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QUALCOMM INC REBOUNDING
The U.S. Census Bureau and the Department of Housing and Urban Development reported Tuesday morning that new housing starts in June rose to a seasonally adjusted annual rate of 1.215 million, an increase of 8.1% from the upwardly revised May rate of 1.122 million and an increase of 2.1% compared with the June 2016 rate of 1.190 million. The consensus estimate from a survey of economists expected a rate of around 1.170 million.
The revision to the May rate added 30,000 new housing starts to the previously reported total.
The seasonally adjusted rate of new building permits rose to 1.254 million, up 7.4% from the upwardly revised May rate of 1.206 million and up 5.1% from the June 2016 rate of 1.193 million. The consensus estimate called for 1.206 million new building permits.Single-family housing starts rose in June to an annualized rate of 849,000, up 6.3% from the revised May rate of 799,000. Single-family starts fell by 2.9% year over year in May.
The June report is solidly higher than the May report, even after upward adjustments to the May figures. Tuesday’s report on homebuilders’ confidence level was lower than expected, but that was likely due to higher costs pressuring both margins and affordability.Permits for new single-family homes rose 0.8% month over month in June, to an adjusted annual rate of 811,000, from a revised total of 779,000 in May. The rate rose 9.2% year over year.
Multi-family starts for buildings with 5 or more units decreased by 10.7% year over year in June but rose by 15.4% compared with May.
TOP BIOTECH STOCKS
Qualcomm Inc. (NASDAQ: QCOM) is scheduled to release its most recent quarterly report after the markets close on Wednesday. The consensus estimates from Thomson Reuters are calling for $0.81 in EPS and $5.26 billion in revenue. The fiscal third quarter from last year had $1.16 in EPS and $6.03 billion in revenue.
This company has been the king of processors in the mobile phone and tablet arena. Its growth recently ran into some headwinds as customers such as Apple chose to go in-house or to cheaper rivals, and the company also has had royalty disputes. Now Qualcomm is hoping to bolster its growth and diversify its revenues away from just expensive microprocessors with the acquisition of a much more diversified NXP Semiconductors in a deal valued at close to $40 billion.
The NXP deal is expected to close at the end of 2017 and should be immediately accretive to earnings. The merger brings together complementary products for mobile, automotive, Internet of Things and networking applications. The JPMorgan report noted:
Now that Apple has stopped making royalty payments we think one of the worst pieces of news is past. We see the stock as inexpensive but would also note the possibility of further news driven volatility.
A few analysts weighed in on Qualcomm ahead of the earnings release:
Morgan Stanley has an Equal Weight rating with a $60 price target.
Stifel has a Buy rating with a $65 price target.
Cowen has an Outperform rating.
BMO Capital Markets has a Market Perform rating with a $54 price target.
Rosenblatt Securities has a Neutral rating with a $56 price target.
Sanford Bernstein has a Market Perform rating with a $60 price target.
Canaccord Genuity has a Buy rating with a $70 price target.
Northland Securities has a Market Perform rating.
Wells Fargo has an Outperform rating.
So far in 2017, Qualcomm has underperformed the broad markets with the stock down nearly 14% year to date. Over the past 52-weeks the stock is actually up about 2%.
Shares of Qualcomm were last trading at $56.33, with a consensus analyst price target of $60.63 and a 52-week range of $51.05 to $71.62.
JULY NEWSLETTER 3
After a wretched 2016, when many of the top biotech companies were hit hard by campaign rhetoric, the industry has roared back to life this year. While nowhere near the highs posted in 2015, it’s clear that worst is over. The question for many investors is will the president or Congress start beating the high drug prices drum again, and if so, how shrill will they get?
In a new research report, Deutsche Bank notes catalysts for the rest of 2017 and beyond, but is also focused on the macro outlook, which includes repatriation of overseas capital and the potential for mergers and acquisitions. Ten stocks in the report are rated Buy, and here we focus on four that are well-followed on Wall Street.
Rumors have flown for some time that this may be a potential acquisition target. Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) develops and commercializes life-transforming therapeutic products.
It offers Soliris (eculizumab), a monoclonal antibody for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a genetic blood disorder, and atypical hemolytic uremic syndrome, a genetic disease. It also provides Strensiq (asfotase alfa), a targeted enzyme replacement therapy for patients with hypophosphatasia, and Kanuma (sebelipase alfa) for the treatment of patients with lysosomal acid lipase deficiency.
The company reported second-quarter earnings that rose from last year and topped what analysts had expected. Revenue for the quarter rose about 21% from last year.
The Deutsche Bank price target for the stock is $153, and the Wall Street consensus target is $155.17. Shares traded early Friday at $136.00.
