Exotic Metals sold for $1.725B

Parker-Hannifin to acquire Exotic Metals for $1.725B in cash

Exotic Metals sold to Parker Hannifin, Stockwinners

Parker Hannifin Corporation (PH) announced that it has entered into a definitive agreement to acquire Exotic Metals Forming Company LLC for $1.725B in cash. When adjusted for approximately $170M of expected tax benefits, the net transaction value is approximately $1.56B.

Parker enters exotic metals business, Stockwinners

The transaction has been approved by the Board of Directors of each company and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

Exotic Metals, headquartered in Kent, Washington, is a privately held company founded in 1966 that designs and manufactures innovative and technically demanding, high temperature, high pressure air and exhaust management solutions for aircraft and engines.

Exotic Metals has expected annual sales of approximately $450M and employs 1,600 team members across three locations in the United States.

Exotic Metals has long-term agreements in place across high growth aerospace programs.

Exotic Metals makes the exhaust cone for GE engines, Stockwinners

Parker also expects growth synergies through cross-selling opportunities and leveraging Parker’s strong aftermarket position.

Parker expects to realize approximately $13M in pre-tax run-rate synergies by fiscal year 2023 by combining supplier networks and implementing Win Strategy initiatives. The cumulative cost to achieve these synergies is expected to be approximately $5M.

The transaction is expected to be accretive to Parker’s organic growth, EBITDA margins, EPS and cash flow, after adjusting for one-time costs, and to achieve high single-digit ROIC in year five with continued expansion.

Upon the closing of this transaction, Parker plans to have Exotic Metals operate as a standalone division within Parker’s Aerospace Group, which is led by Roger Sherrard, Vice President and President Aerospace Group.

Exotic Metals manufactures the intake blades for GE engines, Stockwinners

Parker plans to finance the transaction using new debt.

Following the completion of the transaction, Parker expects to maintain a high investment grade credit profile.

The transaction is not expected to impact Parker’s dividend payout target of approximately 30-35% average percent of net income over a five-year period, while maintaining its record of annual dividend increases.

The transaction is expected to be completed within the next two to three months and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

PH last traded at $172.46, down $2.45.

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Rig counts rise in March

Baker Hughes announces March international rig count of 1,039, up 12

The international offshore rig count for April 2018 was 194. Stockwinners
The international offshore rig count rises in March, Stockwinners

Baker Hughes (BHGE) announced that the Baker Hughes international rig count for March 2019 was 1,039, up 12 from the 1,027 counted in February 2019, and up 67 from the 972 counted in March 2018.

The international offshore rig count for March 2019 was 247, down 3 from the 250 counted in February 2019, and up 62 from the 185 counted in February 2018.

The average U.S. rig count for March 2019 was 1,023, down 26 from the 1,049 counted in February 2019, and up 34 from the 989 counted in March 2018.

The average Canadian rig count for March 2019 was 151, down 79 from the 230 counted in February 2019, and down 67 from the 218 counted in March 2018.

The worldwide rig count for March 2019 was 2,213, down 93 from the 2,306 counted in February 2019, and up 34 from the 2,179 counted in March 2018.

Crude oil is up 2 cents to $62.12 per barrel.

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GE fires CEO, Shares rise

GE shares jump after CEO Flannery ousted amid Power unit challenges

GE introduces new company AiRXOS, Stockwinners
GE fires CEO, Shares rise

Shares of GE (GE) are rising in pre-market trading after the shrinking conglomerate announced that H. Lawrence Culp, Jr. has been named Chairman and CEO, replacing John Flannery, effective immediately.

POWER WRITE-OFF

The company stated that while its businesses other than Power are “generally performing consistently with previous guidance,” the company will fall short of previously indicated guidance for free cash flow and EPS for 2018 due to weaker performance in the GE Power business.

GE expects to take a non-cash goodwill impairment charge related to the GE Power business that will likely be as much as the approximately $23B current goodwill balance for the business, GE added.

GE previously forecast FY18 EPS at the low end of its $1.00-$1.07 range. The current EPS consensus is 95c.

