News Archive


Raytheon wins $1.5 billion U.S. defense contract: pentagon

WASHINGTON (Reuters) – Raytheon Integrated Defense Systems, a unit of Raytheon Co (RTN.N), is being awarded a U.S. defense contract with a maximum value of $1.5 billion, the Pentagon said in a statement on Friday.

Raytheon will provide operations and sustainment support for the Army Navy Transportable Radar Surveillance Model 2 and Sea-Based X-Band radar, the statement said.

Reporting by Eric Beech

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CVS deal for Aetna could help retailer face Amazon entry: analysts

(Reuters) – U.S. pharmacy operator CVS Health Corp’s (CVS.N) move to buy health insurer Aetna Inc (AET.N) could shore-up CVS’ vulnerable pharmacy business and spur another round of dealmaking in an industry fearing Amazon’s arrival, analysts said.

Shares of Aetna, the third-largest U.S. health insurer, closed down 3 percent on Friday after closing 12 percent higher on Thursday on reports of the deal. CVS Health was down 5.9 percent.

CVS Health has made an offer to acquire Aetna for more than $200 per share, or over $66 billion, making it the biggest deal of the year. [nL2N1N12JO]

“A potential combination would diversify CVS profit streams ahead of an Amazon entry and set the stage for a new healthcare-retail delivery model,” Morgan Stanley analysts wrote in a note.

Amazon.com Inc (AMZN.O) is planning to move into online prescription drug sales, multiple media reports have said, potentially posing an existential threat to brick-and-mortar pharmacies.

That possibility has hit shares of most drugstore operators on fears that the online retailer would leverage its vast ecommerce platform in prescription drug sales.

“We believe CVS does need to respond to the potential threat and strike a different path,” Cowen Co analyst Charles Rhyee said in a note.

A deal would make CVS-Aetna a one-stop shop for customers’ health care needs – ranging from employer healthcare and government plans to managing benefits and running drug stores.

The vertical integration of retail pharmacy, PBM, and insurers fits with broader healthcare themes of expanded access, consumerism and cost reduction, Jefferies analysts said, adding that the deal chatter was not a complete surprise.

“It would address each company’s need for a fresh script.”

The deal between companies in two very concentrated industries will likely prompt concern about their rivals having an access to market, or foreclosure, two antitrust expert said.

But the deal will likely win approval from antitrust enforcers because the two companies are in different businesses along the same supply chain, or a vertical merger, other experts said.

“I don’t doubt that there will be a lot of people that will be concerned about such a huge deal,” said Andre Barlow of the law firm Doyle, Barlow and Mazard. “But articulating an antitrust theory (to stop it) is difficult.”

The two companies overlap in at least one area – providing Medicare Part D pharmacy prescription drug coverage. Analysts at Evercore ISI estimated that 23 percent of Aetna’s Part D clients were in counties where there may be antitrust concerns but these could likely be remedied through asset sales.

Some analysts said the deal could also trigger a wave of consolidation across the industry.

It could be a possible catalyst for higher health insurance sector valuation, BMO Capital Markets analyst Matt Bosch said, adding that WellCare Health Plans (WCG.N), Humana (HUM.N) and Centene (CNC.N) could be possible acquisition targets.

Aetna earlier this year scrapped plans to merge with rival Humana after antitrust enforcers said that the combination and a rival deal between Anthem Inc (ANTM.N) and Cigna Corp (CI.N) were anti-competitive.

Reporting by Ankur Banerjee in Bengaluru; Additional reporting by Diane Bartz in Washington and Carl O’Donnell in New York; editing by Saumyadeb Chakrabarty and Cynthia Osterman

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FCC media rule rollback could usher in TV station buying spree

WASHINGTON (Reuters) – The Republican-led Federal Communications Commission is moving to quickly undo roadblocks to increased consolidation among media companies, potentially unleashing an onslaught of deals among TV, radio and newspaper owners as they seek to better compete with online media.

