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The Credit Markets Emasculated: Altria (MO) Delays Deal, Or Kills It

247wallst — Sat, 04 Oct 2008 07:18:13 +0000

As long as companies in the "smokes" business are not being sued by dead people who used their products, it is a hell of a business. Operating margins can run above 20% and cash flow is stupendous.

All of that makes Altria’s (MO) decision to delay its buyout of UST (UST) more troubling. The credit markets have been mauled to the extent that the banks helping finance the deal have suggested it be delayed until early next year. The MO press release on the acquisition said "While Altria currently has fully committed financing to complete the transaction, Altria’s lenders advised that it would be preferable to close the transaction in 2009."

That is double-talk for saying the banks wanted junk-bond rates to consummate the marriage of the two companies, an acknowledgment of how significantly access to credit has fallen in the last two weeks.

The message in a bottle is that no deal, no matter how creditworthy the firms involved may be, is going to get done over the next quarter. If matters do not improve, Wall St. can assume Altria will pay a break-up fee of $300 million and walk away from UST sometime after the first of the year.

The markets should have seen the announcement coming. The 10% coupon that GE (GE) and Goldman Sachs (GS) had to pay Warren Buffett for money was remarkable evidence of how expensive cash is for even iconic American firms.

M&A died last week and the Altria announcement buried it.

Douglas A. McIntyre

Posted in Tobacco Tagged: GE, GS, MO, UST

Top Pre-Market Analyst Downgrades (AZO, CX, FNM, ISIL, MHK, NVDA, PETM, POR, TSCO, UST)

247wallst — Mon, 08 Sep 2008 06:34:12 +0000

These are some of the larger impact calls from analysts with downgrades or negative calls we are seeing this Monday morning with more than two hours to the open:

AutoZone (AZO) Cut to Neutral at Goldman Sachs.
Cemex (CX) Cut to Hold at Deutsche Bank.
Fannie Mae (FNM) and Freddie Mac (FRE) Cut to Sell from Buy at Citigroup.
Intersil (ISIL) Cut to Neutral at UBS.
Mohawk Industries (MHK) Cut to Underweight at JPMorgan.
NVIDIA (NVDA) Cut to Sell at UBS.
PetSmart (PETM) Cut to Neutral at Goldman Sachs.
Portland General Electric (POR) Cut to Neutral at Goldman Sachs.
Tractor Supply (TSCO) Cut to Neutral at UBS.
UST (UST) Cut to Neutral at UBS.

Jon C. Ogg
September 8, 2008

Altria & UST Could Face Antitrust Issues (MO, UST)

247wallst — Fri, 05 Sep 2008 09:36:36 +0000

The merger chatter this morning has Altria Group Inc. (NYSE: MO) looking at UST Inc. (NYSE: UST) in a deal valued at $10 Billion or higher. This could be a major score for Big Tobacco. The Us cigarette leader could grab hold of the largest smokeless tobacco company. Marlboro could add Skoal, Husky, Copenhagen, and other brands to its smokeless tobacco operations to become the leader in that sector as well. But that may also bring up antitrust issues and potential regulatory hurdles.

The current administration has not really blocked any mergers over thelast eight years. Whether the 2009 to 2012 president ends up beingMcCain or Obama, it is very likely that the new administration’s regulatory appointees won’thit each merger application with the auto-approve stamp. Altria is worth more than $40 Billion today and the post-story pop has the value of UST right around $10 Billion. Even if dealsof this size or magnitude are approved they may take longer and comewith more conditions than the last eight years have seen. Does thismean the deal would get blocked? No, likely not. But merging twoleaders in field would face scrutiny not just on the federal level.You have top recall that Big Tobacco has settlements with individualstates who rely upon the companies for taxes that go years and yearsinto the future.

Another issue that may come up is that Altria would have to decide ifit wants to keep UST’s wine operations. Altria already holds a 28.5% stake inSAB/Miller. UST’s Ste. Michelle Wine Estates produces and marketspremium wines sold nationally through the Chateau Ste. Michelle,Columbia Crest, Snoqualmie and Stag’s Leap Wine Cellars wineries, aswell as sparkling wine sold under the Domaine Ste. Michelle label. Italso is the exclusive U.S. distributor of wines made by Italy’sMarchesi Antinori. This would give Altria either another revenuestream it currently doesn’t have, or the company could decide to putthe unit up for sale to help finance a deal.

