• Bloomberg

    Dry Winds Raise Critical Fire Threat Across Southern California

    (Bloomberg) -- Nearly 32,000 customers could lose power Sunday as dry, gusty winds whip up critical wildfire conditions across almost 6,000 square miles in Southern California.The winds gusting as high as 50 miles (80 kilometers) per hour could affect mountains and coastal areas, including Ventura, Los Angeles and San Diego counties, putting 2.6 million people at risk in 5,774 square miles, the National Weather Service said. About 31,975 customers could have their power turned off because of the fire threat, according to Edison International’s Southern California Edison’s website.While not as severe, the threat remains elevated through Monday.“If fire ignition occurs, conditions may be favorable for extreme fire behavior which would threaten life and property,” the weather service said.The state’s largest utility, PG&E Corp., staged four massive blackouts in October to prevent wildfires. PG&E’s equipment caused fires in Northern California in 2017 and 2018, saddling it with an estimated $30 billion in liabilities and eventually forcing it into bankruptcy. It’s strategy of pre-emptive outages this year has drawn anger from customers and state lawmakers who say they’ve gone too far.California has had little rain for months, and more than 81% of the state is abnormally dry, according to the U.S. Drought Monitor in Lincoln, Nebraska. The parched plants and soils, along with the winds called Santa Anas, make fall one of the worst times for fires there.To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.netTo contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net, Steve GeimannFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Macy's Q3 Earnings Preview: Is the Department Store's Decline Set to Continue?

    Macy's Q3 Earnings Preview: Is the Department Store's Decline Set to Continue?

    Macy's and other department stores have not been able to find success or inspire much Wall Street confidence. Can it turn things around in Q3?

  • Can Retail's Rally Hold Up In Next Week's Wave Of Reports?

    Can Retail's Rally Hold Up In Next Week's Wave Of Reports?

    Retailers' performance over the last 2.5 months is a sign of positive market sentiment reentering the space. This sentiment will be tested next week when a wave of retail results hits the market.

  • What Ails Macy's (M) and the Other Department Store Stocks?

    What Ails Macy's (M) and the Other Department Store Stocks?

    What Ails Macy's (M) and the Other Department Store Stocks?

