ECB plays catch up, raises refinancing rate to 2 percent

ECB raises Main Refinancing Rate by 75bps to 2.00%

The ECB stated:

“The Governing Council today decided to raise the three key ECB interest rates by 75 basis points. With this third major policy rate increase in a row, the Governing Council has made substantial progress in withdrawing monetary policy accommodation.

The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target.

Christine Lagarde: ECB President

The Governing Council will base the future policy rate path on the evolving outlook for inflation and the economy, following its meeting-by-meeting approach. Inflation remains far too high and will stay above the target for an extended period. In September, euro area inflation reached 9.9%.

In recent months, soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand have led to a broadening of price pressures and an increase in inflation.

The Governing Council’s monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations. The Governing Council also decided to change the terms and conditions of the third series of targeted longer-term refinancing operations (TLTRO III).

During the acute phase of the pandemic, this instrument played a key role in countering downside risks to price stability.

Today, in view of the unexpected and extraordinary rise in inflation, it needs to be recalibrated to ensure that it is consistent with the broader monetary policy normalisation process and to reinforce the transmission of policy rate increases to bank lending conditions.

Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00%, 2.25% and 1.50% respectively, with effect from 2 November 2022.

Asset purchase programme (APP)

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it started raising the key ECB interest rates and, in any case, for as long as necessary to maintain ample liquidity conditions and an appropriate monetary policy stance.

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Volkswagen to buy back diesel cars amid German bans

Volkswagen offers to buy back diesel cars amid German bans

Volkswagen offers to buy back diesel cars amid German bans. Stockwinners.com
Volkswagen offers to buy back diesel cars amid German bans.

The Volkswagen (VLKAY) brand is starting a diesel campaign for its customers in Germany in April.

The new Germany Guarantee gives the buyers of new and year-old vehicles with diesel engines purchased from a Volkswagen dealership additional security and will keep them on the road in the event of a driving ban.

The Volkswagen Group’s successful environmental incentive has already taken some 170,000 old diesel vehicles from the road since August 2017 and replaced them with efficient and clean current models.

Approximately 120,000 of these customers have chosen a Volkswagen brand model.

The Volkswagen brand continues its effort to rejuvenate the vehicle population by offering the diesel environmental incentive with the purchase of a new diesel vehicle beginning in April.

Volkswagen’s new Germany Guarantee is free of charge and will apply to the purchase of a new or a year-old car with a diesel engine from a Volkswagen dealership from 1 April throughout 2018.

It is valid for three years from the date of purchase and offers customers who would be affected by possible driving restrictions at their home or working address the opportunity to exchange vehicles.

The affected customer will receive an offer that the participating Volkswagen dealership will buy back the original model for the current value determined by the independent institution, Deutsche Automobil Treuhand, if the customer then buys from the same dealership a new or year-old vehicle which would not be affected by driving restrictions.

The participating Volkswagen dealership will give the customer a model-dependent trade-in premium with a maximum value corresponding to the previous environmental incentive. The vehicle exchange will be dealt with the involved Volkswagen Partner and in addition via Volkswagen’s digital ecosystem at volkswagen-we.de.

The Volkswagen brand has already taken some 120,000 old diesel vehicles with Euro 1 through Euro 4 emissions standards from the road since August 2017 with its successful environmental incentive, thus making a substantial contribution to improving the air quality of German cities.

Therefore, the measure will be continued as a diesel environmental incentive for new diesel vehicles until 30 June 2018.

The previous model-dependent premiums will continue unchanged.

VLKAY closed at $38.63.


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Watch these bank earnings

What to watch in bank space earnings reports

What to watch in bank earnings. Stockwinners.com
What to watch in bank earnings.

Bank of America (BAC) and Goldman Sachs (GS) are scheduled to report quarterly results on January 17, while Morgan Stanley (MS) is expected to report on January 18.

What to watch for:

1. TAX REFORM:

Goldman Sachs estimates that the enactment of the new tax legislation will result in a reduction of approximately $5B in the firm’s earnings for Q4 and year ending December 31, 2017, approximately two-thirds of which is due to the repatriation tax.

