Weekly Research Briefing: 'Tis the Season

@DeItaone: WMT RESULTS: Q3

• Total US comparable sales ex-gas +5.5%, EST +3.8%
• Walmart-only US stores comparable sales ex-gas +5.3%, EST +3.73%
• Sam's Club US comparable sales ex-gas +7%, EST +4.22%
• ADJ EPS $0.58, EST $0.53, - Revenue $169.59B, +5.5% y/y, EST $167.49B

Walmart Inc.’s corporate employee bonuses are set to surpass targets again this year as the company’s stock soars and sales outperform its retail rivals.

The Bentonville, Arkansas-based retailer told US-based corporate employees they can expect to earn as much as 120% of their eligible bonuses, people familiar with the matter said. The final amount won’t be determined until the fiscal year finishes at the end of January, they added.

Walmart’s corporate employees earn a base salary with a bonus on top that varies by role. Walmart calculates the annual bonus payout based on company and individual performance, with a target of receiving 100%. Last year, corporate employees received 125%, the highest possible amount, according to a person familiar with the matter.

"Households earning more than $100,000 made up 75% of our share gains. In the U.S., in-store volumes grew, curbside pickup grew faster, and delivery sales grew even faster than that. Becoming more convenient for our customers and members is helping drive our growth." - Walmart CEO Doug McMillon

"It's really hard to know exactly what's going on with the consumer, but our opinion is they're probably a little bit better off than everybody thinks, especially our consumer." - Williams-Sonoma President & CEO Laura Alber

Disney’s “Moana 2” sailed to a blockbuster holiday opening in theaters, leading the box office to its strongest-ever Thanksgiving stretch.

“Moana 2” earned $221 million in domestic ticket sales between Wednesday and Sunday, the strongest five-day domestic Thanksgiving opening of all time. The solid debut for the animated feature, in which a Polynesian teenager goes on a quest to find an ancient lost island, is nearly double the $125 million previous record set by “Frozen II” over the same period in 2019, according to box-office tracker Comscore.

Strong sales for “Moana 2” as well as the continued success of Universal’s hit movie musical “Wicked” and Paramount’s action film “Gladiator II,” collectively led to a record-setting Thanksgiving weekend. Overall, theaters in the U.S. and Canada sold $420 million in movie tickets over the five-day period, the best-ever Thanksgiving haul, topping $315 million in ticket sales during the same period in 2018, Comscore said.

A day after Sotheby’s tested the strength of the trophy market with its $65.5 million Claude Monet, rival Christie’s did one better—by auctioning off a $121.2 million René Magritte. “Empire of Lights,” the painter’s 1954 dichotomy of night and day, was estimated to sell for $95 million.

Magritte, who lived from 1898 to 1967, is known for his dreamlike takes on everyday objects, from smoking pipes to green apples to bowler hats. With this sale, he joins an elite club of fewer than 20 artists whose works have commanded nine-figure sums, including Pablo Picasso and Leonardo da Vinci. The sale, to a telephone bidder after a nearly 10-minute bidding war, also represents the first time this year that any artist has crossed the $100 million mark at auction.

@WalterDeemer: The advance-decline line hit a new high yesterday, so you can worry about something else now...

@bespokeinvest: Pretty crazy stat. The 8 best performing stocks in the S&P 1500 so far this year are from 8 different sectors.

@KevRGordon: Despite a 1% loss in October, the S&P 500 posted a 12m trailing gain of 36%. This @LeutholdGroup table shows that a U.S. recession has never begun in the twelve months following the initial breach of the +35% line.

Strategists at Bank of America Corp. are making a contrarian bet on European stocks as the continent’s main equity index heads for its worst year of underperformance relative to the US since 1976.

Scope for fiscal spending appears to be improving in Europe, while any potential ceasefire in Ukraine could ease pressure from high energy prices, the BofA team led by Sebastian Raedler wrote in a research note. By contrast, the US economy faces headwinds from a stronger dollar and a potential weakening in real disposable income, the strategists said.

“The projected upside for relative euro area growth momentum implies tactical upside for European versus global equities,” Raedler said, upgrading the region to overweight from neutral.

@dailychartbook: "All 8-bellwether market indicators have achieved new all-time highs in November. Historically, when this occurs, the median duration until S&P 500 peak has been 7.5 months. Median return = +5.6%."

@RenMacLLC: $SPX returns in Dec-Jan are equivalent to playing blackjack with hard-19 while the dealer showing a 6. (You lose about 30% of the time). And unlike blackjack (and this gets missed all the time) the payoff in mkt is (can be) asymmetrically skewed vs 1:1 in Blackjack. So 70% w/a 2:1 payoff is actually a HR (to bring another analogy into this mix!).

