Artesyn Embedded Power sold for $400M

Advanced Energy to acquire Artesyn Embedded Power for $400M

Advanced Energy buys Artesyn Embedded for $400M, Stockwinners

Advanced Energy (AEIS) announced that it has entered into a definitive agreement to acquire the Embedded Power business of Artesyn Embedded Technologies from Platinum Equity.

The total consideration for this transaction will be approximately $400M.

Strategic benefits of the deal include:

“Creates a premier global power conversion company with enabling critical power technologies and over $1.3B in annual revenue, based on 2018 combined historical results.

Strong strategic fit with complementary technologies, product portfolios and core competencies in highly engineered, application-specific power solutions for key OEMs in demanding applications.

Accelerates earnings growth with over $20M of expected annualized synergies, driving projected earnings accretion of over 80c per share in 18-24 months and targeting to reach long-term accretion of over $1.50 per share, on a non-GAAP basis.

Creates significant financial value with a purchase price of approximately 5x synergy-adjusted EBITDA, with a path to future margin expansion, additional cost savings and de-levering to create long-term shareholder value.”

Under the terms of the Share Purchase Agreement, based on a total base purchase price of $400M, Advanced Energy will pay approximately $364M in cash and assume approximately $36M of liabilities for Artesyn EP, subject to final adjustments to the valuation of such liabilities and adjustments to reflect working capital as of the closing.

AE expects to finance the transaction through a combination of existing cash and $350N of debt supported by commitments from its lenders. The transaction has been approved by the board of Advanced Energy.

The transaction, which is expected to close during the second half of 2019, is subject to the satisfaction of customary closing conditions, including receipt of international regulatory approvals and completion of certain carve out activities involving Artesyn’s Embedded Computing and Consumer Products businesses.

AEIS +$4.38 to $52.84.

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GE fires CEO, Shares rise

GE shares jump after CEO Flannery ousted amid Power unit challenges

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

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

POWER WRITE-OFF

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

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

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

RECENT ANALYST CONCERNS

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

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

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

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

PRICE ACTION

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


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Vectren Corporation sold for $72 a share

Vectren investors to receive $72/share cash for each share in CenterPoint deal

Vectren Corporation sold for $72 a share, Stockwinners
Vectren Corporation sold for $72 a share

CenterPoint Energy (CNP) and Vectren Corporation (VVC) announced they have entered into a definitive merger agreement to form an energy delivery, infrastructure and services company serving more than 7 million customers across the United States.

Under the terms of the agreement, which have been unanimously approved by both CenterPoint Energy’s and Vectren’s Boards of Directors, Vectren shareholders will receive $72.00 in cash for each share of Vectren common stock.

CenterPoint Energy will also assume all outstanding Vectren net debt.

Vectren Corporation sold for $72 a share, Stockwinners
Vectren Corporation sold for $72 a share, 

The combined company is expected to have electric and natural gas delivery operations in eight states with assets totaling $29 billion and an enterprise value of $27 billion.

With the merger, CenterPoint Energy expects to maintain an annual guidance basis EPS growth target of 5 to 7 percent in 2019 and 2020, excluding any one-time charges related to the merger.

At the closing of the transaction, Scott M. Prochazka will serve as president and CEO of the combined company.

The full executive team for the combined company will be announced prior to or in conjunction with the closing of the merger.

The natural gas utilities operations of the combined company, as well as that businesses’ lead executive, will be headquartered in Evansville.

Additionally, CenterPoint Energy will establish a chief business officer for Vectren’s electric business who will directly report to CenterPoint Energy’s CEO and spearhead southwestern Indiana’s electric grid modernization and generation transition initiatives recently underway.

In addition to utility field employees, CenterPoint Energy will retain key operational activities in support of the utilities in Evansville.

Pursuant to the merger agreement, CenterPoint Energy will contribute an additional $3 million per year for a minimum of five years after the closing of the merger to the Vectren Foundation, which will continue to operate out of Evansville.

The closing of the transaction is subject to Vectren shareholder approval, approvals from the Federal Energy Regulatory Commission and Federal Communications Commission, and expiration or termination of the Hart-Scott-Rodino waiting period.

In addition to these conditions, the company will make certain regulatory filings in Indiana and Ohio. Subject to these conditions, the merger is expected to close by the first quarter 2019. Until the closing, CenterPoint Energy and Vectren will remain separate companies.


