Wabtec Acquires Faiveley Transport

Wabtec’s Acquisition of Faiveley Likely to Boost Earnings Power in 2018, Stifel Says

9:41 AM, Dec 2, 2016 — Westinghouse Air Brake Technologies (WAB), also known as Wabtec, said on Thursday it acquired Faiveley Transport, a provider of services for the railway industry with annual sales of about $1.2 billion, a move that should help the company boost earnings power in 2018, Stifel analsyt Michael Baudendistel said in a note to clients.

Wabtec, along with announcing the acquisition, also issued guidance that was below expectations for 2017, he said. The company issued 2017 earnings guidance of around $4.30, below Stifel’s outlook for $4.45, which the analyst said may be due to a weak core business. Still, that didn’t dampen Stifel’s outlook for the company.

“Despite the lower 2017 outlook, we are encouraged, as we believe the story has been de-risked some, with questions around Faiveley accretion and a preliminary 2017 guidance outlook now behind the company,” Baudendistel said in the note. “Additionally, we believe the true earnings power of the combined company is not reflected by 2017 results, which will include significant integration costs.”

Stifel lowered its 2016 and 2017 pro-forma estimates “slightly” while leaving its 2018 outlook unchanged. The researcher left its buy rating on the company and raised its target price from $88 to $95, 19 times its 2018 earnings estimate of $5 thanks to the confidence in accretion from Faiveley, lower risk profile and higher valuation attributable to “optimism” surrounding a Trump presidency.

The company is poised for “solid” growth in 2018 as several segments should show improvement, Baudendistel said. Freight woes likely will bottom in 2017 and rail volume may be positive next year.

“We believe the true benefit of synergies from the Faiveley deal will be more fully realized in 2018, as net synergies next year are expected to be only $7 million to $10 million out of a total of $50 million in annual synergies expected by 2019,” he said. “We continue to like Wabtec as a diversified and high-quality way to invest in rail globally, both freight and transit.”

Companies: Westinghouse Air Brake Technologies Corporation
Price: 86.04 Price Change: Percent Change: +0.00

NYSE

Stocks Split in Early US Trading as Dow Gains and Nasdaq Head Lower

10:07 AM, Dec 1, 2016 — Stocks in the US started Thursday’s session taking split directions, with the Dow Jones Industrial Average advancing as oil prices topped $50 a barrel while the Nasdaq Composite retreated and the Standard & Poor’s 500 fluctuated between gains and loss.

West Texas Intermediate was trading 2.7% higher at $50.79 a barrel a day after the Organization of Petroleum Exporting Countries announced a deal to cut production. Brent, the main international variety, gained 2.9% to $53.33 a barrel. Energy stocks were up 0.8% on the S&P 500, with Chevron (CVX) rallying to the highest in two years on an intraday basis with a 1.5% increase.

Ahead of Friday’s key jobs report and this month’s Federal Reserve interest-rate decision, investors parsed a slate of economic data including a report that showed the pace of job cuts last month fell to the lowest level of the year, according to consultancy Challenger, Gray & Christmas, while unemployment insurance claims in the week ending Nov. 26 rose by 17,000 to a higher-than-expected 268,000. Analysts polled by Econoday had projected 253,000 claims.

General Motors (GM) jumped 3.3% after the company said it sold 197,609 vehicles in November, a gain of 8% from a year ago. Ford Motor (F) gained 4.4% after reporting a 5% increase in total sales to 197,574 units.

Dollar General (DG) dropped 6.2% after the discount store operator said quarterly earnings and sales missed expectations. Lands’ End (LE) lost 4.7% after the retailer of casual clothing, accessories and footwear reported a larger-than-expected loss in the fiscal third quarter even as revenues beat estimates.

In early trading, the Dow was up 0.3%, the S&P was less than 0.1% stronger and the Nasdaq retreated 0.2%.

