Athenahealh Could Be in Play!

Citi says can’t rule out athenahealth sale with Elliott involved

potential acquirers of athenahealth include tech companies aiming to build a healthcare presence

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#Citi analyst Garen #Sarafia raised his price target on #athenahealh $ATHN saying Elliot Associates’ recently disclosed stake in the company reinforces his favorable view and likely provides a support level for shares.

Additionally, a sale of the company “cannot be ruled out” given the activist investor’s track record, Sarafia argues.

BACKGROUND:

On May 18, Elliott Associates, Elliott International and #EICA disclosed in a regulatory filing that they collectively have combined economic exposure in athenahealth of approximately 9.2% of the common stock outstanding.

Elliott said it may “consider, explore and/or develop plans and/or make proposals” to athenahealth and intends to communicate with the company’s management and board “about a broad range of operational and strategic matters.”

CITI UPS TARGET

Sarafia raised his price target for athenahealth to $163 from $128 citing Elliott’s involvement, pointing out that in the investors’ engagement in nearly 40 campaigns since 2013, slightly over half of which resulted in a sale.

As a result, he believes potential #M&A scenarios “cannot be ruled out.” The analyst said potential acquirers of athenahealth would include tech companies aiming to build a healthcare presence, including #IBM $IBM , which has made several recent acquisitions to bolster its healthcare network. He added that #Aetna $AET ) and #UnitedHealth $UNH , through its Optum business, may also be potential suitors, although UnitedHealth is currently under agreement to use #Allscripts $MDRX software.

Sarafia added more distant possibilities include healthcare tech companies #Cerner $CERN or privately-held Epic. He, however, believes a “collaborative engagement to unlock sustainable value” is a likely scenario over an acquisition, citing the company’s history of engagement with large shareholders.

In addition, Sarafia said the activist stake will make operational improvements at the company a high priority, with a renewed focus on core strengths, potential cost-cutting in general and administrative expenses and possibly research and development, and increased free cash flow. He keeps a Buy rating on the shares.

PRICE ACTION: In Monday trading, athenahealth rose nearly 1% to $139.30. The stock has a 52-week trading range of $90.11 – $142.40.

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Gigamon is For Sale

Gigamon makes software that is installed in large data centers to boost the flow of traffic

Elliott Management owns 15% of shares and has encouraged firm to sell

 

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After activist investor Elliott Associates recently reported a roughly 15% economic exposure in shares of #Gigamon $GIMO and encouraged the company to undertake a strategic review process, the software maker has begun working with Goldman Sachs $GS to talk with companies and private equity firms interested in acquiring it, according to Reuters.

Gigamon Inc. develops and delivers solution that delivers visibility and control of data-in-motion traversing enterprise, federal, and service provider networks in the United States, rest of Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers traffic intelligence applications that provide controls for traffic selection, forwarding, manipulation, modification, de-duplication, SSL decryption, correlation, sampling, and generation of flow records.

Gigamon could attract interest from Hewlett Packard Enterprise (HPE), F5 Networks (FFIV) and PE firm Thoma Bravo, which previously bought Riverbed Technology, according to the report.

Needham analyst Alex Henderson estimated that a fair value for Gigamon is in the $50-$55 range.

Elliott has succeeded in pushing many technology companies to sell themselves in recent years, including Mentor Graphics, LifeLock Inc and Qlik Technologies.

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Wonder Woman does Wonders at the Box Office

‘Wonder Woman’ wins weekend with $100.5M debut

“Captain Underpants: The First Epic Movie,” disappoints with $23.5M debut

 

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#TimeWarner’s ($TWX) “Wonder Woman” earned $100.5M in its U.S. debut over the June 4 weekend, matching expectations for at least $100M. The latest entry in the DC Comics cinematic universe received an A in audience polls from #CinemaScore, holds a critics rating of 93% on #RottenTomatoes — significantly higher than the 27% of its most immediate predecessor, 2016’s “Batman v Superman” — and was produced with a reported budget of $149M. In foreign markets, the Gal Gadot-led film took $122.5M.

