9:55 am Technology Sector trading higher by 0.4%
The tech sector -- XLK -- trails the broader market. Semiconductors, meanwhile, display relative weakness as the SOX index trades -0.6%. Within the SOX index, SUNE (+1.2%) outperforms, while ARMH (-2.0%) lags. Among other major indices, the SPY is trading 0.4% lower, while the QQQ and the NASDAQ are also -0.4% on the session. Among tech bellwethers, AAPL (+0.3%) is showing relative strength, while CSCO (-1.2%) lags.
This morning in earnings:
- CRNT (-10.0%) missed EPS estimates
- CYOU (+1.2%) beat EPS estimates on below-consensus rev
- TYPE (+0.5%) reported in line
- SOHU (-2.0%) beat EPS, but missed rev estimates
- Z (-5.6%) to acquire TRLA (+9.1%) for $3.50 billion in stock
- BIDU (+0.3%) upgraded to Buy at BNP Paribas
- INFA (+3.2%) upgraded to Buy at Nomura
- JNPR (unch) upgraded to Outperform at Bernstein
- SMTC (+0.9%) upgraded to Strong Buy at Raymond James
- XRX (+0.7%) upgraded to Neutral at JP Morgan
- CSCO (-1.2%) downgraded to Sector Perform at Pacific Crest
- AMKR (-1.0%), KN (-1.6%), MSTR (-0.5%), IDTI (-1.0%), ADVS (-0.4%)
- ARW (+0.1%), GLW (-0.2%), AXE (-0.7%), FIS (-0.5%), AVX (-0.5%), HRS (-0.3%), YNDX (-2.1%), CVLT (-0.1%)
7:46 am AcelRx shares plunge 30% following FDA response letter for Zalviso
- AcelRx (ACRX $7.50 -3.34) announced that has issued a Complete Response Letter for the Company's new drug application for Zalviso (sufentanil sublingual tablet system). The Company is currently reviewing the FDA's comments and requests contained in the CRL and plans to discuss these requests with the FDA. The CRL contains requests for additional information on the Zalviso System to ensure proper use of the device. The requests include provision of bench data demonstrating a reduction in the incidence of optical system errors which require premature drug cartridge change, changes to the Instructions for Use for the device, and additional data to support the shelf life of the product. Co believes some of the requests have been addressed in amendments to the NDA that have been submitted prior to the receipt of the CRL but, as acknowledged by the FDA, have not been reviewed. There is no guarantee that the information previously provided to the FDA will be adequate to address the issues in the CRL. Additional bench testing will be required and human factors testing may be required to address certain items in the CRL. There were no requests to conduct additional human clinical studies.
- Co's Commentary: "We believe we can satisfy all of FDA's requests in the CRL and resubmit the NDA by the end of 2014, although we will have more clarity on the process and timing after our conversation with FDA.."
7:15 am Changyou.com shares fall following downside guidance
- Changyou.com (CYOU) reported second quarter earnings of $0.04 per share, which is higher than expected, while revenues fell 2.5% year/year to $177.8 million which is lower than expected. Online game revenues were $153.9 million, a decrease of 6% quarter-over-quarter and 9% year-over-year, and were below the Company's guidance by $7.1 million. Online advertising revenues were $14.7 million, an increase of 59% quarter-over-quarter and 46% year-over-year, and were in line with the Company's guidance.
- An Update on Changyou's Share Repurchase Program On July 27, 2013, Changyou's Board of Directors authorized a share repurchase program of up to $100 million of the outstanding ADSs of Changyou over a two-year period from July 27, 2013 to July 26, 2015. Guidance: The company issued guidance for the third quarter with EPS of ($0.11)-$0.00 which is line with worse than expected and revenues of $186-192 which is below estimates.
7:12 am Qiagen shares little changed following Asterzenca (AZN)
- Qiagen (QGEN 24.99 +0.00) announced a collaboration agreement with AstraZeneca PLC (AZN $74.48 +0.00) for the co-development and commercialization of a liquid biopsy-based companion diagnostic to be paired with IRESSA, AstraZeneca's targeted therapy for non-small cell lung cancer. The project builds on a master framework agreement signed by both companies in 2013 and aims to develop and market a novel QIAGEN companion diagnostic that analyzes plasma samples to assess EGFR mutation status in NSCLC patients. The assay will be designed to guide the treatment of NSCLC patients with Astra Zeneca's oral monotherapy anti-cancer treatment when tumour tissue is not available. QIAGEN already offers the therascreen EGFR RGQ PCR Kit as a tissue-based companion diagnostic for lung cancer patients, which was approved in the U.S. by the FDA in July 2013 and in China in May 2014.The companies will collaborate to create a new companion diagnostic for IRESSA based on liquid biopsy samples from NSCLC patients, rather than requiring invasive surgical collection of tissue samples. Data from several studies, including the IFUM Study presented at the "World Lung 2013" conference, provided evidence of the ability to assess the EGFR status of advanced lung cancer patients using blood / plasma samples. This breakthrough provides hope for patients for whom surgical biopsy is not an option by enabling them to have their EGFR mutation status assessed using a less invasive method.
6:53 am Sohu shares little changed following beat on earnings
- Sohu.com (SOHU) reported second quarter loss of $0.87 per share, excluding non-recurring items, which is higher than expected, while revenues rose 18.1% year/year to $400.2 million which is lower than expected. Total online advertising revenues, which include revenues from brand advertising and search and others businesses for the second quarter of 2014, were US$218 million, up 49% year-over-year and 25% quarter-over-quarter. Brand advertising revenues for the second quarter of 2014 totaled US$133 million, up 33% year-over-year and 20% quarter-over-quarter. The year-over-year increase was mainly due to revenue increases in the online video and 17173 advertising businesses.