FCC Chairman Ajit Pai on Wednesday disclosed his plans to ask the media and communications regulator on Nov. 16 to eliminate the 42-year-old ban on cross-ownership of a newspaper and TV station in a major market.

The changes would also make it easier for media companies to buy additional TV stations in the same market, or for local stations to jointly sell advertising time.

The move, along with other expected FCC media rule changes, could usher in a new era of media consolidation that could help struggling newspapers and TV stations, but limit the diversity of media voices.

FCC’s Pai has cited rising competition for advertising from websites like Alphabet Inc’s Google and Facebook Inc as a reason for easing the media ownership rules as well as helping struggling newspapers.

Big media firms including Tegna Inc and Nexstar Media Group Inc, have cited the potential rule change as motivating them to look for expansion opportunities.

In the near future, the decision could also allow Sinclair Broadcast Group’s, which is seeking approval for its proposed $3.9 billion acquisition of Tribune Media Co, to avoid some divestitures in order to get the deal approved.

Eliminating “outdated regulations that unnecessarily hobble local broadcast stations will benefit consumers in communities across the country,” said the National Association of Broadcasters Friday.

Advocacy group Free Press criticized Pai’s proposal, saying it “ignores how decades of runaway media consolidation have significantly harmed local news and independent voices.”

Anne Bentley, a spokeswoman for Tegna, a TV broadcaster formerly known as Gannett before it spun off the newspapers in 2015, said the company “expects to be a strategic and disciplined consolidator at this pivotal time of positive regulatory change.”

Nexstar Chief Executive Officer Perry Sook said in a statement Thursday the changes would allow local broadcasters to “make additional investments in localized programming content, our people, news resources and reporting capabilities.”

Roger Entner, an analyst at Recon Analytics, told Reuters the rollback of the rules means “we will see more consolidation on the local level, where TV stations or TV groups will buy local newspapers.”

CBS Corp Chief Executive Les Moonves said in February he believed Pai’s deregulatory plans “will be very beneficial to our business.” With rule changes, CBS “would strategically want to buy some more.”

In April, the FCC voted to reverse a 2016 decision that limits the number of television stations some broadcasters could buy.

Under rules adopted in 1985, stations with weaker over-the-air signals could be partially counted against a broadcaster’s ownership cap. But last year, the FCC under Democratic President Barack Obama said those rules were outdated after the 2009 conversion to digital broadcasting, which eliminated the differences in station signal strength.

Pai said in late March that he also planned to take a new look at the current overall limit on companies owning stations serving no more than 39 percent of U.S. television households.

Reporting by David Shepardson; Editing by Chris Sanders and Diane Craft

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After CSeries deal, Bombardier aero unit faces uncertain future

MONTREAL (Reuters) – Bombardier Inc (BBDb.TO) secured the future of its struggling CSeries jet but still needs to find ways to spur growth in other units that have aging products or face larger rivals, industry players and analysts said.

A blockbuster deal with Airbus SE (AIR.PA) that saw the European company take control of the CSeries for $1 leaves Bombardier’s commercial aviation division with the soft-selling turboprop and regional jets lines.

Meanwhile, on the rail side, Bombardier recently lost out on a merger with Germany’s Siemens AG (SIEGn.DE) and now faces off against China’s merged rail company CRRC Corp (601766.SS) and a soon-to-be-formed European giant in Siemens-Alstom.

Macquarie on Friday said it would tweak 2019 company valuations to focus on corporate jets and rail, in the wake of the Airbus deal and media speculation on further commercial aircraft sales.

While the Airbus partnership boosts the CSeries and potentially Bombardier’s small aerostructures and engineering division, which produces aircraft components, the remaining lines in its commercial aerospace arm are “mature and stay stable at best as the industry changes around them,” according to AltaCorp analyst Chris Murray.

Removal of the CSeries headache means the company can focus on its more profitable rail and business jet divisions.

Yet even there, concerns remain with Moody’s this week downgrading Bombardier partly on “longer-term concerns” about the competitiveness of its rail business and concerns about its “future in the commercial aircraft space.” Bombardier said Moody’s action was “ill-founded.”

