IOCL Q1 PAT seen up 23.2% YoY to Rs. 5,604.8 cr: KR Choksey

KR Choksey has come out with its first quarter (April-June�� 18) earnings estimates for the Oil & Gas sector. The brokerage house expects IOCL to report net profit at Rs. 5,604.8 crore up 23.2% year-on-year (up 7.2% quarter-on-quarter).

Net Sales are expected to increase by 30.3 percent Y-o-Y (up 17 percent Q-o-Q) to Rs. 137,329.5 crore, according to KR Choksey.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 35.2 percent Y-o-Y (down 1.9 percent Q-o-Q) to Rs. 10,815.9 crore.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More First Published on Jul 22, 2018 07:05 pm

Intuitive Surgical (ISRG) Announces Quarterly Earnings Results, Beats Estimates By $0.28 EPS

Intuitive Surgical (NASDAQ:ISRG) announced its quarterly earnings results on Wednesday. The medical equipment provider reported $2.76 earnings per share for the quarter, beating the consensus estimate of $2.48 by $0.28, Bloomberg Earnings reports. The company had revenue of $909.30 million during the quarter, compared to analysts’ expectations of $877.43 million. Intuitive Surgical had a return on equity of 20.72% and a net margin of 23.25%. Intuitive Surgical’s quarterly revenue was up 19.8% on a year-over-year basis. During the same period last year, the business earned $5.95 earnings per share.

Shares of Intuitive Surgical traded down $6.62, reaching $521.29, on Thursday, MarketBeat Ratings reports. The company’s stock had a trading volume of 1,011,600 shares, compared to its average volume of 844,149. The stock has a market capitalization of $59.34 billion, a PE ratio of 75.20, a price-to-earnings-growth ratio of 4.65 and a beta of 0.58. Intuitive Surgical has a 52-week low of $307.00 and a 52-week high of $532.30.

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In other news, EVP David J. Rosa sold 54,000 shares of the business’s stock in a transaction that occurred on Friday, April 20th. The stock was sold at an average price of $457.02, for a total value of $24,679,080.00. Following the completion of the sale, the executive vice president now directly owns 65,141 shares in the company, valued at $29,770,739.82. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through this link. Also, SVP Mark J. Meltzer sold 6,000 shares of the business’s stock in a transaction that occurred on Thursday, June 7th. The shares were sold at an average price of $483.65, for a total value of $2,901,900.00. Following the completion of the sale, the senior vice president now owns 11,552 shares of the company’s stock, valued at $5,587,124.80. The disclosure for this sale can be found here. Insiders sold 170,767 shares of company stock valued at $77,995,219 over the last 90 days. Company insiders own 2.20% of the company’s stock.

ISRG has been the subject of several recent research reports. Bank of America lifted their price target on Intuitive Surgical from $465.00 to $510.00 and gave the company a “buy” rating in a research report on Wednesday, April 18th. Vetr cut Intuitive Surgical from a “strong-buy” rating to a “buy” rating and set a $454.14 price target for the company. in a research report on Tuesday, April 10th. Leerink Swann reiterated an “outperform” rating and set a $510.00 price target (up from $475.00) on shares of Intuitive Surgical in a research report on Wednesday, April 18th. Cantor Fitzgerald lifted their price target on Intuitive Surgical to $510.00 and gave the company an “overweight” rating in a research report on Wednesday, April 18th. Finally, Sanford C. Bernstein initiated coverage on Intuitive Surgical in a research report on Wednesday, June 27th. They set an “outperform” rating and a $560.00 price target for the company. Five analysts have rated the stock with a hold rating, fourteen have issued a buy rating and one has given a strong buy rating to the company. The stock has an average rating of “Buy” and an average target price of $476.97.

Intuitive Surgical Company Profile

Intuitive Surgical, Inc designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories. The company's da Vinci surgical System translates a surgeon's natural hand movements, which are performed on instrument controls at a console into corresponding micro-movements of instruments positioned inside the patient through small incisions or ports.

Further Reading: Closed-End Mutual Funds (CEFs)

Shares of Cleveland-Cliffs Inc. Pop 10% as Second-Quarter Earnings Surge

What happened?

Shares of Cleveland-Cliffs Inc. (NYSE:CLF), the largest and oldest iron-ore mining company in the U.S., were up 10% as of 3:14 p.m. EDT Friday after the company announced better than expected second-quarter results.

So what

The company reported consolidated revenues of $714 million, significantly better than the prior year's $471 million, and higher than analysts' estimates of $692.2 million, per analysts surveyed by investment research firm Zacks. Income from continuing operations jumped to $229 million, or $0.76 per diluted share, which was again a large improvement from the prior year's $84 million, or $0.28 per share, and well ahead of analysts' estimates calling for $0.56 per share, per Zacks. Another bright spot was a 16% increase in its U.S. iron-ore realized revenue rate.

Image source: Getty Images.

President and CEO Lourenco Goncalves said in a press release: "Our second quarter is a definitive statement about the new Cliffs and our earnings power. After almost four years of consistent execution of a well-designed and thoroughly implemented strategy, our company has become a very powerful cash-generating enterprise."

Now what

It's understandable that investors pushed the stock higher today. The second-quarter surge in earnings reflects an end, or near-end, to its multiyear transformation to get back to its roots as a supplier of high-grade iron units. Now that the company is focused on its roots, it expects to generate cash this year at a level it hasn't seen in years, and for that strong momentum to continue into 2019. Business is looking good, and today's 10% jump means investors are buying into its future potential.

