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Caterpillar (NYSE:CAT) Misses On Revenues, FY16 Guidance EPS Above Consensus, Revenues In-Line

By
Carol Harper
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Caterpillar Inc. (NYSE:CAT)

Caterpillar Inc. (NYSE:CAT) reported adjusted earnings that topped the Capital IQ consensus expectations by five cents a share in the fourth quarter. On a GAAP basis, the company suffered a net loss compared to profit last year. Its revenue dipped 22.6% and fell shy of analysts’ estimations. Looking ahead, the company sees earnings above the consensus for the year 2016. The company indicated that its guidance reflected the continued weakness in commodity prices, as well as the slowdown in economic growth.

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Sales Under Pressure

Caterpillar said that its restructuring actions, operational execution and cost management were helping its bottom line. The company suffered a net loss of $87 million or a loss of 15 cents a share compared to net income of $757 million or $1.23 a share last year. On an adjusted basis, earnings per share dipped to 74 cents from $1.35.

Sales and revenue dropped 22% to $11.03 billion from $14.24 billion. While earnings topped estimates, revenue missed Capital IQ consensus of $11.42 billion. The company blamed it on weak commodity prices, as well as, the slowing economic growth in emerging markets. The mining equipment maker said that it gained traction in market position for the fifth straight year for machines as inventory levels witnessed a fall.

Well-Positioned For 2016

Caterpillar Inc. (NYSE:CAT) said that the company is well-positioned to take advantage of its product quality, which remained high, and safety levels are considered world class. Its Chairman and CEO, Doug Oberhelman, said that the company was already gaining from its recent mvoes, and once the market rebounds, it would gain further in the future.

Going forward, Caterpillar Inc. (NYSE:CAT) expects earnings of $4.00 a share for the fiscal year 2016, which was significantly higher than the Capital IQ consensus estimation of $3.53. However, the company’s revenue projection of $40 – $44 billion fell short of $43.48 billion predictions. The company indicated that its sales in construction industries, energy transportation and resources industries will to fall 5 – 10%, 10 – 15%, and 15 – 20% respectively this year.

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JetBlue (NASDAQ:JBLU) Beats On Revenues and EPS

By
Carol Harper
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JetBlue Airways Corporation (NASDAQ:JBLU)

It could not have been a better time for JetBlue Airways Corporation (NASDAQ:JBLU) to report a doubling in profit. One of the main reasons for it was the significant drop in oil prices. A few other metrics like revenue passenger miles and capacity growth along with load factor also helped to post earnings five cents a share higher than expectations. The company also provided an upbeat forecast for capacity for the first quarter and the full year.

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Yield per Mile Down

JetBlue Airways Corporation (NASDAQ:JBLU) reported net income of $190 million, which was more than double the $88 million a year ago. Similarly, earnings per share also jumped to 56 cents from 26 cents. Its pre-tax margin jumped 9.3 points to 19.0%. Revenue grew 10.2% to $1.59 billion in the fourth quarter, which was also higher than the Capital IQ estimation of $1.57 billion.

The airline firm’s revenue passenger miles advanced 12.4% to 10.6 billion with the help of a 10.4% growth in the capacity. The company indicated that its load factor rose 1.5 points to 83.6% in the December quarter. However, yield per passenger mile slipped 3.6% to 13.62 cents whereas passenger revenue per available seat mile fell 1.9% to 11.39 cents. Similarly, operating revenue per available seat mile slackened 20 basis points to 12.62 cents.

Guidance For Q1 and Full Year

Moving ahead, JetBlue expects capacity to grow in the range of 14% – 16% in the first quarter. For the full year, the airliner sees a growth of 8.5% to 10.5%. The company indicated that severe winter weather was causing a considerable number of cancellations this quarter. As a result, growth pace in capacity as scheduled.

JetBlue also sees change in CASM, which excluded fuel as well as profit sharing. As a result, the company sees a 0 to -2% in the first quarter compared to last year. CASM is likely to witness a growth of 0% – 2% for the full year 2016.

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Eli Lilly (NYSE:LLY) Reports EPS and Revenues In-Line, Reaffirms FY16 Guidance

By
Carol Harper
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Eli Lilly and Co (NYSE:LLY)

Eli Lilly and Co (NYSE:LLY) reported 12% growth in net earnings for the fourth quarter driven by a 5% increase in top line apart from tax gains. The company’s adjusted earnings, as well as revenue came in line with the Capital IQ consensus expectations for the quarter. The drug maker also reaffirmed its guidance for the fiscal year 2016.