The remainder includes the effects of the implementation of the territorial tax system and the re-measurement of U.S. deferred tax assets at lower enacted corporate tax rates.

Earlier this month, Morgan Stanley (MS) said it also estimates the net income for the quarter ending December 31, 2017 will include an aggregate net discrete tax provision of approximately $1.25B, comprised of an approximate $1.4B net discrete tax provision as a result of the enactment of the Tax Cuts and Jobs Act, primarily from the re-measurement of certain net deferred tax assets using the lower enacted corporate tax rate, partially offset by an approximate $160M net discrete tax benefit, primarily associated with the re-measurement of reserves and related interest relating to the status of multi-year Internal Revenue Service tax examinations.

2. CRYPTOCURRENCY:

On December 14, Bloomberg reported that Goldman Sachs is seeking a 100% margin on some bitcoin future trades deterring some customers from looking to clear their trades through the bank and resulting in some taking their business elsewhere.

A week later, the publication said the bank was establishing a trading desk to make markets in digital currencies such as bitcoin. The company intends to get the business running by the end of June, if not earlier, the report added.

Also last month, Morgan Stanley said in a regulatory filing that it had purchased an 11.4% stake in Overstock (OSTK), which launched cryptocurrency trading with its tZERO subsidiary.

3. FAVORABLE OUTLOOK:

On November 29, JPMorgan analyst Kian Abouhossein raised his price target for Goldman Sachs to $270 from $263 and called it his top investment banking pick for 2018.

The analyst said he is more positive around the strength of the franchise and believes its fixed income, currencies and commodities business revenue growth opportunity of $1B-plus is more likely to be achieved. Goldman has shown “excellent progress” when it comes to delivering shareholder value, #Abouhossein contended.

Last month, BofA/Merrill analyst Michael #Carrier added Goldman Sachs to the U.S. 1 List, citing an increasing favorable outlook with rising GDP growth, favorable risk/reward, low expectations, and potential catalysts from de-regulation, tax reform, and increased volatility.

Carrier reiterated a Buy rating on the stock and raised his price target on the shares to $300 from $290.

4. BREXIT

On November 20, Goldman Sachs CEO Lloyd Blankfein said the bank will have two EU hubs, in Frankfurt and Paris, post-Brexit, according to Reuters. “We will have more employees on the continent. Some, if they want to, would come from London, we will hire others,” Blankfein said.

“Brexit pushes us to decentralize our activities. In the end, it’s the people who will largely decide where they prefer to live.”


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Credit Suisse pledges to return capital to shareholders

Credit Suisse pledges to return 50% of net income to shareholders by 2019

Credit Suisse pledges to return 50% of net income to shareholders by 2019. See Stockwinners.com
Credit Suisse pledges to return 50% of net income to shareholders by 2019

Credit Suisse (CS), in its Investor Day presentation, said that “As we approach 2018 – the final year of our three-year restructuring plan – we remain committed to achieving the 2018 targets announced last year for the Swiss Universal Bank, International Wealth Management, Investment Banking & Capital Markets and Global Markets.

For our Wealth Management & Connected business in Asia Pacific, we are confident that we can achieve our 2018 target of CHF 700M of adjusted pre-tax income for the full year 2017 ahead of schedule and we are therefore setting a new target for 2018 of CHF 850M.

Reflecting our strong progress on cost, we are confident of beating our target cost base of less than CHF 18.5B for 2017 and we estimate that our total cost base for the year will be approximately CHF 18B .

We are confirming our 2018 cost base target of less than CHF 17B.

Looking ahead, the Group aims to operate with a total cost base of between CHF 16.5B and CHF 17B in 2019 and 2020, subject to market conditions and investment opportunities within this range.

We are confident that we can complete the wind-down of our non-core unit, the Strategic Resolution Unit, and reach our targeted adjusted pre-tax loss of approximately CHF 1.4B in 2018.

