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McClatchy Co. (NYSE: MNI) shares have been hit by another wave of selling. So far this year, its stock down 46% to $7.09, as well as off 60% in the past year. While the newspaper company announced relatively solid earnings, concerns continue about the number of its digital subscriptions and its $858 million in debt.
McClatchy’s numbers looked similar to those of several other newspaper chains. Revenue fell 7.1% to $225 million. Ad revenue dropped 11% to $125 million, though digital only ad revenue rose a modest 10%. Circulation revenue benefited from digital subscriptions, but the total number of these is still fairly small.
The company’s management commented:
Audience revenues were $89.9 million, down 0.6% in the second quarter compared to the same period in 2016. Digital-only audience revenues were up 6.7% due to subscriber growth and pricing strategies implemented throughout 2016. The number of digital-only subscribers ended the quarter at 91,000, representing an increase of 13.8% from the second quarter of 2016.
The 91,000 are spread across what McClatchy calls 30 media properties in 29 markets. Among these are several very large newspapers, including the Miami Herald, Kansas City Star, Sacramento Bee, Charlotte Observer and Fort Worth Star-Telegram. For the McClatchy paywall programs to be major contributors to revenue, the 91,000 figure will have to increase substantially. This is particularly true because of the decline in print revenue and modest increase in online advertising.
McClatchy lost $70 million last quarter, of which $46 million was equity investment impairments. A better way to look at its prospects was that operating income was $12 million. However, that was before $20 million in interest expense. The relationship between those two numbers is too close for some investors.
Craig Forman, McClatchy’s new president and CEO, said in the company’s earnings release:
We plan to continue our digital audience growth in the second half of the year by providing relevant journalism to our readers and viewers while explaining the benefits of subscribing to our digital products. We also will learn more about our customers as they begin using the new audience platform, and as a result we can engage more meaningfully with our subscribers.
Part of the engagement comes from McClatchy’s growing online audience. Average total unique visitors to the company’s media sites hit 66 million, up 14.6% from the same quarter a year ago. This expands the number of people McClatchy can market to advertisers. In addition, it needs to sharply boost its digital subscriptions if it hopes to improve both top and bottom lines.
Walt Disney Co. (NYSE: DIS) will start its own sports and movie streaming networks and pull content from Netflix Inc. (NASDAQ: NFLX), the streaming industry leader. It is a huge gamble by Disney based on the supposition it can market its content directly to consumers and build a huge subscriber base. Companies like Disney, which include Time Warner Inc. (NYSE: TWX), recently bought by AT&T; Viacom Inc. (NASDAQ: VIAB) and CBS Corp. (NYSE: CBS), may be tempted to go the same route.
Disney wants to get away from Netflix as a conduit for cord cutters, people who drop cable and watch shows directly via broadband. The trend has particularly hurt is massive ESPN sports networks, which has eroded Disney’s earnings. Disney hopes to make that money back through a new ability to market channels like ESPN to consumers. The same dynamic has begun to undermine the futures of other large sports and premium content companies.
Time Warner may have the most to gain by breaking away from Netflix. Its Warner Bros. division distributes movies via Netflix. Viacom has nearly as much to gain, potentially. Its Paramount division has a deal with Netflix. CBS has already started its own All Access business to distribute content direct to consumers.
The landscape in the streaming media ecosystem is more complex than the relationship of large content creators and Netflix. Hulu, a Netflix competitor, is owned by NBC Universal, Fox, Disney and Turner. In turn, NBC Universal is owned by cable company Comcast Corp. (NASDAQ: CMCSA), Fox by Twenty-First Century Fox Inc. (NASDAQ: FOXA) and Turner by Time Warner. Several of these content companies also have distribution deals with Amazon and Apple.
The web of distribution deals has become remarkably complicated. However, one thing is certain. Netflix has over 50 million subscribers in the United States and another nearly 50 million overseas. The bet that any content company can completely part ways with Netflix is highly risky. Disney is willing to take that chance. Its rivals are watching, and some may decide to follow its path.
Acadia Pharmaceuticals Inc. (NASDAQ: ACAD) reported its second-quarter financial results after the markets closed on Tuesday. This company perhaps had one of the best responses to its earnings report on Wednesday and saw its shares skyrocket out of the gate. Prior to the release of this report, the stock was only up 2.4% year to date, but now this has more than sextupled.The company said that it had a net loss of $0.55 per share and $30.5 million in revenues, compared with consensus estimates that called for a net loss of $0.71 per share and $19.6 million in revenue.During the second quarter of 2017, Acadia generated $30.5 million of net product sales of Nuplazid, which includes the one-time recognition of $3.6 million associated with the transition to the sell-in revenue recognition method of accounting from the sell-through method.