  • EnLink's 20% Yield Is Everything Wrong With America's Pipelines

    EnLink's 20% Yield Is Everything Wrong With America's Pipelines

    (Bloomberg Opinion) -- When a stock goes into free fall, one hope is that some acquirer out there will catch it. Sometimes, though, suitors come with their own complications. That brings us to EnLink Midstream LLC.EnLink operates gathering and processing pipelines and other oil and gas infrastructure across several onshore U.S. basins. In the summer of 2018, Devon Energy Corp., an exploration and production company, sold its stakes in various EnLink entities to Global Infrastructure Partners for just over $3.1 billion. After a subsequent simplification of EnLink, GIP owns 46% of the common units, now worth $1.2 billion.EnLink has been undone by weaker commodity prices. Earlier this month, Devon announced it had dropped the number of rigs operating in one of Oklahoma’s shale basins to precisely zero (how’s that for a coda to last year’s deal?). This confirmed a trend evident already in permitting and drilling data for the Anadarko basin, where just four companies account for the majority of activity; and, crucially, they have operations in other basins that are more competitive in terms of breakeven costs.The distribution yield on EnLink’s stock now scrapes 20% — on a par with the current yield on long-dated bonds of Chesapeake Energy Corp., which just issued a going-concern notice. There’s being paid to wait, as they say, and then there’s being paid to wait in that trash compactor from Star Wars.EnLink’s cash flow math is tight. Consensus forecasts — which have now had time to digest cost savings pledged on the latest earnings call — put Ebitda at $1.1 billion in 2020. Take off around $500-$550 million for cash interest and (much-reduced) capital expenditure, and that leaves about $550-$600 million versus current distributions of about $550 million. With Ebitda forecast to grow at just 1% a year through 2022, that tight squeeze won’t ease up. Wells Fargo & Co.’s analysts estimated in a recent report that, absent a change in distribution policy, current leverage of 4.2 times adjusted Ebitda could reach almost 6 times by 2025. By any rational measure, the distribution should be cut.The complicating issue is that EnLink’s leverage is compounded by more leverage at the GIP level in the form of a $1 billion term loan. Technically, it is separate from EnLink’s own finances. But as the company acknowledges in its own 10K filing, debt owed by an entity owning almost half the company plus its managing partner, and which is serviced by EnLink’s own distributions, is very much a risk factor. By my calculations, the loan requires roughly $80 million a year of EnLink distributions (GIP didn’t respond to requests for comment)(1). As of now, distributions amount to about $255 million. So, in theory, EnLink could slash its payout by about two-thirds and GIP could still service the loan.In practice, that would be a bitter pill to swallow. As it is, GIP’s common units in EnLink are now worth not much more than the value of the loan and way below the original investment. Cutting distributions would certainly help EnLink’s balance sheet; all else equal, a 67% cut would save enough cash to take leverage below 4 times adjusted Ebitda, in line with long-term targets. But this would almost certainly push the value of GIP’s stake even lower, at least in the near term. As Ethan Bellamy, analyst at Robert W. Baird & Co. Inc., put it to me:Does GIP leverage prevent EnLink from cutting the distribution and right sizing the ship? It wouldn’t be the first time we’ve seen parental leverage from a private equity sponsor lead to sub-optimal outcomes for the subsidiary public entity.On the other hand, if EnLink cuts and its price falls further, then GIP might be tempted to make an offer for the rest of the company in an effort to salvage things out of the public eye. Needless to say, a takeover premium on an even lower EnLink price would do very little to make up for the losses suffered to date. We are seeing this play out with Blackstone Group Inc.’s offer for another midstream company, Tallgrass Energy LP, although the pain there is compounded by an agreement between the buyer and Tallgrass’s executives that effectively shields the latter from losses (see this).EnLink captures so much of what has gone wrong in America’s pipelines business. There’s the misalignment of interest between ordinary investors and the sponsors steering the company’s destiny. There’s the exposure to commodity markets from which, in theory, midstream companies were supposed to be insulated. Above all, there’s the overcapitalization of this sector, with obligations piled onto assets (largely to fund outsize payouts to controlling sponsors) that ultimately couldn’t generate the profits to service them (largely because too much stuff got built).Almost exactly four years ago, Kinder Morgan Inc. presaged the midstream reckoning to come by slashing its dividend. The stock has been listless for much of the period since then; even with the cut, chipping away at debts in a post-boom environment is a laborious process. As this decade of nominal success for America’s shale boom draws to a close, EnLink’s predicament shows the hangover remains very much a work in progress.(1) This assumes the full $1 billion remains outstanding. Interest is charged at Libor plus 4.25%, equating to 6.15%, or about $62 million. A debt-service covenant ratio of 1.1 times takes this to $68 million. Mandatory annual amortization of 1% of the loan plus assumed G&A costs results in an estimated minimum requirement of about $80 million to service the debt. Details derived from Moody's Corp.'s initial rating report from July 2018.To contact the author of this story: Liam Denning at ldenning1@bloomberg.netTo contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Occidental Gets a Break With Buffett Stake, Icahn Court Defeat

    Occidental Gets a Break With Buffett Stake, Icahn Court Defeat

    (Bloomberg) -- Occidental Petroleum Corp. rose after Warren Buffett’s Berkshire Hathaway Inc. bought an additional stake in the debt-laden oil producer and a Delaware judge ruled against activist investor Carl Icahn’s request for company files.Occidental gained as much as 4.2% Friday after Berkshire disclosed the purchase of $332 million of shares in the third quarter. That makes it the 17th-largest investor in Occidental, according to data compiled by Bloomberg.The stock is in addition to the $10 billion of preferred shares Buffett bought earlier in 2019 to help Occidental fund its takeover of Anadarko Petroleum Corp.The vote of confidence from Buffett is “certainly a positive for the stock,” said Muhammed Ghulam, a Houston-based analyst at Raymond James & Associates. “I wouldn’t be surprised if he buys more if the price drops lower.”Occidental dropped to a 14-year low earlier this month after Chief Executive Officer Vicki Hollub unveiled a plan to slash capital spending by 40% to deal with the debt taken on in its $37 billion takeover of Anadarko.Icahn has said the takeover, which was completed in August, was flawed. He plans a proxy battle to change Occidental’s board next year. But the billionaire investor lost a ruling that would have required Occidental to hand over company files related to the deal that may have assisted him in his fight. Icahn plans to appeal the decision.Occidental traded 2.8% higher at $38.83 a share at 10:29 a.m. in New York.To contact the reporter on this story: Kevin Crowley in Houston at kcrowley1@bloomberg.netTo contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.netFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Shake Shack, Grubhub Tie Up to Boost On-Demand Delivery

    Shake Shack, Grubhub Tie Up to Boost On-Demand Delivery

    Shake Shack (SHAK) benefits from various sales-building initiatives and digitalization.

