Riyadh Forum: Trump Middle East Trip Starts With Deals Flurry In Saudi Arabia

4:11 AM, May 22, 2017 — U.S. firm Honeywell (HON) was among a slew of companies that signed deals with state-owned oil giant Saudi Aramco and other firms and entities in the Kingdom at the weekend worth tens of billions of dollars as Donald Trump made his first overseas foray as the U.S. president.

In a deal announced on Saturday, Saudi Aramco signed a memorandum of understanding with Honeywell as part of Aramco’s In-Kingdom Total Value Add (IKTVA) program for an estimated $3.6 billion.

The kingdom is looking to increase its domestic market by adding a complete value chain – including creating a manufacturing center.

Aramco plans to reach 70% localization in all spending while exporting 30% of the country’s energy sector products by 2021.

General Electric (GE) signed deals worth $15 billion for services and equipment, while Jacobs Engineering (JEC) will form a joint venture with Aramco to manage business projects in the kingdom, and McDermott International (MDR) will transfer some of its ship fabrication facilities from Dubai to a new shipbuilding complex planned by Aramco in a deal estimated at $2.8 billion.

Dow Chemical (DOW) signed an agreement to build a manufacturing facility to produce polymers for coatings and water treatment applications. It also agreed to a feasibility study on proposed investment in performance silicones. Petrochemicals are a key growth area for Gulf oil producers like Saudi Arabia to increase high-end value products to meet demand from Asia.

Weatherford (WFT) signed an agreement for potential projects worth $2 billion to localize oilfield goods and services.

An extension was signed for Weatherford’s joint venture with Nabors (NBR) to see additional well services and studies into rig movements involving an investment of $9 billion over 10 years as well, a $7 billion investment over 10 years with Rowan Companies (RDC) to own and operate offshore drilling rigs.

On the defense side, Saudi Arabia discussed building a domestic arms industry instead of big ticket imports as has been the case in the past and Lockheed Martin (LMT) said to that end it would support the final assembly and completion of an estimated 150 S-70 Black Hawk utility helicopters in Saudi Arabia.

Lockheed Martin said Saudi Arabia expressed its intent to procure more than $28 billion worth of the company’s integrated air and missile defense, combat ship, tactical aircraft and rotary wing technologies and programs.

Meanwhile, Raytheon Company (RTN) said it and Saudi Arabia Military Industries Company signed a memorandum of understanding to cooperate on defense-related projects and technology development.

Meanwhile U.S. Secretary of State Rex Tillerson said on Saturday that deals worth $350 billion have been signed between U.S. companies and Saudi Arabia during the president’s first day in Riyadh.

He added brief comments on the Iranian presidential election by saying he newly-elected Iranian President Hassan Rouhani will use his second term in office to end Tehran’s ballistic missile program and end what he called its network of terrorism.

“I’m not going to comment on my expectation. But we hope that if Rouhani wanted to change Iran’s relationship with the rest of the world those are the things that he could do,” Tillerson said.

 

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Home Depot Profit Jumps in First Quarter, Full-Year Earnings Guidance Raised

12:15 PM, May 16, 2017 — Home Depot (HD), a US home improvement supplies retailer, raised its forecast for diluted earnings-per-share growth in the fiscal year on Tuesday as it posted double digit growth in its first-quarter earnings against a backdrop of brightening sentiment in the US housing market.

Net earnings for the quarter ended April 30 totaled $2.01 billion, or $1.67 per diluted share, compared with $1.80 billion, or $1.44 per diluted share, in the same period a year earlier, the Atlanta, Georgia-based company said in a statement on Tuesday. This beat the consensus estimate of analysts polled by Capital IQ for net earnings of $1.94 billion.

Revenue was worth $23.89 billion compared with $22.76 billion in the fiscal first quarter a year earlier, also topping the average analyst forecast of $23.74 billion in a Capital IQ poll. Gross profit was up by 4.7% at $8.15 billion over the same time frame.

The results “reflected broad-based growth across our interconnected platform and all geographies,” Craig Menear, chief executive of Home Depot, said.

The results come against a backdrop of improving sentiment in the US housing market. Sales of new single-family houses in March rose 5.8% from February to 621,000, the US Census Bureau and the Department of Housing and Urban Development said in a joint release last month. The February rate was revised to 587,000.