We have lowered our 2019 adjusted pre-tax loss target for the Strategic Resolution Unit from approximately $800M to approximately $500M, which represents a significant improvement… Our objective is to achieve a Group reported return on tangible equity of 10% to 11% for 2019 and 11% to 12% for 2020.

We aim to operate with a look-through CET1 ratio of above 12.5% from 2018 to 2020, before the implementation of the Basel III reforms beginning in 2020.

Cumulatively in 2019 and 2020, as we continue to strengthen our capital generation, we expect to allocate approximately 20% for investment in wealth management and connected businesses .

We also expect that approximately 30% of the cumulative capital generated will be used for the RWA uplift resulting from Basel III reforms and other contingencies. We also aim to increase returns to shareholders and plan to distribute 50% of net income earned to them primarily through share buybacks or special dividends.”

CS closed at $16.65.


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Barron’s is bullish on Morgan Stanley and Samsung

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

 

BULLISH  MENTIONS

Caesars looks ready to grow again – After a disastrous 2008 leveraged buyout, Wall Street seems to have warmed to Caesars (CZR) story this year in a strong market for casino operators, Andrew Bary writes in this week’s edition of Barron’s. With a bankruptcy filing settled, the company’s shares have surged this year, and the gambling giant could hit $18, up 50% in the next 18 months, he adds.

Coach shares look undervalued, could rise nearly 30% – Coach (COH), which has announced that it would be changing its name to Tapestry, is finally on the right path to growth, Emily Bary writes in this week’s edition of Barron’s. Recent acquisitions and brand-loyalty initiatives should help the company maintain its market share, and in the next 12 months the shares could return nearly 30%, including dividends, she adds.

DowDuPont shares likely to return as much as 30% over next year – If DowDuPont (DWDP) can cut $3B from its yearly costs and attract a higher valuation by splitting into three parts, the shares stand to return 15%-30% over the next year, including dividends, Jack Hough writes in this week’s edition of Barron’s.

Lufthansa has more room to climb – Amid competitor’s troubles, Lufthansa (DLAKY) has scored an “upgrade to first class,” Victor Reklaitis writes in this week’s edition of Barron’s. However, several bulls say other factors will be bigger drivers, seeing the stock’s price rising to $35.36 due to a range of tailwinds, and implying a rally of about 20%, he adds.

Another 20% gain in Morgan Stanley stock likely – In a follow-up story, Barron’s says Morgan Stanley’s (MS) strategic response to the financial crisis proves more resilient than others,’ and another 20% gain in the stock is likely.

Samsung has lots of upside driven by chips/screens – Samsung (SSNLF)  stock is up 50% this year and it is still cheap, Assif Shameen writes in this week’s edition of Barron’s. While the company is known for smartphones, Samsung lives off semiconductors and screens, with analysts estimating that chips will generate 70% of profits and screens 13%, he adds.

BEARISH MENTIONS

Market pounds United, sees American/Delta as possibly safe bets – United Continental’s (UAL) earnings were bad news for the company, with shares dropping after the carrier reported better than expected earnings but offered guidance that suggested that its fourth quarter earnings would miss, Ben Levisohn writes in this week’s edition of Barron’s. While Delta Air Lines (DAL) and American Airlines (AAL) followed their peer lower, their shares did not go much lower, as the Market seems to see the two airlines as possibly safe bets, he adds.

Regulators inquiries fuel speculation about big tech breakup – Facebook (FB), Amazon (AMZN) and Alphabet (GOOG; GOOGL) deserve a lot of the credit for last week’s record stock market highs but their positive effect will now depend on how they respond to U.S. and European regulators, Tiernan Ray writes in this week’s edition of Barron’s. European inquiries and those from the U.S.’s Federal Trade Commission have prompted speculation about the breakup of these companies, he adds. And it is not only antitrust issues that are in play, as many see the huge amounts of personal data that these companies are amassing as troubling, Ray contends.


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GE Disappoints!

GE shocks with ‘unacceptable’ results, guidance cut

GE gets $15B contract from Saudi Arabia

Shares of General Electric (GE) are lower in Friday’s  trading after the company reported quarterly profit that missed consensus estimates by 20c per share.

