Scripps, Discovery Deal Questioned by Analysts

Scripps, Discovery deal odds debated as reported talks boost media space

Shares of Scripps Networks (SNI) and Discovery Communications (DISCA) are on the rise following reports from both The Wall Street Journal and Reuters that the media companies are in talks to merge.

While research firm #Citi sees a deal as likely, Credit Suisse analyst Omar Sheikh believes the Journal’s initial report has “low credibility.”

MERGER TALKS

Yesterday, The Wall Street Journal said that Discovery Communications is in discussions to merge with Scripps Networks. A similar report from Reuters added that Viacom (VIAB) also had held talks to buy Scripps.

CREDIT SUISSE QUESTIONS DEAL CHANCES

Commenting on the news, Credit Suisse’s #Sheikh told investors that he believes the Journal’s report “looks vague,” and his initial view is that it has “low credibility.”

Combining the two portfolios of unscripted cable networks has some industrial logic, but previously reported discussions between the companies probably came to nothing because the price and structure of a transaction could not be agreed upon, the analyst contended, adding that he struggles to see what might have changed now. Sheikh reiterated an Underperform rating and a $24 price target on Discovery’s shares.

BULLISH ON DEAL

Citi analyst Jason #Bazinet, on the other hand, told investors that he views the reports as “credible” and finds it likely that Discovery and Scripps Networks reach an agreement. Furthermore, Bazinet argued that the pressures on the traditional cable network ecosystem are acute enough and valuations are low enough that he can see merits to this potential combination. Assuming a 20% premium is offered to Scripps, a deal would likely be about 10% accretive to Discovery, Bazinet noted, citing his M&A math.

Meanwhile, #JPMorgan analyst Alexia #Quadrani said she sees both a strategic and financial rationale for a merger between Scripps Networks and Discovery Communications, pointing out that a combined company would have greater leverage with domestic distributors and advertisers. Discovery could also help Scripps with its international rollout, #Quadrani contended, adding that there is potential for cost and tax synergies.

However, she believes that with no terms mentioned in any of the press reports on the deal talks, it is difficult to evaluate any potential transaction. Further, the analyst noted that the speculation “may end up just being chatter” coming out of last week’s media executive conference in Sun Valley. Nonetheless, Quadrani believes the press reports should have a “very positive influence” on media stocks, which she noted have been out of favor. The analyst expects to see particular outperformance from heavily shorted media names such as AMC Networks (AMCX).

PRICE ACTION

In Wednesday afternoon trading, shares of Scripps Networks have jumped almost 15% to $76.87, while Discovery Communications’ stock has gained 4% to $27.09 and AMC Networks is up 4% to $59.25.

Other media names, including 21st Century Fox (FOXA), Viacom and Disney (DIS), are also higher in afternoon trading.

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Lightower Sold for $7.1 Billion

Crown Castle to acquire Lightower for $7.1B in cash

Stocks to Buy Now, Stocks to Watch today

Crown Castle International Corp. (CCI) announced that it has entered into a definitive agreement to acquire LTS Group Holdings, or #Lightower, from #Berkshire Partners, Pamlico Capital and other investors for approximately $7.1B in cash, representing approximately 13.5x expected adjusted EBITDA contribution during Crown Castle’s first full year of ownership.

Lightower owns or has rights to approximately 32,000 route miles of fiber located primarily in top metro markets in the Northeast, including Boston, New York and Philadelphia.

Lightower’s products include network and video transport, alternative access, nationwide long haul services, dark fiber, Ethernet, and cloud computing services. Lightower has built out access to over 22,000 service locations throughout the Northeast, Mid-Atlantic, and Midwest including 275+ data centers and 7,000+ wireless towers

Following completion of the transaction, Crown Castle will own or have rights to approximately 60,000 route miles of fiber.

Crown Castle CEO Jay Brown said, “We expect the transaction to be immediately accretive to our AFFO per share and long-term dividend growth and, as a result, anticipate increasing our annual common stock dividend rate, subject to approval by our board of directors, between 15c and 20c per share following the closing of the transaction.”