RECENT ANALYST CONCERNS

In a recent note to investors, RBC Capital analyst Deane Dray lowered his price target on GE shares to $13 from $15, stating that the company had yet to reach a point where bad news does not make the stock decline and arguing that the bottom had not yet been reached.

Last month, JPMorgan analyst Stephen Tusa lowered his price target for General Electric to $10 from $11 and kept an Underweight rating on the shares.

The analyst’s channel checks, which were confirmed by GE Power’s CEO, GE investor relations, suggested GE had experienced a failure in a first stage blade on an H-frame in one of its two initial marquee installations in the U.S., Colorado Bend. Further, Tusa said the problem was material enough for Exelon (EXC) to have shut the plant down, along with the “award winning” Wolf Hollow plant for precautionary measures.

There should no longer be any doubt that GE Power has company-specific issues, Tusa contended at the time, stating that his new price target assumed weaker results at GE Power and some franchise value impact.

PRICE ACTION

In Monday’s pre-market trading, GE shares are up $1.53, or 13.5%, to $12.82.


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Arconic higher following report of private equity interest

Arconic higher following report of private equity interest

Arconic higher following report of private equity interest, Stockwinners
Arconic higher following report of private equity interest, Stockwinners

Shares of Arconic (ARNC) are rising following a report that the aluminum producer has received interest from private equity firms including Apollo Global Management (APO).

PE  INTEREST

Arconic has received takeover interest from private-equity firms, including Apollo Global, The Wall Street Journal reported Friday.

A deal for the aerospace parts maker, which currently has a market value of $8.3B, could be worth over $10B, but no buyout agreement is imminent, the report said.

The company, which also holds $6.4B in debt, has a tumultuous recent history, facing an activist investor campaign from Elliott Management after being separated from the aluminum business now known as Alcoa (AA) in 2016.

The campaign led to the resignation of former Arconic Chief Executive Officer Klaus Kleinfeld and an overhaul of the company’s board.

In addition, the company came under scrutiny after investigators discovered its aluminum composite panels contributed to the spread of a fire last year at London’s Grenfell Tower that killed 80 people.

At the time, Arconic said it had no control over how its products were used in the building.

‘PLAUSIBLE LBO CANDIDATE’

Following the WSJ report, Morgan Stanley analyst Rajeev Lalwani said two things stand out to make Arconic a “plausible” leveraged buyout candidate: Its low EV/EBITDA multiple, which creates potentially favorable entry and exit points, and its cash flow profile, which has room for improvement.

The analyst stated that a more lean and efficient approach could support considerably better cash generation.

While the reported private equity interest “adds a level of intrigue,” Lalwani still believes headwinds within it rings and disks business, working capital and CapEx issues and volatility associated with aluminum prices will be the key driver of shares in the near-term.

Given the aforementioned execution concerns, Lalwani kept an Equal Weight rating and $20 price target on Arconic shares.

‘VERY VIABLE LBO CANDIDATE’

Credit Suisse analyst Curt Woodworth said he views Arconic as a “very viable” leveraged buyout candidate given its “highly depressed” multiples, operational and financial mismanagement, and “very strong” positions in automotive and aerospace end markets.

The analyst believes the issues at Firth Rixson are “very fixable” as the company is a new entrant into the disks market and said Arconic could be worth $24-$26 per share in a buyout. Woodworth has an Outperform rating on the shares with a $28 price target.

WHAT’S NOTABLE

On Monday, Arconic announced it had signed a new long-term contract with Boeing (BA) to supply aluminum sheet and plate for all models produced by Boeing Commercial Airplanes.

The multiyear contract, which extends and adds to the companies’ 2014 contract, is the largest to date and captures growth in the build rate increases of the Boeing 737 program.

PRICE ACTION

Arconic rose about 10%, or $1.73, to $19.12 in morning.


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GE creates new company to develop unmanned traffic management

GE creates  AiRXOS to develop unmanned traffic management 

GE introduces new company AiRXOS, Stockwinners
GE introduces new company AiRXOS

GE (GE) introduced AiRXOS a new company helping to accelerate the safe, efficient, scalable integration of air and ground space for manned and unmanned vehicles.

AiRXOS helps government agencies, regional aviation authorities and private sector operators manage and meet the increasing demand for sophisticated and safe Unmanned Aircraft Systems operations. AiRXOS is a wholly-owned subsidiary of GE.

