Genetic products maker Affymetrix Inc (AFFX) has announced the launch of its GeneChip miRNA 2.0 array, an extended version of its coveted first-generation microRNA/miRNA (a small RNA molecule) array solution. The new array has been geared to advance gene expression research by expediting the identification of biomarkers and gene expression signatures associated with disease.
The GeneChip miRNA 2.0 array offers similar benefits of the legacy miRNA array with updated content and high sensitivity, reproducibility and performance. It covers the broadest spectrum of miRNA encompassing 131 organisms on a single array.
The new array, with nearly double the content of its predecessor, offers the most sensitive, accurate and comprehensive measurement of miRNA transcripts involved in gene regulation. This affordable array is compatible with the company’s existing GeneChip systems. The miRNAs discovered using GeneChip miRNA 2.0 can be validated using the upcoming QuantiGene 2.0 miRNA assay kit.
California-based Affymetrix is a leading provider of microarray-based products and services to the global research community. Along with Illumina Inc. (ILMN), it is one of the two major providers of microarray technologies primarily used in the field of genetic research.
Affymetrix has expertise in gene expression monitoring arrays, which are used to identify correlations between genes, determine their biological functions and identify patterns that enable more accurate disease classification.
Affymetrix is expanding its customer base through new product introductions and strategic alliances. The company’s Axiom array platform (launched in October 2009) has been a key driver for its DNA business, representing roughly 40% of total volumes in fourth-quarter fiscal 2010, boosted by healthy customer demand.
To broaden its Axiom platform, Affymetrix launched the Axiom Custom Genotyping Arrays in July 2010, enabling it to address the latest trends in genetic research. Moreover, in January 2011, the company launched its first high-density rice genotyping test dubbed GeneChip Rice 44K SNP Genotyping Array for identifying rice varieties and exploring genetic traits.
Affymetrix continues to enjoy steady end-user demand for its arrays as evidenced by sustained volume growth over the past few quarters. However, the company remains challenged by a soft operating backdrop in Europe and competitive product offerings that leverage advanced technologies.
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Leucadia National Corporation (LUK) reported its financial results for the fourth quarter and the fiscal year 2010 on February 25, 2011. In the fourth quarter, the company generated a net income (from continuing operations) of $6.77 per share, up compared with a net loss of 34 cents per share in the year-ago quarter.
In the fiscal year 2010, net income from continuing operations was $1,891.4 million or $7.66 per share, up compared with $533.7 million or $2.18 per share in the previous year. The improvement can be attributed to significant revenue growth and tax benefits, offset partially by higher expenses in the year.
In the fourth quarter 2010, revenue jumped significantly year over year to $585.6 million from $192.8 million in the year-ago comparable quarter. Revenue in the fiscal year 2010 was $1,320.0 million, up compared with $575.2 million in the previous year. The improvement was attributed to strong performances across all segments.
In the fiscal year 2010, revenue from the Manufacturing segment was $260 million, up 15.7% year over year and accounted for 19.7% of total revenue. Oil and Gas Drilling segment accounted for 8.8% of revenue and totaled $116.6 million.
Revenue generated from Gaming Entertainment operationswas roughly 8.7% of total revenue, and increased 10.8% to $114.8 million, while revenue of $17.1 million from Domestic Real Estate segment accounted for 1.3% of total revenue.
Revenue from Medical Product Development segment slipped to $0.1 million from $5.1 million in the year 2009. Proceeds from Other operations were $67.1 million, up from $51.8 million in 2009 and accounted for about 5.1% of total revenue, while corporate segment revenue of $744.3 million accounted for 56.4% of revenue.
Expenses in the fiscal year 2010 increased 16.5% year over year to $951.0 million from $816.4 million in the year 2009. In relation to revenue, expenses dipped to 72% from 142% in the earlier year.
Exiting the fourth quarter, Leucadia’s cash and cash equivalents went up 36.5% sequentially to $441.3 million, while its long-term debt dipped by 3.7% to $1,548.5 million compared with $1,608.4 million in the previous quarter.