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Volume and Price Hike

Eli Lilly and Co (NYSE:LLY)’s net income grew 12% to $478.4 million from $428.5 million while earnings advanced 13% to 45 cents a share from 40 cents a share last year. Excluding adjustments, net income dipped 6% to $828.2 million while earnings per share fell 5% to 78 cents. Adjusted EPS was in line with Capital IQ expectations.

The company’s top line advanced 5% to $5.38 billion from $5.12 billion while non-GAAP revenue remained flat at $5.38 billion. Capital IQ estimated the drug maker to deliver revenue of $5.33 billion. The growth in revenue was attributed to a 7% increase in volume while 3% came due to price hikes. However, unfavorable impact from foreign exchange rates negated benefits by 6%.

America’s Contribution

Eli Lilly also gained from its North American market where it witnessed a 15% increase in revenue to $2.82 billion fueled by price hikes and higher volume. Volume increases for Erbitux, Cyramza, and Trulicity all contributed.

However, revenue from rest of the world saw a 4% drop to $2.56 billion as foreign exchange rates hurt results. Aside from that, it lost exclusivity for Cymbalta in 2014 in Europe though it was partly compensated by the addition of Novartis Animal Health revenue besides higher volumes from other products.

Re-Affirms Outlook

For the current year, Eli Lilly reaffirmed its adjusted earnings outlook of $3.45 – $3.55 a share for the year 2016 while Capital IQ consensus estimated called for $3.55 a share. Similarly, the company expects revenue of $20.2 – $20.7 billion, which was lower than the prediction of Capital IQ’s $20.91 billion. The drug maker indicated that it sees revenue growth, excluding currency impact, from several established products like Forteo, Humalog, Strattera, and animal health products.

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Alphabet (NASDAQ:GOOG) Seeking Sanctions Against Oracle (ORCL) After Information Leak

By
Andy Parker
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Alphabet Inc (NASDAQ:GOOG) is not comfortable with the recent disclosures made by an Oracle Corporation (NYSE:ORCL) lawyer in court. As such, the company has asked the court’s permission to allow it muzzle Oracle to avoid further discussion on what it terms confidential information. Among other things, Oracle’s lawyer discussed how Android has generated $22 billion in profit and how Google paid Apple Inc. (NASDAQ:AAPL) $1 billion to retain its search bar on iPhones.

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The disclosures by Oracle through its lawyer surprised many. It has never been known that Google pays money to Apple to keep its search bar on iPhones. It has also never been made public that Google and Apple have a revenue-sharing agreement whereby the companies split search revenue generated through iPhones. In any case, Apple has been critical of Google’s monetization strategy whereby it sells its user data to advertisers.

Friends or enemies?

Oracle’s court disclosures brought to the fore how Alphabet and Apple appear to antagonize each other on the surface but have secret revenue arrangements built around mobile search.

Oracle’s lawyer further disclosed that Android, which is the most widely used mobile operating system in the world, has generated $31 billion in revenue and at least $22 billion in profits since it was released.

Access to confidential information

Perhaps fearing further disclosure of details of its confidential relationship with Apple, Google wants the court to muzzle Oracle’s lawyer. Google’s letter to seek permission for sanctions against Oracle was sent to Donna Ryu, a U.S. Magistrate judge and William Alsup, a U.S. district judge. The letter specifically seeks to bar Oracle’s lawyer from accessing the now controversial confidential information regarding Google’s revenue arrangement with Apple. What that would accomplish at this point is anyone’s guess, given the information is already public.

Dispute over Java in Android

Alphabet and Oracle are in contest over the use of Java in Android. Oracle wants a share of Android revenue because of its Java language used in the software. Alphabet for its part insists that it doesn’t have to pay Oracle for using Java. Google also fought with Microsoft Corporation (NASDAQ:MSFT) over Android in the past.

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Amazon’s (NASDAQ:AMZN) Prime Music Gets X-Ray Lyrics, Prime Stations In UK

By
Andy Parker
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Amazon.com, Inc. (NASDAQ:AMZN) has enriched its music offering for its customers in the U.K., a move that brings them at par with U.S. Amazon Prime Music listeners. Amazon has added Prime Stations, of which there are hundreds, and X-Ray Lyrics features to the U.K. version of Prime Music. Amazon’s Prime Music is competing for listener attention with Apple Inc.’s (NASDAQ:AAPL) Apple Music and Spotify.

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Prime Music comes as part of Amazon Prime membership, which costs $99 a year and also includes free shipping of items purchased on Amazon’s website.

