3 Reasons Canopy Growth Investors Should Brace for More Losses

Canopy Growth (NYSE:CGC) recently reported results for the last three months of 2018, and the beginning of Canada’s adult-use program helped the company sell 334% more marijuana than a year earlier. Unfortunately, operating expenses rose much further than sales, plus profit margins in the adult-use market are slimmer than expected.

Thanks to a $5 billion cash injection from Constellation Brands earlier this year, the company can afford the losses, but investors want to know if they’ll continue. Here are a few reasons to expect at least several more quarters of operating losses from Canopy Growth.

Dry marijuana flowers next to a huge pile of cash.

Image source: Getty Images.

1. Mail-order marijuana is still going strong

The rollout of recreational marijuana in Canada was a non-event for most of the country’s users because buying illicit marijuana has felt nearly legal for a long time. There are dozens of mail-order marijuana shops (MoMs) online that ship through Canada Post, discreetly, and most of them even accept PayPal. Although police can get warrants to inspect packages after they’ve been delivered, it’s rarely worth the trouble. Criminal charges for customers are practically unheard of.

Edibles and concentrates are the two fastest-growing product categories in the U.S., but you can’t buy either from licensed retailers in Canada. Of course, there are plenty of MoMs that cater to connoisseurs of both. 

MoMs aren’t the only competition that licensed producers and retailers like Canopy Growth have to deal with. There are still plenty of illegal marijuana dispensaries throughout the country, and it doesn’t look like they’re going anywhere. In New Brunswick, Canopy Growth’s potential customers are waltzing right past government-run stores that sell its products and into marijuana dispensaries that don’t.

While there are occasional reports about dispensaries getting shut down by authorities, local municipalities that don’t want to be seen limiting patients’ treatment options rarely take action. When pressed about the issue, though, authorities generally claim that enforcing marijuana laws just aren’t an efficient use of limited resources. Whatever the case, Canopy will probably have to compete with a thriving illicit market for the long term.

2. Licensed producers can’t compete with MoM

Statistics Canada runs anonymous online surveys that ask people for the size and price of their latest marijuana purchases, illicit or licensed. The average price reported for non-medical marijuana fell to just 7.43 Canadian Dollars ($5.61) per gram in 2017, and that was before companies like Canopy Growth started producing enough cannabis each month to cover the Hudson Bay.

During the three months ended December, Canopy Growth recorded an average selling price per gram of CA$6.96 ($5.25) from recreational sales. That’s not necessarily bad, but the company also expensed CA$6.41 ($4.84) in production costs per gram sold.

Canopy Growth also reported a CA$1.45 ($1.09) per-gram expense related to Canada’s new cannabis excise tax. This is a big advantage for MoMs and illicit dispensaries that don’t pay the federal excise tax or provincial sales taxes.  

The price difference for medical-use patients who want an edible solution is enormous. A 60-capsule bottle of Canopy Growth’s flagship brand, Tweed soft-gels, costs CA$226.80 ($171.23) at the Ontario Cannabis Store. The bottle contains just 600 mg of marijuana’s active ingredient, which is the amount of THC that patients can buy as gummies or candies for between CA$40 ($30.20) and CA$60 ($45.30) from MoMs and dispensaries.

3. There’s no legal weed shortage in Canada

Across the country, licensed retailers are having a tough time keeping their shelves stocked, but that isn’t because licensed producers can’t keep up. According to Health Canada, retailers sold just 14,379 kg of legal cannabis in December. During the same month, ready-for-sale product in the supply chain rose to 57,914 kg.

Aurora Cannabis (NYSE:ACB) is another giant Canadian producer that lost a lot of money recently, and its earnings call highlighted a possible cause of the perceived adult-use marijuana shortages. Aurora, Canopy Growth, and their peers have licenses to export medical marijuana to countries that pay more per gram. As a result, Aurora isn’t providing provinces with more adult-use cannabis than their long-term supply contracts require.

At the end of December, Canopy Growth’s inventory was worth CA$185 million ($140 million), or 23% more than three months earlier. Keeping sufficient inventory levels is important, but this much inventory growth during a perceived shortage isn’t a good sign. 

Two hands passing money and marijuana to another set of hands in an illegal marijuana transaction.

Image source: Getty Images.

On to Plan B?

Canada’s adult-use program isn’t going to be the revenue contributor investors hoped for, and that’s going to cause Canopy Growth to report more operating losses in the quarters ahead. 

Canopy sold medical marijuana in the EU for CA$13.28 ($10.03) per gram, which suggests the region could become a high-margin revenue stream down the road. Sadly, an international revenue stream is probably a lot further down the road than investors hoped for. International sales reached just CA$2.7 million ($2.04 million) during the quarter ended December, which was just CA$1.7 million ($1.28 million) more than a year ago.

Recently, members of the European Parliament approved a motion for a resolution on cannabis for medicinal purposes. The non-binding resolution will ask member countries to prioritize cannabis research and reconsider domestic laws that prevent its sale. 

While a larger EU market could help Canopy Growth make ends meet, it won’t happen fast enough to stop this marijuana producer from bleeding money in the foreseeable future. That makes this stock too risky to even consider right now.

Top 10 Oil Stocks To Own Right Now

SAExploration Holdings Inc (NASDAQ:SAEX)’s share price reached a new 52-week low on Friday . The stock traded as low as $0.41 and last traded at $0.44, with a volume of 7054 shares changing hands. The stock had previously closed at $0.50.

Separately, ValuEngine upgraded shares of SAExploration from a “sell” rating to a “hold” rating in a research report on Saturday, June 2nd.

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The company has a quick ratio of 1.10, a current ratio of 1.10 and a debt-to-equity ratio of 5.62.

SAExploration (NASDAQ:SAEX) last posted its quarterly earnings data on Wednesday, August 8th. The oil and gas company reported ($2.24) earnings per share for the quarter. SAExploration had a negative net margin of 80.46% and a negative return on equity of 394.81%. The business had revenue of $16.88 million for the quarter.

Top 10 Oil Stocks To Own Right Now: Transocean Inc.(RIG)

Advisors’ Opinion:

  • [By Jason Hall]

    On June 27, shares of Seadrill Ltd (NYSE:SDRL), Diamond Offshore Drilling Inc (NYSE:DO), and Ensco PLC (NYSE:ESV) traded up more than 10% at various points. And while they’ve cooled off a bit — up 9.9%, 10.3%, and 8.9%, respectively, at recent prices — they continue to march toward today’s close with big gains. And while not quite as much as the three aforementioned companies, shares of Transocean LTD (NYSE:RIG) and Noble Corporation PLC (NYSE:NE) are showing big days as well, up 6.4% and 7.2% in late-afternoon trading. 

  • [By John Bromels]

    Unless it’s not. Which it may not be. There’s a big cloud of uncertainty hanging over the company, in part thanks to its status as a very small fish in a very big deepwater ocean that’s full of huge, hungry competitors like Transocean (NYSE:RIG) and Ensco (NYSE:ESV). Questions also abound about its parent company, Seadrill (NYSE:SDRL).

  • [By Joseph Griffin]

    Shares of Transocean LTD (NYSE:RIG) have been assigned a consensus recommendation of “Hold” from the twenty-four brokerages that are covering the stock, Marketbeat Ratings reports. Three equities research analysts have rated the stock with a sell rating, seven have issued a hold rating, twelve have given a buy rating and one has issued a strong buy rating on the company. The average twelve-month price target among brokers that have issued ratings on the stock in the last year is $12.52.

  • [By Joseph Griffin]

    CenturyLink Investment Management Co trimmed its stake in Transocean LTD (NYSE:RIG) by 10.7% during the third quarter, Holdings Channel reports. The fund owned 97,454 shares of the offshore drilling services provider’s stock after selling 11,676 shares during the period. CenturyLink Investment Management Co’s holdings in Transocean were worth $1,359,000 as of its most recent filing with the Securities & Exchange Commission.

  • [By Matthew DiLallo]

    A wave of merger activity has swept across the offshore drilling sector in recent years. The latest news came on Monday when Ensco (NYSE:ESV) announced that it had agreed to buy Rowan in a $12 billion deal. That transaction occurred on the heels of Transocean’s (NYSE:RIG) agreement earlier last month to acquire Ocean Rig for $2.7 billion. Before that, Transocean bought Songa Offshore for $3.4 billion while Ensco acquired Atwood Oceanics.

Top 10 Oil Stocks To Own Right Now: Apache Corporation(APA)

Advisors’ Opinion:

  • [By Steve Symington, John Bromels, and Keith Noonan]

    So, we asked three top Motley Fool contributors to each discuss a stock that they believe is absurdly cheap right now. Read on to learn what they had to say about JD.com (NASDAQ:JD), Apache Corporation (NYSE:APA), and Baidu (NASDAQ:BIDU).

  • [By Chris Lange]

    Apache Corp. (NYSE: APA) fourth-quarter results are scheduled for Thursday. The consensus forecast is for $0.22 in EPS on $1.55 billion in revenue. Shares were trading at $38.11. The consensus price target is $50.43. The 52-week range is $35.70 to $56.51.

  • [By John Bromels]

    It seems like a great time to buy in, but you still shouldn’t just buy any oil and gas stock. Luckily, it doesn’t take a genius to identify great choices in the oil and gas industry like Apache Corporation (NYSE:APA), Devon Energy (NYSE:DVN), and Royal Dutch Shell (NYSE:RDS-A)(NYSE:RDS-B). Here’s why they’re such no-brainer investments.

Top 10 Oil Stocks To Own Right Now: Marathon Oil Corporation(MRO)

Advisors’ Opinion:

  • [By Matthew DiLallo]

    Marathon Oil (NYSE:MRO) is another oil producer built for $50 oil. At that level, Marathon can generate enough cash to grow its U.S. oil production 25% to 30% this year, while at $60 oil, the company can produce $500 million in free cash — and even more at current prices. Marathon Oil has a range of options for that money, including buying back shares, boosting the dividend, paying off debt, or acquiring more drillable land.

  • [By Max Byerly]

    Get a free copy of the Zacks research report on Marathon Oil (MRO)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Matthew DiLallo]

    Marathon Oil (NYSE:MRO) put the wraps on a strong year by delivering solid fourth-quarter results, which came in slightly ahead of expectations. With that, the company exceeded its initial growth projection for the year while sticking to its budget, and was thus able to generate and return lots of cash to shareholders. The company expects more of the same in 2019 as its drilling machine aims to continue printing money.

  • [By Ethan Ryder]

    Shares of Melrose Industries PLC (LON:MRO) have received an average rating of “Buy” from the nine analysts that are currently covering the firm, MarketBeat.com reports. Nine analysts have rated the stock with a buy recommendation. The average 1 year target price among analysts that have issued a report on the stock in the last year is GBX 255 ($3.30).

Top 10 Oil Stocks To Own Right Now: ConocoPhillips(COP)

Advisors’ Opinion:

  • [By Chris Lange]

    The number of ConocoPhillips (NYSE: COP) shares short fell to 11.83 million from the previous 12.60 million. Shares were trading at $71.30, within a 52-week range of $45.65 to $74.73.

  • [By Ethan Ryder]

    Whittier Trust Co. grew its holdings in ConocoPhillips (NYSE:COP) by 15.8% in the first quarter, HoldingsChannel reports. The institutional investor owned 11,978 shares of the energy producer’s stock after acquiring an additional 1,635 shares during the period. Whittier Trust Co.’s holdings in ConocoPhillips were worth $710,000 at the end of the most recent reporting period.

  • [By Logan Wallace]

    Get a free copy of the Zacks research report on ConocoPhillips (COP)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Chris Lange]

    The number of ConocoPhillips (NYSE: COP) shares short decreased to 23.15 million from the previous level of 24.60 million. Shares were trading at $52.55, within a 52-week range of $42.27 to $61.32.

Top 10 Oil Stocks To Own Right Now: Halliburton Company(HAL)

Advisors’ Opinion:

  • [By WWW.GURUFOCUS.COM]

    For the details of Packer & Co Ltd’s stock buys and sells, go to www.gurufocus.com/StockBuy.php?GuruName=Packer+%26+Co+Ltd

    These are the top 5 holdings of Packer & Co LtdBall Corp (BLL) – 625,005 shares, 7.52% of the total portfolio. Hess Corp (HES) – 2,039,400 shares, 6.78% of the total portfolio. Anadarko Petroleum Corp (APC) – 1,432,600 shares, 6.35% of the total portfolio. Shares added by 14.37%Citigroup Inc (C) – 604,500 shares, 6.34% of the total portfolio. Shares reduced by 11.04%General Electric Co (GE) – 1,118,800 shares, 5.98% o

  • [By Logan Wallace]

    Ladenburg Thalmann Financial Services Inc. decreased its position in shares of Halliburton (NYSE:HAL) by 2.9% during the first quarter, HoldingsChannel reports. The firm owned 43,482 shares of the oilfield services company’s stock after selling 1,312 shares during the period. Ladenburg Thalmann Financial Services Inc.’s holdings in Halliburton were worth $2,035,000 at the end of the most recent reporting period.

  • [By Ethan Ryder]

    Societe Generale downgraded shares of Halliburton (NYSE:HAL) from a buy rating to a hold rating in a report released on Friday, The Fly reports. They currently have $43.00 price target on the oilfield services company’s stock.

  • [By Shane Hupp]

    SemGroup (NYSE: SEMG) and Halliburton (NYSE:HAL) are both oils/energy companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, risk, dividends, valuation, earnings, analyst recommendations and profitability.

Top 10 Oil Stocks To Own Right Now: Magellan Midstream Partners L.P.(MMP)

Advisors’ Opinion:

  • [By Max Byerly]

    Magellan Midstream Partners (NYSE: MMP) and Noble Midstream Partners (NYSE:NBLX) are both oils/energy companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, institutional ownership, analyst recommendations and earnings.

  • [By Joseph Griffin]

    Magellan Midstream Partners, L.P. (NYSE:MMP) insider Douglas J. May sold 5,000 shares of the stock in a transaction on Thursday, September 20th. The stock was sold at an average price of $68.69, for a total value of $343,450.00. Following the completion of the sale, the insider now owns 33,000 shares in the company, valued at approximately $2,266,770. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through the SEC website.

  • [By Tyler Crowe]

    One way to balance the needs of income and preserving your nest egg is to invest in stocks that can pay a consistent and growing dividend. Using dividend payouts as an income stream leaves your principle intact and gives it a chance to grow over time. The trick is finding top-shelf dividend stocks that will deliver for decades to come. Three stocks that have this quality are pipeline master limited partnership Magellan Midstream Partners (NYSE:MMP), healthcare real estate investment trust HCP Inc. (NYSE:HCP), and alternative asset manager Brookfield Infrastructure Partners (NYSE:BIP). Here’s why you should consider these three for your retirement.  

  • [By Matthew DiLallo]

    That outperformance adds up over time. Case in point: Magellan Midstream Partners (NYSE:MMP). Over the last decade, the master limited partnership (MLP) has tallied a total return of more than 540%, which crushed the S&P 500’s total return of around 190%. And that outperformance could continue as the MLP expects to keep growing its high-yield payout at a steady pace for at least the next few years — which makes it a great stock to consider buying.

  • [By Matthew DiLallo]

    Magellan Midstream Partners (NYSE:MMP) is one of the best master limited partnerships (MLPs) around. The oil and refined products pipeline and storage company boasts one of the top credit ratings and financial profiles in the sector. As a result, the company’s 5.6%-yielding distribution is on rock-solid ground.

