Stock Market Predictions

D-Telekom shares drop on move to block AT&T deal

Stock Market Predictions

"There is talk the sale will be blocked by the justice department," a Frankfurt-based trader said.

At the same time AT&T shares dropped 3 percent in New York while competitor Sprint (S.N) gained 10 percent.

Deutsche Telekom was not available to comment.

(Reporting by Harro ten Wolde)

AOL shares up on going private report

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AOL has huddled with bankers in recent days to discuss options, including early-stage discussions to focus on a price that may entice AOL's management to consider such a transaction, the newspaper reported citing sources.

Last week, AOL had confirmed it has an investment banker and a law firm on retainer.

Teams from investment banking firm Allen & Co and law firm Wachtell, Lipton, Rosen & Katz were reported to have met AOL executives last Wednesday.

AOL, which Time Warner (TWX.N) spun off after a disastrous decade-long merger, is trying to regain its status as one of the world's most popular online destinations by investing in efforts such as hyperlocal news network Patch and buying the Huffington Post.

AOL shares were trading up 80 cents at $16.11 in morning trade on Wednesday on Nasdaq after touching a high of $16.44 earlier in the session.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Joyjeet Das)

Bouygues shares jump on buyback plan

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The telecoms, media and construction group also tweaked its sales target for the year higher after a 4 percent increase in first-half sales as its construction unit returned to growth.

Bouygues shares have fallen around 26 percent in the last three months on concerns about the impact of the global economic slowdown on its construction unit and increasing competition in the mobile telecoms market.

As a result, the company's market capitalization has shrunk to around 8.4 billion euros, below the group's shareholders equity of 9 billion euros at the end of June.

At 1217 GMT, Bouygues was the best-performing stock on the CAC-40 index .FCHI, up 16.87 percent at 26.99 euros.

Bouygues's plan to support its share price and lift earnings per share was seen as a positive signal on the market, sparking hopes of more buybacks by companies, and sending the STOXX construction and materials sector .SXOP up 3.4 percent, strongly outperforming the broad market.

Bouygues' larger rival Vinci (SGEF.PA) and Vivendi (VIV.PA), the telecom and entertainment group, said on Wednesday that they are not planning share buybacks.

The move also signals that Bouygues is set to favor internal growth over acquisitions in the absence of interesting targets, as indicated by Chief Executive Officer Martin Bouygues.

Speaking at a press conference, he ruled out any plans for large mergers or acquisitions, dismissing speculation of possible interest in French cable operator Numericable.

Bouygues' buyback might boost earnings per share by 11 percent if all shareholders take up the offer, which is due to be voted at a meeting on October 10.

The repurchase covers 11.7 percent of the company's capital and will be made at 30 euros per share, representing a premium of 30 percent on the closing price of 23.07 euros on Tuesday, Bouygues said on Wednesday.

Chief Financial Officer Philippe Marien told reporters on a conference call that Bouygues would finance the operation, expected to be a one-off, through its own resources, which total 8 billion euros.

"This proposal benefits all of our shareholders," Martin Bouygues said in a statement. "It is good financial management and does not alter our industrial strategy."

The company also slightly upgraded its sales target for 2011 to 32 billion euros from 31.9 billion as it reported a 27 percent fall in first-half net profit to 391 million euros from 532 million a year earlier.

The decline in net profit, which beat an average of 348 million in a Global Markets poll of four analysts, reflected a lower contribution from Bouygues' 31 percent stake in power and transport engineering company Alstom (ALSO.PA).

The group reported a 4 percent increase in first-half sales to 15.2 billion euros as the construction business returned to growth.

Speaking on the sidelines of the press conference, Martin Bouygues said there could be opportunities for its construction unit in Libya as part of the country's reconstruction after the end of Muammar Gaddafi's 42 year old rule.

($1=.6897 Euro)

(Editing by Helen Massy-Beresford and Jon Loades-Carter)

Esprit falls to 3-week low after profit warning

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The stock fell to as low as HK$19.96 before steadying at HK$20.15 as at 0200 GMT, still down 7.8 percent. That compared with a 0.76 fall in the benchmark Hang Seng Index .HSI.

