Archives for June 22, 2017

European stocks dragged down by oil shares for third session

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A third day of declines was in store for European stocks Thursday, as the energy sector grappled with the slide in oil prices.

The Stoxx Europe 600 SXXP, was down 0.5% at 386.47, led by oil and gas, telecom and financial shares. The health care sector, however, was up and the tech group was printing a small rise.

The pan-European benchmark on Wednesday lost 0.2%.

Crumble in crude: The direction of oil prices was holding sway over the direction of equity trade Thursday as oil prices US:CLN7 LCOQ7, pulled back, stuck in a bear market and trading at 10-month lows.

The Stoxx Europe 600 Oil and Gas Index SXEP, flopped down 1.5%, on course for a nearly 4% drop over the last three sessions.

Crude prices have tumbled on worries about persistent oversupply in the global oil market. The U.S. Energy Information Administration on Wednesday said weekly domestic production climbed by 20,000 barrels to 9.35 million barrels a day.

Among European oil producers, Tullow Oil PLC TLW, gave up 3.4%, trading at the bottom of the Stoxx 600, and France’s Total SA FP, was pushed 1.7% lower.

Norwegian oil services company Subsea 7 SA SUBC, sank 5% following a downgrade to equal weight at Morgan Stanley, and AMEC Foster Wheeler PLC AMFW, shed 2.8%.

Indexes: In London, the FTSE 100 UKX, which is heavily weighed by oil and mining shares, fell 0.5% to 7,413.61. France’s CAC 40 index PX1, fell 0.5% to 5,248.18

Germany’s DAX 30 DAX, was off 0.3% at 12,739.89, but is less exposed to commodity stocks compared with other benchmarks.

The euro EURUSD, fetched $1.1163, not far off from $1.1170 late Wednesday in New York.

Brexit watch: U.K. Prime Minister Theresa May on Thursday evening is expected to present Britain’s plans for European Union citizens living in the U.K. as part of Brexit negotiations.

May’s Conservative Party is still trying to work out a policy-support deal with the Democratic Unionist Party from Northern Ireland, after losing its parliamentary majority in this month’s general election. U.K. Treasury chief Philip Hammond said on BBC Radio he was confident an agreement will be made.

Data: Confidence in France’s manufacturing sector declined slightly in June, as business leaders were less bullish about their own production levels, said statistics agency Insee.

Berkshire Hathaway to Invest in Embattled Lender Home Capital

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Berkshire Hathaway to Invest in Embattled Lender Home Capital

Warren Buffett’s Berkshire Hathaway Inc. has stepped in to inject funds into Home Capital Group Inc., the Canadian alternative lender attempting to rebound from near collapse after being accused by regulators of misleading investors.

Berkshire Hathaway has agreed to indirectly acquire C$400 million ($300 million) of the Company’s common shares on a private placement basis and provide a C$2 billion line of credit facility to subsidiary Home Trust Company, the company said in a statement late Wednesday in Toronto.

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“Home Capital’s strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment,” Buffett said in the statement.

The move is the latest sign of a turnaround in the 30-year-old lender after a regulator in April accused it of misleading shareholders on mortgage fraud, which sent its shares tumbling, sparked withdrawals and threatened to disrupt Canada’s real estate sector. Earlier this week, Home Capital agreed to sell a clutch of commercial mortgages to affiliates of KingSett Capital Inc. for C$1.16 billion in cash.

Source: Bloomberg Markets

How Can Kroger Be Down 26% In 5 Days?

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Why Is Kroger Down 26% in 5 days?
A glimpse of Kroger’s (KR) share price movement reveals that it has plunged over 26% in the past five days.

A glimpse of The Kroger Company’s KR share price movement reveals that it has plunged over 26% in the past five days. In the past one month, the stock has nosedived roughly 24.6% compared with the Zacks categorized Retail-Supermarkets industry that has gained 11.8%.

Further, Momentum Score of “C” clearly indicates that the stock is likely to spiral downward in the coming days. Additionally, a downtrend in the Zacks Consensus Estimate in the past seven days also echoes the same sentiment.

So what is behind the debacle? We have tried to ascertain major reasons that can be held responsible for this Zacks Rank # 5 (Strong Sell) stock’s dismal show in the bourses. You can see the complete list of today’s Zacks #1 Rank stocks here.

Declining Comps

Stiff competition, falling comps, volatility in food prices, aggressive promotional environment and waning store traffic are making things tough for Kroger. We noted that identical supermarket sales (excluding fuel center sales) had fallen 0.2% in first-quarter fiscal 2017, following a 0.7% decline in the final quarter of fiscal 2016.

This trend may be short lived, but is enough to impact the shares. Kroger envisions identical supermarket sales, excluding fuel, to be flat to up 1% in fiscal 2017.

Debt Burden

Apart from the aforementioned reasons, Kroger’s debt level may also elevate investors’ concern. The company ended first-quarter fiscal 2017 with a total debt of $13,444 million compared with $12,386 million in the year-ago period. As a result, interest expense rose 14.2% year over year in the quarter under review, following an increase of 11.5% and 16% in the fourth and third quarters of fiscal 2016, respectively.

We also noted that the company’s debt-to-equity ratio, which represents the proportion of debt and equity it is deploying to finance its assets, is displaying an increasing trend – 1.88, 2.09, 2.10 and 2.19 in the second, third and fourth quarters of fiscal 2016 and first-quarter of fiscal 2017, respectively.

Waning Bottom Line

This is evident from first-quarter fiscal 2017 results, wherein the bottom line continued to decline year over year for the third straight quarter, despite an increase in the top line fueled by recent buyouts. After falling 4.7% and 7% in the third and fourth quarters of fiscal 2016, respectively, the bottom line plunged 18.3% in the first quarter of fiscal 2017. (Read: Kroger Q1 Earnings Beat but Decline Y/Y, Outlook Cut)

Subsequently, Kroger trimmed its forecast and now envisions fiscal 2017 earnings in the band of $2.00–$2.05 per share down from earlier projection of $2.21–$2.25. As a result, analysts polled by Zacks have also tweaked their estimates. In the past seven days, the Zacks Consensus Estimate of $2.00 and $2.11 for fiscal 2017 and 2018 has declined 22 cents each. Moreover, for the second quarter the same has dropped 6 cents to 42 cents.

Whole Foods’ Buyout News Sends Ripples

Kroger’s shares came under immense pressure, after the news of Whole Foods Market, Inc.’s WFM buyout by Amazon.com Inc. AMZN spread through the market. The deal may help firm Whole Foods’ position against Kroger and Wal-Mart Stores Inc. WMT. Analysts are looking at this mammoth acquisition as an amalgamation between online marketplace and physical stores that could bring a massive change in the retail industry going forward. (Read: Whole Foods’ Buyout by Amazon, Worries Wal-Mart & Others)