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Overstock rises on plans for new blockchain venture

Overstock rises after reporting plans for new blockchain venture 

Overstock rises on plans for new blockchain venture. Stockwinners.com
Overstock rises on plans for new blockchain venture

In a regulatory filing last night, Overstock.com (OSTK) disclosed that on December 27 the company, its wholly owned subsidiary Medici Ventures, Patrick Byrne and Hernando de Soto entered into a Memorandum of Understanding that provides that the parties will form a company, “Desoto,” that will be owned 50% by Medici, 33% by Hernando de Soto and 17% by Patrick Byrne, who is the CEO and a member of the Board of Directors of Overstock, and also serves on the board of directors of Medici.

The goal of the new company is to develop a blockchain-based system to develop a global property registry system focused on the property rights of people in the developing world.

Overstock and/or Medici will pay or contribute $14M to help launch the project, $8M of which will be used to fund DeSoto, and Medici will receive a 50% ownership interest in DeSoto.

Patrick Byrne personally will contribute $14M to help launch the project, and will receive a 17% ownership interest in DeSoto.

Hernando de Soto will serve as Chairman of DeSoto and as a director of Medici. Patrick Byrne will serve as Co-Chairman and CEO of DeSoto, in addition to his positions with Overstock and Medici.

“The MOU contemplates a more detailed future agreement, and provides that the parties will cooperate in good faith to reach more detailed agreements in the future,” the filing added.

In pre-market trading, Overstock has risen $1.95, or 2.7%, to $73.50 per share.


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Scana Corporation sold for $14.6 billion

Dominion, Scana announce all-stock merger valuing Scana at $55.35 a share

 Scana Corporation sold for $7.9 billion. Stockwinners.com
Scana Corporation sold for $7.9 billion.

Dominion Energy (D) and Scana Corporation (SCG) announced an agreement for the companies to combine in a stock-for-stock merger in which Scana shareholders would receive 0.6690 shares of Dominion Energy common stock for each share of Scana common stock, the equivalent of $55.35 per share, or about $7.9B based on Dominion Energy’s volume-weighted average stock price of the last 30 trading days ended Jan. 2.

Including assumption of debt, the value of the transaction is approximately $14.6B.

The agreement also calls for significant benefits to Scana’s South Carolina Electric & Gas Company subsidiary electric customers to offset previous and future costs related to the withdrawn V.C. Summer Units 2 and 3 project.

After the closing of the merger and subject to regulatory approvals, this includes: A $1.3B cash payment within 90 days upon completion of the merger to all customers, worth $1,000 for the average residential electric customer.

Payments would vary based on the amount of electricity used in the 12 months prior to the merger closing; An estimated additional 5% rate reduction from current levels, equal to more than $7 a month for a typical SCE&G residential customer, resulting from a $575M refund of amounts previously collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform; A more than $1.7B write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, which would never be collected from customers.

This allows for the elimination of all related customer costs over 20 years instead of over the previously proposed 50-60 years; Completion of the $180M purchase of natural-gas fired power station at no cost to customers to fulfill generation needs.

Scana would operate as a wholly owned subsidiary of Dominion Energy.

It would maintain its significant community presence, local management structure and the headquarters of its SCE&G utility in South Carolina.

The transaction would be accretive to Dominion Energy’s earnings upon closing, which is expected in 2018 upon receipt of regulatory and shareholder approvals.

The merger also would increase Dominion Energy’s compounded annual earnings-per-share target growth rate through 2020 to 8% or higher.

The merger is contingent upon approval of Scana’s shareholders, clearance from the U.S. Federal Trade Commission/the U.S. Department of Justice under the Hart-Scott-Rodino Act, and authorization of the Nuclear Regulatory Commission and Federal Energy Regulatory Commission.

Scana and Dominion Energy also will file for review and approval from the public service commissions of South Carolina, North Carolina, and Georgia.


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Vistra Energy and Dynegy merge

Vistra Energy, Dynegy to combine in tax-free, all-stock transaction 

Vistra Energy (VST), the parent company for TXU Energy and Luminant, and Dynegy (DYN) announced that their Boards of Directors have approved, and the companies have executed, a definitive merger agreement pursuant to which Dynegy will merge with and into Vistra Energy in a tax-free, all-stock transaction, creating the leading integrated power company across the key competitive power markets in the United States.

The resulting company is projected to have a combined market capitalization in excess of $10 billion and a combined enterprise value greater than $20 billion.

Under the terms of the agreement, Dynegy shareholders will receive 0.652 shares of Vistra Energy common stock for each share of Dynegy common stock they own, resulting in Vistra Energy and Dynegy shareholders owning approximately 79 percent and 21 percent, respectively, of the combined company.