Prime Stations

Amazon introduced its Prime Music in the U.K. six months ago, but the service came with certain restrictions that didn’t apply to U.S. listeners. There was no way U.K. Prime Music subscribers could access extra entertainment through Prime Stations. Amazon has music offerings that it calls Prime Stations, which may be genre-based offerings or something else, but normally designed to enhance the listening experience. With the latest move, U.K. Prime Music subscribers can now access Prime Stations, which Amazon says are in the hundreds.

X-Ray Lyrics

The other feature that was lacking in the U.K. version of Prime Music was X-Ray Lyrics. The feature allows people to access text lyrics of the song they are listening to, which means you can listen and read simultaneously.

Amazon’s Prime Stations and X-Ray Lyrics can both be accessed on multiple platforms, including Windows, Android, iOS and Mac devices. Users can also access the features on Amazon’s branded hardware such as Kindle Fire tablets and Fire TV.

The update to the U.K. Prime Music means that listeners there are now on par with their U.S. counterparts.

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Mislabeling Triggers Recall Of 70,000 Pounds Of Pizza At Whole Foods (NASDAQ:WFM)

By
Andy Parker
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Whole Foods Markets, Inc. (NASDAQ:WFM) is in the process of pulling lots of frozen pizza from its shelves. More than 70,000 pounds of pepperoni pizza are being recalled over misbranding issues. The problem was that the pizzas being recalled were wrongly labeled as being beef-based when they were actually pork-based.

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There is no health alarm over Whole Foods’s pizza recall. The recall has been classified as a Class II recall, which means that health risks resulting from the labeling confusion are low. However, because of factors such as religious beliefs and possible allergic reactions to pork, some Whole Foods customers could be adversely affected if they consume the misbranded pizzas.

However, there have not been any reports about people being affected by Whole Food’s mislabeled pepperoni pizza. It is emerging that the pizza misbranding problem stemmed from Whole Foods switching suppliers. However, the mix-up was discovered during label review.

The recall

The pizza recall affects certain 10-ounce and 19-ounce pizza packages produced in the period between Jan. 5, 2015 and Jan. 22, 2016. The items had sell-by dates ranging from Jan. 12, 2015 to Jan. 30, 2016. The affected packages were delivered to New Hampshire, New York, New Jersey, Rhode Island, Connecticut and Maine.

Some 74,000 pounds of the mislabeled pepperoni pizza are being recalled.

Whole Foods sells mainly organic foods as well as items that meet special dietary needs of its customers. Obviously, that involves making sure that items are accurately labeled so that customers are sure what they are buying and/or consuming.

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Seadrill Ltd (NYSE:SDRL) May Dilute Its Shares To Raise $1 Billion

By
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Embattled energy company Seadrill Ltd (NYSE:SDRL) could return to the equity market to raise an additional $1 billion to help remain afloat. The company is also expected to renegotiate with creditors to push back maturity of certain debt obligations. If Seadrill doesn’t act fast to put its house in order, the company could face a $2.5 billion funding hole by 2018.

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Things aren’t well with Seadrill along with most other companies exposed to the oil and gas market. The step-down in drilling and postponement of rig projects because of falling oil prices doesn’t sit well for Seadrill. The company has multiple debt obligations to meet, yet it is not generating enough money to cover the repayment of those debts as the oil market rout continues to bite despite a mild recovery in the last few days.

Equity refinancing

Before its debt wall climbs too high, Seadrill could sell fresh shares to the tune of $1 billion to try and strengthen its balance sheet and boost its liquidity position. That is the view of Janne Kvernland, an analyst with Nordea Bank AB. According to Kvernland, raising equity could at least help Seadrill cope with the nearly $2.5 billion funding gap in view by 2018.

Debt renegotiation

In addition to selling new shares, Kvernland also says that Seadrill is likely to get back to the negotiation table with its bondholders and banks to try and convince them to extend the maturity of its various debts. Among other debts, Seadrill has a $1 billion bond maturing in 2017.

Kvernland is of the view that banks are likely to accept Seadrill’s debt renegotiation.

Doomsday not in view

As much as Seadrill appears to be taking a beating from all directions, management remains confident that the company can weather the storm. The company’s CEO, Per Wullf, recently played down claims that the company was approaching its end.

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MannKind (NASDAQ:MNKD) Could Soon Sell Itself

By
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MannKind Corporation (NASDAQ:MNKD) is said to be exploring strategic options for its future and a sale of the company is one of the considerations. Thoughts about MannKind possibly selling itself in the near future are surfacing following the termination of the company’s collaboration deal with Sanofi SA (NYSE:SNY). There are also fears that MannKind could go bankrupt at any moment considering that it is quickly running low on cash and is already deep in the red.