GE also cut its outlook for fiscal 2017 as new CEO John Flannery called the results “unacceptable.”

MISS AND CUT

GE this morning reported third quarter industrial operating earnings per share of 29c excluding restructuring charges, missing analysts’ estimates of 49c.

Total revenue for the quarter was $33.47B, which beat analysts’ expectations of $32.56B.

The company said that while the majority of its business units had “solid” earnings performance, “this was offset by a decline in Power performance in a difficult market.” “This was a very challenging quarter,” CEO John Flannery said.

Looking ahead, GE cut its FY17 EPS view to $1.05-$1.10 from $1.60-$1.70, well below estimates of $1.53.

“We are focused on redefining our culture, running our businesses better, and reducing our complexity,” Flannery added.

EXECUTIVE COMMENTARY

On GE’s earnings call, Flannery said the results were “unacceptable to say the least” and that while there are many areas of strength at the company, “it’s clear we need to make some major changes.”

Flannery said GE is doing “deep dives” on all aspects of the company, adding that “everything is on the table and there have been no sacred cows.” The company has started to outline its restructuring plans, saying it plans to exit more than $20B of its businesses in the next one to two years, but noted that the dividend is a “priority.”

STRATEGY UPDATE UPCOMING

GE is planning to update its company strategy and 2018 framework on November 13. Flannery has already been cutting jobs, research operations and corporate jets and cars.

PERSONNEL CHANGES

GE has also undertaken personnel changes, including the earlier-than-expected retirement of Chairman Jeff Immelt. According to a spokeswoman, “[Immelt felt Flannery] is prepared to be chairman and CEO now and leaving GE allows him to look at opportunities outside the company.”

Additionally, on October 6, GE said CFO Jeff Bornstein would leave the company on December 31 and will be succeeded by GE Transportation CEO Jamie Miller.

Bornstein said on today’s earnings call that GE was not “living up to our own standards or investor standards and the buck stops with me.”

Earlier this month, GE announced the election of Trian Fund’s Ed Garden to its board to replace Robert Lane, who is retiring. Trian’s Nelson Peltz said he had pushed to get Garden on GE’s board to “bring a fresh mindset.”

‘SHOCKING’ RESULTS

Deutsche Bank analyst John Inch called GE’s weaker than expected Q3 results this morning “shocking,” noting that the company “falls well short” of generating enough cash to pay its $8B common dividend from operations, which raises the prospects of a pending dividend cut and/or raising financial leverage to pay for the dividend. He has a Sell rating and $21 price target on GE shares.

Meanwhile, Citi analyst Andrew Kaplowitz said the earnings report indicates that the mounting challenges developing over time in the Power business now appear to be fully materializing. Kaplowitz, who has a Buy rating and $31 price target on GE, thinks shares could potentially be approaching a bottom.

PRICE ACTION

GE shares are down about 3%  at $22.72, improving quickly from their opening lows. The early drop pushes the stock’s year-to-date losses to nearly 30%. Shares have a 52-weeks trading range of $22.10 – $32.38.


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Honeywell to reorganize itself

Honeywell announces planned portfolio changes

Honeywell to reorganize itself. See Stockwinners.com for details

Honeywell (HON) announced the results of its comprehensive portfolio review, including its intention to separately spin off its Homes product portfolio and ADI global distribution business, as well as its Transportation Systems business, into two stand-alone, publicly-traded companies.

The planned separation transactions are intended to be tax-free spins to Honeywell shareowners for U.S. federal income tax purposes and are expected to be completed by the end of 2018.

“Today’s announcement marks the culmination of a rigorous portfolio review involving a detailed assessment of every Honeywell business. As part of that review, we analyzed numerous criteria, including growth outlook, financial performance, market dynamics, potential for disruption, and, most importantly, assessment of fit as a Honeywell business,” said Honeywell President and CEO Darius Adamczyk.

“The remaining Honeywell portfolio will consist of high-growth businesses in six attractive industrial end markets, each aligned to global mega trends including energy efficiency, infrastructure investment, urbanization and safety.

