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Cardinal Health, Inc. (NYSE: CAH) is going to shuffle things up. The healthcare products and services company plans a tax-free spin-off of its clinical and medical products businesses as a separate public company. The new company will be led by current vice chairman David L. Schlotterbeck. Cardinal expects the deal to be completed by the middle of 2009.
Monthly Archives: September 2008
Cardinal Health To Spin Off Med Tech (CAH)
Top Pre-Market Analyst Upgrades (ACV, CMM, NCC, NT, RHD, TLAB, TRA, XLNX)
These are some of the top analyst upgrades we have seen this Monday morning with about two hours to the open:
- Alberto-Culver (ACV) Started as Buy at Goldman Sachs.
- China Mass Media (CMM) Started as Outperform at Oppenheimer.
- National City (NCC) Raised To Outperform at Oppenheimer.
- Nortel Networks (NT) Raised to Buy at UBS.
- R.H. Donnelley (RHD) Raised to Hold at Deutsche Bank.
- Tellabs (TLAB) Raised to Outperform at Baird.
- Terra Industries (TRA) Raised to Neutral at Goldman Sachs.
- Xilinx (XLNX) Raised to Buy at Piper Jaffray.
Jon C. Ogg
September 29, 2008
Early Bird Analyst Downgrades (AAPL, RATE, COP, INFN, MOT, SMOD, TSCM, THO, WM, WGO)
These are not all of the analyst downgrades this Monday morning, but these are some of the standout calls we have seen affecting shares early with more than two hours to the open:
- Apple (AAPL) Cut to Equal Weight at Morgan Stanley.
- Bankrate (RATE) Cut to Neutral at Merriman Curhan Ford.
- ConocoPhillips (COP) Cut To Neutral at Goldman Sachs.
- Infinera (INFN) Cut To Sell at Goldman Sachs.
- Motorola (MOT) Cut to Hold at Citigroup.
- Smart Modular Tech (SMOD) Cut to Hold at Deutsche Bank.
- TheStreet.com (TSCM) Cut to Neutral at Merriman Curhan Ford.
- Thor Industries (THO) Cut to Underperform at Baird.
- Washington Mutual (WM) Cut to Underperform at KBW.
- Winnebago Industries (WGO) Cut to Underperform at Baird.
Jon C. Ogg
September 29, 2008
The Treasury’s $700 Billion Bill Limited, The Markets Turn To The Fed
The attention of the markets is focused in the wrong direction. The Treasury will probably get its $700 billion bailout bill. A number of banks and other financial firms will have their balance sheets buttressed. Credit availability may improve, but banks may hold on to a lot of the capital to shore up reserves against more write-offs due to a failing housing market.
Because the system is so badly damaged, it is unlikely that the economy will be suddenly awash in capital.
The Fed, working quietly, is building an insurance policy into the system and it may do more than the new "Emergency Economic Stabilization Act of 2008."
For $700 Billion, The Little Guy With A House Gets Nada
Congress has built all kinds of protections into the $700 billion bailout to keep the average citizen from having to foot the bill. If assets sold to the Treasury by financial companies have not regained their value in five years, the firms must pay the government back. That only works if the banks are still in business.
There will be oversight of the program so that Treasury cannot draw down the entire $700 billion all at once and use the money for a vacation in Mexico.
The package of salvation has been named the "Emergency Economic Stabilization Act of 2008." It may stabilize some big banks and a portion of the credit markets and may or may not cost taxpayers money over time. It almost certainly gives the troubled homeowner nothing.
Europe Markets Take On Water, US Plan Not Enough
The bailout plan proposed by Treasury and likely to pass Congress this week has not been nearly enough to calm world markets. The Heng Seng fell over 4%.
In Europe, at 5.35 AM, the FTSE is off 2.1%. The DAXX is down 2.7% and the CAC 40 is off by 2.6%.
Douglas A. McIntyre
Media Digest 9/29/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, Congress is ready to vote on a $700 billion financial bailout package.
Reuters reports that Belgian-Dutch group Fortis was nationalized
Reuters reports that British mortgage lender Bradford & Bingley will have it branches sold and the rest will be nationalized.
Reuters reports that weak US bank Wachovia (WB) is likely to be taken over by Citigroup (C) or Wells Fargo (WFC)
Asia Markets 9/29/2008
Asia markets fell on concerns that the US federal bailout may be too little, too late.
