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PPD dampens takeover talk

July 19, 2011 in Global Markets News


By Esha Dey

BANGALORE |
Mon Jul 18, 2011 4:34pm EDT

BANGALORE (Reuters) – Pharmaceutical Product Development Inc (PPDI.O) said its board had asked management to review its strategic plan, but was not in talks with other clinical research providers, a day after a media report said the company was looking to sell itself.

The drug research services provider’s shares rose as much as 18 percent earlier Monday. They closed up 10 percent at $30.74 on Nasdaq.

PPD could fetch around $4 billion, or about $35-$37 a share, industry analysts said, reacting to a report on The Wall Street Journal on Sunday, adding that a private equity deal was more probable than a strategic transaction.

“As a premier late-stage focused contract research organization with a growing international presence, PPD is well-positioned to capitalize on Big Pharma’s emphasis on Phase II-IV global trials,” BBT analyst James Kumpel said.

PPD, which mostly provides late-stage drug research services to drugmakers, has a market capitalization of $3.15 billion, according to Thomson Reuters data.

While the entire sector was badly hit during the credit crunch with several research-stage biotechs going belly up or halting certain drug programs due to lack of money, the industry is finally seeing a resurgence in bookings.

However, PPD’s valuation has taken a hit over the past quarter and the shares lost 12 percent of their value since the company posted a weak quarterly profit in April, hurt by higher cancellations.

“PPD has been trading at a fairly noticeable discount to its peer group — 10-15 percent discount — despite having the best balance sheet,” Robert W. Baird analyst Eric Coldwell said.

“I don’t put high odds on a possible deal, but it definitely makes a lot of sense for PPD,” he added.

The article mentioned that PPD could see interest from private equity or other contract research firms.

BBT analyst Kumpel mentioned that apart from PE firms, there are not many natural buyers for the company and it was not clear “what a buyer would do to further improve margins or operating performance.”

There has been a slew of PE takeovers in the health sector recently, including Apax Partners’ APAX.UL $5 billion deal for Kinetic Concepts Inc (KCI.N), TPG Capital’s TPG.UL $2 billion buy of diagnostics firm Immucor (BLUD.O) and KKR’s (KKR.N) $2.38 billion buyout of Pfizer’s (PFE.N) Capsugel unit.

Last year, PPD’s rival Charles River Laboratories International Inc (CRL.N) had to shelve its plan of buying Chinese peer Wuxi PharmaTech (WX.N) for $1.6 billion after investors and proxy advisory firms opposed the deal.

Earlier this year, INC Research, a privately-held CRO, bought Kendle International Inc KNDL.O for $232 million.

Other large publicly-traded CROs includes Covance Inc (CVD.N) and Icon (ICON.I) (ICLR.O), with privately-held Quintiles being the other major player.

BBT makes a market in the securities of PPD and reported that it expects to receive compensation for investment banking services from the company in the next three months.

(Reporting by Esha Dey and Shravya Jain in Bangalore; Editing by Joyjeet Das, Prem Udayabhanu)

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Gannett ad revenue slumps, shares drop

July 19, 2011 in Global Markets News


By Jennifer Saba

NEW YORK |
Mon Jul 18, 2011 12:07pm EDT

NEW YORK (Reuters) – Gannett Co’s quarterly profit and revenue fell in the latest sign U.S. newspapers have yet to recover from an advertising slump.

Gannett, the largest newspaper chain in the United States, said on Monday total revenue fell 2.2 percent to $1.33 billion in the second quarter, in line with the average analyst forecast, according to Thomson Reuters I/B/E/S.

The publisher of USA Today and 81 other newspapers said ad revenue at its newspapers dropped 6.5 percent to $646.9 million as retail, automotive, and national advertisers pulled back on their spending.

Advertising revenue this quarter is “getting off to the same start” as the second quarter Gracia Martore, president and chief operating officer of Gannett, said during a conference call.

The company also doubled its quarterly dividend and reinstated its $1 billion share buyback. Nevertheless, Gannett’s shares fell 3 percent in early trade.

