Stock Market Predictions

KCC shares jump after $602 million Hyundai Heavy stake sale

Stock Market Predictions

The sale of its 2.49 million shares or 3.27 percent stake in Hyundai Heavy via a block trade follows KCC's planned purchase of a $675 million stake in Samsung's unlisted amusement park operator Everland.

"Our recent stake sales in Hyundai Motor (005380.KS) and Mando Corp (060980.KS) can cover the Everland stake buy. A decision on proceeds from the Hyundai Heavy share sale has not been made yet," a KCC media official said.

The manufacturer of chemical products used in construction, automobile and other industries sold the shares at 280,000 won each, at the high end of a price range offered previously.

Hyundai Heavy Industries (009540.KS) slid 1.5 percent as of 0034 GMT, underperforming other Korean shipbuilders.

Through the stake disposal, KCC reduced its Hyundai Heavy stake to 3.12 percent.

(Reporting by Ju-min Park; Additional reporting by Joonhee Yu; Editing by Yoo Choonsik and Jonathan Hopfner)

Analysis: Investors likely to wait out 2012 drug launches

Stock Market Predictions

Not so long ago, biotech makers could practically bank on seeing their company values jump once they obtained regulatory approval to market a drug. Now, investors are more likely to wait on the sidelines, or short a stock, ahead of proof the new treatments will be a commercial success, a process that could take months.

"People are all freaked out about product launches," said ISI Group analyst Mark Schoenebaum.

Well aware of that angst, drug developers are spending far more time laying the groundwork to get paid by insurance plans and to convince doctors and patient groups of their medicines' value as they prepare for regulatory approval.

"There was a time when products got full value prior to launch. I think we have now swung back in the other direction," said John Orwin, chief executive officer at Affymax Inc (AFFX.O), which expects U.S. regulators to decide by late March whether to approve its experimental anemia drug.

Shares of Dendreon Corp (DNDN.O), maker of the novel therapeutic prostate cancer vaccine Provenge, ended last year down 83 percent from their peak in May, while Human Genome Sciences (HGSI.O) finished with a drop of 75 percent after launching Benlysta, the first new drug for lupus in more than 50 years.

Initial sales of Provenge and Benlysta failed to live up to lofty expectations, and investors are cautious ahead of early sales results for drugs launched in 2011 by companies including Incyte Corp (INCY.O), Seattle Genetics (SGEN.O) and Savient Pharmaceuticals (SVNT.O).

Even shares of Vertex Pharmaceuticals (VRTX.O), which launched hepatitis C drug Incivek last year with record-breaking sales of $420 million for its first full quarter on the market, ended the year 44 percent below their 52-week high.

The overall sector is up so far this year, and still outperforms the wider stock market. The Nasdaq Biotech Index .NBI rose 12 percent in 2011, compared with a flat return for the Standard & Poor's 500 Index .SPX.

The growing challenges for new drugs -- reimbursement, regulatory issues and safety concerns -- were major topics here this week at the annual JP Morgan healthcare conference. "Sometimes there is a gap between customers' expectations and companies' expectations," said Yoshihiko Hatanaka, CEO of Astellas Pharma (4503.T), Japan's No. 2 drugmaker. "It is critical for us to reduce that gap."

Astellas has partnered with Medivation Inc (MDVN.O) to develop prostate cancer drug MDV3100, which could win regulatory approval as soon as late 2012.

TREND AWAY FROM BIG LAUNCHES

As the market has begun to recognize that innovative drugs have unproven real-world outcomes, companies are pursuing more niche markets.

"There is a trend away from big launches," said Ulrik Schulze, global leader for biopharma R&D at Boston Consulting Group.

In the 1990s, it typically took less than two years for a new pharmaceutical to reach peak sales, he said. That time frame is widening as companies grapple with pressure from payers and a greater focus on whether a new treatment truly improves upon existing ones.

Some drugmakers are even starting to compete on the basis of price at a drug's launch, rather than expect a premium for its novelty.

Regeneron Pharmaceuticals Inc (REGN.O), which began selling its macular degeneration drug Eylea in November, said this week that sales in the first six weeks totaled $24 million to $25 million -- well above the $5 million expected by Wall Street.

Eylea competes against Roche AG's (ROG.VX) well-established Lucentis, but is priced slightly lower on a per-dose basis and can be given less frequently.

CEO Leonard Schleifer said Regeneron was careful ahead of its launch to lay the groundwork with retinal physicians and to set up a system for reimbursement.

"If you deliver a product that physicians, payers, and patients think is an important product, your launch will be fine," he said.

