Barron’s turns bullish on Baker Hughes

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

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BULLISH MENTIONS

Buy Baker Hughes – While it is “not easy” to be a General Electric company (GE) and seems like GE may be giving up on Baker Hughes (BHGE), it does not mean investors should, Ben Levisohn writes in this week’s edition of Barron’s. The recent selloff may be a chance to pick up shares of Baker Hughes at a bargain, he adds.

Activist investors Nelson Peltz still in P&G picture. – In a follow-up story, Barron’s notes that while a month ago Procter & Gamble (PG) claimed to have survived a challenge from activist Nelson Peltz, a new vote tally last week showed that Peltz’s Trian Fund Management had won a board seat. A Peltz win would be good for the stock, as the consumer-products giant has faced a lack of significant revenue growth, the publication contends

IBM could be next to fetch higher valuation – Investors are warming to moderately priced blue chips, and IBM could be the next “slumbering giant” that could fetch a higher valuation, Jack Hough writes in this week’s edition of Barron’s. IBM’s gross profit could grow in the current quarter for the first time in years, suggesting its big investment in analytic and cloud products are winning over customers, he notes, adding that a stock rebound could follow.

BEARISH MENTIONS

More needed for Cisco to have ‘groove back.’  – While the Nasdaq composite returned to its heights a couple of years ago, it took Cisco Systems (CSCO) until last week to regain its footing, with an upbeat outlook by the company, Tiernan Ray writes in this week’s edition of Barron’s. Cisco has “certainly achieved something,” but not everything it needs, he notes, adding that while it seems to have stability, it has a kind of fixation on its own balance sheet that does not bode well for its competitiveness in the years to come.

Risk remains after GE dividend cut – While buying General Electric (GE) shares after a big payment cut may seem like a safe move, it might not be as GE would have to move still lower to give it the “sort of plump yield befitting a struggling giant” in need of a turnaround, Jack Hough writes in this week’s edition of Barron’s. 


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Barron’s is bullish on biotechs, Target

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

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BULLISH  MENTIONS

Local Chinese consumer plays to have significant advantages – China’s 19th Communist Party Congress gave expanded powers to President Xi Jinping to wield in a second five-year term as the country’s leader, endorsing the continued shift of China’s economy toward domestically focused consumer goods and services, which should be bullish for stocks such as Alibaba (BABA) and China Life Insurance (LFC), John Kimelman and Assif Shameen write in this week’s edition of Barron’s. Meanwhile, U.S. companies with footholds in the country’s consumer markets can expect to face regulatory and other roadblocks in the years ahead, they add.

Biotech selloff creates buying opportunity for investors – Biotech companies are not looking that healthy, with Amgen (AMGN), Biogen (BIIB), Celgene (CELG), and Gilead Sciences (GILD) all offering disappointments of one kind or another, but the selloff has created a buying opportunity for investors, Ben Levisohn writes in this week’s edition of Barron’s. Biotech looks like a victim of high expectations and could be ready to run again, he adds.

Tech giants continue to exploit their dominance – The latest earnings, particularly from Amazon.com (AMZN), Alphabet (GOOGL; GOOG), and Microsoft (MSFT), show that tech giants continue to exploit their dominance to Wall Street’s amazement, Tiernan Ray writes in this week’s edition of Barron’s. All three are examples of network effects, the ability of a business to exploit its position in a kind of virtuous cycle, and the payoff continues to astound Wall Street, he adds, noting that Apple (AAPL) is expected to report earnings this Thursday.

Playing double-up strategy with GE worth considering – General Electric (GE) stock is down 34% this year and seems poised to trade even lower amid fears that it may cut its dividend, Steven Sears writes in this week’s edition of Barron’s. While Sears has profitably recommended wagering against the stock since May, and still thinks bearish trades make sense, he recognizes that many investors feel stuck with their GE holdings and are not sure what to do. The “humble double-up strategy” is worth considering for anyone who wants to maintain ownership of the stock, and also realize a tax loss, he argues.

Target shares could return up to 30% amid renovation – Target’s (TGT) missteps have cost the company $15B in stock-market value over the past three years, Vito Racanelli writes in this week’s edition of Barron’s. The retailer is now remodeling stores, cutting costs and ramping up its online business to combat Amazon (AMZN), and store traffic and earnings look poised to rise in coming years, which could lead to an upward revaluation of the shares, he adds.

