12:03 pm Terex Falls on Profit Warning
Machinery manufacturing company Terex (TEX 32.72, -1.98) is having a tough go of it today after lowering its third quarter and FY14 EPS guidance below analysts' expectations. The warning was pinned primarily on the company's Cranes segment, which is its second largest segment accounting for 27% of sales in 2013.
The company's other business segments include aerial work platforms, material handling & port solutions, construction, and materials processing.
Terex said the order rate for its Cranes business dropped significantly in July and August despite a positive book-to-bill ratio over the first half of 2014. Notably, Terex acknowledged that customers in developing markets are struggling to secure financing for orders scheduled for delivery in the second half of 2014.
Terex derived nearly two-thirds of its sales outside the US in 2013.
Based on the weakness in the Cranes segment, which has more than offset some positive trends in certain aspects of the company's other segments, Terex expects FY14 EPS to range from $2.35 to $2.50 versus its prior guidance of $2.50 to $2.80.
For the third quarter, Terex is projecting EPS to fall between $0.55 and $0.65, excluding certain non-recurring items. The range of analysts' estimates for the third quarter had been $0.71 to $0.88.
Terex reiterated that it still expects FY14 free cash flow to be between $200 million and $250 million. Including today's loss, shares of TEX are down 22% year-to-date.
Industry peer Manitowoc (MTW 27.27, -0.84), whose crane business accounted for 62% of its sales in 2013, is trading lower in response to the Terex warning.
11:32 am Microsoft Lower Following Confirmation It Will Acquire Mojang, maker of 'Minecraft'
Microsoft (MSFT 46.31 -0.39) is trading 0.8% lower this morning after confirming that it agreed to acquire Mojang, maker of 'Minecraft' franchise for $2.5 billion. Microsoft expects the acquisition to be break-even in fiscal year 2015 on a GAAP basis and expects it to close in late 2014.
The company notes that, available across multiple platforms, "Minecraft" is one of the most popular video games in history, with more than 100 million downloads, on PC alone, by players since its launch in 2009.
"Minecraft" is one of the top PC games of all time, the most popular online game on Xbox, and the top paid app for iOS and Android in the US. The "Minecraft" community is said to be among the most active and passionate in the industry, with more than 2 billion hours played on Xbox 360 alone in the past two years. Nearly 90% of paid customers on the PC have signed in within the past 12 months.
The stock has been trending higher since a year ago and has continued to hit new 52-week highs in recent weeks. It also remains at a level not seen since April 2000. On a daily chart, the stock remains above its 20, 50, 100 and 200-day moving average.
10:03 am RadioShack In Talks With UBS and Standard General About Potential Financing Package
RadioShack (RSH 1.03, +0.12) is trading higher by 13% this morning following a few pieces of news. First, on Friday afternoon WSJ reported further information about a potential financing package from UBS and shareholder hedge fund Standard General. WSJ noted that RSH is considering $585 million in loans from the bank and hedge fund, replacing the current loan from GE Capital. Earlier last week Bloomberg reported about the UBS and Standard General deal, which could lessen some of the immediate liquidity concerns about the electronics retailer.
In addition, RSH announced an interim CFO this morning. The company re-appointed AlixPartners Managing Director and longtime RadioShack advisor Holly Etlin. She will replace John Feray, who resigned on Friday citing personal reasons, as the company searches for a more permanent solution.
In addition to the report about the potential financing package and CFO news, RSH was also the subject of comments from an analyst at SunTrust Robinson Humphrey, who this morning cited five reasons RadioShack should be a serious target for an Amazon (AMZN) acquisition. Among the reasons, the analyst sees the location base of RadioShack local stores being an attractive distribution aid in the furthering of Amazon's mission to ship items faster to the consumer.
While today's 13% percentage gain is a strong response to the news, it is not uncommon for RSH to see large swings in either direction. Just over the past month the stock has traded from $0.67 up to $1.77 and back to its current levels around $1.00. The move from $0.67 up to $1.77 was sparked by initial reports from Bloomberg about a potential rescue financing package from Standard General.