Affymax also plans to undercut the price of its biggest rival for the treatment of anemia in kidney dialysis patients -- Amgen Inc's (AMGN.O) blockbuster Epogen.

"We recognize that peginesatide has to be part of a solution to lower costs," Orwin said, referring to the Affymax drug.

Amgen CEO-elect Robert Bradway said the company expects competition from Affymax sometime this year, but still anticipates less erosion in Epogen sales relative to 2011. Sales of Epogen, which totaled $2.5 billion in 2010, have waned over the last several years amid safety concerns.

Amgen expects the Food and Drug Administration to decide in late April whether to approve its bone drug Xgeva, or denosumab, for preventing the spread of prostate cancer to the bone.

"Xgeva is the biggest opportunity for us in 2012," Bradway said.

But uptake of denosumab for osteoporosis has been gradual and some Wall Street analysts are wary of Xgeva's potential relevance in the prevention of bone cancer.

The first high-profile drug that could reach the market this year is diabetes treatment Bydureon, which is being developed by Amylin Pharmaceuticals (AMLN.O) after it recently ended a long-time diabetes partnership with Eli Lilly & Co (LLY.N).

The latest deadline for an FDA decision on Bydureon is January 28.

Bydureon faces strong competition from similar drugs and Amylin will for the first time be responsible for launching a drug on its own.

"We think there is substantial uncertainty and think that there is somewhat more risk of sales falling short than of exceeding our estimates," Cowen and Co said in a research note to clients.

(Reporting by Deena Beasley, editing by Matthew Lewis)

Rovi shares rise on Roxio sale

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Rovi came to own Roxio -- a maker of products like the Roxio Creator that helps create and save digital media content on computers -- through its acquisition of the popular DivX software maker Sonic Solutions in late 2010.

On Thursday, the company also forecast 2012 revenue between $810 million and $840 million and adjusted earnings of $2.50 to $2.80 a share.

Analysts were looking for revenue of $826.6 million and a profit of $2.63 a share, according to Thomson Global Markets I/B/E/S.

Shares of Rovi rose to a near two-month high of $30.96 in heavy morning trading on the Nasdaq.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Maju Samuel)

Diamond Foods slides on report of criminal inquiry

Stock Market Predictions

The Wall Street Journal said on Thursday that the Justice Department has launched a criminal inquiry into the snack maker's accounting of payments to walnut growers while it was in talks to buy Pringles from Procter & Gamble (PG.N).

"It is prudent to go to the sidelines until the audit committee investigation is complete ... and we have more clarity on the outcome of these additional inquiries," KeyBanc Capital Markets analyst Akshay Jagdale wrote in a note to clients.

He downgraded the stock to "hold" from "buy."

Shares of the company were down 9 percent at $30.03 in early trade on the Nasdaq, after touching a two-week low of $29.36.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Unnikrishnan Nair)

Radian writes more business as housing recovers

Stock Market Predictions

The U.S. housing downturn caused mortgage insurers PMI Group PPMIQ.PK and Triad Guaranty (TGIC.OB) to go bust and led others like Old Republic (ORI.N) to stop writing new insurance.

However, better capitalized insurers like Radian, MGIC Investment Corp (MTG.N) and Genworth Financial (GNW.N) could expand their underwriting.

As of December 31, Radian Guaranty is expected to maintain its risk-to-capital ratio below the allowed limit of 25 to 1, with about $500 million of holding company liquidity, the company said in a statement.

"The increase (in writing more business) is driven by the fact that we have invested steadily in expanding sales force," Chief Executive S.A. Ibrahim told Global Markets. "We have also benefited from gaining market share from a couple of players who are no longer writing business."

The $6.5 billion in new insurance tops the company's previous estimate of more than $5 billion in new underwriting in the fourth quarter. It wrote $4.1 billion in new mortgages in the third quarter.

Radian's robust capital position and low risk ratios are helping it be more aggressive in its quest for new business.

"Radian's capital position is strong entering into 2012, where we expect losses to be significantly lower than a year ago," Macquarie analyst Matthew Howlett told Global Markets.

At end-September, the company was able to keep its risk-to-capital ratio at 21.4 to 1, below the maximum level.

"I feel pretty good that the company can maintain risk-to-capital ratio at or below the limit. They are on page to turn profitable," Howlett said.

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Starmine dataset: r.reuters.com/dap95s

Graphic on U.S. Housing market: r.reuters.com/gyq93s

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SEEKING WAIVERS

Mortgage insurers have been struggling to meet capital adequacy benchmarks and have time and again sought waivers to continue writing business in many states in the United States.