May be ‘lots to be gained’ from CVS/Aetna possible tie-up – In a follow-up story, Barron’s says that while CVS Health (CVS) shares were under pressure following a report by The Wall Street Journal saying the company and Aetna (AET) were in talks, there is “lots to be gained from a tie-up.” By securing better drug pricing from CVS than it gets now, Aetna stands to win more health-plan customers, and it can send many of them to CVS for drugs but also for care, the report explains, adding that the deal would help transform CVS into a company that also profits from health outcomes. Further, Barron’s argues that it could help protect it from future changes in health-care law, and from losing sales to Amazon (AMZN).

Enterprise Products Partners promises growth, income – Enterprise Product Partners (EPD) is a leader among U.S. energy master limited partnerships but its units are depressed like those of many peers, with investors worrying about slowing growth, competitive pressures, weak energy prices and cuts or moderating gains in distributions, Andre Bary writes in this week’s edition of Barron’s. However, he argues that compared with other MLPs, Enterprise has better corporate governance and a stronger sheet, offering an “enticing yield” of nearly 7% and a good growth outlook that investors should see as a “winning combination.”

Apple iPhone X may be catalyst for Sony – Long ago considered a rival of sorts for Apple (AAPL), Sony (SNE) has instead emerged as one of its key suppliers, but its stock is up just 10% over the past six months, while other suppliers have seen their shares almost double in the same period, Assif Shameen writes in this week’s edition of Barron’s. Sony supplies iPhone X’s12-megapixel camera, as well as state-of-the-art 3-D sensors designed to boost iPhone’s Face ID and augmented-reality capabilities, he adds, noting that Jefferies analyst Atul Goyal believes these attributes merit a re-rating for the shares, which he thinks can rise at least 40%.

Shire bear case may be too extreme – While Shire (SHPG) has struggled against generic pressures and rising competition, the bear case may be too extreme, Victor Reklaitis writes in this week’s edition of Barron’s.


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ExxonMobil pays $800 million to Russia’s Statoil

Exxon Mobil to acquire interest in Carcara oil field block from Statoil

ExxonMobil in deal with Statoil. See Stockwinners.com for details

ExxonMobil (XOM) announced that it has completed an agreement to purchase half of Statoil’s (STO) interest in the BM-S-8 block offshore Brazil, which contains part of the pre-salt Carcara oil field.

The Carcara field contains an estimated recoverable resource of 2 billion barrels of high-quality oil. The block is located approximately 200 miles offshore Rio de Janeiro.

Statoil currently holds a 66% interest in the block, which contains about half the Carcara field.

The other part of the field is in the adjacent North Carcara block, where ExxonMobil, Statoil and Petrogal Brasil were high bidders in a bid round held. Statoil will continue to operate the Carcara development and hold 33% interest.

Over the last month, through bid rounds and announced farm-in agreements, ExxonMobil has added 14 blocks comprising more than 1.25M net acres offshore Brazil to its portfolio, bringing its total acreage in the country to more than 1.4M net acres.

Separately, ExxonMobil recently added highly prospective acreage to the company’s portfolio after completing a farm-in agreement with Queiroz Galvao Exploracao e Producao.

ExxonMobil will make an upfront cash payment of approximately $800M for the interest in BM-S-8 block, and an additional contingent cash payment for a potential total of approximately $1.3B.

The transaction is subject to government approvals and is expected to close in 2018. Following the close of the transaction, partner interests in the BM-S-8 block will be 33% for Statoil, 33% for ExxonMobil, 14% for Petrogal Brasil, a subsidiary of Galp, and 10%each for QGEP and Barra.


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Deltic Timber sold for $4 billion

Deltic Timber jumps after agreeing to be bought by larger peer Potlatch

Deltic Timber sold for $4 billion. See Stockwinners.com for details

Shares of Deltic Timber Corporation (DEL) are higher after the company agreed to be acquired by larger peer Potlatch Corporation (PCH).

The combined company is expected to have a pro-forma market cap of about $3.3B and a total enterprise value of over $4B.

ALL-STOCK TRANSACTION

Potlatch confirmed this morning that it has agreed to buy Deltic Timber in an all-stock transaction, creating a company with a total enterprise value of $4B.

Under the terms of the deal, Deltic shareholders will receive 1.8 Potlatch shares for each Deltic share they own.

When the deal closes, which is expected to occur in the first half of 2018, Potlatch shareholders will own 65% of the combined company. The combined company will be called Potlatch Deltic Corporation and trade on the Nasdaq Stock Market under the ticker “PCH.”

Deltic Chief Executive Officer John Enlow will be the combined company’s vice chairman, while Potlatch Chief Executive Officer Mike Covey would continue in the role. Deltic will convert to a real estate investment trust structure, and will pay out accumulated profits of $250M to investors through a dividend consisting of 80% stock and 20% cash by the end of 2018.

