Thursday, January 29, 2015 - 7:58am

In a report published Thursday, Nomura analyst Curt Woodworth reiterated a Buy rating on United States Steel Corporation (NYSE: X), but lowered the price target from $55.00 to $37.00.

In the report, Nomura noted, “US Steel has significantly exceeded earnings guidance in each of the past four quarters and consequently has established a track record of conservatism. We expect the market to be skeptical of the guidance given the continued decline in sheet prices and expectations for scrap to fall by $30-40/ton in Feb. We believe it is important for investors to understand that iron ore accounts for only ~13% of US Steel's Flat Rolled cost base and X should see significant benefits in 2015 from lower natural gas, coke, and scrap prices. In addition, we project that US Steel should be able to generate an incremental $200mn of realized project Carnegie savings relative to the 4Q-14 run rate; note X achieved $575mn of benefits in 2014. US Steel's flat rolled ASPs have been very stable over the past several years owing to continued improvements in product mix and success in maintaining price levels for OEM contracts, as was very evident in 4Q-14.”

United States Steel closed on Wednesday at $23.58.


Thursday, January 29, 2015 - 7:57am

Analysts at Compass Point downgraded Union Bankshares Corporation (NASDAQ: UBSH) from Buy to Neutral.

The price target for Union Bankshares has been lowered from $29.00 to $24.00.

Union Bankshares shares have dropped 6.30% over the past 52 weeks, while the S&P 500 index has surged 11.59% in the same period.

Union Bankshares' shares fell 6.62% to close at $21.73 yesterday.


Thursday, January 29, 2015 - 7:55am

Dr. Thomas Carr, founder of DrStoxx.com, suggested to Benzinga that investors use Alibaba Group Holding Ltd's (NYSE: BABA) earnings report as a "sell the news" play.

Carr noted that last quarter, Alibaba's earnings report fell a nickel short of expectations, causing shares to slide from $120 to a low near $95.

"This time things should be different," Carr told Benzinga via email. "Remember Singles Day? It beat revenue expectations by over $1 billion, with a 60 percent year over year sales growth, which has had the analysts all scrambling to raise consensus targets."

Carr added that Alibaba should easily report a top-line beat, but investors should still pay attention to the firm's monetization rates as there is some concern that it will be lower than it was a quarter a quarter.

Bottom line, "this may be a sell the news play."

In Thursday's premarket, Alibaba reported EPS of $0.81, beating expectations of $0.74.


Thursday, January 29, 2015 - 7:54am

Viacom, Inc. (NASDAQ: VIAB) reported results for the fiscal first quarter.

The New York-based company posted quarterly net earnings from continuing operations of $500 million, or $1.20 per share, compared to $547 million, or $1.20 per share, in the year-ago period. Excluding non-recurring items, the company's adjusted earnings surged to $1.29 per share from $1.20 per share

Its revenue gained 5% to $3.34 billion. However, analysts were expecting earnings of $1.28 per share on revenue of $3.4 billion.

Media networks revenue gained 4% to $2.65 billion, while filmed entertainment revenue rose 6% to $720 million in the quarter.

During the quarter, the company repurchased 10.2 million shares under its stock repurchase program, for an aggregate price of $750 million.

At December 31, 2014, Viacom's cash balances totaled $1.2 billion, versus $1.0 billion at September 30, 2014.

Sumner M. Redstone, Executive Chairman of Viacom, said, “Viacom's powerful entertainment brands continue to lead the way in reaching global audiences with groundbreaking content. Our outstanding management team has positioned Viacom for continued success.”

Viacom shares fell 0.95% to close at $66.50 yesterday.


Thursday, January 29, 2015 - 7:50am

The single-tenant net lease REIT sector continues to be one of the top performing, high octane REIT sectors, when it comes to both total returns and high yields.

Along with W.P. Carey Inc (NYSE: WPC), top names in this sector trading at or near 52-Week Highs include: Realty Income Corp (NYSE: O), National Retail Properties, Inc. (NYSE: NNN) and Spirit Realty Capital, Inc (New) (NYSE: SRC).

Simple Business Model

The single-tenant triple-net business model is straightforward and easy to understand. REITs acquire (or build-to-suit) freestanding facilities leased to creditworthy corporate tenants. In addition to monthly rent, tenants pay: insurance, taxes and almost all of the maintenance.

Tale Of The Tape

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This REIT sector has continued its strong performance in 2015.

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However, the incredible short-term gains in Realty Income and NNN shares have resulted in dividend yields that are no longer as attractive to traditional REIT investors.

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Spirit Realty Capital is still paying a competitive dividend, however, it has significant concentration risk in one U.S. retailer, Shopko, Inc. SRC has recently made moves to remedy that situation over time.

Related Link: This REIT Is Focused On Creating Long-Term Value

U.K. Automotive Acquisition Hits On All Cylinders

On January 28, W.P. Carey announced that it had acquired 73 retail automotive facilities for $365 million and leased them back to Pendragon plc.

Pendragon is the largest automotive dealer in the U.K. with 225 automotive franchises selling 26 brands across the country including: Kia, Ford, Range Rover, BMW, Mercedes, Aston Martin and Ferrari.

The 73 locations contain 1.6 million square feet, and are net-leased to Pendragon for an initial term of 15-years, including annual inflation based escalations.