Of the 16 states that impose risk-based capital requirements in the United States, Radian has received waivers to write new business from Arizona, Illinois, Kentucky and Wisconsin, and has applications pending in 10 other states.

Kansas has declined to grant waivers to mortgage insurers at present, the company said in a statement.

Radian has also applied to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) for approval of a separate mortgage insurance unit, Radian Mortgage Assurance Inc, to write insurance in the states where waivers are not available or approved, the company said.

U.S. mortgage insurers have been creating new units to write more business and find a way around soaring risk ratios.

"We believe, given our financial position, our case should be equally compelling for waivers as those of our peers who have successfully shown that they can get waivers," Ibrahim said.

(Reporting by Satyanarayan Iyer and Aman Shah in Bangalore; Editing by Roshni Menon, Supriya Kurane)

SAP beats forecasts with Q4 profit rise

Stock Market Predictions

Operating profits were up 10 percent at 1.78 billion euros ($2.28 billion) in the quarter, ahead of the consensus forecast of 1.65 billion euros expected by analysts, according to Thomson Global Markets StarMine.

The company attributed the strong performance to demand for its biggest software products and growing demand for its HANA offering -- which allows companies to analyze business data quickly -- and said it had won market share overall.

SAP's share price was up 3.8 percent at 43.02 euros by 1450 GMT, when the German market's DAX index .GDAXI was 0.7 percent lower.

"We believed that SAP would show an in-line quarter and are therefore positively surprised by the outperformance on the license side and in particular with the realtime solution HANA," DZ Bank analyst Oliver Finger said.

Expectations had also been dimmed by poor quarterly results from SAP's big rival Oracle Corp (ORCL.O) last month, sending shock waves across the technology sector as investors feared they may have overestimated the resilience of corporate tech spending in a deteriorating global economy.

SAP's sales of software and related services, which are key to future lucrative maintenance revenue streams, rose 12 percent from a year ago to 3.72 billion euros in the fourth quarter.

The company is due to publish full results on January 25 when it will also provide an outlook for the full year 2012.

Fourth-quarter operating profit excludes some one-off items such as acquisition-related charges of 115 million euros.

SAP last month agreed to buy SuccessFactors (SFSF.N) for $3.4 billion to keep up keep up with rivals in the frenzied race for cloud-computing business.

SAP had raised its sales outlook on the deal, saying its revenue could easily reach 21 billion euros by 2015, about a billion euros more than expected.

Its 2012 earnings will be diluted by the purchase, but there will be a positive impact from 2013 on.

The German company, based in Walldorf near Heidelberg, built its business on large, integrated software systems sold to many of the world's biggest companies, such as Apple (AAPL.O), GE (GE.N), McDonald's (MCD.N) and Pepsi (PEP.N).

SAP currently has some 176,000 customers and bills itself as the world's leading provider of software for managing supply chains and customer relations.

($1=0.7814 euros)

(Reporting by Maria Sheahan and Harro ten Wolde; Editing by Mike Nesbit and Greg Mahlich)

Tesco exec sold shares ahead of profit warning

Stock Market Predictions

Noel "Bob" Robbins, UK chief operating officer, sold 50,000 shares at 404.51 pence apiece on January 4, netting around 202,000 pounds ($309,000), according to a filing published on January 5.

That was eight days before Tesco reported its biggest drop in underlying British sales for decades, and just three days before the end of the period covered by its trading statement.

UK listing rules say directors should not buy or sell shares in their company while in possession of unpublished, price-sensitive information.

The regulations, policed by the Financial Services Authority (FSA), also require directors and senior managers to obtain board-level approval before selling shares and forbid trading in shares during so-called "close periods" between the end of a financial period and the reporting of its results.

One shareholder watchdog described the sale as troubling.

"It doesn't look very good, especially in this case, when you are head of UK operations," said Simon Wong, a partner at corporate governance watchdog Governance4Owners.

Tesco said it and Robbins had operated within the rules.

"Bob Robbins sold less than 5 percent of his substantial shareholding in Tesco for necessary family expenditure," a spokesman said.

"We are confident that Bob was not in possession of any price-sensitive information at the time the sale was approved."

Wong, however, said simply operating within the letter of the law was not enough. "If these companies say it's still within the rules, then I think the rules may need to change, because this is a concern and it damages confidence."

Indeed the FSA says its listing rules are designed not only to avoid abuse but also to ensure that the right thing is seen to be done. Companies are given the freedom to impose even stricter guidelines should they deem it necessary.

Under Tesco's rules, directors were barred from trading company shares from January 7 to Jan 12.