Cash flow from operating activities was a net inflow of $431.3 million in 2010 compared with a net outflow of $133.4 million in the previous year. Spending on property, equipment and leasehold improvements increased in the year to $44.3 million compared with $23.6 million in the previous year.
In the fiscal year 2010, the company paid dividends totaling $61.0 million and issued common shares worth $11.3 million.
Leucadia is engaged in manufacturing, telecommunications, oil and gas drilling services, property management and services, gaming entertainment, real estate activities, medical product development operations and various other investment activities in the United States. We currently maintain our Neutral recommendation on Leucadia.
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Recently, Thermo Fisher Scientific (TMO) decided to sell its Athena Diagnostics to leading diagnostics player Quest Diagnostics (DGX) for $740 million. Athena, with $110 million in revenues in 2010, provides diagnostic tests for neurological and other diseases, with an emphasis on gene-based tests.
For the last few years, Quest has been strengthening its foothold in the esoteric testing market. Gene-based and esoteric testing now accounts for 22% of the company’s total revenues in 2010, up from 9% in 2000.
Although Quest has been witnessing a decline in revenues derived from anatomic pathology, the company recorded a 3% growth of gene-based and esoteric testing during the fourth quarter, driven primarily by sales to hospitals and specialist physicians.
The increase in esoteric testing was primarily driven by a more than 30% growth in Vitamin D testing, which is being increasingly used for a range of conditions such as osteoporosis, cancer, diabetes and heart disease.
Additionally, Thermo Fisher decided to sell its Lancaster Laboratories to Belgium based Eurofins Scientific for $200 million. Lancaster Laboratories, with $115 million of revenues in 2010, is a contract-testing laboratory providing analytical services for pharmaceutical, biopharmaceutical and environmental sciences customers.
In another development, the company authorized a new $750 million share repurchase program. For 2010, Thermo Fisher had spent slightly more than $1 billion on its buyback program and is left with $385 million of authorization at present.
As a result of this continuous buyback program, the outstanding share count at the end of the fourth quarter was 398.8 million, down 5.5% from the year-ago period, thus boosting the bottom line.
The divestment of the two businesses is expected to be closed in the second quarter of 2011, subject to regulatory approvals. In 2010, the combination of Athena and Lancaster Laboratories contributed 11 cents to Thermo Fisher’s adjusted EPS.
The company will provide an updated 2011 guidance early in the second quarter. The company assumes that the proposed acquisition of Dionex Corporation (DNEX) will be over in early second quarter, and these two divestments along with the new share buyback programs will raise 2011 adjusted EPS by 5 cents.
A gradual improvement in the economic scenario along with its focus on potential markets and other strategies should drive Thermo Fisher’s top line in the forthcoming period. Moreover, the company’s decision to align its business to focus on core areas is also encouraging.
However, any kind of economic turbulence could negatively impact the company’s sales based on financial constraints and customers deferring their buying decisions.
We are currently Neutral on the stock.
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Americans Just Lost More Buying Power
The U.S. Dollar Index has declined sharply again this morning. The U.S. Dollar Index is trading lower by 0.47 cents to $76.79. This is the lowest the U.S. Dollar Index has traded since November 4, 2010 when the index traded as low as $76.17.
On January 10, 2011 the U.S. Dollar Index was trading as high as $81.63; however, since that time the U.S. Dollar Index has declined lower by $4.80 to trade at this morning's low. The next major support level will be around the $76.00 level which is the double bottom area from November 2010.
Retirees and people on fixed incomes are being directly effected from the weak U.S. Dollar Index. When the U.S. Dollar Index trades lower most of the major stock and commodity indexes will inflate higher. Remember, most every commodity is traded in U.S. Dollars, therefore, commodities and dollars usually trade inverse to each other.
