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Assessing Transcocean’s Cost Reduction to Fight Industry Downturn

Transocean’s (RIG) drilling expense-to-revenue ratio fell from 559% in 3Q14 to 56% in 3Q15. To withstand the current industry downturn, offshore drilling companies (OIH) (XLE) have no choice but to reduce their costs as much as possible.

Transocean (RIG) and peers such as Diamond Offshore Drilling (DO), Atwood Oceanics (ATW), Seadrill (SDRL), Ocean Rig (ORIG), Pacific Drilling (PACD), and Noble (NE) have announced cost reduction plans to maintain profit margins in this difficult scenario.

3Q15 drilling expenses

As we can see in the above graph, Transocean’s expenses showed an improvement of 10%, from $985 million adjusted drilling costs in the second quarter to $880 million. 2Q15 expenses of $197 million included net favorable items of $788 million associated with Maconda-related insurance recoveries and other items. These are one-time gains, and the adjusted operating and maintenance expenses amount to $985 million. Two-thirds of the decrease in expenses was due to reduced activity and included the benefits related to cost-effective stacking activity.

The company mentioned that its ultra-deepwater stacking costs have decreased by approximately 35%, and the company further expects these costs to be below $40,000 per day in early 2016.

General and administrative costs

General and administrative costs in the third quarter increased to $45 million from $44 million in the prior quarter.

The company has planned structural changes to improve cash flow over the next three to four quarters. The company will recognize restructuring costs in the fourth quarter. With this, we may see higher general and administrative expenses in the fourth quarter. Going forward in 2016, the company expects these expenses to decline to approximately $165 million

The Worst Is Behind Schnitzer Steel, Morgan Stanley Upgrades

Analysts expressed optimism regarding the company's mid-cycle margins, while expecting robust free cash flow yield.

The consensus is looking at $25-27/t margins for FY2016, and giving only a small credit for recent cost savings.

Its also believed that the worst is over for Schnitzer Steel, given that the stock has underperformed its peers by about 50 percent over the last five years. However, the company has demonstrated its ability to manage costs and generate cash, which is expected to provide downside support.

In addition, its believed that the risk-reward is balanced at present, although "some structural challenges remain.

Avon Shares Soar After Citigroup Points to Signs of Turnaround

Avon Products Inc.’s stock jumped as much as 28 percent, its biggest gain in more than four decades, after Citigroup Inc. raised its rating on the beleaguered cosmetics company.

Citigroup upgraded the company to a buy recommendation, with a target price of $5, saying that Avon will “likely articulate some long-awaited plans to fund reinvestment in the business to reaccelerate more profitable growth.”

The report renewed investor optimism for a company reeling from three years of losses and the waning effectiveness of its door-to-door sales model. Avon also has struggled with currency fluctuations and a new industrial production tax in Brazil, resulting in an unexpected loss last quarter.

Box Stock Rising on BofA/Merrill Lynch Rating Upgrade

Shares of Box Inc. (BOX) are higher by 2.85% to $13.33 on heavy volume in midday trading on Tuesday afternoon, following a rating upgrade to "buy" from "neutral" at Bank of America/Merrill Lynch this morning. The firm raised its rating on the cloud-based, mobile-optimized Enterprise Content Collaboration platform as it believes Box is seeing higher renewals. Bank of America/Merrill Lynch has set an $18 price target on Box stock. So far today, 1.06 million shares of Box have exchanged hands, as compared to the stock's 30 day moving average of 751,371 shares. Box is a Los Altos, CA-based application software company that allows organizations to manage their content. The company's platform enables users to collaborate on content both internally and externally, build workflows and deploy compliance and security features.

CA Inc. CA, +4.00% announced plans to raise its dividend by 2% in fiscal 2017, said it has accelerated the completion of its previous stock buyback program and added a new $750 million program. The new dividend will be $1.02 a share, on an annual basis, up from $1 a share. The business software company said it has agreed to repurchase 22 million shares from Careal Holding AG, it's largest shareholder, for $590 million. The effective price of the buyback was $26.81 a share, which represents a 0.3% discount to Tuesday's closing price of $26.90. CA said that effectively completes its previous $1 billion buyback program. The company said it expects the accelerated buyback to increase earnings per share by 3 cents in fiscal 2016. The stock, which was still inactive in premarket trade, has lost 12% year to date, while the S&P 500 has slipped 0.4%.

Lazard Ltd (LAZ) today launched the first Levelized Cost of Storage Analysis (LCOS 1.0), an in-depth study comparing the costs of various energy storage technologies for particular uses.

LCOS 1.0, conducted with support from Enovation Partners, is being released in tandem with Lazard’s latest annual Levelized Cost of Energy Analysis (LCOE 9.0), which analyzes the costs of generating electricity from conventional and alternative technologies.

“Although in its formative stages, the energy storage industry appears to be at an inflection point, much like that experienced by the renewable energy industry around the time we created the LCOE study eight years ago,” said George Bilicic, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group. “Based on our analysis of storage technologies and our experience with LCOE, we expect to see rapid declines in the costs of energy storage.”

LCOS 1.0 is an analytically rigorous study of the major energy storage technologies in the context of their various uses, from large-scale, power grid-oriented applications to small-scale, residential applications. Its purpose is to compare the cost-effectiveness of each technology on an “apples to apples” basis within applications, and to compare each application to conventional alternatives.