It appears that Wall Street likes the notion of this merger. On a day where themarkets are down about 1% we see Altria shares are up 1% at $20.87 andUST shares are up almost 25% at $67.32. If the companies do decide tomerge it would seem that they would ultimately be able to get the deal approved.After all, both presidential candidates are generally deemed as tobacco friendly.There would just likely be certain conditions upon the terms andforward pricing.

Jon C. Ogg
September 5, 2008

Top 10 Pre-Market Analyst Calls (ACAS, AAPL, CAi, CMA, DBD, GYI, UST, WHQ, YHOO)

247wallst — Mon, 05 May 2008 07:12:54 +0000

These are some of the analyst calls affecting shares this Monday morning:

American Capital Strategies (NASDAQ: ACAS) downgraded to Sell at UBS.
Apple (NASDAQ: AAPL) raised target to $220 from $200 at RBC.
CACI International (NYSE: CAI) raised to Buy at Jefferies & Co.
Comerica (NYSE: CMA) raised to Buy at Deutsche Bank.
Countrywide (NYSE: CFC) cut tp underperform at FBR.
Diebold (NYSE: DBD) raised to Buy at KeyBanc Capital Markets.
Getty Images (NYSE: GYI) downgraded to Market Perform at William Blair.
UST Inc. (NYSE: UST) raised to Buy at Deutsche Bank.
W-H Energy Services (NYSE: WHQ) raised to Buy at Deutsche Bank.
Yahoo! (NASDAQ: YHOO) downgraded to Sell at Citigroup.

Jon C. Ogg
May 5, 2008

Top 10 Pre-Market Analyst Calls (AFL, CROX, DKS, DWA, EXPD, ERIC, POT, STT, UST, XTO)

247wallst — Wed, 02 Apr 2008 06:52:57 +0000

Below are the top analyst calls we are focusing on this Wednesday morning:

AFLAC (NYSE: AFL) cut to Neutral from Buy at UBS.
Crocs (NASDAQ: CROX) cut to Neutral from Overweight at JPMorgan.
Dick’s Sporting Goods (NYSE: DKS) cut to Neutral from Buy at UBS.
DreamWorks Animation (NYSEL DWA) started as Neutral at UBS.
Expeditors International (NYSE: EXPD) cut to Neutral at UBS.
LM Ericsson (NASDAQ: ERIC) cut to Neutral at HSBC Securities.
Potash Corp. (NYSE: POT) target Raised to $240 From $200 at CIBC.
State Street (NYSE: STT) cut to Market Perform from Outperform at KBW.
UST (NYSE: UST) cut to Neutral from Buy at Goldman Sachs.
XTO Energy ((NYSE: XTO) started as Outperform at Morgan Keegan.

Jon C. Ogg
April 2, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

The 52-Week Low Club

247wallst — Tue, 21 Aug 2007 15:50:36 +0000

UST Inc (UST) Philip Morris USA is testing rival product. Shares drop to $47.73 from 52-week high of $61.17.

Saks (SKS) Market miffed about Q2 loss. Drops to $16.55 from high of $23.25.

Williams-Sonoma (WSM) Citi initiates retailer as "sell". Falls to $29.51 from 52-week high of $36.95.

Oplink Communications (OPLK) Fiber optics company gives weak outlook. Fall sto $13 from 52-week high of $22.38.

Adams Respiratory (ARXT) Posts loss and see generic competition. Falls to $34.50 from 52-week high of $46.67.

Douglas A. McIntyre

Pre-Market Earnings Gappers (July 26, 2007)