The companies expect to realize about $50M of after-tax cash synergies and operational efficiencies. The combined company will have a diverse timberland portfolio of approximately 2M acres, with approximately 1.1M acres in the U.S. South, 600,000 acres in Idaho, and 150,000 acres in Minnesota.

In addition, the company will operate eight wood products manufacturing facilities, including six lumber manufacturing facilities, one medium density fiberboard facility and one industrial plywood mill.

The combined company will have lumber capacity of 1.2B board feet in total. Deltic and Potlatch compete with Weyerhaeuser (WY).

WHAT’S NOTABLE

In August, Deltic said it was assessing a “comprehensive range” of strategic alternatives, both internal and external. The company said at the time that it had been approached “by a number of industry participants” regarding interest in a potential deal.

Deltic said it had met with Southeastern Asset Management, which held a 15% stake in Deltic as of August 25, “on a number of occasions” to discuss the ideas. In August, SAM said “it has become clear after many attempts that Deltic is not serious about engaging with Southeastern at a substantive level,” and that it may nominate directors at Deltic’s next annual meeting.

OTHER POTLATCH NEWS

Potlatch this morning also reported quarterly results, with earnings per share excluding items of 94c beating analysts’ consensus estimates of 90c. Revenue of $190.44M was essentially in line with analysts’ $190.45M consensus. Potlatch also raised its quarterly dividend 7% to 40c per share from 37.5c, payable December 29 to investors of record on December 8.

PRICE ACTION

In Monday’s trading, Deltic Timber is up over 6% to $94.83, while Potlatch is up about 2% to $53.90.


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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: 

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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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Barron’s is bullish on GM, China Mobile

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

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BULLISH  MENTIONS

Activision to continue earnings growth from in-game spending – Activision Blizzard (ATVI) started encouraging more in-game spending, getting users to pay for new weapons, new missions, and new virtual outfits within titles they owned and as a result its stock soared since the beginning of the year, Emily Bary writes in this week’s edition of Barron’s. Smaller competitors have also ramped up recurring spending, with shares of Electronic Arts (EA) and Take-Two Interactive Software (TTWO) also jumping in 2017, she notes. Bary adds game makers should continue to see strong earnings growth from in-game spending.

China Mobile looks cheap, but there may be a catch – China Mobile (CHL) has $60B of net cash, equal to 30% of its market shares, Andrew Bary writes in this week’s edition of Barron’s. But many fear the Chinese government, which owns 73% of the company, will divert it to prop up other enterprises, he notes, adding that as a result the company’s shares have performed poorly in the last few years.

Cognizant is returning cash to investors – Cognizant (CTSH) is building a lucrative digital-consulting business, Resham Kapadia writes in this week’s edition of Barron’s. Meanwhile, the company’s shareholders could see a twofold payoff thanks to activist investor Elliott Management, which took a 4% stake last November, acquired three board seats, and pressed management to prioritize profit-margin expansion, the publication noted, adding that Cognizant will return $3.4B through 2018 via stock buybacks and dividends.

GM (GM) well-placed to make self-driving, battery-powered cars – In a follow-up story, Barron’s says General Motors has become an autonomously driven stock, climbing to $45 on chatter over GM being well-placed to make the self-driving, shared, battery-powered cars of the future. GM remains more than 60% cheaper than the S&P 500, the publication noted, adding that investors should hold out for more upside, and the 3.4% dividend yield.

BP, Royal Dutch Shell dividends look safe – Foreign companies tend to favor paying dividends over buying back stock, Lawrence Strauss writes in this week’s edition of Barron’s. BP (BP), Enel, ING Group (ING), Royal Dutch Shell (RDS.A), TSMC (TSM) and WPP (WPPGY) dividends all look safe, Strauss notes, adding that with the exception of Royal Dutch Shell and BP, they are all expected to pay higher dividends in 2018 than in 2017.

Nvidia stock/options market disconnection an opportunity – While Nvidia (NVDA) is “red hot” in the stock market, it is “lukewarm” in the option market, which creates an “intriguing” opportunity, Steven Sears writes in this week’s edition of Barron’s.

E-Commerce helping Wal-Mart ‘jump-start stalled revenue – While Wal-Mart (WMT) has played in online shopping since 2000, it got a boost a year ago with its $3.3B acquisition of Jet.com, Jack Hough writes in this week’s edition of Barron’s. As an e-Commerce player, Wal-Mart is growing faster than Amazon (AMZN) has in years, and shareholders will benefit, he adds.