Based on Vistra Energy’s closing share price of $20.30 on October 27, 2017 and the aforementioned exchange ratio, Dynegy shareholders would receive $13.24 per Dynegy share.

Through the all-stock transaction, both Vistra Energy and Dynegy shareholders are expected to benefit from an estimated $350 million in projected annual run-rate EBITDA value levers, additional annual free cash flow value levers of approximately $65 million, and approximately $500-600 million in projected net present value benefit from tax synergies.

The combined company is projected to achieve approximately $350 million in annual run-rate EBITDA value levers by streamlining general and administrative costs, implementing fleet-wide best-in-class operating practices, driving procurement efficiencies, and eliminating other duplicative costs.

Vistra Energy estimates the full run-rate of EBITDA value levers will be achieved in approximately 12 months of closing.

The companies anticipate closing the transaction in the second quarter of 2018.

The transaction is subject to certain regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and approval by the Federal Energy Regulatory Commission, the Federal Communications Commission, the Public Utility Commission of Texas, the New York Public Service Commission, and other customary closing conditions.

The transaction is subject to approval by the shareholders of Vistra Energy and Dynegy.

In addition, the transaction will not require any refinancing of Vistra Energy’s or Dynegy’s debt, but preserves flexibility for opportunistic refinancing at, or after, closing.

Following the close of the transaction, the combined company will be led by Curt Morgan as President and CEO. Bill Holden will serve as the CFO with Jim Burke as the COO.

The Board of Directors is expected to have a total of 11 directors consisting of the current eight members of the Vistra Energy Board and three members from Dynegy’s Board.

The Dynegy Board of Directors and Mr. Flexon have mutually agreed to extend his employment as permitted under the terms of his existing employment agreement for one year.

Mr. Flexon will continue to serve as President and CEO of Dynegy through April 30, 2019 or the date the transaction closes, whichever comes first. The combined company’s headquarters will be in Irving, Texas.

In addition, the combined entity has retail offices in Houston, Texas, Cincinnati, Ohio, and Collinsville, Illinois.


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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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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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Exa Corporation sold for $400 million

Exa Corp. to be acquired by Dassault Systemes for $24.25 per share 

Exa Corporation sold for $400 million. See Stockwinners.com for details

Exa Corporation (EXA) announced that its board has unanimously agreed to be acquired by Dassault Systemes in a transaction valued at approximately $400M or $24.25 per share.

Under the terms of the merger agreement, a subsidiary of Dassault Systemes will commence a tender offer within the next 10 business days to acquire all of the issued and outstanding shares of Exa common stock for a price of $24.25 per share payable in cash upon completion of the offer.

This represents a fully diluted equity value for Exa of approximately $400M. The acquisition is expected to close in Q4.

With the addition of Exa, Dassault Systèmes’ 3DEXPERIENCE platform will provide customers with a proven portfolio of Lattice Boltzmann fluid simulation technologies, fully industrialized solutions and over 350 highly experienced simulation professionals.

Simulation of fluid flow, such as the cooling of an engine or the lift of a wing, is a necessary component of simulating the physical behavior of products, nature and life. For the many situations where fluid flow conditions change rapidly, simulation of dynamically variable flows is critical to accurate assessments of a product and its behavior in its environment. For these applications, the combination of Exa’s accuracy and timeliness provides results that are superior to those of alternative CFD methods.

Completion of the transaction is subject to customary closing conditions, including required regulatory approvals. The acquisition is expected to close in the fourth quarter of 2017, subject to the satisfaction of customary closing conditions.


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Accenture, Microsoft expand strategic alliance

Accenture, Microsoft expand strategic alliance to offer cybersecurity solutions

 Accenture, Microsoft expand strategic alliance. See Stockwinners.com for details

Accenture (ACN), Microsoft (MSFT) and Avanade are collaborating through a multi-year, multi-million-dollar agreement to develop, integrate and bring to market enhanced cyber defense solutions to help clients better detect, investigate and respond to cyber threats.

The collaboration extends the companies’ longstanding strategic relationship, which began in 2000.

The cyber defense offerings will be infused with joint threat intelligence and initially span three core areas:

Managed Security Operations: enhancing existing Accenture managed security services with integration of the latest Microsoft security products and services to monitor, detect and quickly respond to security breaches – targeted for on-premises, cloud and hybrid systems.

Incident Response Support: a joint, global and collaborative teaming approach leveraging tools and integrated processes to help clients return to normal operations after a significant security breach.