Esprit said late on Thursday that it was set to post a sharp drop in 2010/11 profit as a result of one-off costs related to restructuring. Esprit, whose results are due on September 15, said its board had approved a strategic plan to restructure store operations.

Esprit, which competes with Swedish clothing retailer Hennes & Mauritz AB (HMb.ST), U.S. group GAP Inc (GPS.N) and Spain's Inditex SA (ITX.MC), had said earlier this year that its sales in Europe fell 3.6 percent in local currency terms for nine months ended in March, while Asia-Pacific sales rose 26.3 percent. Sales in Europe accounted for 79.1 percent of total turnover during the period.

(Reporting by Donny Kwok; Editing by Ken Wills)

Major shareholder plans Omega Pharma buyout

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Couckinvest NV, owned by Omega Pharma founder and chief executive Marc Coucke, will bid 36 euros per share for the shares in the company that it does not already own, valuing the group at some 880 million euros ($1.26 billion).

It has a 30.01 percent stake in the company that sells non-prescription products such as wart treatment or sun tan lotion to pharmacists, with 5.06 percent in the hands of Capital Research Group and 61.3 percent in free float.

Coucke said that Omega Pharma needed substantial investments in brands and country structures to grow further and that these could have a "strong impact" on short-term results.

"This strategy, which is to be executed in an uncertain macroeconomic environment, implies more risks and uncertainties than in the past. Couckinvest wishes to provide shareholders the opportunity to exit the Omega Pharma share at a fair price," he said.

The bid is below the 37 euros Omega Pharma referred to in July as a "working hypothesis" for a potential delisting and is 5.5 percent above Thursday's close of 34.12 euros.

Belgian financial markets regulator FSMA suspended trading in Omega Pharma's shares ahead on Friday, pending a news release. It said trading should resume later on Friday.

Omega sells prescription-free medicines and healthcare products, over-the-counter (OTC) items and competes with the OTC arms of pharma giants such as Johnson & Johnson (JNJ.N) and Bayer BAYG.DE and of consumer product groups from Procter & Gamble (PG.N) to Reckitt Benckiser (RB.L).

Omega, the only sizeable stand-alone OTC company, ranks just outside the top 10 in that market with sales last year of 857 million euros.

Couckinvest will finance the bid with a bank loan and a capital injection from private equity group Waterland and a small number of co-investors.

The takeover is contingent on receiving acceptances representing at least 90 percent of the company. The deal is expected to close early in 2012.

KBC Securities is advising the company's directors. BNP Paribas Fortis and ING are advisors for Couckinvest.

($1=.6969 Euro)

(Reporting by Robert-Jan Bartunek; Editing by Philip Blenkinsop and Jon Loades-Carter)

Analysis: Big name investors, funds bet on Rite Aid recovery

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Debt-saddled, money-losing Rite Aid is the third-largest U.S. drugstore chain, with nearly 4,700 stores. After years of declines, same-store sales have risen in its three most recent quarters. On Thursday, Rite Aid said second-quarter same-store sales were up 2.2 percent.

The improvement, however modest, is fueling speculation that Rite Aid shares, which have been trading for less than $1.50 for nearly a year and a half, have hit bottom.

New initiatives, like a customer loyalty program and smaller stores, are gaining traction with shoppers, and the company's CEO of 14 months, John Standley, is well regarded by investors.

Shares in Rite Aid have fallen 84 percent in roughly four years and were as low as 20 cents in 2008.

"You could see the business doing a lot better; you could see the stock doing a lot better " one large shareholder said, speaking on condition of anonymity. His fund has tripled its shares in Rite Aid in recent months.

Even a modest rise in shares could yield a big payday for investors, many of whom were bondholders who bought debt on the cheap in 2008 and have converted that into equity.

Investors that recently have taken equity in Rite Aid or added to what they already owned include: Leonard Green & Partners LP, Diamondback Capital Management, Perry Capital LLC, Standard Pacific Capital and billionaire investor George Soros, whose fund reported a small stake in May.