BEARISH  MENTIONS

Costco shares still fell despite good quarter– Since Amazon (AMZN) announced its acquisition of Whole Foods, Costco (COST) has been “on the ropes,” Ben Levisohn writes in this week’s edition of Barron’s. The retailer shares have dropped 12% since then, even as the company delivers earnings beats and same-store sales increases, he adds.

RH shares fully priced – Combined with July-quarter report, RH‘s shares (formerly known as Restoration Hardware) buyback has lifted its stock 146% this year and “squeezed those unwelcome guests called short sellers,” Bill Alpert writes in this week’s edition of Barron’s. But now RH shares look fully priced, and is one of the most richly priced retailers around, he adds.

Gun shares look overvalued – Tragedies involving guns and political pronouncement about gun violence tend to move shares of publicly traded firearms companies, such as Sturm Ruger (RGR), American Outdoor Brands (AOBC) and Vista Outdoor (VSTO), Vito Racanelli writes in this week’s edition of Barron’s. But with prospects dim for stricter gun control, an impetus for long-term sales growth is lacking, he notes, adding that the stocks look overvalued.


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Barron’s is bullish on Applied Materials and Expedia

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

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BULLISH  MENTIONS

Applied Materials, TSMC among ‘heroes’ of AI – Shares of Applied Materials (AMAT), the largest vendor of tools to Intel (INTC) and others, and TSMC (TSM), the largest contract manufacturer of circuits, which serves chip vendors such as Nvidia (NVDA) seem a good bet for the foreseeable future as computer-chip technology enters a bold new phase, Tiernan Ray writes in this week’s edition of Barron’s.

General Dynamics most promising amid corporate aircraft comeback – The business-jet market is showing signs of a comeback and the plane maker that offers the most promise to investors appears to be General Dynamics (GD), whose Gulfstream models are among the most popular corporate jets, Lawrence Strauss writes in this week’s edition of Barron’s.

First Solar to benefit from potential aggressive tariff hike – Cheap imported solar cells have fueled an alternative-energy boom in the U.S., but now President Donald Trump is considering tariffs that could slow the flow of foreign cells, Avi Salzman and Bill Alpert write in this week’s edition of Barron’s. If the White House pushes ahead with an aggressive tariff hike, the major beneficiary would be First Solar (FSLR), the U.S. industry leader, whose products would become cheaper than those sold by foreign competitors, while residential solar firms such as Sunrun (RUN) would be hurt, as they would no longer have access to cheap cells, they added.

Expedia still has room to rise – In a follow-up story, Barron’s says that Expedia’s HomeAway is starting to look like a “home run” as it is contributing a hefty portion of overall growth. That bodes well for Expedia (EXPE) stock, the publication notes, adding that a double-digit return seems likely over the next year.

Senate Health funding helps Thermo Fisher – In a follow-up story, Barron’s says that by blocking President Trump’s proposed research funding cuts, the Senate helps Thermo Fisher’s (TMO) key market.

Target lifts pay as retailers bid for workers in tight market – In a follow-up story, Barron’s notes that with the jobless rate at a 16-year low, it could be challenging for retailers to find sufficient holiday sales help this year. As retailers bid for workers in a tight labor market, Target (TGT) followed Wal-Mart (WMT) in lifting hourly pay, the publication noted.

BEARISH MENTIONS

Competition may be coming after Tesla – While electric vehicles currently sell for about $8,000 more than gas guzzlers, they will be cheaper than traditional cars by the early to mid-2020s, Emily Bary writes in this week’s edition of Barron’s, citing Cowen analyst Jeffrey Osborne. The increasing affordability of electric vehicles may not be good news for Tesla (TSLA), as rivals may see it as an incentive to take the space seriously, Bary adds


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Changes to S&P Indices

S&P announces changes to S&P MidCap 400, S&P SmallCap 600 indices

Stocks to buy, stocks to watch, upgrades, downgrades, earnings S&P Dow Jones Indices will make the following changes in the S&P MidCap 400 and S&P SmallCap 600 indices effective prior to the open of trading on Monday, October 2:

Six Flags Entertainment (SIX) will replace PAREXEL International (PRXL) in the S&P MidCap 400. Pamplona Capital Management is acquiring PAREXEL in a deal expected to be completed soon pending final conditions.

S&P SmallCap 600 constituent Sterling Bancorp (STL) will replace Oil States International (OIS) in the S&P MidCap 400, and

KEMET (KEM) will replace Astoria Financial (AF) in the S&P SmallCap 600, and

Oil States will replace Sterling Bancorp in the S&P SmallCap 600. Sterling Bancorp is acquiring Astoria in a deal expected to be completed soon pending final closing conditions. Post merger, Sterling Bancorp will be more representative of the mid-cap market space. Oil States is more representative of the small-cap market space.