Analysts Set Shire PLC (SHPG) Target Price at $208.89

Shares of Shire PLC (NASDAQ:SHPG) have earned an average recommendation of “Buy” from the twenty brokerages that are currently covering the stock, Marketbeat.com reports. One analyst has rated the stock with a sell recommendation, seven have assigned a hold recommendation and twelve have given a buy recommendation to the company. The average 12 month price target among brokers that have covered the stock in the last year is $208.89.

Several equities research analysts recently issued reports on SHPG shares. Zacks Investment Research upgraded Shire from a “sell” rating to a “hold” rating in a report on Friday, March 23rd. Cantor Fitzgerald set a $222.00 price target on Shire and gave the stock a “buy” rating in a report on Wednesday, March 28th. Bank of America reiterated a “buy” rating on shares of Shire in a report on Wednesday, March 28th. BidaskClub upgraded Shire from a “sell” rating to a “hold” rating in a report on Friday, March 30th. Finally, B. Riley upped their price target on Shire to $200.00 and gave the stock a “buy” rating in a report on Thursday, April 19th.

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Hedge funds have recently bought and sold shares of the business. Raymond James & Associates boosted its position in Shire by 15.5% in the fourth quarter. Raymond James & Associates now owns 101,051 shares of the biopharmaceutical company’s stock worth $15,675,000 after purchasing an additional 13,567 shares during the last quarter. Rockefeller Capital Management L.P. purchased a new position in Shire in the first quarter worth $113,097,000. Sawtooth Solutions LLC purchased a new position in Shire in the fourth quarter worth $200,000. Palo Alto Investors LLC boosted its position in Shire by 4.3% in the fourth quarter. Palo Alto Investors LLC now owns 135,800 shares of the biopharmaceutical company’s stock worth $21,065,000 after purchasing an additional 5,600 shares during the last quarter. Finally, OLD Mission Capital LLC purchased a new position in Shire in the fourth quarter worth $18,368,000. 17.92% of the stock is currently owned by institutional investors and hedge funds.

Shire traded down $0.82, hitting $172.06, during trading on Monday, Marketbeat.com reports. 489,507 shares of the company were exchanged, compared to its average volume of 1,362,866. Shire has a 52 week low of $123.73 and a 52 week high of $177.51. The company has a market capitalization of $52.55 billion, a P/E ratio of 11.36, a price-to-earnings-growth ratio of 1.43 and a beta of 1.28. The company has a current ratio of 1.14, a quick ratio of 0.66 and a debt-to-equity ratio of 0.45.

Shire (NASDAQ:SHPG) last announced its quarterly earnings results on Thursday, April 26th. The biopharmaceutical company reported $3.86 earnings per share (EPS) for the quarter, topping the Thomson Reuters’ consensus estimate of $3.58 by $0.28. Shire had a return on equity of 13.60% and a net margin of 28.96%. The business had revenue of $3.77 billion during the quarter. During the same quarter last year, the company posted $3.63 EPS. The company’s quarterly revenue was up 5.4% compared to the same quarter last year. analysts predict that Shire will post 15.27 EPS for the current year.

Shire Company Profile

Shire plc, a biotechnology company, researches, develops, licenses, manufactures, markets, distributes, and sells medicines for rare diseases and other specialized conditions worldwide. The company offers products in therapeutic areas, including hematology, genetic diseases, neuroscience, immunology, internal medicine, ophthalmology, and oncology.

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3 Reasons to Buy United Technologies Stock

United Technologies' (NYSE:UTX) execution hasn't been flawless in the last few years, but that doesn't seem to worry leading hedge fund managers Dan Loeb and Bill Ackman. Apparently they see a value opportunity, enough to cause them to take large positions in the stock. Actually, there are three key reasons to own the stock, and they all directly relate to valuation. Let's take a look at them.

United Technologies stock offers compelling value. Image source: Getty Images.

Valuation-based arguments for owning United Technologies stock

The key points:

The stock trades at a discount to its peers, including poorly performing General Electric�(NYSE:GE) as well as outperforming companies like�Honeywell International (NYSE:HON). The company is going through a period of suppressed earnings due to transitioning several businesses toward long-term earnings growth -- it should trade at an earnings premium rather than a discount. Management is actively looking at breaking up the company, and there's significant value to be released if it does so. Discount to peers

Looking across its industrial conglomerate peers, it's clear the stock trades at discount on an EV-to-EBITDA -- enterprise value (market cap plus net debt) to earnings before interest, tax, depreciation and amortization -- basis. (EV-to-EBITDA is a very commonly used measure that helps compare companies with different debt loads.)

UTX EV to EBITDA (Forward) data by YCharts.

On the downside, United Technologies continues to face headwinds from issues as diverse as China's construction markets (in its Otis segment), technical difficulties and production ramp-ups on its geared turbofan aircraft engine (Pratt & Whitney), and raw material cost increases (UTC Climate, Controls & Security, or CCS). Furthermore,�Boeing continues to pressure suppliers (affecting UTC Aerospace Systems, or UTAS).�

However, not every industrial conglomerate is going to have all of its segments firing on all cylinders at all times. Unlike General Electric, United Technologies isn't facing cash flow issues or structural decline in its core segment (GE power). Furthermore, GE missed its production target on the LEAP engine (produced as part of a joint venture with Safran) in the first quarter.�

Honeywell's aerospace operations also face pressure from Boeing. Honeywell was forced to grant significant incentives to original equipment (OE) manufacturers in 2016 and 2017 in order to be on new aircraft programs, and a slowdown in construction in China would also hurt Honeywell.

All told, does United Technologies really deserve to trade at such an obvious discount to its conglomerate peers?