Canadian retailer Jean Coutu Group (PJCa.TO), Rite Aid's biggest shareholder since it sold its U.S. drugstores to Rite Aid in 2007, when Rite Aid shares were worth $6.70, said in July it would shed 10 percent of its 26.8 percent stake. Coutu also said it intends to remain the largest investor.

NOT A TAKEOVER TARGET ... YET

A major draw for investors is Rite Aid's potential as a takeover target, despite its market value of just $1 billion.

Still, Rite Aid will not be in play until it makes serious inroads into its enormous debt load.

For now, the company could keep selling or shutting some stores. In recent years, rival Walgreen Co (WAG.N) has bought more than 20 stores from Rite Aid.

Analysts say Walgreen and CVS Caremark Corp (CVS.N), the top two drugstore chains, could particularly be drawn to Rite Aid's attractive portfolio of stores in California and Pennsylvania, while Wal-Mart Stores Inc (WMT.N) could be tempted by its stores' sizes to help expand its new smaller-format business.

Rite Aid's $6 billion long-term debt has been an albatross, leading to severe liquidity crises in 2000 and 2008. The company's interest expenses of more than $500 million a year in the last two fiscal years effectively wiped out any profit.

"The biggest obstacle (to a deal) is their debt load," said a retail investment banker, who declined to be named because he was not authorized to speak to the media.

Rite Aid's debt is seen as so risky that on Thursday it cost 29 times more to protect $10 million of Rite Aid debt for five years than Walgreen debt based on credit default swap trades, according to Markit. Walgreen CDS are thinly traded.

Although Leonard Green, the private equity firm that has done a number of leveraged buyouts of retail chains, is the No. 2 investor in Rite Aid and holds a seat on its board, it is unlikely to make a bid for the company, a source close to the situation said. One reason is that Rite Aid largely leases its stores rather than owning them.

Leonard Green did not return a request for comment. Rite Aid declined to comment for this article.

In addition, Rite Aid's unionized workers would deter Wal-Mart, which has no U.S. unions, industry experts said.

Despite the debt load, a Chapter 11 bankruptcy protection filing is not considered an imminent possibility. Rite Aid has no major maturities coming due until 2014 and generates ample cash from $25 billion in annual sales.

TOUGH TURNAROUND

Rite Aid still faces a number of challenges.

It commands just 11.4 percent of the U.S. market, compared with 27.1 percent for CVS and 32 percent for Walgreen, according to IBISWorld. Its same-store sales gains have been far smaller than its profitable, deep-pocketed rivals.

Many of its stores are not very productive, and sit in undesirable locations under landlords with tough lease terms.

Last fiscal year, Rite Aid stores generated sales of about $534 per square foot, compared with $822 at CVS and $802 at Walgreen, according to data in the companies' annual reports.

"It's all about sales per square foot," said Andrew Wolf, an analyst with BB&T Capital Markets.

CVS and Walgreen have the means to invest heavily in sprucing up their stores, expanding their worksite wellness clinics and offering more fresh food.

Rite Aid, despite being handcuffed by its debt, also has managed to try new concepts, but analysts say it lags rivals.

"One of the issues Rite Aid has had for a while is that it's not a first mover in the industry," said IBISWorld healthcare analyst Sophie Snyder. Snyder believes Rite Aid's market share will hold steady but that Walgreen and CVS will keep gaining customers.

The next few years will be decisive for Rite Aid.

"We have at least four years or more of what we call runway, the time for the business to perform and rebound," the shareholder said.

(Reporting by Phil Wahba and Nadia Damouni in New York, and Jessica Hall in Philadelphia; editing by Gunna Dickson)

H&R Block shares fall on weak Q1

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Analysts said though some investors may have been surprised by the huge charge, the company had indicated it when they announced the sale of RSM, and so it was expected to have an impact on the results.