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Repligen tumbles after losing largest customer

Repligen sliding after biggest customer launches new resin

Repligen tumbles after losing largest customer. See Stockwinners.com for details

Shares of Repligen (RGEN) are sliding after GE Healthcare (GE), its largest customer, announced plans to launch a new Protein A resin that will not use the former as the manufacturer of the associated Protein A ligand.

Commenting on the news, Jefferies analyst Brandon Couillard said while the near-term impact may be “negligible” to Repligen, the longer-term implications are negative. Meanwhile, his peer at Stephens told investors that he sees GE Healthcare’s resin as a niche product and he remains positive on Repligen.

NEW PROTEIN A RESIN

GE Healthcare has introduced a new Protein A chromatography resin, #MabSelect PrismA, which the company says will help biopharmaceutical manufacturers improve their monoclonal antibody purification capacity by up to 40%.

The resin is significantly more alkaline-stable, meaning that MabSelect PrismA can be cleaned with a higher concentration of sodium hydroxide to better control cross-contamination and bioburden risks, GE stated in its announcement yesterday.

MabSelect PrismA addresses a number of key challenges, including the increased upstream titers, the company said, adding that the new resin is highly efficient due to its excellent binding capacity.

MabSelect PrismA has been developed at the GE Healthcare Life Sciences site in Uppsala, Sweden, where the resin is also manufactured. Between 2017-2022 GE Healthcare is annually investing up to $70M in the production facility to significantly increase the factory’s capacity.

GE LAUNCH TO WEIGH ON VALUATION

Jefferies’ Couillard told investors that GE Healthcare will not utilize Repligen as the manufacturer of the associated protein A ligand for the new Protein A chromatography resin.

While the near-term financial impact appears negligible to Repligen given its long-term contracts and new Protein A resins’ typical long adoption cycle, the long-term implications are negative, as GE Healthcare’s move to in-source Protein A ligands diminishes the value of Repligen’s near-monopoly position and could weigh on its premium multiple.

GE Healthcare’s sizable planned investment outlay suggests it may eventually look to bring production of other protein A ligands in-house as part of a broader continuity plan once its long-term contracts expire in 2019/2021, the analyst added.

Moreover, #Couillard pointed out that the move also brings into question whether Millipore-Sigma may pursue a similar in-sourcing strategy down the road. The analyst reiterated a Hold rating and a $40 price target on Repligen shares.

GE RESIN A NICHE

In a research note of his own, Stephens analyst Drew Jones told investors that he is “not distracted” from his positive long-term outlook on Repligen after GE Healthcare’s plans.

The analyst believes this will be a niche resin that will not drive “meaningful” revenue for at least five to seven years.

Further, Jones noted that Repligen’s revenue from GE Healthcare will not be impacted due to long-term contracts. The analyst reiterated an Overweight rating and $50 price target on Repligen shares.

PRICE ACTION

In Tuesday’s  trading, shares of Repligen have dropped almost 13% to $37.69.


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Calgon Carbon sold for $1.3 billion

Japan’s Kuraray to acquire Calgon Carbon for $21.50 per share. 

Japan's Kuraray to acquire Calgon Carbon for $21.50 per share. See Stockwinners.com for details

Calgon Carbon Corporation (CCC) and Japan’s Kuraray Co. announced that their respective board have unanimously approved, and the parties have entered into, a definitive merger agreement under which Kuraray will acquire Calgon Carbon for $21.50 per share in cash, which equates to an equity value of approximately $1.1B, and a transaction value in excess of $1.3B, including Calgon Carbon’s net indebtedness.

The transaction remains subject to customary closing conditions, including regulatory approvals and approval by Calgon Carbon stockholders.

The parties are targeting a closing by the end of December, 2017.

The acquisition will be completed through a merger of a newly-created subsidiary of Kuraray with and into Calgon Carbon, with Calgon Carbon as the surviving corporation.

Shares of Calgon, a manufacturer of activated carbon with capabilities in ultraviolet light disinfection, are up 59%, or $7.80, to $21.00 in premarket trading.


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Barron’s is bullish on Cullen/Frost and Caterpillar

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

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BULLISH  MENTIONS

Affiliated Managers bull case ‘working out well,’ – In a follow up story, Barron’s says that Affiliated Managers (AMG) stock has jumped about 25% over the past 12 months but the opportunity is not over.