Crown Castle International Corp., owns, operates, and leases shared wireless infrastructure in the United States and Australia. Th company is headquartered in Houston Texas.

CCI closed at $96.64.

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Stocks to Watch for Today-Homebuilders Down as Lumber Prices Spike

Homebuilder sentiment falls to eight month low as lumber prices spike

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Shares of U.S. homebuilders are all trading lower after a key metric for the group missed expectations.

HOME BUILDER SENTIMENT

The Housing Market Index ( #HMI ) is based on a monthly survey of #NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

Builder confidence for newly-built single-family homes dropped to its lowest level since before the Trump election. The confidence metric slipped two points in July to 64.

The HMI measure of current sales conditions has been at 70 or higher for eight straight months, indicating strong demand for new homes,” said NAHB Chief Economist Robert Dietz.

“However, builders will need to manage some increasing supply-side costs to keep home prices competitive.” “Home builders are troubled due to the increasing costs of material, in particular lumber,” said NAHB Chairman Granger MacDonald. The situation is impacting housing affordability even as consumer interest purchasing a new home is strong.

CANADIAN LUMBER TARIFFS

In June, commerce secretary Wilbur Ross proposed new lumber tariffs adding to the previous tariffs proposed by the Trump administration on Canadian softwood lumber imported into the U.S. That type of lumber is used to build U.S. homes.

Back in June, NAHB Chair MacDonald said adding the new tariffs “to the proposed 20% countervailing lumber duty that the Trump administration slapped on imports of lumber this spring means that total tariffs would be a whopping 27%.”

Publicly traded companies in the space include Beazer Homes (BZH), D.R. Horton (DHI), Hovnanian (HOV), KB Home (KBH), Lennar (LEN), PulteGroup (PHM), and Toll Brothers (TOL). Shares of construction materials vendors are also lower, including Vulcan (VMC), Martin Marietta Materials (MLM), Eagle Materials (EXP), US Concrete Inc (USCR), and Beacon Roofing Supply (BECN).

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Stock Upgrades Downgrades for July 18, 2017

Stockwinners’ analysts upgrades, downgrades and initiations for July 18, 2017

Everyday, we will e-mail our readers a list of analysts actions as shown below. Please see below on how to sign up for Stockwinners’ Service.

 

STOCK UPGRADES

CMG Chipotle to Buy from Hold at Maxim
CMG Chipotle to Buy on queso launch at Maxim
IPXL Impax to Neutral from Underweight at Piper Jaffray
MMP Magellan Midstream to Buy from Neutral at UBS
NFLX Netflix to Buy from Neutral at Rosenblatt
OAS Oasis Petroleum to Buy from Hold at Williams Capital
ORLY O’Reilly Automotive to Buy from Neutral at Northcoast
QDEL Quidel to Outperform from Market Perform at William Blair
SC Santander Consumer to Outperform from Market Perform at JMP Securities
SEAS SeaWorld to Neutral from Sell at Goldman Sachs
SEDG SolarEdge to Outperform at Oppenheimer
SEDG SolarEdge to Outperform from Perform at Oppenheimer
SKX Skechers to Positive from Mixed at OTR Global

DOWNGRADES

ADP ADP to Equal Weight from Overweight at Barclays
CCJ Cameco to Underperform at Credit Suisse
COG Cabot Oil & Gas to Hold from Buy at Williams Capital
DDC Dominion Diamond to Market Perform from Outperform at BMO Capital
DDC Dominion Diamond to Hold from Buy at Gabelli
DNN Denison Mines to Underperform from Neutral at Credit Suisse
EXLS ExlService to Neutral from Buy at Citi
FMC FMC Corporation to Neutral from Buy at Seaport Global
FPI Farmland Partners to Market Perform from Outperform at FBR Capital
IPGP IPG Photonics to Hold from Buy at Canaccord
NYLD NRG Yield to Hold from Buy at Deutsche Bank
OAS Oasis Petroleum to Hold from Buy at Deutsche Bank
OAS Oasis Petroleum to Hold at Deutsche Bank
QEP QEP Resources to Hold from Buy at Deutsche Bank
SSL Sasol to Neutral from Overweight at JPMorgan
UAA Under Armour to Negative from Mixed at OTR Global