• Quikrete Holdings has struck a $9.2 billion deal to acquire Summit Materials SUM -0.29%decrease; red down pointing triangle, bringing together two of the biggest makers of building materials in the U.S. Privately held Quikrete is expected to pay $52.50 a share in cash for Summit, the companies said Monday, confirming an earlier report from The Wall Street Journal. Including debt, the deal values Summit at $11.5 billion. (WSJ).
• Italian bank UniCredit SpA made a €10 billion ($10.5 billion) all-share bid for domestic rival Banco BPM SpA. UniCredit’s CEO, Andrea Orcel, wants to move his lender into the top echelons of European banking and is separately weighing a bid for Germany’s Commerzbank AG. (Bloomberg)
• Amcor has agreed to buy Berry Global Group in a roughly $8.4 billion stock swap that will create a consumer and healthcare packaging company with annual revenue of about $24 billion. (WSJ)
• Blackstone has agreed to buy Jersey Mike's Subs, the sandwich chain said on Tuesday, in a deal that a source said valued the company at around $8 billion including debt. (Reuters)
• US pipeline operator Oneok Inc. announced its purchase of the common units of EnLink Midstream LLC it doesn’t own for $4.3 billion. (Bloomberg)
• Anglo American signed a deal to sell its remaining steelmaking coal assets to U.S. coal miner Peabody Energy BTU for up to $3.775 billion, in the mining giant’s first major step in its large-scale business reshaping. (WSJ)
• And in Canada, mutual fund manager CI Financial Corp. plans to go private for about C$4.7 billion ($3.4 billion) in a deal backed by Abu Dhabi’s Mubadala Capital. (Bloomberg)
• Regional lender Old National Bancorp will buy privately held Bremer Financial in a $1.40 billion cash-and-stock deal, the companies said on Monday, creating a combined bank with over $70 billion in assets. (Reuters)
• Honeywell International has agreed to sell its personal-protective-equipment business to a private-equity firm’s portfolio company for $1.33 billion in cash. The industrial conglomerate Friday said it would sell the PPE unit to Protective Industrial Products, a portfolio company of Odyssey Investment Partners. The deal, expected to close in the first half of next year, comes as the Charlotte, N.C., company faces a call to break up. (WSJ)
• Heidelberg Materials said it struck a deal to buy U.S. cement producer Giant Cement Holding for about $600 million in a bid to expand its footprint on the East Coast. (WSJ)
• Comcast is officially cutting the cord on most of its cable networks. The company announced a plan Wednesday that will offload the bulk of NBCUniversal’s financially challenged cable portfolio — excluding Bravo — into a new entity owned by Comcast shareholders. The thinking is the new company will be positioned to acquire other media and digital properties, to gain greater scale in an increasingly streaming-focused landscape. Alternatively, the separation of the NBCU cable group would make it easier to sell the business... Over the 12 months ended Sept. 30, 2024, SpinCo generated approximately $7 billion in revenue, according to Comcast. (Variety)
• SL Green Realty Corp. sold a stake in One Vanderbilt to Japanese firm Mori Building Co., in a deal that values the trophy office skyscraper near Manhattan’s Grand Central Terminal at $4.7 billion. Mori purchased an 11% interest in the property, according to a statement Thursday. SL Green now owns 60% of the building. The 1,401-foot-tall (427-meter) tower opened during the depths of the pandemic in 2020. The building, which is fully leased, is one of the newest towers in Midtown and has attracted many finance, tech and law firm tenants, including Carlyle Group Inc. and Toronto-Dominion Bank. (Bloomberg)

UK dealmaking activity accelerated this week with the announcement of four takeover offers worth a total of £5.3bn, underlining the country’s position as Europe’s foremost destination for mergers and acquisitions this year.

On Friday, the board of TI Fluid Systems, a FTSE 250 car parts manufacturer, recommended that shareholders vote in favour of a £1bn offer from Canada’s ABC Technologies, which is backed by Apollo Global Management.

This followed a £701mn bid by Macquarie for waste-management group Renewi on Thursday and a £351mn purchase of pub and restaurant chain Loungers by Abu Dhabi-backed Fortress Investment Group.

On Wednesday night, Direct Line also said it had rejected a £3.3bn bid from larger rival Aviva, prompting the FTSE 100 insurer to approach shareholders about its offer.

The flurry has underscored the UK’s position as the most active hub in Europe for deals so far this year. Activity has accelerated following October’s Budget, as dealmakers have more certainty to push ahead with transactions before the end of the year.

The value of mergers and acquisitions involving UK companies, whether buying or selling, has hit $306.3bn so far this year, a 57 per cent increase on the same period last year, according to data from Dealogic.