Betting on Cullen/Frost (CFR) stock could produce a 25% gain – Frost Bank has survived the Great Depression, the oil-patch bust of the 1980s, and the housing bubble of the 2000s, but investors seem to be betting it will have a tough time handling Texas latest challenges, namely weak energy prices and the effects of Hurricane Harvey, Lawrence Strauss writes in this week’s edition of Barron’s. However, he believes anyone making that wager is likely to lose in the long run, with the shares of its parent Cullen/Frost Bankers looking like a bargain for patient investors who could have a 25% gain.

Caterpillar, Analog Device among few stocks rising on earnings surprises – Until recently, companies that beat quarterly earnings estimates could routinely expect shares to rise, but not anymore, Jack Hough writes in this week’s edition of Barron’s. Although there is a shortage of true upside surprises, Hough says there are still some, with Align Technology (ALGN), Analog Services (ADI), Caterpillar (CAT), E-Trade Financial (ETFC) and Red Hat (RHT) among those who beat earnings and revenue estimates and enjoyed quick share price gains as a result, which should bode well for future performance.

 

BEARISH  MENTIONS

Equifax breach unsettles online investors – Equifax (EFX) breach unsettles online investors, with brokers stressing the need for getting rid of Social Security IDs and for close monitoring of accounts for unusual activity, Theresa Carey writes in this week’s edition of Barron’s.

Almost no one expecting FedEx results to be good– FedEx  (FDX) is set to report first-quarter earnings on Tuesday, and almost no one is expecting them to be good, Ben Levisohn writes in this week’s edition of Barron’s. Levisohn argues, however, that just because FedEx is “an express shipper doesn’t mean we need to rush to judgment,” and says sitting back and waiting to see how TNT plays out looks like the best strategy.

Goldman Sachs might be underdog – Goldman Sachs (GS) is rarely thought of as an underdog, but it might be right now, Ben Levisohn writes in this week’s edition of Barron’s. Goldman’s decline is a result of its own missteps, Levisohn notes, adding that if it can correct its problems, its stock may be able to close the performance gap with its peers.


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Kirby Goes Shopping!

Kirby acquires Stewart & Stevenson for $756.5M

Kirby acquires Stewart & Stevenson for $756.5M. See Stockwinners.com Market Radar for details

Kirby (KEX) closed the acquisition of substantially all of the assets and businesses of Stewart & Stevenson for approximately $756.5M, before post-closing adjustments. The purchase was funded with 5.7 million shares of Kirby common stock valued at $366.6M and $377.0M in cash through Kirby’s revolving credit facility, as well as assumed debt of $12.9M.

The company expects the transaction to be 2c-4c per share accretive to Q4 EPS. The full benefit from the earnings contribution is likely to be partially offset in the quarter by one-time integration and transaction-related expenses. Kirby will include a more definitive earnings assessment of Stewart & Stevenson in its 2018 full year guidance on its Q4 earnings call in January.

Kirby Corporation operates domestic tank barges in the United States. The company’s Marine Transportation segment provides marine transportation services and towing vessels transporting bulk liquid products, as well as operates tank barges throughout the Mississippi River System, on the Gulf Intracoastal Waterway, coastwise along three United States coasts, and in Alaska and Hawaii.

Kirby acquires Stewart & Stevenson for $756.5M. See Stockwinners.com for details

Stewart & Stevenson, founded in 1902, is a manufacturer and distributor of products and services for the oil and gas, marine, construction, power generation, transportation, mining and agricultural industries. The company serves domestic and global markets with equipment, rental solutions, parts, and service through a strategic network of sales and service centers in domestic and international locations.

HURRICANE  IMPACT

Kirby announced that Hurricanes Harvey and Irma caused little damage to Kirby vessels and minor flooding to one facility.

CEO Grzebinski stated, “Harvey has significantly dislocated normal supply and distribution routes in our inland barge business. Ports from Corpus Christi to Houston started closing on August 23rd, and began reopening on September 1st.

Irma has also significantly disrupted our offshore business. We expect lost revenues and costs associated with recovery efforts for both hurricanes to impact Q3 EPS by 6c-8c per share.

For Harvey, the lost revenues have been partially offset by an increase in our vessel utilization as the U.S. Gulf Coast petrochemical and refinery complex returns to normal operations.

As such, we believe Q3 earnings results will fall within our previously provided guidance range, although towards the low end after the negative impact from the storms.” The company had seen Q3 EPS of 40c-55c, consensus is 48c.

PRICE ACTION

KEX has a 52-weeks trading range of $55.09 – $74.50. Shares last traded at $64.33.


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Dover to Sell its Upstream Energy Unit

Dover to explore strategic alternatives of separation of upstream energy unit

Dover to explore strategic alternatives for upstream energy unit. See Stockwinners.com for details

Dover (DOV) announced that it is exploring strategic alternatives for the separation of its upstream energy businesses within its Energy segment, collectively, the “Wellsite” business.

