Yesterday saw Monsanto, the $45bn agricultural behemoth, gain 2.4% to settle at $103.52 following the release of its latest quarterly results. Despite ending higher, the group actually missed expectations, but was pushed higher after investors suspected that its weak results would encourage the group to conclude a deal with Bayer. For its fiscal 3rd quarter, revenue declined by 9% to $4.19bn, from $4.58bn a year ago, while earnings fell by 14% to $2.17 per share, down from $2.51 previously and sharply lower than expectations of a decline to $2.40 per share. Lastly, Monsanto noted that it expects to be at the low end of its ongoing full-year guidance range of between $4.40 and $5.10 per share.
On Tuesday, Nike gained 2.31% during the normal session, but fell up to 6% in after-hours trade after releasing its results for the 4th quarter. Despite earnings beating expectations, the group missed estimates on revenue and fell short in forecasted future orders. For the quarter, the group reported revenue of $8.24bn, up from $7.78bn a year ago, but slightly lower than expectations of an increase to $8.28bn. In addition, future orders, excluding currency changes, increased by 11%, short of Wall Street’s 12% expectation However, earnings came in at 49 cents, marginally higher than estimated of 48 cents. Nike’s shares have fallen around 15% during 2016 and are marginally lower over the past 12 months.
On Monday, the FTSE 100 shed 2.55% to settle at 5,982.20 index points, extending Friday’s 3.15% drop. However, in spite of the declines, it must be noted the index has held up relatively well compared to the region’s other benchmarks. The market’s relative complacency over Brexit was not shared by the ratings agencies however. Both S&P and Fitch have stripped the UK of its top credit grade. As it stands, S&P has lowered its grade by two notches to AA, from AAA previously, while Fitch has cut its credit rating by one notch to the equivalent level. Both agencies highlighted the risk of less predictable, stable and effective policy frameworks and weaker economic growth as a key factors in their decisions. The third ratings agency, Moody’s, has cut the UK’s credit rating outlook to negative.
On Friday, the JSE gold mining index surged 11.43% to settle at 2,287.35 index points, helped along by a rally in the gold price. Sibanye provided the biggest boost to the index, as the stock gained 13.64% to close at R49.45, while Gold Fields added 12.61% as it rose to a new 52-week high during the session. Meanwhile, Harmony rose 12.53%, while AngloGold Ashanti gained 9.92% as it also surged to register a new 52-week high. Lastly, despite the sharp increase in the previous session, the gold mining index only added 6.67% over the course of the week, but has now gained an astounding 116.34% during 2016 alone.
International markets are cautious ahead of today’s Brexit vote, although they do seem to be pricing in a “Remain” result. Sterling climbed to its highest level this year, in early trade, after two polls suggested a shift toward the “Remain” campaign. The first was a telephone survey done by ComRes which gave “Remain” the edge with 54%, while “Leave” came in at 46%. The second was a poll from YouGov which shows a tighter margin, with 51/49 in favour of “Remain”. The bookies have always favoured the a “Remain” vote however and there has been a shortening of the odds over the last week. Currently bookies are pricing it an 82% chance the UK will say within the EU. In the financial markets, prime brokers have however issued warnings on potential liquidity shortages and volatility over the next few trading days. There have also been significant hikes in the margins required for highly leveraged contracts. The financial services industry is certainly taking this “event risk” very seriously.
On Tuesday, Adobe Systems gained 1.77% to settle at $99.72 per share, but declined sharply in after-hours trade following the release of its second quarter results. Revenue for the quarter increased by 20.4% to $1.4bn, in line with expectations, boosted by an uptick in subscribers for Creative Cloud. In addition, net income increased by 65% to $244.1mn, or 48 cents per share. However, excluding items, net income increased to 71 cents per share, beating estimates of 68 cents. Lastly, while these numbers broadly met or surpassed expectations, investors were disappointed the group did not raise its revenue or profit expectations for the upcoming period.
Steinhoff gained 1.96% on Monday to settle at R87.88 per share, helped along by a surge in both local and European markets. In addition, the group received a boost following news it has set its sights on Poundland as its next target. Steinhoff, which already owns Harveys and Bensons for Beds in the UK, has acquired 22.78% in Poundland in the open market. As it stands, the group has confirmed any possible offer will be made in cash, with 13 July as the deadline to make a formal offer. While Poundland has scale, the group has suffered a large decline in its share price over the last year. The group showed an 84% drop in pre-tax profits in its latest results released on Thursday.
MTN was one of the top performers on Friday, up 5.06% at R144.62, helped along by a slump in the Nigerian Naira. This is most likely linked to optimism over the recently agreed upon fine being denominated in Naira. A significant weakening in the Nigerian currency will lead to a significant reduction of the dollar value of MTN’s payment. This looks likely as Nigeria’s currency prepares for a wild ride following the news that Nigeria’s Central Bank has decided to let the currency float. This marks the end of more than a year of being pegged at between 197 and 199 Naira per dollar. It is expected to move quickly towards the 260 level. The floating currency will also improve MTN’s ability to do business in the country as much needed liquidity returns to the Nigerian market.
LinkedIn surged 46.64% to close at $192.21 per share on Monday, following news Microsoft would acquire the company for $26.2bn. Microsoft agreed to pay $196 per share in an all-cash transaction, representing a 49.5% premium to Friday’s closing price. Despite the acquisition, LinkedIn will retain its independence, culture and brand, while Jeff Weiner will remain as CEO. The deal was unanimously approved by both boards and is expected to close by the end of the year. Twitter gained 9.1% following the news on speculation it might also be acquired, but eventually pared gains to end 3.8% higher.
Aspen announced yesterday it had reached an agreement with AstraZeneca to acquire its anaesthetics portfolio. The agreement will see Aspen’s wholly-owned subsidiary, Aspen Global Incorporated (AGI), acquire the exclusive rights to commercialise AstraZeneca’s global (excluding the USA), anaesthetics portfolio. The portfolio consists of seven established medicines, with the products sold in more than 100 countries worldwide. During the year ended 31 December 2016, these products generated revenue of $592mn. In terms of the agreement, AGI will pay $520mn and double-digit percentage royalties on sales of the portfolio, as well as sales related payments of up to $250mn in the 24 months following completion.