FedEx (FDX) is scheduled to release its earnings next week–and RBC’s John Barnes and team aren’t expecting great news:
FedExreports 3FQ/16 (ended February 2016) results on March 16 after market close…We are trimming our 3FQ/16 EPS estimates to reflect higher than expected peak season costs. We also expect the company to rein in FY/16 EPS guidance when it reports. Accordingly, we are cautious onFedEx into earnings next week…
FedExoperations negatively impacted by severe weather and a last minute surge in volumes the week before Christmas. In order to cope, the company ran operations of Christmas and the day after. We believe this reduced Ground margins by 70 bps. Our sense is that this was less of an issue for the Express operation…
Mid-point of guidance likely to move lower. Our new FY/16 EPS estimate of $10.43 sits near the low end of the $10.40-$10.90 guidance range. We expect management to both lower guidance and tighten the range to $10.40-10.60 even after incorporating the benefit from share repurchase activity.
Hot Forestry Stocks To Buy Right Now: Corrections Corporation of America(CXW)
Corrections Corporation of America, together with its subsidiaries, owns and operates privatized correctional and detention facilities in the United States. It owns, operates, and manages prisons and other correctional facilities; and provides inmate residential and prisoner transportation services for governmental agencies. The company also offers various rehabilitation and educational programs, including basic education, religious services, life skills and employment training, and substance abuse treatment, as well as food services, work and recreational programs, and healthcare services, such as medical, dental, and mental health services. In addition, it leases its facilities to third-party operators. The company serves federal, state, and local correctional and detention authorities. As of December 31, 2012, the company owned and managed 47 correctional and detention facilities; and managed 20 correctional and detention f acilities, which it did not own. Corrections Corporation of America was founded in 1983 and is based in Nashville, Tennessee.
- [By Ben Levisohn]
Shares of Corrections Corp of America (CXW) and GEO Group (GEO) have lost half their value after reports that the Justice Department plans to end the use of private prisons. The Washington Post’s Matt Zapotosky has the details:
Bryan Anselm for The Wall Street Journal
The Justice Department plans to end its use of private prisons after officials concluded the facilities are both less safe and less effective at providing correctional services than those run by the government.
Deputy Attorney General Sally Yates announced the decision on Thursday in a memo that instructs officials to either decline to renew the contracts for private prison operators when they expire or substantially reduce the contracts scope. The goal, Yates wrote, is reducing and ultimately ending our use of privately operated prisons.
It’s not as if these stocks weren’t without their problems before their announcement. In a report released on Aug. 14, Canccord’s Ryan Meliker and Michael Kodesch discussed the headwinds facing Corrections Corp of America and GEO Group:
The prison sector has faced headwinds as of late, as BOP reductions, family detention dynamics, and general sentencing reform dialogue have weighed on the two prison REIT names. We continue to believe the sector offers a unique blend of stable fundamentals and the potential for accretive external growth, though we also acknowledge CXW’s current risk associated with the renegotiation of a material contract, which we believe to be one-off in nature. Additionally, it is our view that while headline risk is a concern from a stock performance perspective, these are unwarranted concerns from an operating perspective. We continue to prefer GEO shares to those of CXW, driven by GEO’s lower risk to family detention, higher and safer dividend yield (8.0% vs. CXW’s 7.9%) and
diversified business model.
But it sure looks like their probl
- [By Ben Levisohn]
Yesterday, Corrections Corp of America (CXW) and GEO Group (GEO) lost more than a third of their values after the Department of Justice said it would seek to wind down the use of private prisons. SunTrust Robinson Humphrey’s Tobey Sommer and Kwan Kim call the selloff “overdone.” They explain why:
Todd Meier for the Wall Street Journal
If the Bureau of Prisons (BOP) in-sources its business over time, that could represent 10%-12% of EBITDA at CXW and 13%-15% of EBITDA at GEO. Our sense is that the BOP will evaluate each facility at the time of its contract renewal date, taking into account the quality of each facility and the agencys overall needs. This means the business is unlikely to be turned off overnight, but rather potentially be at risk over 5 years.
Currently, we believe the BOPs total inmate population to be 193,000, with 157,000 in their own facilities. Occupancy in BOP facilities is 117% vs. 140% several years ago. In-sourcing by increasing overcrowding in BOP facilities is an economically viable choice, but not one consistent with a desire to deliver superior quality to those inmates, in our view.
The BOP canceled the CAR 16 procurement for 10,800 beds in the Southwest and is set to issue a substitute procurement for just 3,600 beds only in Texas. Of the three facilities operated by private firms in TX, we believe GEOs Big Spring facility (3,600 beds) is the highest-rated facility.
Paradoxically, we believe the BOP may also renewing contracts for certain facilities. We believe that the Department of Justice surprised the corrections space with its announcement.
