June 25, 2019 7:58am

Will news of Abbvie (ABBV) buying Allergan (AGN) enhance its earnings and cost reductions, keep the multiple sustainable and spur other acquisitions?

Pre-open indications: indeterminate – oversold directions are colorless but, 2 SELLs

“Five percent of the people think; ten percent of the people think they think; and the other eighty-five percent would rather die than think.”  Thomas A. Edison

 

A daily analytic read of potentials is constructed by warnings of emerging situations - a negative hoping to stimulate a positive

 

Dow futures are DOWN -0.10% (-28 points), S&P futures are DOWN -0.15% (-5 points) and NASDAQ futures are DOWN -0.27% (-21 point)

 

U.S. stock index futures were lower Tuesday morning, amid expectations of more dovish talk from the Fed,

European stocks traded lower after the U.S. imposed sanctions on Iran over the shooting down of an unmanned American drone last week while the pan-European Stoxx 600 dropped 0.3% during the morning session,

Asia Pacific stocks slipped while investors looked toward a meeting between U.S. President Trump and Chinese President Xi Jinping set to happen later in the week,

 

Data docket: Philadelphia Fed manufacturing for June and the S&P CoreLogic Case-Shiller National Home Price Index (HPI) for April are both scheduled to be released shortly after the opening bell. New home sales for May for May will be released at around 10:00 a.m. ET, with consumer confidence figures, Richmond Fed survey data and Dallas Fed services for June set to follow slightly later in the session.

 

Henry’omics:  

Futures on the NASDAQ were seen slightly lower.

Market focus is largely attuned to the U.S. central bank, with no less than five Fed policymakers, including Chair Jerome Powell, scheduled to speak.

Investors are eagerly anticipating a meeting between Trump and Chinese President Xi Jinping later this week. The meeting between Trump and Xi will be the first face-to-face meeting for the leaders since trade talks broke down in May, leading to a hike in U.S. tariffs on imports of Chinese goods <CNBC>.

AbbVie Inc. (ABBV -0.42%) will buy pharmaceutical company Allergan PLC (AGN -0.95%) in a deal with equity value of $63 billion. Allergan's stock soared 30% in premarket trading while AbbVie shares tumbled 9.9%.

Under terms of the deal, Allergan shareholders will receive 0.8660 and $120.30 in cash for each Allergan share they own, which based on Monday closing prices values Allergan shares at $188.24 each, a 45.3% premium. Based on 327.8 million shares outstanding as of May 3, the per-share bid represents a market-capitalization for Allergan of $61.71 billion.

AbbVie will buy Allergan for $188 a share, or over $60 billion. ABBV expects the deal to provide annual synergies and other cost reductions of at least $2 billion, and is expected to be 10% accretive to adjusted EPS over the first full year following the close of the deal, which is expected to occur in early 2020. AGN's stock has dropped 11.5% over the past three months and ABBV’s shares have slipped 1.3%.

 

From Monday night’s post, “slipping and sliding. Optimism is at low ebb, caution is the byword as low volume sets the trend. As I stated, “about the iShares NASDAQ Biotechnology (IBB) indicator: I’m still feeling gravity will be a force” and … it was!”

  • The close was negative with an A/DL of 7/35 and 1 flat and 2 acquired;
  • Monday’s range of the 7 upside was +0.46% (GBT) to +7.28% (MESO) while the 35 downside ranged from -0.49% (RENE.L) to -11.71% (CUR -$0.04);
  • 2 out of the 7 upside had higher than the 3 month average volume;
  • 8 out of the 35 downside had higher than the 3 month average volume
  • The iShares NASDAQ Biotechnology (IBB) indicator: Monday closed down -2.13% after Friday closed up +0.76% after Thursday +0.42%, Wednesday +0.57% and last Tuesday’s +1.38%.

 

Q2/19 so far:

  • In June, there were 7 positive, 1 neutral and 8 negative close, so far;
  • In May, there were 14 negative, 1 holiday and 8 positive closes;
  • In April, there has been 10 positive and 11 negative closes;

 

Companies in my headlights – It’s your decision; I provide an idea and context: post earnings release:

ReNeuron (RENE.L) closed down again -$1.00 after Friday’s -$1.50 to $206.00 after Thursday’s -$12.50 to $207.50 after Wednesday’s -$17.50 to $220.00, Tuesday’s -$5.00 to $237.50 and last Monday’s -$7.50 to $242.50. RENE.L has been floating on the market’s lows with a U.S. a negative -$0.30 or -0.15% differential indication – Maintaining SELL;

Vericel (VCEL) closed down -$0.89 to $17.45 after Friday’s +$0.47 to $18.34, Thursday’s +$0.43 to $17.87 after Wednesday’s +$0.63 to $17.44, Tuesday’s -$0.63 to $16.81 and last Monday’s -$0.30 to $16.51. The chart looks likes its time skim the froth, statistically there is a 52 week change of +52.68% and the closer we get to the end of the month (June) as the summer solstice begins and end of the quarter (Q2)- Maintaining SELL;

 

Opinions expressed are those of the author and are subject to change, and not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors.  All investments are subject to risks. Investors should consider investment objectives.

Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.