Another indicator, the US National Association of Homebuilders (NAHB) housing market index of homebuilder sentiment rose to 70 in May from 68 in April while the index of expectations for single family home sales for the next six months rose to 79 from 75, NAHB data published on Monday indicated.

The company, which operates 2,281 retail stores in across all US states and in Canada and Mexico said comparable store sales rose 5.5% and comparable sales in the US jumped by 6%. The company reiterated its sales growth estimates for this fiscal year at 4.6% and said it sees comparable sales also rising by about 4.6%.

Home Depot also raised its diluted earnings-per-share growth forecast for the fiscal year and now expects diluted earnings-per-share growth after anticipated share repurchases of about 11% percent to $7.15.

Price: 159.37 Price Change: +2.04 Percent Change: +1.30

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Apple Invests $200 Million in Glass Maker Corning From Advanced Manufacturing Fund

12:03 PM, May 12, 2017 — Apple (AAPL) said on Friday that it will invest $200 million into long-time supplier Corning (GLW), a specialty glass and ceramics manufacturer, from a new $1 billion fund it has set up to help support manufacturing in the US.

This is the first investment from Apple’s advanced manufacturing fund, created earlier this month, which aims to foster the development of new technologies and processes among US-based manufacturers and to create highly skilled jobs.

The investment will be made in Corning’s 65-year-old Harrodsburg, Kentucky facility, and will support Corning’s research and development as well as capital equipment needs and glass processing, Apple said. Apple and Corning have been working together since the latter supplied glass for the first iPhone 10 years ago.

Tim Cook, Apple’s chief executive, said earlier this month when unveiling the $1 billion fund that the impact of the investments would be far-reaching in creating US jobs.

“By doing that, we can be the ripple in the pond,” Cook told CNBC in an interview earlier this month. “Because if we can create many manufacturing jobs around, those manufacturing jobs create more jobs around them because you have a service industry that builds up around them.”

Apple now supports 2 million jobs across the US, including 450,000 jobs attributable to Apple’s spend and investment with US-based suppliers. Last year, the company said that it ordered goods worth $50 billion from more than 9,000 domestic suppliers and manufacturers.

The plan is also in line with one of the main campaign pledges put forward by US President Donald Trump, which was to bring back manufacturing jobs to the US from abroad.

Companies: Apple Inc.
Price: 155.62 Price Change: +1.67 Percent Change: +1.08

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INTERVIEW: TMX CEO Lou Eccleston – Commentary on Shorting Canada Stocks

11:06 AM, May 10, 2017 — Lou Eccleston, the head of TMX Group (X.TO), was on Canada’s BNN TV on Wednesday talking up the outlook for business on the key stock markets that it operates — Canada’s main market, the Toronto Stock Exchange (TSX), and the smaller TSX Venture Exchange (TSXV).

TMX – which has key subsidiaries that operate cash and derivative markets and clearinghouses for multiple asset classes including equities, fixed income and energy – at last look was down near 7% today, despite reporting what it itself called “strong” Q1 earnings and increasing its dividend to $0.50 per common share. Eccleston told BNN TV the fundamentals with his company were strong.

But BNN, for its part, noted there has been some market concerns about an apparent lack of Canadian initial public offerings — at least high profile ones — and some concerns around the fact that the TSX has underperformed its U.S. counterparts of late. In response, Eccleston noted a jump of 20% in initial public offerings (IPOs) on the TSX in Q1 versus the year earlier period and a jump of 75% in IPOs on the TSXV in Q1 compared to a year ago.

Eccleston was also asked by BNN TV about a belief in the market that Canadian stocks are easier to short, as per recent events surrounding embattled Home Capital Group (HCG.TO) and previously with Valeant (VRX.TO) and Concordia (CXR.TO), with these companies seeing huge losses on short selling, largely from the United States.
Eccleston said it has not been a hindrance in attracting companies to list in Canada so far. “We have a very unique system here where companies can come in and raise capital….the average financing is about $8 million. So we are a home for a small company that can grow.”

Eccleston in looking at the plus signs for being involved with his company noted about 20% of current TSX companies graduated up from the TSX Venture Exchange, which MT Newswires Canada covers extensively. He noted there have been 600 graduates from the TSXV to the TSX and also noted there are 280 innovation companies today on the TSXV, and 75% of them have closed financings in the last two years, with 60 of them going public.

Eccleston said he sees a positive long term trend around financings and growing companies, not just going public. “We sit right in the middle of an integration of three things that I think is the future. One is, what has been the public market. What has been the Venture market. And what is this growing peer to peer market, ie crowd funding. And we actually touch all those as a way for companies to grow, not just go public.”