BOX OFFICE RUNNERS-UP

“Captain Underpants: The First Epic Movie,” distributed by Fox (FOX) and produced by Comcast’s (CMCSA) DreamWorks, opened at $23.5M versus estimates of $28M. The animated children’s film was scored B+ in audience polls and holds an 86% critics rating.

Taking third place, Disney’s (DIS) “Pirates Of The Caribbean: Dead Men Tell No Tales” grossed $21.6M, representing a second-weekend drop of more than 65%. Internationally, the fifth installment in the fantasy adventure series continued its strong showing with receipts of $74M.

Rounding out the top five, Disney’s “Guardians Of The Galaxy Vol. 2” added $9.7M for a global cumulative total of $817M while Viacom’s (VIA) “Baywatch” earned $8.5M. Other publicly traded companies in filmmaking include Lionsgate (LGF.A) and Sony (SNE).

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Qdoba Moves Jack In the Box

Jack In the Box would net $223M from the sale of Qdoba

After Qdoba sale, Jack in the Box’s free cash flow would rise to 6%

 

The shares of fast food chain owner Jack in the Box (JACK) are climbing after Wells Fargo upgraded the stock and Oppenheimer said the company’s risk/reward ratio will be “intriguing” if it can sell Qdoba.

Jack in the Box announced on May 17 that it was exploring strategic alternatives for #Qdoba, it’s burrito chain.

UPGRADE:

Wells Fargo analyst Jeff Farmer upgraded Jack in the Box to Outperform from Market Perform, arguing that the stock does not fully reflect the benefits that the company will obtain from selling Qdoba.

Estimating that the company would net $223M from the sale of Qdoba, the analyst predicted that it would repurchase $423M of its stock in the wake of the deal, lowering its share count by 14%.

Moreover, following a deal, $Jack in the Box’s EBITDA margin would increase by 10.5 percentage points and its return on invested capital would rise by over three percentage points, Farmer estimated. He raised his price target on the shares to $125 from $114.

INTRIGUING:

The risk/reward ratio of Jack in the Box’s stock is “intriguing,” assuming the company sells Qdoba, contended analyst Brian #Bittner.

Selling Qdoba would enable Jack in the Box to more effectively lower its costs and debt levels, Bittner believes.

After unloading Qdoba, Jack in the Box’s free cash flow would rise to 6% before share buybacks, versus the average of its peers of 4%-5.5%, the analyst stated.

Additionally, Jack in the Box can benefit from its delivery initiatives and discount deals, as well as commodity inflation that could force its competitors to scale down their discounts, Bittner believes. He kept a $125 price target and an Outperform rating on the shares.

PRICE ACTION: In midday Friday trading, Jack in the Box (JACK) rose 2.3% to $109.32. Note that the quick service restaurant sector has been outperforming other parts of the Restaurant sector.

Other stocks to watch: MCD, QSR, WEN, DPZ, YUM, and SONC.

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May’s Job Report Disappoints!

U.S. nonfarm payrolls rose only 138k in May, disappointing estimates for a near 200k gain

The unemployment rate dropped to 4.3% versus 4.4% previously

 

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U.S. nonfarm payrolls rose only 138k in May, disappointing estimates for a near 200k gain, following a downwardly revised 174k increase in April (was 211k) and a 79k gain in March.

The unemployment rate dropped to 4.3% versus 4.4% previously.

Average hourly earnings rose 0.2% as was the case in April (revised from 0.3%). The workweek was steady at 34.4.

For the internals, the labor force plunged 429k after April’s 12 rise, with household employment tumbling 233k from 156k.

Private payrolls were up 147k compared to the 253k jump in the ADP, while government subtracted 9k.

Jobs in the goods producing sector were up 16k, with construction increasing 11k and manufacturing falling 1k.

The service sector added 131k jobs, led by education/health with a 47k gain, while business services jobs were up 38k.