  • Bloomberg

    GrubHub Gains as Barclays Upgrades on Hopes for Board Action

    (Bloomberg) -- GrubHub shares are trading higher Friday after Barclays raised its investment opinion two notches, to overweight from underweight.The “irrational competitive landscape” in online food delivery over the past 15 months, and GrubHub executives’ “ill-timed strategic investments, and poor execution” have resulted in the stock plunging 75% to two-year lows, analyst Deepak Mathivanan told clients. As such, Mathivanan has a few requests for the GrubHub board of directors, and upgraded “on the hope of swift execution.”One request to the board is to explore consolidation with another leading food delivery player, which should result in “meaningful synergies.” Mathivanan believes that under the right M&A scenario, shares could be valued at “well north of $50 per share.” He noted the German market as a case study, where Ebitda improved after Takeaway.com NV’s acquisition of Delivery Hero SE’s German business and Takeaway shares rallied more than 75% since the December announcement. Delivery Hero climbed almost 60%.Another recommendation for GrubHub directors is to “reduce investments on unproven areas.” There’s been little benefit from the $100 million in additional marketing investment over the past 12 months, and now GrubHub is planning to spend another $150 million on “other unproven strategies,” he said. “We don’t believe these programs are likely to help achieve sustainable growth in this intense competitive environment.”Mathivanan also urges asset value preservation “before it’s too late.” GrubHub has “meaningful asset value” from its corporate offering and NYC/Chicago consumer businesses. “These assets are under intense attack from competition.” The analyst believes that GrubHub is a “dominant brand” that is worth “a lot more than current valuation under the right strategy in a rational market.”GrubHub shares rose as much as 5.7% Friday to $40.69. Barclays’ positive rating comes after Mathivanan’s 22 months in the bearish camp, during which time GrubHub fell 49% compared with the S&P 500’s advance of 8.5%.(Updates to add regular session share move in sixth graph.)To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.netTo contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper, Steven FrommFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Singles' Day Bonanza a Prelude to Holiday Season: 5 Picks

    Singles' Day Bonanza a Prelude to Holiday Season: 5 Picks

    After a successful Singles' Day, American retailers expect a smashing holiday season.

  • Deckers' Unmissable Run on the Bourses Makes It a Hot Pick

    Deckers' Unmissable Run on the Bourses Makes It a Hot Pick

    Deckers (DECK) is focused on expanding brand assortments, launching innovative products, and optimizing omni-channel distribution. Also, the company is benefiting from its sturdy e-commerce.

  • Company News For Nov 15, 2019

    Company News For Nov 15, 2019

    Companies In The News Are: CGC, VIAB, NTAP, GLOB.

  • Are Options Traders Betting on a Big Move in Canopy Growth (CGC) Stock?

    Are Options Traders Betting on a Big Move in Canopy Growth (CGC) Stock?

    Investors need to pay close attention to Canopy Growth (CGC) stock based on the movements in the options market lately.

  • Is the Options Market Predicting a Spike in Transocean (RIG) Stock?

    Is the Options Market Predicting a Spike in Transocean (RIG) Stock?

    Investors need to pay close attention to Transocean (RIG) stock based on the movements in the options market lately.