STOCK INITIATIONS

DC Agree Realty with a Buy at Canaccord
ADRO Aduro Biotech with an Outperform at Cowen
ALBO Albireo Pharma with a Buy at Needham
BFAM Bright Horizons with a Buy at Citi
BHGE Baker Hughes resinstated with a Sell at Goldman Sachs
CVNA Carvana with a Neutral at Wedbush
FANG Diamondback Energy with an Outperform at Imperial Capital
FCPT Four Corners Property Trust with a Hold at Canaccord
GOOD Gladstone with a Hold at Canaccord
GPMT Granite Point Mortgage with an Overweight at JPMorgan
GPMT Granite Point Mortgage with a Market Perform at Keefe Bruyette
GTY Getty Realty with a Buy at Canaccord
INFN Infinera with a Buy at Craig-Hallum
MSCI MSCI with an Equal Weight at Barclays
MTDR Matador with an Outperform at Imperial Capital
O Realty Income with a Buy at Canaccord
OMF OneMain Holdings with a Buy at DA Davidson
REN Resolute Energy with an Outperform at Imperial Capital
RM Regional Management with a Neutral at DA Davidson
TAL TAL Education with a Neutral at Citi
TWOU 2U with a Buy at Citi
WPX WPX Energy with an Outperform at Imperial Capital

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Stocks to Watch – Beleaguered Signet Jewelers Names New CEO

Amid recent struggles and sexual harassment allegations, Signet Jewelers names new female CEO

 

Stock downgrades, Stocks to buy, stocks to watch, stock upgrades, stock earnings, Stocks to Avoid, stocks to buy on margin

Shares of Signet Jewelers (SIG) are in focus in morning trading after the company said Chief Executive Officer Mark Light would be succeeded by named Virginia Drosos on August 1.

The appointment comes after the company reported quarterly earnings below expectations in May, disclosed the resignation of its COO, announced plans to outsource its credit portfolio and faced sexual harassment allegations.

CEO APPOINTMENT

Signet, the owner of Zale and Kay Jewelers, announced this morning that Mark Light, who has served as CEO of Signet since 2014, has decided to retire after more than 35 years with the company due to health reasons. Signet’s board of directors has appointed Virginia “Gina” Drosos, who has served as an independent director of the company’s board since 2012, as the company’s new CEO. Drosos has over 29 years of executive leadership experience in the beauty and consumer goods industries, most recently serving as president and CEO of Assurex Health, Signet said in a statement.

RECENT COO RESIGNATION, DISAPPOINTING EARNINGS AND OTHER WOES

Light’s departure follows the recent resignation of Chief Operating Officer Bryan Morgan due to violations of company policy “unrelated to financial matters.”

Additional details regarding Morgan’s resignation have not been reported. In January, Signet announced several senior organizational changes to drive growth, including promoting Morgan to COO from executive vice president, Supply Chain Management and Repair.

In May, Signet, which has been struggling with declining revenue over the past four quarters as demand for its jewelry has weakened, reported first quarter earnings that fell below analysts’ expectations. Light said at the time that Signet had a “very slow start” to the year as headwinds in the overall retail environment were exacerbated by a slowdown in jewelry spending and company-specific challenges.

Additionally, Signet announced plans to outsource its credit portfolio. The company has also said it would step up efforts to restore its reputation following allegations of sexual harassment at its Sterling Jewelers unit and diamond swapping allegations.

In May, Signet said it reached an agreement with the EEOC to resolve claims related to pay and promotion of female retail sales workers.

Signet has said allegations of sexual harassment have no merit, calling them “distorted and inaccurate.”

PEERS IN THE NEWS

Other publicly traded retailers of fine jewelry include Tiffany & Co (TIF), which in May reported quarterly sales that fell below analysts’ forecasts as well as a decline in comparable store sales.