Bombardier’s CEO Alain Bellemare said recently the firm continues to weigh options for the rail unit. Asked about the future of the commercial aerospace unit on Oct. 20, he told reporters, “Right now the focus is to keep on selling these aircraft.”

“I think they will be forced to take a decision (to) either fix, coast or sell,” U.S. analyst Richard Aboulafia said of the commercial plane unit. “But fix means putting some serious money into product upgrades.”

Upgrading a regional jet with a new engine and wings would cost upwards of $1 billion, an amount likely to be prohibitive for the company as it spends on ramping up its CSeries and bringing its strong-selling Global 7000 to market, analysts say.

Bombardier has long weighed a sale or partnership venture to boost orders for its Q400 prop planes, which trail European rival ATR, owned by Airbus and Leonardo SpA (LDOF.MI). Such a deal, however, would be complicated by the need to ensure Canadian job security because the aircraft are assembled in Canada, government and union sources said.

Bombardier tried unsuccessfully in 2013 to sell 100 Q400 turboprops in Russia and set up a joint-venture assembly line there.

“I‘m sure they’d love to sell the Q400 if they could get a serious buyer,” said an industry source specializing in the prop market.

Reporting By Allison Lampert; Editing by Cynthia Osterman

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/5tNOecU5k0E/after-cseries-deal-bombardier-aero-unit-faces-uncertain-future-idUSKBN1CW2P4

Exxon, Chevron results linked to oil price, not cost cuts

HOUSTON (Reuters) – Rising oil and natural gas prices boosted third-quarter profits at Exxon Mobil Corp and Chevron Corp by about 50 percent, underscoring how reliant they remain on commodity markets for their financial futures than better technology or cost cuts.

Despite deep capital spending cuts and a refocusing on projects that can generate faster paybacks in recent years, the results on Friday showed the pair, neither of whom hedge oil output, are still at the mercy of price gyrations.

Exxon and Chevron have pointed to aggressive plans for boosting low-cost U.S. shale production. But in recent quarters total output at both has atrophied and shale is unlikely to deliver a marked lift until the next decade, based on corporate projections.

“Both are trying to be disciplined and show growth,” said Brian Youngberg, an oil industry analyst with Edward Jones. “But it’s a little bit of a transition, especially as they’re trying to increase shale (output).”

The pair reported the same day as French rival Total SA posted a 29 percent jump in its third-quarter net profit as project ramp-ups and new investments lifted production.

Exxon, which reported a better-than-expected quarterly, said its Permian oil production will grow 45 percent each year through 2020, to more than 400,000 barrels per day. The company also has a large shale position in North Dakota’s Bakken shale formation.

Still, Exxon said higher prices contributed $860 million to its earnings while volume increases added only $20 million to the latest quarter’s exploration profit. Exxon’s total output in the quarter was the lowest this year.

Also on Friday Exxon, part of a consortium with Norway’s Statoil and Portugal’s Petrogal, a unit of Galp Energia, won one of four blocks in Brazil’s coveted pre-salt oil region in an auction.

Exxon stock edged up 0.1 percent to $83.53 on Friday afternoon.

At Chevron, a writedown of its Bangladesh operations and a drop in U.S. production weighed on results, which missed Wall Street estimates by a wide margin.

Chevron’s stock slid 4.5 percent to $113.15, a drop that surprised Chief Executive Officer John Watson, he said during an investors conference call.

The San Ramon, California, company, which has been one of the Permian’s largest acreage holders since the 1930s, has only recently begun to aggressively develop its oil reserves there. Watson told Reuters earlier this year the Permian is “very important” in the company’s portfolio.

While the company has yet to forecast 2018 production goals for the Permian, Watson said on Friday that Chevron will grow aggressively in the region.

Chevron’s overall average daily output was up 8 percent over a year ago, but that was largely due to the start of giant natural-gas projects. U.S. oil production at Chevron fell overall, as aging field output offset a jump in Permian production.

The loss in U.S. oil production narrowed sharply as the price received for its crude rose 13.5 percent over a year earlier.