The Company is considering options which may include a tax-free spin-off, sale or other strategic combination.

Dover’s Wellsite business, including Dover Artificial Lift, Dover Energy Automation, and US Synthetic, operates in some of the most attractive segments of the oil & gas drilling and production industry.

Dover Artificial Lift is a leading provider of a full range of artificial lift equipment and solutions and includes the industry-leading brands Norris, Harbison-Fischer, Accelerated, PCS Ferguson and Oil Lift.

Dover Energy Automation provides wellsite productivity software, equipment and IIoT solutions and includes the leading brands Norriseal-Wellmark, Spirit, Quartzdyne, Theta and Windrock.

USS is the industry leader in the development and production of polycrystalline diamond cutters used for oil and gas exploration.

In 2017, the Wellsite business is expected to generate approximately $1B in revenue and $250 million in earnings, before interest, taxes, depreciation and amortization.

The Bearings & Compression and Tulsa Winch Group businesses, which are also reported within the Energy segment, are not part of the strategic review.

“Today’s announcement continues our strategy of streamlining our portfolio to focus and invest in our core platforms of market-leading businesses competing in attractive industrial markets that offer lower volatility and strong growth prospects,” said Robert Livingston, Dover’s President and CEO.

“As a result of our strategic review, we have decided to explore options for separating the Wellsite business. Over the years our teams have built Wellsite into a great set of businesses that are leaders in their markets, differentiated by their technology, customer service and trusted brands, and that have generated high returns for our shareholders,” Livingston added.

“We are pleased with the performance of the business in 2017 and the momentum heading into 2018, and will leverage these strengths as we complete a review of separation alternatives to assess which option we believe will create the best long-term results for the businesses and the most value for shareholders.”

Dover expects to complete its assessment of strategic separation alternatives by the end of the year.


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Barron’s is bullish on WalMart, bearish on Papa John’s

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

Wal-Mart, BlackRock attractive amid seasonal market volatility – September and October may bring seasonal volatility that could push stocks around, Steven Sears writes in this week’s edition of Barron’s, while recommending that rather than just trading the swoons, one should focus on companies with indestructible, “cockroach-like qualities.” Some nearly indestructible stocks seem to be Wal-Mart (WMT) and BlackRock (BLK), the publication notes.

Wall Street may want to look at Japan – Investors worried about valuations and an impending correction on Wall Street may want to take a look at Japan, as its macroeconomic fundamentals have not looked this good in years, Assif Shameen writes in this week’s edition of Barron’s. Honda (HMC) and Sony (SNE) hold attractions, the publication noted.

Gartner Inc. (IT) could earn $8 a share of free clash flow in 2019, and potentially could trade 20 times or more to at least $160, Andrew Peck, a fund manager at Baron Capital Management, tells Barron’s. The tech research and advisory firm closed at $120.79 on Friday. TransUnion (TRU), which closed at $47.81, could rise to the mid $60s by 2019 as it expands its data products from credit to health care, Peck says. Online travel giant Priceline Group Inc. (PCLN), which closed at $1,850 on Friday, could rise to $2,500.

Nathan’s Famous trading at 40%-45% discount – Nathan’s Famous (NATH) has gobbled up share in the premium hot-dog market, while its stock has done well, compounding at 17% a year in the past decade, but the stock is not followed by Wall Street analysts and the company is “poorly understood,” Adam Seessel writes in this week’s edition of Barron’s. At a recent $58, Nathan’s trades at a 40%-45% discount to his estimate of intrinsic asset value, he notes.

Most of Harvey insurance money will go to replace flooded cars – A big part of Harvey insurance dollars will go to replace flooded cars, Alex Eule writes in this week’s edition of Barron’s. Wall Street analysts spent the last few days trying to better understand the transfer of wealth from insurance companies to car makers and auto dealers, with investors quick to pounce on their findings, the publication notes. Publicly traded companies that saw their shares rise include Group 1 Automotive (GPI), AutoNation (AN), and Penske Automotive Group (PAG), Eule adds.

Refiner shares probably volatile, long run opportunity – Hurricane Harvey flooded refineries and forced about a quarter of U.S. capacity off-line, but the damage “didn’t faze Wall Street,” and most refining stocks rose afterward, Avi Salzman writes in this week’s edition of Barron’s. While this dynamic may be short-lived, and the refiners could give back those gains in the near-term, in the longer-term, U.S. refining stocks are attractive, and people looking to profit from U.S. energy independence should consider buying them, the publication notes. Publicly traded companies in the space include Delek US (DK), HollyFrontier (HFC), Marathon Petroleum (MPC), Phillips 66 (PSX), Andeavor (ANDV), Valero (VLO) and Western Refining (WNR).