Top 10 Oil Stocks To Own Right Now: Range Resources Corporation(RRC)

Advisors’ Opinion:

  • [By Stephan Byrd]

    Get a free copy of the Zacks research report on Range Resources (RRC)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Tyler Crowe, Matthew DiLallo, and Reuben Gregg Brewer]

    So we asked three of our investing contributors to each highlight a company they think has a compelling investment case right now in the oil and gas industry. Here’s why they selected Devon Energy (NYSE:DVN), Range Resources (NYSE:RRC), and ExxonMobil (NYSE:XOM).

  • [By Chris Lange]

    The stock posting the largest daily percentage gain in the S&P 500 ahead of the close Monday was Range Resources Corp. (NYSE: RRC) which rose about 6% to $16.05. The stock’s 52-week range is $11.93 to $25.96. Volume was 8.6 million compared to the daily average volume of 7.4 million.

Top 10 Oil Stocks To Own Right Now: Whiting Petroleum Corporation(WLL)

Advisors’ Opinion:

  • [By Matthew DiLallo]

    Whiting Petroleum (NYSE:WLL) bounded upward more than 55% for the quarter, fueled by rising crude prices and its strong first-quarter results. After struggling to scrape by on lower oil prices, Whiting’s cash flow has surged this year, providing it enough money to fund its drilling program with more than $100 million to spare during the first quarter.

  • [By Logan Wallace]

    Whiting Petroleum Corp (NYSE:WLL) gapped up before the market opened on Tuesday . The stock had previously closed at $53.25, but opened at $51.53. Whiting Petroleum shares last traded at $52.01, with a volume of 68181 shares.

  • [By Stephan Byrd]

    Get a free copy of the Zacks research report on Whiting Petroleum (WLL)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Stephan Byrd]

    Oppenheimer began coverage on shares of Whiting Petroleum (NYSE:WLL) in a research note issued to investors on Wednesday. The firm issued an outperform rating and a $67.00 price objective on the oil and gas exploration company’s stock. Oppenheimer also issued estimates for Whiting Petroleum’s Q3 2018 earnings at $0.64 EPS, Q4 2018 earnings at $0.80 EPS, FY2018 earnings at $2.97 EPS, Q3 2019 earnings at $1.45 EPS, Q4 2019 earnings at $1.50 EPS and FY2019 earnings at $5.99 EPS.

  • [By Ethan Ryder]

    Here are some of the media stories that may have impacted Accern Sentiment Analysis’s rankings:

    Get Whiting Petroleum alerts:

    Whiting Petroleum Corp (WLL) Expected to Post Earnings of $0.62 Per Share (americanbankingnews.com) Oil Edges Higher On Iran Fears – OIR 220818 (proshareng.com) Whiting Petroleum (WLL) Presents At EnerCom’s 23rd Annual Oil & Gas Conference – Slideshow (seekingalpha.com) Whiting Petroleum (NYSE: WLL) – Day One Breakout Notes (oilandgas360.com)

    Several analysts have issued reports on WLL shares. Bank of America raised shares of Whiting Petroleum from a “neutral” rating to a “buy” rating in a research report on Thursday, May 10th. Robert W. Baird increased their price objective on shares of Whiting Petroleum from $50.00 to $61.00 and gave the company an “outperform” rating in a research report on Sunday, July 29th. Imperial Capital increased their price objective on shares of Whiting Petroleum from $40.00 to $45.00 and gave the company a “line” rating in a research report on Wednesday, May 2nd. Piper Jaffray Companies reaffirmed a “hold” rating and issued a $75.00 price objective on shares of Whiting Petroleum in a research report on Friday, July 20th. Finally, SunTrust Banks increased their price objective on shares of Whiting Petroleum to $70.00 and gave the company a “buy” rating in a research report on Thursday, July 5th. Fourteen research analysts have rated the stock with a hold rating, fifteen have issued a buy rating and one has issued a strong buy rating to the stock. Whiting Petroleum currently has a consensus rating of “Buy” and a consensus price target of $48.54.

  • [By Jon C. Ogg]

    Whiting Petroleum Corp. (NYSE: WLL) was reiterated as Overweight and the target price was raised to $56 from $45 (versus a $50.78 close) at KeyBanc Capital Markets.

Top 10 Oil Stocks To Own Right Now: Encana Corporation(ECA)

Advisors’ Opinion:

  • [By Jon C. Ogg]

    Encana Corp. (NYSE: ECA) may be one of the most undervalued companies in the energy patch. The Canadian energy player was given upside of almost 60% in a call from Merrill Lynch that noted the innovative shale leader has an infrastructure advantage and rising free cash flow.

  • [By Matthew DiLallo]

    Canada’s Montney Shale doesn’t currently capture investors’ attention like the Permian Basin. However, that doesn’t mean it’s a second-tier play. Quite the contrary since, like the Permian, it’s a resource-rich region with as many as six drillable formations that produce highly economic liquids-rich natural gas. Because of those features, it has become an important growth driver for companies like Encana (NYSE:ECA).

  • [By ]

    Already, shale companies such as Encana (ECA) , Occidental Petroleum (OXY) and Pioneer Natural Resources (PXD) , among others, are reporting higher cash flows and earnings on higher oil prices. As a result, they are paying down debt, increasing dividends and engaging in buybacks. This is a dramatic improvement in shareholder yield for the group.

  • [By Stephan Byrd]

    Cenovus Energy (NYSE:CVE) and Encana (NYSE:ECA) are both large-cap oils/energy companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, profitability, dividends, earnings and analyst recommendations.

  • [By Stephan Byrd]

    Sentinel Trust Co. LBA lessened its stake in shares of Encana Corp (NYSE:ECA) (TSE:ECA) by 37.4% in the 2nd quarter, according to its most recent 13F filing with the Securities and Exchange Commission (SEC). The firm owned 328,255 shares of the oil and gas company’s stock after selling 195,760 shares during the quarter. Encana accounts for about 1.0% of Sentinel Trust Co. LBA’s investment portfolio, making the stock its 26th largest position. Sentinel Trust Co. LBA’s holdings in Encana were worth $4,283,000 as of its most recent filing with the Securities and Exchange Commission (SEC).

  • [By Joseph Griffin]

    These are some of the media stories that may have effected Accern’s scoring:

    Get Encana alerts:

    Should You Listen to This Stock? Encana Corporation (ECA) moves 51.44% away from One Year Low (nasdaqchronicle.com) Hot Mover of the Day – Encana Corporation (NYSE:ECA) (thestockgem.com) Enrapturing Stocks: Encana Corporation, (NYSE: ECA), AmTrust Financial Services, Inc., (NASDAQ: AFSI) (globalexportlines.com) Analysts, Options Traders Love This Lesser-Known Energy Stock (schaeffersresearch.com) Encana Corp (ECA) Expected to Announce Quarterly Sales of $1.12 Billion (americanbankingnews.com)

    ECA traded up $0.27 on Thursday, hitting $12.47. 9,071,326 shares of the stock were exchanged, compared to its average volume of 9,380,907. Encana has a 12 month low of $8.01 and a 12 month high of $14.31. The company has a quick ratio of 1.16, a current ratio of 1.16 and a debt-to-equity ratio of 0.62. The stock has a market capitalization of $11.70 billion, a price-to-earnings ratio of 29.00, a P/E/G ratio of 1.98 and a beta of 2.00.

Top 10 Oil Stocks To Own Right Now: Williams Partners L.P.(WPZ)

Advisors’ Opinion:

  • [By Tyler Crowe, Jason Hall, and Matthew DiLallo]

    Matt DiLallo (Williams Companies): This natural gas pipeline giant has had a slow start in 2018. Through the first half of the year, cash flow at the company’s MLP Williams Partners (NYSE:WPZ) has only increased by about 2%, due mainly to recent asset sales. However, with a major expansion project coming on line, cash flow growth should accelerate in the second half of the year. That project and others in the pipeline have the company on track to grow cash flow 9% in 2018 and another 13% next year.

  • [By Reuben Gregg Brewer]

    There’s an interesting dichotomy here, however. Crestwood was looking to stay financially disciplined, but it also needed to invest to grow. Doing both at the same time is difficult, which is why it partnered up with Con Ed in the Marcellus region, Shell Midstream Partners LP (NYSE:SHLX) and First Reserve in the Delaware Basin, and Williams Partners (NYSE:WPZ) in the Powder River basin. These agreements allow Crestwood to keep expanding its business without having to foot the entire bill for the investments.

  • [By Matthew DiLallo]

    Williams Companies (NYSE:WMB) was off to a great start in 2018 thanks to the growth of its majority-owned master limited partnership, Williams Partners (NYSE:WPZ). There’s plenty more where that came from, which was clear from the comments of CEO Alan Armstrong on the accompanying quarterly conference call. While he didn’t fill in every detail about what lies ahead, he made sure investors knew that the company’s future looks bright.

  • [By Lisa Levin] Gainers
    Carver Bancorp, Inc. (NASDAQ: CARV) shares jumped 92.1 percent to $7.01.
    iPic Entertainment Inc. (NASDAQ: IPIC) gained 21.6 percent to $9.73.
    Baozun Inc. (NASDAQ: BZUN) shares jumped 18.7 percent to $53.49 after reporting Q1 results.
    World Wrestling Entertainment, Inc. (NYSE: WWE) shares jumped 15.9 percent to $50.50. The company's "Smackdown Live" may not be renewed at NBCUniversal network and the company's "Monday Night Raw" program could be worth three times its current value elsewhere, according to a report for The Hollywood Reporter.
    Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) gained 14.7 percent to $ 20.46 after the company issued further details on Phase 3 ADVANCE study of ROLONTIS.
    Motus GI Holdings, Inc. (NASDAQ: MOTS) climbed 13.4 percent to $5.5009.
    Endocyte, Inc. (NASDAQ: ECYT) rose 13.3 percent to $ 14.23 after the company announced presentation of Phase 2 data from prostate cancer trial of 177Lu-PSMA-617 at the 2018 ASCO Annual Meeting.
    Diana Containerships Inc. (NASDAQ: DCIX) gained 12.9 percent to $1.7499 after the company announced the sale of Post-Panamax Container Vessel for $21 million.
    Essendant Inc. (NASDAQ: ESND) gained 12.7 percent to $12.43. Essendant confirmed receipt of unsolicited proposal from Staples of $11.50 per share in cash.
    Blink Charging Co (NASDAQ: BLNK) rose 11.8 percent to $8.04 after surging 31.68 percent on Wednesday.
    OptimumBank Holdings, Inc. (NASDAQ: OPHC) gained 11.5 percent to $5.15.
    Flotek Industries, Inc. (NYSE: FTK) shares climbed 10.7 percent to $3.74.
    Farmer Bros. Co. (NASDAQ: FARM) rose 7.9 percent to $25.95 after climbing 7.90 percent on Wednesday.
    Minerva Neurosciences Inc (NASDAQ: NERV) rose 6.5 percent to $6.93 after Journal of Clinical Psychiatry published positive results of cognitive performance from Phase 2B trial of roluperidone in schizophrenia patients.
    Williams Partners L.P. (NYSE: WPZ) rose 5.6 percent to $40

CatchMark Timber Trust Inc (CTT) Q4 2018 Earnings Conference Call Transcript

CatchMark Timber Trust Inc  (NYSE:CTT)

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Q4 2018 Earnings Conference CallFeb. 15, 2019, 10:00 a.m. ET

Contents:
Prepared Remarks Questions and Answers Call Participants
Prepared Remarks:

Operator

Good morning, everyone and welcome to the CatchMark Timber Trust Fourth quarter 2018 Earnings Call and Webcast. All participants today will be on listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that today’s event is being recorded.

And with that, I’d like to turn the conference over to Brian Davis. Please go ahead.

Brian Davis — Chief Financial Officer

Thank you, Brian. Good morning and thank you for joining us for a review of CatchMark Timber Trust results for full year 2018 and the three month period ended December 31, 2018. I’m Brian Davis, the Chief Financial Officer of CatchMark. Joining me today on the call are President and CEO, Jerry Barag; Senior Vice President of Forest Resources, Todd Reitz; President of our Triple T joint venture John Rasor.

During this call, CatchMark management will make forward-looking statements. These forward-looking statements are based on management’s current beliefs and the information currently available.

CatchMark’s actual results will be affected by certain risks and uncertainties that are beyond its control or ability to predict and could cause our actual results to differ materially from expectations. For more information about the factors that could cause such differences, we refer you to our 2017 Annual Report on Form 10-K and subsequent reports that we file with SEC.

Today’s presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our earnings release, which is posted on our website. Todd, John and I will join Jerry to answer any of your questions after this presentation.

Now I turn over the call to Jerry Barag to cover full year 2018 results, fourth quarter results and company guidance for the year ahead.

Jerry Barag — President, Chief Executive Officer, and Director

Thanks, Brian. Good morning, everybody and thank you for joining us. As we all know, the past six months have been somewhat volatile for the timber and wood products industry and especially difficult for lumber manufacturers with prices down 50% to 60% in certain lumber categories. This led to a challenging fourth quarter, particularly impacting owners of timberland in the Pacific Northwest.

At CatchMark, by design, we have been able to navigate through this rough patch effectively unscathed, our pure-play model circumventing lumber price volatility. The U.S. South micro markets where we are concentrated are steady and improving driven by recent under way and announced mill expansions, which should result in future strengthening of unit prices.

Furthermore, southern yellow pine lumber prices have been less affected compared to other species and today stand at close to long-term trend prices. Quite frankly, our operations have remained unchanged during this period and so does our outlook for CatchMark-owned properties.

Since CatchMark’s inception as a public company, we have steadily expanded assembling the industry’s consistently highest quality timberland portfolio and consistently meeting our operating targets. We’ve reduced exposure to volatility through our pure-play nature.

We’re a timberland investor not a lumber company. Our acquisitions have proved out by picking the right locations with proximity to the best mill markets. Our delivered wood sales strategy and fiber supply agreements continue to help baseload and optimize our timber sales revenue through relationships with creditworthy counterparties.

Our diversified cash flow streams have enabled to defer harvest to optimize future upside. We’ve managed our capital effectively to maximize growth, including entering into strategic joint ventures with institutional investors. And our new investment management business delivers asset management fees, helps protect against downside volatility and provides opportunities to capture very attractive incentive fees.

As a result of our business strategy, CatchMark is extremely well positioned to generate and grow durable cash flows, always seeking to deliver a reliable dividend over time.

In 2018 specifically, we took bold and significant steps to execute our long-standing strategic initiatives to increase cash flow, expand our prime timberland portfolio in top mill markets, maximize results from harvest operations, and reinforce our capital position.

In addition, we significantly advanced our investment management business, diversifying and solidifying our revenue streams. And again we met our company guidance for the year.

In 2018, we increased timberlands managed by 200% to more than 1.5 million acres. That included investing $200 million in the Triple T joint venture, which has secured significant stable ongoing asset management fees, offers potential superior investment returns and attractive long-term sustainable growth from extremely high quality Texas timberlands, and provides the opportunity for capturing performance based incentive management fees.

We further diversified assets and expanded sawtimber holdings by entering into the leading Pacific Northwest mill markets through the purchase of 18,000 acres of Prime Oregon Timberlands in the $89.7 million Bandon transaction.

After the Triple T investment upgraded our regional portfolio, we rebalanced our holdings in Texas and Louisiana and recycled capital to facilitate the Bandon purchase. That was accomplished with the sale of 56,000 acres of timberlands for $79.3 million in the Southwest disposition.

We completed other HBU land sales of approximately 8,500 acres for $17.5 million, meeting our target for the year within the range of 1% to 2% of the acreage disposed. We raised $72.5 million of capital in an equity offering to pursue opportunities in a robust acquisition pipeline.

We improved liquidity by increasing total borrowing capacity by $75 million to $644 million at year-end and secured a new seven-year, $140 million term loan to replace existing debt. And we executed $200 million of interest rate swaps to mitigate exposure to rising interest rates.

