Darden's Olive Garden to embrace value deals

Darden's Olive Garden to embrace value deals

Stock Market Predictions

(Global Markets) - Darden Restaurants Inc (DRI.N) forecast full-year profits below Wall Street's view and vowed to step up value-priced promotions aimed at luring more diners to its Olive Garden and Red Lobster chains, sending its shares down 1 percent.

Darden forecast fiscal 2013 earnings growth of 8 percent to 12 percent, which works out to a range of $3.87 to $4.01 per share. That was below analysts' average estimate of $4.05, according to Thomson Global Markets I/B/E/S.

Darden has been slow to adopt the types of discounts that competitors long have used to bring in customers, analysts said.

The tweak to its strategy came after a disappointing quarter that saw demand fall at full-service dining chains like those Darden operates, hampered by higher gasoline prices.

"The competitive environment's been tough with a frustratingly slow economic recovery that's constrained consumers," Chief Executive Clarence Otis said on a conference call with analysts.

Darden historically has been one of the restaurant industry's top operators and it easily outperformed rivals during the depths of recession and the early days of the recovery.

But that has changed as rivals such as DineEquity Inc's (DIN.N) Applebee's and Brinker International Inc's (EAT.N) Chili's Grill & Bar close the gap and perfect low-price menus.

Darden is "slowly coming around to doing the things that their competitors have been doing for awhile. They were caught on their back heels and are still a little bit behind," Bernstein Research analyst Sara Senatore said.

Olive Garden next week will start a "two for $25" promotion that offers unlimited soup or salad, two entrees and the choice of either an appetizer or dessert.

Applebee's and Chili's have been running "two for $20 promotions" for several years, Senatore said.

SALES FALL SHORT

Same-restaurant sales at Darden's "Big Three" brands - Olive Garden, Red Lobster and LongHorn Steakhouse - fell 1.9 percent overall for its fiscal fourth quarter that ended May 27. Analysts were expecting a rise of at least 1 percent.

Traffic to Olive Garden restaurants, which generate almost one-half of Darden's revenue, fell during the latest quarter. That contributed to a 1.8 percent decline in sales at Olive Garden restaurants open at least 16 months.

Darden has been working to fix marketing at Olive Garden for more than a year. Executives on Friday blamed last quarter's miss on a lackluster "Taste of Tuscany" promotion and a decision not to advertise around Mother's Day.

Same-restaurant sales at Red Lobster fell 3.9 percent, hurt by the timing of its Lenten season Lobsterfest promotion and higher gas prices.

Sales were up 3 percent at LongHorn Steakhouse, but that still fell short of analysts' expectations.

Darden's quarterly profit from continuing operations rose almost 10 percent to $151.6 million, or $1.15 per share, matching analysts' view as compiled by Thomson Global Markets I/B/E/S. That was up from $138.0 million, or $1 per share, a year earlier.

Overall sales rose 3.8 percent to $2.07 billion, falling short of analysts' estimate of $2.11 billion.

"This clearly was a disappointing quarter for (Darden) that will have ramifications today throughout most of the full-service dining universe," Miller Tabak analyst Stephen Anderson said in a client note.

Darden shares were down 50 cents, or 1 percent, to $49.89 in afternoon trading on the New York Stock Exchange. Shares in Brinker were down 0.9 percent, while DineEquity's were off 0.3 percent.

(Reporting by Lisa Baertlein in Los Angeles and Aditi Shrivastava in Bangalore; Editing by Supriya Kurane, Jeffrey Benkoe, Tim Dobbyn and Phil Berlowitz)

Theratechnologies sinks on HIV drug setback

Theratechnologies sinks on HIV drug setback

Stock Market Predictions

(Global Markets) - Theratechnologies Inc shares plummeted more than 60 percent on Friday after the Canadian drugmaker said its European partner, Ferrer Internacional SA, was withdrawing a marketing application for its lead drug for HIV patients.

The Spanish company's decision to pull the European Medicines Agency application for tesamorelin, used to reduce excess abdominal fat in HIV-infected patients with lipodystrophy, was made after a health committee raised safety concerns.

The injectible drug is already approved by the U.S. Food and Drug Administration, according to the company's website.

The Canadian drugmaker said it no longer expects to report a profit before interest, tax, depreciation and amortization (EBITDA) in 2013. It booked a net loss in the last fiscal year.