The Nikkei was off 1.3% to 11,744. Toyota (TM) fell over 3% on concerns about a recession. Mizuho Financial Group fell almost 2%.
The Hang Seng dropped 2.9% to 18,129. Ping An Insurance dropped 9% on a bail-out of Fortis.
The Shanghai market was closed for a holiday.
Data from Reuters
Douglas A. McIntyre
As Wachovia (WB) And Fortis Falter: The Bailout Will Have Been Too Little
Two European financial firms fell apart during the last 24 hours. The U.K. government said that mortgage bank Bradford & Bingley is being nationalized after investors and lenders lost confidence in the group. B&B’s stock market listing was canceled. Investors got nothing.
Belgian banking and insurance group Fortis received an 11.2 billion euro ($16.37 billion) injection from the Netherlands, Belgium, and Luxembourg. It would have failed without the capital.
In the US, Wachovia (WB) has begun negotiations with Citigroup (C) and Wells Fargo (WFC) to sell all or parts of its operations. The New York Times says that the buyout conversations are active.
In the European cases, potential buyers walked away because the finances of Fortis and B&B were so severely damaged that no other financial company would take them on. With Wachovia, other banks may wait until its assets can he bought at fire sale prices. The examples of Bear Stearns and Washington Mutual have given strong companies an idea of how little they can pay for potentially valuable properties.The credit crisis has perverted the process of valuing assets.
Banks Wait To Screw Wachovia (WB) Shareholders
Banks and investment banks who watched Bear Stearns, Washington Mutual, and Lehman go down in flames have learned a lesson. Bank of America (BAC) moved too fast to buy Merrill Lynch (MER). If it had held off a few days, it could have gotten the broker at a much lower price. Investors were driving its shares down relentlessly. Of course, BAC might have risked another company picking off Merrill. That is probably its excuse for buying too early and wasting shareholders’ money. JPMorgan (JPM) got an extraordinary deal on WaMu’s asset by letting the bank reach the point of failure.
Wall St. Turns On Google (GOOG)
The perverse view of Google (GOOG) as a "recession proof" company has already been given lie by the firm’s share price. Last week, the stock got as low as $421, near its 52-week low of $406 and down from its period high of $747.
UK Financial News Wrap: FT, Times, Telegraph, Observer
According to The Times of London, the Treasury is poised today to nationalize Bradford & Bingley, the troubled mortgage bank.
The Times also reports that hedge funds and institutions could be forced this week to write down billions of dollars related to trading positions that were frozen when Lehman Brothers was put into administration two weeks ago.
The FT reports that Wachovia (WB) approached potential buyers, including Citigroup (C), Wells Fargo (WFC) and Spain’s Banco Santander, on Friday after a 27 per cent plunge in its shares deepened fears over the future of the sixth-largest US bank.
The Observer reports that UK inflation rose to 4.7% last month.
The Telegraph reports that hedge funds are preparing to return between 10 per cent and 50 per cent of their assets under management to investors who want their money back at the end of yet another quarter of dire investment performance
Apple (AAPL): Unlocking The iPhone, Hammering It Partners
Apple (AAPL) has begun the process of "unlocking" its new 3G iPhone, a move that caused controversy with the earlier version of the handset.
The unlocked phone can be used on any wireless network. That takes business away from Apple’s cellular distribution partners, lead by AT&T (T) in the US. An unlocked iPhone does not force consumers to sign expensive subscription deals with Apple’s carrier affiliates. That, in turn, undermines their ability to make money.
Bailout Deal Looks Done
The bailout may be done. According to The Wall Street Journal, "U.S. lawmakers said a tentative deal has been reached to bailout the troubled financial system. Treasury Secretary Henry Paulson said bailout deal legislation still needs to be finalized, but that `I think we’re there’ on a deal."
The latest wrinkle to the legislation is that it "will expand the range of firms that can sell troubled assets to the government to include pension plans, local governments and community banks serving "low- and middle-income families."
The announcement of a finished bill could come before the open of Asian markets.
Douglas A. McIntyre
Worst Performing Bank Stocks (DSL, FED, CORS, GRAN, NCC, BKUNA, VNBC)
The carnage and fallout from the Washington Mutual (NYSE: WM) failure on Friday was broad-based and very ruthless in the banking sector. Most companies had no news, yet speculation of exposure and related counterparty and credit default risk drove investors to sell almost all questionable banking names.