“It’s not a surprise that print media continues to drag down Gannett,” said Joscelyn MacKay, an analyst at Morningstar. “We don’t expect Gannett to return to (revenue) growth in a 10-year time horizon.”

Gannett cut 2 percent of its workforce, or 700 employees at its U.S. newspaper division in June, citing a sputtering economic recovery weighing down on national and local advertising.

Derek Maupin, research analyst at Hodges Capital management, which holds shares in Gannett, is slightly concerned about Gannett’s print advertising but believe shares are still undervalued at its current price.

“If you look at it as a whole, (Gannett) had strong increases in the other segments,” he said adding that he expects broadcasting revenue to be strong next year.

Digital advertising rose almost 13 percent to $173.4 million.

At the company’s broadcast division, which includes Captivate, total revenue inched up to $184.4 million compared with $184 million in the same quarter a year ago.

TV revenue was up slightly to $177.7 million and the company forecast the percentage decline in the third quarter to be in the mid-single digits.

Gannett posted a net profit of $151.5 million, or 62 cents per share, compared with $195.5 million, or 73 cents per share a year earlier.

Excluding costs for facility closures and job cuts and a net tax benefit, Gannett posted a profit of 58 cents per share, beating analysts forecast by a penny.

The company doubled its dividend to 8 cents per share. It expects to repurchase $100 million in shares over the next 12 months, as part of the $1 billion share buyback originally approved five years ago.

(Reporting by Jennifer Saba, editing by Maureen Bavdek and Derek Caney)

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Halliburton profit jumps on strong U.S. demand

July 19, 2011 in Global Markets News


By Matt Daily and Braden Reddall

NEW YORK/SAN FRANCISCO |
Mon Jul 18, 2011 1:15pm EDT

NEW YORK/SAN FRANCISCO (Reuters) – Halliburton Co (HAL.N), the world’s second-largest oilfield services company, reported a forecast-topping 54 percent jump in profit on Monday as a U.S. onshore drilling boom showed no sign of cooling off.

The second-quarter results clearly demonstrate how Halliburton has benefited from its North American leadership in the pressure pumping technology that enables oil and gas producers to tap in to shale rock.

High oil prices have prompted those producers to plunge billions of dollars into developing fields such as the Eagle Ford shale in Texas, creating a tighter market for equipment that allowed Halliburton to push through price rises.

“It was both top and bottom lines, and a significant component was pricing,” said Roger Read, an analyst with Morgan Keegan Co.

The North American boom was likely to last through 2012, helped by the move to more developments that benefit from high oil prices as natural gas drilling slows.

“What we are seeing in North America, plus the continued international recovery, will lead to even a more favorable earnings picture as we go through 2011 and beyond,” Chief Executive Dave Lesar told analysts on a conference call.

Second-quarter net profit climbed to $739 million, or 80 cents per share, from $480 million, or 53 cents per share, a year earlier. Excluding one-time items, it earned 81 cents per share, topping the average analyst estimate of 74 cents from Thomson Reuters I/B/E/S.

Second-quarter revenue rose 35 percent to $5.9 billion and came in above the average analyst forecast of $5.71 billion. (For a graphic on Halliburton versus its competitors: r.reuters.com/dyw62s )

UBS analyst Angie Sedita, who anticipates more positive earnings surprises from Halliburton driven by North America, noted that the stock traded at a discount to its peers.

Shares of industry leader Schlumberger Ltd (SLB.N), with far more exposure to markets beyond North America, were down 0.5 percent on Monday morning while those of Houston-based rival Baker Hughes Inc (BHI.N) rose along with Halliburton.

Halliburton said its margins would grow more slowly in the third quarter than in the second due to cost inflation and a slowdown in the recovery of Gulf of Mexico deepwater drilling as new permits become harder to come by.

“The pace of permit issuance has slowed again and the fact that some of the initially permitted wells are nearing completion creates a risk that the Gulf recovery could slow or stall in the second half of 2011,” Lesar said.

