Calpine is in-play below $16

CalpineThe Wall Street Journal reported yesterday that #Calpine $CPN , the largest power producer, is exploring a sale.
#Deutsche Bank sees few strategic acquirers for Calpine (CPN), making going private or remaining public the most likely outcomes in the analyst’s view.
Market power issues in #Texas make a combination with Vistra Energy $VST or NRG Energy $NRG unlikely, and while #PSEG $PEG and #Exelon $EXC could afford buying Calpine, such a deal would be a shift in strategy for both.
The analyst finds it unlikely that a go-private deal gets done much north of $16 per share.
The analyst believes, however, that a mid-teens per share takeout is possible “with some creative structuring.”
Even without a deal, Calpine offers value based on its cash flow profile, Deutsche contends. The analyst reiterates a Buy rating on Calpine with a $14 price target.
The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Moody’s Lowers its view of Canadian Banks

canada-banks#Moody’s Investors Service downgraded the #Baseline Credit Assessments (BCA), the long-term ratings and the #Counterparty Risk Assessments  (CRA) of six Canadian banks and their affiliates, reflecting Moody’s expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, that could lead to a deterioration in the banks’ asset quality, and increase their sensitivity to external shocks.

The banks affected are: #Toronto-Dominion Bank $TD , Bank of Montreal $BMO , Bank of Nova Scotia $BNS , Canadian Imperial Bank of Commerce $CM , National Bank of Canada $NTIOF , and Royal Bank of Canada $RY .

The BCAs, long-term debt and deposit ratings and CRAs of the banks and their affiliates were downgraded by 1 notch, excepting only Toronto-Dominion Bank’s CRA, which was affirmed.

The short term Prime-1 ratings of the Canadian banks were affirmed.

All relevant ratings for these banks continue to have negative outlooks, reflecting the expected introduction of an operational resolution regime in Canada.

“Today’s downgrade of the Canadian banks reflects our ongoing concerns that expanding levels of private-sector debt could weaken asset quality in the future. Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past.” said David Beattie, a Moody’s Senior Vice President.

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Boeing 737 Woes drag DJIA Lower

737maxDJIA component #Boeing $BA is lower, dragging the index lower due to issues with its long awaited 737 Max airplane. The company announced the suspension of #737 Max flights due to a manufacturing issue with low-pressure turbine discs.

Engine supplier CFM International, a joint venture between #General Electric $GE and #Safran $SAFRY , notified Boeing of the manufacturing issue, Boeing said in a statement.

The 737 Max remains in testing and is yet to commence commercial flights.

Shares of plane suppliers #Spirit AeroSystems $SPR , #Textron $TXT , #United Technologies $UTX and #Rockwell Collins $COL followed Boeing lower on the news. Boeing in afternoon trading is down $2.59 to $182.90. DJIA is down 54 units while GE is down 1% to $28.67.

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SEC fines Barclays $97M

barclaysThe #SEC announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged.

In a settlement of more than $97M, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50M, according to the SEC.

The SEC’s order finds that two Barclays $BCS advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren’t being performed as represented.

#Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another 22,138 accounts paid excess fees to Barclays due to miscalculations and billing errors by the firm.

Without admitting or denying the SEC’s findings, Barclays agreed to create a “Fair Fund” to refund advisory fees to harmed clients.

The Fair Fund will consist of $49.79M in disgorgement plus $13.75M in interest and a $30M penalty. Barclays will directly refund an additional $3.5M to advisory clients who invested in third-party investment managers and investment strategies that underperformed while going unmonitored.

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Peanuts and Strawberry Shortcake Sold for $345M

Peanuts#Iconix Brand $ICON has entered into a definitive agreement to sell its interest in the #Peanuts and #Strawberry Shortcake brands to #DHX Media for $345M in cash, subject to a customary working capital adjustment.

The company intends to use the net proceeds from this transaction plus additional cash on the balance sheet to pay down approximately $362M of debt.

This includes a mandatory payment of approximately $152M of the company’s Senior strawberrySecured Notes issued under its securitization facility, and the full extinguishment of the $210m outstanding balance of its Senior Secured Term Loan. Going forward, the entertainment segment will be reported as a discontinued operation.

The company expects the elimination of earnings from the entertainment segment to be offset by interest savings from the reduction of debt. The total acquisition cost of these brands was $246M. This transaction is expected to close by the end of Q2.

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Softbank to push T-Mobile and Sprint into a deal

sprint#SoftBank  $SFTBF is prepared to enter talks on potential mergers and acquisitions for wireless unit #Sprint $S , particularly keen on a potential deal with #T-Mobile $TMUS , Reuters reports, citing comments made by CEO Masayoshi Son at a news conference.

The company previously tried to acquire T-Mobile for Sprint but dropped talks following opposition from U.S. antitrust regulators. “Of all potential partners, T-Mobile is the one that would yield the most synergies, the most orthodox choice and we’d sincerely love to begin talks,” Son said, adding that the current U.S. adtmobileministration is more open to the possibility of a deal.