Reporting by Ernest Scheyder; Editing by Jeffrey Benkoe

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Iwl4mNTvONI/exxon-chevron-results-linked-to-oil-price-not-cost-cuts-idUSKBN1CW1XT

Exxon, investors huddle on climate data as proxy deadline looms

BOSTON (Reuters) – Activist Exxon Mobil Corp (XOM.N) investors, five months after winning a landmark shareholder vote, are still pressing the company for an analysis on how its business could be affected by regulations aimed at limiting climate change.

The two sides have held discussions, and talks are continuing ahead of a mid-December deadline to prepare proxy resolutions for next spring’s shareholder meeting, activists said.

An Exxon spokesman said it was meeting with investors but declined to discuss specifics.

A number of investors said they were looking for Exxon to give details such as those recently recommended by a climate task force of the Financial Stability Board. It suggested companies lay out the impact they would face from policies like carbon pricing plans, or how changes in supply and demand for resources like oil would affect their balance sheets.

“We’re hopeful that Exxon will take the opportunity to get in front of this and set new standards in terms of disclosure and transparency around climate change,” said Andrew Howard, head of sustainable research for asset manager Schroders, one of the filers of the resolution which has since spoken with Exxon executives.

Spokespeople for the Church of England and for New York State Comptroller Thomas DiNapoli, the lead sponsors of the May resolution, also confirmed they were in talks with Exxon.

“We have an active engagement process for environmental, social and governance matters,” said Exxon spokesman Scott Silvestri, who declined to comment on specific meetings with activists. Last year, the company interacted with shareholders that held 1.1 billion shares, including 40 percent of its institutional holders, he said.

In May, Exxon Chief Executive Officer Darren Woods said the world’s largest publicly-traded energy company would consider the issue after 62 percent of shares voted at the meeting supported a non-binding call for an annual climate-impact review.

Exxon faces several lawsuits, including from New York and Massachusetts state attorneys general, over the possibility it misled the public and investors about the risks of climate change. Exxon has denied the allegations and called them politically motivated.

Calls for companies to disclose more about how they will fare in a warming world received higher-than-usual levels of support at shareholder meetings this past spring, sometimes with new backing from asset managers like BlackRock Inc (BLK.N) and Vanguard Group.

Occidental Petroleum Corp, (OXY.N) said in a second quarter earnings presentation that it would provide additional disclosure of “climate-related risks and opportunities” after a majority of investors backed a call for such a report in May.

Also, this month refiner Marathon Petroleum Corp (MPC.N) published a report, “Perspectives on Climate-Related Scenarios,” meant partly to address suggestions from the Financial Stability Board.

A shareholder measure calling for a climate-impact report received 41 percent support at Marathon’s annual meeting in April.

Some investor activists have a “wait and see” position on what Exxon may disclose. “It’s very unclear what Exxon is going to do” at this point, said Danielle Fugere, president of shareholder advocate As You Sow. She said the California group withdrew a resolution ahead of Exxon’s 2014 shareholder meeting calling for a climate risk analysis, only to be disappointed by the resulting document. On the other hand, were Exxon to do nothing this time around, its directors could face calls for their removal, Fugere said.

Reporting by Ross Kerber in Boston and by Gary McWilliams in Houston; Editing by David Gregorio

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Strong tech earnings, Apple lift Nasdaq higher

(Reuters) – Strong earnings from tech giants and Apple’s upbeat statement on its iPhone X demand lifted the Nasdaq Composite index 2 percent and led the gains on Wall Street.

Amazon (AMZN.O) jumped as much 12.8 percent after reporting a quarterly sales surge. Google-parent Alphabet (GOOGL.O) gained 6.4 percent as its revenue got a boost from advertising sales.

Microsoft (MSFT.O) advanced 7.3 percent after the world’s largest software company reported further gains from its cloud computing services.

Apple (AAPL.O) rose 3.4 percent after the company allayed concerns of muted demand for its 10th anniversary phone.