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MannKind management isn’t commenting on the possibility of selling the company. The closest that the CEO, Matthew Pfeffer, came to hinting at a new direction for MannKind was a comment that they were exploring new partnerships post the Sanofi deal termination. In particular, Pfeffer talked about seeking new sales and distribution partners for Afrezza, the company’s flagship insulin inhaler.

Trying to convey the message that it was working to remain steady, MannKind recently entered into a new deal with Receptor Life Sciences. The deal revolves around developing and commercializing inhaled drug products for inflammation, pain and others.

As much as MannKind’s management is trying to remain vague about the ultimate fate of the company, a number of analysts are convinced that a sale could be the best way out of the quagmire. Rumors of MannKind selling itself were received well in the market, leading to a rare 14% uptick in its stock price.

However, shares of MannKind have nosedived since the announcement of termination of the deal with Sanofi and are currently trade close to their 52-week lows. Perhaps MannKind’s beaten down market cap of less than $400 million could attract fellow drug companies interested in its assets and networks.

$44 million owed to Sanofi

MannKind’s Q3 losses surged to $31.9 million. The company also owed Sanofi about $44 million at the end of the last quarter.

MannKind and Sanofi have agreed to an orderly end of their partnership.

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Rowan (NYSE:RDC) Pulls The Plug On Dividends, Amends Credit Facility

By
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Rowan Companies PLC (NYSE:RDC) will no longer pay quarterly dividends. The suspension is as of now indefinitely. The company has also renegotiated fresh terms for its credit facility, primarily pushing maturities back. The elimination of dividends and amendment of credit terms are all geared towards strengthening the company’s liquidity position.

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Rowan is a smaller player in the oil and gas industry, which is undergoing quite a baptism of fire as crude prices have collapsed. The situation is so tough that some companies in the industry risk going out of business, but Rowan believes its latest internal adjustments will enable it to survive the pressures.

Rowan used to distribute $0.10 per share to its Class A ordinary shareholders as a quarterly dividend. The company is now seeking to preserve cash to try to weather the storm. Management says that elimination of dividends will boost Rowan’s liquidity by at least $50 million annually.

Rowan has not provided an update on when it might restore the dividend payment.

New credit terms

In another adjustment, Rowan has been able to push the maturity of its revolving credit facility to 2021 from 2020. That gives it an extra one-year, which should also help alleviate the company’s financial pressures. Rowan has access to $1.5 billion until January 23, 2019 under the credit facility, which falls to $1.44 billion on January 23, 2020 and later to about $1.29 billion until maturity in 2021.

Note retirement

In yet another measure to bring more flexibility to its balance sheet, Rowan said it retired about $98 million worth of senior notes, which were due to mature in the next four years. If the notes ran their full course, they would have added $21 million of interest burden for the company.

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U.S. Dollar Moderately Lower Against Major Currencies

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The Euro maintained its gains against the U.S. dollar today after the much-awaited statement from the Federal Reserve was finally released a day earlier. As widely anticipated, the Fed kept short-term interest rates as is given global market turmoil. The bank hiked the rate for the first time in seven years last month.

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EUR/USD was firm against the greenback by 0.08% at 1.0901. The pair should see support near 1.0538 and resistance at 1.1496. January industrial and consumer data will be key numbers to look at in the Eurozone.

Other currencies

At the same time, the British pound rallied against the U.S. dollar following the release of the Fed commentary, but the gains are limited. GBP/USD was up 0.30% at 1.4277. U.K. fourth quarter growth data will be a key focus of European markets today.

Meanwhile, the U.S. dollar slipped by 1.38% against the Russian ruble to 76.782. The ruble breached its record lows on Wednesday this week after oil prices breached the $30 level, though they have since recovered to over $32. The Russian economy, being driven by oil exports, has been greatly damaged by the plunge in oil prices due to oversupplies. The continued slump in crude has heightened the fears that Russia is on the brink of an economic crisis.

Bank of Japan Statement

The U.S. dollar maintained its pace ahead of the Japanese yen as well as it was trading higher by 0.11% at 118.80 . The Federal Reserve’s optimistic tone about growth and a stronger labor market strengthened the greenback. After the Fed’s statement, investors are closely eyeing the Bank of Japan’s decision about monetary easing this Friday. There are growing beliefs that the BoJ will have to undertake monetary easing measures to some extent due to global weakness. However, rates are likely to remain unchanged for now.

China’s yuan barely moved today as the People’s Bank of China set a strong fix for the currency. The bank has fixed yuan at 6.5528 against 6.5533 yesterday. The dollar was 0.03% lower against the Yuan at 6.5761.

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