U.S. Stocks Up; Endo, Qualitest Deal

Arthi Gupta
28 Sep, 2010
New York City

U.S. stocks open higher. President Obama signed small business bill into law. The ADB raised Asia growth forecast to 8.2% TransDigm agreed to buy McKechnie Aerospace for $1.27 billion and Endo Pharmaceuticals agreed to acquire Qualitest Pharmaceuticals for $1.2 billion.

[R]9:35 AM New York – U.S. stocks open higher. President Obama signed small business bill into law. The ADB raised Asia growth forecast to 8.2% TransDigm agreed to buy McKechnie Aerospace for $1.27 billion and Endo Pharmaceuticals agreed to acquire Qualitest Pharmaceuticals for $1.2 billion.[/R]

Asian markets declined on concerns that China might take additional measures to curb the property market and European markets traded mixed.

The Asian Development Bank stated today that Asia''s developing economies are likely to grow at a faster pace citing the region''s strong export-based recovery, robust private demand, and the sustained effects of stimulus policies for its upward revision.

The 45 economies of developing Asia are now forecast to expand 8.2%, well above the 5.4% growth recorded in 2009 and also above the ADB''s earlier forecast of 7.5% in April.

President Barack Obama on Monday signed a bill aimed at boosting small business and job creation. Obama said that small businesses are the anchors of the American economy.

He further noted that the recent economic downturn had a devastating effect on small businesses and the middle class, with depressed consumer spending leading to less demand and the financial crisis making it more difficult for small businesses to get credit.

Obama said his administration has put in place a series of programs to boost small businesses from cutting taxes and offering tax credits for job creation and working to make credit more available.

TransDigm Group Incorporated, the aircraft components maker announced an agreement to purchase McKechnie Aerospace Holdings Inc. controlled by JLL Partners, for a price of $1.27 billion in cash.

On a full-year basis, the company expects the McKechnie business to achieve meaningful growth in fiscal 2011 in revenues and operating earnings.

Endo Pharmaceuticals entered into an agreement to acquire Qualitest Pharmaceuticals, a leading, privately-held generics company in the U.S., for approximately $1.2 billion in cash. The company brings a portfolio of 175 generic drugs.

Upon deal closing, Endo anticipates that Qualitest would add approximately $400 million in annualized revenue and $0.40 in annualized adjusted diluted earnings per share. Endo also expects revenue growth of the combined generics business to be at least 15% over the next two years.

Further, Endo expects to realize a $30 million annualized cost synergy run-rate in 2013. The synergies will be associated with procurement, distribution, manufacturing and other general and administrative expenditures.

Research In Motion Limited, the Canadian smartphone maker launched the BlackBerry PlayBook, its first tablet computer but was vague on the price and when the product will be available next year.

Earnings Review

Cognex Corp. ((CGNX)), the scientific and technical instruments maker increased its revenue guidance for the third quarter of 2010. Revenue for the third quarter of 2010 is now estimated between $74 million and $76 million, compared to the previous guidance of $65 million to $68 million provided on August 2.

ITC Holdings Corp. ((ITC)), the electric utilities provider reaffirmed its earnings guidance for fiscal year 2010 in the range of $2.70 to $2.75 per share.

Jabil Circuit, Inc. ((JBL)), the contract electronics manufacturer reported fourth quarter revenue surged 38% to $3.86 billion from $2.80 billion in the same quarter last year. Net income in the quarter soared 967% to $58.7 million or 27 cents per diluted share, compared to net income of $5.5 million or 3 cents per share for the year-ago quarter.

Palatin Technologies, Inc. ((PTN)), the biopharmaceutical company reported fourth quarter revenues plunged 83% to $0.7 million from $4.2 million in the same quarter a year ago. Net loss in the quarter widened to $4.2 million or 40 cents per diluted share compared to a net loss of $0.2 million or 2 cents per share in the prior year.

Paychex, Inc. ((PAYX)), the payroll and human resource service provider said first quarter revenue increased 4% to $518.3 million from $500.2 million in the same quarter last year. Net income in the quarter rose 7% to $131.9 million or 36 cents per diluted compared to net income of $123.6 million or 34 cents per share in the prior-year quarter.

Walgreen Company ((WAG)), the drugstore chain stated fourth quarter sales increased 7.4% to $16.87 billion from $15.70 billion in the year ago quarter. Total sales in comparable stores rose 1.5% in the quarter, while front-end comparable drugstore sales increased 1.2% in the quarter.

Net earnings in the quarter rose 7.8% to $470 million or 49 cents per diluted share, compared to net earnings of $436 million or 44 cents per share in the same quarter last year.