Declines were registered in trade/transport and information services.

The disappointing report will knock bond yields lower but shouldn’t seriously impact expectations for a Fed rate hike on June 14. The dollar is lower following the job report as some hope that FOMC may not raise interest rates at its next meeting.

Stocks to watch: MAN, RHIKELYATMH, ASGN, KFRC

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Pinnacle Foods Could be Sold

Three years ago, Pinnacle Foods agreed to a takeover of $4.3 billion by Hillshire Brands. That deal was canceled after Hillshire agreed to sell itself to Tyson Foods.

 Hillshire was led at the time by Sean Connolly, who is now chief executive of Conagra. 

Reuters reports that ConAgra Brands (CAG) has approached Pinnacle Foods (PF) for a takeover.

Conagra’s approach to Pinnacle Foods took place in the last few weeks. There is no assurance that Pinnacle Foods will choose to walk down the alter, or that Conagra will pursue a potential deal further, the report said.

Pinnacle Foods operates through four segments: Frozen, Grocery, Boulder, and Specialty. The Frozen segment offers brands such as the Bird’s Eye,  Van de Kamp’s, Mrs. Paul’s, Lender’s, Celeste, Hungry-Man, and Aunt Jemima names. The Grocery segment brands include the Duncan Hines, Vlasic, Wish-Bone, and Mrs. Butterworth’s.

Conagra Brands, Inc. (CAG) operates as a food company in North America. It operates through five segments: Grocery & Snacks, Refrigerated & Frozen, International, Foodservice, and Commercial.  The company markets its products primarily under the Healthy Choice, Hunt’s, Slim Jim, Reddi-wip, Alexia, Blake’s, Frontera, Bertolli, P.F. Chang’s, and Marie Callender’s brands.

What Goes Around, Comes Around

Three years ago, Pinnacle Foods agreed to a takeover of $4.3 billion by Hillshire Brands. That deal was canceled after Hillshire agreed to sell itself to Tyson Foods Inc for $7.7 billion.  Hillshire was led at the time by Sean #Connolly, who is now chief executive of Conagra.

Connolly’s second attempt at an acquisition of Pinnacle Foods underscores the need for further consolidation in the frozen food and condiments sectors, as sales continue to decline with consumers opting for healthier choices.

Conagra has been seeking to reinvent itself since selling its private label unit for $2.7 billion in 2016 to focus on its branded food business. Last year it spun off its $6.9 billion frozen potato business, Lamb Weston Holdings Inc. This week it agreed to sell its Wesson oil brand to Folgers coffee maker J.M. Smucker for $285 million.

Conagra has a market cap of $17 billion while Pinnacle has a market cap of less than $8 billion.

Price Action

PF shares last traded at $62.31. It has a 52-week trading range of $42.09 – $66.50

CAG last traded at $39.78. CAG has a 52-week trading range of $33.08 – $41.68.

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Palo Alto Results Lift Cyber Security Stocks

The company’s revenue came in at $432M, versus the consensus outlook of $412M

The company provided Q4 EPS guidance of 78c-80c, versus expectations of 74c

 

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The shares of Palo Alto (PANW) are climbing, and lending a boost to some peers, after the IT security company last night reported stronger than expected third quarter results and provided fourth quarter profit guidance that exceeded expectations.

A number of analysts were more upbeat about Palo Alto in the wake of its results.

RESULTS:

Palo Alto reported third quarter earnings per share, excluding certain items, of 61c, versus the consensus outlook of 55c. The company’s revenue came in at $432M, versus the consensus outlook of $412M.

“We reported record revenue…in our fiscal third quarter and added the second highest number of new customers in the company’s history,” said Palo Alto CEO Mark McLaughlin.

The company $PANW provided fourth quarter EPS guidance, excluding some items, of 78c-80c, versus the consensus outlook of 74c.