Many traders and investors have bought hard and soft commodities to try and defend against a weak U.S. Dollar Index. This morning the PowerShares DB US Dollar Index Bullish (UUP) is trading lower by 0.11 cents to $22.07 a share. Most leading commodity stocks are trading higher this morning. Stocks such as U.S. Steel Corp. (X) and AK Steel Holdings Corp. (AKS) are both trading higher off of the weaker U.S. Dollar Index.
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St. Louis-based Peabody Energy Corporation (BTU) has signed an agreement with Indonesia's PT Cahaya Energi Mandiri (CEM) to source 2 million tons of coal to improve exports. Indonesia is the world's largest supplier of seaborne thermal coal.
Peabody said that the coal secured from PT CEM’s East Kalimantan mine over two years will be exported to Asian countries. Peabody will conduct the Asian exports through its international trading hub in Singapore, COALTRADE. The company said that its relationship with PT CEM can be expanded over time.
Peabody said this is the third agreement it has reached recently to source Indonesian coal, including a deal inked in December with PT Supra Bara Energi in Indonesia. These deals together total 5.5 million tons of Indonesian coal.
Peabody notes that its leading coal trading and brokerage platform continues to expand to serve high-growth Asia-Pacific markets. The company said it will continue to increase its coal sourcing in Indonesia going forward.
In 2011, seaborne coal demand is projected to exceed 1 billion tons, with the Asia Pacific region comprising the vast majority of demand growth. Peabody serves customers in more than 25 countries on six continents and has trading and business offices in Indonesia, Singapore, China, Australia, the United Kingdom and the United States.
In January, Peabody Energy reported fourth-quarter 2010 earnings of 85 cents per share, beating the Zacks Consensus Estimate of 70 cents. For the full year Peabody’s adjusted earnings were $3.05 per share, recording a 4.8% positive earnings surprise compared to the Zacks estimate of $2.91. The increase was driven by higher global prices and demand for coal, which offset the production disruptions emanating from the devastating rains and floods in Australia.
We note that Peabody continues to advance multiple organic growth projects in Australia and the United States. Given the company’s robust pipeline of growth projects as well as an improving global economy, we expect the company’s earnings to be strong in 2011. The current Zacks Consensus earnings estimate for 2011 is $4.82 per share.
Peabody Energy is involved in the exploration, mining and production of coal for its global consumers. Peabody fuels 10% of U.S. power and 2% of the world’s electricity. The company primarily competes with Arch Coal Inc. (ACI) and CONSOL Energy Inc. (CNX).
Peabody Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.
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ITT Corporation (ITT) announced that NASA has selected its OI Analytical total organic carbon analyzer and WTW VARIO conductivity temperature meter. The end-use of these will be on the final flight of the Space Shuttle Discovery and by the crew of the International Space Station for measurement of conductivity and analyzing quality of water.
These instruments will be used to analyze the organic carbon level in water to assess that it is safe for human consumption.
ITT plays an important role in vital markets, including water and fluids management, global defense and security, and motion and flow control. It possesses industry leading brands in the Fluid Technology and Motion & Flow Control businesses. The company is well diversified and serves attractive end-markets with a broad geographic footprint.
We are particularly bullish about these two segments: a) water equipment (primarily pumps), which should benefit from the replacement and upgrade of ageing networks in developed markets and the build-out of infrastructure in emerging markets, and b) ITT’s Defense business, with the bulk of sales derived from electronic and network-centric warfare.
The Defense Electronics & Services business segment is subject to a number of risks, including defense budgets and government contract requirements and regulations, which could have an adverse impact on the results of its operations.
The Fluid Technology and Motion & Flow Control business segments are subject to certain industry risks, which could have an adverse impact on the results of its operations.
Adverse macroeconomic and business conditions, particularly in the local economies of the countries or regions where the company operates, may negatively affect its revenues, profitability and operations.