Many top analysts are very bullish on this large cap biotech, even though the stock is still down almost 30% from highs printed in March of 2015. Biogen Inc. (NASDAQ: BIIB) discovers, develops and delivers to patients worldwide innovative therapies for the treatment of neurodegenerative diseases, hematologic conditions and autoimmune disorders. Founded in 1978, Biogen is one of the world’s oldest independent biotech companies, and patients worldwide benefit from its leading multiple sclerosis (MS) and innovative hemophilia therapies.
The company’s core MS drug market is facing challenges going forward, with most diagnosed patients now treated, payers limiting net benefits from price increases and competing entrants expected. With those issues in mind, the analysts are still positive on Tysabri, especially for secondary-progressive MS, with upcoming clinical data a big factor.
Biogen posted solid second-quarter results, boosted by strong sales of its spinal muscular atrophy drug, Spinraza, which is priced at $750,000 for the first year of therapy. Buoyed by the demand for Spinraza, the company raised its full-year earnings and revenue forecasts.
Deutsche Bank has a $315 price target, and the consensus estimate is $322.91. The shares traded Friday morning at $285.70.
This stock is trading at an astounding multiple of less than seven times estimated 2017 estimated profits. Gilead Sciences Inc. (NASDAQ: GILD) discovers, develops and commercializes medicines in areas of unmet medical need in North America, South America, Europe and the Asia-Pacific.
Its products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.
The stock was hit earlier this year on 2017 guidance, which was much lower than expected on diminishing hepatitis C revenue. However, the analyst is positive on the company’s HIV franchise going forward. It also cited new drug filings this year as potential catalysts.
Shareholders receive a very solid 2.77% dividend. The $79 Deutsche Bank price objective compares with the consensus target price of $76.50. The shares traded recently at $75.00.
This company is partnering with a top big pharmaceutical company and the data have been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) is a biopharma company focused on developing and commercializing therapies for neurological and endocrine disorders.
The company’s lead asset is Ingrezza, approved for the treatment of tardive dyskinesia (TD) and in development for the treatment of Tourette syndrome. Neurocrine is also partnered with AbbVie on elagolix, in development for the treatment of endometriosis and uterine fibroids, and it is developing opicapone as an adjunct therapy for Parkinson’s disease.
Recent results have shown anticipated uptake for the company’s Ingressa and Teva’s Austedo in moderate to severe TD, but preference has swung toward Neurocrine’s offering, partially due to the lower price point. This has many analysts on Wall Street raising their earnings estimates. The Deutsche Bank report noted:
While expectations are relatively low for the first quarter of Ingrezza sales, it will be the key focus for the quarter. Payer reactions as well as anticipated demand (and timing for potential guidance) will also be important. The company reports earnings next week.
Deutsche Bank has set its price target at $65. The posted consensus target is $70.77. Shares traded at $49.00.
Johnson & Johnson (NYSE: JNJ) released its fiscal second-quarter earnings report before the markets opened on Tuesday. The company posted $1.83 in earnings per share (EPS) on $18.8 billion in revenue. The second quarter from last year had $1.74 in EPS and $18.48 billion in revenue. Thomson Reuters has consensus estimates calling for $1.80 in EPS and $18.95 billion in revenue.
Operational sales results increased 2.9% with a negative impact from currency of 1%. This included domestic sales increases of 1.6%, while international sales rose 2.3%, reflecting operational growth of 4.4% and a negative currency impact of 2.1%.
Johnson & Johnson’s segments reported for the quarter:
Worldwide consumer sales of $3.5 billion for the second quarter represented an increase of 1.7% versus the prior year, consisting of an operational increase of 2.3% and a negative impact from currency of 0.6%.
Worldwide pharmaceutical sales of $8.6 billion for the second quarter represented a decrease of 0.2% versus the previous year with an operational increase of 1% and a negative impact from currency of 1.2%.
Worldwide medical devices sales of $6.7 billion for the second quarter 2017 represented a gain of 4.9% versus the prior year consisting of an operational increase of 5.9% and a negative currency impact of 1.0%.
During the quarter, New Brunswick, New Jersey-based Johnson & Johnson announced the completion of the acquisition of Actelion, a leading biopharmaceutical company, for about $30 billion in cash.
In terms of guidance for the full fiscal year, J&J expects its sales to come in a range of $75.8 billion to $76.1 billion up from the previous level. Additionally, the company raised its EPS guidance to a range of $7.12 to $7.22. The consensus estimates are calling for $7.10 in EPS and $75.67 billion in revenue.
Alex Gorsky, chairman and chief executive officer, commented:
Our second-quarter results reflect strong adjusted earnings growth and we are optimistic that the investments we are making will accelerate our sales growth in the second half of this year. Our pharmaceutical pipeline continued its strong momentum with the approval of TREMFYA as well as the submission and approval of several key line extensions. The Actelion acquisition establishes a new therapeutic area as well as another engine for growth.
Shares of J&J were last trading down about 0.6% at $131.35, with a consensus analyst price target of $133.67 and a 52-week range of $109.32 to $137.00.
HOUSING STARTS UP