ANALYST REACTION:

Palo Alto’s business metrics “improved modestly” last quarter compared with the previous quarter, wrote #Jefferies analyst John #DiFucci. The company’s recent slowdown was primarily caused by the stage of its product cycle, the analyst stated. He thinks that the company’s Q4 guidance is “likely prudent” and could be conservative. DiFucci raised his price target on the name to $155 from $150 and kept a Buy rating on the stock.

#Gabelli analyst Hendi #Susanto upgraded Palo Alto Networks to Buy, saying the positive Q3 report increased confidence of its sales reorganization execution trajectory.

Palo Alto’s results were “just what it needed to turn the tide…after a rough couple of quarters,” wrote #JPMorgan analyst Sterling Auty. The fact that the company’s Q3 product revenue beat expectations by about $18M makes it Q4 guidance look more realistic, #Auty believes. The results should be a relief to investors who were worried that the company’s slowdown did not bode well for others in the space, the analyst added. Yesterday’s results indicate that Palo Alto’s previous troubles were caused by sales execution and were “company specific, ” he stated. However, Auty kept a Neutral rating on the stock.

OTHERS TO WATCH:

Other publicly traded companies in the space include Barracuda (CUDA), Check Point (CHKP), F5 Networks (FFIV), FireEye (FEYE), Fortinet (FTNT), Imperva (IMPV), Proofpoint (PFPT), Qualys (QLYS) and Symantec (SYMC).

PRICE ACTION: In Thursday’s trading, Palo Alto jumped 15.6% to $137.09.

Short Squeeze In Progress

Note that some of the price increase in PANW is due its high #short ratio. As of last May 15th, a total of 7,988,200 shares have been sold short which give the stock a short ratio of about 4 days.

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Dakota Access Pipeline Begins Carrying Oil

The “Bakken Pipeline” begins carrying oil

The Bakken Pipeline is a 1,872-mile, mostly 30-inch pipeline system that transports domestically produced crude oil from the Bakken/Three Forks productions areas in North Dakota to a storage and terminalling hub outside Patoka, Illinois, and/or down to additional terminals in Nederland, Texas.

 

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Bakken Pipeline is a 1872 mile, 30-inch diameter line

Energy Transfer Partners (ETP) announced that the #DakotaAccess Pipeline and the Energy Transfer Crude Oil Pipeline, collectively the “Bakken Pipeline,” are in commercial service under the Committed Transportation Service Agreements through their respective pipeline systems.

The #Bakken Pipeline, owned by Dakota Access, LLC and Energy Transfer Crude Oil Company LLC, respectively, is a 1,872-mile, mostly 30-inch pipeline system that transports domestically produced crude oil from the Bakken/Three Forks productions areas in North Dakota to a storage and terminalling hub outside Patoka, Illinois, and/or down to additional terminals in Nederland, Texas.

The Bakken Pipeline is a joint venture between Energy Transfer Partners with a 38.25 percent interest, MarEn Bakken Company LLC with a 36.75 percent interest, and Phillips 66 (PSX) with a 25 percent interest.

MarEn is an entity owned by MPLX LP (MPLX) and Enbridge Energy Partners L.P. (EEP).

Dakota Access and ETCO, developed at a combined cost of approximately $4.78 billion have commitments, including shipper flexibility and walk-up, for approximately 520,000 barrels per day. This is up from 470,000 barrels per day due to the successful Supplemental Open Season held earlier this year that committed an additional 50,000 barrels per day.

The combined system is expandable to a capacity of approximately 570,000 barrels per day. The pipeline will transport light, sweet crude oil from North Dakota to major refining markets in a more direct, cost-effective, safer and more environmentally responsible manner than other modes of transportation, including rail or truck.

Energy Transfer Partners approved and announced the pipeline project on June 25, 2014. In October 2014, Phillips 66 acquired 25% stake in the project. Since then, the project has been controversial. The firm had to fight several lawsuits to secure right-of-way for the project. The company was sued by Indian tribes, Iowa farmers, and environmental groups. The U.S. Army Corp of Engineers ( #USACE ) got involved and the entire project became a political issue. On November 1, 2016, President #Obama announced his administration was monitoring the situation and had been in contact with the USACE to examine the possibility of rerouting the pipeline to avoid lands that Native Americans hold sacred.

