Holy Ship Greece Broke Out
It was another mixed day in the market, with regional banks and healthcare propelling the small-cap Russell 2000 higher. Let’s see what else you missed.
Today’s issue covers earnings from several shippers, the breakout in Greek stocks, and a Monday full of M&A deals.
Check out today’s heat map:
6 of 11 sectors closed green. Communication services (+0.91%) led, and consumer staples (-1.49%) lagged.
Speculation over the Fed’s next move continues, with several speakers this week. Minneapolis Fed President Neel Kashkari’s CNBC appearance made headlines after he cautioned against reading too much into a June interest rate pause. St. Louis Fed President James Bullard thinks the Fed will need two more 25 bps hikes this year due to inflation’s slow downward progress and fairly robust U.S. economic growth. And Atlanta Fed President Raphael Bostic said he is comfortable “waiting a little bit” before any more rate moves.
Meanwhile, the People’s Bank of China kept its benchmark lending rates for the ninth straight month as it battles a slowing economy and rising capital outflows.
Pfizer shares popped 5% after a phase two clinical trial showed that its oral weight loss drug may be as effective as and quicker than competitor Novo Nordisk’s “Ozempic.”
JPMorgan raised its full-year net interest income forecast by $3 billion to $84 billion. It attributed the uptick to its takeover of First Republic Bank.
Other symbols active on the streams included: $GME(+9.75%), $MULN (-11.20%), $HEPA (+118.40%), $OMH (+1.96%), $IONQ (+22.30%), $AVRO(+69.01%), $RAIN (-87.71%), and $MBOT (+159.35%).
Here are the closing prices:
| S&P 500 | 4,193 | +0.02% |
| Nasdaq | 12,721 | +0.50% |
| Russell 2000 | 1,795 | +1.22% |
| Dow Jones | 33,287 | -0.42% |
Shipping News Floats To The Top
Shipping stocks aren’t often a topic of conversation, but today’s moves in two stocks brought them into view.
Zim Integrated Shipping Services saw shares fall 17% today on weaker-than-expected results.
Some of the key metrics from the quarter included:
- Revenues of $1.37 billion (-63% YoY)
- Carried volume of 679,000 TEUs (-10% YoY)
- Average freight rate per TEU of $1,390 (-64% YoY)
- Diluted loss per share of $0.50 (vs. $14.19 per share earnings last year)
- Adjusted EBITDA of $373 million (-85% YoY)
Executives attributed the results to a steep decline in freight rates and weak demand,particularly in the Transpacific trade. Given the weak macro conditions, they expect the near-term environment to remain challenging. That said, they reaffirmed their full-year 2023 guidance of adjusted EBITDA of $1.8 to $2.2 billion and adjusted EBIT of $100 to $500 million.
$ZIM shares are trading at their lowest level since February 2021.
Meanwhile, Nordic American Tankers saw shares rise after reporting results.
Executives said the average time charter equivalent (TCE) for their fifteen spot vessels during the first quarter was $60,005 per day per ship. Including the four vessels on term contracts, the total average NAT TCE was $51,902 per day per ship.
That’s the second-strongest first-quarter TCE in the company’s 28-year history. And for context, operating costs are about $8,000 per day per vessel.
Some other key stats from the tanker company included:
- Net profit of $0.22 per share and adjusted EBITDA of $67.7 million
- 65% of spot voyages for Q2 have been booked at an average TCE of $42,111 per day per ship
- Dividend hike to $0.15 per share
- Net debt of $168 million, or $8.9 million per ship
Executives remain positive about the future. While last year was focused on Europe’s energy challenge, this year, the reopening of China and the re-emergence of India and the Far East should add demand to an already tight NAT market.
$NAT shares jumped 8% as they continue to trade near the top of their 5-year range.
Atlas-t A Breakout In Greek Stocks?
Last week we discussed Japanese stocks hitting 33-year highs. And this week, the strength in foreign stocks continues, with Greece of all places making headlines.
Let’s discuss what’s happening and see if investors will want a “pita the action.”
First, we’ll start with a weekly chart of the Global X MSCI Greece ETF ($GREK), one of the most popular vehicles offering direct exposure to the country’s stock market. As we can see from the chart below, prices are breaking out of the range they’ve been trapped in since 2015. Their last attempt in 2018 failed miserably, but they’re taking another shot at it five years later.
Helping drive the breakout was election news from over the weekend. The country’s ruling New Democracy party doubled Syriza’s 20% of the vote. With that said, it’s projected to win just 145 seats in Parliament. That will leave it six short of an absolute majority.
As a result, Greek President Katerina Sakellaropoulou is giving the three leading parties three days each to form a coalition government. If none are successful, a caretaker government will be appointed to prepare for a runoff election about a month later.
Ultimately, we’ll have to see how it plays out. But for now, the country’s stock market is pricing in a “positive result,” whatever that means.
So why does this matter? Developed markets outside of the U.S. have been strong recently. Greece’s breakout is just more evidence of that.And ultimately, bullish investors suggest that continued strength overseas will be a tailwind for U.S. markets since these global asset classes tend to move in tandem.
Whether or not that holds true remains to be seen, but for now, investors are welcoming Greece to the party. “Feta late than never,” we always say…
An M&A-Filled Monday
It was a busy day for dealmaking activity, so let’s quickly review.
Regional banks were buoyed after PacWest Bancorpsaid it would sell a portfolio of real estate construction loans to shore up its balance sheet. The company will sell 74 loans with an aggregate principal outstanding of $2.6 billion to a unit of Kennedy-Wilson Holdings. It’s also selling them six additional loans with an aggregate balance of around $363 million. While the deal comes at a discount, investors are celebrating PacWest’s steps toward improving its liquidity position.
