Good morning, here’s your equity research roundup from the Street:
- Canadian Financial Services: Lending volumes were stable in July, up 0.6% month on month; total mortgage loans up 96 basis points. For the year, lending has increased 8.1%. However, deposits held fell 25 basis points, though still positive for the year.
- General Motors (NYSE: GM): UAW contract signing seen as neutral for the firm. Exact details are still unknown, but negotiations have apparently borne out $5,000 bonuses for workers and plans to open an idled plant for an undisclosed vehicle. Forecasting this will add 3 cents to cost.
- Nike (NYSE: NKE): The footwear and clothing manufacturer reports earnings this Thursday. Barclays expects revenue growth of 10% to $5.7 billion, but with margins to decline to 44.0%.
- Suncor Energy (NYSE: SU): Upgraded on back of finished turnaround plan. Believes improved operating performance at oil sands unit on deteriorating costs ~C$40 per barrel, from C$53.1 per barrel, this quarter.
- Autos: September sales running briskly, compared to August. Expecting seasonally adjust annual rate of sales to hit 12.8 million in 2011 and 13.9 million in 2012, above analyst consensus.
- Generics: On wave of generic prescriptions to hit the market in 2012 – which will impact drugs with combined sales of $90 billion – Citi expects wholesalers to benefit. Upgrading Cardinal Health and McKesson to a Buy, and leaving AmerisourceBergen as a Hold.
- Semi Conductor Capital Expenditures: Expecting industry wide CapEx to fall 9% to $52 billion from $57 billion. Intel at $8 billion for the year, mostly on the back of equipment. Samsung flat.
- Nokia (NYSE: NOK): Raising estimates to €0.21 a share for 2012 but maintaining underperform rating. Channel checks and a recent trip to Asia suggest stronger supply chain management.
- Teva Pharmaceuticals (NYSE: TEVA): Day 7 of patent infringement Copaxone trial against Novartis AG’s Sandoz unit, Momenta Pharmaceuticals Inc., Mylan Inc., and Natco Pharma Ltd. Credit Suisse sees uphill battle for defendants, as Teva hopes to halt production of generics. Copaxone is the largest multiple sclerosis drug by revenue.
- Federal Open Markets Committee meeting to dominate headlines this week. Meeting to last two days so policymakers can discuss benefits and costs of various monetary policy actions.
- Starbucks (NYSE: SBUX): Management undeterred by macro uncertainty, mainly on back of strong same store sales this year. Expects reasonable K-Cup launch in November to take 10% of market – may boost next year’s EPS to $1.78.
- United Technologies (NYSE: UTX): Is lining up major debt financing for a large acquisition, likely at +$10 billion levels. Goodrich cited as likely takeover target.
Goldman Sachs & Co:
- Retail E-Commerce: Slowed to 10% growth in August, possibly attributable to Hurricane Irene. Expecting sales to revert back to brisk pace at mid-teen pace in September.
- Amerigroup (NYSE: AGP): See near-term margin pressures to be alleviated by state moves to managed care plans. Notes that recent bid wins in Louisiana and Texas have added $1.4 billion in incremental revenue for 2012.
- Netflix (NYSE: NFLX): Maintaining a buy rating, but lowering EPS estimates for 2011 to $5.03 from $5.12 on recent announcements. Ability to attract quality content still key driver of subscribers.
- Salesforce.com (NYSE: CRM): As of Saturday, Salesforce.com server transactions were up 9.6% compared to last year. Growth expected to accelerate through end of year, but weakness may come in the form of higher attrition.
- Property and Casualty Insurance: Capital reserves trending 50% lower to year ago period; deployment may only bump earnings marginally. Reserve releases have attributed approximately 30% of earnings over the past two years.
- Brinker International (NYSE: EAT): chilli’s traffic is up 1.2% versus industry wide 0.2% declines. This follows the past three years where chilli’s led in declines, with same store sales down 23.5% compared to 20.1% and 18.0% declines at Applebee’s and California Pizza Kitchen, respectively. Company has settled on new renovations, with all 865 units likely to be completed by 2014. Costing between $225,000 to $250,000 per location, JPM estimates this will increase sales targets by 3% and annual comps by a point.
- Pfizer (NYSE: PFE): A pharmaceutical match up between Pfizer and Bristol-Myers Squibb may be coming in 2012, Jefferies thinks. A strategic review finds the company should not downsize its pharma unit, meaning the company will have to invest heavily in research and development in the coming years, leaving Bristol as a possible candidate on its strong growth drivers. Bristol is up more than 1% on the news.
- Walgreens (NYSE: WAG): MS puts likelihood of an agreement between Express Scripts and Walgreens at 70%. The two have been disputing rate reimbursements and if an agreement is not reached, Walgreens with EPS downside risk between 30 and 40 per cent.
- Goldman Sacs & Co (NYSE: GS): Managing trade risks through comparables and expects GS will either grow return on equity through expense management (read that as layoffs and decreased spends) or risk on trades. Legal risks and worries in the Euro zone are weighing on the stock.
- Global Semi Conductors: Upgrading to positive. Finds the industry is still weak but not deteriorating as in the past. UBS notes that stocks are not responding to bad news, a signal that most are already bottomed out and the markets had already priced it in. Revenue forecasts unchanged, but firms have stronger balance sheets than in 2008.
- Boardwalk Pipeline (NYSE: BWP): Upgrading but maintaining earnings guidance. The company serves about 10% of daily US consumption of natural gas and has firm orders on 85% of its revenue.
- New York Times (NYSE: NYT): Ad lineage is down 12% for the first three weeks of September. National Auto advertisers contributed heavily to the decline, down 72%. The Wall Street Journal also saw declines, albeit modest at -4%.
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