These businesses are best positioned to leverage Honeywell synergies from our technologies, financial and business models, and talent. Our simplified portfolio will offer multiple platforms for organic growth and margin expansion through further deployment of our world-class HOS Gold operating system and the Honeywell Sentience Platform.

Honeywell will also have multiple levers for continuing to execute an aggressive capital deployment strategy, including a vigorous and disciplined M&A program.

“The spun businesses will be better positioned to maximize shareowner value through focused strategic decision making and capital allocation tailored for their end markets,” Adamczyk said.

“At Honeywell, we will continue our track record of execution, delivering growth, margin expansion, and aggressive capital allocation for our shareowners.”

The new Homes and Global Distribution business will be a leader in the home heating, ventilation and air conditioning, or HVAC, controls and security markets, and a leading global distributor of security and fire protection products. The business is expected to have annualized revenue of approximately $4.5B, a high-yield credit rating, approximately 13,000 employees, and financial responsibility for certain Honeywell legacy liabilities.

The new Transportation Systems business will be a global leader in turbocharger technologies with best-in-class engineering capabilities for a broad range of engine types across global automobile, truck and other vehicle markets.

The business is expected to have annualized revenue of approximately $3B, a high-yield credit rating, approximately 6,500 employees and financial responsibility for Honeywell legacy automotive segment liabilities in an amount equal to our Bendix legacy asbestos liability.

The planned separations will not require a shareowner vote.

Each spin-off will be subject to finalization of the contours of the spun-off business, assurance that the separation will be tax-free to Honeywell shareowners for U.S. federal income tax purposes, finalization of the capital structure of the three corporations, the effectiveness of appropriate filings with the SEC, final approval of the Honeywell board, and other customary matters.

HON closed at $143.60.


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Collegium higher on Cigna deal

Collegium rises as Cigna turns to Xtampza in fighting opioid abuse

Collegium rises as Cigna turns to Xtampza in fighting opioid abuse. See Stockwinners.com for details

Shares of Collegium Pharmaceutical (COLL) are on the rise after health insurer Cigna (CI) announced that it will start covering the drugmaker’s Xtampza ER, an extended-release oxycodone equivalent that cannot become more fast-acting through cutting or crushing.

Citing growing opioid addiction, Cigna also said it is stopping coverage of OxyContin, the painkiller sold by Purdue Pharma.

CIGNA CONTRACT WITH COLLEGIUM

In a press release yesterday, Cigna said it has taken a “multi-faceted approach” to reducing opioid use among its customers by 25% by 2019.

“The company’s covered drug lists are regularly evaluated with an eye to eliminating the inappropriate use of opioids and assisting customers in safely achieving positive health results, while also managing their out-of-pocket costs. As a result, the brand OxyContin is no longer covered as a preferred option on Cigna’s group commercial drug lists effective January 1, 2018,” the company said.

Cigna (CI) is asking opioid manufacturers to align with efforts to reduce opioid use, and has signed a value-based contract with Collegium for Xtampza ER, an oxycodone equivalent with abuse deterrent properties.

Under the terms of the contract, Collegium is financially accountable if the average daily dosage strengths of Xtampza ER prescribed for Cigna customers exceed a specific threshold. If the threshold is exceeded, Collegium will reduce the cost of the medication for many of Cigna’s benefit plans.

MANAGED CARE PLANS CHANGES TO HELP XTAMPZA

Commenting on the news this morning, Needham analyst Serge Belanger said he believes Xtampza can play a “significant role” in payors’ efforts to address the ongoing opioid epidemic, and that he does not expect Xtampza’s price/prescription to be impacted by the contract terms.

Overall, Belanger told investors that he sees this as a “nice formulary win” that will help drive substantial prescriptions away from OxyContin toward Xtampza and create goodwill for Collegium.

Furthermore, the value-based contract could become a blueprint for other payors seeking to reduce OxyContin use while encouraging responsible opioid usage with an abuse-deterrent product such as Xtampza, he contended. Belanger reiterated a Buy rating and $25 price target on Collegium’s shares.