The Department of Transportation recently announced the UAS IPP to help government agencies, municipalities, regional aviation authorities and private sector operators manage and meet the increasing demand for sophisticated and safe UAS operations.

Of the ten pilot programs, AiRXOS was selected as a partner for three: The City of San Diego, the City of Memphis, and the Choctaw Nation of Oklahoma. AiRXOS will work with these program partners in safely demonstrating capabilities such as operations over urban settings, night operations, beyond visual line of sight, as well as developing overall UTM systems.

Drive Ohio’s UAS Center announced an investment of $5.9M for UTM research that will include both air and ground vehicles and will complement Drive Ohio’s current efforts for autonomous and connected vehicle testing along the U.S. 33 Smart Mobility Corridor. AiRXOS has been selected as a partner, along with Gryphon Sensors, CAL Analytics, and Ohio State University’s College of Engineering to implement a UTM solution for the U.S. 33 Smart Mobility Corridor. AiRXOS has also formed a collaboration with NUAIR Alliance for an unmanned testing and rating initiative that will combine NUAIR’s new National Unmanned Systems Testing and Rating capability with AiRXOS’ Autonomous Service Platform.

While NUSTAR will objectively measure UAS performance and test systems against industry consensus standards, AiRXOS will automate the processes used by commercial operators, pilots, organizations, and drone manufacturers to engage in commercial flight operations.

To support this effort, AiRXOS plans to open an office in the Syracuse, New York Tech Garden offices. To keep pace with innovation, NASA’s Technical Capability Level testing and the expansion of the Low Altitude Authorization and Notification Capability service program continue to move the industry forward.

AiRXOS is a TCL partner and has recently applied for a LAANC application in support of bringing a broad range of UAS operations safely to scale.

GE closed at $13.64.


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United to increase capacity by 5 percent

United’s plan to increase capacity drags down airline stocks 

United plan to increase capacity by 5%. Stockwinners.com
United plan to increase capacity by 5%.

Shares of United Continental (UAL) are sliding after the company said in its earnings conference call that it plans to grow capacity by 4%-6% in 2018, likely threatening its profit margin.

This comes as United looks for a competitive edge in its fight against low-cost carriers such as Southwest Airlines (LUV) and JetBlue (JBLU).

This morning, Evercore ISI analyst Duane Pfennigwerth downgraded United to a neutral-equivalent rating.

RESULTS, OUTLOOK

Last night, United Continental reported fourth quarter adjusted earnings per share of $1.40 and revenue of $9.4B, with consensus at $1.34 and $9.42B, respectively.

The company also said Q4 2017 consolidated passenger revenue per available seat mile was up 0.2% compared to Q4 2016.

Additionally, the carrier noted it sees 2018 capacity growth of 4%-6%, and a similar growth rate in 2019 and 2020.

United expects 2018 EPS to be $6.50-$8.50 and sees 2018 capital expenditures of $3.6B-$3.8B.

CAPACITY CONCERNS

In a research note to investors this morning, Evercore ISI’s #Pfennigwerth downgraded United Continental to In Line from Outperform, with a $75 price target, following its quarterly report.

The analyst noted that while United’s belief appears as high as ever in the view that restoring domestic share in its hubs is the shortest path to margin expansion, the “biggest missing ingredient” from its presentation was any evidence that the strategy is working.

The company’s higher growth pitch likely plays well with labor ahead of another round of contract negotiations in 2019 but limits broader participation from longer term investors seeking confidence at this point in the cycle, he contended.

Furthermore, the analyst argued that growth acceleration following poor pricing execution in 2017 and in the face of a significantly higher fuel curve is “surprising.”

Meanwhile, his peer at Stephens also voiced concern over the company’s capacity growth plans. While analyst Jack #Atkins acknowledged that he was encouraged that United issued both 2018 and long-term EPS guidance, he believes its plan to grow its system capacity by 4%-6% for each of the next three years is “concerning” as it implies about 6%-8% growth in the domestic market.

This level of capacity growth risks muting unit revenue growth in the market as well as potentially sparking a competitive response from one of United’s network peers, Atkins added.