Looking specifically at full year 2018 result highlights, we increased total revenues by 7% year-over-year. We increased adjusted EBITDA by 19%. We increased asset management fees to $5.6 million, which were primarily generated by Triple T during the second half of 2018. We also produced $2.6 million in income and received $8.5 million in distributions from the Dawsonville Bluffs joint venture. And during the year we paid fully covered dividends totaling $26 million or $0.54 per share.

CatchMark also incurred a net loss of $122 million for full year 2018. These results were overwhelmingly due to losses allocated from the Triple T joint venture in accordance with GAAP rules. In meeting our guidance for 2018, we again effectively demonstrated how our disciplined strategy for assembling the consistently highest quality timberlands portfolio and the ongoing operations excellence together to maximize cash flow and support our dividend to all phases of the business cycle. And yesterday we declared a first quarter 2019 cash dividend of $0.135 per share for stockholders payable on March 15. Our dividend yield is the highest among timber REITs and continues to offer superior risk-adjusted coverage.

In 2018, we completed an industry-leading investment, the Triple T joint venture and took the first step in entering the Pacific Northwest through the Bandon acquisition. Triple T especially represents a significant expansion of our holdings and both investments are designed to register durable cash flow growth and support our dividend well into the future.

They further enhance the quality of our prime timberlands in leading markets, reinforced by delivered wood sales strategy and fiber supply agreements which meet our investment profile. Their premium stocking and productivity characteristics are in keeping with our stringent investment criteria which are proved out in helping deliver superior results and enabling operation advantages throughout our portfolio.

And these operating advantages continue to pay-off in consistent and predictable cash flow. We operate in superior micro markets with proximity to leading mills and customers. We continue to benefit from executing on our delivered wood sale strategies in those mill markets and we gain from our extensive long-term fiber supply agreements with creditworthy counterparties.

By strategic design, the mill markets where we operate in the U.S. South continue to outperform southwide averages. CatchMark’s average pine sawtimber stumpage price has maintained a premium over southwide averages ranging up to 9% since the first quarter 2017.

The premium has been even higher in the chip-n-saw category ranging from 20% to 40%. Delivered wood sales had been at the foundation of our management philosophy and we increased delivered wood sales as a percentage of total harvest from 74% in 2017 to 80% in 2018. Through our delivered wood sales strategy, we can keep better control of our supply chain and produce more stable and predictable cash flows.

We also made a tactical decision early in the year to defer some harvest in anticipation of stronger future pricing. Our gross timber sales declined 3% year-over-year as harvest volume declined 8% year-over-year, as a result of these discretionary deferrals.

But our per term pulpwood pricing increased about 6% to help offset the decline in harvest volume and our fourth quarter pine sawtimber stumpage price registered a $25 per ton compared to southwide averages which have tracked below $24 for the past eight quarters according to TimberMart-South.

In addition the significant new asset management fees from Triple T and execution of planned HBU Timberland sales to dispose of less productive holdings, buttressed overall company performance during the year. The new asset management fees are notable in diversifying our revenue streams and provide a predictable and significant source of ongoing cash flow.

In addition, we have the opportunity to earn attractive performance based incentive fees going forward. Both our joint ventures in Triple T and Dawsonville Bluffs are operating to plan. And integration of Triple T operations has been efficient and well-managed meeting our performance objectives to date.

With regard to Dawsonville Bluffs we recognized $2.6 million of income during the year generated primarily from the planned sale of HBU Timberland and mitigation bank credits. In addition we received $8.5 million in distributions as we move to fully monetize this finite life $10 million investment ahead of schedule. In terms of adjusted EBITDA, Dawsonville contributed $6.8 million.

Now turning specifically to CatchMark’s operating results for the 3-month period ending December 31, 2018. We increased revenues 1% year-over-year. We generated adjusted EBITDA of $9.4 million compared to $9.9 million in the fourth quarter of 2017. We produced $2.8 million in asset management fees primarily from Triple T.

We completed Timberland sales of approximately 1300 acres for $2.6 million. We incurred a net loss of $32 million, primarily due to GAAP accounting losses allocated from Triple T. And we paid a dividend of $0.135 per share to stockholders of record on December 13, 2018.

As a result of our plan to strategically defer harvest for an anticipated future stronger pricing environment, gross timber sales revenue in the fourth quarter decreased 20% from fourth quarter 2017 due to a 22% decrease in harvest volume. Timberland sales for the quarter were higher year-over-year due to selling more acres at a price per acre 26% above fourth quarter 2017. In the fourth quarter, CatchMark completed a series of coordinated transactions by closing on the sale of 56,000 acres of timberlands in Texas and Louisiana, the Southwest Region disposition.

As a part of the sale, we retained approximately 200,000 tons of merchantable inventory to be harvested over the next two years. Proceeds from the Southwest disposition were recycled to pay down debt used for last summer’s Bandon acquisition. As a result of these two transactions in Triple T, we improved the overall quality of our timberlands ownership in the Southwest and reduced our regional exposure to post the Triple T investment.

We also redeployed capital to prime sawtimber holdings in the Pacific Northwest and we strengthened our overall capital position. Also in the fourth quarter under our $30 million share repurchase program announced in August 2015, CatchMark repurchased close to 99,000 shares of common stock for approximately $1 million in open market transactions. As of December 31, 2018, CatchMark may repurchase up to an additional $18.7 million worth of shares under the program.

Given the relative stability of our cash flow and recent steps taken to reduce debt including the Southwest disposition, we’re very comfortable with our balance sheet. During the year, we raised $72.5 million in equity to support our investment pipeline. We refinanced existing debt, which was outstanding under our multi-draw facility, securing $140 million term loan. This refinancing improved our weighted average maturities and our first step maturities are now marked until 2024.

After increasing our borrowing capacity to a total of $644 million, we had $165 million of dry powder at year-end. And we entered into $200 million of interest rate swaps to reduce exposure to potential rising interest rates. Approximately, three quarters of our rate exposure was swaps fixed rate as of year-end 2018.

As a result going into the New Year, we have sufficient capacity and flexibility to continue our track record of growth through select acquisitions and joint venture investments at the appropriate time. Taken together, all the initiatives we completed last year will help set the stage for growth in adjusted EBITDA for 2019 as well as in the future. And we believe that we are well positioned to navigate through current economic volatility, stemming from general concern about the housing market and tariff and trade issues as well as global uncertainty.

Lumber mills in our micro markets are operating at or near full capacity. Demand is good for finished lumber supported by expected level of housing activity including robust repair and remodel business. We also see no pullback in previously announced mill expansion projects in the U.S. South and recent capital investments in mills are beginning to pay off with improved production levels. That is beginning to drive increased log demands in our micro markets across the region.

Another positive sign overall finished lumber inventories are light, which bodes well for mills to run at or near capacity levels with multiple shifts. Furthermore, Southern Yellow Pine lumber manufacturers are still able to produce lumber with comfortable margins based on current levels of finished lumber prices and timber input prices.

Our pulp markets also remained strong across all products. As a result, our fiber supply agreement partners and other pulp customers appear well-positioned for steady production throughout the year ahead. Lastly, historically, weather conditions are supporting and even increasing timber prices in our market.

Taking all factors into consideration, for full year 2019 guidance, we anticipate adjusted EBITDA in a range of $52 million to $60 million or a 4% to 21% increase compared to full year 2018. This increase will result primarily from earning a full year of Triple T asset management fees of $11.5 million as well as an increase in net timber revenue attributable to higher harvest volumes.

Harvest volumes are anticipated in the range of 2.2 million to 2.4 million tons and increases our forecast to drive from Southwest disposition timber reservations, deferred harvest from last year, and expect the new harvest from the Bandon acquisition. Beginning in the second quarter Bandon should also help increase the share of sawtimber and our mix into a range of 40% to 50%.

In the U.S. South, we also anticipate a slight increase of approximately 1% in harvest volume as a result of our delivered wood sales and fiber supply agreements in select micro markets. The timberland sales target of $16 million to $18 million remains consistent with past years within the range of 1% to 2% of the acreage.

We’ve also been delighted with Dawsonville Bluffs which by year end 2018 had generated adjusted EBITDA of $8.8 million. We anticipate Dawsonville generating an additional $3 million to $5 million surpassing our original investment of $10 million.

Our outlook does not include potential contributions from future acquisitions and joint ventures which we pursue as part of our ongoing growth strategy and does not include any potential capital recycling from dispositions.

So, in summary CatchMark’s favorable guidance for the year ahead derives directly from the well-formulated and consistently executed programs that deliver durable cash flow for our shareholders and support our dividend.

They are; investing capital prudently in prime timberlands in selected markets near leading mill customers to provide growth opportunities which has resulted in price and demand stability; also benefiting from the disciplined management of delivered sales strategy and fiber supply agreements in those markets with creditworthy counterparties to cushion against volatility; capturing new highly predictable revenue streams from entry into the investment management business; and finally, focusing to derive upside from our investment in Triple T and further upside from Dawsonville Bluffs.

So, in conclusion, CatchMark had an extremely successful year in 2018 in meeting our strategic objectives, registering higher year-over-year revenues and higher EBITDA, and significantly expanding our investments and investment management platform. And we believe we’re well-positioned to move ahead successfully in 2019.

All of us at CatchMark, our Executive Group, our Board, our astounding and dedicated employees have worked extremely hard to position the company to deliver on our promise to our shareholders, grow cash flow and support our dividend from execution of a clear and focused strategy and operations excellence. That will continue to be our focus in the year ahead.

I appreciate everybody being on the call today. And now Todd, Brian, John Rasor and I are available to take any of your questions.

Questions and Answers:

Operator

We’ll now begin the question-and-answer session. (Operator Instructions) And look today’s first question will be from Collin Mings with Raymond James. Please go ahead.

Collin Mings — Raymond James — Analyst

Thanks. Good morning, guys.

Jerry Barag — President, Chief Executive Officer, and Director

Good morning

Brian Davis — Chief Financial Officer

Good morning, Collin.

Collin Mings — Raymond James — Analyst

To start Jerry, do you have any other acquisitions or dispositions in the active pipeline right now? And just along those lines, how do you think about the potential to reduce leverage further here in 2019 with some additional capital recycling?

Jerry Barag — President, Chief Executive Officer, and Director

Okay. So it’s an easy answer to the first part of your question, no. We purposefully made a decision post the frenetic end of 2018 and closing Triple T the Southwest disposition and Bandon to make sure that we had appropriately integrated all those changes into our portfolio. And so we have effectively stopped looking at acquisitions for the time being.

And then with the dislocation that happened in our share price, we didn’t think that it was a particularly opportune time to aggressively go and seek new investments.

So having said that, from a capital standpoint, we are very, very focused right now on liquidity in particular. And the use of that liquidity, which we think would be best spent on a combination of paying down debt and some tactical share repurchases, assuming our share price remains at a level that I think is unrealistically low and opportune for us to repurchase shares.

So I think that will be certainly the focus of what we’re doing for the first six months of 2019. And we’ll continue to reevaluate that. Brian, do you have anything you want to add?

Brian Davis — Chief Financial Officer

No. I guess another point of emphasis here Collin is, when we take a look at our guidance for 2019, which reflects a full year impact associated with Bandon as well as Triple T, our leverage profile does naturally reduce from the levels where on a stated basis today by another turn to turn in a quarter.

So you put that on top of what Jerry is talking about an opportunity for us to review some capital recycling opportunities that would be on a CAD per share neutral basis and that would also maximize our asset realizations, you see some opportunities inside of our portfolio for additional leverage reduction.

Collin Mings — Raymond James — Analyst

Okay. So on balancing nothing under contract or really active right now neither of the acquisition or disposition front or just given where things stand it sounds like the buyers would be — fear to go one way or the other, it would may be to be to sell something to on the margin bring down leverage a little bit more, is that a fair recap?

Brian Davis — Chief Financial Officer

I think that is very accurate as the way we’re thinking about things.

Collin Mings — Raymond James — Analyst

Okay. That’s helpful. And then switching to Triple T, can you just provide us an update both operationally as well as any progress toward restructuring the sawtimber supply agreement or really any other value-creation event recognizing you guys are highly incentivized to unlock value in the first few years of that deal? So an update there again both operationally as well as any sort of value-creation activity would be very helpful.

Jerry Barag — President, Chief Executive Officer, and Director

So, John Rasor is here joining us today and I’m going to turn over the specifics of that question to him. But he as well as everybody on the team involved with Triple T have done just a remarkable job of integrating 1.1 million acres into full operations and I’m pleased to report that we are running at a full operational run rate at this point and have been for some time.

We’ve met all of the minimum deliveries or the expected deliveries to the supply agreement counterparties in the Southwest and it continues to go well. There continues to improve and John will talk a little bit about that.

With respect to the future opportunities that we identified when we purchased the Triple T property we’re working toward that diligently. That was not meant to be an overnight process. It’s going to take a little bit of time. But we have begun the process of trying to get to agree that we think we’ll have the opportunity to add significant value to that property.

John, won’t you give a little bit more detail about that?

John Rasor — President, Triple T Timberlands

Okay. I think the headline what the property of this size and the amount of volume that has to move is best described as more than 400 truckloads a day to support the supply agreements then and the additional sales we make into the market.

And with the weather that has been absolutely historically epic over there meaning it just has rained and rained and rained with the rainfall for the quarter being well over anything that anybody has seen previously I’m feeling like we met the challenge.

As Jerry said we satisfied both the big Georgia Pacific supply agreement requirements and the IP supply agreement requirements that was quite an accomplishment, but the challenges we faced with the weather alone.

I would add to that that while we hit all the numbers on the volumes, we did come up short on the hardwood volumes simply because we could not access the tracks. We will be prepared to get after that again in 2019. And you really only have about three-month window over there in the flatwoods of Texas to get into these bottom lands. And we intend to be fully prepared to take advantage of that opportunity as we look at 2019. Surely, the rain will be less by then.

On the harvest revenue side, I can tell you pricing has been a bit less than we had expected, but we’re seeing some uplift now. So that we’re looking at a really good start in January. And we see prices moving upward, specifically, around the prime pulpwood and the prime sawtimber products.

Also our surface use income has been significant and better than we expected with the oil and gas activity that has become quite a component of our business that’s been value-added.

And we will — we’ve started to implement a modest land sale program and are very encouraged by the kind of pricing and interest we’re getting. So, it was a tough six months, but we got there and we’re looking forward to 2019.

Jerry Barag — President, Chief Executive Officer, and Director

Yes. So, I will remind everybody that all of these things and all of the accomplishments that have happened over there are important. But from a cash flow standpoint, from an EBITDA standpoint to CatchMark, it’s really a barometer for what we expect to be able to move property value and NAV over time.

The earnings that CatchMark receives on that property are essentially from the investment management fees. So, realistically changes in prices, changes in income for 2019 really won’t have any bearing on the EBITDA that CatchMark is going to get from its investment.

Collin Mings — Raymond James — Analyst

Okay. That’s very helpful update guys. Two other quick ones for me. I’ll turn it over. Just on CapEx. Brian it looks like you guys came in a little bit below budget for 2018. How should we think about 2019 on the CapEx front? I apologize if I missed this in the guidance.

Brian Davis — Chief Financial Officer

It’s about $5 million to $6 million next year. We got a carryover from the fourth quarter and first quarter this year. So, $5 million to $6 million in 2019.

Collin Mings — Raymond James — Analyst

Okay. And then on — just the cost side overall, it does look like G&A forestry management fees and other operating expenses were all up notably sequentially in the fourth quarter. Again not necessarily huge dollar amounts but just collectively that was a notable variance for us at least. Just anything in particular we should be mindful of?