Eccleston said the fact that private equity, pension funds are moving in to keep some firms private is not a threat, but is actually complementary to what the TMX is doing. He said: “We need to be in the conversation and as people change from this idea, well, am I either private or am I public….the idea of public venture is really starting to take hold. And it is an exit strategy, where you can get a higher multiple for a Venture company, you don’t just have to sell out.” He added: “There is no panacea for every company. It is not right for every company, it’s not wrong for every company. But more and more, as we start to educate the market place out there, more Venture companies are looking to that public market as a way to keep growing the company. And there are a lot of examples.”

BNN TV noted the successful IPO involving Shopify (SHOP.TO, SHOP) helped the TMX last year. But it also noted this year the TSX is underperforming the benchmarks in the United States — while acknowledging that there are a lot of tech companies with heavy weightings in the US compared to Canada’s focus on Energy, Metals and Bank stocks. Eccleston said Canada in Q1 again was number one in terms of international listings, with 30% of money invested coming from outside of Canada. “We are a Canadian business, with a global franchise,” he said.

 

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Cigna's First-Quarter Profit Tops Analysts' Expectations Driven by Commercial Business

Cigna’s First-Quarter Profit Tops Analysts’ Expectations Driven by Commercial Business

1:16 PM, May 5, 2017 — Cigna (CI), a US healthcare insurance provider, posted first-quarter earnings that were better than analysts had expected, driven by growth in new customers in its commercial business. That prompted it to raise its full-year earnings outlook.

Adjusted income from operations, which excludes some non-recurring items, was $2.77 per share, compared with $2.32 per share a year earlier, the Bloomfield, Connecticut-based company said on Friday. Analysts in a Capital IQ survey expected $2.46 per share.

Consolidated operating revenue climbed to $10.3 billion from $9.9 billion a year earlier, which beat the consensus for $10.1 billion. Revenue was powered by strong business growth in Cigna’s commercial health care and global supplemental benefits segments, which was partially offset by contraction in the seniors business, which the company said it had predicted.

Within global health care, the number of customers in the commercial business increased to 15.2 million from 14.5 million in the same quarter a year earlier, which was slightly offset by a drop in government customers to 502,000 from 615,000. Premiums and fees in the division increased 4% from a year earlier, driven by customer growth and specialty contributions, the company said.

Based on the quarter’s performance, the company raised its profit estimate for the whole year.

“We expect continued positive momentum and growth across targeted customer segments, fueled by ongoing investments in innovative products and services,” Chief Executive Officer David M. Cordani said.

For the full year, Cigna expects adjusted earnings between $9.25 and $9.75 per share, higher than a previously forecast range of $9.00 to $9.50. That compares with an average analyst estimate of $9.50. The company predicts revenue growth of 3% to 4%, rather than 2% to 3% estimated previously. The average analyst forecast is for revenue growth of 2.4%.

Price: 158.64 Price Change: +1.91 Percent Change: +1.22

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BP Swings to Profit in First Quarter, Helped by Production Growth, Higher Oil Prices

6:49 AM, May 2, 2017 — British oil and gas production company BP (BP, BP.L) swung to a profit in the first quarter of the year, beating analysts’ estimates amid a recovery in oil prices and a higher rate of production.

Profit in the first quarter of the year was worth $1.45 billion, according to results published by the company on Tuesday. This compared to a loss of $583 million in the corresponding quarter of the prior-year and exceeded the mean estimate of analysts polled by Capital IQ for $1.26 billion. Underlying replacement cost profit, which is adjusted for non-recurring items, was $1.51 billion, surpassing analysts’ estimates for $1.23 billion and up from $532 million in the prior-year period.

Sales and other operating revenue totaled $55.86 billion, which missed analysts’ estimates for $59.87 billion but nevertheless marked a year-on-year increase from the $38.51 billion which was registered in the same quarter in 2016. Oil and gas production was 5% higher than a year earlier, the company said.

Continued curbs on spending also contributed to the profit improvement; the company has been cutting costs and selling assets since the Deepwater Horizon disaster, which killed 11 people in 2010 and caused an oil spill in the Gulf of Mexico.