The Committee for Medicinal Products for Human Use in Europe cited potential concerns for long-term users and a lack of data on cardiovascular risks as the reason for its unfavorable view of the drug, Theratechnologies said in a statement.

Theratechnologies sank 61 percent to 75 Canadian cents on the Toronto Stock Exchange, making it the biggest decliner on the index in percentage terms.

(Additional reporting by Aftab Ahmed in Bangalore; Editing by Frank McGurty)

Alexza resubmits drug application early, shares soar

Alexza resubmits drug application early, shares soar

Stock Market Predictions

(Global Markets) - Alexza Pharmaceuticals Inc resubmitted the marketing application for its anti-agitation treatment earlier than expected, sending its shares up as much as 47 percent.

Alexza's Adasuve, which delivers an older antipsychotic drug called loxapine through the company's Staccato inhaler, was denied approval twice before, most recently in May.

"The market was not looking for (the resubmission) quite this early," JMP Securities analyst Charles Duncan said.

Early last month, when the U.S. Food and Drug Administration denied approval to Adasuve, the company had said that the issues raised by the agency were "readily addressable."

The FDA had found certain deficiencies at the company's Mountain View, California manufacturing facility during an inspection.

Three injectable drugs, Bristol-Myers Squibb's Abilify, Eli Lilly's Zyprexa and Pfizer Inc's Geodon, are already approved to calm down patients with schizophrenia or bipolar disorder, but Alexza's product would be the first to be inhaled.

The powder formulation used in Adasuve passes through the lungs and into the blood stream faster than a typical pill. Loxapine is also available as an oral drug for schizophrenia.

Schizophrenia causes delusions and hallucinations, while bipolar disorder prompts alternating bouts of depression and mania.

Alexza is now awaiting the FDA's decision on a potential review date for Adasuve.

Typically, the U.S. Food and Drug Administration classifies a resubmission as a class 1 or class 2 response, signifying a review time of 2 months and 6 months, respectively.

Alexza, which has partnered with Spanish company Grupo Ferrer International S.A. to market Adasuve in Europe, also underwent a European pre-approval inspection in May.

"There have been no deficiencies in their pre-approval inspection. That addresses a key point of concern regarding their manufacturing," the analyst said.

Besides Adasuve, the company is also developing treatments for several other indications like migraine headache, postoperative pain, acute panic attacks, insomnia and nicotine addiction.

The company's shares were up 34 percent to $3.67 in afternoon trade amid heavy volumes, making it the top percentage gainer on the Nasdaq. The shares touched a high of $4.10 earlier in the session.

About 1.8 million shares changed hands by 1227 ET, 12 times their 10-day average daily volume.

(Reporting by Balaji Sridharan and Prateek Kumar in Bangalore; Editing by Sreejiraj Eluvangal)

Monte dei Paschi shares rise on capital hopes

Monte dei Paschi shares rise on capital hopes

Stock Market Predictions

MILAN/ROME (Global Markets) - Shares in Banca Monte dei Paschi di Siena (MPS) (BMPS.MI) rose as much as 10 percent on Friday, with traders citing hopes that Italy's third-biggest lender will not need to tap the market to bolster its financial strength.

Monte dei Paschi, which will update investors on its capital-strengthening plans next week, must plug a 3.3 billion euro ($4.2 billion) shortfall by June 30 to meet tougher capital rules set by the European Banking Authority (EBA).

Its new management has taken measures to bolster its financial strength. But with the deadline looming large and little sign of flexibility from regulators, it still needs to find between 1 billion and 1.4 billion euros, according to sources close to the situation and analyst estimates.

That might only be possible if the government stepped in to help, because the deepening euro zone crisis makes it too expensive for the bank to issue bonds and planned asset sales have not yet materialized.

On Friday, MPS shares partially recovered from steep losses over recent weeks on speculation that the bank will not have to tap the market for a capital increase, implicitly pricing in some sort of state intervention. The stock closed 6 percent higher at 0.22 euros.

"The idea that they may not go to the market is enough reason to buy the shares," one Milan trader said.

Unlike struggling Spanish banks, Italian lenders have limited exposure to the real estate market and a relatively high level of deposits from retail investors.

MPS, however, has suffered because of its 25 billion euro exposure to Italian government bonds, which is proportionally higher than that of its domestic peers.