As far as ICE and U.S. Marshals businesses are concerned, we see them as more secure from in-sourcing risk since neither agency maintains its own network of facilities. Other risks exist, such as the family detention business in the news recently, but the risk of in-sourcing is relatively low, in our view.
Sommer and Kim h
Hot Forestry Stocks To Buy Right Now: Rex Energy Corporation(REXX)
Rex Energy Corporation operates as an independent oil and gas company in the Appalachian Basin and the Illinois Basin. It focuses on the Marcellus Shale drilling projects, and Utica Shale and Upper Devonian Shale exploration activities in the Appalachian Basin. The company also holds interests in the Lawrence Field ASP Flood project, which is an oil recovery project located in Lawrence County, Illinois. As of December 31, 2011, it operated approximately 2,117 wells, including approximately 517 disposal and injection wells. The company had estimated proved reserves of 366.2 billions of cubic feet equivalent. Rex Energy Corporation was founded in 2007 and is headquartered in State College, Pennsylvania.
- [By Ben Levisohn]
Our peer group is up an average of 46% over the past 4 weeks in response to a 30% rebound in the 12-month strip NYMEX oil price. Some of the largest gainers include Hold and Sell rated stocks that we would not chase such asDenbury Resources (Sell, +138%), Halcon Resources (HK) (Sell, +147%), Jones Energy (JONE) (Hold, +166%), Rex Energy (REXX) (Sell, +60%), Sanchez Energy (SN) (Hold, +93%), Ultra Petroleum (UPL) (Sell, +61%), andWhiting Petroleum (Hold, +103%), which have outperformed the E&P Index (+32%) over the same time period. Balance sheets and/or well level returns remain challenged for these companies despite improved oil prices. While we believe oil markets should re-balance over the next 12 to 15 months, the recent recovery to $40 could reverse during 2Q16 as bloated inventories continue to rise, new volumes from Iran pressure an oversupplied market, and a highly anticipated decline in non-OPEC supply (especially in the U.S.), is not as steep as expected. The risk of an oil price retracement, which would significantly pressure the recent out-performers, outweighs the upside in these stocks, in our view. However, we are raising our target prices on Buy ratedAnadarko Petroleum ($54 from $48), Concho Resources (CXO) ($120 from $109), Matador Resources (MTDR) ($22 from $21),Noble Energy (NBL) ($40 from $34), SM Energy (SM) ($22 from $15), Rice Energy ($14 from $12), Pioneer Natural Resources (PXD) ($155 from $135),Continental Resources ($32 from $28), and Parsley Energy (PE) ($24 from $23). We believe our Buy-rated stocks are better positioned to weather challenging oil markets.
Hot Valued Stocks To Watch Right Now: BioCryst Pharmaceuticals Inc.(BCRX)
BioCryst Pharmaceuticals, Inc., a biotechnology company, designs, optimizes, and develops small-molecule pharmaceuticals that block key enzymes involved in infectious diseases, cancer, and inflammatory diseases. It uses structure-based drug design, which incorporates multiple scientific disciplines, including biology, crystallography, medicinal chemistry, and computer to develop new therapeutic candidates. The company has three novel late-stage compounds in development, which include Peramivir, a neuraminidase inhibitor for the potential treatment of influenza; BCX4208, a purine nucleoside phosphorylase (PNP) inhibitor for gout; and Forodesine, a PNP inhibitor for cutaneous T-cell lymphoma (CTCL) and chronic lymphocytic leukemia (CLL). Peramivir is being developed under a contract from the Biomedical Advanced Research and Development Authority within the United States Department of Health and Human Services. Forodesine has been granted orphan drug status by the FDA for thr ee indications, which include T-cell non-Hodgkin?s lymphoma, including CTCL; CLL and related leukemias, including T-cell prolymphocytic leukemia, adult T-cell leukemia, and hairy cell leukemia; and for treatment of B-ALL. The FDA has also granted fast track status to the development of forodesine for the treatment of relapsed or refractory T-cell leukemia, and special protocol assessment from the FDA for forodesine to conduct a pivotal clinical trial in CTCL with an oral formulation. The company announced the initiation of a Phase 2b study of BCX4208 as add-on therapy in gout patients who have not responded to allopurinol therapy alone. BioCryst Pharmaceuticals utilizes crystallography and structure-based drug design to discover additional compounds and to progress others through pre-clinical and early development to address the unmet medical needs of patients and physicians. The company was founded in 1986 and is headquartered in Durham, North Carolina.
- [By Monica Gerson]
BioCryst Pharmaceuticals (NASDAQ: BCRX) shares gained 5.98% to $6.91 in the pre-market session after the company has been awarded contract by the National Institute of Allergy and Infectious Diseases to develop BCX4430 for the treatment of Marburg virus disease.