Last week, Tiffany named Alessandro Bogliolo, who spent 16 years at Bulgari SpA and once served as that company’s COO, as its new CEO. Bogliolo is expected to take over as Tiffany’s CEO by October 2, the company said, and he will also join the company’s board.

The company increased the size of its board of directors earlier this year, adding three independent directors and ousted former CEO Frederic Cumenal in February following pressure from activist investor JANA Partners amid declining sales and profits.

PRICE ACTION

Signet (SIG) shares are down roughly 1.9% to $58.764 in Monday’s trading. Shares are down nearly 37% year-to-date.

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Dominion Diamond Sold for $1.2 Billion

Dominion Diamond to be acquired by The Washington Cos for $14.25/share in cash

 

Dominion Diamond in advanced talks to be bought by Washington Companies. See Stockwinners.com Market Radar for more

 

Dominion Diamond (DDC) and The Washington Companies, a group of privately held North American mining, industrial and transportation businesses founded by industrialist and entrepreneur Dennis R. Washington, announced that they have entered into an arrangement agreement under which an entity affiliated with Washington will acquire all of Dominion’s outstanding common shares for $14.25 per share in cash or a total equity value of approximately $1.2B pursuant to a plan of arrangement under the Canada Business Corporations Act.

The transaction represents a 44% premium to Dominion’s unaffected share price of $9.92 on March 17, 2017. The transaction marks the result of Dominion’s review of strategic alternatives as previously announced on March 27, 2017.

The Board of Directors of Dominion, after consultation with financial and legal advisors, and based on the recommendation of a special committee of the Board consisting of four independent directors, has unanimously determined that the Arrangement is in the best interests of the Company, approved the Arrangement and recommends that Dominion’s shareholders vote in favor of the Arrangement.

All directors of the Company have entered into support agreements to vote their common shares in support of the Arrangement.

As part of this acquisition, Washington plans to: Operate Dominion as a standalone business as Washington does with its other successful operating companies; Appoint a new CEO based in Canada to the Dominion management team; Keep Dominion’s headquarters in Canada and maintain a significantly Canadian management team.

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TherapeuticsMD Tumbles on FDA Update

TherapeuticsMD drops as TX-004HR update seen not reading ‘well at all’

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Shares of TherapeuticsMD (TXMD) plunged in pre-market trading on Monday after the company provided a regulatory update on the status of its New Drug Application for TX-004HR.

REGULATORY UPDATE

In a statement, TherapeuticsMD provided an update on the status of its NDA for TX-004HR, its investigational applicator-free estradiol vaginal softgel capsule for the treatment of moderate-to-severe vaginal pain during sexual intercourse, saying that it participated in a Type A Post-Action Meeting on June 14 with the FDA’s Division of Bone, Reproductive, and Urologic Products.

At the meeting, the two sides discussed the complete response letter that TherapeuticsMD previously received for the NDA, which also allowed the company to present new information it believes could address concerns raised in the letter and “positively” impact the status of the NDA.

TherapeuticsMD said it has formally submitted the new information for consideration per the FDA’s request.

However, the company noted that while it continues to have “productive” dialogue with the FDA related to its review, it has not yet received a formal timeline for a conclusion of this review.

#TherapeuticsMD said it “looks forward” to working with the FDA to address its concerns and sees further clarity on the pathway forward for the NDA “in the coming weeks,” adding that it “reserves the right to pursue the FDA’s formal dispute resolution process if a reasonable timeline to address such concerns cannot be established.”

WHAT’S NOTABLE

On May 8, TherapeuticsMD said it received the CRL from the FDA regarding the TX-004HR NDA.

At the time, the company said it planned to meet with the FDA as soon as possible to address the concerns raised in the letter, which involved “the lack of long-term endometrial safety data for TX-004HR beyond the 12-weeks studied in the pivotal phase 3 Rejoice Trial.”

Adam #Feuerstein, who previously wrote about biotech stocks for TheStreet and currently is a senior writer for StatNews, tweeted in May that the company lacks the cash to conduct the type of safety study of TX-004HR requested by the FDA, without cutting expenses or raising more money, adding that a delay for this product “could be fatal” for the company.