Bank Stock (Ticker) Close (drop and %) Volume
Downey Financial Corp. (DSL) $2.03 (-$1.87; -47.95%) 3,663,566
FirstFed Financial Corp. (FED) $10.04 (-$8.21; -44.99%) 1,972,956
Corus Bankshares Inc. (CORS) $3.75 (-$1.05; -21.88%) 993,442
Bank of Granite (GRAN) $4.50 (-$1.58; -25.99%) 65,354
National City Corporation (NCC) $3.71 (-$1.28; -25.65%) 326,015,615
BankUnited Financial (BKUNA) $0.79 (-$0.21; -21.00%) 1,200,562
Vineyard National Bancorp (VNBC)$1.10 (-$0.28; -20.29%) 81,173
There were also several REIT and other non-bank financial stocks that performed worse than some of these, but these were the banking related names that tanked after WaMu became Shamu.
Jon C. Ogg
September 27, 2008
Research in Motion Loses Its Analyst Fans (RIMM)
Research in Motion Ltd. (NASDAQ: RIMM) had a really bad week. In fact, the huge drop seen Friday broke so far under the prior 52-week low of $80.20 that you would have thought the sky was falling. The sky is not falling, but this is what happens when beloved mega-growth companies post a second disappointing report in a row. To make matters worse, the company was cautious on margins out to 2010 rather than just in the near-term as its component costs are hurting margins on new product launches. As you will see, R-I-M lost a lot of ground in analyst coverage to the point that the cheering section is going to be much smaller for a while.
Citi-chovia or WaCiti (C, WB)
The rumor mill and the deal-making mill might not be dead. The New York Times’ DealBook noted that Citigroup Inc. (NYSE:C) and Wachovia Corporation (NYSE: WB) were in early merger talks. Citi shares closed up 3.8% at $20.15 in a late-day run-up after being down sharply earlier. Wachovia shares closed down 27% at $10.00 on fears that it would face credit troubles similar to WaMu. These mergers have so far not been great for shareholders at competing banks. Wachovia’s stock is actually down about 3% in after-hours trading. Where that ultimately goes is anyone’s guess. Until there is a confirmation from one or both companies, we are treating this more as rumor than as fact.
As we noted, Citigroup’s financial supermarket model is now being vindicated based upon the financial consolidation. Too bad it executed that strategy poorly.
Jon C. Ogg
September 26, 2008
The 52-Week 9/26/2008 (MRVL)(RIMM)(WM)(JAVA)(SFD)(NCC)
Washington Mutual (WM) Shut down by feds. Drops to $.148 from 52-week high of $26.47.
Smithfield Foods (SFD) Credit concerns. Sells down to $13.95 from 52-week high of $32.26.
Sun (JAVA) Company shares continue to drift off on growth worries. Falls to $7.52 from 52-week high of $25.04.
Research in Motion (RIMM) Misses Wall St. forecast numbers. Plunges to $69.50 from 52-week high of $148.13.
NCC (NCC) Picks up worries from Washington Mutual collapse. Down to $2 from 52-week high of $27.21.
Marvell Tech (MRVL) Key supplier to RIMM. Drops to $9.57 from 52-week high of $18.84.
Fortress Files For $1 Billion Securities Shelf (FIG)
Fortress Investment Group, LLC (NYSE: FIG) has filed a shelf registration to offer as much as $1 billion in mixed securities. It lists Class A shares, preferred shares, depository shares, warrants, subscription rights, purchase contracts, and purchase units as the combination of securities it can sell. Fortress plans to use the proceeds for working capital and other general corporate purposes, which may include the repayment or refinancing of debt. No underwriters were named. Fortress is down over 16% today at $11.25, and its 52-week trading range is $8.38 to $24.73. Its current market cap is $1.06 billion.
Jon C. Ogg
September 26, 2008
Warren Buffett Helping AIG Unit (AIG, BRK-A)
There was an announcement this morning from Lexington Insurance Company, a unit of American International Group (NYSE: AIG). The unit has said that effective September 15, 2008 it has arranged a Contingent Property Reinsurance cover from the Berkshire Hathaway Inc. (NYSE: BRK-A) unit called National Indemnity Company for Lexington’s Real Estate Portfolio, as well as policies having limits of $250 million or greater, policies with home/foreign exposure and the property sections of most of Lexington’s homeowners book. It noted that this reinsurance provides coverage under the same policy terms and conditions as issued by Lexington. In the event of a covered loss, Berkshire stands behind Lexington.
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