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10:05 am Expected IPO Pricings Jan 26 - Jan 30

The following IPO's are expected to price and begin trading next week:

Wednesday, January 28

  • Presbia (:LENS): The ophthalmic device company developing an implantable optical lens for treating presbyopia is expected to price its 4.2 million share IPO between $11-13. Lead underwriters on the deal are Deutsche Bank, Citigroup, JP Morgan, and Morgan Stanley.
  • Zosana Pharma (ZSAN): The clinical-stage pharma developing a transdermal micro-needle patch system to deliver formulations of existing drugs is expected to price its 3.0 million share IPO between $10-12. Lead underwriters on the deal are Ladenburg Thalmann and Roth Capital.
Thursday, January 29
  • Ascendis Pharma (:ASND): The clinical stage pharma developing long-acting therapies, including lead candidate TransCon human growth hormone for growth hormone deficiency is expected to price its 5.0 million share IPO between $16-18. Lead underwriters on the deal are Bank of America/ Merrill Lynch and Leerink Partners. 
  • Flex Pharma (:FLKS): The biotech developing treatments for nocturnal leg cramps and spasms associated with neuromuscular conditions is expected to price its 4.6 million share IPO between $12-14. Lead underwriters on the deal are Jefferies and Piper Jaffray. 
Friday, January 30
  • Avinger (:AVGR): The commercial-stage medical device company selling catheter-based systems to treat peripheral arterial disease is expected to price its 4.6 million share IPO between $12-14. Lead underwriters on the deal are Canaccord Genuity and Cowen Company.
  • Entellus Medical (:ENTL): The medical tech company focused on commercializing minimally invasive treatments for chronic sinusitis is expected to price its 4.4 million share IPO between $15-17. Lead underwriters on the deal are Bank of America/Merrill Lynch and Piper Jaffray.
  • Infraredx (:REDX): The cardiovascular imaging company advancing diagnosis and treatment of coronary artery disease is expected to price its 4.0 million share IPO between $13-15. Lead underwriters on the deal are RBC Capital, Canaccord Genuity, and BMO Capital Markets. 
  • InfraREIT (:HIFR): The REIT that owns rate-regulated electric transmission and distribution assets such as power lines, substations, transmission towers is expected to price its 20.0 million share IPO between $19-21. Lead underwriters on the deal are Bank of America/Merrill Lynch and Citigroup.
  • Shake Shack (:SHAK): The burger/American food restaurant chain is expected to price its 5.0 million share IPO between $14-16. Lead underwriters on the deal are JP Morgan and Morgan Stanley.
  • Spark Therapeutics (:ONCE): The biotech company focused on gene therapy with an initial focus on orphan diseases, whose first product candidate targets rare blinding conditions is expected to price its 5.5 million share IPO between $15-17. Lead underwriters on the deal are JP Morgan and Credit Suisse. 
  • Tracon Pharmaceuticals (:TCON): The clinical stage biopharmaceutical focused on developing therapeutics for cancer, age-related macular degeneration, and fibrotic diseases is expected to price its 3.6 million share IPO between $12-14. Lead underwriters on the deal are Wells Fargo and Stifel.

10:00 am McDonald's Caps Off Tough Year with Soft Fourth Quarter Results

There wasn't a lot of shine on the fourth quarter and full-year results reported this morning by McDonald's (MCD 91.01, +0.12).  That wasn't a surprise, though, as the company struggled throughout the year with a supplier issue in its APMEA region and increased competition around the globe.

For the full year, McDonald's posted a 1.0% decline in global comparable sales, driven by negative traffic in all major markets, a 2% decrease in consolidated revenues (flat in constant currencies), a 9% drop in consolidated operating income, and a 13% decrease in diluted EPS to $4.82.  Excluding items that totaled $0.54 per share, McDoanld's earnings were down 3% compared to the prior year.

The fourth quarter had a familiar look to it.  Global comparable sales decreased 0.9% with negative guest traffic in all major segments, consolidated revenues fell 7% (1% in constant currencies), consolidated operating income dropped 20%, and diluted EPS, which included a $0.09 per share impact due to the supplier issue in APMEA, declined 19% to $1.13.

In the fourth quarter, U.S. comparable sales were down 1.7%.  In Europe, they were down 1.1%, and in APMEA, they declined 4.8%.  Reuters, citing data obtained from research firm Consensus Metrix, reported that the decline in global comparable sales and U.S. comparable sales was not as steep as analysts expected.

The latter is being touted as a reason why MCD shares have held up reasonably well after its report.

Looking ahead, CEO Don Thompson said McDonald's continues to face meaningful headwinds.  January comparable sales are expected to be negative and results are expected to remain pressured.

The company didn't provide any specific revenue and EPS guidance for FY15 in its press release, although it was noted that its capital expenditure plan of approximately $2.0 billion will be its lowest capital budget in more than five years.  In turn, McDonald's said it remains on track to meet its target of returning $18 billion to $20 billion to shareholders for the three-year period from 2014 to 2016 through a combination of dividends and share repurchases.

McDonald's has a lot of work ahead of it to get things turned around from an operational standpoint.  The tying factor for many investors in the interim will be its attractive dividend yield of 3.7%.   That, too, is a supportive factor for the stock because it's a well-covered dividend and compares very favorably to the lowly 1.83% yield on the 10-yr note.