Globally, the Shanghai Composite rose 0.7%, the Nikkei 225 advanced 1.1%, the Hang Seng increased 0.4%, the FTSE 100 fell 0.9% and the CAC 40 fell 0.3%.

Rolls-Royce

Rolls-Royce Unveils Plans to Cut 800 Roles Worldwide

7:40 AM, Dec 1, 2016 — Rolls-Royce (RR.L) unveiled plans to cut hundreds of roles worldwide on Thursday as the producer of high-performance power systems said that it is seeking to accelerate the transformation of its marine business following continued weakness in the maritime market.

The company, which employs more than 50,000 people around the world, said that it would further simplify the structure of its marine business, with a streamlining of its senior management team and a series of cost reduction initiatives which would result in the loss of around 800 roles worldwide and an estimated 45-50 million pounds ($56.9 million-to-$63.3 million) of annualized savings from mid-2017.

The costs of the restructuring are expected to be around 20 million pounds, split between 2016 and 2017,the company said. As part of the program, Rolls Royce said that investments were also being proposed to establish a research and development center for the development of new propulsion products, and an expanded services hub for Northern Europe, both in Ulsteinvik, Norway.

The proposed job cuts are in addition to the reduction of 1,000 employees announced in May and October last year. The marine business currently employs around 4,800 people in 34 countries.

Mikael Makinen, president of the marine business at Rolls-Royce, said: “The ongoing market weakness that has followed the dramatic fall in the price of oil continues to have an adverse impact upon our order book and profitability. We have made significant progress in transforming marine into a far more agile and simplified business than we were and we have to take further steps to address our cost base.”

“Reducing our workforce is never an easy decision, but we have no option but to take further action beyond the changes we have made to date. This remains a fundamentally strong business, but we need to overcome the immediate challenges and focus our investments on the technologies that will shape our future growth,” he added.

NYSE

Stocks Give Back Most Gains by US Close But Indexes Rally in Strong Monthly Moves

4:50 PM, Nov 30, 2016 — Stocks in the US gave back most of their gains by the close on Wednesday, with the Standard & Poor’s 500 reversing its advance and the Dow Jones Industrial Average finished little changed, backing off from the record high it touched earlier.

The Nasdaq spent most of the day lower as tech majors retreated. Facebook (FB) fell 2% and Intel (INTC) dropped 1.7%. On the Dow, Visa (V) slid 2.3% in the steepest decline while Goldman Sachs (GS) advanced 3.7%. Chevron (CVX) gained 2% and Exxon Mobil (XOM) added 1.6% as energy shares surged 5.2% after the Organization of Petroleum Exporting Countries announced an agreement on cutting oil production.

OPEC said it will cut production by 1.2 million barrels a day to 52.5 million barrels, with effect from Jan. 1. Oil prices had fluctuated in recent days on speculation that an agreement wouldn’t be reached, but West Texas Intermediate was 8.6% stronger late in the day at $49.14 a barrel.

Even though the indexes ended mostly lower on Wednesday, they still posted strong gains in November, driven by the surprise win of Republican Donald Trump in the US election. The S&P 500 was up 3.4% in the month, the Dow rose 5.4% and the Nasdaq climbed 2.6%

Economic data added support to the belief that the Federal Reserve will raise rates at its December meeting. The probability of a hike stood at almost 99% on the CME Group’s FedWatch tool. The private sector added 216,000 new jobs in October, beating Wall Street estimates for a gain of 160,000. Consumer spending increased 0.3% while incomes rose 0.6%, and manufacturing in the Chicago Fed area accelerated to its highest level in over a year. Pending home sales was the only miss with a 0.1% gain in October versus estimates for a 0.2% rise.

The US economy grew in most of the 12 Fed districts with higher retail sales reported, but the stronger dollar was a headwind for manufacturers, the Fed said in its Beige Book summary of comments on current economic conditions.

Outlook for higher rates helped financial stocks gain 1.3%, with Bank of America (BAC) rising 4.5%, Wells Fargo (WFC) climbing 2% and JPMorgan Chase (JPM) increasing 1.6%.