The analyst told investors he expects the group to come under pressure as investors work to determine who has the most exposure to its incremental capacity growth and what it means for domestic revenue trends for the industry. He reiterated and Equal Weight rating and $78 price target on United Continental shares.

REMAINS TOP PICK

In a note of his own, UBS analyst Darryl #Genovesi told investors he expects estimates for United Continental to move higher over the next few days and that he came away from the company’s guidance meeting more positive on the fundamental go-forward strategy.

The analyst pointed out that he believes the capacity concerns will likely get swept under the rug if industry RASM continues to be strong. Genovesi reiterated a Buy rating and $90 price target on United shares.

PRICE ACTION

UAL is down 10.5% to $69.80.


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Barron’s is bullish on Alaska Air

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

Alaska air should bounce back in 2018 – While shares of Alaska Air (ALK) are down over 20% this year, they should get back up in 2018, Strauss writes in this week’s edition of Barron’s. With a lower valuation and a better dividend yield than many rivals, the company should rise after if fully integrates Virgin Air, which already is adding to earnings, he notes.

CBOE should not be treated as ‘set and forget’  – Bitcoin futures have pushed CBOE’s (CBOE) stock to a new record high, and some see the stock as a way to benefit from investors fascination with Bitcoin, Steven Sears writes in this week’s edition of Barron’s. However, Sears is recommending that investors no longer treat the shares as a “set and forget” position until it is clearer how the Bitcoin ecosystem will influence CBOE.

Spark Therapeutics selloff may be overdone – Spark Therapeutics (ONCE) shares plunged after the company released disappointing results for its hemophilia A treatment, but the selloff may be overdone given the company’s other promising treatments, Andrew Bary writes in this week’s edition of Barron’s.

More consolidation to come after Disney/Fox deal – Netflix (NFLX) success and its high valuation is forcing the rest of the TV work to scramble, Alex Eule writes in this week’s edition of Barron’s. In the wake of Disney’s (DIS) 21st Century Fox (FOXA; FOX) purchase, investors should expect more consolidation to come, he adds. Given that FOX RSN business looks very similar to MSG Networks (MSGN) and with Disney’s deal spurring a new wave of RSN interest, 208 could be the year that MSG gets sold, Barron’s says. Other potential attractive targets include AMC (AMCX) and Viacom (VIAB), Eule contends.

BEARISH  MENTIONS

Exxon (XOM) disclosure of climate-change regulation impact has risks – In a filing with the Securities and Exchange Commission, Exxon’s board acceded to a proxy request to disclose more about what tightening climate-change regulations may do to the long-term value of its hydrocarbon assets in the ground, Vito Racanelli writes in this week’s edition of Barron’s. Once Exxon discloses this information, companies that do not will be under pressure, he notes, adding that while more disclosure as a rule is good for shareholders, there are risks as it could hurt its competitive position and the ability to sell assets at a fair price.

New Apple iPhone features also bring software bugs – While each new Apple iPhone (AAPL) brings more “dazzling” features, it also brings a rising number of software bugs, Tiernan Ray writes in this week’s edition of Barron’s. Apple has little choice but to keep adding features to stay ahead of the pack, and one large cost is having to divert engineers to fix bugs, he adds.


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Boeing paints a rosy picture

Boeing forecasts $730B market for new airplanes in Middle East

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Boeing (BA) forecasts that airlines in the Middle East will need 3,350 new airplanes over the next 20 years, valued at an estimated $730B.

Boeing presented its 2017 Current Market Outlook for the region during the Dubai Airshow.

“Traffic growth in the Middle East is expected to grow at 5.6% annually during the next 20 years,” said Randy Tinseth, vice president of Marketing, Boeing Commercial Airplanes.

“The fact that 85% of the world’s population lives within an eight-hour flight of the Persian Gulf, coupled with robust business models and investment in infrastructure, allows carriers in the Middle East to channel traffic through their hubs and offer one-stop service between many cities.”

More than half of the total deliveries in the Middle East will be single-aisle airplanes such as the 737 MAX.

Operators in the region will need 1,770 single-aisle airplanes valued at $190B, driven by the growth of low-cost carriers.