- The quarter-over-quarter increase was mainly due to increases in the online video and automobile advertising businesses.Search and others revenues for the second quarter of 2014 were US$85 million, up 84% year-over-year and 32% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly due to increased traffic and improved monetization.Online game revenues for the second quarter of 2014 were US$154 million, down 9% year-over-year and 6% quarter-over-quarter.
- The year-over-year and quarter-over-quarter decreases were mainly due to decreased revenues from Wartune and DDTank in China, and decreased revenues from TLBB because fewer players spent money in the game in the second quarter of 2014 after Changyou released a new expansion pack that made some of the gameplay easier for players to play.Gross Margin Both GAAP and Non-GAAP gross margin were 58% for the second quarter of 2014, compared with 62% in the first quarter of 2014 and 66% in the second quarter of 2013 Guidance: The company issued guidance for the third quarter with EPS of ($0.85) - ($0.75), which is line with estimates and revenues of $427-442 which is below estimates.
6:52 am Tyson Foods shares little changed following miss on earnings
- Tyson Foods (TSN $39.54 +0.00) reported third quarter earnings of $0.75 per share, which is worse than expected, while revenues rose 10.9% year/year to $9.68 billion which is higher than expected. The company issued guidance for the fiscal year 2014 with at least 10% EPS growth, with revs of approximately $38 billion.-- co expects fiscal 2015 sales to approximately $42 billion as we integrate Hillshire Brands and continue to execute our strategy of accelerating growth in domestic value-added chicken sales and Prepared Food sales. "In fiscal 2015, we expect overall domestic protein production (chicken, beef, pork and turkey) to increase ~1% from fiscal 2014 levels. Grain supplies are expected to increase in fiscal 2015, which should result in lower input costs as well as decreased costs for cattle and hog producers. The related outlook includes impacts related to the Hillshire Brands acquisition, sale of our Brazil and Mexico chicken production operations, and closure of the three Prepared Foods plants. "Overall, our results were in line with our expectations. The Chicken segment could have performed better had it not been for isolated issues at a couple of plants. The Beef segment finished the quarter remarkably well after a difficult start.
- The Pork segment had a record third quarter despite tight hog supplies due to the PED virus. The Prepared Foods segment had a disappointing quarter primarily due to the continued run up in pork raw material inputs. As part of our prepared foods strategy, on Friday we announced that we are closing three plants to improve capacity utilization and streamline our cost structure. In addition to these plant closures, today we're announcing the sale of our operations in Brazil and Mexico for $575 million. Although these are good businesses with great team members, we haven't had the necessary scale to gain leading share positions in these markets. In the short term, we'll use the sale proceeds to pay down debt associated with our acquisition of Hillshire Brands. Longer term, we remain committed to our international business and will continue to explore opportunities to extend our international presence."
- Co has reached a definitive agreement with JBS SA to sell its poultry businesses in Mexico and Brazil, the co announced today. The transaction is valued at $575 million and will be paid for in cash. Tyson Foods officials currently expect the sale, which is subject to regulatory approval, to be completed by the end of 2014. JBS and Pilgrim's Pride currently expect to maintain all the operations working to capacity with the existing workforce and to maintain all labor contracts in both countries. Acquisition of the Hillshire Brands on track for closing in fourth quarter of fiscal 2014,"
6:51 am Family Dollar shares soar 21% following news that Dollar Tree (DLTR)
- Dollar Tree (DLTR $55.90 +1.68) and Family Dollar Stores (FDO $73.15 +12.49) announced that they have entered into a definitive merger agreement under which Dollar Tree will acquire Family Dollar in a cash and stock transaction. The value of the consideration is $74.50 per share, a 22.8% premium over Family Dollar's closing price as of July 25, 2014. The transaction, which has been unanimously approved by the Boards of Directors of both companies, is expected to close by early 2015, at which time the Family Dollar shareholders will receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares.
- At closing, Family Dollar shareholders will own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree. Howard R. Levine and Trian Fund Management, L.P. and funds managed by it, which collectively own ~ 16% of the outstanding stock of Family Dollar, have entered into voting agreements in support of the merger. The transaction is estimated to be accretive to cash EPS within the first year post-closing, excluding one-time costs to achieve synergies. Dollar Tree will be better positioned to invest in existing and new markets and channels and to grow its store base across multiple brands. The combined company expects to generate significant free cash flow, enabling it to pay down debt rapidly. Under the terms of the transaction, Family Dollar shareholders will receive $74.50 for each share they own, comprised of $59.60 in cash and $14.90 in Dollar Tree stock.
- The stock portion will be subject to a collar such that Family Dollar shareholders will receive 0.2484 Dollar Tree shares if the average Dollar Tree trading price during a specified period preceding closing is equal to or greater than $59.98 and 0.3036 Dollar Tree shares if this average trading price is less than or equal to $49.08. If the average trading price of Dollar Tree stock during this period is between $49.08 and $59.98, Family Dollar shareholders will receive a number of shares between 0.2484 and 0.3036 equal to $14.90 in value. The transaction values Family Dollar at an enterprise value of ~ $9.2 billion, and it represents an enterprise value to last twelve months May 31, 2014 EBITDA multiple of 11.3x.
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