Ironwood Pharmaceuticals is buying Switzerland-based drug developer VectivBio for $1.15 billion. The acquisition will add a promising treatment for digestive disorders to Ironwood’s portfolio. Its drug treats a type of short bowel syndrome, wherein the body cannot properly absorb nutrients. Data from a late-stage study is expected by year-end, but clearly, Ironwood feels the news will be positive.
Oil giant Chevron is throwing its weight around by buying PDC Energy. The stock-and-debt deal is valued at $7.6 billion and will increase Chevron DJ basin output by roughly 260,000 barrels/day. The deal comes at a time when oil companies are trying to diversify their operations away from areas like Russia that have significant geopolitical risks. The U.S. investment should also appease the Biden administration, which has been critical of major oil players for not investing enough domestically.
The “Big Law” industry is getting a little bigger after A&O and Shearman announced a merger. The giant global law firm will have about 4,000 lawyers and $3.4 billion in revenue across 49 offices and 29 countries. The news comes after Shearman abandoned a merger with Hogan Lovells, causing many of its senior partners to abandon ship. And the deal gives A&O the U.S. expansion it has been recently seeking.
The world’s largest alternative asset manager, Blackstone, apparently buys into the “diamonds are forever” saying. It’s fully acquiring jewelry certification firm International Gemological Institute (IGI) from China’s Fosun and the company’s founding family for about $530 million. Executives expect the acquisition to enable IGI to focus more resources on development strategies and expand beyond its main market, India.
Japanese lender Mizuho is buying U.S. investment bank Greenhill & Co. in an all-cash transaction that values the firm at $550 million, including debt. It joins its Japanese competitors that have expanded their investment banking businesses to the U.S. It’s likely they feel the recent dealmaking slump gives them the opportunity to pick these firms up cheaper than they otherwise could have.
While not M&A news, the following headlines were worth noting.
The world’s biggest maker of the tools used in manufacturing semiconductors, Applied Materials, says it will invest $4 billion in a new Silicon Valley chip research center. The new center will come online in 2026 and create up to 2,000 engineering jobs, hosting $25 billion of research over the next decade.
Mediterranean restaurant chain Cava filed for an initial public offering (IPO) on Friday, planning to trade on the New York Stock Exchange (NYSE) under the ticker symbol $CAVA. Its Form S-1 indicated that net sales rose 12.8% to $564.1 million in 2022, but its losses totaled $59 million. However, it’s still focused on growth through store expansions and building customer loyalty. It currently boasts more than 3.7 million loyalty members accounting for 25% of its sales, pushing same-store sales to grow 28.4% in Q1 of this year.
Lastly, some investors see SoftBank’s entrance as a contrarian signal of trouble ahead for private credit markets. Senior investors from the Japanese firm are speaking to market participants about directly lending as much as $1 billion to technology firms. The move comes as more firms, hurt by plunging valuations, turn to direct lending to get much-needed funds. On the other hand, the higher yields offered by these types of loans have attracted various new entrants into the market.
Bullets From The Day:
◀️ More apps now let you hit the undo button on your messages. Meta’s WhatsApp product will now give users 15 minutes after sending a message to edit it, rolling out the new feature to all users in the coming weeks. While the app has offered users the option of deleting messages for a while, this highly-requested feature will further streamline its user experience. The launch adds to its busy month of May, where it’s rolled out a new app for Wear OS smartwatches, poll and caption features, and a new locked conversations function. TheVerge has more.
👨💼 Wise shares fall following sudden CEO and CFO shakeup. The Fintech firm’s shares fell 2% after announcing that its CFO, Matt Briers, will resign from his post in March 2024 after eight years. It adds to the recent news that CEO Kristo Kaarman will take an extended sabbatical between September and December to spend time with his family. During that period, CTO Harsh Sinha will step in as interim CEO, driving speculation among investors that he could be moved into the role permanently after the short stint. More from CNBC.
💵 Could dollar stores be packaged foods companies’ next major growth driver? As dollar store growth continues, America’s largest household brands are repositioning their products for discount shelves. There are now more than 34,000 dollar stores in the U.S., with brands like Dollar Tree, Family Dollar, and Dollar General not planning on slowing down anytime soon. In addition, the category was the fastest-growing food retailer by household spending from 2008 to 2020. As a result, companies like Kraft Heinz are focused on delivering “meal solutions that make the dollar go further” to further tap into this market opportunity. Axios has more.
⚕️ Patient21 raises $108 million to expand its healthcare clinics. The Berlin-based startup operates as a digital healthcare platform with brick-and-mortar clinics and has raised $108 million in Series C funding that includes a mix of debt and equity. Its platform covers almost the entire patient cycle, from online bookings to digital case histories, check-ins, billing, insurance, and more. However, it’s lagging behind competitors in a critical market aspect by not offering a remote healthcare option. Executives say that’s because of their focus on dentistry, which requires more in-person touchpoints. But as it expands, this is an area it will have to tackle eventually. More from TechCrunch.
💰 European Union privacy regulator hits Meta with another record fine. Ireland’s Data Protection Commissioner (DPC) imposed a 1.2 billion euro fine over the tech giant’s handling of user information, giving it five months to stop transferring users’ data to the United States. The regulator found that Meta continued transferring data beyond a 2020 EU court ruling invalidating an EU-U.S. data transfer pact. The company said it would appeal the ruling and seek a stay of the suspension orders through the courts. Yahoo Finance has more.