Boeing’s presence and support for the Middle East also includes Global Services, the company’s third and newest business unit that is expanding its service capability offerings to better support the region’s airlines and aircraft.

Around the world, Boeing has forecasted long-term demand for 41,030 new airplanes, valued at $6.1T.

These new airplanes will replace older, less efficient airplanes, benefiting airlines and passengers and stimulating growth in emerging markets and innovation in airline business models.

BA closed at $260.85.


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FedEx buys 50 planes from Airbus

FedEx Express to buy up to 50 turboprop planes from ATR

FedEx Express to buy up to 50 turboprop planes from ATR. See Stockwinners.com for details

FedEx Express, a subsidiary of FedEx Corp. (FDX), announced that it has completed a purchase agreement with ATR, a joint venture between Airbus (EADSY) and Italy’s Leonardo SpA, that will begin to modernize the company’s fleet of feeder aircraft.

Under the agreement, FedEx Express is making a firm purchase of 30 ATR 72-600F aircraft with options to purchase up to 20 additional ATR 72-600Fs.

Delivery of the first aircraft is expected in 2020, with subsequent deliveries of about six aircraft per year over a five year period.

“The purchase of new, more advanced feeder aircraft like the ATR 72-600F is the next step in our very successful fleet modernization strategy, which has helped us greatly improve our fuel efficiency and fleet reliability in recent years,” said David L. Cunningham, president and CEO, FedEx Express.

“We worked closely with ATR, which developed this new aircraft with special features to help us grow our business, especially in the air freight market where shipments are larger and heavier.” ATR 72-600Fs will have: a forward Large Cargo Door (LCD) and a rear upper-hinged cargo door; digital cockpits; advanced avionics technology and enhanced take-off performance; ADS-B “out” capabilities.

Current FedEx feeder aircraft do not carry containers or palletized freight, so these new features will help the company better serve customers in the air freight market where palletized shipments are the norm.

FedEx currently deploys more than 300 feeder aircraft in 45 countries. Most of these feeder aircraft are owned by FedEx, and are leased and operated by different third-party air carriers under their own operating certificates.

The FedEx feeder fleet is comprised of aircraft under 60,000 pounds maximum gross take-off weight, and allows the company to provide fast, economical service to small and medium-sized markets around the world.

FDX closed at $221.16. EADSY closed at $24.99.


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Orbital ATK Sold for $9.2 billion

Northrop Grumman Corp. to buy Orbital ATK for $134.50 a share

Orbital ATK Sold for $7.5 billion. See Stockwinners.com Market Radar to read more

Northrop Grumman (NOC) and Orbital ATK (OA) announced they have entered into a definitive agreement under which Northrop Grumman will acquire Orbital ATK for approximately $7.8B in cash, plus the assumption of $1.4B in net debt.

Orbital ATK shareholders will receive all-cash consideration of $134.50 per share.

The agreement has been approved unanimously by the boards of both companies. The transaction is expected to close in the first half of 2018 and is subject to customary closing conditions, including regulatory and Orbital ATK shareholder approval.

Upon completion of the acquisition, Northrop Grumman plans to establish Orbital ATK as a new, fourth business sector to ensure a strong focus on operating performance and a smooth transition into Northrop Grumman.

On a pro forma 2017 basis, Northrop Grumman expects to have sales in the range of $29.5B-$30B based on current guidance.

Northrop Grumman expects the transaction to be accretive to earnings per share and free cash flow per share in the first full year after the transaction closes, and to generate estimated annual pre-tax cost savings of $150M by 2020.

Northrop Grumman has received fully committed debt financing and expects to put in place permanent financing prior to closing.

Northrop Grumman remains committed to maintaining a solid investment grade credit rating and will use its strong cash flow to support debt reduction, while continuing to pay a competitive dividend and repurchase shares.


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Disney Tumbles on guidance, streaming service, and Irma

Disney slides after CEO comments on guidance, streaming service

This blog was updated with Disney World Closure Information

Disney to end Netflix distribution agreement in 2019. See Stockwinners.com Market Radar for details

During Bank of America Merrill Lynch’s Media, Communications & Entertainment Conference, Disney (DIS) CEO Bob Iger said that he expects the company’s 2017 earnings per share to be roughly in line with last fiscal year, sending the stock into negative territory.