Second-quarter activity outside North America was soft. While seasonal pickups in the North Sea and Russia lifted revenue, the Libya shutdown, delays in Iraq, rising sub-Saharan Africa costs and sluggish markets in Britain and Algeria all cut into profits in those markets. Lesar said those factors shaved 4 percentage points off Eastern Hemisphere margins.

Halliburton shares were up 0.3 percent at $53.22 on Monday even as a 2 percent drop in oil prices hurt the sector .OSX.

(Reporting by Matt Daily in New York and Braden Reddall in San Francisco; Editing by Derek Caney, Maureen Bavdek and Matthew Lewis)

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UPDATE 1-China’s PICC plans $5 bln-$6 bln HK, Shanghai offering -IFR

July 18, 2011 in Banking Industry News


Mon Jul 18, 2011 2:09am EDT

* PICC plans Hong Kong, Shanghai offering of up to $6 bln -
IFR

* HSBC, Credit Suisse, CICC handling PICC offering – IFR

* PICC IPO comes amid increased activity in financial sector

(Adds financial listings, analyst comment, insurers’ profits)

HONG KONG, July 18 (Reuters) – State-owned People’s
Insurance Company of China Group (PICC), one of the country’s
largest insurers, plans to raise $5 billion to $6 billion in an
initial public offering in Hong Kong and Shanghai, IFR reported
citing two sources with knowledge of the plans.

China International Capital Corp (CICC), HSBC and
Credit Suisse were hired to handle the deal, said IFR,
a Thomson Reuters publication. More banks are expected to be
added to the roster later, IFR said.

PICC’s offering comes amid an expected flurry of activity in
the financial services industry over the coming months as
companies look to raise funds to bolster their balance sheets.

Around $25 billion in share offerings in Hong Kong and China
could come to the market over the next 12 months from insurers
alone, Credit Suisse estimated in a report last week.

PICC, the parent of China’s largest property insurer PICC
Property Casualty Co , had submitted an IPO
application to the State Council in May, the China Securities
Journal reported on Friday.

The company started roadshows around the world to look for
strategic investors in the offering.

Major Chinese financial groups eyeing a Hong Kong listing
this year include Citic Securities , Haitong
Securities , China Everbright Bank
and New China Life.

“The market is not as good as last year. Whether or not
these big financial IPOs can be completed this year depends on
market conditions in the second half,” said Chen Xingyu,
financial analyst at Phillip Securities in Shanghai.

For PICC and New China Life, it also depends on the
insurance industry’s profit outlook.

“The earnings outlook for the insurance industry is pretty
good for this year,” he said.

Chinese insurance firms saw their total profits rise 72.3
percent to a collective 49 billion yuan ($7.6 billion) in the
first half of the year from the same period last year, data from
the China Insurance Regulatory Commission showed.

($1 = 6.463 Chinese Yuan)

(Reporting by Fiona Lau and Soo Ai Peng in Shanghai, Writing by
Elzio Barreto; Editing by Jacqueline Wong and Vinu Pilakkott)

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Stricter bank test leaves 80 bln euro hole -analyst

July 17, 2011 in Banking Industry News

Sat Jul 16, 2011 7:14am EDT

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Brokerage profits-and clients-take a vacation

July 16, 2011 in Banking Industry News


By Joseph A. Giannone

NEW YORK |
Fri Jul 15, 2011 6:41pm EDT

NEW YORK (Reuters) – Investors left early for summer vacation, sapping midyear earnings for Charles Schwab Corp SCHW.N and other U.S. brokerages that focus on retail investors.

A sluggish economy, volatile markets and threats of government debt defaults worldwide have scared investors away from buying stocks, analysts said . That bodes ill for Schwab, TD Ameritrade (AMTD.O) and other so-called retail brokers that are reporting their quarterly earnings during the week beginning July 18.

“We saw a much weaker quarter,” said Joel Jeffrey, an analyst at Keefe, Bruyette Woods. “With the tough economic news, some retail investors moved to the sidelines.”