The company’s Defense Electronics and Services segment develops, manufactures and supports high-technology electronic systems and components for worldwide defense and commercial markets, and provides communications systems and engineering and applied research. Principal manufacturing facilities are located in the United Kingdom and United States of America.
ITT Corporation, with 2010 revenues of $11 billion, is a global multi-industry leader in high-technology engineering and manufacturing. It is engaged in the design, manufacture and sale of a wide-range of engineered products and the provision of services. Lockheed Martin Corporation (LMT) is a major competitor.
We currently have a Neutral recommendation on ITT Corporation.
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Leading medical devices player, Medtronic (MDT) has recently acquired the rights to chitosan-dextran gel technology from its developers, Adelaide Research & Innovation Private Limited, Robinson Squidgel Limited and Otago Innovation Limited in order to complement its functional endoscopic sinus surgery (FESS) product portfolio.
The financial terms of the deal were however not disclosed. This innovative gel technology helps control postoperative bleeding and adhesions common in sinus patients and thereby increases the probability of a successful FESS.
The demand for FESS is currently on a high with 525,000 annual cases handled in the US. The incorporation of the gel technology to Medtronic’s FESS procedure would bolster the company’s surgical technology foothold and help capitalize on the growing demand for sinus surgeries.
Medtronic earns revenues from seven divisions – Cardiac Rhythm Disease Management (CRDM), Spinal, CardioVascular, Neuromodulation, Diabetes, Surgical Technologies and Physio-Control. The Surgical Technologies segment comes under the restorative therapies group. This segment deals with products and therapies to treat diseases and conditions of the ear, nose and throat (ENT), and certain neurological disorders.
During the most recent quarter, the segment generated sales of $259 million, up 8% year over year. The strong results were driven by improved performance across the portfolio of ENT, Power Systems, and Navigation product lines. Balanced growth across capital equipment, disposables, and service also added to this success.
Metronic’s acquisitions (the most recent being privately held Ardian) and a strong pipeline should enable the company to increase revenues in the forthcoming period. In addition, Medtronic is increasing its focus on emerging markets and honing its skills on upcoming therapies touted to be major growth drivers ahead. The emerging market recorded a 26% growth in the last reported quarter.
However, the company operates in a highly competitive landscape with stiff competition from larger players like Boston Scientific Corporation (BSX), St. Jude Medical (STJ), and Zimmer (ZMH). The company is also exposed to the risk of currency movement. Moreover, its biggest segment, CRDM, continues to be a drag on its top line.
We currently have a ‘Neutral’ rating on Medtronic.
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Arthur Hill: HEALTHCARE AND UTILITIES LEAD — BOMBAY SENSEX TESTS MID-FEBRUARY LOWS — BOVESPA BOUNCES OFF KEY RETRACEMENT — PETROBRAS AND VALE FEATURE PROMINENTLY — HANG SENG SURGES OFF SUPPORT AS SHANGHAI EXTENDS BREAKOUT[[http://stockcharts.com/members/videos/|Link for today’s video.]] Sector movements on Monday showed relative strength in two **defensive sectors: healthcare and utilities**. The third defensive...
Last week, Northern Trust Corporation (NTRS) announced the acquisition of Bank of Ireland Securities Services (BOISS) for $82 million (€60 million).
BOISS, the fund administration unit of Bank of Ireland (IRE), comprise the fund administration, investment operations outsourcing and custody business of the bank. Dublin-based BOISS is the largest Irish-owned asset administration provider of specialised, client-driven services to a broad range of funds, including mutual money-market, multi-manager, exchange-traded funds (ETFs), and property funds, serving both the on-shore and off-shore markets.
The acquisition is expected to close in the second quarter of 2011, depending on applicable regulatory approvals and other customary closing conditions.
Through this acquisition, Northern Trust expects to combine the fund administration business with existing activities in Ireland and continue to provide the outstanding consumer service and solutions to clients. The acquisition will improve and expand Northern Trust’s Global Fund Service capabilities, particularly in the fund administration and ETFs.