Position in its business cycle

United Technologies is positioning itself for long-term growth, but three of its four segments are suffering near-term headwinds as a consequence. Otis has been more price-competitive in order to win market share in the elevator equipment market in China, in turn generating more profitable long-term services revenue growth.

Meanwhile, Pratt & Whitney is ramping up production of its geared turbofan engine with a view to maximizing long-term aftermarket and service revenues, while UTAS' commercial OE sales have been weak as the company transitions from selling equipment on legacy aircraft toward newer aircraft from Boeing and Airbus.�

All of these things are holding back near-term earnings, but analysts are seeing EPS growth moving from zero in 2017 to single digits in 2018, and then double digits in 2019. Given that the best is yet to come for United Technologies, it should arguably trade at a premium.

Breakup value

While the stock is perhaps a good value in any case, there's also some significant upside from a possible breakup of the company. Hedge fund managers Loeb and Ackman may have grabbed the headlines with calls to separate the company into three different parts -- CCS, Otis, and an aerospace company comprising UTAS, Pratt & Whitney, and the soon to be acquired Rockwell Collins�-- but the reality is,�CEO Greg Hayes has already told investors that he's considering doing it.�

United Technologies won't move until the Rockwell Collins deal is completed -- hopefully by the summer --�but don't be surprised if Hayes announces a breakup after this.

The case for splitting up is based on the idea that each separate part of the company trades at a discount to its specific competitor. Moreover, there is little overlap between, say, Pratt & Whitney's aircraft engines and Otis' elevators or CCS' air conditioners, so breaking up the company shouldn't create dis-synergies.�

Meanwhile, the challenges created by Boeing on its suppliers mean that a combined United Technologies aerospace segment would receive the management focus and investment it might lack as part of a conglomerate.

The key takeaway

Investing in United Technologies offers a value proposition with a kicker from the potential for a breakup. General Electric and Honeywell have both won plaudits for their plans to sell and spin off businesses in 2018, and a similar move by Hayes would likely be rewarded, too.

If Hayes and the board elect to split up the company, then shareholders can expect its constituent parts to start closing the valuation gap between each business and its peers. That would be good news for investors.

Analysts Expect PBF Energy Inc (PBF) Will Post Earnings of $1.41 Per Share

Wall Street analysts forecast that PBF Energy Inc (NYSE:PBF) will report earnings per share (EPS) of $1.41 for the current fiscal quarter, according to Zacks. Five analysts have made estimates for PBF Energy’s earnings, with estimates ranging from $0.99 to $2.09. PBF Energy posted earnings per share of ($0.06) in the same quarter last year, which indicates a positive year-over-year growth rate of 2,450%. The business is expected to report its next earnings results before the market opens on Thursday, August 2nd.

On average, analysts expect that PBF Energy will report full year earnings of $3.60 per share for the current fiscal year, with EPS estimates ranging from $2.41 to $5.86. For the next financial year, analysts expect that the company will report earnings of $5.01 per share, with EPS estimates ranging from $3.54 to $8.14. Zacks’ earnings per share calculations are a mean average based on a survey of research firms that that provide coverage for PBF Energy.

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PBF Energy (NYSE:PBF) last posted its earnings results on Thursday, May 3rd. The oil and gas company reported ($0.29) EPS for the quarter, missing the consensus estimate of ($0.19) by ($0.10). The firm had revenue of $5.80 billion during the quarter, compared to the consensus estimate of $5.43 billion. PBF Energy had a return on equity of 4.39% and a net margin of 2.09%. PBF Energy’s revenue for the quarter was up 22.0% on a year-over-year basis. During the same quarter last year, the company posted ($0.20) EPS.

A number of brokerages have recently weighed in on PBF. ValuEngine lowered shares of PBF Energy from a “strong-buy” rating to a “buy” rating in a research note on Monday, July 2nd. Macquarie raised shares of PBF Energy from a “neutral” rating to an “outperform” rating in a research note on Monday. Scotiabank reaffirmed a “sector perform” rating on shares of PBF Energy in a research note on Thursday, April 12th. Citigroup lowered shares of PBF Energy from a “buy” rating to a “neutral” rating and set a $37.00 price target for the company. in a research note on Wednesday, April 18th. They noted that the move was a valuation call. Finally, Morgan Stanley upped their price target on shares of PBF Energy from $37.00 to $38.00 and gave the stock a “sell” rating in a research note on Monday, April 16th. Four analysts have rated the stock with a sell rating, ten have issued a hold rating and five have assigned a buy rating to the company’s stock. The company currently has a consensus rating of “Hold” and an average price target of $38.00.

A number of hedge funds have recently added to or reduced their stakes in the stock. Polianta Ltd acquired a new stake in PBF Energy during the second quarter valued at approximately $1,127,000. Empowered Funds LLC acquired a new stake in PBF Energy during the second quarter valued at approximately $1,434,000. Clinton Group Inc. acquired a new stake in PBF Energy during the second quarter valued at approximately $1,095,000. Dorsey Wright & Associates acquired a new stake in PBF Energy during the second quarter valued at approximately $614,000. Finally, Cerebellum GP LLC acquired a new stake in PBF Energy during the second quarter valued at approximately $175,000. 95.07% of the stock is owned by institutional investors and hedge funds.

Shares of NYSE:PBF traded up $0.40 during trading on Thursday, reaching $44.14. The company had a trading volume of 72,289 shares, compared to its average volume of 2,172,990. The firm has a market cap of $4.76 billion, a P/E ratio of 38.37, a P/E/G ratio of 1.18 and a beta of 1.22. PBF Energy has a twelve month low of $19.46 and a twelve month high of $50.99. The company has a current ratio of 1.50, a quick ratio of 0.50 and a debt-to-equity ratio of 0.74.