Other retailers opted for much longer close periods ahead of their key Christmas trading updates. Marks & Spencer's (MKS.L) and J Sainsbury's (SBRY.L), for example, both ran for about four weeks, although they were reporting quarterly sales figures. Tesco published third-quarter sales on December 8, and was giving just a seven-week trading snapshot on Thursday.

Morrisons (MRW.L), on the other hand, which like Tesco had a truncated Christmas trading period of six weeks, had a similar close period that ran from December 30 to January 9.

The importance of keeping to the spirit, as well as the letter, of rules on personal dealings was highlighted last week when Swiss National Bank chairman Philipp Hildebrand resigned, saying he could not prove he had been unaware of a currency trade made by his wife.

SHARE PRICE PLUNGE

On Thursday, Tesco said investment to improve its British business would hit profits in its 2012-13 financial year, sending its shares down as much as 19 percent, their biggest one-day drop since 1988.

The stock fell a little further on Friday to touch a 34-month low of 315 pence.

"The significant movement in the share price on Thursday was, we believe, primarily due to the announcement on profit guidance and UK investment plans for 2012/13. Bob was not party to discussions around the profit guidance or the investment plans at the time he made his sale," the Tesco spokesman said.

The FSA, which routinely looks into large share price movements, declined to comment.

A Tesco veteran, Robbins, 54, was appointed UK chief operating officer on March 1, 2011, having previously worked as chief executive officer for central and eastern Europe and strategy and development director in Asia. He sits on the group's executive committee, one level below its main board.

A regulatory filing on Friday showed Tesco's new chairman Richard Broadbent bought 30,149 shares at 329.98 pence on Thursday, or about 99,000 pounds.

On December 22, internet director Ken Towle also sold 40,193 shares at 385.6 pence apiece, worth around 155,000 pounds.

($1 = 0.6528 British pounds)

(additional reporting by Paul Hoskins, James Davey, Peter Thal Larsen and Sinead Cruise; Editing by Chris Wickham and Will Waterman)

Metabolix hits life low as joint venture partner exits

Stock Market Predictions

Metabolix shares fell 56 percent to $2.64 on Friday morning, making it the top percentage loser on the Nasdaq. They touched a life low of $2.58 earlier in the session.

The Cambridge, Massachusetts-based company's shares were among the most traded stocks on the Nasdaq with over 6.3 million shares changing hands by 10:38 ET.

On Friday, Jefferies downgraded the company -- which makes plastics, chemicals and energy from non-food crops like switchgrass -- to "hold" from "buy," saying the joint venture termination illustrates "one of the challenges faced by the capital-intensive renewables sector."

On Thursday, ADM, the largest U.S. producer of ethanol, called off a joint venture for making a type of biodegradable plastics called PHAs, saying projected financial returns were "too uncertain."

The joint venture Telles, established in July 2006, sold PHA-based bioplastics in the United States, Europe and other countries.

Following the termination of the joint venture, Metabolix said in a statement that it would restructure its bioplastics business in 2012.

"In order to start up a new PHA operation, Metabolix will need to obtain new supply agreements for corn sugar and fermentation capacity," Jefferies analyst Laurence Alexander said in a note to clients.

(Reporting by Divya Lad in Bangalore; Editing by Roshni Menon)

Chesapeake Energy shares slump on gas price

Stock Market Predictions

Shares of Chesapeake fell to an intraday low of $21.61, under pressure from a slide in natural gas prices. U.S. natural gas futures slid to a 28-month spot chart lows amid concerns over a mild winter, bloated inventories and record production.

Argus Research oil analyst Phil Weiss, who rates Chesapeake a "sell," cut his earnings estimates on the company on Friday, citing low gas prices.

Chesapeake, which is shifting spending to exploration for pricier crude oil and natural gas with a high liquids content, has not hedged its 2012 gas production and has little price protection.

Shares of Chesapeake experienced a big rally after billionaire investor took a big stake in the company about a year ago. The stock shot up to intraday highs over $35 per share after Icahn's investment, but those gains have all been erased as the outlook for natural gas price remain bleak.

Shares of Chesapeake fell 33 cents, or 1.5 percent, to $21.84 in late morning New York Stock Exchange trading.

(Reporting by Anna Driver in Houston; Editing by Gerald E. McCormick)

JPMorgan profit falls, but sees hope in economy

Stock Market Predictions

Chief Executive Jamie Dimon said the New York-based bank was seeing signs of improvement in credit quality as well as loan demand from corporations and consumers in the United States.

"We see a mild recovery which actually might be strengthening, and it's broad," Dimon said in a conference call with reporters following the earnings report on Friday. "Hopefully, it will add to more jobs. We have seen jobs growing ... it's not enough but it could be self-sustaining."