Brian Davis — Chief Financial Officer

So in the Q4 in G&A it included pursue costs about $150,000. I think that’s noted inside the adjusted EBITDA reconciliation line. As it stands with other operating expenses, we expense basis of timber related to lease terminations and timber deed expirations and casualty losses within the operating expense line item. In the fourth quarter, we had just under $600,000 of non-cash charges related to this activity. The corresponding entry reflecting these non-cash expenses can be found on our cash flow statement in the operating section. So those are the two notable areas, which you can — we can provide detail on.

Collin Mings — Raymond James — Analyst

Okay. I’ll turn it over and go back in the queue. Thanks, guys.

Brian Davis — Chief Financial Officer

Thank you.

Operator

Next question will be from Anthony Pettinari with Citi. Please go ahead.

Randy Toth — Citi — Analyst

Good morning, guys. This is actually Randy Toth sitting in for Anthony. I guess, my first question is…

Brian Davis — Chief Financial Officer

Good morning.

Randy Toth — Citi — Analyst

…good morning — can you talk a little bit about your 2019 guidance and what baked in? I know you have $3 million to $5 million coming from Dawsonville and I imagine around $11 million coming from Triple T. Just any assumptions around pricing in the U.S. South?

Jerry Barag — President, Chief Executive Officer, and Director

I’m going to let Todd answer that.

Todd Reitz — Senior Vice President-Forest Resources

Sure. So we’ll think about overall market conditions and where we’re coming out of 2018. We finished fourth quarter very strong, had a nice run rate coming up to that point as Jerry mentioned in his comments, some of that being weather related. But the bigger takeaway and the stable steady part of this is that we’re beginning to see build consumption improve. Some of the capital improvements that have been initiated in late 2017 and 2018 are beginning to come online. So we’re seeing some of that demand pull.

That being said, we’re anticipating some more stable view of pricing if you will going forward. So if we saw a 2% to 3% very modest uptick over the year that would be what we’re looking at going forward. Additionally we have a little stronger mix of sawtimber in there. As Jerry mentioned with Bandon coming on and we’re positioned to harvest this year going to be more in that 40% to 50% range. So some added value associated with that as well.

Jerry Barag — President, Chief Executive Officer, and Director

Yeah. And I probably like to remind everybody that a year ago when we did this call, I think my exact words were that we would be disappointed if we didn’t see some modest improvement in prices over the operating areas where CatchMark owns its properties. And in fact, we delivered that in spite of some headwinds that came from southern yellow pine, exports that were effectively derailed as a result of tariffs that were put on particularly punitive tariffs from the U.S. South.

And so, we’re very proud at being able to do that. We certainly saw the conditions strengthening and being able to do that. We think we delivered it. And I think we feel relatively confident that we will see some more strengthening going into 2019.

Randy Toth — Citi — Analyst

Okay. That’s helpful. And then just saying in the U.S. South, it’s quite a bit of saw mill capacity coming online over the next 12 to 24 months especially in Alabama and Georgia. My question is, how will all of this capacity impact pricing for pulpwood, because of the saw mill residuals? Just kind of curious how that relationship — how you think about that?

Jerry Barag — President, Chief Executive Officer, and Director

Sure. So you look at a lot of the customers where we’re operating and in general they have a baseload that is associated with raw logs that have to come in, pulpwood that has to come in. That component will be consistent. Pricing for that has been very very stable. We see that being strong going forward and customers being well positioned for that.

As far as the residuals are concerned they’ll work that into their overall mix. And we think that we’re going to see some positive movement on the market going forward. Additionally with our supply agreements, we have a strong position with our customers that are stable and set forth into the future, 10, 12 years depending on who we’re working with, that allows us to be a little bit insulated to any of the ups and downs, if you will, in the marketplace.

Randy Toth — Citi — Analyst

Okay. That’s helpful. Thank you. I’ll turn it over.

Jerry Barag — President, Chief Executive Officer, and Director

Thank you.

Operator

(Operator Instructions) Next question will be from Paul Quinn with RBC Capital Markets. Please go ahead.

Paul Quinn — RBC Capital Markets — Analyst

Yeah. Thanks very much. Good morning, guys.

Jerry Barag — President, Chief Executive Officer, and Director

Hi, Paul.

Brian Davis — Chief Financial Officer

Hi, Paul.

Paul Quinn — RBC Capital Markets — Analyst

Hey. Just a question on 2018 just what was the quantify of harvest that you deferred? And it sounds like that you’re going to harvest a part of the deferral or all it. So maybe you could just help me out in 2019?

Jerry Barag — President, Chief Executive Officer, and Director

Sure. So when you look at it as a year-over-year, call it, 150,000, 100,000-or-so tons that we pulled back going into 2018. Going into 2019, we’re going to end up adding about that amount back in. So it’s kind of a rebalancing of where we were compared to previous. Again, it will be a regional difference with the Northwest coming in and then having the timber reservation coming out of the Southwest as well. So all of that will pretty much be brought back online throughout 2019.

Paul Quinn — RBC Capital Markets — Analyst

So the original reason for the deferral was to take advantage of higher timber prices down the round is the stuff that you’re coming in. But I guess the increased harvest in 2019 as a result of the deferral in 2018. On the regional mix is that going to result in a higher price in the sort of 2% to 3% that you’re kind of expecting?

Jerry Barag — President, Chief Executive Officer, and Director

We would anticipate that going — the modest increase throughout the year or potential for throughout the year. That’s correct.

Paul Quinn — RBC Capital Markets — Analyst

Okay. And just shifting now, we haven’t seen a lot of timberland transactions, it seems like, I don’t know, a-year-and-a-half, two years now. And we had a pretty steady increase in interest rates throughout 2018. Have you seen or you experienced yourself changing underwriting criteria around that?

Jerry Barag — President, Chief Executive Officer, and Director

I think underwriting criteria has generally been somewhat stable, Paul. Now where the volatility has been, has been really out in the Pacific Northwest, where you’ve had a lot of volatility for the most part to the upside, but more recently to the downside in timber prices. And so interestingly, there — since we closed on the Bandon transaction there were two properties that were offered out in the Pacific Northwest. One of them actually transacted. The other one didn’t transact in that. That was the first time in quite some time that a property in Pacific Northwest failed to meet a clearing price.

What we’re seeing going forward into 2019 are a couple of things, a couple of trends. One is quality has become much more important even — it was important previously, it’s become much more important. And so higher quality property is the best properties are trading. And they are supporting floor pricing number one.

Number two, it’s going to be an interesting transaction, because there still is seemingly a lot of pressure on the TIMOs who have a decade-or-so old investments that there is pressure for them to liquidate, but they have been cycling through their portfolio selling the better properties as opposed to the weaker properties. And in the U.S. that’s getting harder to do, because you had seen a lot of transactions in the Pacific Northwest and that seems to be coming off given I think people’s anticipation that Pacific Northwest properties are going to at least flatten or potentially some of the valuations out there might fall.

Interestingly, what we’ve heard at this early point in the year is there maybe a significant number of international transactions that happen or offerings that are coming from the TIMOs this year. And so naturally, we won’t be a very active participant in things like that.

Paul Quinn — RBC Capital Markets — Analyst

All right. Thanks very much. Best of luck guys.

Jerry Barag — President, Chief Executive Officer, and Director

Thanks, Paul.

Brian Davis — Chief Financial Officer

Thanks, Paul.

Operator

Next question is a follow-up from Collin Mings. Please go ahead.

Collin Mings — Raymond James — Analyst

Thanks. Just a couple of housekeeping things from me here. Just as far as the timing of future losses associated with Triple T, can you just maybe give us some guidepost there and remind us what that should be just given how that just from a net perspective kind of a big driver?

Brian Davis — Chief Financial Officer

Certainly, Collin. So how we’re thinking about is about $25 million per quarter for Q1 through Q3 and then the remaining $15 million in Q4 2019.

Collin Mings — Raymond James — Analyst

Okay. And then, I apologize if I missed this Brian. But as far as — have you quantified a G&A number for 2019? Again, I guess, you kind of gave us some other puzzled pieces but can you be a little bit more explicit there?

Brian Davis — Chief Financial Officer

We’ll, give you the corners to your puzzle, Collin. So we anticipate G&A to increase about 1% to 2% year-over-year, which close about $2.6 million of equity compensation. One thing, I should note as we kind of fill these things in our other operating expense is expected to remain flat on a gross basis even after backing out the other operating expense that we occurred in fourth quarter this year, the real net increase is resulting from property taxes. And for — where we added for forestry management will increase year-over-year to about $7.3 million to $7.7 million as we allocate expenses of our management of our joint ventures from G&A into this line item. And this is inclusive of approximately about $500,000 of equity compensation expense.

Collin Mings — Raymond James — Analyst

Okay. That’s helpful detail. And then just going back to Paul’s question as far as timberland transaction markets. Jerry just for our benefit, can you maybe just — maybe clarify a little bit as far as some of the evolution in the market if you will. How much of that is being driven by some of the potential bidders not maybe emerging as much they would have a couple of years ago? Is it concerns around pricing and the trajectory of pricing specifically in the Northwest near-term or longer-term outlook for the U.S. South? Just curious — maybe more simply that the pool of potential buyers has changed or maybe has some of their underwriting and the environment changed where it just has been as active?

Jerry Barag — President, Chief Executive Officer, and Director

I think the answer is yes to all of the above. So the backdrop to the markets really starts with liquidity. And liquidity is I would tell you it was a transaction year last year. So there is liquidity. It is coming from different places. And it is — it’s spotty certainly compare to what it used to be a decade ago. And that trend has been around for the last couple of years, and I don’t think that it is going to change.

If you look at the buyer’s property over the last year or over the last couple of years, it’s a rotation in names. I mean its different names than you would have likely seen a decade ago. And the philosophies around those transactions tend to be a little bit different.

So by and large the — as I previously mentioned, higher quality properties and really high quality markets are the ones that are ultimately transacting. There have been some other transactions of lesser-quality properties. And after being marketed for multiple times, some of those had begun to actually trade now. There was actually a trade of some Alabama property at the end of last year that transacted at just under $1,200 an acre.

And interestingly, it was a pretty similar price to the Triple T transaction, although, it was much worse mill markets, much less productive property than Triple T, and a much different story. And so you may see some of that actually come to market and finally transact now in 2019.

But I believe the real focus is going to be from the sellers. They’re going to looking around their portfolio for properties in pockets of strength. And I think right now they believe that those pockets of strength really are international properties, international investments that they’ve made. And that there’s probably more liquidity especially in the TIMO market for international properties right now than domestic properties.

Collin Mings — Raymond James — Analyst

Along those lines are you concerned though as maybe some of these lower-quality properties clear the market? Just the impact that might have on Timberland appraisals and just from that environment recognizing again you have Triple T up there which at some point you like the optionality around that. But just curious how you think this might actually filter through from an appraisal standpoint in the marketplace?

Jerry Barag — President, Chief Executive Officer, and Director

Yes. As you pointed out it really becomes an appraisal issue. The appraisal issue at least for us, the biggest outcome of that would be around the loan-to-value ratios the coverage ratios that go with our debt. We think we’re comfortably insulated from it. And — but at the end of the day, we do believe that the appraisers and the market in general has made the distinction between lower-quality properties and higher-quality properties.

And we are not feeling much downward pressure, if any, on the types of properties that we own. I think it’s going to be a different state of properties which ultimately may have an impact on the NCREIF Timberland Index. So it should cause some interesting headlines, but operationally for us I don’t expect there’s problems.

Collin Mings — Raymond James — Analyst

I appreciate all the extra color.

Jerry Barag — President, Chief Executive Officer, and Director

Great. Thanks Collin

Operator

At this time this will conclude today’s question-and-answer session. I’d like to turn the conference back over to Jerry Barag for any closing remarks.

Jerry Barag — President, Chief Executive Officer, and Director

Thanks again everybody for joining us for the fourth quarter. This call is always a marathon for us. And I appreciate everybody hanging in and we will talk to everybody in 90 days.

Operator

The conference has now concluded. We do want to thank everyone for attending today’s presentation. At this time you may now disconnect.

Duration: 46 minutes

Call participants:

Brian Davis — Chief Financial Officer

Jerry Barag — President, Chief Executive Officer, and Director

Collin Mings — Raymond James — Analyst

John Rasor — President, Triple T Timberlands

Randy Toth — Citi — Analyst

Todd Reitz — Senior Vice President-Forest Resources

Paul Quinn — RBC Capital Markets — Analyst

More CTT analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Best Biotech Stocks To Watch Right Now

ADMA Biologics Inc (NASDAQ:ADMA) – Equities researchers at Oppenheimer issued their Q1 2019 earnings per share estimates for ADMA Biologics in a research note issued on Monday, August 13th. Oppenheimer analyst L. Gershell forecasts that the biotechnology company will post earnings per share of ($0.26) for the quarter. Oppenheimer currently has a “Buy” rating and a $13.00 price target on the stock. Oppenheimer also issued estimates for ADMA Biologics’ Q2 2019 earnings at ($0.26) EPS, Q3 2019 earnings at ($0.21) EPS, Q4 2019 earnings at ($0.20) EPS and FY2022 earnings at $0.68 EPS.

Get ADMA Biologics alerts:

ADMA has been the subject of several other research reports. ValuEngine raised ADMA Biologics from a “sell” rating to a “hold” rating in a research note on Monday, May 14th. Chardan Capital initiated coverage on ADMA Biologics in a research note on Monday, July 30th. They set a “buy” rating and a $10.00 target price for the company. Maxim Group set a $10.00 target price on ADMA Biologics and gave the stock a “buy” rating in a research note on Monday, May 14th. BidaskClub raised ADMA Biologics from a “hold” rating to a “buy” rating in a research note on Thursday, August 2nd. Finally, LADENBURG THALM/SH SH cut their target price on ADMA Biologics to $7.50 and set a “buy” rating for the company in a research note on Wednesday, June 13th. Seven analysts have rated the stock with a buy rating, The company presently has an average rating of “Buy” and an average target price of $9.50.

Best Biotech Stocks To Watch Right Now: ArQule Inc.(ARQL)

Advisors’ Opinion:

  • [By Cory Renauer]

    What’s behind these dramatic gains? Read on to find out.

    Company Gain in H1 2018 Market Cap
    Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) 270% $1.19 billion
    ArQule, Inc. (NASDAQ:ARQL) 235% $482 million
    Endocyte, Inc. (NASDAQ:ECYT) 222% $959 million
    Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) 205% $3.99 billion

    Data source: YCharts.

  • [By Ethan Ryder]

    ArQule, Inc. (NASDAQ:ARQL) insider Value Fund L. P. Biotechnology sold 1,035,939 shares of the business’s stock in a transaction dated Wednesday, May 30th. The shares were sold at an average price of $5.00, for a total value of $5,179,695.00. The transaction was disclosed in a filing with the SEC, which is available through this hyperlink.

  • [By Joseph Griffin]

    ArQule (NASDAQ:ARQL)‘s stock had its “buy” rating restated by equities researchers at Needham & Company LLC in a research report issued to clients and investors on Tuesday, Marketbeat Ratings reports. They currently have a $6.00 price target on the biotechnology company’s stock, up from their prior price target of $5.00. Needham & Company LLC’s price target suggests a potential upside of 134.38% from the company’s previous close.

  • [By Stephan Byrd]

    Get a free copy of the Zacks research report on ArQule (ARQL)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

Best Biotech Stocks To Watch Right Now: Amgen Inc.(AMGN)

Advisors’ Opinion:

  • [By Cory Renauer]

    The market for complex therapies that train living cells to attack cancer is taking baby steps, but there’s still a lot of enthusiasm for experimental drugs coming through the pipeline from bluebird bio (NASDAQ:BLUE) and it’s big biotech partner Celgene (NASDAQ:CELG). That enthusiasm fell a notch after Amgen (NASDAQ:AMGN) released exciting data from a handful of patients that suggests it’s found a much easier way to achieve the same goal. 