  • Warren Buffett Finds Wrong Elephant

    Warren Buffett Finds Wrong Elephant

    (Bloomberg Opinion) -- Warren Buffett’s Berkshire Hathaway Inc. has $128 billion of cash. There is almost no purchase too large for the company — in fact, large is exactly what investors are waiting for. And yet, the only stock Berkshire bought last quarter was a dinky retailer, RH.Berkshire disclosed in a regulatory filing Thursday that it took a $212 million stake in RH, a California-based home-furnishings chain valued at $3.3 billion. Buffett could even buy the entire company and it’d still be a puny deal for him. But it was a big deal for RH, because the shares surged 9% in after-hours trading and held near that level early Friday morning.I admit I didn’t even recognize the retailer’s name at first. RH used to be called Restoration Hardware, a place that sells $6,000 linen sofas and elongated wooden dining tables with “forthright silhouettes.” The company shrank its name and supersized its stores, an effort to target a more upscale clientele. It’s even installed some on-site restaurants, a little nourishment to help one ponder a new addition to the ski house. That’s partly what makes RH such a funny investment for Buffett. Not only is the billionaire known for his down-to-earth lifestyle — he’s lived in the same fairly modest house for more than 60 years — but he’s also usually drawn to businesses that mirror the America he sees from his unassuming Omaha office: railroads, truck stops, Dairy Queens, the Nebraska Furniture Mart. Furthermore, Berkshire tends not to waste time on minority stakes in small, specialty chains; its only other retail holdings are Amazon.com Inc. and Costco Wholesale Corp., companies valued at $870 billion and $134 billion, respectively. RH was the only new position Berkshire took in the latest quarter, aside from buying common shares of Occidental Petroleum Corp., in which it already purchased $10 billion of preferred equity (part of a financing deal to assist the oil and gas explorer in its takeover of Anadarko Petroleum Corp.). All in all, it was another dull period for Berkshire, whose last splashy stock pick was Amazon earlier in the year. With U.S. equities still on the rise, Buffett, 89, and his investing deputies are struggling to find cheap candidates. Whoever made the call on RH — Todd Combs, Ted Weschler or the Oracle himself — he may have had prescient timing. At the end of May, RH’s price-to-earnings ratio hit a low, and the shares have doubled since then, taking a big leg up in September. That said, RH’s overnight gains drove the shares above analysts’ average target level, which is $181 apiece. “The business remains tough to predict and we believe expectations may now be somewhat elevated,” Bobby Griffin, an analyst for Raymond James & Associates who has the equivalent of a “hold” rating on RH, wrote in a Sept. 11 report, citing the China tariffs and a slowdown in high-end U.S. housing. Similarly, Gordon Haskett Research Advisors wrote to clients Sept. 10 that the firm finds other retailers such as Wayfair Inc., Williams-Sonoma Inc. and At Home Group Inc. more attractive. At the end of the day, though, no matter how RH performs, it won’t have much of an impact on Berkshire’s portfolio. Another quarter has passed without a major acquisition by Berkshire, its cash pile hitting a record yet again. RH may sell a $449 wool felt elephant, but it isn’t the kind of elephant Buffett is after. The wait continues.To contact the author of this story: Tara Lachapelle at tlachapelle@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • J.C. Penney reports earnings — here is why investors are cheering
    Yahoo Finance

    J.C. Penney reports earnings — here is why investors are cheering

    What you need to know about J.C. Penney's latest challenging quarter.

  • Financial Times

    Icahn suffers Occidental legal blow as Buffett buys in

    A Delaware judge rejected Mr Icahn’s attempt to force Occidental into disclosing financial records in connection with its acquisition. In a judgment handed down on Thursday, the Delaware Court of Chancery said Mr Icahn had failed to provide any evidence of wrongdoing. “Allegations of mismanagement appear to be nothing more than disagreements with how Occidental’s directors exercised their business judgment,” wrote Joseph Slights, vice-chancellor.

  • What Does TripAdvisor, Inc.'s (NASDAQ:TRIP) P/E Ratio Tell You?
    Simply Wall St.

    What Does TripAdvisor, Inc.'s (NASDAQ:TRIP) P/E Ratio Tell You?

    Today, we'll introduce the concept of the P/E ratio for those who are learning about investing. We'll show how you can...

  • Target Q3 Earnings Preview: Buy TGT Stock After Walmart's Growth?

    Target Q3 Earnings Preview: Buy TGT Stock After Walmart's Growth?

    Target jumped over 2% Thursday after rival Walmart impressed Wall Street once again with its comps and e-commerce growth. So is it time to buy TGT stock heading into earnings?

  • Financial Times

    Google/travel sites: rout of passage

    US online travel sites Expedia, TripAdvisor and Booking Holdings make their living peddling dream vacations in far-flung locales. Dismal results last week sent stocks plunging. Google was to blame.

  • Aurora Cannabis Inc. (ACB) Q1 Earnings Surpass Estimates

    Aurora Cannabis Inc. (ACB) Q1 Earnings Surpass Estimates

    Aurora Cannabis Inc. (ACB) delivered earnings and revenue surprises of 133.33% and -21.69%, respectively, for the quarter ended September 2019. Do the numbers hold clues to what lies ahead for the stock?

  • Why Marijuana Stocks Plummeted in 2019

    Why Marijuana Stocks Plummeted in 2019

    Marijuana stocks were on a tear last year, but 2019 has sent stock tumbling back down to Earth. What happened?