9:15 am UPS Issues Weak Q4 And FY15 EPS Guidance, Lowers FY14 EPS Guidance

UPS (UPS 114.33) tanked this morning after reducing its outlook,

The company expects to see adjusted EPS of $1.25, which falls well below expectations. Full-year 2014 adjusted diluted earnings per share is expected to be $4.75, up 3.9% over 2013 adjusted diluted earnings per share of $4.57.

Company earnings for 2014 were lower than previous guidance, primarily due to the underperformance of the U.S. Domestic segment. While package volume and revenue results were in line with expectations, operating profit was negatively impacted by higher than expected peak-related expenses.

"UPS invested heavily to ensure we would provide excellent service during peak when deliveries more than double. Though customers enjoyed high quality service, it came at a cost to UPS. Going forward, we will reduce operating costs and implement new pricing strategies during peak season."

Peak plans were designed to provide high quality service for volume surges. The extra capacity was necessary to process the extreme spike in package volume on Cyber Monday and peak day, Dec 22. However, demand was less than expected on other days. This resulted in a sub-optimized network during peak season. A decline in productivity, increased contract carrier rates, as well as costs associated with overtime and training hours contributed to the excess cost.

In addition, the network was somewhat disrupted by volume fluctuations caused by the West Coast port dispute. International adjusted operating profit was also below expectations, primarily due to non-recurring charges and negative currency comparisons. Meanwhile, the Supply Chain and Freight segment performed in line with guidance.

The company also issued downside guidance for fiscal year 2015. The company sees EPS growth slightly less than long term target of +9-11% YoY, which calculates to slightly less than approximately $5.18-5.27, which comes short of expectations. UPS expects solid business growth across all segments in 2015. However, increased pension expense of approximately $180 million due to lower discount rates, and currency headwinds of more than $50 million will negatively impact results.

Following this outlook, the stock dropped sharply and fell as low as $103.26/share. The stock is currently near that LoD and is now just above $104/share, about 9% below yesterday's closing price.

8:05 am Starbucks Cashing In on Strong First Quarter Results

There's no doubt that a whole lot of people enjoy the taste of Starbucks coffee.  The proof of that point was contained in the record fiscal first quarter earnings report from Starbucks (SBUX 82.74), which was released after Thursday's close.

Revenues for the 13-week period ended December 28 increased 13% to $4.8 billion and global comparable sales rose 5%, aided by a 2% increase in traffic and gains in all geographic regions.  To that end, Americas comp sales increased 5%, Europe, Middle East and Africa comp sales jumped 4%, and China/Asia Pacific comp sales were up 8%.

The company made the most of its sales gains, leveraging that growth to achieve an 80 basis points increase in non-GAAP operating margin to 19.5%.  That flowed down to a non-GAAP profit of $0.80 per share that was in-line with analysts' average expectation and up 16% from the same period a year ago.

Starbucks opened 512 net new stores in the quarter, bringing its total company store count to 21,878.  Over the past 12 months, Starbucks has achieved 767 net new store openings in China/Asia Pacific.  It added that it is on its way to achieving its goal of 3400 stores in China by 2019.

Following its fiscal first quarter report, Starbucks reaffirmed its FY15 targets, which call for revenue growth of 16-18%, global comparable sales growth of mid-single digits, a non-GAAP operating margin that is flat to up slightly versus FY14, and non-GAAP EPS in the range of $3.09 to $3.13.  On its conference call, Starbucks said it has 94% of its 2015 coffee needs priced and sees stronger revenue growth in the second half of 2015.

For its fiscal second quarter, Starbucks expects EPS in the range of $0.64 to $0.65.   That is actually below analysts' average estimate, yet there has been some chatter that Starbucks is being deliberately conservative with its guidance, making it easier to surpass expectations when it posts its actual results.

Whatever the case might be, investors don't appear to be too unnerved by the second quarter guidance. Shares of SBUX are indicated nearly 5% higher in pre-market action, leaving them on track to hit a new all-time high.

Separately, Starbucks named Kevin Johnson, the former CEO of Juniper Networks (JNPR), as its new president and chief operating officer.

6:29 am LeapFrog shares plunge 24% following sharp reduction in Q3 guidance

Leapfrog (LF $2.95 -0.95) shares are trading lower by 24% after the company reported that it sees third quarter revenues of $145 million vs prior guidance of $220-240 million which is well below consensus. Co sees thrid quarter net loss of $1.77 with items which is below estiamtes.

The company stated "In our major territories, holiday sales of children's tablets across the toy and electronics segments declined more than expected. This fall in consumer demand resulted in lower than planned LeapPad shipments in the quarter."

"Due to development issues, we shipped and promoted our new LeapTV educational video game system later than planned. This delay along with communication challenges and inconsistent execution at retail resulted in us significantly missing our sales expectations on this innovative new platform." "The lower consumer sales of LeapPad and LeapTV hardware resulted in less demand for cartridges, accessories and digital content."

"Our LeapReader learn-to-read system sales were also lower than expected over the quarter, partly due to the significant drop in the retail prices of children's tablets." "In addition to the primary drivers above, retail in-stocks of our new tablets were hampered by tighter inventory management and open-to-buy challenges across a number of our retailer partners and the West Coast port slowdown in the US." "We expect our net sales to decline in the fourth quarter," continued Mr. Arthur.

"However, we cannot provide a sales estimate at this time as we continue to evaluate our retail inventory levels coming out of the holidays. We are, therefore, withdrawing our prior guidance for the current fiscal year ending March 31, 2015."

LF shares are trading lower by 49% YTD as its busienss has been hurt by tablet business from Apple (AAPL) and other vendors. Look for support near the $2.85 level (2011 lows).

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