Owned 36% by the government, Bank of Ireland, is selling assets in an effort to raise 2.2 billion euros of additional capital required by the central bank. The banks in the country are under pressure as bad loan losses are escalating subsequent to the collapse of the domestic real-estate bubble.
Northern Trust anticipates that on completion of the transaction, combined assets under custody and administration in Ireland will increase by approximately $96 billion (€70 billion).
On the other hand, the deal will increase Bank of Ireland’s core Tier 1 capital by €40 million and also the financial potential of the bank. Since 2000, Northern Trust has been providing custody and fund administration services to clients from its Dublin office and opened its Limerick operations in 2006.
Last month, Northern Trust reported fourth-quarter earnings of 64 cents per share, below the Zacks Consensus Estimate of 71 cents per share. The decrease was attributable to low interest rate environment, which negatively affected net interest income and trust fees.
The combined entity is expected to boost Northern Trust’s position in Ireland and will make the company more competitive in the market. Further, we expect increased asset management and servicing fees based on improvement in equity markets and higher volumes. The company is also poised to benefit with the growth in client network.
However, we expect low interest rate environment to continue restraining earnings, impacting net interest income and securities lending fees. Moreover, the Dodd-Frank Act will ring in numerous regulatory changes over the next several years, which might act as a deterrent to the company’s fundamentals.
Northern Trust currently retains its Zacks #4 Rank, which translates into a short-term Sell rating. However, considering the fundamentals, we are maintaining our Neutral recommendation on the stock. We also maintained a Neutral recommendation on Northern Trust’s peers -- The Bank of New York Mellon Corporation (BK) and State Street Corp. (STT).
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Waste Management Inc. (WM) has sold $400 million of its 4.6% senior notes due March 1, 2021 under an effective shelf registration statement previously filed with the Securities and Exchange Commission.
Waste Management is offering the 4.6% senior notes at 99.762% of face value. The offering is expected to close on February 28, 2011.
The net proceeds of the offering will be utilized to repay $147 million principal amount of 7.65% Senior Notes that mature in March 2011, plus accrued and unpaid interest. The balance will be used for general corporate purposes, including additions to working capital, capital expenditures and the funding of potential acquisitions and business investments.
Waste Management ended 2010 with a long-term debt balance of $8.7 billion compared with $8.1 billion at the end of 2009. Of the long-term debt outstanding, Waste Management had $5.45 million in senior notes and debentures, maturing through 2039, with interest rates ranging from 4.75% to 7.75% (weighted average interest rate of 6.5% as on December 31, 2010).
As of December 31, 2010, the debt-to-capitalization ratio was 58.7%, compared with 58.5% as of December 31, 2009. The net effect of the issuance and the repayment will be an accretion of 68 basis points to the debt-to-capital ratio.
The company incurred net interest expenses of $473 million in 2010 compared with $426 million in 2009.
The significant increase was due to the issuance of an additional $600 million of senior notes in November 2009 to support acquisitions and investments made throughout 2010, considerably higher costs rellated to the execution and maintenance of Waste Management’s revolving credit facility (which was refinanced in June 2010) and a decrease in benefits to interest expense provided by active interest rate swaps as a result of decreases in the notional amount of swaps outstanding.
Waste Management’s high debt level is a cause of concern. Further, Waste Management’s debt-to-capitalization ratio exceeds that of its peer Republic Services Inc.’s (RSG) ratio of 46.2%. Besides the weak financial strength, the company continues to be plagued by lower volumes.
Though the company asserted stabilizing volumes, we still see weakness in the market. Given the uncertain economic conditions, we believe it will take more than a couple of quarters before the company sees a substantial improvement in its volumes. On this note of caution, we currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
Houston, Texas-based Waste Management is the largest provider of comprehensive waste management services in North America. The company provides collection, transfer, recycling and resource recovery, and disposal services to nearly 20 million residential, commercial, industrial and municipal customers. It is also a leading developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the U.S.
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