Morningstar analyst Vishnu Lekraj said the RSM sale was a favorable action and that the stock's fall was due to uncertainties over H&R's future growth and general market conditions in which companies missing estimates are getting punished.

"Selling of RSM McGladrey and taking that charge is some near-term pain that's going to provide some long-term opportunities and some good long-term strategic moves," Lekraj told Global Markets.

Kansas City, Missouri-based H&R Block reported a lower-than-expected first-quarter revenue of $267.6 million.

H&R Block shares, which had earlier hit a low of $13.19, recouped some of their losses to trade down 12 percent at $13.38 on the New York Stock Exchange.

(Reporting by Aman Shah in Bangalore; Editing by Sriraj Kalluvila)

Liz Claiborne finds new owner for global Mexx business

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Shares of the company rose 12 percent in morning trade on the New York Stock Exchange.

"One word on this: finally," said Wall Street Strategies analyst Brian Sozzi.

"The Mexx business has been the black sheep of the Liz Claiborne portfolio for some time ... the fact that they were able to get anything for the brand underscores the work that has been done to reposition it and clean up the store base profile," Sozzi said.

Liz Claiborne will sell the unit and get an 18.75 percent stake in the joint venture, plus $25 million in cash. The joint venture will also assume $60 million of debt.

Liz Claiborne bought Mexx in May 2001 for about $264 million, as part of an effort to diversify its portfolio -- a strategy it has stepped back on over the past few years as it works to realign its business model and become profitable.

The New York-based company has not seen a profit since 2006.

In July, the company said it was considering roping in an investor to take a majority interest in its international Mexx business.

"We've brought the Mexx European business to the early stages of a true turnaround. But there is more to be done, and in uncertain times and true market volatility, de-risking became essential," Liz Claiborne Chief Executive William McComb said in a statement.

McComb also said the deal will do away with a forecasted loss of about $25 million before interest, taxes, depreciation and amortization associated with the global Mexx business.

Last month, Liz Claiborne said it would sell the trademarks on some of its perfumes, including Curve, to Elizabeth Arden Inc (RDEN.O) in part to lower the size of its debt.

The company -- which owns Juicy Couture, kate spade, Lucky Brand and Mexx -- has sold, licensed, or closed a bunch of underperforming wholesale brands in recent years to switch its attention to brands in its own retail stores.

The global Mexx business, which had sales of $730 million last year, will continue to be led by Thomas Grote as chief executive.

The deal is expected to close in the fourth quarter.

Shares of the company were up 10 percent at $5.59 in late morning trade on Friday on the New York Stock Exchange. (Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Viraj Nair and Gopakumar Warrier)

Bombardier stock hit again by regional jet outlook

Stock Market Predictions

Several brokerages cut their price targets for Bombardier stock and at least one analyst downgraded it even though the company's second-quarter earnings and revenue, released on Wednesday, beat market expectations.

Bombardier shares closed 21 Canadian cents, or 4.4 percent, lower at C$4.56 on the Toronto Stock Exchange on Thursday in heavy trading after losing 6.8 percent on Wednesday.

Montreal-based Bombardier said on Wednesday it may have to curb production of its CRJ fleet of regional commercial aircraft if orders do not pick up, and its results showed a much higher-than-expected cash burn .

Bombardier's aerospace outlook has become more muted on growing concerns over global slowdown, said Raymond James analyst Steve Hansen, who downgraded the stock to "market perform" from "outperform".

"If the company does not win these CRJ (sales) campaigns, we believe it will reduce production rates, which in turn may impact its 2013 EBIT target of 10 percent," said analyst Walter Spracklin of RBC Capital Markets.

Spracklin, who cut his price target on the stock by a C$1 to C$6, said he does not expect any big orders for Bombardier's new larger-sized jet, the C-Series, any time soon.

"With most of the large U.S. carriers already announcing or postponing their fleet renewal plans into 2012, we believe the probability of a 'mega' order (which we would consider 100-plus firm orders as such) in the coming months as low," he said.