The executive also said Marvel and Star Wars will go exclusively to the company’s upcoming streaming service.

GUIDANCE

Disney CEO Bob Iger expects the company’s fiscal year 2017 earnings per share to be roughly in line with last fiscal year.

In 2016, Disney reported adjusted earnings per share of $5.72, according to Bloomberg data. The consensus estimate for 2017 prior to Iger’s comments today was for 2017 earnings per share of $5.88, according to First Call.

“I think you have to look at the year as being roughly in line with an EPS basis that we delivered in fiscal ’16, and that’s for a few reasons, some, by the way, very topical. We mentioned all the way at the beginning of the year the impact of the NBA, big growth in cost to ESPN on the rights front. We also did not have a big Star Wars movie. […]

HURRICANE  IRMA

In addition to that, we have had some impact already from Hurricane Irma. There, we’ve seen cancellations in Orlando, and we’ve also had to cancel three cruise itineraries and shorten a couple of others. Lastly, there will be some expense us in fiscal ’17 that are tied to the BAMTech acquisition,” the executive said during the media conference.

[youtube https://www.youtube.com/watch?v=Ki6q5KaGqrA?rel=0&controls=0&w=560&h=315]

Walt Disney World to close from Saturday until Tuesday or later – Walt Disney World will begin closing its theme parks from Saturday September 9 and “hopes” to resume normal operations on Tuesday September 12, the company stated in an update on Hurricane Irma posted to its website. 

DISNEY STREAMING SERVICE

During the presentation, CEO Bob Iger also said that Marvel and Star Wars titles will go exclusively to the new Disney streaming platform, a service that is set to launch in late 2019.

“We’re going to launch it in late 2019. We’re doing that for two reasons. First of all, as we exit the Netflix (NFLX) output deal, we don’t get access to our theatrical release movies until the beginning of ’19.  Secondly, we wanted time to actually develop and build up original programming for the platform. So late ’19, we’ll launch a Disney-branded service.

It will have — it will be the output distributor for the theatrical release movies. […] We’ve now decided that we will put the Marvel and Star Wars movies on this app as well. So it will have the entire output of the studio: animation, live action, Disney including Pixar, Star Wars and all the Marvel films,” he explained.

Additionally, it will also have four to five original Disney series as well as three to four exclusive Disney movies. “We are going to make less costly movies that are going to be on our proprietary service,” he said.

ESPN

Discussing the company’s ESPN sports network, Iger pointed out that he expects its own streaming service to launch sometime in the Spring, and that ultimately each user will be able to choose the events and sports he wants to watch.

“We will launch with 10,000 live sporting events that are not currently on ESPN’s linear channels. And those will include Major League Baseball, the National Hockey League, MLS, some other tenants and a lot of college in sports that we own the rights to already. […] It will be an ESPN app that exists today. Today, on that ESPN app, you can watch ESPN’s linear channels live authenticated. That will continue to exist. On top of that in the same app, you’ll be able to subscribe to, let’s call it, a plus service. You’ll be able to subscribe to significantly more sports programming than you get just through the linear channels. […] Over time, I think the way you have to look at this is this will be a sports marketplace platform.

You’ll be able to pick and choose over time what it is you want. It won’t necessarily be a one-size-fits-all. We may launch it that way, but the goal eventually is to create something that the sports fan can essentially use to design what their sports media experience can be,” Iger stated.

PRICE ACTION

On Thursday shares of Disney dropped about 4.4% to $97.06, while Netflix’s stock closed fractionally lower to $179.00.


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Rockwell Collins Sold for $30 billion

United Technologies Corp. to buy Rockwell Collins for $140 a share

Rockwell Collins Could Be Sold for $145 a share. See Stockwinners.com Market Radar

The Dow Jones Industrial Average component, United Technologies Corp. (UTX) to buy Rockwell Collins Inc.  (COL) for about $23 billion, to create an aerospace behemoth that can outfit warplanes and jetliners from tip to tail.

The transaction creates an aircraft-parts giant better positioned to withstand the squeeze from planemakers Boeing Co. and Airbus SE for pricing discounts and higher output.