On January 24, 2017, President Donald #Trump, in contrast to the Obama administration, signed a presidential memorandum to advance the construction of the pipeline under “terms and conditions to be negotiated.”

Energy Transfer Partners began loading the pipeline with crude oil by April 2017. A small, 84-gallon spill of crude oil occurred at a South Dakota pumping station on the route on April 6, 2017. With full operation, East Coast refineries reduced their orders for rail-delivered oil in May and June.

Crude oil last traded at $50.68 per barrel.

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Crude Oil Higher on Supplies Drawdown

API reported a draw of 8.67 million barrels in U.S. crude oil inventories for last week

Gasoline inventories fell by 1.726 million barrels, Distillate inventories rose by 124,000 barrels

 

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Crude oil is higher following inventory data

For the week ending May 26, the American Petroleum Institute ( #API ) reported a draw of 8.67 million barrels in United States crude oil inventories, compared to analyst expectations of a draw of 2.8 million barrels.  Gasoline inventories fell by 1.726 million barrels, according to the API. #Distillate inventories rose this week by 124,000 barrels, while inventories at the Cushing, Oklahoma, site fell by 753,000 barrels.

It appears that refiners have been making gasoline in anticipation of the summer driving season. Whatever the reason for the drawdown, it is welcomed by producers. Oil prices have fallen this week, from WTI at $51.41 last week to $48.24 on Wednesday ahead of the API report. Brent traded at $50.68 ahead of the report—off from $54.11 this time last week.

WTI = West Texas Intermediate

The Vienne Group Decision

Last week, the Organization of Petroleum Exporting Countries, #OPEC, ministers meeting in Vienna produced an agreement to maintain production reduction of 1.8 million barrels per day for another nine months. The so-called Vienne Group, which is OPEC nations plus allied oil producing nations, most notably Russia, are hoping the move would support prices.  Saudi Arabia last week announced it would reduce oil exports by 15% to the US to manually adjust the inventory equation, in hopes of lifting prices.

Rig Counts Rise

Prices are pushed lower by continued rise in the domestic production and a rise in rig counts in the U.S. and Canada. The U.S. rig count rose 7 rigs last week to 915, with oil rigs up 2 to 722, gas rigs up 5 to 185, and miscellaneous rigs unchanged at 1. The U.S. Rig Count is up 511 rigs from last year’s count of 404, with oil rigs up 406, gas rigs up 98, and miscellaneous rigs unchanged. The Canadian Rig Count rose 8 rigs last week to 93, with oil rigs up 4 to 40 and gas rigs up 4 to 53. The Canadian Rig Count is up 50 rigs from last year’s count of 43, with oil rigs up 26, gas rigs up 25, and miscellaneous rigs down 1 to 0.

Five Weeks Drawdown

This week inventory number showed a significant draw in itself. The last five reporting weeks has seen a reduction of 19.277 million barrels, according to API data, and 15.9 million barrels using the Energy Department’s Energy Information Agency’s #EIA numbers. While the draw doesn’t offset the builds we saw in Q1 but drawdown trends from Q1 to Q2 cannot be ignored, and should be a positive sign for the industry.

EIA reports its inventory data on Thursday morning, delayed one day due to the Memorial Day holiday.

At last check, WTI was trading at $48.72 per barrel, up 42 cents. WTI has a 52-week trading range of $44.13 – $58.15. Brent last traded at $51.20 per barrel, up 44 cents. Brent has a 52-week trading range of $46.47 – $60.21 per barrel.

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Exact Sciences Higher on UnitedHealth News

Cologuard is a noninvasive, at-home screening test for colon cancer

About 30M more people will be able to be reimbursed for Cologuard tests as a result of UnitedHealth’s decision

 

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UnitedHealth to begin covering Cologuard July 1

 

EXACT Science ( $EXAS ) shares are climbing after health insurance giant UnitedHealth ( $UNH ) agreed to cover the company’s Cologuard test, starting July 1.

