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United States Steel 10-16 19:15 GMT
(Comment)
In our last U.S. Steel (X) report (GC 8/8/19), we noted that the company was stepping up...
Corporate Development by Evan Mann, CFA
In our last U.S. Steel (X) report (GC 8/8/19), we noted that the company was stepping up capital spending at what we view as late in the steel market cycle. While the success of this investment program could yield higher EBITDA and cash flows down the road, it comes at the expense of higher leverage, reduced liquidity, and free cash flow shortfalls over the near to medium term. A lot has happened since this report. In early October, the company announced the acquisition of a 49.9% joint venture interest in Big River Steel for $700 million (expected to close at the end of October) with an option to acquire the remaining 50.1% within the next four years bringing total consideration to $2.325 billion (includes an expansion program that is underway). Earlier this week, X announced plans to issue $300 million of senior convertible notes due 2026 (with an option to increase the size an additional $50 million) with the net proceeds slated to support its strategic investments and capital spending needs. The company also released preliminary third quarter results including adjusted EBITDA of $134-144 million, ahead of mid-September guidance of $115 million on higher shipments, better than expected manufacturing performance in Flat-rolled, and a contingency gain from recovered claims arising out of the bankruptcy of a supplier. We expect the company's transformation plans (capital spending plans plus the acquisition of Big River) to strain the balance sheet for the foreseeable future. Maintain underperform.
Cardinal Health, Inc. 10-16 17:46 GMT
(Comment)
The Wall Street Journal is reporting that the big three drug distributors are in...
Legal Development by Carol Levenson, CFA
The Wall Street Journal is reporting that the big three drug distributors are in talks to settle opioid litigation with a coalition of state attorneys general. The companies have not confirmed this, but the stocks are up on the reports. The settlement with state and local governments would involve payment of $18 billion over 18 years, split three ways presumably according to market share, as with the master tobacco settlement. This would be a manageable amount for Cardinal, which generates over $1 billion in free cash flow annually with projected leverage of 3x. It probably would want to cut back on its share repurchases, currently about $700 million annually. If this indeed comes to fruition at these terms and settles all current and future opioid litigation (not a certainty), it would eliminate a major overhang for Cardinal and would be a credit positive despite the cash outlays.
McKesson Corporation 10-16 17:37 GMT
(Comment)
The Wall Street Journal is reporting that the big three drug distributors are in talks...
Legal Development by Carol Levenson, CFA
The Wall Street Journal is reporting that the big three drug distributors are in talks to settle opioid litigation with a coalition of state attorneys general. The companies have not confirmed this, but the stocks are up on the reports. The settlement with state and local governments would involve payment of $18 billion over 18 years, split three ways presumably according to market share, as with the master tobacco settlement. This would be a manageable amount for McKesson, which generates $3-$4 billion in free cash flow annually and carries leverage of less than 2x. It probably could even continue to repurchase its stock, currently running at about $2 billion annually. If this indeed comes to fruition at these terms and settles all current and future opioid litigation (not a certainty), it would eliminate a major overhang for MCK and would be a credit positive despite the cash outlays.
Spectrum Brands 10-16 02:55 GMT  
(Report with Analyst's Data Sheet) 
Spectrum Brands (SPB) earlier this year sold its battery business and its Global Auto Care business to Energizer for over $3 billion collectively. This...
A Smaller Spectrum by Kim Noland
Cencosud S.A. 10-16 02:28 GMT  
(Report with Analyst's Data Sheet) 
Retailing in Chile is getting harder, as we had indicated earlier this year. Yet, Cencosud S.A. (CENSUD) is showing a resilient performance. The company...
Mixed Signals by Cedric Rimaud, CFA
JPMorgan Chase 10-16 02:22 GMT  
(Report with Analyst's Data Sheet) 
There has been discouraging news recently, both in the economic data, and on the political front. But you wouldn't know it from looking over JPMorgan...
Above The Fray by Kathleen Shanley, CFA
Omnicom Group Inc. 10-15 14:30 GMT
(Comment)
Omnicom Group reported a 2.2% increase in organic revenue for the third quarter, a pace...
Earnings by Dave Novosel, CFA
Omnicom Group reported a 2.2% increase in organic revenue for the third quarter, a pace below those of the last four quarters. Latin America led the way with a gain of 6.6%, while Middle East Africa, which happens to be the company?s smallest region, was the only declining region (-4.5%). Organic growth in the U.S. was 2.7%. Reflecting the foreign exchange impact and the effect of dispositions, reported revenue fell 2.4%. That was better than the declines posted in the first two quarters of the year. In terms of segments, advertising and CRM- Consumer performed well, while Public Relation and CRM-Execution were weak. Operating margins rose substantially, given the weakness last year stemming from repositioning actions including severance costs and lease terminations. Margins were also boosted by improved efficiencies in real estate portfolio management, back office services, procurement, and IT services. Business divestitures helped the mix. We expect full-year margins to be up considerably versus last year, although 2018 was burdened by the poor Q3. Nonetheless, at 14%, it would mark the highest margin we have ever seen. As usual, free cash flow through the first nine months was not very impressive, with Q4 being the critical period for the company. We expect more than $700 million for the full year. OMC slashed debt by roughly $400 million in Q3, pushing leverage down to 2.2x, which is where it started the year.
Transnet SOC Ltd. 10-15 02:43 GMT  
(Report with Analyst's Data Sheet) 
Despite challenging economic conditions that led to lower demand in mining commodities, Transnet SOC Ltd. (SAFTRA) managed to post some good results...
Going Off The Rails by Alexandre Dray
Dominion Energy 10-15 02:33 GMT  
(Report with Analyst's Data Sheet) 
The new Dominion Energy (Virginia Electric now accounts for only half of EBITDA) just changed its management structure to match its pending new reporting...
Yes, Virginia by Carol Levenson, CFA
Thermo Fisher 09-29 
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