The gains drove the SP technology index .SPLRCT up about 3 percent. The sector has gained about 35 percent this year, double the gains in the broader SP index.

“In many ways, we’re seeing the strong getting stronger,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank.

“While valuations are full, it certainly becomes imperative on them to deliver solid operating results and that’s something that we did see.”

Adding to the positive sentiment was the third-quarter GDP data that showed the U.S. economy unexpectedly maintained a brisk pace of growth, despite a hurricane-led drop in consumer spending and construction activities.

A report about President Donald Trump favoring Federal Reserve Governor Jerome Powell as the head of the U.S. central bank also supported the stocks. In Powell’s appointment, investors see a continuation of the current stock market-friendly monetary policy.

At 12:24 p.m. ET, the Dow Jones Industrial Average .DJI was up 30.2 points, or 0.13 percent, at 23,431.06, the SP 500 .SPX was up 19.07 points, or 0.74 percent, at 2,579.47 and the Nasdaq Composite .IXIC was up 132.19 points, or 2.02 percent, at 6,688.96.

The three indexes were on track to post weekly gains and the Nasdaq was poised to record its best intraday percentage gain in nearly a year.

Chevron’s (CVX.N) 3.8 percent dip weighed on the SP and the Dow after the oil giant’s profit missed estimates.

Merck (MRK.N) slipped about 5 percent after the company reported a revenue drop due to a cyber attack and loss of market share for many of its older drugs.

Mattel (MAT.O) plunged 14 percent after the toymaker said it would miss its full-year revenue forecast and stop dividend from the fourth quarter.

Expedia (EXPE.O) was slumped 18.4 percent after the online travel services company’s profit missed Wall Street’s consensus forecast.

Shares of drug distributors tumbled on a report that Amazon gained wholesale pharmacy license in multiple states.

CVS Health (CVS.N), Walgreens Boots Alliance (WBA.O), Rite Aid (RAD.N) fell between 6 percent and 3.9 percent.

Advancing issues outnumbered decliners on the NYSE by 1,674 to 1,144. On the Nasdaq, 1,657 issues rose and 1,167 fell.

Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fb-TLKY_fs4/strong-tech-earnings-apple-lift-nasdaq-higher-idUSKBN1CW1J7

Inventories, trade shield U.S. economy from hurricane headwinds

WASHINGTON (Reuters) – The U.S. economy unexpectedly maintained a brisk pace of growth in the third quarter as an increase in inventory investment and a smaller trade deficit offset a hurricane-related slowdown in consumer spending and a decline in construction.

Gross domestic product increased at a 3.0 percent annual rate in the July-September period, also supported by strong business spending on equipment, the Commerce Department said on Friday. With inventories, goods yet to be sold, contributing almost three-quarters of a percentage point to growth last quarter, the increase in GDP overstates the economy’s health.

Excluding inventory investment, the economy grew at a 2.3 percent rate, slowing from the second quarter’s 2.9 percent pace. A measure of domestic demand also decelerated to a 2.2 percent growth rate from the April-June period’s 3.3 percent pace.

“This is a positive report for an economy that was battered by two hurricanes late in the quarter but it is not as strong as the headline 3.0 percent growth might suggest,” said John Ryding, chief economist at RDQ Economics in New York.

The economy grew at a 3.1 percent pace in the second quarter. It was the first time since 2014 that it experienced growth of 3 percent or more for two quarters in a row. Economists had forecast GDP increasing at a 2.5 percent rate in the third quarter.

The government said while it was impossible to estimate the overall impact of hurricanes Harvey and Irma on third-quarter GDP, preliminary estimates showed that the back-to-back storms had caused losses of $121.0 billion in privately owned fixed assets and $10.4 billion in government-owned fixed assets.

Harvey and Irma struck parts of Texas and Florida in late August and early September. Hurricane Maria, which destroyed infrastructure in Puerto Rico and the Virgin Islands, had no impact on third-quarter GDP growth as the islands are not included in the United States’ national accounts.