  • [By Max Byerly]

    Gables Capital Management Inc. purchased a new stake in Amgen, Inc. (NASDAQ:AMGN) during the first quarter, according to the company in its most recent Form 13F filing with the SEC. The firm purchased 1,023 shares of the medical research company’s stock, valued at approximately $174,000.

  • [By Chris Lange]

    Amgen Inc. (NASDAQ: AMGN) is waiting for the FDA to review its Biologics License Application (BLA) for Aimovig (erenumab) for the prevention of migraine in patients experiencing four or more migraine days per month. The FDA has set a PDUFA date for May 17.

  • [By ]

    For example, if you buy 100 shares of the Nasdaq 100 ETF (NYSE: QQQ), you’re theoretically buying 11.9 shares of Apple (NASDAQ: AAPL)… 7.7 shares of Facebook (NASDAQ: FB)… 1.8 shares of Amgen (NASDAQ: AMGN)… 2.6 shares of Comcast (NASDAQ: CMCSA)… and even smaller amounts of about 95 different companies.

  • [By Cory Renauer]

    The Food and Drug Administration recently approved Aimovig from Amgen (NASDAQ:AMGN) and Novartis (NYSE:NVS), the first of several high-profile new drug candidates with a similar mode of action. Teva Pharmaceuticals Industries (NYSE:TEVA) and Eli Lilly (NYSE:LLY) have sent applications for similar drugs to the FDA and Alder’s starting to look like a terrier that showed up to a bullfight. 

Best Biotech Stocks To Watch Right Now: Biogen Idec Inc(BIIB)

Advisors’ Opinion:

  • [By Sean Williams]

    Of course, my “bet against all Alzheimer’s drugs” thesis took a bit of a hit last week when biotech blue-chip Biogen (NASDAQ:BIIB), which is working alongside partner Eisai (NASDAQOTH:ESALY), reported positive mid-stage data on blockbuster hopeful BAN2401.

  • [By Steve Symington]

    But several individual stocks lagged the broader market. Read on to see why Cerner (NASDAQ:CERN), Biogen (NASDAQ:BIIB), and Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) slumped today.

  • [By Cory Renauer]

    Healthcare is something that people need no matter what’s happening in the economy, so the sector is full of great stocks for investors seeking steadily growing income streams. That said, Abiomed, Inc. (NASDAQ:ABMD), Biogen Inc. (NASDAQ:BIIB), and Canopy Growth Corporation (NYSE:CGC) are three popular healthcare stocks that would make horrible additions to a retirement portfolio.

Best Biotech Stocks To Watch Right Now: Alnylam Pharmaceuticals Inc.(ALNY)

Advisors’ Opinion:

  • [By Brian Orelli]

    Alnylam Pharmaceuticals (NASDAQ:ALNY) updated investors last month on how the launch of Onpattro, its first drug that was approved to treat transthyretin-mediated amyloidosis (ATTR), was going at the J.P. Morgan Healthcare Conference.

  • [By Shane Hupp]

    Alnylam Pharmaceuticals (NASDAQ:ALNY) had its price target lowered by equities research analysts at Morgan Stanley from $107.00 to $99.00 in a report released on Friday. The firm presently has an “equal weight” rating on the biopharmaceutical company’s stock. Morgan Stanley’s price objective would indicate a potential upside of 3.97% from the stock’s current price.

  • [By Cory Renauer]

    Anyone who likes a good underdog story will want to keep their eye on Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) and GW Pharmaceuticals PLC (NASDAQ:GWPH) through this year and next as they launch their first products in the U.S. Smaller biotechs have a terrible track record when it comes to launching new drugs on their own, but most analysts expect these companies to buck the trend and propel their recently approved drugs to blockbuster status within a few years.

  • [By Keith Speights]

    Speaking of competition, Ionis should have its hands full battling rivals for Tegsedi assuming the drug wins approval. Alnylam (NASDAQ:ALNY) anticipates winning FDA approval for its hATTR drug patisiran within a few weeks. Because the FDA delayed its decision on Tegsedi, Alnylam appears to be in position to reach the market first. In addition to its first-mover advantage, patisiran appears to have an edge over Tegsedi in efficacy and safety based on clinical data for the two drugs. 

Why Buffett's Berkshire Hathaway Took a Stake in Canadian Oil Giant Suncor

Stocks in just about every industry had a bad fourth quarter last year, pushing the S&P 500 down some 20% from its peak in early October to the bottom on Christmas Eve. While this big market sell-off was happening, crude oil prices also crashed, driving down many oil stocks even more than the market average. 

Canadian integrated oil giant Suncor Energy (NYSE:SU) was one of the hardest-hit, with its stock price falling almost 35% over that period even as it continued to generate significant cash flows. 

Guess what? Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), led by investing legend Warren Buffett, who is assisted in his stock-picking endeavors by Todd Combs and Ted Weschler these days, took note. Suncor is now part of Berkshire’s portfolio.

Warren Buffett smiling at the camera.

Image source: The Motley Fool.

What makes Suncor an attractive investment

In what was a generally light buying quarter for Berkshire, the Suncor investment stood out because it represents only the second energy industry holding in the company’s portfolio, along with longtime holding Phillips 66. The position in Phillips 66 also saw some action, but in the other direction: Berkshire sold some 3.5 million shares in the fourth quarter, continuing its recent history of selling shares of the refinery and midstream giant. 

So, why the shift away from Phillips 66 and movement into Suncor? While I don’t think it’s a case of picking one over the other, there’s a lot to like about Suncor. First, the company’s integrated business in the Canadian tar sands has proven incredibly profitable. Last quarter, it generated well over CA$3 billion in operating cash flows even as Canadian crude prices plummeted, as shown in the chart below.

SU Cash from Operations (Quarterly) Chart

SU Cash from Operations (Quarterly) data by YCharts

Although Canadian crude prices fell as low as $10 per barrel, Suncor managed to generate a substantial amount of cash thanks to its highly integrated business. Suncor is able to refine the heavy crude it produces from Canadian Tar Sands, giving it the ability to generate very strong margins on the refined products it produces. 

Furthermore, Canada’s west coast ports give Suncor access to strong demand markets in Asia, meaning it has great optionality to sell its products to end markets with the highest demand to get the best returns. 

When it comes to durable advantages like these, Buffett isn’t one to miss out — especially when considering that Suncor was a bargain last quarter, with its shares trading for some of the cheapest multiples to its cash flows we have seen in the past several years.

SU Price to CFO Per Share (TTM) Chart

SU Price to CFO Per Share (TTM) data by YCharts

Is Suncor worth buying?

The chart above shows that, at least based on the company’s cash flows, Suncor is absolutely worth considering for a portfolio. Oil prices have rebounded, meaning gasoline, diesel, jet fuel, and other refined products are now selling for more than Suncor likely realized in the fourth quarter, while its Tar Sands oil feedstock remains cheap to produce and source. In other words, Suncor’s cash flows are likely to be even higher now than they were last quarter.  

Suncor is also an excellent dividend stock, with a 3.3% yield at recent prices and foreign exchange rates (it pays the dividend in Canadian dollars), and there’s a good chance the payout will go up along with cash flows. Whether it remains a part or becomes a bigger component of the Berkshire portfolio remains to be seen. But for investors looking for a dependable investment in the energy industry, you could do far worse than Suncor, particularly at what remains a very cheap price for a high-quality company. 

Store Closures Coming in 2019, but Don't Call It a Retail Apocalypse

Just because it’s cold today does not mean that global warming isn’t real. Weather isn’t climate and a chilly day (or even an unexpectedly cold season) does not mean much in the big-picture science behind climate change.

The same can be said for the predictions of retail apocalypse you see everywhere. Stores are closing — and a new report from Coresight forecasts that number to grow year-over-year — but blaming those closures on the rise in digital sales ignores what’s actually happening (and some basic math).

Digital retailers have exposed how poorly many brick-and-mortar chains are run, forcing a number of them to close stores or even go bankrupt. That’s not happening because consumers have chosen digital over physical. Instead, shoppers have more choice and they can now more easily opt out of shopping at brick-and-mortar chains that do a bad job.

Unoccupied new construction retail stores

Just because some stores are closing does not mean that there is a retail apocalypse. Image source: Getty Images.

Take a look at which chains have closed

Retailers that have embraced the current market dynamics like Best Buy (NYSE: BBY), Target, and Walmart have thrived. These chains acknowledged that digital rivals changed the game. Best Buy, which was at one time at risk of being driven out of business by Amazon, changed its business in numerous ways (none of which included significant store closures).

The electronics retailer made its stores into destinations by adding store-within-a-store shops for major brands and focusing on growing its service business. It also adjusted its prices because consumers might pay a little more for an HDMI cable to have it now, but they won’t pay two or three times what Amazon charges, even if that means waiting two days for it.

In addition, Best Buy, along with the other successful retailers mentioned above have embraced omnichannel retailing and they use their stores as a major part of fulfillment. A Best Buy customer might buy online and pickup in store or buy online and return in a store. The company might also fulfill a digital order from a store. To make the logistics of all this work has taken significant investment.

Best Buy made that investment and it’s thriving while its not-so-dearly departed rival Radio Shack still operated as if the internet did not exist. That’s something you could accuse many other “retail apocalypse” victims of doing, including Sears, J.C. Penney, Sports Authority, and so many others.

A look at the numbers

Store closures actually fell in 2018 when 5,524 stores were shuttered compared to the previous year when the lights went out at 8,139, according to Coresight. In 2019, Coresight said 2,187 stores have already been closed, up 23% compared to the same time period last year. That figure was released before reports came out Thursday that Payless ShoeSource is planning to close its 2,300 stores when it files for a second bankruptcy later this month.

Since 2017 e-commerce sales as a percentage of all retail sales have climbed from 9% to 10% in 2018 with a forecast of them growing to 11.1% in 2019 and 13.7% by 2021, according to a Statista chart. That growth does impact brick-and-mortar chains, but it’s also coming at a time when the National Retail Federation (NRF) reported that U.S. retail sales overall (including digital and brick-and-mortar) grew by 4.6% in 2018 and are expected to grow between 3.8%-4.4% this year.

That’s a lot of numbers to say that while digital sales are growing as a percentage of the whole, the whole is growing as well. Using the NRF projections, overall sales will grow from $3.48 trillion in 2018 to between $3.82 trillion and $3.84 trillion in 2019 (a 9.8% to 10.3% rise). Digital sales will go from $682.8 billion in 2018 to between $751.1 billion and $764.8 billion (a 10% to 12% rise). That means that brick-and-mortar sales will go from roughly $2.79 trillion in 2018 to about $3 trillion in 2019 (using the top of the NRF range), which is a 7.5% rise.

Those numbers don’t factor in that brick-and-mortar locations — at least at well-run chains like Best Buy — help facilitate digital sales. A need remains for physical retailers. Demand, while it’s not growing as fast it is on the digital side, will continue to increase. It’s not a retail apocalypse. It’s a culling of weak, poorly run retailers which did not embrace the changing needs of consumers.

 

Hot Insurance Stocks To Own Right Now

Great Business:

Aon Corporation (NYSE:AON) is a global professional services firm with 70,000+ employees in 120 countries. The company provides insurance brokerage to corporate clients (70% of EBIT) and human resource consulting services for pension, health benefits, compensation, etc. (30% of EBIT).

The company produces significant and growing free cash, strong ROE (~20%), is capital light, has mostly recurring revenue, customer stickiness (client retention over 90%), low capex requirements and consistent margin improvement.

Aon has strong capital allocation capabilities and a solid track record of creating value for its shareholders.

Current market cap. is ~$29 billion and EV is ~$35 billion.

The following slides provide a good overview of the business:

Click to enlarge

Hot Insurance Stocks To Own Right Now: Adams Resources & Energy, Inc.(AE)

Advisors’ Opinion:

  • [By Shane Hupp]

    Aeternity (AE) uses the hashing algorithm. Its launch date was September 2nd, 2017. Aeternity’s total supply is 273,685,830 tokens and its circulating supply is 233,020,472 tokens. Aeternity’s official website is www.aeternity.com. Aeternity’s official Twitter account is @aetrnty and its Facebook page is accessible here. The Reddit community for Aeternity is /r/Aeternity and the currency’s Github account can be viewed here.

  • [By Ethan Ryder]

    Aeternity (CURRENCY:AE) traded 0.3% lower against the US dollar during the 1 day period ending at 23:00 PM Eastern on June 16th. Aeternity has a market cap of $610.90 million and approximately $5.83 million worth of Aeternity was traded on exchanges in the last 24 hours. Over the last week, Aeternity has traded 21.4% lower against the US dollar. One Aeternity token can now be purchased for approximately $2.62 or 0.00040024 BTC on major cryptocurrency exchanges including Lykke Exchange, Binance, Koinex and Gate.io.

  • [By Shane Hupp]

    Aeternity (CURRENCY:AE) traded down 15.9% against the US dollar during the 24 hour period ending at 17:00 PM ET on June 10th. One Aeternity token can currently be purchased for approximately $2.94 or 0.00043736 BTC on popular exchanges including LATOKEN, Lykke Exchange, CoinBene and IDAX. Aeternity has a market cap of $684.89 million and approximately $14.30 million worth of Aeternity was traded on exchanges in the last 24 hours. Over the last week, Aeternity has traded down 16.7% against the US dollar.

Hot Insurance Stocks To Own Right Now: Landec Corporation(LNDC)

Advisors’ Opinion:

  • [By Stephan Byrd]

    Landec Co. (NASDAQ:LNDC) Director Nelson Obus bought 12,900 shares of the business’s stock in a transaction on Friday, February 8th. The stock was acquired at an average cost of $12.12 per share, for a total transaction of $156,348.00. The transaction was disclosed in a filing with the SEC, which can be accessed through this link.

  • [By Shane Hupp]

    Get a free copy of the Zacks research report on Landec (LNDC)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Garrett Baldwin]

    By submitting your email address you will receive a free subscription to Profit Alerts and occasional special offers from Money Map Press and our affiliates. You can unsubscribe at anytime and we encourage you to read more about our privacy policy.

    The Top Stock Market Stories for Tuesday
    The price of Brent crude oil pushed above $85 per barrel yesterday, its highest level in four years. Analysts are projecting that oil could easily hit $100 per barrel in the next few weeks, as OPEC and Russia continue to focus on pushing prices higher. The recent price rally has been driven by the Trump administration’s Nov. 4 deadline for nations to stop purchasing crude from Iran. Gold prices are sitting under $1,200, one week after the U.S. Federal Reserve raised interest rates for the third time this year. However, Money Morning Resource Specialist Peter Krauth has predicted a big bounce for gold prices in the coming months. Just how high will gold bounce thanks to the ongoing geopolitical problems around the globe? Find out right here.
    Stocks to Watch Today: AMZN, PEP, TSLA
    Shares of Amazon.com Inc. (NASDAQ: AMZN) are in focus after the company announced it will raise its minimum wage to $15 per hour. The change will take place on Nov. 1. The wage change will affect 250,000 employees. Pepsico Inc. (NYSE: PEP) leads a busy day of earnings reports. The beverage company topped Wall Street expectations with an EPS of $1.59 on top of $16.49 billion in revenue. Those numbers beat consensus forecasts of $1.56 on $16.38 billion in revenue. CEO Indra Nooyi is stepping down this week, but she will remain the chair of the board. Tesla Inc. (NASDAQ: TSLA) announced it produced 83,500 vehicles in the third quarter. The stock has been on a whirlwind in recent days. On Monday, the U.S. Securities and Exchange Commission announced it had settled a case with CEO Elon Musk over his misleading tweets about taking the company private. Musk and Tesla will pay $20 million each, and M

Hot Insurance Stocks To Own Right Now: Xilinx, Inc.(XLNX)

Advisors’ Opinion:

  • [By Shane Hupp]

    Xilinx, Inc. (NASDAQ:XLNX) reached a new 52-week high during trading on Thursday . The stock traded as high as $79.92 and last traded at $79.89, with a volume of 193274 shares changing hands. The stock had previously closed at $79.15.