Meanwhile, his peer at Jefferies pointed out in a research note of his own that Cigna’s plan changes as well as UnitedHealth (UNH) coverage of Xtampza as a preferred brand in 2018 versus Tier 3 coverage in 2017 should bolster Collegium’s drug uptake.

Analyst David #Steinberg told investors that given the recent improvement in prescriptions, this year’s consensus Xtampza estimate now “looks beatable” and next year’s forecast could be as well.

Moreover, the analyst argued that he continues to believe that Collegium shares are seemingly well positioned for an uptick as the company’s modest valuation arguably does not entirely reflect improving fundamentals. He reiterated a Buy rating and $15 price target on Collegium’s shares.

PRICE ACTION

In Thursday’s trading, shares of Collegium have gained 8% to $11.59.


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Alliance Automotive Group sold for $2 billion

Genuine Parts to acquire Alliance Automotive Group for approximately $2B

Alliance Automotive Group sold for $2 billion. See Stockwinners.com Market Radar for details

Genuine Parts Company (GPC) and Alliance Automotive Group, a leading European distributor of vehicle parts, tools and workshop equipment, announced that they have entered into a definitive agreement under which Genuine Parts Company will acquire Alliance Automotive Group from private equity funds managed by Blackstone (BX) and AAG’s co-founders.

The acquisition is valued at a total purchase price of approximately $2B, including the repayment of AAG’s outstanding debt upon closing.

The transaction has been approved by the Board of Directors of GPC and is expected to close in the fourth quarter of 2017, subject to the satisfaction of customary closing conditions and applicable regulatory approvals.

AAG is expected to generate gross annual billings of approximately $2.3 billion (US$) including supplier direct billings, or $1.7 billion of revenue on a U.S. GAAP basis in 2017.

Additionally, the Company expects the acquisition to be immediately accretive to earnings in the first year after closing.

For 2018, incremental diluted earnings per share is estimated at $0.45 to $0.50 and adjusted earnings per share is estimated at $0.65 to $0.70, which excludes the amortization of acquisition-related intangibles.

The Company expects to incur one-time transaction costs in the fourth quarter of 2017.

The Company intends to finance the transaction, including the pay-off of AAG’s existing debt arrangements, with approximately $2 billion of debt financing. This will include the combination of new term loan agreements, new multi-currency debt and an upsized revolving credit facility.


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Galapagos Higher on its Idiopathic Pulmonary Fibrosis Drug

GLPG1690 was found to be generally well tolerated in this Phase 2 trial

Galapagos Higher on its Idiopathic Pulmonary Fibrosis Drug. See Stockwinners.com Market Radar to read more

Galapagos NV (GLPG) announces positive topline results with its autotaxin inhibitor GLPG1690 in patients with idiopathic pulmonary fibrosis (IPF) in the FLORA Phase 2a trial.

FLORA was an exploratory, randomized, double-blind, placebo-controlled trial investigating a once-daily oral dose of GLPG1690.

The drug candidate was administered for 12 weeks in 23 IPF patients, 17 of whom received GLPG1690 and 6 placebo.

Primary objectives of the trial were to assess safety, tolerability, pharmacokinetics and pharmacodynamics of GLPG1690 in an IPF patient population.

Secondary objectives included the evaluation of lung function, changes in disease biomarkers, FRI, and quality of life. The IPF diagnosis was confirmed by central reading.

The baseline characteristics of the recruited population were in line with published data in similarly conducted studies and were balanced between active and placebo.

Patients with previous experience on nintedanib or pirfenidone were required to have discontinued treatment with either agent for at least 4 weeks prior to initiating treatment with GLPG1690.

Patients on GLPG1690 treatment showed a clear reduction of serum LPA18:2, a biomarker for autotaxin inhibition, as expected based on the mechanism of action of GLPG1690.

Thus, the level of target engagement observed in Phase 1 with healthy volunteers was confirmed in IPF patients in FLORA.

