At WU’s upcoming Investor Day (Sept. 24th) we expect management to provide further detail around its Global Strategy Initiatives (expected to generate $50mm in savings in 2020, and $100mm in annual run-rate savings in 2021), with incremental color around growth investments and partnerships with tech firms including AMZN and Visa. We remain constructive around WU’s digital investments, willingness to partner with leading companies which can leverage its global network and retail cross-border, but expect competitive dynamics from P2P, new digital entrants and investments needed to stimulate growth in B2B may result in muted EPS growth over the medium-term.
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We survey investors quarterly to quantify sentiment and views on key topics. This quarter we had 86 replies. Thanks for replying, if you did! We think this survey had some particularly interesting and actionable results.
Investors are cautious on global gas fundamentals because demand growth has been hyper-concentrated in a few markets while supply rises, and Wolfe Utilities, E&P, Transport, and Industrials collaborative Power Supply Study confirms risk of accelerating renewables capacity as a headwind to gas demand (certainly in the US and possibly worldwide). We run a global gas demand model built on core growth geographies and are reducing the 2030 demand outlook as world gas markets take on a US-like weather driven pattern, with gas prices more linked across continents as LNG capacity grows.
On July 24, BMY reported mixed topline results from its much-anticipated CheckMate-227 trial. While Part 1A of the trial (Opdivo+Yervoy) was positive, Part 2 (Opdivo+chemo) failed. We and others had expected the opposite (i.e. that Part 1A would fail and that Part 2 would work).
How do industrials perform through a rate cutting cycle? Generally positive but not in the early stages where there is a bias for defensive outperformance. Since June, we have seen cyclicals lead, but history tells us this is not normal. We need to see FY20 earnings (and share prices) rebalance before we can get behind the short cycle rotation trade.
Our monthly 50-page report details key supply, demand and pricing trends that are important for the Trucking and Truck OEM stocks. Each month, we also update our global truck production forecasts and mark-to-market our Truck OEM models.
LPLA published August metrics after the close. Takeaways were very encouraging as accelerating core organic growth, sizable uptick in client cash, and continued remixing to higher-fee Advisory all affirm key tenets of our bull case (see recent management meeting note & webcast). We expect shares to outperform tomorrow given strong reported metrics.
Now that the NXST-TRCO deal has finally closed, we’re looking forward to the uncertainty/overhang on this stock finally being removed. Two surprises in today’s announcement: 1) The higher synergy guide of $185MM vs. the initial $160MM - as we felt TRCO had already done everything it could to squeeze every efficiency. 2) NXST’s new ‘19/‘20 PF FCF guide of $1.02B was even higher than our $986MM est. (by ~3%) even with a $20MM “disruption” from the T dispute. NXST management is hosting a call at 10AM tomorrow. Dial in: 334-777-6978. We reiterate our Outperform and raise our June 202E price target to $157 from $146.
We view IHRT as a secular winner in the Audio space given its premium brand, unparalleled scale/reach, innovative management team, and massive technology platform. We’d highlight: 1) IHRT has the largest portfolio of radio stations (848 in ~160 markets); 2) it is the No. 1 podcaster in the U.S (per Podtrac’s August 2019 report); 3) the iHeartRadio app already has ~71MM MAUs; and 4) most important, IHRT is the only audio co. that is past its heavy investment spend; therefore, all it has to do now is monetize its various assets.
Upgrading To Outperform. Alongside our sector move to Market Weight from Underweight, we’re upgrading COG to Outperform from Peer Perform. We’ve been on the sidelines at COG looking for a better entry point and waiting for expectations to reset around a $2.50/mmbtu price environment. With the stock now -20% over the last three months, Consensus coming down to 5% 2020/21 volume growth, and our $27 PT intact, we see an improved risk/reward and opportunity to own one of the best low-cost asset bases and steady FCF profiles amongst E&Ps.