BEARISH  MENTIONS

Papa John’s run of underperformance may continue– Papa John’s (PZZA) is lagging behind the S&P 500 this year and, despite a plan to spend $500M to buy back shares, its run of underperformance may continue as competition hits its plans for growth, Leslie Norton writes in this week’s edition of Barron’s. Competition is everywhere as pizza will increasingly be delivered by Amazon (AMZN) and Uber, she notes, adding also that the choices have expanded dramatically, with chicken nuggets and fries being ordered from McDonald’s (MCD) or soup and a bagel from Panera.

Dialysis providers claim they make no money on patients – Although 88% of dialysis patients are insured by government programs, dialysis providers say they make no money on those patients, Bill Alpert writes in this week’s edition of Barron’s. And if private insurers succeed in cutting payments to dialysis firms, either by refusing subsidized premiums or simply reducing reimbursement rates, DaVita (DVA) and American Renal (ARA) will see their profits contract, he notes. Other dialysis providers include Fresenius Medical Care (FMS).


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Harvey’s Winners and Losers

Harvey impact seen as boon for some E&Cs, bane for others

Insurance Stocks down on Harvey. See Stockwinners.com Market Radar for details

As Harvey leaves a path of destruction in Texas, Citi analyst Andrew #Kaplowitz tells investors he sees potential impacts for Engineering & Construction names he covers, both positive and negative.

Meanwhile, his peer at Wells Fargo noted that multiple Houston area refineries have initiated shutdowns or curtailed operations, and may remain offline.

IMPACT FOR E&CS

Commenting on the potential impact of Hurricane Harvey, Citi’s #Kaplowitz noted that he sees potential impacts for his Engineering & Construction names, both positive and negative.

While it is way too early to tell how much ultimate impact the storm will have on the companies he covers, the analyst told investors he thinks there could be modest positive impacts for Jacobs Engineering (JEC), Fluor (FLR) and potentially Aecom (ACM) and for Quanta Services (PWR) and MasTec (MTZ), as E&Cs can assist with recovery and relief.

Additionally, he sees potentially negative impacts for Chicago Bridge & Iron (CBI). There are several larger projects still currently under construction on the Texas Gulf Coast and Southern Louisiana that could be significantly impacted by flooding rains, Kaplowitz pointed out, including CBI’s Cameron and Freeport LNG, and Axiall/Lotte Cracker, and Fluor’s CP Chem Ethylene Cracker and Sasol’s Cracker.

Nonetheless, the analyst acknowledged that forecasting any negative impact on these projects would be “highly speculative” at this point.

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

ROOFING and BUILDING SUPPLY STOCKS

One primary beneficiary of any natural disaster of this magnitude would be supplier of products that are needed to rebuild. Here are a list of such companies:

  • Beacon Roofing (BECN): The company is a maker of roof shingles
  • Home Depot (HD)
  • Lowes (LOW)
  • Lumber Liquidator (LL)
  • United Rentals (URI)
  • Waste Management (WM)
  • Republic Industries  (RSG)

IMPACT FOR REFINERS

Significant portions of U.S. refining capacity are offline following Category 4 Hurricane Harvey’s landfall on the middle Texas Coast and epic flooding in the Houston area, Wells Fargo’s Roger Read noted.

The analyst told investors that the majority of the refining units from Corpus Christi to Houston, Texas are offline and will remain so for much if not all of the coming week.

With approximately 25% of Gulf Coast refining capacity offline the impact of Hurricane Harvey is on par with prior major hurricane impacts on the Gulf Coast, he contended, adding that disruptions to normal activities may persist, crack spreads are likely to remain elevated and refining equities are likely to respond positively.

Nonetheless, Read noted that it is unclear if the flooding has damaged the refining units. Including condensate splitters, the analyst estimates 2.5-3.0 million barrels per day of refining capacity is offline, which represents just over one-quarter of Gulf Coast capacity and about 15% of U.S. refining capacity. Publicly traded companies in the refining space include Delek US (DK), HollyFrontier (HFC), Marathon Petroleum (MPC), Phillips 66 (PSX), Tesoro (TSO), Valero (VLO) and Western Refining (WNR).

PRICE ACTION

Fluor and Aecom are fractionally up in late morning trading, Quanta Services has gained almost 2%, and MasTec and CBI have risen about 1%. HollyFrontier has jumped almost 7%, while Marathon Petroleum and Philips 66 are up 1% and Valero has gained about 2%.


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