QIWI Plc (QIWI) : downgraded to Underweight from Neutral at JP Morgan

 

 

Kraft Heinz (KHC) downgraded to junk by Fitch

(Bloomberg)—Kraft Heinz Co., the iconic food giant created in a merger five years ago, was downgraded to junk by Fitch Ratings, raising fresh worries among investors that a slowing economy could threaten the broader corporate bond market.

The packaged-food company was cut one level to BB+, its first high-yield rating. Similar action from S&P Global Ratings or Moody’s Investors Service would officially dub Kraft Heinz as a fallen angel, taking it out of investment-grade indexes.

Though Kraft Heinz, with just under $30 billion of debt, is a relatively small investment-grade issuer, it would become one of the top three in high yield if another credit rater follows Fitch. It’s just one of many companies that have wound up with a massive debt load as the result of deals, jeopardizing credit ratings in the process.

The food giant, created in a merger orchestrated by Warren Buffett and the private equity firm 3G Capital, is in the midst of a turnaround as its brands fall out of favor with consumers. It reported a drop in fourth-quarter sales Thursday that sent its bonds and stock tumbling, the latest sign that the company’s turnaround plan still has a long way to go.

“Kraft is to investment grade as Velveeta is to cheese,” said Christian Hoffmann, a portfolio manager at Thornburg Investment Management. “The ingredients dictate what something is and Kraft Heinz is junk.”

Fitch cut the company one level to its highest junk rating and has a stable outlook. It said Kraft Heinz may need to divest a sizable portion of its business in order to reduce debt. Kraft Heinz also needs to cut its dividend, Fitch said in August, but the company said Thursday it would maintain the annual $2 billion payout to shareholders.

“We believe it’s important to Kraft Heinz shareholders to maintain our dividend during this time of transformation,” Michael Mullen, a spokesman for the company, said in an emailed statement. Kraft Heinz remains committed to reducing leverage “over time,” he said. The company plans to release a more detailed turnaround plan around the time of its next earnings report in early May.

Kraft Heinz is one of many companies with BBB ratings, the lowest level of investment grade, which now comprises half of the broader $5.9 trillion market. It’s grown steadily since the financial crisis, as a decade of low interest rates prompted companies to load up on debt for mergers and acquisitions, often at the expense of credit ratings.

But a wave of fallen angels, which some investors fear, has yet to follow. Many strategists contend that BBB companies have the ability to defend their investment-grade ratings, whether by selling assets or cutting dividends. Companies like General Electric Co. and AT&T Inc. have done just that to stave off downgrades.

Kraft Heinz debt is already on the way to trading like junk. Its 4.625% bonds due 2029 now yield 3.6%, compared to the 2.88% for the average BBB company with similar duration. It’s the worst-performing issuer in both the U.S. and European markets Friday, and the cost to protect its debt against default has spiked to levels last seen in October.

=Tesla (TSLA) downgraded to Underweight from Equal-Weight at Morgan Stanley

=3D Systems (DDD) : downgraded at Loop Capital

• Jan-16-20  Downgrade Loop Capital  Hold → Sell  $9 

3D Systems Corp. (NYSE: DDD) was downgraded to Sell from Hold with a $9 target price (versus an $11.90 close, after a 2.6% gain) at Loop Capital. 3D Systems had a consensus target price of $9.58, and its 52-week trading range is $6.47 to $14.50.

Signet Jewelers Ltd. (SIG) downgraded at Wells Fargo

Shares of Signet Jewelers Ltd. (SIG), the parent of Zale and Kay jewelry store chains, plunged 14% in afternoon trading Thursday, to pace declines among its retail peers, after Wells Fargo analyst Ike Boruchow turned bearish, citing expectations of continued declining consumer interest in the brands and concerns over the highly levered balance sheet. The stock extends the 31.6% selloff suffered in 2019, which marked the fifth straight yearly decline, the longest such streak in its publicly traded history. The stock 2019 performance compares with the 12.3% gain in the SPDR S&P Retail ETF XRT, -0.76% and the S&P 500's SPX, +0.84% 28.9% rally last year. Boruchow downgraded Signet to underweight from equal weight, and slashed his stock price target to $12, which is 25% below current levels, from $16. Boruchow said a survey of 750 shoppers showed that purchase intent has worsened over the last 12 months, to 68% of respondents planning to shop at Signet stores less from 47% planning to shop less over the previous 12-month period.

GRPN : downgraded to sell from neutral at Goldman

 

-=Kraft Heinz (KHC) : downgraded to Sell from Neutral at Goldman

-=GOOS : downgraded to Market Perform from Outperform at Wells Fargo

Analysts at Wells Fargo downgraded to stock to market perform from outperform on valuation concerns.

"While we remain confident on the trajectory of the GOOS brand and the fundamental story that has developed since their IPO in 2017, we feel the risk/reward today is not as compelling as it once was (when shares were cheaper and upside to numbers seemed easier to come by)," said analyst Ike Bochurow on Thursday.

The firm also said it believes that the fact that Canada Goose is not as popular on Google Trends as a reason for its downgraded outlook.

"We do view the fundamental story here as quite compelling (GOOS remains one of the strongest multi-year growth stories under coverage), we simply feel that valuation is going to become more relevant as the brand matures, the branded space remains choppy and certainly if brand 'heat' begins to cool off a bit," Bochurow said.

Wells Fargo lowered Canada Goose's price target to $68 from $80, which still represents a 37% upside from the stock's previous closing price.