Just as Bombardier is trying to ramp up its regional jet sales in emerging markets, several new products are coming online, including Russia's Superjet, Japan's MRJ, and China's ARJ regional jet, making Bombardier's penetration of these markets more difficult, Spracklin said.

J.P. Morgan Securities, Credit Suisse, Desjardins Securities and Stonecap Securities cut their price targets on the stock as well.

JP Morgan's Joseph Nadol, however, said: "The key earnings driver is a business jet recovery and we see Bombardier as the best play on this end market in our group." Nadol kept his "overweight" rating on the stock.

(Reporting by Bhaswati Mukhopadhyay in Bangalore and Nicole Mordant in Vancouver; Editing by Peter Galloway)

Netflix shares fall after stumble with Starz

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The collapse of talks, announced Thursday, with cable channel operator Starz Entertainment underscored investor concerns that Netflix may lose its edge in online rentals.

Under the leadership of well-regarded Chief Executive Reed Hastings, Netflix shares have tripled since January 2010. But the rocketing price and recent stumbles, including a July decision to raise some prices, have drawn short sellers betting the momentum cannot continue.

Hastings decided to raise prices for subscribers who still want DVDs-by-mail, a move seen as emphasizing higher-margin streaming plans. The price hike angered so many customers that the company warned it would see a pause in its normally explosive subscriber growth.

Wedbush analyst Michael Pachter, who has rated Netflix "underperform" for more than a year, said the failure to make a deal with Starz was evidence of higher content costs the company must grapple with as providers recognize their leverage.

"Starz is the perfect example. Content owners have to play hardball with Netflix," said Pachter, who has a $110 price target on Netflix shares.

Starz, controlled by John Malone's Liberty Media, ended talks with Netflix to renew a streaming deal. After February, Starz will stop providing its content, which includes exclusive rights to first-run Sony Corp and Walt Disney Co movies, for streaming on Netflix.

Netflix said Starz movies and shows account for just 8 percent of U.S. subscribers' viewing, but some analysts said lack of new content may lead to higher customer attrition.

Netflix has long enjoyed a near-monopoly in the online streaming space but the recent entry of Amazon.com Inc and Google Inc's YouTube could potentially lead to subscribers switching to alternative services.

The field could get even more crowded. Dish Networks, which won Blockbuster Inc in a bankruptcy auction for $320 million, is expected to expand its business beyond satellite TV and eventually into online video streaming.

"Rising content costs and increasing competition from incumbent and new players alike remain our top concerns," UBS analyst Brian Fitzgerald said of Netflix.

SHORT SELLERS' PICK

Yoni Jacobs. portfolio manager for Chart Prophet Capital, said he previously shorted Netflix in the face of growing competition in the online market and a "weak" streaming library. Jacobs covered his short position when Netflix shares hit $200 but remains negative on the company's outlook.

"Their library is even weaker now" after the breakdown with Starz, Jacobs said.

Gareth Feighery, a founder of Philadelphia-based options education firm MarketTamer.com, said the inability to renew the Starz contract could just be the trigger for short sellers. "The failure to strike a deal with Starz might be just the fundamental event the short sellers have been waiting to pounce upon."

Netflix is one of the heaviest shorted blue-chip technology stocks. Its shares have a short interest of 15.5 percent as of August, implying that more than 1 in 6 Netflix shares is shorted. Blue-chip technology stocks like Google and Apple have short interest positions below 2 percent.

Content owners and short-sellers have questioned how Netflix can charge customers so little.

ALTERNATE DEALS

Netflix was offering to pay somewhere in the $200 million to $300 million range annually for rights to stream Starz content, a source familiar with the negotiations said.

Some analysts remain positive on Netflix's prospects to secure alternative deals.

Stifel Nicolaus analyst George Askew, who has a "hold" rating on the company's stock, said the loss of the Starz contract could help Netflix in the long term, as it could use the money for replacement content.

Netflix shares closed Friday on Nasdaq down $20.16 at $213.11.

(Reporting by Himank Sharma and Lisa Richwine; Editing by Gopakumar Warrier, Maju Samuel and Tim Dobbyn)