  • California Governor Newsom Fielding More PG&E Takeover Calls

    California Governor Newsom Fielding More PG&E Takeover Calls

    (Bloomberg) -- For California Governor Gavin Newsom, sitting back and watching PG&E Corp.’s bankruptcy run its course is no longer an option.The mayors of 22 cities are pressing him to turn the embattled power giant into a customer-owned cooperative. San Francisco, the city he once served as mayor, wants to take over the company’s local wires. On Wednesday, a board member of a statewide consumer group sent Newsom a proposal that would have the state run PG&E like a massive municipal utility. And the former chief of California’s utility commission joined a coalition of groups to similarly press him for public control.“It is time for California to take over PG&E and stop letting profits stand in the way of a safe, clean energy future we all need and deserve,” the coalition, including former California Public Utilities Commission president Loretta Lynch, said in its letter to Newsom Thursday.The proposals reflect a groundswell of anger against PG&E following years of deadly wildfires sparked by the company’s power lines, and most recently, deliberate mass blackouts that plunged millions of Californians into darkness four times last month. They also underscore the growing pressure that Newsom, who took office just weeks before PG&E filed for bankruptcy, is facing to step in and fix the troubled power company.“He will be judged -- and he’s already being judged -- by how he manages this transition,” said Katie Bays, co-founder of Sandhill Strategy consulting.Newsom’s office didn’t respond to a request for comment.The municipal utility proposal submitted Wednesday envisions turning PG&E into a public agency governed by a board that could either be elected or appointed. It doesn’t spell out exactly how the state would finance such a plan, but says PG&E’s power plants could be sold and its transmission lines spun off into a separate not-for-profit entity. The new board would “facilitate” efforts by San Francisco and other communities to buy pieces of PG&E.Read More: After Blackouts, PG&E Ranks at Bottom for Customer Satisfaction“PG&E will never again be able” to provide “safe and reliable service at just and reasonable rates,” wrote Jeff Shields, a former public power executive who repeatedly tried to buy part of PG&E’s grid when he led an irrigation district in California’s Central Valley. He now serves on the board of the Utility Reform Network consumer group.“Their culture of criminal conduct and repeated disregard for public safety must end under your leadership,” Shields said.In some ways, Newsom has already involved himself in PG&E’s reorganization. He’s called on companies and cities to make bids on PG&E’s assets, saying he was unimpressed with the restructuring plans that had been presented in its Chapter 11 case. He pulled stakeholders, including PG&E Chief Executive Officer Bill Johnson, into a closed-door meeting to press for a quick exit from bankruptcy. He’s fighting PG&E’s plan to pay wildfire insurers $11 billion and has threatened a state takeover if the company fails to act soon.‘A Different Model’Should he make good on that threat, he’ll have options. Backers of both the co-op and municipal utility ideas say their proposals would establish a new PG&E capable of regaining the public’s trust. And more pitches may follow.“We all just need to work together to create a different model, because the current model of a PG&E driven by Wall Street and dividends, it just doesn’t work,” state Senator Scott Wiener said in an interview. The San Francisco Democrat is working on a bill to be introduced by February that would convert PG&E into a public utility. He said he’s still hashing out the details.Even those on Wall Street are looking to state leaders to do more about power line-sparked wildfires and mass blackouts before they wreak long-term havoc on California’s economy. Already, the combined impact of this year’s fires and power shutoffs -- estimated at as much as $11.5 billion -- could put such a large dent in California’s economic output that the state might underperform the U.S. economy for the first time since 2010, said Scott Anderson, chief economist at Bank of the West.Read More: Mayors of One-Third of PG&E Customers Back Utility Takeover “The earlier an enduring policy solution is implemented, the less risk to the state’s long-term credit,” Wells Fargo Securities senior analysts Randy Gerardes and George Huang wrote in a report.Any effort to remake PG&E would be complex. The company serves 16 million people spread across 70,000 square miles, including mountains, farmland and dense cities.The cooperative proposal would leave the company relatively intact but change its governance and business model. As a co-op, the new PG&E would have lower financing costs than the investor-owned company does, said Dan Richard, a former PG&E senior vice president of public policy who helped draft the cities’ plan. The company would issue bonds to pay off its debts, which Richard said conservatively range from $45 billion to $50 billion.Whatever Newsom does must turn PG&E into a dramatically different institution with new governance, Bays said, because Californians won’t stand for anything less. “The governor absolutely pays consequences for allowing that to happen,” she said.(Adds letter from former California utility regulator starting in second paragraph)To contact the reporters on this story: David R. Baker in San Francisco at dbaker116@bloomberg.net;Romy Varghese in San Francisco at rvarghese8@bloomberg.netTo contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Joe RyanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.