The business of handling stock and bond trades began slowing in March after a robust start to the year, and events ranging from the Japanese tsunami to the European debt crisis and a lethargic U.S. economy have continued to plague the online brokerage firms and their full-service retail competitors.

“The retail investor has one foot in the market and one foot out,” TD Ameritrade Chief Executive Fred Tomczyk said. “A lot of people are very hesitant and reticent right now.”

The Omaha-based online broker is scheduled to report its quarterly earnings on Tuesday, one day after Schwab discloses its second-quarter results.

Summer is traditionally a slow season, but Raymond James analyst Patrick O’Shaughnessy estimates that June trading at the online brokers fell at a precipitously high double-digit rate from an already weak May.

Another indication of investor frustration was their pulling money from the stock mutual funds that the broker-dealers sell on their “financial supermarket” platforms. Stock funds, like stock transactions themselves, are more lucrative to broker-dealers than are short-term money-market investments and most fixed-income products.

Indeed, Schwab, TD Ameritrade and many fund companies have been waiving their fees on money market funds for more than a year because the near-zero interest rates being paid could result in negative returns if fees were charged. The fee waivers have cost broker-dealers hundreds of millions of dollars.

Analysts polled by Thomson Reuters I/B/E/S have been shaving their estimates for Schwab in recent weeks, with the mean estimate at 20 cents a share, up from 17 cents in the year-ago quarter. The consensus estimate for Ameritrade has been cut by about a penny to 29 cents recently, compared with 23 cents last year.

Full-service firms with large retail brokerage units such as Raymond James Financial (RJF.N) and Stifel Financial Corp (SF.N) also are expected to beat last year’s results but have been losing ground in recent weeks.

Per-share earnings estimates for Stifel have fallen about 12 percent since July 6 to 55 cents, compared with profit in the 2010 second quarter of 46 cents a share. The rapidly expanding St. Louis-based broker is expected to report its results on August 8.

Estimates for Raymond James have declined an average of 30 percent in the last month to 45 cents a share. The St. Petersburg, Florida-based firm, expected to report on Wednesday, earned 80 cents a share in the June 2010 period.

Shares of retail brokerage stocks have been falling in tandem with clients’ withdrawal from the markets, with Schwab off about 12 percent this year, TD Ameritrade down more than 5 percent and Stifel and Raymond James about 20 percent and 11 percent respectively.

The outlook for a quick recovery after the traditional summer slowdown, meanwhile, is iffy. “The retail recovery is already here, but it isn’t a jet going straight up,” said Brad Hintz, an analyst at Sanford Bernstein. “It’s an old-fashioned propeller plane struggling to gain altitude.”

(Reporting by Joseph A. Giannone, editing by Jed Horowitz)

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First Horizon talking to regulators to use excess

July 16, 2011 in Global Markets News


By Tanya Agrawal

BANGALORE |
Fri Jul 15, 2011 12:39pm EDT

BANGALORE (Reuters) – First Horizon National Corp’s (FHN.N) second-quarter profit topped Wall Street estimates, boosted by improving credit quality in its markets, and the lender said it was working with regulators to deploy its excess capital.

Large regional banks like PNC Financial (PNC.N), BBT (BBT.N), US Bancorp (USB.N) and others have boosted their dividends after receiving regulators’ blessings, in a sign that the U.S. banking environment is improving.

“I don’t know how long that (capital deployment) will take. But that is something that we intend to work on and we will continue to work through that process,” Chief Executive Bryan Jordan said on a call with analysts.

Jordan, however, did not give a firm guideline on when the capital deployment would occur.

“First Horizon needs to redeploy around $500 million in excess capital,” Anthony Davis, analyst with Stifel Nicolaus Co, said.

However, any capital deployment will likely come with more clarity on the bank’s private-label buyback liabilities.

First Horizon has been under cloud due to the possibility that it may have to buy back some of the mortgages it securitized and sold to private investors, before it sold off its mortgage business to Metlife Inc’s (MET.N) banking unit.