Also in company news, GoPro (GPRO) rose 1.5% after announcing 33% higher camera sales through its website over the Thanksgiving to Cyber Monday period and plans to cut 15% of its workforce. American Eagle Outfitters (AEO) tumbled 12% after the specialty retailer guided for downbeat earnings and comparable store sales for the current quarter.

Grocery giant Kroger (KR), discount retailer Dollar General (DG) and cloud applications firm Workday (WDAY) are slated to report earnings Thursday. The economic calendar has a long list of mid-tier data ahead of Friday’s marquee employment report, with the Challenger Job-Cut report at 7:30 a.m. ET, initial weekly jobless claims at 8:30 a.m. and the November Markit manufacturing purchasing managers’ index at 9:45 a.m., among others.

By the close, the Dow was up just 0.01%, the S&P 500 was down 0.3% and the Nasdaq retreated 1.1%.

GoPro

GoPro to Cut 15% of Workforce in Restructuring Plan to Focus on ‘Core Business’

12:35 PM, Nov 30, 2016 — GoPro (GPRO), the maker of action cameras, said it will cut more than 200 full-time jobs, or 15% of its workforce, and close its entertainment division in a bid to cut expenses.

That comes even after the company said sales of cameras through its website from the US Thanksgiving last Thursday through Cyber Monday earlier this week were up 33% annually.

“Consumer demand for GoPro is solid and we’ve sharply narrowed our focus to concentrate on our core business,” said found and Chief Executive Officer Nicholas Woodman. “We are headed into 2017 with a powerful global brand, our best ever products, and a clear roadmap for restored growth and profitability in 2017.”

GoPro’s restructuring includes canceling open jobs and a reduction in facilities, the company said. President Tony Bates will leave at the end of the year, GoPro said, without giving a reason for his departure.

The firm wants to reduce full-year 2017 non-GAAP operating expenses to approximately $650 million “and achieve its goal of returning to non-GAAP profitability in 2017,” it said.

The restructuring will result in charges of $24 million to $33 million, including up to $18 million of cash expenditures which will be mostly severance costs. Up to $15 million in non-cash spending will be from stock-based compensation expense and accelerated depreciation from office consolidations. Most of the charges will be taken in the fourth quarter of this year.

Companies: GoPro, Inc.
Price: 10.07 Price Change: +0.24 Percent Change: +2.44

market data

Stocks Defy Sliding Oil Prices as Tech Shares Push Nasdaq to Record US Intraday High

2:19 PM, Nov 29, 2016 — Stocks in the US reversed earlier declines and headed higher on Tuesday afternoon, looking past a retreat in oil prices that weighed on energy stocks to bullish economic data, while the Nasdaq Composite pushed to an intraday record high.

The tech-heavy Nasdaq was bolstered by a 5.5% jump in Chinese e-commerce firm JD.com (JD), a 1.3% advance in Sirius XM Holdings (SIRI) and the same size increase in Microsoft (MSFT).

The Nasdaq’s pharmaceutical components benefitted amid a 0.8% gain on the Standard & Poor’s 500 health care sector, with Novan (NOVN) the top advancer, rising 20% after the company reported statistically significant trial results from a treatment for genital warts caused by human papillomavirus. QLT (QLTI) and Aegerion Pharmaceuticals (AEGR) both surged 17% after they completed their merger.

The indexes had started the trading session in the red as crude prices plunged ahead of Wednesday’s Organization of Petroleum Exporting Countries meeting. West Texas International, the US benchmark oil type, dropped 3.5% to $4542 barrel, pulling down the S&P’s energy sector by 1.1%. Chevron (CVX) was 0.9% lower in the Dow Jones Industrial Average’s biggest loss.

The oil losses were offset by strong data showing the US economy grew by a 3.2% annualized rate in the third quarter. Consumer confidence rallied to 107.1 in November, defying expectations for 101. Home prices improved 0.4% in September,and corporate profits jumped 7.6% in the third quarter, following a 1.9% contraction previously.