8:06 am Whirlpool Gets China Blessing of Hefei Rongshida Majority Stake
It was more than a year ago -- August 2013 to be exact -- that Whirlpool (WHR 152.11) announced its intention to acquire a 51% stake in Chinese company Hefei Rongshida Sanyo Electric Co. for $552 million in cash. It was just today that Whirlpool received written approval from the China Securities Regulatory Commission ("CSRC") to proceed with the purchase
Some things take longer than others on the M&A front, and typically when a Chinese company is involved, longer is the status quo. Whirlpool knew this wouldn't be an expeditious process. It said last August that it didn't expect this deal to be finalized until the end of 2014.
This deal, while small in size, is important strategically for Whirlpool since it builds its footprint in China, which offers a growing base of middle-class consumers. Whirlpool doesn't currently have a major competitive presence in Asia, which accounted for just 4.3% of the company's total sales in 2013.
Hefei Rongshida reported revenues of $866 million and net earnings of $59 million in 2013. The company's main brands include Sanyo, Rongshida/Royal Star, and Diqua.
Whirlpool isn't expecting the transaction to have any material impact on its earnings or cash flow in 2014, although it does expect the transaction to be accretive in the first full year of integration.
With today's blessing from the CSRC, Whirlpool now thinks the transaction will close at the end of the third quarter or early fourth quarter of 2014.
Separately, Whirlpool announced in July that it had entered into an agreement to acquire a majority stake in Italian company, Indesit, for approximately $1.04 billion.
7:50 am Apple shares little changed following AT&T (T)
Apple (AAPL) shares are roughly unchanged in the pre-market trading after AT&T (T) announced that Friday September 12th was the largest iPhone pre-order date in history.
Indications of strength in pre-orders came early on Friday following reports that Apple's (AAPL) website was experiencing problems due to high levels of traffic. In addition, many customers were reporting shipping delays as the demand for the iPhone 6 + broke records.
Apple (AAPL) official iPhone 6 launch date will be Friday September 22nd where customers can purchase either the 4.7" iPhone 6 or the 5.5" iPhone 6 Plus at Apple's retail stores. Expect some more information regarding sales following that opening weekend.
Apple shares are trading near all time highs, which sit near the $104 level.
7:16 am Danaher Wins Nobel Biocare Prize
Danaher Corporation (DHR 76.88) announced the acquisition of Swiss firm, Nobel Biocare Holding AG, for a total enterprise value of approximately $2.2 billion.
The aim of the deal is to expand Danaher's presence in the global dental care industry and to accelerate Nobel Biocare's strategic objectives and future growth. Nobel Biocare's specialties include dental implant systems, high-precision individualized prosthetics, biomaterials and digital diagnostics, treatment planning and guided surgery.
The acquisition of Nobel Biocare, which generated annual revenues of approximately $750 million in 2013, will be a big addition to Danaher's dental business, which generated $2.1 billion in revenue last year.
The dental business is Danaher's smallest segment, accounting for 11% of total revenue in 2013. The Life Sciences & Diagnostics business is Danaher's largest business. It comprised 36% of total revenue.
The purchase price translates into an offer of CHF17.10 for Nobel Biocare shareholders, which is nearly a 23% premium to its closing price on July 28, 2014, or the day before speculation regarding a potential sale of the company was heard.
Pending the necessary approvals, the acquisition is expected to be completed in late 2014 or early 2015.
6:48 am Cognizant Technologies Buying TriZetto
Cognizant Technology (CTSH 44.76) is an IT services company catering primarily to the financial services, health care, and manufacturing/retail/logistics industries. Today, it took a step forward to grow its health care practice with the announced acquisition of privately-held TriZetto Corporation for $2.7 billion in cash.
TriZetto provides both payer and provider solutions and it serves more than 350 health plans that reach nearly 245,000 care providers.
Last year, Cognizant's health care business reported revenue of approximately $2.3 billion, accounting for 26% of total revenue. The company's financial services business, which accounted for 42% of revenue, is Cognizant's largest segment.
With the purchase of TriZetto, Cognizant expects to achieve approximately $1.5 billion of potential revenue synergies cumulatively over the next five years.
The deal is going to be financed with cash on hand and debt. Cognizant said it has received $1.0 billion of committed financing in support of the transaction, which is expected to close in the fourth quarter of 2014 and be immediately accretive to non-GAAP EPS, excluding one-time transaction costs and adjustments.
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