WPC - Not Focused On U.S. Retail

  • The fact of the matter is that most of W.P. Carey's U.S. REIT peers, including Realty Income, NNN as well as Spirit Realty, are first and foremost focused on acquiring facilities and leasing them back to U.S. retailers.
  • Competition from other REITs, private equity and foreign buyers often results in cap rates being driven down on "cookie-cutter" fast food, convenience stores and corner drug stores.
  • W.P. Carey does not typically compete in that arena.

WPC - Differentiated Business Model

  • W.P. Carey is focused on mission critical facilities that it acquires or builds for a wide range of corporate customers including: office, industrial, R&D, etc. These facilities are often "one of" and underwriting them requires a higher level of sophistication.
  • W.P. Carey also derives fee income from managing and acquiring properties for its non-traded REIT portfolio.
  • Along with its diversified portfolio of U.S. assets, WPC has about one-third of its investments in the U.K., Europe, and Asia/Pacific.
  • When it comes to investing in retail, W.P. Carey CEO Trevor Bond prefers "higher barrier to entry" markets found overseas, where leases often contain uncapped inflation escalators.

Related Link: W.P. Carey: How 5 Acquisitions Can Tell A Compelling Story

Bottom Line

Investors looking for income have traditionally turned to the U.S. REIT sector. During 2015 YTD 10-Year U.S. Treasury Note yields have continued to decline, making it difficult for investors to find attractive investments.

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The fact that the vast majority of W.P. Carey leases have rent escalators will help the company to grow its cash available for distribution moving forward.

The fees generated from the non-traded REITs are non-dilutive to shareholders and provide an additional source of cash flow to pay and increase dividends.

(Article image sourced from WPC press release)


Thursday, January 29, 2015 - 7:50am

Ford Motor Co. (NYSE: F) reported better-than-expected earnings for the fourth quarter.

The Dearborn, Michigan-based company posted quarterly net income of $52 million, or $0.01 per share, compared to $3.07 billion, in the year-ago period. Excluding one-time costs, the company earned $0.26 per share, beating analysts' estimates of $0.23 per share.

The company's pretax operating profit, excluding special items, declined to $1.1 billion from $1.3 billion.

Its revenue dropped 4.5% to $35.9 billion in the quarter, versus estimates of $34.54 billion.

Pretax profit from North America declined to $1.55 billion from $1.8 billion, while the company's North American sales slipped by 44,000 units in the quarter.

The company's losses in Europe narrowed to $443 million from $529 million, while South America's losses increased to $187 million from $126 million.

Asia-Pacific profit declined to $95 million from $109 million in the quarter. Ford Motor Credit's profit surged to $408 million versus $355 million.

“2014 was a solid yet challenging year for Ford — with our investments and a record number of new products launched around the world positioning us for strong growth this year and beyond,” said Mark Fields, Ford president and CEO. “The entire Ford team remains focused on our three priorities of accelerating our One Ford plan, delivering product excellence and driving innovation in every part of the business.”

For 2015, the company maintained its pretax operating profit outlook of $8.5 billion to $9.5 billion.

Ford shares rose 2.01% to $14.75 in pre-market trading.


Thursday, January 29, 2015 - 7:48am

Analysts at Atlantic Equities downgraded Microsoft Corporation (NASDAQ: MSFT) from Neutral to Underweight.

The price target for Microsoft has been lowered from $45.00 to $40.00.

Microsoft shares have gained 11.75% over the past 52 weeks, while the S&P 500 index has surged 11.59% in the same period.

Microsoft's shares rose 0.15% to $41.25 in pre-market trading.


Thursday, January 29, 2015 - 7:48am

In a report published Thursday, Nomura analyst Frederick Grieb reiterated a Buy rating on Fortinet (NASDAQ: FTNT), and raised the price target from $34.00 to $35.00.

In the report, Nomura noted, “Fortinet reported F4Q'14 billings of $283mn, representing 35% yoy growth, above the Street estimate of 19% yoy growth. Fortinet has seen a strong acceleration in its billings growth over the past year, from a combination of a recent product refresh, increased sales and marketing spend and increased customer focus on security in the wake of several high profile security breaches. That said, Fortinet has provided soft guidance of 20% billings growth with 20% operating margins for four to five years out. We continue to rate Fortinet Buy, remaining positive with a target price of $35 (up from $34, previously), representing 14% upside potential to aftermarket indications. Fortinet currently trades at 23x our CY'15 uFCF estimate, below security software peers at 32x.”

Fortinet closed on Wednesday at $31.40.


Thursday, January 29, 2015 - 7:47am

The USD/JPY is trading 118.10, up 0.50.

Chatter about comments from various policy makers in Asia and Europe have kept traders on both sides of the market active. The wide trading range in U.S. index futures overnight have provided plenty chatter.


Thursday, January 29, 2015 - 7:46am

The March U.S. Dollar index is trading up 0.14 at 94.87. Trading is mildly choppy ahead of U.S. data.

Market chatter about FOMC and the U.S. data due out at 8:30 a.m. ET. Traders are waiting for Initial Jobless claims expected to be 310K vs 307K and Continuing Claims expected to be 2450K vs 2443K. More data will come at 10:00 a.m. ET when Pending Home Sales for December are released; expectations are 0.6 percent vs. 0.8 percent.