“We are still waiting for development in rep and warranty issues. I don’t think they need to enter into settlement like Bank of America (BAC.N) or other larger banks though,” analyst Anthony Davis said.

Bank of America, the largest U.S. bank by assets, said it expects to take more than $20 billion in charges after settling toxic loan cases with mortgage bond investors.

As of the second quarter, First Horizon said it had not received any requests for private label repurchases.

FEWER LOAN LOSSES

Despite the overhang of possible mortgage putbacks, First Horizon, the largest bank in Tennessee, set aside just $1 million to cover future bad loans, signaling an improved credit outlook in its South-Eastern U.S. markets.

First Horizon, which counts hedge fund RS Investments, T Rowe Price Associates, Marisco Capital and Vanguard Group Inc among its top investors, also said its net charge-offs fell more than 50 percent to $66 million.

Second-quarter net income available to common shareholders was $42.6 million, or 16 cents a share, beating analysts’ estimates of a profit of 11 cents a share.

The company’s non-performing assets fell to $747.9 million from $899.8 million.

First Horizon’s shares were up 3 percent at $9.75 in midday trade on the New York Stock Exchange. They touched a high of $10.18 earlier in the session.

(Reporting by Tanya Agrawal in Bangalore; Editing by Gopakumar Warrier)

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BHP bid for Petrohawk gives wings to shale companies

July 16, 2011 in Global Markets News


BANGALORE |
Fri Jul 15, 2011 8:49am EDT

BANGALORE (Reuters) – Shares of U.S. oil and gas producers that own shale acreages rose on Friday, following major global miner BHP Billiton’s bid to buy Petrohawk Energy at a hefty premium.

BHP will buy Petrohawk for $12.1 billion, paying a premium of 65 percent to raise its presence in shale fields, which are underground rock formations rich in oil and gas.

Shares of Chesapeake Energy, Range Resources Corp, SM Energy Co, Southwestern Energy Co, Carrizo Oil Gas and Ultra Petroleum rose in trading before the bell.

“Transactions of this size always seem to offer a bid to the group …,” Wells Fargo analyst Michael Hall said in a note. “As it relates to specific tickers, Range Resources stands out as a key beneficiary given that it is essentially a pure play shale company.”

Shares of Petrohawk, the company that Hall calls “emblematic of the industry’s shift toward shale gas development,” already have risen more than 28 percent this year. The stock leaped 64 percent on Friday.

“We expect the exploration and production space to outperform in the coming days, with a focus on companies with high relative exposure in the Eagle Ford, and to a lesser extent the Haynesville,” Oppenheimer analyst Fadel Gheit said.

He was referring to the shales that straddle parts of South and East Texas, along with Louisiana.

(Reporting by Krishna N Das in Bangalore; Editing by Maju Samuel)

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Mattel 2nd-quarter profit tops Wall Street estimates

July 16, 2011 in Global Markets News


By Helen Chernikoff

NEW YORK |
Fri Jul 15, 2011 12:56pm EDT

NEW YORK (Reuters) – Mattel Inc (MAT.O), the world’s largest toy company, reported a higher-than-expected quarterly profit on strong sales of its Barbie dolls and toys based on the “Cars 2″ movie.

The sales increase shows the growing global reach of Mattel. International sales increased 12 percent, excluding currency fluctuations.

“They’re looking to have a great year,” said Wedbush Securities analyst Edward Woo. “They’ve gained market share and they’re likely to continue to maintain that momentum into the holiday season.”

The shares had been up more than five percent, but they gave back some of their gains because they are getting close to their fair value, said MKM Partners analyst Eric Handler, whose price target is $28.

Now the question is whether the shares will keep rising in the run-up to the holidays.

Woo thinks that could happen and his price target is under review. The company is in a position to grow earnings by at least 10 percent on a revenue increase in the mid to high single digits, he said.

“Barbie is getting big internationally,” said Handler. “The whole company has become more internationally focused.”

The maker of Hot Wheels cars and Fisher-Price toys said second-quarter net profit rose to $80.5 million, or 23 cents per share, from with $51.6 million, 14 cents per share, last year.