Integrated Threat Hunting: leveraging the Incident Response experience of the three companies to actively locate previously undetected breaches. According to the Accenture Security Index, more than 70% of organizations globally cannot identify and fully protect their corporate high-value assets.

In addition, the associated costs of cyber attacks are having a growing financial impact on businesses.

In 2017, the average cost of cyber crime climbed to $11.7M per organization, a 23% increase from last year, according to a new study by Accenture and the Ponemon Institute.


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Barron’s is Bullish on Carlyle Group, Bearish on Nike

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

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BULLISH  MENTIONS

Altaba could reward investors ‘nicely’  – Alibaba (BABA) is having a stellar year and a cheap way to play it is through Altaba (AABA), whose 15% stake in Alibaba is valued at $65B, Andrew Bary writes in this week’s edition of Barron’s. While Altaba shares are up 65% this year on Alibaba’s big gains, it trades at a 30% discount to the value of the company’s assets, the publication adds’

New Apple Watch may threaten telecoms – As the world awaits the 10th-anniversary iPhone, the real news may be buried within a redesigned Apple Watch 3, Tiernan Ray writes in this week’s edition of Barron’s. Apple (AAPL) has said that the next smartwatch will gain the ability to dial up the internet wirelessly even when not connected to an iPhone, the publication notes, adding that the new Apple Watch will probably make use of an embedded SIM. Apple already allows people using its iPad tablet to select which wireless carrier they want on a month-by-month basis, and Apple Watch will allow the same, signaling that Apple may want to take more control of the mobile subscriber, Tiernan says.

Carlyle Group may be ‘best deal’ in private equity – Carlyle Group (CG) is one of the world’s largest private-equity managers, with $170B in assets under management spread over six continents, but has had a much lower profile with investors, with its units fallen 24% over the past five years, Jack Willoughby writes in this week’s edition of Barron’s. Carlyle has finally put its hedge fund woes behind it and expects a big jump in earnings, Willoughby notes, while questioning if the stock price can double.

Texas Instruments, CVS Health worth a look for income investors.  Barron’s has looked for firms with the highest dividend-safety rankings that yield at least 2% and have market caps above $25B. The top five finishers based on those criteria were Texas Instruments (TXN), CVS Health (CVS), PNC Financial (PNC), Sysco (SYY) and Medtronic (MDT), Lawrence Strauss writes in this week’s edition of Barron’s.

BEARISH  MENTIONS

Nike could fall another 10% – As Adidas (ADDYY) picks up the pace, Nike (NKE) is losing ground in the sneaker race, and its stumbling stock could fall another 10% or more in the coming year, Jack Hough writes in this week’s edition of Barron’s. Hough argues that Nike’s problem is twofold, namely the growth of e-commerce which has rattled Nike’s retail partners, including Foot Locker (FL), and Adidas that seems to have finally figured out how to sell sneakers in the U.S.


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Insmed Could be Sold

Insmed seen as potential target after inhaled antibiotic study succeeds

Insmed seen as potential target after inhaled antibiotic study succeeds. See Stockwinners.com Market Radar for details

Insmed (INSM) has announced results from a phase 3 clinical trial, saying its inhaled antibiotic successfully treated patients with a rare lung disease caused by a bacterial infection.

Following the news, Citi analyst Liav #Abraham argued that the positive headline data could increase the likelihood of Insmed being a viable takeover target.

STUDY RESULTS

This morning, Insmed announced top-line data from its Phase 3 CONVERT study, saying it met its primary endpoint of culture conversion by month 6 with statistical and clinical significance.

The study demonstrated that the addition of ALIS to guideline-based therapy eliminated evidence of nontuberculous mycobacterial, or NTM, lung disease caused by MAC in sputum by month 6 in 29% of patients, compared to 9% of patients on GBT alone.

Insmed plans to pursue accelerated approval of ALIS under subpart H based on the data from the CONVERT study, which will be reviewed by the Division of Anti-Infective Products, the company noted.

TAKEOUT TARGET

In a research note this morning, Citi’s Abraham told investors that the positive headline data for Insmed’s ALIS for the treatment of NTM lung disease bode well for the potential approval of the therapy.

The analyst highlighted the clinical meaningfulness of the data, with a 20% difference in culture conversion reported between the active and control arms of the trial.

Additionally, Abraham pointed out that the debate on the stock is likely to shift to the commercial outlook for ALIS, with pricing also being key to the uptake of the drug. The positive headline data “could well increase the likelihood of the company as a viable takeout target,” she argued. Abraham reiterated a Neutral rating on the shares.