Feuerstein tweeted this morning that TherapeuticsMD’s regulatory update on resolving the CRL “does not read well at all.”

ANALYST COMMENTARY PRIOR TO UPDATE

Oppenheimer analyst Jay Olson upgraded TherapeuticsMD to Outperform recently ahead of the FDA meeting update, and said there was a “reasonable probability” of positive news.

Olson argued that data on complete response letters provides confidence that there are likely no other TX-004HR approvability issues besides lack of long-term endometrial safety data beyond the 12 weeks studied in REJOICE and that there are likely no approvability issues that would have any implications for TX-001HR.

PRICE ACTION

In pre-market trading on Monday, TherapeuticsMD is down 12%.

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Box Office Report for July 14 Weekend

‘War for the Planet of the Apes’ tops ‘Spider-Man’  

'War for the Planet of the Apes' tops 'Spider-Man' . See Stockwinners.com Market Radar every Friday and Sunday for the Box Office Report

BOX OFFICE BATTLE:

Ahead of Sony’s (SNE) “Spider-Man,” 21st Century Fox’s (FOX) “War for the Planet of the Apes” led the North American box office, coming in on the low end of expectations with $56.5M from a little over four thousand locations.

OVERSEAS SALES

Overseas, the latest film in the rebooted franchise opened in less than a third of the marketplace, grossing $46M from 62 markets for global bow of $102.5M. “War for the Planet of the Apes” holds a critics rating of 95% on Rotten Tomatoes and received an A- in audience polls from #CinemaScore.

BOX OFFICE RUNNERS-UP:

Declining more than expected in its sophomore outing to $45.2M, Sony’s “Spider-Man: Homecoming” came in second place.

Behind it was Comcast’s (CMCSA) “Despicable Me 3” in its third weekend, with $18.9M for a domestic total of $188M. Sony’s “Baby Driver” followed at number 4 with $8.8M for a domestic total of $73.1M.

Rounding out the top five, “The Big Stick” ended the week with $7.6M from 2,597 cinemas. Amazon (AMZN) Studios acquired the critical hit out of #Sundance before partnering with Lionsgate (LGF.A) on the theatrical release.

Other publicly traded companies in filmmaking include Disney (DIS), Time Warner (TWX) and Viacom (VIAB; VIA).

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General Cable is For Sale

General Cable to review strategic alternatives, potential sale 

The Company reports preliminary Q2 revenues of approximately $923M

 

general cable is for sale. See Stockwinners.com Market Radar to read more.

General Cable (BGC) has announced that its Board of Directors has initiated a review of strategic alternatives to maximize shareholder value, including a potential sale of the company.

General Cable has engaged #JPMorgan Securities as financial advisor and Sullivan & Cromwell as legal advisor to assist in the process.

There can be no assurance that the Board’s strategic review will result in any transaction, or any assurance as to its outcome or timing. The company does not intend to disclose or comment on developments related to its review unless and until the Board has approved a specific transaction or otherwise determined that further disclosure is appropriate.

Separately, the company reported preliminary Q2 revenues of approximately $923M for North America, Europe and Latin America, one estimate $922.75M. Reported Q2 reported operating loss and adjusted operating income of approximately ($23M) and $32M, respectively.

The expected reported operating loss primarily reflects a one-time non-cash charge of approximately $36M related to the sale of General Cable’s investment in Algeria, consistent with the company’s previously announced divestiture program.

Additionally, as of June 30, General Cable maintained availability of approximately $360M under its $700M asset-based revolving credit facility.

General Cable Corporation (BGC) develops, designs, manufactures, markets, and distributes copper, aluminum, and fiber optic wire and cable products for the energy, industrial, construction, specialty, and communications markets in North America, Europe, Latin America, and Africa/the Asia Pacific.

Price Range:

BGC last traded at $16.55. It has a 52-week trading range of $11.70 – $20.80.