The Tuscan bank, the only Italian lender still with a sizeable capital gap under EBA rules, must also repay 1.9 billion euros of government-backed bonds that it borrowed in 2009.

Any delay in fixing its capital weakness would further weigh on its shares, which have lost 50 percent of their value in the past three months.

"There is not much room for maneuver and the option of state help might be the most sensible one," Societe Generale banking analyst Carlo Tommaselli said.

While government intervention could come in the form of another issue of high-yield Treasury-backed bonds, that would add to Italy's already ballooning public debt.

An alternative solution would be for state holding Cassa Depositi e Prestiti to underwrite a capital increase in MPS, ending up with a stake in the bank, or buy contingent convertible bonds - securities that convert into equity in times of stress.

Industry sources say that they would have to pay double-digit interest rates to attract private investors.

MPS chief executive Fabrizio Viola will present the business plan on June 26 together with newly appointed chairman Alessandro Profumo, the respected former CEO of Italian lender UniCredit (CRDI.MI).

"The decision does not lie just with MPS, it also depends on talks with authorities," a source close to the situation said.

Besides capital, the bank's balance sheet is also under pressure and the new business plan is expected to suggest a focus on retail business, reduced lending and cost cuts through to 2015. "Doing fewer things, better," was how Profumo put it recently.

FALLING DEPOSITS

Customer deposits fell 6.1 percent in the first quarter, extending a slide in the last three months of 2011.

Rating agency Standard & Poor's, which threatened this week to downgrade MPS, said that non-performing loans stood at 16.2 percent of gross loans, above the Italian average.

"With a loan-to-retail funding ratio of 128 percent, MPS needs to gradually rebalance its assets and liabilities," Deutsche Bank analysts said in a report.

The Siena-based lender has limited financial flexibility because its largest shareholder, a charitable foundation with close ties to local politicians, is emerging from months of wrestling with creditors to restructure its own debt.

The foundation has had to cut its MPS stake to 36.3 percent and does not want to fund a new capital increase.

As it seeks to raise cash, MPS is in talks to sell its stake in Biverbanca for 200 million euros. It is also looking to sell 150 branches - 5 percent of its network - which analysts say would reap only 300 million euros. ($1 = 0.7873 euro)

(Writing by Silvia Aloisi; Editing by Dan Lalor and David Goodman)

FDA rejects Repligen's imaging agent, shares drop

FDA rejects Repligen's imaging agent, shares drop

Stock Market Predictions

(Global Markets) - Repligen Corp said U.S. health regulators denied approval for its imaging agent to detect structural abnormalities in the pancreas, sending its shares down 10 percent.

The U.S. Food and Drug Administration has asked for additional efficacy and safety trial data to approve the agent, called RG1068, in a complete response letter.

Repligen said in April that it did not expect the FDA to approve the imaging agent as the regulator had canceled an advisory committee meeting to review the agent.

In the complete response letter, the regulator did not cite any deficiency with respect to the manufacturing, pharmacology or toxicology sections of the approval application.

The company's shares, which dropped 40 percent on April 26 when the company said it was expecting a rejection, were down 9 percent at $3.99 in morning trade on the Nasdaq. They touched a low of $3.95 earlier in the session.

(Reporting by Prateek Kumar and Esha Dey in Bangalore; )

Centerra's Kyrgyz gold mine caught in green tangle; shares plunge

Centerra's Kyrgyz gold mine caught in green tangle; shares plunge

Stock Market Predictions

(Global Markets) - Canadian miner Centerra Gold Inc said allegations of environmental violations at its flagship Kumtor mine in Kyrgyzstan, made by a commission set up by the country's parliament, were without merit.

The Kyrgyz Parliament is discussing a report by the commission, formed to review Kumtor's compliance with environmental, health and safety standards, the company said.

Shares of Centerra, in which the Kyrgyz state owns a 33 percent stake, fell as much as 35 percent to a more than two-and-half-year low of C$7.66 on Friday on the Toronto Stock Exchange.

Centerra, which also produces gold in Mongolia, said it is not able to comment on the likely outcome of the discussions in parliament at this time.

The report said the company is polluting the site around the mine, Centerra CFO Jeffrey Parr told Global Markets. He said he did not expect the report to interrupt the mine's production.

The economy in Kyrgyzstan, a mountainous former Soviet republic, relies heavily on gold production from Kumtor.