U.S. toy companies, which make most of their toys in China, are grappling with rising costs of plastics, packaging paper, freight and labor. Mattel’s gross margins fell 20 basis points.

“Costs have been rising, but it’s manageable for them,” Woo said.

Sales at the company, which counts Wal-Mart Stores Inc (WMT.N), Toys R Us (TOYS.N) TOY.UL and Target Corp (TGT.N) as its biggest customers, rose 14 percent to $1.16 billion.

Analysts on average expected earnings of 16 cents a share, on sales $1.11 billion, according to Thomson Reuters I/B/E/S.

The company’s shares were up nearly 2 percent at $27.29 in midday trading. They have risen 6.3 percent so far in 2011. They trade at about 13.1 times forward earnings, well above the sector average of 7.9. Rival Hasbro Inc’s (HAS.O) shares trade at a multiple of about 13.9.

(Additional reporting by Dhanya Skariachan and Nivedita Bhattacharjee in Bangalore; editing by Maju Samuel, Steve Orlofsky and Andre Grenon)

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Google scores a plus as investors toast results

July 16, 2011 in Global Markets News


SAN FRANCISCO/BANGALORE |
Fri Jul 15, 2011 11:44am EDT

SAN FRANCISCO/BANGALORE (Reuters) – Shares of Google Inc (GOOG.O) surged 14 percent on Friday, a day after blockbuster results and early signs of success in newer initiatives revived hopes that the Internet giant is getting back on the growth track.

The shares shot up to $600.25, climbing back to pre-2011 levels on Nasdaq. If the gain stands by the end of Friday, it would mark the biggest single-day gain for Google shares since October of 2008.

“We are witnessing signs of increased competitive advantage for Google, particularly in Display and Local, with Search showing no signs of slowing,” Evercore analyst Ken Sena said.

Sena raised his price target on the stock to $735 from $670, while Collins Stewart analyst Mayuresh Masurekar raised his price target to $725 from $680.

Jefferies raised its price target on the stock to $830 from $800, while Barclays Capital lifted its target to $730 and $675.

The results were strong despite a seasonally slow quarter, macro softness and substantially higher costs, analyst Masurekar said.

Going forward, the analysts expect Google to post strong revenue growth on international, display and mobile segments.

On a conference call, Chief Executive Larry Page said Google’s new social networking service, Google+, had signed up more than 10 million people.

Clearly, the success of Google+ is a huge swing factor but the early signs of 10 million users and 1 billion items shared are encouraging, Wells Fargo analyst Jason Maynard said.

Evercore’s Sena said he was encouraged by Google+ both in terms of traction and the company’s plans to integrate its data signals and sharing capability into other products and services.

“TOOTHBRUSH” WORKS

CEO Page had compared Google’s approach to being “like a toothbrush,” something you use twice a day.

“We have made a good start but we are at only 1 per cent of what’s possible… Google is just getting started… and that is why I am here — working hard to lead this company to the next level,” Page said.

The share jump that followed Google’s results may be an indicator that the Wall Street is now more willing to give Page the benefit of doubt — in terms of his investment and leadership strategy — than just a quarter ago when he stunned investors by cutting short his appearance on the post-earnings conference call.

“We think investors will welcome his reassuring comments about fiscal discipline and product focus,” Maynard said.

The better-than-expected results and successful Google+ launch should stem some of the short-term stock angst about their investment and development strategy, Maynard said.

Investors had feared Google’s ever-increasing spending would eat into margins. Operating expenses leapt 49 percent to $2.97 billion in the second quarter, to about a third of revenue.

Google is fighting technology heavyweights that include Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O), as well as upstarts such as Groupon, as it seeks to protect its lucrative search business at a time when mobile gadgets and social media are redefining the way consumers use the Web.

All five brokerages kept their top ratings on the stock, which was trading at $592.70 in late morning trade. (Reporting by Supantha Mukherjee in Bangalore and Edwin Chan in San Francisco; Editing by Gopakumar Warrier, Roshni Menon)

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