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Wells Fargo to Close 450 Branches

Wells Fargo targeting $2B expense reduction by year-end 2018

Wells Fargo to close 450 branches. See Stockwinners.com Market Radar for the story.

Sees FY17 effective tax rate about 29%. Expects efficiency initiatives will reduce expenses by $2B annually by year-end 2018 and that those savings will support investments in the business.

Plans to close ~450 branches in 2017-2018 to eliminate overlap and improve performance of the network; says 93 branches closed YTD 2017 through June.

Anticipates $130M in 2017 savings from gains on building dispositions and workforce optimization with an additional $20M in 2018.

Also reducing non-customer facing travel and expenses with focused efforts on virtual conferences and telepresence, as well as leveraging internal meeting spaces and services.

Wells Fargo sees auto portfolio stabilizing in 1H18 – Says seeing “slow but steady” improvement in retail business.

Expects an additional $2B in annual expense reductions by the end of 2019; these savings are projected to go to the “bottom line.”

Says had digital active customers of 27.9M, stable LQ and up 2% YoY; had 20.4M mobile active customers, up 1% LQ. Notes that mobile active customers surpassed our desktop active customers for the first time in May.

Expects to increase Q3 dividend to 39c per share from 38c per share, subject to board approval.

WFC last traded at $55.17.

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Congressman Requests Hearing on Amazon Whole Food Merger

Democratic Rep calls for oversight hearing on Amazon-Whole Foods tie-up

Democratic House Representative David Cicilline of Rhode Island wrote a letter to the Republican leaders of the House Subcommittee on Regulatory Reform, Commercial and Antitrust Law, requested that the committee hold an oversight hearing on Amazon’s (AMZN) proposed takeover of Whole Foods (WFM).

#Cicilline said in the letter that he has heard concerns that the merger may discourage innovation and entrance into emerging markets, such as grocery and food delivery.

The Rep added that some have raised concerns that the deal will also increase Amazon’s online dominance, enabling it to “prioritize its products and services over competitors.”

“Without taking a position on the legality of the transaction under the antitrust laws, Amazon’s proposed acquisition of Whole Foods raised important questions concerning competition policy, such as how the transaction will affect the future of retail grocery stores, whether platform dominance impedes innovation, and if the antitrust laws are working effectively to ensure economic opportunity, choice, and low prices for American families,” Cicilline said in the letter.

Note that United Natural Foods (UNFI) is headquartered in the Congressman’s district. United Natural Foods, Inc. distributes and retails natural, organic, and specialty foods and non-food products in the United States and Canada. The company operates through three divisions: Wholesale, Retail, and Manufacturing and Branded Products.

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Dominion Diamond is For Sale

Dominion Diamond in advanced talks to be bought by Washington Cos.

 

Dominion Diamond in advanced talks to be bought by Washington Companies. See Stockwinners.com Market Radar for more

Washington Companies is in advanced negotiations to purchase Dominion Diamond after it raised its prior unsolicited cash offer of $13.50 per share and a deal could be announced within weeks, the New York Times reports.

Dominion Diamond Corp of Canada is the world’s third-largest diamond producer by market value.

Dominion Diamond Corporation engages in the mining and marketing of rough diamonds. It operates through Diavik Diamond Mine and Ekati Diamond Mine segments.

The company holds 88.9% ownership interest in the Core zone and 72.0% ownership interest in Buffer zone of Ekati Diamond Mine; and a 40% ownership interest in the Diavik Diamond Mine located at Lac de Gras in Northwest Territories, Canada.

It produces, sorts, and sells rough diamonds in Canada, Belgium, and India. The company was formerly known as Harry Winston Diamond Corporation and changed its name to Dominion Diamond Corporation in March 2013.

It is unclear how much Washington increased its proposal for Dominion, which previously rejected Washington’s initial bid, saying it undervalued the company.

Trade in Dominion shares on the Toronto Stock Exchange was halted pending news. The stock had gained as much as 4.74 percent following Reuters’ report on the talks. DDC last traded at $13.46, up 70 cents.

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