Cologuard is a noninvasive, at-home screening test for colon cancer. It is for adults 50 years or older who are at average risk for colon cancer, and it is available by prescription only.  As of March 2017, the list price of Cologuard was $649.

A number of analysts responded to the news by raising their price targets on EXACT Sciences.

TARGET INCREASES:

Canaccord analyst Mark #Massaro raised his price target on EXAS to $40 from $38.

About 30M more people will be able to be reimbursed for Cologuard tests as a result of UnitedHealth’s decision, and a total of more than 227M people will be able to get reimbursed for the test by their insurers as of July 1, the analyst stated. The analyst expects the company’s 2017 revenue to come in at the high end of its 2017 guidance range of $195M-$205M, although he noted that the consensus outlook was $210M before yesterday.

He increased his 2020 earnings per share estimate for the company to 90c from 80c, but he believes that estimate could be conservative. The analyst kept a Buy rating on the stock and continued to identify it as a top pick.

#Benchmark analyst Raymond Myers increased his price target on Exact Sciences to $50 from $34 as he raised his 2018 test volume growth forecast for Cologuard to 55% from 50% and increased his revenue forecast per test to $470 from $440. He kept a Buy rating on the shares.

DEMAND SEEN AS STRONG: “Essentially” all major insurers now cover Cologuard and demand for the test should continue to be strong, according to William Blair analyst Brian Weinstein. By the middle of 2018, most major insurers should have deals with EXACT Sciences to cover the test for at least the $510 that Medicare is paying, the analyst predicted. He kept an Outperform rating on the stock.

Meanwhile, shot-seller site #Citron Research views UnitedHealth’s (UNH) coverage of Cologuard as a negative for Exact Sciences (EXAS), claiming Exact had to lower the price of the test, making it unprofitable.

PRICE ACTION: In morning trading, EXACT Sciences rose nearly 10% to $35.90.

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Avoid Bank Stocks, JP Morgan Chart Signals Sell

Bank stocks rose on prospects of tax-cuts but Trump’s problems have sidelined his agenda

Yield Curve is now Flattest since the Election rally began

 

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Head and Shoulders pattern on JP Morgan (JPM)

JP Morgan (JPM), the DJIA component, shares rose along with the rest of the market  following last year’s election on expectation of tax cuts and other pro-growth measures. But Trump has been embroiled in troubles, distracting him from his legislative agenda. Republicans are divided on key issues, including how much to cut and how to offset the lost revenue, if at all. Easing of bank regulations and oversight imposed by the Frank-Dodd Law appear to have taken backseat to the Russian and Comey investigations.

On a 1-year daily chart of  JPM stock chart there is a clear active bearish head and shoulders pattern that became active when price broke below the neckline at the $82 area.

Rising Rates

Economic growth spurs demand for loans, but it also encourages higher interest rates and wider spreads between banks’ short-term funding costs and long-term lending rates. Yield spreads widened after the election. But with the Federal Reserve raising short-term interest rates and the 10-year Treasury yield sliding toward 2017 lows, the yield curve is the flattest since the 2016 election. That’s bad news for banks’ net margins and not a comforting sign for the economy as a whole. It is widely expected that the FOMC will raise its key lending rate by 25 bp on June 9th.

Sector Troubles

JP Morgan is considered as one of the best operated large banks. If you add impact of other not-so-well-managed banks to the sector, you will realize that the Financial Select Sector ETF ( $XLF ) is heading lower.

This morning New York City Mayor Bill de Blasio and Comptroller Scott M. Stringer jointly announced that they will vote to prohibit New York City from entering into new contracts for deposits with Wells Fargo ( $WFC ). The beleaguered bank has lost many executives and customer over its various marketing schemes.  Shares of WFC are now in a well defined bearish downward pattern. Shares are trading well below their 200-day moving average #MA .

