Note that those not at work due to weather popped to 496k in January, versus a 331k 10-year average for the month.

For the goods sector, jobs rose by a solid 57k as expected, with gains of 15k for factories, 36k for construction, and 6k for mining, but hours-worked for the goods sector fell 0.5%, with declines of 0.3% for factories, 0.5% for construction, and 0.2% for mining.

Analysts saw big gains of 409k for civilian jobs and 518k for the labor force that left a fourth consecutive 62.7% participation rate.

For annual revisions, analysts saw larger than expected boosts of 230k for December payrolls, 247k for private payrolls, and a 17k downward bump for government.

For the benchmark month last March, analysts saw a 146K SA upward revision and a 138k NSA hike, versus guidance of a smaller 95k NSA boost.

The first question is whether the U.S. economy can maintain a robust pace of monthly job creation this far into the economic cycle. Already, the three- and six-month moving averages for job creation have significantly exceeded the pace that would be expected after impressive prior gains and a steep decline in the unemployment rate.

By contrast, wage growth has continued to run below expectations. In turn, this has limited the household income gains that would normally accrue with the labor market achievements. This may also help to explain why the labor participation rate has not materially edged up from a level that remains uncomfortably near multi-decade lows.


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MediciNova reports positive MS data

MediciNova’s MN-166 shows positive risk reduction in progressive MS

MediciNova reports positive MS data. Stockwinners.com
MediciNova reports positive MS data

MediciNova (MNOV) announced the presentation of additional positive clinical data from the SPRINT-MS Phase 2b Trial of MN-166 – ibudilast – in progressive multiple sclerosis, conducted through the National Institutes of Health-sponsored NeuroNEXT network.

MN-166 demonstrated a 26% reduction in the risk of confirmed disability progression compared to placebo.

Confirmed disability progression was a secondary endpoint in this Phase 2b trial but would be considered a primary endpoint in Phase 3.

MediciNova’s power analysis has determined that a Phase 3 trial of MN-166 that enrolls approximately 700 subjects will be sufficiently powered to achieve statistical significance for confirmed disability progression.

As reported in October 2017, the SPRINT-MS Phase 2b Trial of MN-166 in progressive MS achieved both primary endpoints. MN-166 (ibudilast) demonstrated a statistically significant 48% reduction in the rate of progression of whole brain atrophy compared to placebo, and demonstrated a favorable safety and tolerability profile.

The most common treatment-emergent adverse events during the study were gastrointestinal adverse events, which occurred with a higher frequency in the MN-166 group, and upper respiratory tract infections, which occurred with a higher frequency in the placebo group.

The MN-166 (ibudilast) portfolio, which includes the Phase 2-staged lead drug compound and proprietary analogs, represents novel, first-in-class, non-opioid drugs for the treatment of drug addiction, progressive multiple sclerosis and pain.

MN-166 is a first-in-class, orally bioavailable, small molecule glial attenuator that suppresses pro-inflammatory cytokines IL-1ß, TNF-a, and IL-6, and may upregulate the anti-inflammatory cytokine IL-10.

MNOV closed at $8.32.


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Chipotle drops on downgrade

Analyst says sell Chipotle amid ‘depressed’ brand perceptions, more competition

Chipotle Mexican Grill spokesman Chris Arnold says the company is aware of a "small number" of illnesses linked to a store in Sterling, Virginia
Chipotle drops on downgrade

Shares of Chipotle Mexican Grill (CMG) dropped in Thursday’s trading after a UBS analyst said to sell the stock, telling investors that brand perceptions “remain depressed” while competition is unlikely to ease this year.

SELL CHIPOTLE

UBS analyst Dennis #Geiger downgraded Chipotle to Sell from Neutral, saying he is “concerned” about deteriorating online customer review trends and possible implications for the trajectory of sales.

The analyst, who cut his price target to $290 from $345, noted that online review trends have continued to trend downward and have dropped below pre-food safety crisis lows.

He contended that “Despite aggressive efforts to improve brand perceptions through a new national advertising campaign and the launch of new products including queso recently, customer review scores have not shown any signs of improvement.”

Additionally, Geiger told clients that in addition to “depressed” brand perceptions, competition is unlikely to ease in 2018 and said Chipotle’s unit development expectations could be “ambitious.”

His analysis of more than 230,000 Chipotle reviews found that food safety, combined with rising competition, has likely weighed on Chipotle’s efforts to regain customers.

“The increasing penetration of fast casual brands and traditional quick service restaurants has likely weighed on Chipotle’s efforts to regain lost customers. In the aftermath of the Chipotle food safety incidents, our survey analysis indicated ‘like other QSR better’ as the second most cited reason for eating less at Chipotle,” Geiger said.

WHAT’S NOTABLE

Chipotle has faced several foodborne illness outbreaks since 2015. As recently as December 2017, public health officials in Los Angeles investigated a possible foodborne illness outbreak at a local Chipotle restaurant.

Chipotle confirmed that it was aware of the reports tied to its Pico Boulevard location, but said it had not heard from any customers directly. “As a precautionary measure, we have implemented heightened sanitization measures at this restaurant, which we do as a matter of policy if ever we receive reports of illness — even if they are not substantiated,” Chipotle spokesman Chris Arnold said at the time.

The company’s executive ranks have also been in turmoil, with the company searching for a new chief executive officer.

When a new CEO is appointed, current CEO and founder Steve Ells said he will focus primarily on innovation. In December, an analyst at Bernstein called Chipotle a “reasonably” attractive takeover target.

PRICE ACTION

In Thursday morning trading, shares of Chipotle Mexican Grill are down 4.3% to $310.92.


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Alibaba buys a third of Ant Financial 

Alibaba to take 33% equity stake in Ant Financial 

Alibaba to take 33% equity in Ant Financial. Stockwinners.com
Alibaba to take 33% equity in Ant Financial

Alibaba Group (BABA) and Ant Small and Micro Financial Services Group announced that pursuant to 2014 transaction agreements, Alibaba will acquire a 33% equity interest in Ant Financial.

The parties have agreed to certain amendments to their 2014 transaction agreements to facilitate the transaction.

Under the terms of the amended agreements, Alibaba will acquire newly-issued equity from Ant Financial in exchange for certain intellectual property rights owned by Alibaba exclusively related to Ant Financial. There will be no cash impact to Alibaba following completion of the transaction.

Upon closing, the companies will terminate the current profit-sharing arrangement under which Ant Financial pays royalty and technology service fees in an amount equal to 37.5% of its pre-tax profits to Alibaba.

Daniel Zhang, CEO of Alibaba Group, said, “This transaction is a significant step for Alibaba to enhance our long-term strategic relationship with Ant Financial as we continue to pursue our mission to make it easy to do business anywhere.

Importantly, an equity stake in Ant Financial enables Alibaba and our shareholders to participate in the future growth of the financial technology sector, as well as the benefits of user growth and improved customer experience.”

The transaction was reviewed and approved by a committee of non-executive directors, the majority of whom are independent under NYSE rules, the audit committee of Alibaba’s board and the full Alibaba board of directors.

The closing of the transaction is subject to customary conditions. Alibaba will acquire the equity interest in Ant Financial through a Chinese domestic subsidiary.

Morrison & Foerster and King & Wood Mallesons acted as legal advisors, Credit Suisse acted as financial advisor and PricewaterhouseCoopers acted as tax advisor to the Alibaba Independent Committee.

Wachtell, Lipton, Rosen & Katz, Sidley Austin LLP and Fangda Partners acted as legal advisors to Ant Financial.


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