“Energy storage system manufacturers and customers told us they expect to achieve significant price decreases over the next five to seven years,” said Jonathan Mir, Head of Lazard’s North American Power Group. “Falling prices should in turn drive wider deployment, and spur further innovation that could greatly expand the use of energy storage systems, both on and off the power grid, including greater use of renewable energy.”


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Investors started betting that Taser International (TASR) would be a big winner as police departments embraced wearable video cameras. They forgot that launching new products come with a cost.

That helps explain how shares of Taser, which were trading near a 52-week high as recently as July 17, could drop 51% to a 52-week low as of yesterday. But there’s nothing like an analyst upgrade to give shares a boost, especially when that analyst was never very bullish to begin with. Here’s Ladenburg Thalmann’s Glenn Mattson explaining why he upgraded Taser to Buy from Neutral:

We highlight that while earnings growth is modest by our forecast (in comparison to the multiple), the company is generating solid free cash flow, resulting in about $150 million in estimated cash and investments by the end of 2017. Shares of TASER International are now down over 50% from their all-time high of $35.95 in June versus the S&P 500 which is down 2.8% over the same time period. We believe the stock’s decline is a result of falling earnings expectations related to higher opex, growing competition in the on-officer video market, as well as a decline in the rate of growth for the weapons segment. We believe that all of these concerns are valid, but priced in at this point.

Amplify Snack Upgraded To Outperform At Credit Suisse: Here's Why

Robert Moskow of Credit Suisse has upgraded the rating on the company from Neutral to

Outperform, while raising the price target from $13 to $16.

Moskow believes that the robust Q3 results suggest that Amplify Snack Brands is on track to achieving management’s plan, “if not slightly ahead.”

Analyst Robert Moskow expressed greater confidence in the SkinnyPop brand, given that there are several factors that could drive upside, such as higher than expected Paqui sales, international expansion ahead of schedule and potential acquisitions sooner than anticipated.

“The company improved its distribution footprint at several of its biggest customers during the course of the year, and it has good visibility into further distribution gains in 2016,” Moskow said.

In fact, management emphasized its “its early efforts to penetrate the c-store and foodservice channels,” while saying that it expected to get the results of the test “at a major foodservice account” in 1Q16.

Also, customer at key accounts have agreed to merchandise more SkinnyPop products, while improving merchandizing, with one customer intending to start testing the brand internationally in 2016.

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4 Reasons Bankrate Could Have Enormous Opportunity Ahead

Robert Moskow of Credit Suisse has upgraded the rating on the company from Neutral to

According to the Bank of America report, there are four avenues that could drive the stock’s outperformance. “First, we expect Bankrate to return to growth in 2016, with the overhangs behind the company,” the report said.

Secondly, the personal loans segment could offer a meaningful market opportunity, while Bankrate is “more aligned with providers” following “the shift of its business to cost-per-closed loan from a cost-per-click model.”

“Third, strong growth from the credit card segment due to website redesign, which should continue into the next few quarters. Fourth, stock support from share repurchases,” Tran explained.

Bankrate reported strong Q3 results, with revenue rising 15 percent year-on-year, ex-insurance. The company also raised its 2015 revenue guidance above the consensus, while also increasing the EBITDA guidance.

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Small Cap Daily Report

December 4, 2015

  • Ambarella profit trailed estimates
  • Cooper Companies forecast missed lowest estimates
  • Fate therapeutics was rated new outperform at Wells Fargo

Read Full Report.

Buy - Sell - Hold

December 3, 2015

  • Affimed was rated a new outperform at Wells Fargo
  • Applied Genetic Tech also rated new outperform at Wells Fargo
  • Atwood Oceanics upgraded at Barclays

Read Full Report

Small Cap Movers

On Deck Capital, Inc. Common St

NYQ : ONDK - 04 Dec, 4:02pm
-0.44 (-3.85%) After Hours:
Open 11.35 Mktcap 768.31M
High 11.35 52wk Hight 28.98
Low 10.47 52wk Low 8.55
Vol 841008 Avg Vol 474044
Eps 0.14 P/e
Currency: USD

Mattson Technology, Inc.

NMS : MTSN - 04 Dec, 4:00pm
-0.04 (-1.11%) After Hours:
Open 3.60 Mktcap 267.77M
High 3.65 52wk Hight 5.10
Low 3.56 52wk Low 2.13
Vol 2.76M Avg Vol 541017
Eps 0.11 P/e 17.89
Currency: USD

Truett-Hurst, Inc.

NCM : THST - 04 Dec, 3:59pm
-0.4101 (-20.5050%) After Hours:
Open 1.7500 Mktcap 6.41M
High 2.1000 52wk Hight 4.5000
Low 1.4500 52wk Low 0.2000
Vol 378392 Avg Vol 61506
Eps 0.0200 P/e
Currency: USD

SunLink Health Systems, Inc. Co

ASE : SSY - 04 Dec, 3:05pm
+0.018 (+1.714%) After Hours:
Open 1.116 Mktcap 10.09M
High 1.118 52wk Hight 2.010
Low 1.051 52wk Low 0.940
Vol 21521 Avg Vol 17090
Eps nan P/e
Currency: USD

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