The company is also open to other possible deals if there were better offers.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Import Prices Jump in April

Ships gather off the ports of Los Angeles and Long Beach, California in an aerial imageU.S. April import prices rose 0.5% while export prices edged up 0.2%.

The 0.2% decline in March import prices was revised up to 0.1% (and February’s 0.4% gain was revised down to 0.3%). The 0.2% March export price increase was bumped down to 0.1%.

For import prices, petroleum climbed 1.6% from -0.4% (revised from -3.6%). Excluding petroleum, import prices were up 0.4% from 0.1% (revised from 0.2%).

Industrial supply prices increased 1.1%, while food and beverage prices rose 0.3%.

Import prices with Canada rose 0.6% from 0.7% (revised from -1.3%), and were down 0.1% with China versus the 0.2% March gain.

For exports, agricultural prices were up 0.3% following the prior 0.8% gain (revised from 0.9%). Excluding ag, export prices inched up 0.1%, the same as in March (revised from 0.2%).

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Crude Oil Higher on Inventories Draw

The American Petroleum Institute #API reported a draw of 5.789 million barrels in UOil barrels on the price chart backgroundnited States #crude oil inventories, compared to analyst expectations that markets would see a crude oil draw of 1.8 million barrels for the week ending May 5.

#Gasoline inventories rose by 3.169 million barrels, according to the API. A draw of 700,000 barrels was expected. Gasoline inventories continue to build up ahead of summer driving season, as refiners continue to turn crude oil into gasoline above demand for the fuel.

So while crude oil has experienced an overall drawdown over the last couple of weeks, it’s being converted to gasoline, and extra inventories are moving from one side of the refinery to the other. Gasoline inventories have continued to build for four weeks in a row, if the EIA confirms this week’s build on Wednesday.

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Pilots Strike Leads to Passenger Brawl!

saveShares of #Spirit Airlines $SAVE are lower by 3% in Tuesday trading after its pilots’ strike forced the carrier to cancel several of its flights.  To make matters worse for the discount airline, a brawl erupted among Spirit Airlines passengers in Florida late Monday after another round of flight cancellations from the carrier, reports Reuters, citing a video of the event.

The cancellations are “just the latest of hundreds” from Spirit, which is engaged in a labor dispute with its pilots, Reuters says. “We are shocked and saddened to see the videos of what took place,” a spokesperson told the news service, adding that its pilots are engaged in “unlawful” strikes.

Footage of the fights spread widely on social media, creating the latest in a string of public relations headaches for U.S. airlines.

At least 11 Spirit flights were canceled at Fort Lauderdale airport on Monday and 31 delayed, according to data.

Hundreds of Spirit flights have been canceled in recent days. On Tuesday, the airline filed for a temporary restraining order against its pilot union.

Broward County Sheriff’s deputies responded to the incident at the airport as about 500 passengers became irate, police said. Video showed people falling down fighting as security officials tried to restrain them.

Three people were arrested for threatening to harm airline employees and challenging them to fight, police said, adding the trio had made the crowd become “increasingly aggressive.”

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Q1 GDP Growth Rate Forecast Raised!

Tgdpoday’s U.S. #wholesale report revealed divergent surprises, with a disappointing flat figure for March wholesale sales after a 0.7% February increase, but a 0.2% inventory rise that beat the 0.1% drop in the advance indicators report, after a 0.3% February rise.

Sales undershot inventories after beating inventories for three consecutive months, hence slowing the downtrend in the inventory-to-sales (I/S) ratio to leave a 1.28 ratio for a third consecutive month. Analysts now expect a Q1 GDP growth boost to 0.9% from 0.7%, with a $7 B boost in wholesale inventories that accompanies an $8 B downward factory inventory revision, but an $8 B hike in #construction. However, keep in mind that is the view from the rear-view mirror.

Analysts expect Q2 GDP growth of 3.2% with a $5 B inventory subtraction that leaves just a $4 B accumulation rate, after a likely trimming in the Q1 accumulation rate to the $9 B area. For monthly forecasts, analysts expect a 0.2%

#March business inventory rise after a 0.3% February increase.

Today’s 0.2% March wholesale inventory rise accompanies a flat factory figure and an assumed 0.4% retail inventory increase that matches the advance indicators data.

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Pentair to split into two companies!