One of the other major highlights in this report was that Acadia conducted its End-of-Phase 2 meeting with the FDA on the Alzheimer’s disease psychosis program.
In terms of guidance, Acadia expects to see full year Nuplazid net sales in the range of $105 million to $115 million. The consensus estimates are a net loss of $2.79 per share and $94.09 million in revenue. The highest revenue target from analysts is $107 million.On the books, Acadia’s cash, cash equivalents and investments totaled $417.3 million at the end of the quarter, down from with $529.0 million at the end of the previous fiscal year.
Steve Davis, president and CEO of Acadia, commented:
Our commercial efforts continue to drive strong financial performance with solid market uptake for NUPLAZID in patients with Parkinson’s disease psychosis. Following positive data from our Phase II study in Alzheimer’s disease psychosis and recently completed End-of-Phase II meeting with the FDA, we are excited to start our Phase III program in the next couple of months.Shares of Acadia were last seen up about 15% at $33.99, with a consensus analyst price target of $44.20 and a 52-week range of $20.68 to $40.83.
SAFE STOCK PICS
AUGUST NEWSLETTER 6
While the market continues to roll on to record highs, one thing is becoming ever more evident: Turning to the bond market is hardly a safe alternative to equities, and while the prices of government and investment grade debt have come down some, interest rates are still trading near generational lows.
In a new research report, Merrill Lynch is out with its top food and beverage picks, and while the sector may not seem like the most exciting to investors, the companies exhibit much lower volatility, and some in the group benefit big time from the cheaper U.S. dollar.
We selected four that should benefit from the lower dollar as they have larger foreign sales, all are rated Buy at Merrill Lynch.
This company remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers. And the company posted solid-second quarter results recently.
Coca-Cola investors receive a 3.24% dividend. The Merrill Lynch price target for the stock is $50, while the Wall Street consensus target is $45.68. The stock closed Tuesday at $45.70.
This consumer staple stock makes sense for nervous investors. Kraft Heinz Co. (NYSE: KHC) is the third-largest food and beverage company in North America and the fifth-largest in the world, with eight $1 billion+ brands. A globally trusted producer of delicious foods, Kraft Heinz provides high quality, great taste and nutrition for all eating occasions whether at home, in restaurants or on the go.
The company’s iconic brands include Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Consumer staples are expected to continue to do well this year, and this is one of the top companies in the sector. The company reported very solid earnings, and analysts across Wall Street are generally bullish on the potential for solid earnings continuing through 2017 and beyond.
Shareholders receive a 2.77% dividend. Merrill Lynch has a $100 price target, and the consensus target is $90.29. The shares closed Tuesday at $86.67.
While the iconic American beer company did merge with a Canadian beer giant, it is still based in Denver. Molson Coors Brewing Co. (NYSE: TAP) is one of the world’s largest brewers (more than 3% global share) with core brands Coors Light, Carling, Molson Canadian and Staropramen. Molson and Coors merged in February 2005, added StarBev in 2012 and serves markets including the United States, Canada, Eastern Europe and the United Kingdom and Ireland, with exposure to other markets through its Molson Coors International division. It acquired the remainder (58%) of the U.S. joint venture (MillerCoors) in mid-October 2016.
The Coors Light brand remains a huge favorite with Generation X and baby boomers who were all around when the light beer revolution started. With the NFL season right around the corner, you can bet that promotional activity will spike, as the company is a big advertiser.
Shareholders receive a 1.9% dividend. The $110 Merrill Lynch price target compares with the consensus target of $103.42. The shares closed trading on Tuesday at $89.19.
Merrill Lynch analysts feel this company has the potential to show faster relative growth to peers. Pinnacle Foods Inc. (NYSE: PF) is a leading branded packaged food company in the United States and holds the top or number two market share in major categories it competes in. The company’s main categories include frozen vegetables, baking mixes and pickles. Its iconic brands, such as Birds Eye and Duncan Hines, can be found in more than 85% of U.S. households.
The company posted very solid second-quarter results, with the analysts citing strong underlying fundamentals as Pinnacle is driving top-line growth through innovation. While they slightly lowered fiscal 2017 earnings per shares estimates, they remain positive on the outlook for 2017 and beyond.
Shareholders receive a 1.93% dividend. The Merrill Lynch price target is $65, the same as the posted consensus target. The shares closed Tuesday at $59.15.
One thing that should be a huge tailwind for investors in the near future is stocks that provide solid total return. With the market priced to perfection, stocks that pay dividends and have the chance to go higher in value can provide the total return that may become crucial, as advances in the market probably will slow down going forward.