UnitedHealth Group (UNH) gained the most among the blue chips, rising 3.3% after saying late Monday it sees 2017 revenue and earnings above Wall Street estimates.

By mid afternoon, the Nasdaq was up 0.6%, the S&P 500 rose 0.4% and the Dow added 0.2%.

Globally, the Shanghai Composite rose 0.2%, the Nikkei 225 fell 0.3%, the Hang Seng lost 0.4%, the FTSE 100 also retreated 0.4% and the CAC 40 advanced 0.9%.

Consumer Confidence on the Rise

Consumer Confidence Jumps in November as Optimism Maintained After US Election

12:48 PM, Nov 29, 2016 — Consumer confidence rose to 107.1 in November after a “moderate decline” in October, with sentiment from those surveyed after the Nov. 8 US election showing that optimism wasn’t affected by the outcome, according to the Conference Board.

The index increased from 100.8 in October and came in ahead of expectations among analysts polled by Econoday for 101. The percentage of consumers who said business conditions were good rose to 29.2% in November from 26.5% a month earlier, while those saying jobs were plentiful increased to 26.9% from 25.3%, the Conference Board said in a statement.

“A more favorable assessment of current conditions coupled with a more optimistic short-term outlook helped boost confidence,” said Lynn Franco, director of economic indicators at the board. “And while the majority of consumers were surveyed before the presidential election, it appears from the small sample of post-election responses that consumers’ optimism was not impacted by the outcome. With the holiday season upon us, a more confident consumer should be welcome news for retailers.”

Online sales between the US Thanksgiving last Thursday and Cyber Monday reached almost $40 billion, up 7.6% from a year earlier, according to data from Adobe Digital Insights. While e-commerce was strong, the National Retail Federation said average spending per person over the holiday weekend fell to $289.19 from $299.60 last year.

The short-term outlook showed that 15.3% of consumers expect business conditions to improve over the next six months, down from 16.4% a month earlier. But those expecting conditions to worsen narrowed to 10% from 11.8%. The number of people expecting more jobs in the months ahead was “virtually unchanged” at 14.5%, but those who see fewer jobs dropped to 13.8% from 16.6%, the Conference Board data showed.

Costa Coffee Chain

Costa-Owner Whitbread Unveils $190m Efficiency Program

12:13 PM, Nov 29, 2016 — British hospitality company Whitbread (WTB.L) has unveiled details of an efficiency program aimed at delivering around 150 million pounds ($187.4 million) in cumulative cost efficiencies over the next five years.

The company, which operates the Costa coffee chain, Premier Hotel group and Beefeater restaurants, said during an investor day held in London on Tuesday, that the program would cover a range of areas including procurement, supply chain, labor management and process improvements.

Along with organic growth, the company said that the program would aim to help to mitigate ongoing sector headwinds, including the British government’s new national living wage, which came into law in April and is due to be increased next April, business rates and foreign exchange, according to a statement released by the company.

Whitbread said that the program, along with organic growth, would enable the company to achieve its existing margin guidance of approximately 20-30 basis points of investment for Premier Inn in 2017/18 and for approximately 100 basis points of investment for Costa in both 2016/17 and 2017/18.

“With the support of our efficiency programme and organic growth we expect margins to stabilise through to 2019/20 and increase thereafter,” the company said.

Alison Brittain, chief executive of Whitbread, said: “In order to deliver the next phase of growth and maintain our brand leadership positions we will invest in our people and their skills, in innovation in our customer propositions and in improving our IT systems and digital capabilities to develop an efficient platform that will support our growth for many years to come.”

Whitbread posted revenue of 1.56 billion pounds in its interim results for the six months to September 1st, which were published in October. This was 8.1% higher than the corresponding period of the previous year. The company generated underlying profit before tax of 307 million pounds and profit for the period of 200.7 million pounds.