When 3G and Warren Buffett’s Berkshire Hathaway (BRK.B) got together to merge Kraft with Heinz to form Kraft Heinz (KHC), they argued that they could cut expenses to create a more efficient business. But if today’s earnings–which appeared, at least on the surface, to be pretty good–demonstrated anything, it’s that Kraft Heinz might be running out of synergies to juice profitability. Susquehanna’s Pablo Zuanic and Aatish Shah explain:
KHC delivered cumulative cost savings of $1.2Bn over five quarters (thru 4Q16), or about 7% of KRFT sales, and EBITDA margins in the US unit increased 800bp from 4Q14 proforma to 4Q16. Supply chain and footprint savings and trade spending efficiencies have to kick in but should come, so it is reasonable to assume the new synergy target of $1.7Bn by end of 2017 may prove conservative. But based on the slowing synergy realization momentum (the $335M quarterly pace in 4Q16, including the $125M from 4Q15, is in line with the 2Q and 3Q gains), increased challenges (macro, FX, competition), need to increase trade spending as in 4Q (when this is supposed to be a source of savings), and unexpected offsets to gross cost savings ($310M over the five quarters offset the $1.5Bn gross savings; in the US EBITDA grew $176M yoy in 4Q16 only while incremental synergies were $210M), we are less bullish now. We project a $2Bn EBITDA gain from 2015 to 2018 to $8.7Bn vs. $10.3Bn before. We also think that these challenges together with uncertainty on the political/regulatory/tax front will make 3G and Berkshire delay any sizable M&A deal-making in the year ahead (to some extent that was also the read between the lines of the 5pm call on Wednesday). At $91 KHC trades at 26x our new FY17 EPS estimate of $3.51 (vs. $4.01 before; consensus is at $3.91), which is a 30% premium to the S5CONS PE. So with slower EBITDA growth and delayed deal-making we see little upside in the year ahead.
trading penny stocks: Adient plc (ADNT)
- [By WWW.THESTREET.COM]
In the Lightning Round, Cramer was bullish on Western Digital (WDC) , Twilio (TWLO) , Adient (ADNT) , Salesforce.com (CRM) , AT&T (T) and Verizon (VZ) .
trading penny stocks: Koppers Holdings Inc.(KOP)
- [By Monica Gerson]
Koppers Holdings Inc. (NYSE: KOP) is estimated to report its quarterly earnings at $0.09 per share on revenue of $364.50 million.
DENTSPLY SIRONA Inc (NASDAQ: XRAY) is expected to report its quarterly earnings at $0.63 per share on revenue of $734.75 million.
trading penny stocks: Applied Materials, Inc.(AMAT)
- [By Chris Neiger]
Applied Materials (NASDAQ:AMAT) makes equipment that allows companies to manufacture semiconductors, displays, and other components for some of the most advanced technology on the planet. And just like other tech companies, Applied has to stay ahead of new trends so that it can provide the latest equipment to its customers.
- [By Ben Levisohn]
Applied Materials (AMAT) rose to the top of the S&P 500 today as semiconductor stocks rebounded from yesterday’s selloff.
Applied Materials gained 4.5% to $31.44 today, while the S&P 500 was little changed at 2,191.95. The SPDR S&P Semiconductor ETF (XSD) rose 1% to $52.80, while the VanEck Vectors Semiconductor ETF (SMH) climbed 1.6% to $68.77.
My colleague Tiernan Rey at Barron’s Tech Trader Daily quoted B. Rileys Craig Ellis in a post today, who called the selloff yesterday an unusually attractive entry opportunity forApplied Materials andMicrochip Technology (MCHP) buyers.
Applied Materials reported net income of $1.7 billion on sales of $10.8 billion in fiscal 2016.
- [By Chris Lange]
Short interest in Applied Materials Inc. (NASDAQ: AMAT) rose to 13.95 million shares. The previous reading was 13.21 million. Shares were trading at $38.55, in a 52-week range of $19.46 to $39.81.
- [By Sean Williams]
A final company income seekers would be wise to give a look is Applied Materials (NASDAQ:AMAT). Applied Materials provides manufacturing equipment to semiconductor companies, meaning its business tends to be highly cyclical. If the economy is performing well, Applied Materials is probably excelling. But if semiconductor spending is down, Applied Materials is likely struggling.
- [By William Patalon III]
Shares of chip-equipment leader Applied Materials Inc. (Nasdaq: AMAT) have zoomed 80% since we brought them to you in May 2014.
And they’ve jumped 8% since we re-recommended the stock back on Jan. 31.
trading penny stocks: Varex Imaging Corporation (VREX)
- [By Jim Robertson]
Small cap homeland security and screening stocks like FLIR Systems (NASDAQ: FLIR), OSI Systems (NASDAQ: OSIS),Varex Imaging Corp (NASDAQ: VREX) and Patriot One Technologies (OTCQB: PTOTF) stand to benefit fromTrumps focus on border andinternal security in general. Heres what you need to know about all four:
- [By Ben Levisohn]
Varex Imaging (VREX), a stock that wasn’t even in the index yesterday, soared to the top of the S&P 500 today after being spun out of Varian Medical Systems (VAR).
Agence France-Presse/Getty Images
Varex Imaging gained 7.3% to $27.27 today, while the S&P 500 declined 0.6% to2,280.90. Varian Medical Systems fell 1.2% to $77.68.
Varian Medical Systems reported net income of $402 million on sales of $3.2 billion in 2016.
trading penny stocks: Enerplus Corporation(ERF)
- [By Money Morning News Team]
Enerplus Corp. (NYSE: ERF) is a $2.1 billion oil company based in Calgary and trades on both the NYSE and Toronto Stock Exchange. ERF primarily produces crude oil in the Bakken fields in North Dakota and Western Canada.