"The operating mine is vital to the economy. Whatever the outcome is, the parliament will tread very carefully in terms of what impact its decision will have on the operation of the mine," said analyst David West of Salman Partners.

Kumtor, one of the highest-altitude gold mines in the world at nearly 4,000 meters above sea level, accounted for nearly 12 percent of the country's GDP and more than half of its export revenue last year.

The project is in compliance with Kyrgyz laws, and meets Kyrgyz and international environmental, safety and health standards, the company said.

It has been operating without interruption since 1997, Centerra said.

NO EXPROPRIATION LIKELY

Analyst West said there is a very low probability that the government will expropriate the Kumtor asset at this point.

"I do not think the government has the technical expertise to run this mine. With that in mind, I don't think they have a choice but to allow Centerra to run it," West said.

Any negative impact on the operation at Kumtor will not only bring down the amount of Kyrgyzstan's tax revenue but also hurt the actual asset value that the country holds through the Centerra shares, the analyst said.

The mine has been hit by a series of disruptions, with villagers of the Central Asian state blocking the only road to the mine, demanding land and jobs.

Ice movement in the high-altitude pit has cut Kumtor's output, dragging Kyrgyzstan's annual GDP growth to 1.8 percent from the original target of 7.5 percent.

Toronto-based Centerra in March forecast production of 390,000 to 410,000 ounces this year, down from its previous estimate of 575,000 to 625,000 ounces. Kumtor accounted for over 90 percent of the 583,156 ounces the company produced last year.

Shares of Centerra, which has a market value C$2.78 billion, have lost more than a third of their value so far this year.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila and Joyjeet Das)

Ryder System falls on slashed profit outlook

Ryder System falls on slashed profit outlook

Stock Market Predictions

(Global Markets) - Shares of Ryder System Inc (R.N) fell as much as 12 percent on Friday after the logistics company cut its quarterly earnings forecast, citing lower demand at its main commercial rental business.

Commercial rental is part of Ryder's fleet management segment that accounted for almost 64 percent of the company's total revenue in 2011. Ryder does leasing, contract maintenance and commercial rental of trucks, tractors and trailers.

The company plans to cut costs and reduce its commercial rental fleet as it expects the weakness to continue through the year, it said on Thursday.

The fall in commercial rental was greater than-anticipated, and its leasing segment has not been strong enough to offset the decline, BB&T Capital Markets analyst Kevin Sterling wrote in a note to clients.

Weakening business activity worldwide is hitting U.S. companies where it hurts, with more of them signaling disappointing results than at any time over the past decade.

Package delivery major FedEx Corp (FDX.N) on Tuesday forecast a first-quarter below analyst's expectations and said it is stepping up cost-cutting measures to protect margins.

Sterling cut his price target on the stock to $60 from $75, but maintained his "buy" on the stock. The analyst said an aging trucking fleet will drive demand for leasing, given the rising cost of new equipment.

Two other brokerages also slashed their price targets on the stock after the cut in outlook. FBR Capital Markets cut its target by $10 to $55, while Stifel, Nicolaus & Co lowered its to $64 from $74.

Ryder shares fell $4.60 to $36.13 on the New York Stock Exchange on Friday morning. They touched a low of $35.80.

(Reporting by Bijoy Koyitty in Bangalore; Editing by Sreejiraj Eluvangal)

Banro falls on production delay at central Africa mine

Banro falls on production delay at central Africa mine

Stock Market Predictions

(Global Markets) - Shares of Banro Corp (BAA.TO) fell nearly 5 percent after the company said commercial production at its Twangiza gold mine in the Democratic Republic of the Congo will be delayed mainly due to problems with the mill motor.

Banro said Twangiza, its first producing operation, will likely ramp up to full production in the third quarter, a month later than expected.

"The project commissioning phase can often present unforeseen challenges, but at Twangiza the final hurdle appears to be in sight," said BMO Capital Markets analyst Andrew Breichmanas, who cut his price target on the stock to C$5.75 from C$6.

Twangiza, with an expected mine life of seven to eight years, is projected to produce about 120,000 ounces of gold per year, according to the company's website.

The company could show a nearly four-fold increase in output over the next three years from the 120,000 ounces it is on pace to produce this year, CEO Simon Village told Global Markets earlier this year.

