(Bloomberg Opinion) — Add the lackluster performance of defense stocks to the long list of puzzling inequities in the pandemic stock market. A custom basket of top U.S. defense contractors within the S&P 500 Index is down about 20% for the year, even as the broader benchmark pushed into the green this week. Even excluding Boeing Co., whose commercial aerospace travails are more of a focus for investors, the group is still down about 16%. That’s significantly worse than the performance for S&P 500 railroads, restaurants, foot-wear makers and soft-drink companies, all of which are more immediately exposed to the volatility of economic reopenings and behavioral shifts than makers of missiles, fighter jets and radar systems that rely on government contracts sealed years earlier. Lockheed Martin Corp., which reported second-quarter earnings on Tuesday, displayed the sector's resilience amid the pandemic upheaval. Earnings, sales and cash flow were all higher than the year-earlier period, with cash balances helped in part by accelerated progress payments from the Department of Defense that were then passed on to suppliers. At a time when most companies are hesitant to make any concrete predictions about the immediate future, Lockheed touted a record $150.3 billion backlog and actually raised its guidance on all fronts. And yet even after a respectable 2.6% gain on Tuesday's earnings report, Lockheed still trades at roughly 14 times its estimated earnings in 2021. The valuation discount to the broader S&P 500 is just shy of the widest spread in at least five years.Fellow defense contractors Raytheon Technologies Corp., General Dynamics Corp. and Northrop Grumman Corp. are scheduled to report results next week, as is Boeing.The reason for the defense sector’s underperformance appears multi-fold. For one, defense contractors don’t really fit with the technology-focused bent of the recent upswing in stocks and because their business didn’t crash and burn as much as many others did, there’s less room for that mythical, V-shaped recovery many still hope will occur. Second, as Congress debates injecting at least $1 trillion more in stimulus funds into the pandemic-stricken economy, the deficit is set to explode and the government will likely have to make up some of that spending elsewhere. The worry is that the U.S.’s gargantuan defense budget will be a prime target, particularly if former Vice President Joe Biden succeeds in unseating President Donald Trump in this year's presidential election.Any hit to defense spending isn’t likely to be as bad as what’s suggested by current valuations, though. While the deficit may put a cap on defense spending growth, the volatile geopolitical situation likely creates a floor. Historically, there's a weak correlation between deficit-related economic variables — whether that’s business cycles or changes in tax policy — and defense spending, Melius Research analyst Carter Copeland noted on a call earlier this month. Material shifts in budgets tend to be more a reflection of changes in national-security posture, he said, such as President Barack Obama’s withdrawal from Iraq or President Ronald Reagan’s more aggressive stance toward Russia during the early part of his administration. And there’s not much room for that kind of rethink right now, regardless of who gets elected. Tensions are still running hot with the likes of Iran and North Korea, while Russia and China have taken increasingly aggressive postures. Copeland pointed to a Gallup poll published in March that found half of Americans view the current level of defense spending as “about right,” the highest percentage in more than 50 years. Asked on Lockheed’s earnings call Tuesday if the defense budget would decline, new CEO Jim Taiclet declined to “speculate on the behavior of people that are going to make independent decisions that we can’t predict,” but said the company’s divisions are planning for a wide range of scenarios to be prepared for any outcome. He made a point of citing a downturn as a potential opportunity for Lockheed to take advantage of depressed asset prices through strategic M&A. At the end of the day, “sentiment is fickle, while fundamentals are facts,” Vertical Research Partners analyst Rob Stallard wrote in a report last month. “While we think defense companies can’t do much about the slowing Department of Defense budget outlook, they are still growing and have good visibility, good cash flow and good valuations.” What more do you want? This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
from Yahoo Finance https://ift.tt/2OKmFA3
Yahoo Finance’s Alexis Christoforous , Brian Sozzi and Dan Howley discuss Samsung’s new flip-smartphone on The First Trade.
Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Anjalee Khemlani discuss the latest coronavirus news with with Dr. Anand Parekh, Bipartisan Policy Center Chief Medical Advisor.
Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Jessica Smith discuss the latest happenings in the U.S-China relations. Since the start of July, the major cruise lines have ramped up their public-facing efforts to safely resume sailing. Norwegian Cruise Lines and Royal Caribbean have co-founded a Healthy Sail Panel with experts across the medical, public health, and epidemiological fields. Carnival has teamed up with the World Travel and Tourism Council for a July 28 […]
Ford and RTR teamed up to bring the Mustang Mach-E prototype to life. The car has seven motors and can generate 1,400 horsepower.Investors who once overwhelmingly expected President Donald Trump to be reelected have increasingly resigned themselves to the prospect of a Joe Biden presidency.
(Bloomberg) — U.S. health officials agreed pay $1.95 billion for 100 million doses of a vaccine made by Pfizer Inc. and BioNTech SE, the latest step in an effort to fight the coronavirus pandemic.The companies will receive payment upon the receipt of the doses, following regulatory authorization or approval, according to a statement. The government also can acquire up to an additional 500 million doses.Nations around the world have begun ordering vaccines that are still being tested as part of their efforts to try to blunt the impact of the pandemic that’s roiled economies and killed more than 600,000 people since the beginning of the year. The U.S. has already ordered experimental shots developed by the University of Oxford and AstraZeneca Plc.The vaccine would be available to the American people for free, according to the government. Pfizer shares rose more than 5% in pre-market trading. BioNTech climbed about 7%.(Updates with other orders in the third paragraph. An earlier version of the story corrected the number of doses.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
WATERLOO, Ontario, July 22, 2020 /CNW/ — BlackBerry Limited (NYSE: BB; TSX: BB) today announced that it has obtained consents from the beneficial owners of 88.39% of its outstanding 3.75% unsecured convertible debentures (TSX: BB.DB.V) (the “3.75% Debentures”) including Fairfax Financial Holdings Limited and certain of its affiliates (together, “Fairfax”), to give effect to an extraordinary resolution (the “Extraordinary Resolution”) authorizing a supplemental indenture to permit the optional redemption of the 3.75% Debentures prior to November 13, 2020. The outstanding principal amount of the 3.75% debentures is US$605 million. BlackBerry intends to redeem the entire outstanding principal amount of the 3.75% Debentures on or about September 1, 2020 (the “Redemption Date”) at a redemption price of 101.6854% of the outstanding principal amount of the 3.75% Debentures.