About PBF Energy

PBF Energy Inc, together with its subsidiaries, engages in the refining and supply of petroleum products. The company operates through two segments, Refining and Logistics. It produces gasoline, ultra-low-sulfur diesel, heating oil, diesel fuel, jet fuel, lubricants, petrochemicals, and asphalt, as well as unbranded transportation fuels, petrochemical feedstocks, blending components, and other petroleum products.

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Wade G W & Inc. Sells 13,156 Shares of Procter & Gamble Co (PG)

Wade G W & Inc. trimmed its holdings in shares of Procter & Gamble Co (NYSE:PG) by 6.6% in the first quarter, according to the company in its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The fund owned 185,684 shares of the company’s stock after selling 13,156 shares during the period. Procter & Gamble accounts for about 1.7% of Wade G W & Inc.’s investment portfolio, making the stock its 14th biggest holding. Wade G W & Inc.’s holdings in Procter & Gamble were worth $14,721,000 at the end of the most recent quarter.

Several other institutional investors and hedge funds have also bought and sold shares of PG. Signature Estate & Investment Advisors LLC bought a new stake in Procter & Gamble in the fourth quarter valued at approximately $103,000. Cerebellum GP LLC bought a new stake in Procter & Gamble in the fourth quarter valued at approximately $122,000. James Investment Research Inc. increased its stake in Procter & Gamble by 400.0% in the fourth quarter. James Investment Research Inc. now owns 1,500 shares of the company’s stock valued at $138,000 after purchasing an additional 1,200 shares in the last quarter. Lenox Wealth Advisors Inc. increased its stake in Procter & Gamble by 140.5% in the fourth quarter. Lenox Wealth Advisors Inc. now owns 1,621 shares of the company’s stock valued at $149,000 after purchasing an additional 947 shares in the last quarter. Finally, Financial Gravity Companies Inc. bought a new stake in Procter & Gamble in the fourth quarter valued at approximately $171,000. 59.39% of the stock is owned by institutional investors and hedge funds.

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In related news, insider Gary A. Coombe sold 1,529 shares of the stock in a transaction on Monday, June 4th. The shares were sold at an average price of $74.25, for a total transaction of $113,528.25. Following the completion of the transaction, the insider now owns 5,235 shares in the company, valued at $388,698.75. The sale was disclosed in a filing with the Securities & Exchange Commission, which is accessible through the SEC website. Also, insider Steven D. Bishop sold 2,075 shares of the stock in a transaction on Wednesday, May 2nd. The stock was sold at an average price of $71.87, for a total transaction of $149,130.25. Following the transaction, the insider now owns 42,524 shares of the company’s stock, valued at approximately $3,056,199.88. The disclosure for this sale can be found here. Insiders have sold 20,938 shares of company stock valued at $1,604,483 in the last 90 days. 0.35% of the stock is currently owned by corporate insiders.

PG has been the subject of several recent analyst reports. Bank of America reaffirmed a “neutral” rating and issued a $90.00 target price on shares of Procter & Gamble in a research note on Thursday, April 19th. Morgan Stanley lowered their target price on shares of Procter & Gamble from $92.00 to $85.00 and set an “equal weight” rating for the company in a research note on Thursday, April 5th. Zacks Investment Research raised shares of Procter & Gamble from a “hold” rating to a “buy” rating and set a $86.00 target price for the company in a research note on Tuesday, March 27th. SunTrust Banks reaffirmed a “hold” rating and issued a $75.00 target price on shares of Procter & Gamble in a research note on Friday, April 20th. Finally, Jefferies Financial Group reissued a “buy” rating and set a $90.00 price objective on shares of Procter & Gamble in a research report on Thursday, April 19th. Three equities research analysts have rated the stock with a sell rating, ten have given a hold rating, five have given a buy rating and one has given a strong buy rating to the company. Procter & Gamble presently has a consensus rating of “Hold” and an average price target of $87.90.

Shares of PG stock opened at $79.31 on Friday. The company has a quick ratio of 0.74, a current ratio of 0.91 and a debt-to-equity ratio of 0.42. Procter & Gamble Co has a 12-month low of $70.73 and a 12-month high of $94.67. The firm has a market cap of $196.39 billion, a PE ratio of 20.23, a P/E/G ratio of 2.44 and a beta of 0.58.

Procter & Gamble (NYSE:PG) last issued its quarterly earnings data on Thursday, April 19th. The company reported $1.00 earnings per share (EPS) for the quarter, topping the Thomson Reuters’ consensus estimate of $0.98 by $0.02. Procter & Gamble had a net margin of 15.17% and a return on equity of 20.72%. The company had revenue of $16.28 billion during the quarter, compared to the consensus estimate of $16.22 billion. During the same quarter in the prior year, the firm earned $0.96 earnings per share. The firm’s revenue was up 4.3% compared to the same quarter last year. research analysts anticipate that Procter & Gamble Co will post 4.19 EPS for the current fiscal year.

About Procter & Gamble

The Procter & Gamble Company provides branded consumer packaged goods to consumers in the United States, Canada, Puerto Rico, Europe, the Asia Pacific, Greater China, Latin America, India, the Middle East, and Africa. The company's Beauty segment offers hair care products, including conditioners, shampoos, styling aids, and treatments; and skin and personal care products, such as antiperspirant and deodorant, personal cleansing, and skin care products.

Want to see what other hedge funds are holding PG? Visit HoldingsChannel.com to get the latest 13F filings and insider trades for Procter & Gamble Co (NYSE:PG).

