Stocks to watch: Citigroup, Par Pharma
The bank reports better-than-expected earnings, and the pharmaceutical agrees to be acquired by TPG.
By Michael Baron, TheStreet.com
Citigroup reported second-quarter earnings of $2.95 billion, or 95 cents a share, on revenue of $18.64 billion. The average estimate of analysts polled by Thomson Reuters is for a profit of 89 cents a share on revenue of $18.76 billion. Excluding one-time items, the bank earned $3.08 billion, or $1 per share, in the latest quarter.
"Our core businesses performed well in a difficult environment and are generating solid returns," said Vikram Pandit, Citigroup's CEO, in a press release. "We had strong growth in both loans and deposits, showed resilience in our markets-facing businesses, and saw record revenues in Transaction Services. We reduced Citi Holdings to approximately 10% of our balance sheet while our capital strength and liquidity continue to be among the best in the industry. We remain focused on execution, managing our expenses and our risk, and serving clients as only we can."
Also, news surfaced over the weekend that Citigroup reportedly plans to seek permission to increase its dividend by the end of this year. The bank currently has a minimal penny per share quarterly payout following the financial crisis.
"I believe we will be in good shape and have the capital to be able to do that by the end of the year," Pandit reportedly told U.K. newspaper Sunday Telegraph. "That's a decision that will have to be taken with our regulators and we will have those conversations at the end of the year."
Citigroup shares closed Friday at $26.65, down nearly 4% year-to-date. The stock was last quoted at $27.27, up 2.3%, on volume of more than 1.6 million, according to Nasdaq.com.
Par Pharmaceutical (PRX):
Shares of Par Pharmaceutical soared early Monday after the company agreed to be acquired by buyout firm TPG for $1.9 billion. The deal values Par shares at $50 each in cash, a premium of more than 35% to Friday's close at $36.58.
Under the terms of the deal, Par, a Woodcliffe, N.J.-based maker of both generic and proprietary drugs, now enters a go-shop period that allows it to solicit a superior proposal from third parties through Aug. 24. If another offer doesn't materialize, the transaction is expected to close in 2012, subject to customary approvals and closing conditions.
The credit card companies announced their agreement late Friday to settle class action litigation with U.S. retailers. Visa said it's paying $4.4 billion, while MasterCard said its share of the cash portion of the settlement is $790 million. Visa expects to record a $4.1 billion charge in the June-ended quarter in relation to the settlement.
The agreement settles claims by retailers that credit card companies conspired to fix the fees they charge retailers and opens the door for retailers to begin charging consumers extra to use credit cards. Shares of both Visa and MasterCard were moving higher in premarket action.
Texas Instruments (TXN):
The chip maker was downgraded to underperform from market perform at FBR Capital Markets as part of a larger call on the semiconductor makers ahead of second-quarter reporting season. The firm, which also dropped its 12-month price target to $24.50 from $30, said it sees "more downside risks" for Texas Instruments than other chip stocks "trading near trough valuations."
"TI's 3Q12 revenue guidance could be worse than the Street (like many peers) and with risk to the Street's 2013 estimates," FBR said. "Further, we are concerned about challenges in TI's wireless business, gross margin impacts from its 1Q12 die bank inventory build-ahead, and whether TI has too much capacity following its National acquisition. Valuation seems elevated compared to most peers."
Shares of Texas Instruments closed Friday at $27.02, down 8% so far in 2012.
Panera Bread (PNRA):
Panera Bread should be in focus Monday after Piper Jaffray lowered its rating on shares of the bakery-cafe operator to underweight from overweight, citing turnover in the management team.
"Based on our 'human capital trumps financial capital' thesis we recognize a high degree of execution risks until executive positions are filled," the firm wrote. "We recognize this thesis may be construed at the very best as 'contrarian' given the company retains a strong balance sheet (ie $200+ million cash), positive same-store sales trends and a healthy level of unit growth. In the short-term we do very strongly believe our FY12 estimates remain achievable."
Piper left its estimates for the second quarter and the whole of fiscal 2012 intact but lowered its earnings view for fiscal 2013 to $6.43 a share from $6.62 a share.
"Looking forward however, we have reduced confidence (which resulted in our lowered projections) based on a lack of relative upside to mix shift, pending assessment of comp volatility based on National TV advertising and again...overall strategic and tactical execution risks," said the firm, which dropped its 12-month price target to $129 from $165.
Panera shares closed Friday at $147.31, up 1.5% so far in 2012.
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