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Michael Kors Buys Jimmy Choo for $1.35B

Michael Kors to acquire Jimmy Choo PLC for $1.35B

Michael Kors to acquire Jimmy Choo PLC for $1.35B. See Stockwinners.com for stocks to buy, stocks to watch, stocks to follow

Michael Kors (KORS) announced that it has reached an agreement to acquire Jimmy Choo PLC, a global luxury footwear and accessories brand.

Under the terms of the transaction, Jimmy Choo shareholders will receive 230 pence per share, with an enterprise value of approximately $1.35B.

The transaction has been approved by the boards of both Michael Kors and Jimmy Choo.

The transaction is not subject to a financing condition. Michael Kors has committed bridge financing from JPMorgan Chase Bank and Goldman Sachs Bank USA to satisfy the certain funds requirement of the U.K. Takeover Code to complete the transaction.

The transaction is intended to be effected by a U.K. court-approved Scheme of Arrangement and is expected to close in Q4, subject to customary closing conditions, including the receipt of required regulatory approvals as well as the approval of the Scheme by Jimmy Choo shareholders, who together hold at least 75% of the issued share capital of Jimmy Choo and represent a majority of the shareholders voting at the meeting.

Michael Kors has received irrevocable undertakings from JAB Luxury GmbH, Jimmy Choo directors and Sandra Choi, who collectively represent 69.21% of the issued and outstanding Jimmy Choo shares in support of the transaction.

Michael Kors Holdings Limited believes that the acquisition enhances the company’s economic value and will drive improved long-term shareholder value. The acquisition is expected to be accretive on a GAAP basis in fiscal 2020.

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Goldman Sachs Shares Continue to Decline due to Weak FICC Revenue

Goldman Sachs gets second downgrade after earnings

Goldman get second downgrade following earnings. See Stockwinners.com Market Radar

Shares of Goldman Sachs (GS) are sliding after UBS analyst Brennan #Hawken downgraded the stock to Neutral as he has “limited confidence” in a revenue recovery.

Last week, his peer at Keefe Bruyette also cut the stock’s rating to Market Perform, citing his view of its weakening revenue outlook following the investment bank’s second quarter results.

MOVING TO THE SIDELINES

In a research note to investors this morning, UBS’ Hawken downgraded Goldman Sachs to Neutral from Buy and cut his price target on the shares to $230 from $255 as the market seems to be pricing an inflection in their FICC revenues despite the recent weakness, suggesting a recovery is needed to justify 2018 consensus.

#FICC – the group within an investment bank that handles fixed income instruments, currencies, and commodities.

While the analyst recognized recent weak results could rebound, he believes a recovery in trading revenues would need to be substantial as he estimates a roughly 25% rebound in FICC revenues is implied in 2018 consensus estimates.

Further, trading could rebound but that has not happened over the past year for Goldman Sachs absent a surprise event such as #Brexit or the Trump election, Hawken argued, adding that he has difficulty relying on such an event to justify a bullish thesis.

The analyst told investors there are “better opportunities,” such as Morgan Stanley (MS).

On July 19, Keefe Bruyette analyst Brian #Kleinhanzl had also downgraded Goldman Sachs to Market Perform from Outperform, while lowering his price target on the shares to $230 from $260.

The analyst told investors in a research note of his own that he does not expect his previous Outperform thesis for a materially better revenue outlook to emerge near-term, partially due to market activity and partially due to weak performance by the company. Kleinhanzl pointed out that Goldman Sachs has become a “show-me stock,” and it would need to consistently outperform in FICC trading for more than one quarter in order for the analyst to become more constructive.

EARNINGS 

Last week, Goldman Sachs reported second quarter earnings per share of $3.95 and revenue of $7.89B, both above consensus of $3.39 and $7.52B. The company also said that net revenues in Fixed Income, Currency and Commodities Client Execution were $1.16B for the second quarter, 40% lower than the second quarter of 2016, due to significantly lower net revenues in interest rate products, commodities, credit products and currencies, partially offset by higher net revenues in mortgages.

PRICE ACTION

In Monday’s trading, shares of Goldman Sachs dropped 0.5% to $219 per share. Since the morning of its earnings report on July 18, Goldman shares have slid over 4%.

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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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