UK offers new 'business-friendly' plan for Brexit

British Prime Minister Theresa May and her government have agreed a "business-friendly" plan for Brexit.

Announced at the end of a crucial summit on Friday, the proposal seeks to preserve frictionless goods trade with the European Union, and avoid the border checks and tariffs most feared by manufacturing companies.

In a statement, May said she would present the proposal to EU officials quickly. Both sides want a deal by October, before Britain leaves the European Union in March, 2019.

Despite the show of government unity on Friday, the plan is likely to anger members of May's party who favor a clean break with the European Union. But it will be welcomed by companies in Britain and around the world.

May's plan calls for the United Kingdom and the European Union to establish a free trade area that would allow goods and agricultural products to move across borders without delays.

In return for unfettered access to its biggest export market, the United Kingdom would commit to following EU rules and regulations on goods. It would also accept a limited role for bloc's top court.

The UK government said the proposal marks a "substantial evolution" in its negotiating position, and it includes concessions that would maintain closer ties with the European Union than May had previously sought.

UK, European and Japanese businesses have long complained about uncertainty over the UK government's plans. With just nine months to go until Brexit, their growing anxiety was reflected in a series of increasingly insistent warnings in recent days.

Jaguar Land Rover, Britain's biggest carmaker with 40,000 employees, cautioned this week that a bad deal would slash its profits by 拢1.2 billion ($1.6 billion) a year. Airbus (EADSF) and BMW (BMWYY) also issued dire warnings.

The plan announced Friday acknowledges that banking and other UK service industries, which make up the vast majority of the UK economy, would lose some access to European markets.

But Britain's biggest business lobby group, the Confederation of British Industry, welcomed Friday's announcement as a "good starting point."

"This is a genuine confidence boost and the prime minister deserves credit for delivering a unified approach" said Carolyn Fairbairn, CBI director general, in a statement.

Yet elements of the plan are likely to be unacceptable to the European Union.

The world's biggest trading bloc only grants unfettered market access to countries where all its citizens have the right to live and work. May wants to end this freedom of movement, replacing it with a vague "mobility framework."

The UK government plan also calls for a future customs arrangement under which Britain would collect EU tariffs on goods bound for the bloc.

Doing so would allow the United Kingdom to set its own tariff rates, and negotiate its own trade deals. Such a proposal would almost certainly be rejected by the European Union.

"I'm afraid this is nonsensical fudge from the UK Government," said David Henig, a former UK trade negotiator and director of the European Centre for International Political Economy. "Essentially they've changed the language from earlier, but not the approach."

Still, the plan could help move negotiations forward.

"It has taken two years for the UK to agree its position; we now have two months to agree it with Europe," said Fairbairn.

What Happened in the Stock Market Today

A positive jobs report overcame investor concerns about trade on Friday, and the�Dow Jones Industrial Average (DJINDICES:^DJI)�and the�S&P 500 (SNPINDEX:^GSPC)�closed the day and the week in the green.

Today's stock market Index Percentage Change Point Change

Dow	0.41%	99.74
S&P 500	0.85%	23.21

Data source: Yahoo! Finance.

Biotech shares soared on good news from clinical trials; the�iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) gained 3.8%.�The tech sector also had a big day, with the�Technology Select Sector SPDR ETF (NYSEMKT:XLK) jumping 1.2%.

As for individual stocks, Biogen (NASDAQ:BIIB) made headlines with positive results from a trial of an Alzheimer's drug, and PriceSmart (NASDAQ:PSMT) fell after reporting earnings.

Image source: Getty Images.

Encouraging Alzheimer's trial boosts Biogen

Shares of Biogen soared 19.6% after the company announced�results from a midstage�clinical trial�that showed one of its Alzheimer's drug candidates slowed progression of the disease.

The phase 2 trial of BAN2401,�an anti-amyloid beta protofibril antibody that Biogen is developing along with its Japanese partner Eisai, tested the various doses of the drug against a placebo in 856 patients with early Alzheimer's disease. At the highest dose level, the drug met the trial's primary endpoint of change in a composite score that measures the clinical symptoms of the disease. The study also showed a statistically significant reduction of amyloid levels in the brains of test subjects.

"The prospect of being able to offer meaningful disease-modifying therapies to individuals suffering from this terrible disease is both exciting and humbling," said Chief Medical Officer Alfred Sandrock, M.D., Ph.D. "These BAN2401 18-month data offer important insights in the investigation of potential treatment options for patients with Alzheimer's disease and underscores that neurodegenerative diseases may not be as intractable as they once seemed."

Some doubt was cast on the drug's prospects last December when Biogen and Eisai announced that the criteria for success had not yet been met at the 12-month mark. Now the companies say that BAN2401 "began" to show statistically significant clinical benefit�as early as six months, including at 12 months.

Numerous trial failures for drugs targeting Alzheimer's have highlighted the difficulty in finding treatments for the disease. But Biogen has six drugs in development for Alzheimer's, including two in later, phase 3 trials, so today's results have investors encouraged about the company's chances to score a big commercial win in the space, despite the fact that the drug is still a long way from commercialization.

PriceSmart misses profit expectations

PriceSmart, an operator of wholesale club stores in Latin America and the Caribbean, announced fiscal third-quarter results�that didn't meet up with analyst expectations, and the stock fell 10.7%. Revenue increased 7.1% to $782 million and earnings per share fell $0.01 to $0.61. The stock is not closely followed on Wall Street, but the three analysts who cover it expected the company to earn $0.74 on revenue of $784 million.