Under the terms of the agreement, each Rockwell Collins share owner will receive $93.33 per share in cash and $46.67 in shares of United Technologies common stock, subject to a 7.5% collar centered on United Technologies’ August 22, 2017 closing share price of $115.69.

United Technologies expects to fund the cash portion of the transaction consideration through debt issuances and cash on hand, and the company is committed to taking actions to maintain strong investment grade credit ratings.

The transaction is projected to close by Q3 of 2018, subject to approval by Rockwell Collins’ share owners, as well as other customary closing conditions, including the receipt of required regulatory approvals. The purchase price implies a total equity value of $23B and a total transaction value of $30B, including Rockwell Collins’ net debt.

The combined company will boast a broad suite of products for commercial aircraft, from Rockwell Collins’s touchscreen cockpit displays to jet engines made by the Pratt & Whitney division of United Technologies.

United Technologies said it will combine its aerospace business with Rockwell Collins in a new unit named Collins Aerospace Systems. Rockwell Collins Chief Executive Officer Kelly Ortberg will head the division, while Dave Gitlin, who currently runs UTC Aerospace Systems, will serve as president and chief operating officer.

United Technologies is increasing its bet on aerospace, where it has stumbled recently with the rocky rollout of a new jet engine that cost $10 billion to develop. The market accounts for about half of sales at the company, with the rest coming from elevators, air conditioners and other building systems.

Rockwell Collins is already absorbing the largest acquisition in its history. The company earlier this year closed the acquisition of B/E Aerospace, adding deluxe jetliner seats, lavatories and galley equipment to a lineup of high-technology avionics products.

COL closed at $130.61.

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Hurricane Harvey to Push Gas Prices Higher

Hurricane Harvey scheduled to make landfall tonight near Corpus Christi, Texas

Refineries have shut down ahead of the storm

Hurricane Harvey to push gas prices higher. See Stockwinners.com Market Radar to read more

Hurricane Harvey is a tropical cyclone currently threatening to make landfall in Texas as a major hurricane, which would be the first storm of such intensity to strike the United States since Wilma in 2005 and the first to hit the state since Ike in 2008. The eighth named storm and third hurricane of the 2017 Atlantic hurricane season.

Currently, Hurricane Harvey is located within 10 nautical miles of 27.1°N 96.3°W, about 85 miles (140 km) east-southeast of Corpus Christi, Texas, or about 90 miles (145 km) south of Port O’Connor, Texas.

REFINERIES and OIL PRODUCTION

Forty-five percent of total U.S. petroleum refining capacity is located along the Gulf Coast. All of these refineries will shut down for safety reasons.

Oil production operations in the Gulf began shutting down Thursday in response to Hurricane Harvey. Here is what is happening so far:

  • Anadarko (APC) has removed all personnel and temporarily shut in production at their Boomvang, Gunnison, Lucius and Nansen facilities, which are located in the western portion of the Gulf.
  • ConocoPhillips (COP) has taken precaution to evacuate all non-essential personnel from our Magnolia platform in the Gulf of Mexico and they have decided to suspend drilling and completion activities in the Eagle Ford and move non-essential personnel and equipment off the drilling rigs.
  • ExxonMobil (XOM) is in the process of evacuating all personnel from their facilities expected to be in the path of the storm, which includes the Hoover platform and Galveston 209 platform. The Hoover and Galveston 209 platforms are shut-in. Their Hadrian South subsea production system in the Gulf of Mexico is also shut-in.
  • Shell (RDS) shut down production and has secured its Perdido asset and is in the process of returning all personnel working on Perdido to shore.
  • Valero (VLO) said Friday completed the process of temporarily closing two refineries in Corpus Christi and Three Rivers.

As of Friday noon, operators had been evacuated from 39 production platforms — about 5.29 percent of the manned platforms in the Gulf — along with one rig.

As part of the evacuation procedures, operators shut the sub-surface safety valves below the surface of the ocean floor, to prevent releasing oil or gas. That means 9.56 percent of the current oil production in the Gulf has been blocked off, equating to 167,231 barrels per day. In addition, 0.04 percent of the natural gas production in the Gulf has been shut down.