In a new research report, the portfolio team that runs UBS’s Dividend Ruler stocks was able to report a very solid earnings season from their companies. The report noted this:
For Dividend Ruler stocks, the earnings season has impressed. Twenty-six of the 30 Dividend Ruler stocks have reported results and aggregate earnings should be up 18% versus year-ago levels; 13% excluding the out sized percentage earnings gains from the two energy companies in our model portfolio.
In addition, over the past two months four companies in the portfolio have raised their dividends. All four make good sense for long-term investors looking for sensible stocks to own, and the fact that three are based in Europe is an added bonus.
British American Tobacco
While many investors eschew tobacco stocks, this company is also focusing on smokeless products. British American Tobacco PLC (NYSE: BTI) is the largest European tobacco company and the second-largest listed global tobacco company. It has subsidiary operations in most major markets across the globe, other than in the United States, where it is represented by its 42% owned listed associate Reynolds-American. British American Tobacco is viewed as an industry consolidator.
The company’s solid brand portfolio makes it a Wall Street favorite, and it tends to outperform the market and has consistently gained market share. In addition, its 42% of Reynolds American provides sales of the popular Camel and Newport brands. The report noted:
The company pays a semiannual dividend and raised its interim payout by 10% in July after lifting its final dividend by 13% early in the year in February. Management noted in its second quarter earnings call that they “remain committed to rewarding shareholders with an increasing dividend.”
Shareholders receive a 3.37% dividend. The UBS price target was posted in British currency. The Wall Street consensus target is $78.93. Shares traded early Tuesday at $65.40.
This is one of the largest producers of alcoholic beverages in the world. Diageo PLC (NYSE: DEO) produces, markets and sells beverages worldwide. It offers scotch whiskey, gin, vodka, rum, beer and spirits, Irish cream liqueurs, wine, Raki, tequila, Canadian and American whiskey, Cachaça, and brandy, as well as adult beverages and ready to drink products. The company’s premium brands include Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness.
Diageo’s reserve brands include Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie Walker Gold Label 18 year old, Johnnie Walker Gold Label Reserve, Johnnie Walker Platinum Label 18 year old, John Walker & Sons Collection, Johnnie Walker The Gold Route, Johnnie Walker The Royal Route and other Johnnie Walker super premium brands, as well as The Singleton, Cardhu, Talisker, Lagavulin and other malt brands.
The company pays a semiannual dividend, and after raising its interim dividend by 5% in January 2017, the company raised its final dividend by 5% again last month. Good news for investors looking for income.
Shareholders receive a 2.42% dividend. The UBS team has a Buy rating, but the price target also was posted in British currency. The Wall Street consensus price target is $141.19, and shares traded Tuesday at $133.10.24/7 Wall St.
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This company is based in Ireland after its merger with Covidien two years ago. Medtronic PLC (NYSE: MDT) is a medical devices giant, and many on Wall Street saw its historical merger with Covidien, probably one of the largest in the med tech industry, as a momentous event, leading to the creation of a unique company that combines the extensive and innovative abilities of both companies. The combined company officially has joint forces of over 85,000 employees in more than 160 countries.
Top analysts feel that the contributions from Medtronic’s three growth drivers, which they cite as therapy innovation, globalization and services/solutions, should support a 5% or greater constant currency top-line growth this year and beyond.
UBS noted this:
Medtronic delivered a 7% dividend increase – the 40th consecutive year of rising dividends for the company. Over the past four decades, Medtronic has increased its dividend at a 17% compound annual growth rate.
Investors receive a 2.2% dividend. UBS has a $95 price target. The consensus target is $92.42, and shares were last seen at $84.30.
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This very diversified company with large government contract exposure is also on the UBS Bellwether list of high-conviction stock picks. United Technologies Corp. (NYSE: UTX) is an industrial that provides high-technology products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems and Pratt & Whitney.
Many Wall Street analysts believe the company is strategically positioned to benefit from two megatrends in the long-term: urbanization and commercial aerospace. The company received good news recently as the military and foreign buyers are set to increase purchase of the F-135 Jets. UTC’s Pratt & Whitney division, which builds the F135 engine for the military, earns a superb 22.5% profit margin on its products.
The analysts noted:
The company hiked its quarterly payout by 6% to $0.70. Chairman and CEO Greg Hayes noted: “Today’s announcement to increase our dividend reflects our ongoing commitment to remain disciplined in our capital allocation and deliver value to shareowners through our long-term growth strategy.”
Investors receive a 2.3% dividend. The $135 UBS price target compares with the consensus estimate of $127.90. The stock traded Tuesday at $118.30.