Net merchandise sales growth was 5.6% and comparable-store sales increased 2.7%. Comparable sales in Central America, the company's biggest region, fell 1%, which the company attributed to a new warehouse store opening that siphoned off some sales from existing stores nearby. Comps in the Caribbean increased 4.5% and in Colombia soared 17.9%. Income from membership fees jumped 6.8%.�

Gross margin as a percentage of total revenue increased to 16.6% from 15.4% in the period a year earlier. Operating income grew 2.9% to $28.4 million. Profit in the quarter was hurt by an $8 million expense related to the acquisition of Aeropost,�a cross-border logistics and e-commerce provider that PriceSmart bought in March.

PriceSmart, founded by the same father-and-son team that founded Price Club and later merged with Costco Wholesale,�is building a similar member-based warehouse chain in Latin America and the Caribbean.

Dow shakes off trade-war angst to end 180 points higher after Fed minutes, ahead of jobs report

U.S. stocks finished Thursday's trade solidly higher--a day after the Fourth of July break--as investors appeared to dismiss worries about an impending deadline on trade between the U.S. and China, and the release of minutes from the Federal Reserve that acknowledged the potential for tariff disputes to harm domestic economic expansion. The Dow Jones Industrial Average DJIA, +0.75% closed up about 180 points, or 0.8%, at 24,356(on a preliminary basis), the S&P 500 index SPX, +0.86% rose by 0.9% at 2,737, powered by gains in technology XLK, +1.41% health-care XLV, +1.04% and consumer-staples XLP, +1.38% shares of at least 1%. Meanwhile, the Nasdaq Composite Index COMP, +1.12% finished up about 1.1% at 7,586. An account of the June meeting from the policy-setting Federal Open Market Committee's two-day convention ended June 13 pointed to unease over trade clashes that could hold back economic growth but not sufficiently to prevent the Fed from hiking benchmark interest rates. The central bank raised rates by a quarter of a percentage point last month to a range between 1.75% and 2% and indicated that a further two rate increases were in the cards for 2018. Meanwhile, the U.S. is scheduled to impose tariffs on $34 billion of Chinese imports Friday, and China is expected to counter with corresponding tariffs on U.S. imports in less than 24 hours, marking a mounting tit-for-tat conflict between the world's largest economies that has threatened to rattle global markets. Equity and commodity exchanges in the U.S. were closed in observance of Independence Day on Wednesday. Looking ahead, investors will await a key report on jobs on Friday that could influence investor sentiment. The day's action began on a high note on reports that suggested the U.S. was softening its stance against the European Union, with an offer of a "zero solution" to car tariffs. In corporate news, shares of Qorvo Inc. QRVO, +5.66% were the best performer S&P 500, up about 5.7%, while CF Industries Holdings Inc. CF, -2.73% posted the steepest decline, off 2.7%.

Quote References DJIA +181.92 +0.75% SPX +23.39 +0.86% XLK +0.98 +1.41% XLV +0.87 +1.04% XLP +0.71 +1.38% COMP +83.75 +1.12% QRVO +4.38 +5.66% CF -1.21 -2.73% Show all references MarketWatch Partner Center Most Popular Brace for a lost decade for U.S. stocks, warn Morningstar strategists Harvard University is fighting to keep its secretive admissions process under wraps Tech rally leads stocks higher; trade and Fed minutes also in focus The 21st Century has not been the American Century Mortgage rates fall to 3-month low as flight to safety rolls on $(function() { if (window.MutationObserver) { // arrive breaks if MutationObserver not supported by browser $("#dianomiRightRail").arrive(".dianom

Domo Richly Priced At Post-IPO Market Value

&l;p&g;&l;img class=&q;size-full wp-image-185988&q; src=&q;http://blogs-images.forbes.com/greatspeculations/files/2018/06/https___blogs-images.forbes.com_alexkonrad_files_2018_06_domo-ipo1.jpg?width=960&q; alt=&q;&q; data-height=&q;640&q; data-width=&q;960&q;&g; Domo CEO Josh James rings the bell at Nasdaq as the company goes public on June 29, 2018.

Domo (DOMO), a business intelligence and data visualization provider, went public on Thursday, June 28. At a price range of $19 to $22 per share, the company planned to raise up to $189 million. At the midpoint of this price range, DOMO currently earns a &l;a href=&q;https://www.newconstructs.com/stock-rating-methodology/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;very unattractive rating&l;/a&g;. The stock closed Monday at $23.75.

Domo&a;rsquo;s valuation at IPO was less than a quarter of the &l;a href=&q;https://www.domo.com/news/press/domo-closes-100m-in-series-d2-extension-financing-with-a-2-3b-valuation&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;$2.3 billion&l;/a&g; valuation assigned by its last private funding round in April 2017. The company comes to market burning cash at a rapid rate and needing an infusion of capital to fund its operating costs. Meanwhile, concerns over slowing growth and CEO Josh James&a;rsquo; &l;a href=&q;https://www.fool.com/investing/2018/06/19/domo-gets-a-hair-cut-sort-of-addresses-yellow-flag.aspx&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;history of self-dealing&l;/a&g; have investors justifiably spooked, as well as competitive threats from entrenched outfits like Tableau Software (DATA), Salesforce.com (CRM), Oracle (ORCL) and IBM.

Some investors may view these recent struggles as a buy low opportunity, but that could be a big mistake. Despite the recent price drop, Domo still has highly optimistic growth expectations baked into its stock price. Investors should stay away from this IPO.