Banro, which is also developing three other projects in the central African country, aims to start producing gold at a second gold mine in the Democratic Republic of Congo within the next year. It is targeting an annual output of about 450,000 ounces from four mines by 2015.

Banro, with a market value of C$882 million, is one of several junior miners rushing to boost production in resource-rich Africa. It took control of the Twangiza property in 1996.

Banro shares, which have lost 17 percent of their value in the past three months, fell to a low of C$3.80 on the Toronto Stock Exchange on Friday.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Joyjeet Das)

GeoEye faces funding cuts from U.S. government

GeoEye faces funding cuts from U.S. government

Stock Market Predictions

(Global Markets) - Satellite imagery provider GeoEye Inc (GEOY.O) said the U.S. National Geospatial Intelligence Agency (NGA) will not renew the EnhancedView contract with it for the full year due to budget constraints.

The intelligence agency proposed an option under which GeoEye will get service revenue of $39.75 million for the three month ending November 2012, and a nine-month option providing for $119.3 million, contingent on funding.

The government agency also decided not to provide additional funding for GeoEye's satellite beyond $181 million provided for in the contract, the company said in a regulatory filing.

The company has so far invoiced $111 million to the agency and expects that payment in the next 30 days. The NGA proposed new milestones for payment of the remaining $70 million.

GeoEye's rival DigitalGlobe Inc (DGI.N) said earlier this week that the NGA plans to renew its EnhancedView contract for the third year.

Friday's news can decide the fate of consolidation in the commercial satellite imagery industry.

U.S. government officials earlier said the NGA plans to sharply reduce, and possibly halve, its plan to buy $7.3 billion of digital imagery from the two companies, sparking speculation about a consolidation.

GeoEye offered to buy larger rival DigitalGlobe for $792 million in May. But DigitalGlobe rejected the offer, saying it would fare better than GeoEye in the expected round of budget cuts and would wait for the decision on EnhancedView contract to take the next step.

Both DigitalGlobe and GeoEye provide digital imagery services to U.S. military and intelligence agencies and are working on next-generation satellites to double their capacity.

Shares of GeoEye fell 5 percent to $17.39 in after-market trading. They closed at $18.34 on the Nasdaq on Friday.

(Reporting by A. Ananthalakshmi and Kartick Jagtap in Bangalore; Editing by Joyjeet Das)

Arena shares slump 14 pct before diet drug ruling

Arena shares slump 14 pct before diet drug ruling

Stock Market Predictions

(Global Markets) - Shares of Arena Pharmaceuticals Inc (ARNA.O) fell 15 percent on Friday, days ahead of a key meeting at which U.S. regulators will rule on whether to approve its experimental weight-loss drug.

The U.S. Food and Drug Administration is expected to rule on whether to approve the company's drug, lorcaserin, by June 27.

The stock closed down $1.80, or 15 percent, at $9.88. Earlier, it fell to as low as $7.80, a drop of more than 33 percent from Thursday's close.

Investors have been optimistic about the prospects for the drug, and - even with Friday's declines - the stock has appreciated more than 430 percent this year.

There was no news on Friday to explain the decline. The stock closed as the second-most actively traded on Nasdaq Friday, with more than 88 million shares traded, trailing only Intel Corp (INTC.O). Shares have gained ground each day for the past 10 trading sessions, rising 82 percent in expectation of a favorable ruling.

"Biotech stocks often display erratic trade patterns heading into critical FDA decisions," said TD Ameritrade chief derivatives strategist J.J. Kinahan. "Many of the traders are speculating that this could be profit taking as this was a $2 stock two months ago."

Investors in the options market are still betting on gains. Weekly call options expiring July 29 - which give an investor the chance to buy the stock by a given date at a particular price - were active. Investors bought calls at prices higher than the current share price, suggesting they see more gains ahead.

Arena option volume was heavy Friday, running 4.6 times the average daily turnover with 160,000 calls and 86,000 puts traded, according to options analytics firm Trade Alert. The most active options were the July $6 strike put followed by the July $15 call.

"On the options front, we are seeing speculators using the sell-off as an opportunity to take bullish positions by buying weekly June calls expiring next week and July calls expiring on July 20," Kinahan said.

(Reporting by Toni Clarke, additional reporting by Doris Frankel in Chicago; Editing by Bernadette Baum, Gary Hill)