By Jeff Sanford
Toronto, Ontario — June 19, 2017 — This week’s Tuesday Ticker looks at what’s driving 52-week highs for Axalta’s and 3M’s shares, why Toyota is willing to pursue mergers and acquisitions in search of new automotive technologies and much, much more!
– Analysts are weighing in on Sherwin-Williams now that the Valspar acquisition has wound up. Celebrity CNBC stock picker Jim Cramer recently said the Valspar deal could be a “profit primer.” Another report from Longbow Research sees the deal as accretive, suggesting that economies of scale post-merger will be good for the stock price: “… a potential decline in raw material costs can result in positive earnings surprises and upward earnings revisions leading to preservation, if not expansion, of SHW’s valuation multiples and thus higher share prices.” Longbow has a price target of $400 on shares of the company. That target, if hit, would see a roughly 15 percent rise in the stock. Sherwin-Williams has already had a great year, rising more than 30 percent year-to-date. The $11.3 billion Valspar acquisition was completed June 1, 2017. Shares in the company are trading near their 52-week high.
Axalta is also doing well, with shares in the coatings company hitting new 52-week highs this week. Recent bids for the company’s shares have been up to $33.76 a share, near the company’s 52-week high of $33.77. That price gives the company a market cap of almost $9 billion. One report in the financial media this week suggested the company is, “… the toast of Wall Street …” According to the report, “… by historical standards, Axalta Coating Systems Ltd. remains a cheap stock.” This, even though the share price is up more than 24 percent since January. The company launched three new products this past week, including Imron Elite 8831s, a “clear coat catering to the commercial transport market,” according to a press release. The company also announced it has incurred loans of $1,550 million, “… to refinance borrowers’ about $1,541 million of existing US dollar term loans.” The loans mature in 2024.
– 3M shares are also hitting a 52-week high. A report on Benzinga notes that, “Stock [has] quietly hit an all-time high … While financial media obsessed with high-flying tech stocks … shares of Dow component 3M Co ‘quietly’ rallied 13 points.” Cramer at CNBC also noticed the stock’s performance, and tied it to a combination of a weaker US dollar and 3M’s extensive presence outside the US.
– With the AkzoNobel acquisition off the table, PPG is getting back to work. The company this week announced the completion of a, “… 45-million-euro paint and coatings facility in Russia’s Lipetsk region. The facility is commercially operational and can produce approximately 25 million litres of coatings at full capacity. The new facility will cater to the needs of the automotive, industrial, packaging, and protective and marine industries.” PPG’s stock is trading around $111 a share.
– Boyd Group Income Fund announced a cash distribution for the month of June 2017 of $0.043 per trust unit. Research analysts at Jefferies Group have increased their estimates of full year 2017 earnings estimates for Boyd in a research note distributed last Monday. According to a report, the Jefferies Group thinks Boyd will now “… earn $3.49 per share for the year, up from their previous forecast of $3.41.” It seems the recent acquisition of Assured Automotive is driving optimism around the company. Units of Boyd were trading as high as $102 last week. It was only in May that units were trading below $90 a share. It seems clear the market likes the Assured deal.
Related Market Notes
– Speaking at the annual shareholders’ meeting, Toyota President Akio Toyoda, said the company will consider mergers or acquisitions to procure new automotive technologies, including self-driving technologies. According to Toyoda, the company will now be more aggressive in, “… expanding in these areas.” Toyoda conceded, “… he may have focused too much on preserving the status quo at the firm until now,” according to a report by Reuters. Toyoda was quoted as saying, “The auto industry is undergoing big changes, and issues and ideas which we may have thought were far off in the future could affect us tomorrow. That’s why we need to go on the offensive while also preserving our areas of strength … We’ve been investing 1 trillion yen [$9.1 billion] each year for R&D, expanding [capital expenditures] and buying back shares, but this may not be enough. We need to consider all our options, including M&A, to survive in the future.”
– Facebook is going after, “… automakers to increase advertising revenue from an industry that hasn’t been a big buyer of ads on the social media network platform.” COO of Facebook, Sheryl Sandberg, hosted a “Facebook Automotive Summit,” in Detroit according to a report on financial news site Bloomberg. Sandberg was quoted as saying, “Our industries are converging. Detroit’s writing software and Silicon Valley is building hardware … The opportunities to learn from each other have never been better.” Even so, the report notes that, “TV is still the preferred choice when it comes to where most car companies spend their advertising dollars.”
– The Trump administration is investigating whether “aluminum imports pose a threat to ‘self sufficiency.’” According to a news report the US Commerce Secretary Wilbur Ross recently suggested, “… there is concern the Pentagon might be unable to secure enough domestic aluminum to meet its needs.” The idea is an old one and goes back to the Second World War. Were America to put import duties on aluminum to drive domestic production, the price of aluminum could go way up. Apparently administration member Steve Mnuchin, a former senior executive from Goldman Sachs, is “being asked” to stop an acquisition of an American aluminum producer by a Chinese company. Goldman Sachs has “set pretty optimistic forecasts on aluminum prices.” A CNBC report notes the bank, “… expects prices to hit $2,000 per metric ton in six months and $2,100 per ton within a year.”