  • [By Ezra Schwarzbaum]

    Several other optics stocks stand to gain. In a Monday note, Bank of America Merrill Lynch analyst Vivek Arya also highlighlited the semiconductor space as one that could benefit from the news. Other stocks to watch include:

    Lumentum Holdings Inc (NASDAQ: LITE)
    Ciena Corporation (NYSE: CIEN)
    Coherent, Inc. (NASDAQ: COHR)
    II-VI, Inc. (NASDAQ: IIVI)
    Inphi Corporation (NYSE: IPHI)
    Skyworks Solutions Inc (NASDAQ: SWKS)
    Integrated Device Technology Inc (NASDAQ: IDTI)
    Qorvo Inc (NASDAQ: QRVO)
    Xilinx, Inc. (NASDAQ: XLNX)
    Broadcom Inc (NASDAQ: AVGO)

    Related Links:

  • [By ]

    Cramer was bearish on Xilinx (XLNX) , Celgene (CELG) , Exelixis (EXEL) , Moneygram (MGI) , Monster Beverage (MNST) , SunCoke Energy Partners (SXCP) and Mattel (MAT) .

Q4 Results Send Sleep Number Shares Soaring Thursday Morning

What happened?

Shares of Sleep Number (NASDAQ:SNBR), a leader in sleep innovation, biometric sleep tracking, and mattress retailing, are up more than 17% Thursday morning after the company released fourth-quarter results.

So what

Net sales increased 13% during the fourth quarter to $412 million, topping analysts’ estimates of $408 million, and full-year sales increased 6% to a record $1.53 billion. Fourth-quarter adjusted earnings per share checked in at $0.58, lower than analysts’ estimates calling for $0.72 per share. Despite the earnings miss, management remained confident about the company’s outlook.

Mattresses at a retail store.

Image source: Getty Images.

“Our purpose-driven brand and our revolutionary new 360® smart beds are driving enthusiastic consumer engagement and accelerated performance, including 12% adjusted net sales growth and 48% adjusted EPS growth for the second half of 2018,” stated Shelly Ibach, president and CEO, in a press release. “We expect this trajectory to continue in 2019 as we advance our initiatives to drive demand, leverage our business model and deploy capital efficiently.”

Now what

Sleep Number has had its ups and downs, and some investors have given up waiting for its Sleep Number 360 smart beds to move the needle on financial results. Remember that back in 2017 the company was targeting earnings per share of $2.75 for full-year 2019 and, despite a strong fourth quarter and positive outlook, the company is now expecting full-year results in the range of $2.25 to $2.75 per share. Sleep Number delivered a strong back half of 2018, and if its 360 smart beds continue to gain traction and power earnings, 2019 should be a solid step forward for investors.

Caretrust REIT Inc (CTRE) Q4 2018 Earnings Conference Call Transcript

Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool.

CareTrust REIT Inc (NASDAQ:CTRE)Q4 2018 Earnings Conference CallFebruary 14, 2019, 1:00 p.m. ET

Contents:
Prepared Remarks Questions and Answers Call Participants
Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to CareTrust REIT fourth quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press * then 0 on your touchstone telephone. As a reminder, this conference may be recorded.

I would now like to turn the conference over to your host, Miss Lauren Beale, CareTrust Controller. Ma’am, you may begin.

Lauren Beale — Controller

Thank you. Welcome to CareTrust REIT’s Q4 and fiscal year 2018 earnings call. Please note that this call is being recorded. Before we begin, please be advised that any forward-looking statements made on today’s call are based on management’s current expectations, assumptions, and beliefs about CareTrust business and the environment in which it operates.

These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financing, and other matters, all of which are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied herein

Listeners should not place undo reliance on forward-looking statements and are encouraged to review CareTrust’s SEC filings for a more complete discussion of factors that could impact results as well as any financial or other statistical information required by SEC Regulation G.

During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAD and normalized EBITDA FFO and FAD. When viewed together with its GAAP results, the company believes these measures could provide a more complete understanding of its business, but cautions they should not be relied upon to the exclusion of GAAP reports.

Except as required by law, CareTrust REIT and its affiliates to not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reasons. Listeners are also advised that CareTrust yesterday filed its Form 10-K, an accompanying press release, and its quarterly financial supplement, each of which can be accessed on the investor relations section of CareTrust’s website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period.

Management on the call this morning includes Bill Wagner, Chief Financial Officer, Dave Sedgwick, Chief Operating Officer, Mark Lamb, Chief Investment Officer, and Eric Gillis, Director of Asset Management.

I will now turn the call over to Greg Stapley, CareTrust REIT’s Chairman and CEO.

Greg Stapley — Chairman and Chief Executive Officer

Thanks, Lauren. Good morning and welcome, everybody. 2018 started as a somewhat difficult year for us here at CareTrust, but we’re pleased to be reporting that we finished the year with FFO per share of $1.28, which was in line with both consensus and our guidance and a net debt to EBITDA at year end at an all-time low of 3.3 times. It was actually really a little bit better than that. Had we left our at-the-market program in the barn during the second half and avoided the dilution we took, we still could have posted a net debt to EBITDA well below the low end of our target range of four to five times.

However, as the year wore on, we saw on the horizon both clouds and opportunity, which are frequently, as you know, the same thing. So, with imminent deals in the pipe and a constructive view for 2019, we deemed it prudent to reduce debt and increase liquidity. As most of you know our fundraising philosophy, whether off the ATM or through secondaries, is to do our best to match fund our equity raises as closely as possible to our capital deployments. Using the ATM allows us to raise equity capital at a fraction of the cost that a secondary would carry and we can turn it off and on based on our sense of the market and our view of our pipeline at any time.

Q4 demand in particular for our equity was robust and through the quarter and since, we’ve raised $98 million off the ATM. This matches nicely in amount, although not perfectly in timing, with the $100 million in new investments we’ve made since October 1st. Although these last couple of announced deals closed later than expected and were thus unable to contribute to 2018 earnings, we believe that the accretion they represent going forward was well worth the short-term deceleration in our FFO per share growth.

So, we’re happy with where we’ve been and even more excited about where we’re going. We’ve closed on $53 million in new assets already in 2019 and as the 8-K we’ve filed at the January illustrates, we stand on the cusp of another new growth opportunity, which if we can get it successfully closed would surpass in size anything we’ve done to date. After those investments, we’ll still have plenty of dry powder.

We’ve just expanded and extended our revolving credit facility, moved the maturity on another $200 million of our debt out to seven years. We’re still seeing substantial interest in our equity. We have $22 million of cash on hand and our conservative payout ratio will give us another $30 million to $40 million in retained cash that we can deploy in the remainder of this year.

This matters immensely as we contemplate a real estate cycle which by some accounts — and we’re not taking a side or making any predictions here, but some might say it might be getting a little bit long in the tooth. So, we’re ready for whatever opportunities may arise and we plan to carefully manage our assets and the balance sheet to remain ready as the cycle plays out over the next couple of years.

With that, I’d like to turn some time over to the team to fill you in on the details. Dave will talk a little bit about our current assets and operators and Mark will discuss recent acquisitions and opportunities. Then Bill will wrap up the financials. Dave?

Dave Sedgwick — Chief Operating Officer

Thanks, Greg and good morning. Our strategy has never been to grow for growth’s sake. 2018 was the year where the value of that discipline was proven. As Greg mentioned, there were plenty of opportunities to overpay. You said we held our ground and used the lull to position ourselves for better acquisitions in the future. They have begun to come, but I’ll let Mark talk about that pipeline in a minute.

As usual, let me update you on changes in the portfolio, starting with our newest new operator. Tennessee-based Providence Health Group joined us in Q4 through a single-asset acquisition in West Virginia. Providence is owned and led by respected skilled nursing veteran Doug Cox. Doug has assembled a great team of operational, financial, and clinical talent to operate ten facilities in the middle of the country. The first couple of months in our new asset have been terrific and are now looking to add facilities to their master lease.

In other parts of their portfolio, we’ve seen our operators make some tremendous strides, particularly in some of the pre-stabilized assets we acquired in late 2017. I’ll give you a couple of examples. Cascadia Healthcare, based in Idaho, took over several Kindred and Orianna buildings. Adding those facilities immediately took their master lease coverage down to levels that in any other setting would be uncomfortable for both landlord and tenant.

However, turning around non-stabilized facilities is something they know well and for which they have a proven track record and is something we’re intimately familiar with as well as former turnaround operators ourselves. So, we didn’t panic when we saw the expected dip in coverage, which often happens during the first 6 to 18 months of the turnaround or repositioning depending on the size and complexity of the job. We’re really impressed with the solid work that Cascadia has done. If you ask them, they’ll say they still have a lot left to accomplish, but they’re overall trailing three annualized coverage today as back up to about 1.8 times.

Another example is Texas and Louisiana-based PMG. They had a similar experience as they tackled the three Texas Kindred facilities we acquired for them in Q4 of 2017. Predictably, the first several months produced choppy results as they absorbed the new acquisitions and incorporated their operating model into them. We were also carrying out significant CapEx projects in all three. Part of deal with them included us funding the CapEx for a strategic repositioning of these assets, which impacted operations as well. So, they’ve had their fair share of headwinds as they’ve worked to stabilize the buildings.

Nevertheless, looking at the trailing four annualized numbers as of November, their lease coverage in those buildings is now approaching three times and they’re still not quite done with the last remodel, just a sampling of what great operators can do with good, pre-stabilized opportunities. We’re pleased to be associated with these two great operators and several others, both in our portfolio and waiting in the wings.

So, we’re staying firmly focused on our operator-first model. We are continuing to look for more and better ways to evaluate, monitor, educate, and support our tenants and their operations. As I previewed on the last earnings call, effective January 1, we’ve added the qualitative data from PointRight to our operator scorecards.

This qualitative facility and market data is further strengthening our underwriting and asset management processes. Perhaps more importantly, our contract with PointRight allows us to give their data to our smaller tenants who would otherwise be unable to afford it themselves. They can use it to make smarter and more timely management decisions, improve operations, and enhance their ability to compete in the narrowing network environment.

Finally, looking at the broader skilled nursing industry, the landscape remains stable with no major changes from last quarter. Our operating experience, our operators in the stable reimbursing environment and the coming new PDPM reimbursement model combine to inform our positive outlook on the sector, even during this lull before the long-rumored demographic surge starts to make an impact.

With that, I’ll hand it over to Mark to talk about the pipeline. Mark?

Mark Lamb — Chief Investment Officer

Thanks, Dave and hello, everyone. In Q4, we closed approximately $31 million in investments, acquiring three skilled nursing facilities. In the process, we added, as Dave mentioned, a great new tenant in Providence Health Group and tacked on a facility apiece to our existing master leases with Metron and Eduro. We also invested $4.4 million in revenue-enhancing CapEx into the portfolio. These acquisitions brought our total investments for 2018 to $116.4 million.

Just a note about underwriting, although $116 million is a pretty light year by our standards, we are not unhappy with the result, since it reflects a discipline that we believe is critical for our long-term health and success. It can be hard to pass on deals when they can be had just by lowering our underwriting standards a little or by focusing more on a broker’s rosy pro forma than an asset’s actual performance. We learned long ago that getting pricing right, although it’s not a guarantee of success, improves the chances of succeeding immeasurably, while overpaying is rarely anything but a prelude to pain. So, we stuck to our guns and we are now poised for a hopefully outstanding 2019.

And those hopes are starting to be realized. As you might correctly imagine, we spent much of the third and fourth quarters moving the ball on the recently announced Q1 transactions and beyond. In January, we purchased Oakview Heights in Illinois for $9 million as a tack on for our existing tenant, WLC Management.

Earlier this week, we closed on a four-building sale leaseback with another existing tenant, Covenant Care, for just under $44 million. This transaction allowed us to consolidate and eliminate three separate short-term stand-alone leases that we had picked up in a prior deal, enrolled them and the new assets together into a single unified long-term master lease with Covenant Care.

Lastly, as Greg mentioned, we recently AK’d a definitive agreement to purchase 12 facilities in the Southeast for $211 million, which we currently anticipate will close in Q2 if we are successful in obtaining the several remaining approvals and transition agreements. Moving to our pipeline, it sits today in the $275 million to $300 million range and is almost exclusively made up of skilled nursing assets. It includes projected tack-ons with existing operators as well as deals that we can pair with new operators.

Please remember that when we quote are pipe, we only quote deals that we are actively pursuing, which means that yield coverage and underwriting standards that we have in place from time to time and then only if we have a reasonable level of confidence, we can lock them up and close them. Now, I’ll turn it over to Bill to discuss the financials.

Bill Wagner — Chief Financial Officer

Thanks, Mark. For the quarter, we are pleased to report that normalized FFO grew by 14% over the prior year quarter to $27.1 million. Normalized FAD also grew by 14% to $27.9 million. Normalized FFO per share grew by 3% over the prior year quarter to $0.32 and normalized FAD per share also grew by 3% to $0.33.

Given our most recent dividend of $0.205 per share, this equates to a payout ratio of 64% on FFO and 62% on FAD, which again represents one of the best covered dividends in the healthcare REIT sector.

We have continued to strengthen our leverage and liquidity positions, to that, for the quarter and through today, we have issued 5 million shares at an average price of $19.73, resulting in $96.7 million of net proceeds. For 2018 and year to date through today, we issued 12.7 million shares resulting in $227.3 million of net proceeds. We also just closed on a new $600 million revolver and a $200 million seven-year term loan, reducing our borrowing costs again and pushing our earliest debt maturities out to 2024.

With proceeds from the term loan we paid off the entire revolver. We also have $22 million of cash on hand as of today. Today, we have just $5.8 million in authorization left on the ATM, so we plan to put up a new one shortly. As Greg noted, we intend to use it to match fund smaller deals when we can and for larger deals, we can still raise equity via overnights. We intend to do so judiciously as long as health and intelligent growth of CareTrust has been paramount in our decision making and we intend to keep it that way.

For guidance in yesterday’s press release, we initiated our 2019 annual guidance range projecting normalized FFO per share of $1.30 to $1.32 and normalized FAD per share of $1.35 to $1.37. This guidance includes all investments made to date, the recently completely credit facility amendment, a diluted weighted average share count of 88.6 million shares, and also relies on the following assumptions.

One, no additional investments or dispositions, nor any further debt or equity issuances this year. Two, inflation-based rent escalations, which account for almost all of our escalators at an average of 2%. Our total revenues for the year, again, including only acquisitions made to date are projected at approximately $153 million, which includes approximately $1.8 million of straight-line rent.

Three, our three independent living facilities are projected to do about $500,000.00 in NOI this year. Four, interest income of approximately $2 million. Five, interest expense of approximately $26 million — in our calculations, we have assumed a LIBOR rate of 2.5%. That, plus the newly reduced grid-based LIBOR margin rates of 125 BIPs on the revolver and 150 BIPs on the seven-year term loan make up the floating rates on our revolver and term loan.

Interest expense also includes roughly $2.1 million of amortization of deferred financing fees. And six, we are projecting G&A of approximately $12.8 million to $14.2 million. Our G&A projection also includes roughly $4.4 million of amortization of stock comp.