Bank of America ( $BAC ) announced that it expects to complete the sale of its consumer credit card business in the United Kingdom, #MBNA Ltd., to #Lloyds Banking Group (LYG). The sale is expected to improve #Basel 3 risk-based capital ratios by approximately 11 basis points under the Advanced approaches and 15 basis points under the Standardized approach in the second quarter ending June 30, 2017. The U.K. consumer credit card portfolio had approximately $9.4B in credit card receivables and earned $211M in interest income in the first quarter of 2017. This type of news should send BAC shares higher but BAC is down 2.7% and has broken below its support level of $23.

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Deutsche Bank Fined $41 million by the Feds

The Federal Reserve Board announced a $41 million penalty against Deutsche Bank AG for anti-money laundering deficiencies

Deutsche Bank CEO encourages Europeans not to follow U.S. Mortgage Regulations

DB-LOGO

The Federal Reserve Board announced a $41M penalty and consent cease and desist order against the U.S. operations of #DeutscheBank $DB for anti-money laundering deficiencies. “The actions were taken by the Board to address unsafe and unsound practices at the firm’s domestic banking operations.

The Board identified failures by Deutsche Bank’s U.S. banking operations to maintain an effective program to comply with the Bank Secrecy Act and anti-money laundering laws,” the Federal Reserve said.

The consent order requires Deutsche Bank to improve its senior management oversight and controls related to compliance by the U.S. banking operations with anti-money #laundering laws.

Meanwhile, Deutsche Bank CEO John #Cryan pressured regulators in Europe to dismiss the same kind of rules for lenders’ mortgage holdings that have been adopted by their U.S.-based counterparts, Bloomberg reports, citing comments from Cryan at an investor conference in New York.

“By and large, Germans pay their debts” and aren’t close to as a risky as U.S. banks and home-buyers have been in the past, Cryan said, according to Bloomberg.

“For Europe to surrender, to accept U.S. mortgage capitalization rules, I think would be inappropriate,” the Deutsche Bank CEO said. “So to price them as though they were Californian subprime mortgages from 10 years ago is not appropriate.”

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Gilead HIV Success Shields it Against Patent Loss, Competition

The bictegravir combination was “well tolerated and no patients discontinued study medication due to renal events”

Analyst expects Gilead to use one of its priority review vouchers to obtain an accelerated six month regulatory timeline

 

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#Gilead (GILD) announced Tuesday that its latest #HIV treatment candidate met its primary goal in four late-stage studies, showing “non-inferiority” against existing regimens, including a competitor from GlaxoSmithKline (GSK).

By definition, a #non-inferiority trial aims to demonstrate that the test product is not worse than the comparator by more than a small pre-specified amount. This amount is known as the non-inferiority margin, or delta.

Wall Street analysts largely cheered the news and said it could be key in preserving Gilead’s spot in the HIV treatment arena.

BACKGROUND: Gilead announced Tuesday morning that four Phase 3 studies evaluating its #bictegravir in combination with the already-approved emtricitabine/tenofovir in HIV patients met their primary goals of “non-inferiority” against existing regimens, including GlaxoSmithKline’s #Tivicay.

On the safety front, the bictegravir combination was “well tolerated and no patients discontinued study medication due to renal events.” The company noted that it plans an New Drug Application (NDA) submission in Q2, with a Marketing Authorization Approval (MAA) filing in Europe following in Q3.

CITI SEES POTENTIAL FIRST CHOICE FOR PHYSICIANS: #Citi analyst Robyn #Karnauskas says today’s data are “key” to the long-term health of Gilead’s HIV franchise and could make the bictegravir regimen the first choice among physicians, adding that a 1Q18 launch of the bictegravir regimen looks “likely” now. While cautioning that Gilead’s announcement did not include comment on drug superiority or detailed efficacy metrics, Karnauskas’ base case estimates about 25% of patients switching to the bictegravir combo, contributing roughly $6 per share to her discounted cash flow modeling.