The results were also supported by rising commodity prices. Crude oil prices have been in recovery mode since major oil producing nations, including members of the Organisation of Petroleum Exporting Countries (OPEC), agreed to cut production for six months starting in January 2016, in an effort to stabilize prices. At the end of the first quarter Brent crude, the international oil benchmark, was trading around $52.83 per barrel compared with $39.60 per barrel a year earlier.

BP’s organic capital expenditure was $3.5 billion in the first quarter, compared with $4.5 billion for the same period in 2016. It said that it expects payments related to the Gulf of Mexico oil spill to total $4.5 to $5.5 billion in 2017, before falling to about $2 billion in 2018. It made $2.3 billion in payments in the first quarter.

“BP is focused on the disciplined delivery of our plans,” Bob Dudley, group chief executive of BP, said in Tuesday’s results statement. “First quarter earnings and cash flow were robust. We have shown continued operational momentum, it was another strong quarter for the downstream and the first of our seven new upstream major projects has started up, with a further three near completion.”

He said that the new production projects are expected to drive “a material improvement in operating cash flow from the second half.”

Companies: BP p.l.c.
Price: 34.77 Price Change: +0.45 Percent Change: +1.31

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Apple Expected to Post Year-on-Year Gains in Second Quarter Revenue Supported by iPhone Sales

7:03 AM, May 1, 2017 — Apple (AAPL) is expected by analysts to report year-on-year gains in fiscal second quarter revenue and adjusted earnings per share when the consumer-technology company releases its results on Tuesday afternoon, boosted by continued strength of the iPhone, especially as more consumers are expected to have switched to the higher-priced Plus model.

For the quarter ended in March, the mean estimate of analysts polled by Capital IQ is for adjusted earnings per share of $2.02, up from $1.90 in the year-earlier quarter, on revenue of $53.08 billion, up from the year-earlier period’s $50.56 billion.

In April, brokerage firm RBC Capital Markets boosted its estimates for Apple’s fiscal second quarter results to adjusted earnings per share of $2.04 and revenue of $53.5 billion, citing improved iPhone data points and mix expectations.

“We think iPhone units have been stable to modestly better than expected and mix continues to remain positive (more ‘Plus’ models),” RBC said in a note to clients. The firm, which has an outperform investment rating on Apple’s shares with a price target of $157, added: “The wild card into the print will be gross margin, where we see two dynamics: better mix from iPhones offset by higher commodity costs.”

BMO Capital Markets, meanwhile, is expecting adjusted earnings per share of $2.06 and revenue of $53.81 billion for the quarter. The firm noted its expectations for iPhone revenue and units are roughly in line with other analysts’ averages, but it is estimating average selling price slightly higher than the Street view. “We believe a higher percentage of iPhone users are mixing up to the top tier, and we expect a bigger move with the new OLED version,” BMO said in a note to clients last week.

Still, BMO said that it believes Apple’s stock “is less about the March results and June guidance, as all eyes are on the product cycle coming later this year.” BMO has an outperform investment rating on the stock with a price target of $160. Apple’s shares closed Friday at $143.65, near the stock’s all-time high of $145.46, which was reached in early April.

Companies: Apple Inc.
Price: 144.14 Price Change: +0.49 Percent Change: +0.34

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Oil Prices Cling to Gains as US Rig Count Jumps for 15th Week in a Row

1:18 PM, Apr 28, 2017 — Oil futures prices were holding onto early gains on Friday afternoon despite fresh data revealing a 15th consecutive week in which the number of US oil rigs in operation has risen against a backdrop of a weakening greenback.

West Texas Intermediate (WTI) crude oil futures, the main US benchmark, were 0.4% higher at $49.17 per barrel while Brent oil futures, the international gauge, were up by 0.3% at $51.99 per barrel at the time of writing. WTI is currently on track to finish the week down by 0.9% while Brent crude is heading toward a weekly gain of 0.1%.

The total number of US oil and gas rigs in operation stood at 870 in the week ended April 28, according to data published by oilfield services company Baker Hughes on Friday. This was 13 rigs more than in the previous week and 450 more than one year ago. The last time that the US rig count posted a weekly decline was in the week ended January 13, when the number of rigs in operation declined by six.

In Canada, the number of rigs in operation contracted by 14 to 85, although it was up by 48 from one year ago. The international rig count for the month of March, the most recent data, was up by by 2 at 943 and down by 42 from one year ago.