247wallst — Thu, 26 Jul 2007 07:58:07 +0000

(AAPL) Apple traded down initially, but shares are up 7% pre-market after earnings and maintaining 2008 iPhone sales.
(AKAM) Akamai Tech $0.30 EPS vs $0.30 estimate; shares down over 10% pre-market on guidance being in-line and after broker downgrades.
(AN) Auto Nation $0.38 EPS vs $0.42 estimate.
(APA) Apache $1.89 EPS before items vs $1.90.
(ARTG) Art Tech $0.00 EPS vs $0.01 estimate.
(BC) Brunswick $0.65 EPS vs $0.64 estimate.
(BDK) Black & Decker $1.75 EPS versus $1.73 estimate.
(BIDU) Baidu.com posted over 100% growth in earnings and revenues; $0.54 EPS equivalent versus $0.43 estimate; trading up 17% pre-market.
(BZH) Beazer Homes -$0.06 EPS versus -$0.46 estimate, although estimates are all over the place.
(CMCSA) Comcast $0.19 EPS & $7.71 Billion revenues versus $0.19/$7.71B estimates; shares trading down 3% pre-market.
(CMI) Cummins $2.13 EPS versus $1.58 estimate.
(CNX) Consolidated Energy $0.83 EPS vs $0.60 estimate; unsure if comparable.
(COL) Rockwell Collins $0.86 EPS vs $0.83 estimate.
(F) Ford $0.13 EPS versus -$0.36 estimate; unsure if comparable; shares trading up 2% pre-market.
(GT) Goodyear Tire $0.35 EPS vs $0.37 estimate.
(ICE) IntercontinentalExchange $0.85 EPS versus $0.76 estimate.
(IKN) IKON Office $0.23 EPS vs. $0.23 estimate; sees next quarter $0.22 EPS vs $0.23 estimate.
(KEI) Keithly -$0.03 EPS vs -$0.01 estimate.
(KLIC) Kulicke & Soffa $0.08 EPS versus $0.08 estimate; shares down 1% pre-market.
(LLL) L-3 Communications $1.49 EPS versus $1.43 estimates.
(MMM) 3M $1.25 EPS vs $1.18 estimate.
(ODFL) Old Dominion Freight Line $0.57 EPS versus $0.55 estimate.
(PCCC) PC Connection $0.21 EPS versus $0.19 estimate.
(PMTI) Palomar Meed $0.43 EPS vs $0.29 estimates.
(QCOM) Qualcomm $0.55 EPS vs $0.51 estimate; fiscal guidance raised to $1.95 to $1.97 versus prior $1.84 to $1.88 range; shares up 1.5% pre-market.
(QLTI) QLT Inc. $0.08 EPS vs $0.07 estimate.
(RAIL) Freightcar America $0.93 EPS vs $0.92 estimate.
(RCL) Royal Caribbean $0.60 EPS vs $0.60 estimate.
(RTN) Raytheon $0.79 EPS versus $0.68 estimate; unsure if comparable.
(TEN) Tenneco $0.87 EPS vs $0.77 estimate.
(UST) UST Inc. $0.90 EPS vs $0.85 estimate.
(UTEK) Ultratech $0.04 EPS vs -$0.04 estimate.
(WEN) Wendy’s $0.33 EPS vs $0.33 estimate.
(XOM) Exxon Mobil $1.83 EPS vs $1.96 estimate; trading down 2% pre-market.
(XMSR) XM Satellite Radio -$0.45 EPS and $277M revenues versus estimates of -$0.44/$274.75M; added about 338,000 net subscribers; shares down 1.75%.

Jon C. Ogg
July 26, 2007

Cramer Sticks With Tobacco & Sin Stocks (MO, RAI, VGR, UST, BUD)

247wallst — Wed, 20 Jun 2007 17:20:02 +0000

Stock Tickers: MO, RAI, VGR, UST, BUD

On tonight’s MAD MONEY on CNBC, Jim Cramer came out very positive on Vector Group Ltd. (VGR-NYSE). He noted that Carl Icahn is a big backer of the company and noted hat it has a monster yield and has hiked its dividends almost yearly. In call-ins he also noted Altria (MO-NYSE) and Reynolds (RAI-NYSE) in regular tobacco, and even UST (UST-NYSE) in smokeless tobacco all as undervalued stocks. As far as another sin name, he also noted Anheuser Busch (BUD-NYSE) positively in a call-in during the segment.

Jon C. Ogg
June 20, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.

Earlybird Analyst Calls (June 11, 2007)

247wallst — Mon, 11 Jun 2007 06:19:51 +0000

AGP raised to Hold at Jefferies.
ARAY started as Underperform at CIBC.
BE cut to Underperform at Jefferies.
BF/a raised to Overweight at JPMorgan.
BOT cut to Neutral at Credit Suisse.
CAVM started as Buy at Deutsche bank.
CPS raised to Outperform at JMP Securities.
HRB raised to Buy at UBS.
JNJ raised to Neutral at Credit Suisse.
KFS raised to Outperform at CIBC.
MKTX cut to Underweight at JPMorgan.
NKE raised to Overweight at HSBC.
NFLX cut to Underweight at JPMorgan.
RKT raised to Neutral at Credit Suisse.
UST raised to Buy at UBS.
VAR raised to Outperform at CIBC.
VRUS started as Buy at UBS.
WB raised to Outperform at FBR.
WDC raised to Buy at UBS.

Jon C. Ogg
June 11, 2007