Houston also marks the beginning of the Colonial Pipeline, which transports more than 100 million gallons of gasoline, heating oil and aviation fuel each day to as far as the New York harbor. Power outages during Hurricanes Katrina and Rita in 2005 forced the shutdown of parts of the Colonial Pipeline for several days.

FLOODING

Hurricane Harvey’s impact on U.S. oil production could extend beyond offshore platforms and Gulf Coast refineries. Extreme flooding threatens to bring Texas shale activity to a halt, and it may take weeks, if not months, before some shale fields can bounce back.

Texas is by far the largest oil producer in the U.S., and at least part of the oil-rich Eagle Ford shale formation lies in the projected path of the storm.

Motorists across the U.S. might see a spike in gasoline prices following disruptions to offshore rigs, refineries, pipelines and terminals. Pump prices could jump 15 to 25 cents a gallon nationwide.


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Is Buffett Buying Southwest?

Berkshire taking Southwest private seen as one of many potential airline deals

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Upcoming mergers in the airline sector will probably be carried out by smaller regional carriers, including JetBlue (JBLU), Spirit Airlines (SAVE), Alaska Air (ALK), and Hawaiian Airlines (HA), Imperial Capital argued this morning in a research note.

DEALMAKERS

Three regional airlines – Alaska Air, Hawaiian Airlines, and JetBlue – could make deals with each other, according to analyst Michael Derchin wrote to investors. Spirit, Allegiant Travel (ALGT) and privately held Frontier Airlines, identified by Derchin as “ultra-low cost carriers,” may also look to consolidation opportunities, the analyst stated.

RATIONALE

Deals among the smaller carriers would make them more competitive and increase their defensiveness ahead of the next downturn, the analyst stated. Additionally, consolidation would enhance their growth opportunities during the sector’s next expansion cycle, the analyst added.

POTENTIAL DEALS

Alaska Air could merge with JetBlue, Frontier could acquire Spirit, the combination of Frontier and Spirit could merge with Allegiant, and American Airlines Group (AAL) could bid for Hawaiian, which could lead to a bidding war, the analyst wrote.

Another possibility, according to #Derchin, is Berkshire Hathaway (BRK.A, BRK.B) taking Southwest Airlines (LUV) private.

After taking major stakes in the four largest airlines, and with $100B in cash available for additional investments, it is plausible that Warren Buffett’s conglomerate could opt to take one of its holdings private, the analyst contends.

Derchin views Southwest, with its low-cost domestic operation, “unique” culture, and consistent track record as the best fit for being taken private by Berkshire.

LARGE AIRLINES

American (AAL), Delta Air Lines (DAL), United Continental Holdings (UAL), and Southwest Airlines may “largely” remain on the sidelines when it comes to consolidation deals, however, Derchin believes.

Those airlines will probably “focus on enhancing joint ventures” in an effort “to strengthen their international route networks,” the analyst wrote.


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Rockwell Collins Could Be Sold for $145 a share

Rockwell Collins could be acquired for $145 per share

 

Rockwell Collins Could Be Sold for $145 a share. See Stockwinners.com Market Radar

After Reuters and Bloomberg reported that United Technologies (UTX) had made an unconfirmed bid to buy Rockwell Collins (COL), RBC Capital analyst Matthew McConnell estimates that Rockwell Collins could be acquired for $145 per share.

Shares of the maker of avionics and cabin interiors spiked in late trading on Friday after Bloomberg News reported United Technologies Corp. was considering buying the $19 billion company. The idea of a Rockwell Collins purchase isn’t new. Last year, Starboard Value reportedly pushed management to pursue a sale rather than proceed with a takeover of airplane seat-maker B/E Aerospace (that deal closed in April). But it’s jarring to see United Technologies thinking seriously about it.

The analyst says that the deal would strengthen United Technologies and has “ample strategic rationale,” although he notes that airplane makers have expressed opposition to similar deals in the past.

He adds that the deal “would move” United Technologies “up the technology curve” and enable it to enter the avionics business which he says has high barriers of entry.

#McConnell thinks that there is a 50% chance of a deal taking place and raised his price target on Rockwell Collins to $133 from $120. He keeps a Sector Perform rating on Rockwell Collins.

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