As for our credit stats, stats calculated on a run rate basis as of today, our net debt to EBITDA is approximately 3.3 times, leverages about 20% of enterprise value, and our fixed charged coverage ratio is approximately 6 times. We also have $22 million of cash on hand.

With that, I’ll turn it back to Greg.

Greg Stapley — Chairman and Chief Executive Officer

Thanks, Bill. We hope this discussion has been helpful. We thank all of you again for your continued support. With that, we’d be happy to open it up for questions. Valerie?

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you’d like to ask a question, please press * then 1 on your touchstone telephone. Again, if you’d like to ask a question, please press * then 1. One moment for our first question. Our first question comes from Jordan Sadler of KeyBanc Capital. Your line is open.

Jordan Sadler — KeyBanc Capital Markets — Analyst

Thank you and good morning. The first question is regarding the 8-K and the commentary. Mark, you offered the portfolio that you guys are under contract on, that $211 million. Is there any incremental information you can share regarding that portfolio, surrounding markets or coverage? That would be helpful.

Greg Stapley — Chairman and Chief Executive Officer

This is Greg. Honestly, we’ve tried very much to downplay that transaction. We had to file the 8-K because the SEC regulations require an 8-K to be filed when a material agreement is entered into, even if that agreement contains multiple contingencies and diligence and other hurdles left to clear. We’re not out of the woods on that yet. We do have a number of things that have to be done yet. There are multiple parties involved. We really don’t have the permission to talk very much about it. We will give you more information as hurdles are cleared and a hope for closing draws near.

Jordan Sadler — KeyBanc Capital Markets — Analyst

Are there any milestone dates or events that we should look for?

Greg Stapley — Chairman and Chief Executive Officer

Yeah. There’s a number of things that have to be done, but the situation is a little bit fluid. Yeah, there are some approvals that have to be obtained and I’m not sure we have to be exactly what dates those approvals have to be obtained by. We do know there are some regulatory filings that have to be made here this week and those are being made. So, right now, I will tell you that it’s so far, so good. But we’re not counting our chickens before they hatch.

Jordan Sadler — KeyBanc Capital Markets — Analyst

Would you say if these assets are in an existing market or not?

Greg Stapley — Chairman and Chief Executive Officer

Some are and some aren’t.

Jordan Sadler — KeyBanc Capital Markets — Analyst

Are they also included in that pipeline of $275 million to $300 million?

Greg Stapley — Chairman and Chief Executive Officer

Yeah, they are.

Jordan Sadler — KeyBanc Capital Markets — Analyst

And then maybe one for you, Bill — in the guide, what’s the escalator embedded in the guide for the year?

Bill Wagner — Chief Financial Officer

2%.

Jordan Sadler — KeyBanc Capital Markets — Analyst

Okay. Thanks. I’ll hop off.

Operator

Thank you. Our next question comes from Jonathan Hughes of Raymond James. Your line is open.

Jonathan Hughes — Raymond James — Analyst

Hey, good afternoon or good morning on the West Coast. On the $43 million Covenant deal announced earlier this week, that was a sale and lease back, which is not your typical turnaround strategy. I realize that was an existing relationship, but do you see more opportunities for those traditional sales lease backs with your existing operators for properties they operate that you don’t already own?

Bill Wagner — Chief Financial Officer

There are a few operators that own some real estate, but I think for the most part, those opportunities are few and far between. As you know, a good chunk of our operators have given them their start and have kind of launched them and then there are more mature operators that have some existing buildings and those existing buildings are a combination of leased assets. I wouldn’t say this would be the norm for us.

Greg Stapley — Chairman and Chief Executive Officer

Yeah, Jonathan. For Covenant Care in particular, between the four assets and five assets we took the mortgage on, that represents the last of their owned real estate for them.

Jonathan Hughes — Raymond James — Analyst

Fair enough. Then maybe one for Dave — I was hoping you could talk about Texas, where you derive about 20% of rent. Can you talk about skilled nursing fundamentals for the portfolio there, maybe occupancy or coverage and how your portfolio is performing and what’s been characterized as a challenging market by some of the other skilled nursing operators there?

Mark Lamb — Chief Investment Officer

Hey, Jonathan, this is actually Mark. Since I cover Texas, I can probably take this. As you know, our two operators in Texas are Ensign and PMG. Dave’s comments with respect to PMG were the three kindred assets that we took over. They continue to do well in those assets and there are four other buildings that we acquired back in 2016 with them that they continue to do well in.

So, I think it’s safe to say that our portfolio in Texas is performing well, though I don’t necessarily have coverage metrics at my fingertips. That state, the Medicaid rate, it’s no secret, is not great. I think it’s second to last of all the states in terms of Medicaid rate. But from a fundamental perspective, developments come way down. You don’t see buildings popping out of the ground like you did three or four years ago.

And then there are obviously some troubled operators that are currently going through some things in the state. The good flexible operators that we target, the Ensigns, the PMGs of the world, have been able to manage the roadblocks. We think is the bed tax going to pass? Possibly. We still very good about the operating metrics of the tenants we have.

Jonathan Hughes — Raymond James — Analyst

So, of the 35 or so properties you have in Texas, 25 or so are Ensign?

Greg Stapley — Chairman and Chief Executive Officer

Probably 28 because seven are PMG, right?

Mark Lamb — Chief Investment Officer

Yeah.

Jonathan Hughes — Raymond James — Analyst

Just one more and maybe this one is for Dave — PDPM, it’s supposed to be budget neutral, most projections for operators, at least the projections I’ve seen, are positive or break even. Is there a chance that revenues would ultimately fall short? I’m just trying to understand the downside to PDPM since most only talk about that upside opportunity.

Dave Sedgwick — Chief Operating Officer

This is Dave. That’s a really good question. It’s tough to comment on the entire industry. But I’ll give you a little anecdote. Eric and I were meeting with one of our Midwest operators a couple weeks ago and as we were drilling down deep into their operations, we did talk about PDPM. They use the largest electronic medical record system in the states right now, I believe, and that’s PointClickCare. PCC is doing analysis and doing projections for all of their customers.

For our operator that we were with, they showed a significant increase to their revenue, which is great because most of that is going to drop to the bottom line and not even factoring in efficiencies they’re going to get by having the flexibility around their therapy cost. I asked the same question you’re asking, which is, “I bet they say that to all the girls.”

His response was, “Actually, it’s about 50-50.” When they talk to PCC about that, PCC said that, “This is a fun call we’re having with you, but they don’t all sound like this.” Some people are in a situation where they have to make some serious changes or they’re going to be in a tough spot.

So, I think that’s good news because if everybody, of course, does much better, than you might see a situation like we saw in 2011 with RUG-IV, where they reversed course really quickly. But as we can view the future, it looks like there are going to be winners and losers here. Even for those who may not be winners on the topline, they will have the flexibility with how they staff therapy to do better.

Jonathan Hughes — Raymond James — Analyst

That’s great. You have no operators in your stable in that latter camp where it would be concerning.

Mark Lamb — Chief Investment Officer

Not that we’re aware of. We haven’t done that deep dive with everybody on PDPM. The operators we have talked to are positive.

Greg Stapley — Chairman and Chief Executive Officer

Yeah, it’s Greg. I would just add one thing. Dave mentioned we’re still talking to our operators about that. Something new we’re doing next month, we’re holding an operator conference in Southern California for all of our skilled nursing operators to come in. PDPM will be front an center on the agenda for discussion there. So, by this time 30 days from now or so, we should have all those answers in the bag.

Operator

Thank you. Our next question comes from Chad Vancore of Stifel. Your line is open.

Chad Vanacore — Stifel Nicolaus — Analyst

Thanks. Historically, your target leverage has been in that four to five times, but you’re currently sitting under-levered around 3.3 times. Should we think about you remaining on the lower end of that historical range through 2019 popping back up to the middle of the range through acquisitions?

Bill Wagner — Chief Financial Officer

Hey, Chad. It’s Bill. All that will depend on investment flow and where our equity is trading as we continue down 2019. But I think for modeling purposes, if you keep it toward the lower end of the range, it’s probably a safe bet given where we’re trading at today.

Chad Vanacore — Stifel Nicolaus — Analyst

Thanks, Bill. So, thinking about your pipeline, we had discussions about the transaction market maybe in 2018 not looking as attractive to you. What’s making 2019 look more attractive?

Mark Lamb — Chief Investment Officer

This is Mark. The answer to that first question is yeah, it’s predominately SNFs. In terms of 2019, I don’t know that I have a specific answer. As I look at the pipeline, I think it’s made up of current assets that are just not strategic to specific operators. So, they want to go ahead and get rid of those assets, whether they’re not geographically in the footprint or for whatever reason, they just don’t make sense for that specific operator anymore. Then there are other assets where you have the operator that just wants to exit for whatever reason.

So, I don’t know that we are seeing a particular pattern so far in 2019. I can tell you we’ve seen an uptick in total transactions from late in the year. We’re seeing a lot of deal flow. We’re seeing probably a little more on the assisted living and senior housing side than the skilled nursing space right now. I don’t know there’s a specific pattern so far as to why deal flow has picked up, but we are seeing it in the numbers.

Chad Vanacore — Stifel Nicolaus — Analyst

You mentioned seeing some exiting operators. Is anyone coming to you saying, “PDPM is coming up later in the year. We have to make some investments to take advantage of that. Maybe we don’t particularly want to make that investment, so let’s punt this out to another operator?”

Mark Lamb — Chief Investment Officer

We’re seeing mom and pops that are still looking to sell. Nobody has specifically said, “Hey, PDPM is coming and we just want to monetize. I think the broker community has done a good job of letting those mom and pops know what the investment is going to be in PDPM to be successful. I think that has some variant. I don’t think we’ve seen mom and pops saying, “We’re heading for the hills.

We don’t to go through another change. Maybe there’s a small fraction of thinking about PDPM and the changes helps them to get off the sideline, but at the end of the day, you have mom and pops looking at relatively low cap rates and can monetize their assets today in certain states for good numbers on a price per bed basis.

Chad Vanacore — Stifel Nicolaus — Analyst

One more question for me — this is probably better answered by Greg. What kind of considerations have you given to increasing the dividend just given the pretty low payout ratio and then how do you measure that versus reinvestment and get acquisitions?

Greg Stapley — Chairman and Chief Executive Officer

Sure. If you look back historically at our dividend pattern, every year, we have raised that dividend and it typically gets raised in the first quarter of the year. So, I would anticipate a dividend increase coming by the next quarter. But we’ve always looked to keep that dividend at the low end of the peer group in terms of a payout ratio and our investors have been very supportive of our philosophy of plowing as much of that back into the company by way of returning to earnings as we can each year. It’s served us well.

Bill Wagner — Chief Financial Officer

Chad, when you think about the dividend growth, we first start with taxable income. So, as our GAAP income increases every year with investments, we have to raise the dividend just to clear the taxable income.

Operator

Thank you. Our next question comes from Michael Carroll of RBC Capital Markets. Your line is open.

Michael Carroll — RBC Capital Markets — Analyst

Thanks. Greg, was that portfolio that you announced, what is the bigger stumbling block that you have to get through? Is it that you have to complete your due diligence or do you have to wait for the seller to officially take control of those facilities?

Greg Stapley — Chairman and Chief Executive Officer

Diligence is largely completed. We actually got some good news on that this morning. But there’s lots and lots of decision makers involved in various steps of the process and it’s a little like herding cats. We don’t have the width on this one. So, we are doing our best to keep up with it and to see that it gets down to its intended and logical conclusion, but it is not a simple transaction by any means.

Any time you get that many parties in a deal, the difficulty of getting it done goes up exponentially and that’s where we’re at. But we’re used to complex deals, we closed some deals that were similar, probably not as difficult, but similar in terms of their size, number of parties, the complexity at the end of 2017 and we’re cautiously optimistic that we could do it again.

Michael Carroll — RBC Capital Markets — Analyst

I know these are pretty good assets in good markets, but would you consider this a transition portfolio, since you’re switching the operators or how difficult will that be.

Greg Stapley — Chairman and Chief Executive Officer

I would say that part of the portfolio, a small part of the portfolio is transition, but a large part of it, it’s pretty stable. There’s still some upside in all of it. But we feel very good about the assets and what we’re paying for them and we feel good about the operators we’re bring in to run them.

Michael Carroll — RBC Capital Markets — Analyst

Then Mark, related to valuations, how have you seen cap rates for product overall? Have you seen them ticking a little bit lower given the more attractive market and then maybe PDPM coming in toward the end of the year?

Mark Lamb — Chief Investment Officer

I don’t think so. I think you still have markets and states like California, Virginia, Maryland, even on a cap rate basis are still where they were two or three years ago, so very attractive states are maintaining. I think maybe some of the secondary states where you have lower barriers to entry, most of those states are most of the deals we’re seeing in the states are maybe not cash flowing and are trading at a price per bed.

I think in general, maybe the notion is that cap rates are moving up. I would say that’s probably the case in some of the secondary and tertiary markets in states, but in the primary markets, good cashflow means skilled nursing assets are still trading at historical norms over what we’ve seen the last two or three years.

Michael Carroll — RBC Capital Markets — Analyst

Great. Thank you.

Operator

Our next question comes from John Kim of BMO Capital Markets. Your line is open.

John Kim — BMO Capital Markets — Managing Director

Thank you. On the $211 million portfolio acquisition, how did you come up with the 12 assets? Did you cherry-pick them from a larger portfolio or were these three assets the seller marketed for sale specifically?

Greg Stapley — Chairman and Chief Executive Officer

Yeah, John. It’s Greg. I’ll let Mark weigh in on this too. For lack of a better term, we did cherry-pick it to a certain degree. It doesn’t mean every asset is a high flyer or perfect. Like I said, there’s still some upside left across the portfolio, but the good news is operators were bringing in to run these are all experienced operators who are in those markets, who know those markets extremely well and who see the remaining upside in what are arguably stabilized or pretty close to stabilized assets are we’re pretty optimistic about the future of that investment.

John Kim — BMO Capital Markets — Managing Director

You mentioned one of the new operators will be an existing relationship. Can we assume that’s Ensign or PMG who are already in the market with you?

Greg Stapley — Chairman and Chief Executive Officer

Yeah. We’re not ready to discuss that yet.

John Kim — BMO Capital Markets — Managing Director

Okay. Then the 12 separate special purpose entities, I’m curious, is that typical for a portfolio acquisition the way that you structured the acquisition?

Mark Lamb — Chief Investment Officer

Yeah, John. This is Mark. It’s really just a function of this structure. We’re purchasing the membership interests in the entities from the buyer. It’s not uncommon. Historically, we’ve done this maybe once or twice, but it’s just a function of this transaction.

John Kim — BMO Capital Markets — Managing Director

I’m not sure if I missed this earlier, but on their acquisition pipeline or opportunities that you’re looking at, can you just discuss what you’re seeing in senior housing?

Mark Lamb — Chief Investment Officer

Yeah. Senior housing is really kind of a mixed bag. There’s everything from non-stabilized, barely cash flowing primary, secondary, tertiary markets to stabilize. So, we’re certainly tracking and underwriting these types of deals, but senior housing right now seems to be a mixed bag. Now, granted we’re not seeing everything and we’re probably seeing mainly tertiary and secondary markets, which we’ve historically acquired in, but it’s really a mixed bag and there’s a decent amount of deal flow on the market for those property types in those markets.

John Kim — BMO Capital Markets — Managing Director

Is there a preference you have in senior housing in terms of value add or higher growth, something a little bit more stable?