Also feeding into oil trading sentiment was a softening in the value of the greenback and a surprise contraction in the US inventories of oil. As a dollar-denominated commodity, a cheaper US currency makes oil more affordable to buyers outside the US. The Dollar Index, which tracks the value of the US currency against a basket of foreign currencies, was 0.14% lower at the time of writing.

Data published by the Energy Information Administration (EIA) on Wednesday showed that US inventories of oil declined by 3.6 million barrels to 528.7 million barrels in the week ended April 21. This compared to a 1 million barrel weekly decline registered the previous week and an 897,000 barrel increase which had been projected by the American Petroleum Institute (API) on Tuesday.

Price: 7.60 Price Change: +0.12 Percent Change: +1.60

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AstraZeneca First Quarter Revenue Hit by Patent Expiries; CEO Forecasts “Pivotal” Year for New Drugs

11:55 AM, Apr 27, 2017 — AstraZeneca (AZN), a British-Swedish drugmaker, whose chief executive is predicting a “pivotal year” in the development of new drugs, posted a revenue drop in the first quarter as it was hit by patent expiries on several key revenue-earners.

Total revenue declined 12% from the same quarter a year earlier to $5.41 billion, the company said on Thursday adding that the decline mainly reflected the impact of the expiry of a US patent on its Crestor cholesterol drug, meaning generic competitors are free to launch their versions of the medication. In constant currencies sales fell 10%.

Core earnings per share (EPS), which is adjusted for non-recurring items, rose 4% to $0.99 helped by cost control, the Cambridge, England-based company said. Core research and development costs declined by 6% to $1.34 billion and core general administrative and other costs dropped 14% to $1.83 billion.

The company, which has a strong focus on researching new cancer treatments, said it expects 2017 to be “a potentially defining year” in terms of news on its new products under development. It expects to reach major milestones for Faslodex, a breast cancer drug, Lynparza, a treatment for ovarian cancer and its durvalumab drug for bladder cancer in the second quarter.

“The total revenue performance reflected the transitional impact of recent patent expiries, which is expected to recede in the second half of the year,” Pascal Soriot, chief executive of AstraZeneca, said. “Importantly, we anticipate the significant progress of the pipeline to continue. The pipeline continued to deliver in what we expect will be a pivotal year for AstraZeneca as we announced important developments, in particular in oncology.”

Based on the first quarter, AstraZeneca confirmed its forecasts for the full year. It said it sees a low to mid single-digit percentage decline in total revenue and core EPS to drop by a “low to mid teens” percentage.

Companies: Astrazeneca PLC
Price: 30.88 Price Change: +0.30 Percent Change: +0.98

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Stocks Dip in US as Oil Retreats, French Election Jitters Weigh

12:45 PM, Apr 21, 2017 — The main US markets were trading mostly lower on Friday afternoon as concerns about the outcome of the weekend’s presidential election in France weighed and oil prices dropped.

Sunday’s election is widely seen as too close to call, with four candidates leading. The result could have an impact on France’s future role with the European Union, less than a year after the UK’s vote to leave the bloc.

On the Standard & Poor’s 500, eight of the 11 sectors weakened, with a 1.1% drop in telecommunication services leading as Verizon (VZ) fell 1.7%. The firm is slashing prices and offering more data to stem an unprecedented wave of customer losses. But General Electric (GE) fell the most on the Dow Jones Industrial Average, retreating 2.1% after reporting earnings that beat Wall Street estimates, although revenue dipped year-on-year.

The S&P’s energy sector fell 0.5% as West Texas Intermediate lost 2.3% to trade below $50 a barrel while Brent shed 2.1% to $51.88. Schlumberger (SLB) shed 2.9% as the oilfield services giant reported quarterly adjusted earnings that meet Street expectations, but revenue was below the outlook. Halliburton (HAL), which releases results Monday, fell 1.3% and Baker Hughes (BHI), which releases results Tuesday, shed 2.5%.

Mattel (MAT) dropped 11% after the toymaker reported financial results for the first quarter, with a wider-than-expected loss and revenue that fell short of analysts’ expectations. Honeywell (HON) increased 2.5% after reporting better-than-expected earnings and revenue and as it raised the lower end of its 2017 earnings guidance range in line with Street estimates.

In afternoon trading, the S&P 500 fell 0.2% while the Dow and the Nasdaq lost 0.1%.

Globally, the Nikkei 225 advanced 1%, the Shanghai Composite was little changed, the Hang Seng dipped 0.1% and the FTSE 100 also edged down 0.1%.

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