Days after being jilted by merger partner AbbVie after a proposed US government clampdown on overseas deals done for tax benefits, Shire has shown its potential as an independent business.
Shire’s shares soared 155p or nearly 4% to £40.50 after it unveiled a 32% jump in third quarter revenues to $1.597bn and a 60% rise in operating income to £717m. It raised its full year guidance and now expects a rise in earnings per share in the high 30% range. Previously it had been expecting low to mid 30% growth.
As part of its defence against AbbVie it said it planned to double sales to £10bn by 2020. Analysts at Jefferies said:
The 2014 earnings per share outlook is again hiked to high 30% from low-mid 30% growth, suggesting around 7%-10% consensus upgrades. Importantly there are no obvious signs of disruption from the now terminated AbbVie deal. We believe the third quarter results justify the stock trading up 5%. Longer term, compelling growth trajectory at an attractive valuation drives our buy.
Overall the FTSE 100 finished down 30.42 points at 6388.73, after new concerns about the Chinese property market, poor overnight figures from Amazon, a confirmed Ebola case in New York and uncertainty ahead of the ECB bank stress test results due on Sunday. Some reports suggested around 25 banks could fail the tests.
But the leading index still added 78.44 points since Monday, the first weekly rise after four weeks of decline. Its 1.24% rise is the strongest weekly performance since mid-August.
BT fell 6.6p to 370p after a downgrade by Morgan Stanley, but Vodafone added 3.65p to 200.5p as the bank said it preferred the mobile operator.
Anglo American lost 32p to £13.08 following Societe Generale cutting its recommendation from hold to sell and its price target from £16 to £13. SocGen said:
We adopt a sell rating on Anglo American on the back of: 1) challenging ramp-up conditions at Minas Rio (Brazil) and the unfavourable timing of Sishen’s pit constraint, 2) a difficult operating environment to restructure Amplat, 3) sub-par credit metrics and 4) high valuation.
Pearson, the publishing and education group, dropped 30p to £11.39 after it reported flat nine month revenues and said its chief finance officer was stepping down before the end of next year.
Tesco lost another 2.25p to 168.75p after its poor figures on Thursday, with a number of analysts issuing negative notes. Rickin Thakrar said:
We learned three things from Tesco’s first half results: 1)Tesco’s profit warning implies a 11% cut to our earnings per share estimates – we now expect £1.9bn in 2015 earnings before interest and tax and 15p in earnings per share due to increased price investment in the UK and tough Asia margin comps; 2) we estimate £21.5bn in debt obligations at the year end, implying 5 times lease-adjusted net debt/EBITDAR (including pension) – we think Tesco remains at risk of a downgrade in its credit rating to junk status; 3) Tesco has improved on price versus the big four in October but remains 38% adrift on price versus Aldi in our latest survey, while the UK remains mired in deflation – we also remain concerned that Tesco did little yesterday to address declines in the quality of its produce. Our break-up value is 163p [57p for operating company, around 100p for property]; however, we think a rights issue or heavily dilutive asset sale looks necessary in the near-term. We cut our fair value to 145p from 165p due to estimate cuts and maintain our sell recommendation.