Pfizer Inc (PFE) and BioNTech SE (BNTX) have agreed to provide the US government with 100 million doses of their COVID-19 vaccine candidate BNT162, after Pfizer successfully manufactures and obtains approval or emergency use authorization from the US Food and Drug Administration (FDA).The U.S. government will pay the companies $1.95 billion upon the receipt of the first 100 million doses, following FDA authorization or approval. The U.S. government also can acquire up to an additional 500 million doses.Shares in Pfizer are up 5% in Wednesday’s pre-market trading while BioNTech is up 6%.“Expanding Operation Warp Speed’s diverse portfolio by adding a vaccine from Pfizer and BioNTech increases the odds that we will have a safe, effective vaccine as soon as the end of this year,” said Department of Health and Human Services’ Secretary Alex Azar.Americans will receive the vaccine for free following the US government’s commitment for free access for COVID-19 vaccines.The BNT162 program is based on BioNTech’s proprietary mRNA technology and supported by Pfizer’s global vaccine development and manufacturing capabilities. The BNT162 vaccine candidates are undergoing clinical studies and are not currently approved for distribution anywhere in the world.BioNTech is the market authorization holder worldwide and will hold all trademarks for the potential product.The Pfizer/BioNTech vaccine development program is evaluating at least four experimental vaccines, each of which represents a unique combination of messenger RNA (mRNA) format and target antigen. On July 1, Pfizer and BioNTech announced preliminary data from BNT162b1, the most advanced of the four mRNA formulations.The early data demonstrates that BNT162b1 is able to produce neutralizing antibodies in humans at or above the levels observed in the plasma from patients who have recovered from COVID-19, and this was shown at relatively low dose levels. No serious adverse events were reported. On July 20, the companies announced early positive update from German Phase 1/2 COVID-19 vaccine study, including first T Cell response data.If ongoing studies are successful, Pfizer and BioNTech expect to be ready to seek Emergency Use Authorization or some form of regulatory approval as early as October 2020. The companies currently expect to manufacture globally up to 100 million doses by the end of 2020 and potentially more than 1.3 billion doses by the end of 2021.Shares in Pfizer are down 6% year-to-date, while BioNTech has exploded over 170%. Looking forward, analysts take a cautiously optimistic Moderate Buy consensus on both stocks. However, due to the recent rally, BioNTech’s average analyst price target of $60 now indicates 30% downside potential from current levels.Mizuho Securities analyst Vamil Divan has a buy rating on Pfizer and $38 price target (4% upside potential). That’s slightly under the stock’s average analyst price target of $41 (13% upside potential).“We had several discussions with investors today on the back of the initial data, with much of the discussion focused on the commercial potential for a successful SARS-CoV-2 vaccine” the analyst wrote.“The company has mentioned that it will look to price a potential vaccine in line with other commercially-available vaccines, suggesting to us a potential blockbuster commercial opportunity, depending on the vaccine’s clinical profile and the ultimate competitive landscape” he told investors, after the release of ‘encouraging’ early data. (See Pfizer stock analysis on TipRanks)Related News: NuVasive Spikes 5% After-Hours On Sharp Procedure Rebound Intuitive Surgical Delivers Strong Quarter; But Analyst Says Sell Now Is Novavax’s (NVAX) Super-High Valuation Justified? This Analyst Says ‘Yes’TopicsBIONTECHBNTXPFEPFIZERLatest NewsAMC Lenders Allege Debt Default Following Silver Lake Deal- Report14mEricsson, Deutsche Telekom Sign Multi-Year 5G Deal; Analyst Bullish On ERIC43mLockheed Martin Beats Quarterly Estimates, Raises 2020 Outlook1hCheck Point Profit Tops Estimates Fueled By Remote Work Push1hBest Buy Pops 5% On Strong Online Sales; Top Analyst Ramps Up PT1hUnited Airlines Gains in After-Hours Despite $2.6 Billion Quarterly Loss1hAlphabet’s Waymo Expands Chrysler Partnership To Driverless Minivans2hPhillip Morris Beats Quarterly Estimates3hSEE MORETipRanks BlogWhich Leading Financial Blog Has the Best Bloggers?July 16, 2020Nasdaq Trade Talks Interviews TipRanks CEOJuly 15, 2020Meet the TipRanks Team – Eyal Gershon, Head of Product and UXJuly 15, 2020SEE MOREMore ArticlesAMC Lenders Allege Debt Default Following Silver Lake Deal- Report14 minutes agoEricsson, Deutsche Telekom Sign Multi-Year 5G Deal; Analyst Bullish On ERIC44 minutes agoLockheed Martin Beats Quarterly Estimates, Raises 2020 Outlook1 hour agoSEE MORE More recent articles from Smarter Analyst: * AMC Lenders Allege Debt Default Following Silver Lake Deal- Report * Ericsson, Deutsche Telekom Sign Multi-Year 5G Deal; Analyst Bullish On ERIC * Check Point Profit Tops Estimates Fueled By Remote Work Push * Best Buy Pops 5% On Strong Online Sales; Top Analyst Ramps Up PT