ACCELERATED APPROVAL

Also commenting on the announcement, Leerink analyst Joseph Schwartz told investors in a research note of his own that after achieving statistical significance in the primary endpoint for ALIS, Insmed’s management intends on pursuing accelerated approval, in line with the expectations laid out during the company’s recent analyst day.

The higher reported adverse events in the ALIS cohort were expected, and while the secondary endpoint of six-minute walk test did not achieve statistical significance overall, patients who culture converted showed a statistical significant improvement, which was a pre-specified analysis, #Schwartz contended.

The analyst reiterated an Outperform rating on the shares.

Meanwhile, his peer at #Evercore ISI increased his price target for Insmed to $40 from $28 following the clinical data. Analyst Josh #Schimmer noted, however, that the commercial outlook is still not well defined and will likely evolve over time as more is learned about the CONVERT study results, the companion 312 study and the company’s efforts to expand labelled use. Schimmer reiterated an Outperform rating on the shares.

PRICE ACTION

In Tuesday’s trading, shares of Insmed (INSM) are up $14 to $26.


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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.

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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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Barron’s is bullish on Infosys and Medtronics

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

Broadcom ‘big run’ not over yet – In a follow up story, Barron’s notes that after Broadcom (AVGO) beat quarterly estimates for revenue and earnings per share estimates and raised its guidance, investors sent the stock almost 4% lower as they believed the beat/raise was less pronounced than those in the past six quarters. However, the publication says Broadcom big run is not over, with the chip maker gaining share in Apple’s (AAPL) new iPhone and cashing in on Arista Networks’ (ANET) success.

Infosys too cheap to ignore – The resignation of Infosys (INFY) CEO Vishal Sikka and board shake-up shed a light on the spat between the board and co-founder Narayana Murthy, concerning governance and future growth, Dimitra Defotis writes in this week’s edition of Barron’s.

However, value investors “don’t need to get mired in the drama,” the publication notes, adding that they should see Infosys stock as too cheap to ignore.

Skeptical investors may be underestimating Medtronic strength– While shares of Medtronic (MDT) have done quite well this year, the performance masks some investors’ doubts that the company can deliver consistent mid-single-digit sales growth, while still meaningfully boosting margins, Lawrence Strauss writes in this week’s edition of Barron’s. The skepticism seems overblown as Medtronic should be able to reach double-digit annual profit growth in the near-term, helped by multiple product launches, one of which automates insulin-dosing for Type 1 diabetes patients, Strauss adds.

Innovations could lift PayPal another 16%– PayPal (PYPL) shares are up 64% since eBay (EBAY) spun off the company two years ago, but despite that rise, the stock still has upside as innovations could lift it another 16%, Emily Bary writes in this week’s edition of Barron’s.

New space age offers promise for investors – SpaceX, a side project of Tesla (TSLA) founder Elon Musk, has grabbed a leading market share in commercial satellite launches, Jack Hough writes in this week’s edition of Barron’s.

Jeff Bezos, founder of Amazon.com (AMZN) and privately owned Blue Horizon, also plans to compete on launches, and has a vision of moving manufacturing to space, Hough noted. However, public investors may be best off staying clear of the upheaval in commercial satellites, and focusing instead on exposure to the U.S. defense and intelligence sectors, Barron’s argued, adding that Goldman Sachs predicts spending there will grow 6% a year, compounded, over the next five years, benefiting names like Boeing (BA), Lockheed Martin (LMT) and Orbital ATK (OA).

Yum China (YUMC) new leaders pushing digital, possible dividend – Yum China shares have received positive reviews from investors, with the stock producing gains of about 40%, Robin Blumenthal writes in this week’s edition of Barron’s. The company has revamped its management group and plans to add more than 15,000 restaurants in the next 15 years, while Pizza Hut unit experiments with new menu items, and KFC pushes ahead some of its successful tactics, such as delivery, digital engagement with customers, and more individualized restaurants, the publication notes. Additionally, Yum China has promised to decide about a dividend by year end, Blumenthal adds.

BEARISH  MENTIONS

Intel future may rest with initiatives that require patience. – The markets where Intel (INTC) dominates, servers and personal computers, do not show the growth they once did, with its future resting with initiatives that are promising, but that, like a start-up, require patience on the part of investors, Tiernan Ray writes in this week’s edition of Barron’s. Intel’s greatest start-up opportunity may be in the realm of computer-data networking, the publication adds.


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