Loan balances in JPMorgan's commercial division were up 13 percent at the end of December compared with a year earlier, the sixth consecutive quarterly rise in the measure of business borrowing.

But Dimon sounded renewed alarm on the European debt crisis. "I would put myself in the 'increasing worried' category," he said.

His comments came shortly before a senior euro zone government source said credit rating agency Standard & Poor's was set to downgrade several euro zone countries, not including Germany. The report sent the euro and U.S. markets lower.

JPMorgan shares fell 2.9 percent in afternoon trading on the New York Stock Exchange, while the KBW banks index was down 0.7 percent.

JPMorgan is the first major U.S. bank to announce results for the fourth quarter. Its weak investment banking results suggest Wall Street firms Goldman Sachs Group Inc and Morgan Stanley will also report tough quarters when they issue results next week.

Others such as Bank of America Corp and Citigroup Inc, which also report results in the coming days, could benefit from the stronger business loan demand that JPMorgan experienced, but could also face problems in investment banking and housing loans.

Dimon, in a conference call with stock analysts, predicted that other banks will also report what he called "good loan growth in commercial banking." Shares of U.S. regional banks seemed to reflect Dimon's view as they traded better during the day, with PNC Financial Services sliding 0.8 percent and US Bancorp rising 0.8 percent.

But Dimon also conceded that at least some of JPMorgan's new loans came from taking business from competitors. European banks have been retreating from lending in the U.S. and JPMorgan has been deploying new loan marketers in California and Florida.

In a discouraging sign for upcoming results from private equity firms such as Blackstone Group LP, JPMorgan's competing unit showed an $89 million loss in the quarter because of a decline in investment values.

JPMorgan's results "show that there are major headwinds against the banking industry and it requires a strong management team to battle the headwinds," said Rick Meckler, president of investment firm Libertyview Capital Management in New York.

"The bigger negatives tend to be the housing and mortgage situation and investors questioning, 'Have we really hit bottom in this sector or is this just a black hole?'"

In afternoon dealings, Goldman Sachs shares were down 2.5 percent, Morgan Stanley was off 2.9 percent, Bank of America fell 2.8 percent, and Citigroup dropped 3.1 percent.

"We all knew the fourth quarter would be difficult," said Gary Townsend of Hill-Townsend Capital. "But the overall economic outlook has been improving from an economic standpoint starting in December."

ROUGH TIMES

JPMorgan said fourth-quarter net income was $3.72 billion, or 90 cents a share, down from $4.83 billion, or $1.12 a share, a year earlier.

Wall Street analysts, on average, had expected 90 cents a share, according to surveys by Thomson Global Markets I/B/E/S.

There had been some expectation the bank would do better, but that view faded after Dimon warned on December 7 that investment banking was not improving. "He did a great job guiding people down, but people thought he would beat" the estimate, said Paul Miller of FBR Capital Markets.

Revenue declined 17 percent to $22.2 billion on an adjusted basis, missing the average Wall Street estimate of about $23 billion.

Investment banking revenue fell 30 percent to $4.36 billion, hurt by a 39 percent drop in underwriting and advisory fees, a 13 percent decline in fixed income, and a 31 percent fall in equity markets.

The results were complicated by an accounting adjustment that reduced earnings by 9 cents per share to reflect a change in the market value of JPMorgan debt during the quarter. In the third quarter, the accounting adjustment added 29 cents per share to profits.

The bank also booked more than half a billion dollars in additional expenses for litigation, primarily for mortgage matters, an amount that totaled 8 cents a share. It said reducing its loan loss reserves added 11 cents per share to earnings.

"The earnings show how well JPMorgan can be managed in one of the roughest times," said money manager Michael Holland, founder of Holland & Co. "They were able to pull off a meet-or-beat quarter."

The bank's return on equity, a key measure of shareholder profits, fell to 8 percent from 11 percent a year earlier and 9 percent in the 2011 third quarter.

The company's quarter-end share count declined 4 percent from a year earlier as it bought back stock.

For the first time in three quarters, JPMorgan booked more income and revenue from its credit card and card loan businesses than from any other area.

Net income from the consumer credit areas was $1.1 billion, or 28.2 percent of total profit. Investment banking profit, by far the largest generator of profits in the first three quarters of 2011, fell 52 percent to $726 million, or 19.5 percent of total quarterly profit.

(Additional reporting by Jed Horowitz and Angela Moon in New York, Rick Rothacker in Charlotte, North Carolina, and Ben Berkowitz in Boston; editing by Alwyn Scott, John Wallace and Gerald E. McCormick)