#Penairpnr-logo $PNR announced that its Board of Directors has unanimously approved a plan to separate into two independent, publicly-traded companies.
The proposed transaction will create a global water company that designs, manufactures and delivers solutions to residential, commercial and industrial customers. Strategic business groups include Filtration & Process, Flow Technologies and Aquatic & Environmental Systems. The company will retain the Pentair name and ticker symbol. Water generated approximately $2.8B in sales in 2016; and an electrical company focused on improving utilization, lowering costs and maximizing customer uptime.
Strategic business groups include Enclosures, Thermal Management and Electrical & Fastening Solutions. The company will be named at a later date. Electrical generated approximately $2.1B in sales in 2016.
The separation is expected to occur through a tax-free spin-off of Electrical by Pentair to its shareholders.
Both Water and Electrical are expected to be well-capitalized and have investment-grade credit ratings.
Until the planned separation is completed, Pentair expects to continue to pay its quarterly dividend and will set appropriate dividend policies for each business following completion.
Upon separation, John L. Stauch, Senior Vice President and Chief Financial Officer of Pentair, will become Water’s CEO and Karl R. Frykman, the current President of Pentair’s Water segment, will become Water’s COO. Pentair expects to complete the separation in the second quarter of 2018, subject to satisfaction of customary conditions, including obtaining final approval from the Pentair Board of Directors, receipt of tax opinions and rulings and effectiveness of appropriate filings with the U.S. SEC.
$PNE is up 3% to $68.02 in morning trading following the announcement.
The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Pandora shares get a boost from KKR

pandora_logo_blue-796x174Noting that #Pandora $P announced it had raised $150M by selling a 5-year, 8% convertible preferred security to KKR $KKR , #Needham analyst Laura Martin calculates that adding KKR to the Pandora story adds $5 per share to the latter’s value, implying that it should trade up to $15 per share on the news over time.

The analyst believes #KKR provides a financial safety net, and expects KKR’s exit time frame to be 5 years, giving public shareholders a clearer exit path.

She reiterates a Buy rating and $16 price target on Pandora’s shares.

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Changes to S&P Indices

valvoline-hd-logo#S&P Dow Jones Indices will make the following changes to the S&P MidCap 400 and S&P SmallCap 600 indices: #Valvoline $VVV will replace #Noble Corp. $NE in the S&P MidCap 400, and Noble will replace #Celadon Group $CGI in the S&P SmallCap 600 effective prior to the open on Tuesday, May 16.

S&P MidCap 400 constituent #Ashland Global Holdings $ASH is spinning off its remaining stake in Valvoline in a transaction expected to be completed prior to the open on Monday, May 15, pending final conditions. Ashland Global will remain in the S&P MidCap 400 post the spin-off transaction. Noble is ranked at the bottom of the S&P MidCap 400 and is no longer representative of the mid-cap market space. Celadon is ranked near the bottom of the S&P SmallCap 600 and is no longer representative of the small-cap market space.

#MaxLinear $MXL will replace #Exar $EXAR in the S&P SmallCap 600 effective prior to the open on Monday, May 15. MaxLinear is acquiring Exar in a deal expected to be completed on or about that date, pending final conditions.

#Lantheus Holdings $LNTH will replace #Tidewater $TDW in the S&P SmallCap 600 effective prior to the open on Tuesday, May 16. Tidewater is ranked at the bottom of the S&P SmallCap 600 and is no longer representative of the small-cap market space.

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Goodbye Tesla, hello Ferrari

ferrariTwo research firms upped their price targets for #Ferrari $RACE today following strong quarterly results that appear to put the company on track for early delivery of 2019 targets.

Morgan Stanley’s Adam Jonas, also named the stock a Top 3 Pick in U.S. Autos and Shared Mobility coverage, replacing electric carmaker #Tesla $TSLA .

In a research note, Morgan Stanley’s Jonas told investors he is moving Ferrari to be his third highest ranked stock in his U.S. Autos & Shared Mobility coverage, replacing Tesla, as the company demonstrates performance three years ahead of his expectations and pursues the balance of aggressive model line expansion while “preserving the hyper-exclusive mystique of the brand.” The analyst also raised his price target on the shares to $100 from $72, citing a “very significant” first quarter earnings beat featuring 40% incremental EBIT margins and strong cash flow. Additionally, Jonas argued that he looks for Ferrari’s high quality earnings to double in approximately five years. The analyst reiterated an Overweight rating on the shares given its stable and defensible qualities and as he is comfortable with “the more modest growth opportunities” around items like volume and pricing.

WHAT’S NOTABLE: The two stocks Jonas ranks above Ferrari in his U.S. Autos and Shared Mobility coverage are #Adient $ADNT and #Fiat #Chrysler $FCAU .

PERFORMANCE AHEAD OF EXPECTATIONS: Morgan Stanley’s Jonas was not the only analyst bullish on Ferrari this morning.

#Jefferies also raised his price target on the shares to $96 from $74 as the company’s first quarter results put it “firmly” on track for early delivery of 2019 targets. Analyst Philippe Houchois told investors in a note of his own that he believes the future looks set to include more cars at high ROIC. Extending exposure in autos should best ensure the higher growth rates and exceptional ROIC needed to support further multiple expansion, the analyst argued, adding that faster auto growth does not reduce opportunities to leverage the brand into other activities in parallel or at a later date. Nonetheless, Houchois noted that he thinks Ferrari is still looking for its rightful place among a rather disparate set of peers as EBIT margins move to the upper end of luxury peers, and with ROIC significantly higher than all given structurally low net working capital while multiples remain discounted. He reiterated a Buy rating on the shares.

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