&l;strong&g;Record Low Profitability&l;/strong&g;

Domo has the unenviable distinction of earning the lowest return on invested capital (&l;a href=&q;https://www.newconstructs.com/education-return-on-invested-capital/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;ROIC&l;/a&g;) of any of the 2,800+ companies under coverage. With an ROIC of -344%, it lost over three dollars for every dollar invested in its business in 2017. Since ROIC is the &l;a href=&q;https://www.newconstructs.com/roic-paradigm-linking-corporate-performance-valuation/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;primary driver of valuation&l;/a&g;,&l;a href=&q;#_ftn1&q; name=&q;_ftnref1&q; target=&q;_blank&q;&g;&l;/a&g; Domo&a;rsquo;s extremely negative ROIC is a major red flag for investors.

Figure 1 shows that DOMO&a;rsquo;s losses have remained steady. Even as revenue grew by 46% in 2016, after-tax operating profit (NOPAT) remained roughly flat at negative $175 million.

&l;strong&g;Figure 1: DOMO Revenue and NOPAT Since 2016&l;/strong&g;

&l;a href=&q;https://blogs-images.forbes.com/greatspeculations/files/2018/06/NewConstructs_DOMO_RevGrowthVsNOPAT_2018-06-25.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-full wp-image-185763&q; src=&q;http://blogs-images.forbes.com/greatspeculations/files/2018/06/NewConstructs_DOMO_RevGrowthVsNOPAT_2018-06-25.jpg?width=960&q; alt=&q;&q; data-height=&q;267&q; data-width=&q;646&q;&g;&l;/a&g; DOMO Revenue vs. NOPAT

A deeper look at the number doesn&a;rsquo;t reveal much cause for optimism. Gross margin did increase slightly in 2017, from 56% to 59%, but that increase was driven solely by a shift in the revenue mix from Professional Services to Subscription revenue. Subscription gross margins actually declined slightly from 63.4% to 62.9%.

&l;strong&g;Marketing Spend Is Unsustainable&l;/strong&g;

In addition to its comparatively low gross margins, Domo&a;rsquo;s huge losses are driven by its sky-high marketing spend. The company spent $132 million &a;ndash; 121% of revenue &a;ndash; on sales and marketing in 2017.

Potential investors should be alarmed that Domo&a;rsquo;s large marketing budget has not led to higher growth. Figure 2 compares Domo to several other high-profile tech IPOs in 2018 on the basis of revenue growth and selling expense as a percentage of revenue. It shows that Domo ranks in the middle of pack in terms of growth despite spending nearly double that of the next highest company.

&l;strong&g;Figure 2: Revenue Growth and Selling Expenses for Recent Tech IPOs&l;/strong&g;

&a;nbsp;

&l;a href=&q;https://blogs-images.forbes.com/greatspeculations/files/2018/06/NewConstructs_DOMO_RevAndOpExpensesVsPeers_2018-06-25.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-full wp-image-185764&q; src=&q;http://blogs-images.forbes.com/greatspeculations/files/2018/06/NewConstructs_DOMO_RevAndOpExpensesVsPeers_2018-06-25.jpg?width=960&q; alt=&q;&q; data-height=&q;244&q; data-width=&q;646&q;&g;&l;/a&g; DOMO vs. Peer IPOs

Even worse, Domo&a;rsquo;s revenue growth is slowing even as its sales and marketing budget remains sky-high. Revenue growth slowed to 32% year over year in Q1 while the company spent 124% of revenue on sales and marketing.

Domo&a;rsquo;s huge marketing budget led to &l;a href=&q;https://www.newconstructs.com/education-free-cash-flow/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;free cash flow&l;/a&g; of -$160 million in 2017. With just $72 million in cash on hand, the company must cut back on its expenses significantly or constantly raise new capital.

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One place where Domo has already cut costs is in research and development, where its spending declined by 3% in 2017. Underinvesting in the product while overspending on marketing could be a bad sign for the long-term health of the company.

&l;strong&g;Shareholders Have Little Control: CEO Gets 86% of Voting Power&l;/strong&g;

Domo follows in the footsteps of other recent IPOs like &l;a href=&q;https://www.newconstructs.com/dont-buy-what-smart-money-sells/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;Dropbox&l;/a&g; (DBX) and &l;a href=&q;https://www.newconstructs.com/danger-zone-snap-inc-snap/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;Snapchat&l;/a&g; (SNAP) by issuing dual class shares that keeps voting power in the hands of its founder. Despite holding just 15% of the company&a;rsquo;s shares, CEO Josh James will have 86% of the voting power, meaning outside shareholders will effectively have no say in the direction of the company.

&l;strong&g;CEO Has History of Self-Dealing With Family Businesses&l;/strong&g;

The dual-class share structure is especially concerning for Domo, as CEO Josh James has revealed a troubling lack of judgement in the past. The company has been involved in a significant amount of self-dealing, such as leasing a jet and hiring catering and furnishing services from companies owned by James and his siblings. The company recently &l;a href=&q;https://www.fool.com/investing/2018/06/19/domo-gets-a-hair-cut-sort-of-addresses-yellow-flag.aspx&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;filed an amended S-1&l;/a&g; saying it has terminated these relationships, but the existence of these conflicts in the first place is a major red flag.

&l;strong&g;Family, Friends and Insiders Seek Loophole to Avoid Lock-up&l;/strong&g;

In that amended filing, Domo also brought up a new red flag with the announcement of a &l;a href=&q;https://seekingalpha.com/article/4182936-domo-adds-scary-provision-revised-ipo-filing-regardless-price-buy&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;direct share program&l;/a&g; to sell shares in the IPO to company insiders as well as their friends and families. Notably, the friends and families would not be subject to any lockup period in this agreement, meaning they could buy shares at the IPO price and quickly flip them for a profit in the event of a first-day pop.