Post-hurricane labor market, retail sales and industrial production data already show an acceleration in underlying economic activity. Economists expect the Federal Reserve will increase interest rates for a third time this year in December.

“Fed officials will be encouraged by both the overall performance and the composition of growth in the third quarter, which confirms the U.S. economic expansion remains on solid ground,” said Michelle Girard, chief U.S. economist at NatWest Markets in Stamford, Connecticut.      

The dollar rose to a three-month high against a basket of currencies on the data. Prices for U.S. Treasuries fell, with the yield on the interest rate sensitive two-year note touching a fresh nine-year high. U.S. stocks were trading mostly higher.

The economic recovery since the 2007-2009 recession is now in its eighth year and showing little signs of fatigue. The economy is being powered by a tightening labor market, which has largely maintained a strong performance that started during former President Barack Obama’s first term.

Though U.S. stocks have risen in anticipation of President Donald Trump’s tax reform, the administration has yet to enact any significant new economic policies. Trump wants big tax cuts and fewer regulations to boost annual GDP growth to 3 percent.

INVENTORY BOOST

Businesses accumulated inventories at a $35.8 billion pace in the third quarter, leading to inventory investment adding 0.73 percentage point to third-quarter GDP growth. Inventories contributed just over a tenth of a percentage point to output in the prior period. Economists expect a modest boost from inventories in the fourth quarter.

Though export growth slowed in the last quarter, that was eclipsed by the steepest pace of decline in imports in three years, leaving a smaller trade deficit, which added four-tenths of a percentage point to GDP growth. Trade has contributed to output for three quarters in a row.

Business investment in equipment rose at an 8.6 percent rate, increasing for a fourth straight quarter. Growth in consumer spending, which accounts for more than two-thirds of the U.S. economy, slowed to a 2.4 percent rate as hurricanes Harvey and Irma hurt incomes.

Consumer spending rose at a robust 3.3 percent pace in the second quarter and is likely to accelerate in the fourth quarter with a separate report on Friday showing consumer sentiment holding at lofty levels in October.

Despite the moderation in consumer spending, inflation perked up in the third quarter, likely as a result of disruptions to the supply chain caused by the hurricanes.

The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 1.3 percent rate. That followed a 0.9 percent pace of increase in the second quarter.

With inflation rising, income at the disposal of households increased at a 0.6 percent rate, braking sharply from the second-quarter’s strong 3.3 percent pace.

Investment in nonresidential structures fell at a 5.2 percent pace in the third quarter, the biggest drop in nearly two years, as spending on mining exploration, wells and shafts grew at only a 21.7 percent rate, a sharp deceleration from the second-quarter’s 116.3 percent pace.

Investment in homebuilding, which was already undermined by land and labor shortages, contracted for a second consecutive quarter. Government investment recorded its third straight quarterly decline

“While hurricane effects are hard to parse out of the GDP data, we anticipate rebuilding efforts will lift residential investment out of the doldrums it has occupied the last two quarters,” said Michael Feroli, an economist at JPMorgan in New York.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/kTliLj72sWQ/inventories-trade-shield-u-s-economy-from-hurricane-headwinds-idUSKBN1CW0ER

U.S. investigating forex trading at Wells Fargo: WSJ

(Reuters) – Federal prosecutors are investigating foreign-exchange trading at Wells Fargo Co (WFC.N) and have subpoenaed information from the firm, the Wall Street Journal reported, citing people familiar with the matter.

“Wells Fargo learned of an issue associated with a foreign exchange transaction for a single client. The matter was reviewed, the client was promptly notified regarding the issue and Wells Fargo leadership took steps to hold accountable the individuals who were involved,” a company spokeswoman said.

The investigation, which is in early stages, is being conducted by the U.S. Attorney’s Office for the Northern District of California, the Journal reported.

“Wells Fargo remains committed to its foreign exchange business, meeting its clients’ financial needs in an ethical way, and ensuring ongoing review of this and all business operations” the spokeswoman added.

Reporting by Diptendu Lahiri in Bengaluru; Editing by Saumyadeb Chakrabarty

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