Mark Lamb — Chief Investment Officer

I think our presence is stable. Maybe if you can do some value add by way of investing some CapEx in. But as you know, turning a senior housing asset is a lot different than turning a SNF asset. You can turn a SNF asset possibly in three to six months. Turning a senior housing asset can take years. That’s not really a space that we want to play in.

We’re a lot more comfortable seeing a skilled nursing facility that has some immediate upside via changes in the cost structure. We’ll take a little bit of a risk from that perspective, but on the senior housing side, it’s a long tough slog to fully get a building nursed back to health. I would say that stabilized would be our preference.

Operator

Thank you. Our next question comes from Todd Stender of Wells Fargo. Your line is open.

Todd Stender — Wells Fargo — Analyst

Just looking at the Covenant Care transaction, where are the new properties in California in relation to the existing ones and what coverage were they written at and what were the existing ones covering at?

Mark Lamb — Chief Investment Officer

So, the property locations are one in Northern California and three in Southern California. When you blend the entire portfolio of all eight buildings, I believe the coverage is up in the 1.4 to 1.5 times range, but well covering assets on a blended basis with the one master lease across the eight assets. It’s doing well.

Todd Stender — Wells Fargo — Analyst

And the new ones — this is a sale lease back. So, Covenant Care was selling assets?

Mark Lamb — Chief Investment Officer

That’s correct.

Todd Stender — Wells Fargo — Analyst

It looks like the mortgage you provided Covenant Care is securing a few assets in Illinois. Can you provide the terms on this? Where I eventually want to go with the question is as they potentially monetize more assets, is this going to be your standard issue short-term mortgage or can this convert to simple interest as they look at tax-advantaged methods to unload more real estate?

Greg Stapley — Chairman and Chief Executive Officer

Yeah, Todd. This is Greg. That piece of the transaction was a little unusual for us. They were trying to sort out their capital stack. It made sense for us to give them a small mortgage on five assets at a 9% rate in the very short-term. We don’t anticipate these assets converting to our ownership, nor do we anticipate those assets staying with Covenant Care for a very long time.

Todd Stender — Wells Fargo — Analyst

Okay. So, they could come to market and at that point, maybe you look at them?

Greg Stapley — Chairman and Chief Executive Officer

We have looked at them and we’re happy to lend on them, but we don’t see them as acquisition opportunities. We have an Illinois operator we like a lot, but I think five more buildings for him in the near-term would be more than we want him to take on.

Operator

Thank you. Again, if you would like to ask a question, please press * then 1 on your touchstone telephone. One moment, please. Our next question comes from Daniel Bernstein of Capital One. Your line is open.

Daniel Bernstein — Capital One — Analyst

This might be a little bit more hypothetical, but with PDPM coming in and maybe margins moving up on rehab, are you talking to any operators looking to bring rehab back in house? If it doesn’t improve lease coverage, does it improve your fixed charge coverage, corporate coverage, and guarantees with your operators and how you’re thinking about that in terms of future underwriting?

Dave Sedgwick — Chief Operating Officer

Hey, Daniel. This is Dave. We are talking to our operators about that. There’s a lot of discussion they’re having internally with their rehab providers to see which format makes sense. Several of them are planning on going in house with rehab. If they’re not, they’re in active discussions with their therapy providers to come up with a different arrangement to pay for those therapists as they are now not so much a profit center but a cost center. That’s in motion right now and I think it will see different ways to skin that cat as the months progress.

Daniel Bernstein — Capital One — Analyst

Do you think it might be something that could improve the corporate coverage support for your leases on a longer-term basis?

Dave Sedgwick — Chief Operating Officer

We do. It’s really difficult to quantify that yet. All the operators are going to treat it a little bit differently in terms of what kind of reduction to their therapy cost they’ll experience. So, all we can say right now is that common sense says that it will improve margins, but it’s just too difficult to quantify that at this stage.

Daniel Bernstein — Capital One — Analyst

In terms of your pipeline, the number we gave out has a large portfolio in there. The rest of it, is that mainly acquisitions or are you thinking about funding more mortgages or development. I’m trying to understand the concept of acquisitions versus something else?

Greg Stapley — Chairman and Chief Executive Officer

Yeah, Dan. This is Greg. Funding mortgages is not something we normally go out and look for. We’ve done it a couple times to facilitate acquisitions. We have a mortgage with Providence up here in San Bernardino and then we have these mortgages in Illinois with Covenant Care. Both of those mortgages were short-term mortgages that facilitated a larger transaction. In terms of development, we currently have the two development projects that have now been completed and are in lease up in Idaho with Cascadia Healthcare. They’re doing super well.

We’re really excited about them. We could look to do more development on a very, very limited basis down the road if it makes sense. It’s really hard to get new development to pencil when you compare it to simply buying and improving existing nursing home stock. But occasionally, you can find that sweet spot and we have done that in the Boise area.

Operator

Thank you. I’m showing no further questions at this time. I’d like to turn the conference back to Greg Stapley for any closing remarks.

Greg Stapley — Chairman and Chief Executive Officer

Thanks, Valerie. Thank you, everybody for being on the call. Obviously, we appreciate your support. If any of you have any additional questions, we are here and ready to answer for anyone and everyone. Thank you.

Operator

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.

Duration: 49 minutes

Call participants:

Lauren Beale — Controller

Greg Stapley — Chairman and Chief Executive Officer

Bill Wagner — Chief Financial Officer

Mark Lamb — Chief Investment Officer

Dave Sedgwick — Chief Operating Officer

Jordan Sadler — KeyBanc Capital Markets — Analyst

Jonathan Hughes — Raymond James — Analyst

Chad Vanacore — Stifel Nicolaus — Analyst

Michael Carroll — RBC Capital Markets — Analyst

John Kim — BMO Capital Markets — Managing Director

Todd Stender — Wells Fargo — Analyst

Daniel Bernstein — Capital One — Analyst

More CTRE analysis

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Top Bank Stocks To Invest In 2019

India should make it easier for new banks to open in the South Asian nation, according to a new report from the Brookings Institution.

The Reserve Bank of India could consider easing rules for allocation of permits, including an initial capital requirement of 5 billion rupees ($79 million) and so-called priority sector lending targets, which include loans to farmers and smaller businesses, that stand at 40 percent of total loans. These norms seem stringent and will dissuade new applications for the permits, the report said.

“India should move toward a more dynamic banking sector that fosters innovation and checks the inefficiencies created by a lack of entry,” said authors Isha Agarwal and Eswar Prasad. “There can be enormous gains from productive reallocation of capital in the banking sector as inefficient banks are driven out of the system, or merged with other banks, and new banks enter the market.”

Read: IMF Calls for Overhaul of India Banks as RBI Sees Bad Loans Rise

Top Bank Stocks To Invest In 2019: HSBC Holdings PLC (HSBA)

Advisors’ Opinion:

  • [By Stephan Byrd]

    Morgan Stanley set a GBX 855 ($10.91) price target on HSBC (LON:HSBA) in a research note issued to investors on Tuesday. The brokerage currently has a buy rating on the financial services provider’s stock.

  • [By Joseph Griffin]

    HSBC (LON:HSBA) had its target price lowered by equities research analysts at Shore Capital from GBX 721 ($9.60) to GBX 625 ($8.32) in a report issued on Tuesday. The brokerage presently has a “sell” rating on the financial services provider’s stock. Shore Capital’s price objective indicates a potential downside of 14.71% from the company’s previous close.

  • [By Max Byerly]

    HSBC Holdings plc (LON:HSBA) has received an average recommendation of “Hold” from the sixteen analysts that are covering the company, MarketBeat Ratings reports. Two investment analysts have rated the stock with a sell recommendation, ten have issued a hold recommendation and four have assigned a buy recommendation to the company. The average 12-month price objective among brokerages that have issued a report on the stock in the last year is GBX 768.33 ($9.80).

  • [By Ethan Ryder]

    HSBC (LON:HSBA) had its price target dropped by equities research analysts at Citigroup from GBX 810 ($10.78) to GBX 800 ($10.65) in a report released on Tuesday. The brokerage currently has a “buy” rating on the financial services provider’s stock. Citigroup’s price target points to a potential upside of 9.59% from the stock’s previous close.

  • [By Max Byerly]

    HSBC (LON:HSBA) was upgraded by equities research analysts at Credit Suisse Group to a “neutral” rating in a research report issued to clients and investors on Thursday. The firm presently has a GBX 720 ($9.38) target price on the financial services provider’s stock, up from their previous target price of GBX 680 ($8.86). Credit Suisse Group’s price target suggests a potential upside of 5.82% from the company’s previous close.

Top Bank Stocks To Invest In 2019: Canadian Imperial Bank of Commerce(CM)

Advisors’ Opinion:

  • [By Ethan Ryder]

    Sigma Planning Corp boosted its holdings in shares of Canadian Imperial Bank of Commerce (NYSE:CM) (TSE:CM) by 12.6% in the second quarter, HoldingsChannel reports. The firm owned 7,383 shares of the bank’s stock after acquiring an additional 826 shares during the period. Sigma Planning Corp’s holdings in Canadian Imperial Bank of Commerce were worth $642,000 at the end of the most recent reporting period.

  • [By Joseph Griffin]

    Canadian Imperial Bank of Commerce (NYSE: CM) and Foreign Trade Bank of Latin America (NYSE:BLX) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

  • [By Logan Wallace]

    Canadian Imperial Bank of Commerce (TSE:CM) (NYSE:CM) – Analysts at Desjardins reduced their Q2 2018 earnings per share estimates for Canadian Imperial Bank of Commerce in a research report issued to clients and investors on Wednesday, May 2nd. Desjardins analyst D. Young now forecasts that the company will post earnings of $2.85 per share for the quarter, down from their prior estimate of $2.86.

Top Bank Stocks To Invest In 2019: Ampco-Pittsburgh Corporation(AP)

Advisors’ Opinion:

  • [By ]

    Phoenix (AP) — The classified advertising site Backpage.com ignored warnings to stop running advertisements promoting prostitution, sometimes involving children, because the lucrative enterprise brought in half a billion dollars, according to an indictment unsealed Monday.

  • [By ]

    This undated photo provided by BMW shows the 2018 BMW X3, a luxury compact SUV with more traditional design and a starting price of $41,995, including the destination fee. The Audi Q5 and the BMW X3 are two of the most popular compact luxury SUVs out today. Shoppers are typically drawn to the Q5 and the X3 because of their appealing mix of refinement, utility, safety and performance. (Photo: AP)

  • [By ]

    Charlotte, N.C. (AP) — People familiar with the situation say hedge fund manager David Tepper has agreed to buy the Carolina Panthers from team founder Jerry Richardson for a record $2.2 billion.

  • [By ]

    New York (AP) — Demi Lovato has checked out of the hospital she was rushed to two weeks ago for a reported overdose.

    A person close to Lovato said she was released from Cedars-Sinai Medical Center in Los Angeles over the weekend. The person spoke on the condition of anonymity because the person wasn't allowed to speak publicly about the topic.

  • [By ]

    Anchorage, Alaska (AP) — A magnitude 8.2 earthquake off Alaska's Kodiak Island prompted a tsunami warning for a large swath of coastal Alaska and Canada's British Columbia while the remainder of the U.S. West Coast was under a watch.

Top Bank Stocks To Invest In 2019: Wells Fargo & Company(WFC)

Advisors’ Opinion:

  • [By Shane Hupp]

    Dupont Capital Management Corp trimmed its position in shares of Wells Fargo (NYSE:WFC) by 84.4% in the first quarter, according to its most recent 13F filing with the Securities & Exchange Commission. The firm owned 30,092 shares of the financial services provider’s stock after selling 163,405 shares during the period. Dupont Capital Management Corp’s holdings in Wells Fargo were worth $1,577,000 at the end of the most recent quarter.

  • [By Rich Duprey]

    Instead of pitching in more of his own money now, Lampert’s been working to try to secure financing from institutions other than his own hedge fund, ESL Investments. Reuters reports negotiations with Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) fell through as Lampert sought to arrange debtor-in-possession financing. Basically such reorganization efforts allow existing management to continue operating the train. But rumor has it lenders are not willing to give Lampert free rein anymore and are pushing for a Chapter 7 bankruptcy filing that calls for Sears to be liquidated, rather than the reorganization that Chapter 11 allows.

  • [By ]

    Citigroup Inc. (C)  , a rival Wall Street bank, said in a separate report Friday that first-quarter profit jumped 13%, also fueled by growth in trading revenue. Meanwhile, San Francisco-based Wells Fargo & Co. (WFC) , struggling to recover from a series of regulatory penalties over allegedly aggressive sales practices, posted a 5.5% profit increase on a preliminary basis, noting that legal costs might have to be revised higher pending discussions with regulators over as much as $1 billion of new penalties related to auto insurance and mortgage-related violations. Bank of America Corp. (BAC) , Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) are all scheduled to post results next week.

  • [By Garrett Baldwin]

    The Dow was flat this morning as major banks report earnings. Shares of JPMorgan Chase added nearly 1% after the company reported a record Q2 profit. The company also reported stronger results from its trading division, which likely benefited from recent market volatility. Its earnings per share of $2.29 was $0.07 above the average estimate of $2.22. China’s trade surplus against the United States hit a new record in June. Many economists are concerned that this news could cause U.S. President Donald Trump to escalate his tariff battle with China. Earlier this week, President Trump threatened to hit another $200 billion in Chinese goods with a 10% tariff. Trump has demanded that China cut down on its surplus. One of the biggest issues for marijuana companies right now is setting up a bank account. Because cannabis is still illegal under federal law, banks are afraid of federal crackdowns. That means a marijuana dispensary can’t deposit cash or take out a loan to help grow its business. However, that could soon change… Today, we take you into what could be one of the biggest breaks in the legal marijuana business. Check it out here.
    Three Stocks to Watch Today: C, BLK, TGT
    Shares of Citigroup Inc. (NYSE: C) were on the move after the investment bank reported earnings before the bell. The bank reported a stunning 16% jump in quarterly profits for the second quarter. The firm cited the recent tax law, increased fees, and better banking business in Mexico. The firm reported earnings per share of $1.63. That figure easily beat average expectations of $1.56 per share. It’s worth noting that the bank’s income tax provision declined by $351 million thanks to tax reform. This will likely ignite Democratic Senators who are critical of Wall Street. Shares of BlackRock Inc. (NYSE: BLK) pushed higher Friday thanks to an upgrade from investment research firm Keefe, Bruyette and Woods Inc. The upgrade from “market perform” to “outperform” came after analysts sa

  • [By Shah Gilani]

    The prospect of big bank deregulation in light of the outrageous ongoing criminal activity – because that’s what it is – at Wells Fargo & Co. (NYSE: WFC) makes me cringe.

Top Bank Stocks To Invest In 2019: First Commonwealth Financial Corporation(FCF)

Advisors’ Opinion:

  • [By Joseph Griffin]

    Get a free copy of the Zacks research report on First Commonwealth Financial (FCF)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Logan Wallace]

    Get a free copy of the Zacks research report on First Commonwealth Financial (FCF)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Ethan Ryder]

    First Commonwealth Financial (NYSE:FCF) was upgraded by investment analysts at ValuEngine from a “sell” rating to a “hold” rating in a report released on Monday.

  • [By Joseph Griffin]

    Barclays PLC increased its holdings in First Commonwealth Financial (NYSE:FCF) by 24.3% during the 1st quarter, according to its most recent 13F filing with the Securities & Exchange Commission. The institutional investor owned 33,717 shares of the bank’s stock after buying an additional 6,593 shares during the period. Barclays PLC’s holdings in First Commonwealth Financial were worth $476,000 as of its most recent SEC filing.

  • [By Joseph Griffin]

    Get a free copy of the Zacks research report on First Commonwealth Financial (FCF)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com