-=Capital One (COF) reported earnings on Tue 22 Jan 2019 (a/h)

Capital One misses by $0.51, reports revs in-line

• Reports Q4 (Dec) earnings of $1.87 per share, $0.51 worse than the S&P Capital IQ Consensus of $2.38; revenues rose 0.2% year/year to $7.01 bln vs the $7.07 bln S&P Capital IQ Consensus.
• Net interest income increased was flat y/y at $5.82 bln. Net interest margin was 6.96%, decreasing 5 basis points.
• Average loans held for investment in the quarter increased $4.6 billion, or 2%, to $241.4 billion. Commercial Banking average loans increased $1.6 billion, or 2%, to $69.7 billion. Consumer Banking average loans increased $122 million, or less than 1%, to $59.3 billion.
• Provision for credit losses increased 29% to $1.6 billion.

On a related note, the stock was downgraded to 'Perform' from 'Outperform' at Oppenheimer.

-=Weight Watchers (WTW) sinks on JPMorgan downgrade

(Bloomberg) -- Weight Watchers International fell on Friday, dropping for a third straight session after JPMorgan downgraded the stock to neutral from overweight, citing indications of “a weak start to the New Year Resolution enrollment period, which is the key sign up period of the year.”

Analyst Christina Brathwaite also slashed her price target on the stock by nearly 50 percent, dropping it to a Street-low of $37 from $70. The average target is $74, according to Bloomberg data.

Shares slumped as much as 10 percent, extending a lengthy decline that has erased more than two-thirds of the company’s value since June. The stock is trading at its lowest level since June 2017.

“Current trends will make it difficult for the company to generate significant growth in members,” JPMorgan wrote to clients, citing channel checks for its view on membership activity. “If sales growth comes in below expectations, WTW’s profitability will likely also be challenged.”

The company “could make up for the shortfall in the coming months (particularly as some of the shortfall may be related to the government shutdown as furloughed workers are less likely to start a diet membership),” but JPMorgan sees this as unlikely.

Currently, nine firms have a buy rating on Weight Watchers, while five rate it a hold and zero rate it a sell, according to Bloomberg.

-=Stitch Fix (SFIX) downgraded by Piper Jaffray

Shares of Stitch Fix Inc. SFIX, -12.50% are down 10% in Thursday morning trading after Piper Jaffray analyst Erinn Murphy downgraded the stock to neutral from overweight. "We continue to like the development of the business model, appreciate its value for softlines vendors in addition to customers, and acknowledge management's execution year to date," Murphy wrote. Still, she thinks the current stock price doesn't allow much room for competitive threats, rising pressure from customer-acquisition costs, or a potential macroeconomic slowdown in consumer spending. "We note Amazon's Prime Wardrobe is now advertising in key NFL slots and the company is testing a personalized recommendation service (Scout) for certain categories including footwear per CNBC," she wrote. Murphy raised her price target to $43 from $29. The stock is up 62% so far this year, while the S&P 500 SPX, +0.72% has gained 9.3%.

-=YUMC : downgraded to Underperform from Neutral at BofA/Merrill

Gogo Inc.(GOGO) : Moody's lowers the company's credit ratings

** charts after downgrade **  

 

Moody's lowered the company's credit ratings across the board.

In a research note published after the closing bell on Monday, Moody's lowered Gogo's corporate credit rating and probability-of-default grade from B3 to Caa1. The speculative grade liquidity rating fell from SGL-2 to SGL-3.
Moody's view of Gogo moved from "highly speculative" to "substantial risks," with a negative outlook that could lead to even further rating cuts in the near term.

=Ulta Beauty (ULTA) downgraded by Cleveland Research

• Cleveland Research downgrades Ulta Beauty from Buy to Neutral, predicting an expected slowdown in cosmetics, increased promotions

Ulta shares dipped as low as $189.50 on Thursday morning after analysts at Cleveland Research downgraded the stock from Buy to Neutral and said Ulta stock still isn’t cheap considering the challenging environment it is facing in the retail space.

Cleveland said hurricane disruptions and negative sales and margin trends will likely weigh on Ulta earnings in the near-term.

The downgrade came just a day after CNBC's Jim Cramer said he wouldn’t sell his Ulta shares at the current price, but he also wouldn’t recommend buying more.

Ulta was once considered among the handful of U.S. retail stocks that were immune to Amazon.com, Inc. (NASDAQ: AMZN)’s dominance. Unfortunately, investors’ confidence in Ulta’s ability to dodge the Amazon bullet started dissipating back in July after reports started surfacing that Amazon is expanding its packaged beauty product offerings.

In August, BMO's Shannon Coyne and her team downgraded the stock to Hold, warning that the beauty sector is gearing up for an ugly market share war.

Skechers (SKX) falls after Morgan Stanley downgrade, price target cut

Shares of Skechers dropped 8% on Wednesday after Morgan Stanley downgraded the stock to "equal-weight," reduced its full-year earnings estimate, and slashed the company's price target.

  

In a note titled, "Three Stripes, You're Out; Downgrading to EW," Morgan Stanley said that it believes the year-to-date slowdown of Skechers has been due to "longer-lasting issues" and not "temporary macro factors."

With Wednesday's decline, the stock has fallen nearly 30 percent so far in 2016, and nearly 55 percent in the past year.

The firm cut its price target to $25 from $41.

=Yelp (YELP) downgraded

Yelp (YELP) after receiving a downgrade to 'Sell' from 'Neutral' at B. Riley & Co