Taken together, all these governance issues point to a company that is run for the benefit of insiders and executives rather than for shareholders.

&l;strong&g;My Discounted Cash Flow Model Reveals More Potential Downside Risk&l;/strong&g;

Despite the 75% decline in its valuation over the past year, the growth expectations for Domo are still unrealistically high. My&a;nbsp;&l;a href=&q;https://www.newconstructs.com/education-close-the-loopholes-how-our-dcf-works/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;dynamic DCF&l;/a&g; model quantifies exactly what kind of future cash flows the market price of a stock implies a company will generate.

To justify the midpoint IPO price of $20.50/share, Domo must achieve pre-tax margins of 15% &a;ndash; comparable to large enterprise software provider like IBM (IBM) &a;ndash; and grow revenue by 20% compounded annually for the next seven years. The proposed IPO valuation implies that Domo can significantly cut back on its marketing expenses while still maintaining a relatively high growth rate.

Specifically, the company would have to cut sales and marketing costs from 120% to 35% of revenue, maintain its current gross margin on subscription revenue of 63%, and keep all other operating costs at current levels while still growing revenue at 20% annually. Also, Domo would go from having the worst ROIC of any company in our coverage universe to earning a top-quintile 37% ROIC in seven years. &l;a href=&q;https://www.newconstructs.com/wp-content/uploads/2018/06/DOMO_DCF_20.50.png&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;See the math behind this dynamic DCF scenario here&l;/a&g;.

If Domo achieves 10% pre-tax margins and grows revenue by 11% compounded annually for the next decade, the stock is worth just $8/share today, 62% below the midpoint of the IPO range. In this scenario, Domo would go from having the worst ROIC of any company in our coverage universe to earning a top-quintile 24% ROIC in ten years. &l;a href=&q;https://www.newconstructs.com/wp-content/uploads/2018/06/DOMO_DCF_8.png&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;See the math behind this dynamic DCF scenario here&l;/a&g;.

&l;strong&g;Critical Details Found in Financial Filings By My Firm&s;s&a;nbsp;&l;/strong&g;&l;a href=&q;https://www.newconstructs.com/harvard-publishes-case-study-on-our-robo-analyst-technology/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;&l;strong&g;Robo-Analyst Technology&l;/strong&g;&l;/a&g;

As investors &l;a href=&q;https://www.newconstructs.com/iss-buying-eva-dimensions-signals-more-focus-on-fundamental-research/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;focus more&l;/a&g; on fundamental research, research automation technology is needed to analyze all the critical financial &l;a href=&q;https://www.newconstructs.com/danger-zone-fund-managers-that-dont-analyze-details-in-10-ks/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;details in financial filings&l;/a&g;. Below are specifics on the adjustments I make based on Robo-Analyst&l;a href=&q;#_ftn2&q; name=&q;_ftnref2&q; target=&q;_blank&q;&g;&l;/a&g; findings in Domo&a;rsquo;s S-1:

Income Statement: I made $2 million of adjustments, with a net effect of removing $2 million in non-operating expense (2% of revenue). The biggest adjustment was removing $1 million in non-operating expense due to the &l;a href=&q;https://www.newconstructs.com/implied-interest-op-lease-nopat-adj/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;implied interest cost on operating leases&l;/a&g;. You can see all the adjustments made to DOMO&a;rsquo;s income statement &l;a href=&q;https://www.newconstructs.com/wp-content/uploads/2018/06/DOMO_IS_Adjustments.png&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;here&l;/a&g;.

Balance Sheet: I made $17 million of adjustments to calculate invested capital with a net increase of $16 million. The largest adjustments was $17 million in &l;a href=&q;https://www.newconstructs.com/off-balance-sheet-debt/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;operating leases&l;/a&g;. This adjustment represented 62% of reported net assets. You can see all the adjustments made to DOMO&a;rsquo;s balance sheet &l;a href=&q;https://www.newconstructs.com/wp-content/uploads/2018/06/DOMO_BS_Adjustments.png&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;here&l;/a&g;.

Valuation: I made $84 million of adjustments with a net effect of decreasing shareholder value by $84 million. There were no adjustments that increased shareholder value. Outside of the operating leases mentioned above, the largest adjustment to shareholder value was $20 million in &l;a href=&q;https://www.newconstructs.com/outstanding-employee-stock-options/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;outstanding employee stock options&l;/a&g;. This option adjustment represents 4% of DOMO&a;rsquo;s proposed market cap.

&l;em&g;Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.&l;/em&g;

&l;em&g;&a;nbsp;&l;/em&g;&l;a href=&q;#_ftnref1&q; name=&q;_ftn1&q; target=&q;_blank&q;&g;&l;/a&g; Ernst &a;amp; Young&a;rsquo;s recent white paper &a;ldquo;&l;a href=&q;https://www.newconstructs.com/ernst-young-proves-superiority-of-our-data-roic/&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;Getting ROIC Right&l;/a&g;&a;rdquo; demonstrates the link between an accurate calculation of ROIC and shareholder value.

&l;a href=&q;#_ftnref2&q; name=&q;_ftn2&q; target=&q;_blank&q;&g;&l;/a&g; Harvard Business School features the powerful impact of our research automation technology in the case &l;a href=&q;https://hbr.org/product/new-constructs-disrupting-fundamental-analysis-with-robo-analysts/118068-PDF-ENG&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;New Constructs: Disrupting Fundamental Analysis with Robo-Analysts&l;/a&g;.&l;/p&g;