JPMORGAN SAYS KEY TO HIV FRANCHISE: #JPMorgan analyst Cory #Kasimov is “generally encouraged” by Gilead’s announcement but “not entirely surprised” given the previous Phase 2 data. Kasimov thinks a 2018 launch, potentially with accelerated FDA review using one of the company’s priority vouchers, could be “key” to help the company maintain market share in the face of pending patent expirations as well as continued growth in GlaxoSmithKline’s Tivicay. Kasimov adds that he expects sales of the bictegravir product to peak around $5B by 2022.

LEERINK SEES POTENTIAL YEAR-END LAUNCH: #Leerink’s Geoffrey #Porges says the bictegravir news looks “in line” with both his and the company’s expectations: While the trials “do not appear to have shown statistical superiority,” they also didn’t bring new safety concerns. The analyst expects Gilead to use one of its priority review vouchers to obtain an accelerated six month regulatory timeline, potentially allowing for year-end approval and launch, adding that his forecast for the regimen eventually ramps to over $10B in global sales.

PRICE ACTION: Shares of Gilead showed volatility Tuesday, reaching highs near $64.75 before paring those gains into session close at $64.50. Meanwhile, GlaxoSmithKline $GSK gained 1.8% to $43.43.

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Ensco to buy Atwood Oceanics

Offshore driller Ensco to buy is rival Oceanis for $10.72 per shares

The combined company will have a market cap just shy of $7 billion

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Offshore driller Ensco Plc $ESV said it would buy smaller rival Atwood Oceanics Inc $ATW in an all-stock deal valued at about $839 million.

Atwood shareholders will receive 1.6 Ensco shares for each Atwood share.

The deal, which values each Atwood share at $10.72, represents a premium of 32.6 percent to the company’s Friday close.

Ensco expects to realize annual pre-tax expense synergies of approximately $65 million for full year 2019 and beyond. The combination is expected to be accretive on a discounted cash flow basis.

The transaction will join two leading offshore drillers – combining long-established histories of operational, safety and technical expertise with high-quality assets that cover the world`s most prolific offshore drilling basins.

The acquisition will strengthen Ensco`s position as the leading offshore driller with exposure to deep- and shallow-water markets that span six continents.  Upon closing, Ensco will add six ultra-deepwater floaters, including four of the most capable drillships in the industry, and five high-specification jackups. The combined company will have a fleet of 63 rigs, comprised of ultra-deepwater drillships, versatile deep- and mid-water semisubmersibles and shallow-water jackups, along with a diverse customer base of 27 national oil companies, supermajors and independents.

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CardConnect Sold for $15 per share

Payments solution company #CardConnect $CCN agreed to be acquired by #FirstData $FDC for $15.00 per share in cash.

The transaction is expected to be modestly accretive to First Data’s EPS in the first full year post-closing

ccn
CardConnect to be acquired by First Data

CardConnect CCN is a provider of payment processing and technology solutions and is one of First Data’s largest distribution partners. It processes approximately $26 billion of volume annually from about 67,000 merchant customers which are served by CardConnect’s large base of distribution partners. CCN closed at $13.65. FDC closed at $16.64.

First Data FDC will commence a tender offer to acquire all of the outstanding CardConnect common stock for a purchase price of $15.00 per share in cash. The aggregate transaction value is approximately $750 million, including repayment of CardConnect’s outstanding debt and the redemption of CardConnect’s preferred stock. First Data intends to fund the transaction with a combination of cash on hand and funds available under existing credit facilities.

First Data Corporation provides electronic commerce solutions for merchants, financial institutions, and card issuers worldwide. It operates through three segments: Global Business Solutions, Global Financial Solutions, and Network & Security Solutions. The Global Business Solutions segment offers retail point-of-sale merchant acquiring and e-commerce services; and mobile payment services and Webstore-in-a-box solutions, as well as its cloud-based Clover point-of-sale operating system. FDC has a market capitalization of $15.3 billion.

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