Hot Forestry Stocks To Buy Right Now: Westar Energy, Inc.(WR)
Westar Energy, Inc. (Westar Energy), incorporated on March 6, 1924, is an electric utility in Kansas. The Company provides electric generation, transmission and distribution services to approximately 700,000 customers in Kansas. The Company provides these services in central and northeastern Kansas, including the cities of Topeka, Lawrence, Manhattan, Salina and Hutchinson. Kansas Gas and Electric Company (KGE), Westar Energy’s subsidiary, provides the services in south-central and southeastern Kansas, including the city of Wichita. Both Westar Energy and KGE conduct business using the name Westar Energy. The Company supplies electric energy at retail to customers in Kansas. The Company also supplies electric energy at wholesale to municipalities and electric cooperatives in Kansas, and has contracts for the sale or purchase of wholesale electricity with other utilities. The Company classifies it customers as residential, commercial and industrial. It has approximately 6,2 70 megawatts (MW) of generating capacity in service.
Fossil Fuel Generation
The three coal-fired units at Jeffrey energy center have an aggregate capacity of approximately 2,150 MW, of which the Company owns or consolidate through a variable interest entity (VIE) a combined share, or over 1,970 MW. The two coal-fired units at La Cygne Generating Station (La Cygne) have an aggregate generating capacity of approximately 1,400 MW, of which the Company owns or consolidate, through a VIE. La Cygne uses primarily Powder River Basin (PRB) coal but one of the two units also uses a small portion of locally mined coal. Lawrence and Tecumseh Energy Centers have an aggregate generating capacity of approximately 540 MW.
The Company uses natural gas as a primary fuel at its Gordon Evans, Murray Gill, Hutchinson, Spring Creek and Emporia Energy Centers and at the State Line facility. The Company also uses natural gas as a supp lemental fuel in the coal-fired units at Lawrence and Tecums! eh Energy Centers.
The Company uses diesel to start some of its coal generating stations, as a primary fuel in the Hutchinson No. 4 combustion turbine and in its diesel generators. The Company also purchases No. 2 diesel in the spot market.
Wolf Creek is approximately 1,170 MW nuclear power plant located near Burlington, Kansas. KGE owns an interest in Wolf Creek, or approximately 550 MW.
The Company owns approximately 150 MW of designed installed wind capacity. Also of the approximately 1,310 MW of wind power under contract, the Company has over 910 MW in operation.
- [By Jayson Derrick]
According to a report by Bloomberg, Westar Energy Inc (NYSE: WR) is a potential takeover target from rival Ameren Corp (NYSE: AEE) and a consortium of investors, including Toronto-based Borealis Infrastructure Management and the Canada Pension Plan Investment Board.
Hot Forestry Stocks To Buy Right Now: Cliffs Natural Resources Inc.(CLF)
Cliffs Natural Resources Inc., a mining and natural resources company, produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. The company operates six iron ore mines in Michigan, Minnesota, and eastern Canada; two iron ore mining complexes in Western Australia; five metallurgical coal mines located in West Virginia and Alabama; and one thermal coal mine located in West Virginia. It also owns a 45% economic interest in a coking and thermal coal mine located in Queensland, Australia; and a 30% interest in Amapa, a Brazilian iron ore project in Latin America, as well as chromite properties in Ontario, Canada. The company, formerly known as Cleveland-Cliffs Inc, was founded in 1847 and is headquartered in Cleveland, Ohio.
- [By Monica Gerson]
Benzinga's newsdesk monitors options activity to notice unusual patterns. These large volume (and often out of the money) trades were initially published intraday in Benzinga Professional . These trades were placed during Monday's regular session.
Twitter Inc (NYSE: TWTR) Jan17 22.0 Calls: 20500 @ ASK $1.20: 22k traded vs 2041 OI: Earnings 7/26 After Close $17.63 Ref Antero Resources Corp (NYSE: AR) Aug16 25.0 Calls: 7500 @ ASK $2.30: 11k traded vs 560 OI: Earnings 8/3 $26.06 Ref Mobileye NV (NYSE: MBLY) Fri 7/22 52.0 Calls (Wkly) Sweep: 1000 @ ASK $0.50: 1003 traded vs 0 OI: Earnings 8/4 $48.50 Ref Cliffs Natural Resources Inc (NYSE: CLF) 7/29 8.0 Calls (Wkly) Sweep: 1000 @ ASK $0.15: 1000 traded vs 1 OI: Earnings 7/28 Before Open $6.83 Ref Integrated Device Technology Inc (NASDAQ: IDTI) Nov16 22.0 Calls Sweep: 1520 @ ASK $1.85: 1520 traded vs 67 OI: Earnings 8/1 $20.64 Ref Fortuna Silver Mines Inc (NYSE: FSM) Aug16 7.5 Calls: 2496 @ ASK $1.65: 2502 traded vs 162 OI: Earnings 8/5 $8.81 Ref Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL) 7/29 13.0 Calls (Wkly): 4300 @ ASK $0.30: 7000 traded vs 10 OI: Earnings 8/4 $12.22 Ref
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