"I will tell you that the pent-up demand of M&A is coming. And we're seeing it not only with what we're hearing from our clients, but what we're hearing from others in the industry. I had a conversation with the head of the [ICBA] just on Monday, actually. And she indicated that she's hearing a lot of the same stuff. So not only are we hearing M&As going to pick up, definitely opportunities for regulatory concerns and scrutinies to maybe lessen specifically from the [CFPB] and some things that were coming there. So all of those will continue to help kind of drive this M&A market." - Jack Henry & Associates COO Gregory R. Adelson

There are hundreds of private technology companies waiting for the market for initial public offerings to open up, according to a JPMorgan Chase & Co. global chair of technology investment banking, with clarity on the US election expected to provide a shot in the arm for listing hopefuls.

“When we look at our analysis, we have about 750 quality companies in tech alone that want to get out,” Madhu Namburi said in a Bloomberg Television interview. “Sixty to 70 companies go public in a normal year. That’s a lot of backlog.”

With the election in the rearview mirror, the market is showing signs of wanting to reward companies prioritizing growth as opposed to just profitability, Namburi said.

On the M&A front, Namburi said megadeal activity has been soft, though transactions in the range of $5 billion to $10 billion have rebounded to pre-Covid pandemic levels.

Big-ticket transactions in technology have been impeded by protracted regulatory reviews lasting 12 to 18 months or longer, according to Namburi, which is something that he expects to change under the incoming Trump administration.

“The process should become more streamlined — that’s the expectation and the hope — which should get people more bold to start venturing back into these larger deals,” he said.

@RenMacLLC: This isn't happening in Russell 1000 tech, but in Russell 2000 tech, equal weight relative performance is breaking out.

Private equity-backed initial public offerings on US exchanges are poised for a comeback.

Last year, companies backed by buyout firms saw just $8.7 billion in US IPO exits, significantly below the pre-pandemic average of $45.1 billion, according to a new analysis by data provider PitchBook. The factors that affected the broader IPO market — high interest rates, macroeconomic uncertainty and rising geopolitical risks — all contributed to a dire environment for private equity-backed companies.

Now with US stocks hitting record highs and the macroeconomic environment improving, the prospects for exits have brightened. PitchBook identified 50 PE-backed companies poised for IPOs on US exchanges next year, choosing firms with sufficient scale for public markets, recent IPO filings or preparatory activities, as well as having been on buyout firms’ books for an extended period.

“Stock prices being at all-time highs creates a halo effect and we fully expect 2025 to be another recovery year,” said Tim Clarke, lead analyst for private equity at PitchBook.

One of the world’s most valuable private tech companies is raising billions more in cash and is in no rush to go public, sources told CNBC.

San Francisco-based Databricks is raising at least another $5 billion in its latest funding round, though it could raise up to $8 billion given the round is ongoing, according to several people familiar with the matter, who asked not to be named because the discussions were private. The latest raise would value the company at $55 billion and could top the largest round of the year, by OpenAI.

The latest funding is designed to help Databricks employees sell shares, one of the people said. Reducing pressure from employees to cash out also reduces the need for a liquidity event such as an IPO. One source said the funding round makes Databricks’ highly anticipated public debut less urgent. But it could still happen in the back half of next year.

WELLS: $JPM “reiterated that they have $2B of AI benefits and that this # is likely conservative.

“.. Gen AI has gone from zero employees 12 mos ago to 200K employees now, implying that AI is now at the fingertips of nearly all employees.

“.. JPM is the lone U.S. bank to provide AI fin'l metrics.”

Donald Trump’s Treasury Secretary pick, Scott Bessent, has a government deficit-reduction plan, neatly packaged as 3-3-3, which includes the U.S. producing an additional 3 million barrels of oil-equivalent a day. Not only does that energy plan seem impossible to implement, it makes little sense.

First of all, convincing oil-and-gas companies to produce more—the equivalent of over a fifth of total U.S. oil production today—will be a near-impossible task. The industry was scarred by years of overproduction during the shale boom, and investors no longer tolerate wildcatter behavior: They would rather see cash returns over excessive fracking. Trump’s major oil and gas donors have already signaled that they don’t want to “drill, baby, drill.”

U.S. energy companies on average say they need WTI crude prices to be at least $65 a barrel for drilling to be profitable and $89 a barrel for them to increase drilling substantially, according to the latest survey by the Kansas City Federal Reserve. With prices today below $70 a barrel, there is scant incentive for drillers to increase production...

If energy production increases so much, it will most likely cause global commodity prices to drop. If that happens, tax receipts from the oil-and-gas industry would decline, Pickering notes. Oil prices could drop to $50 a barrel if the U.S. does increase production by 3 million barrels a day within the next five years, he added.

WASHINGTON—Donald Trump’s campaign-trail vow to end President Biden’s signature climate law is running into a cold reality: Too many Republican lawmakers want to keep it.

The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects across the country, with Republican-led states getting the lion’s share of the funding. Even though not a single Republican in the House or Senate backed the Democratic package, today there likely isn’t enough support in Congress to pass a repeal, according to Capitol Hill watchers and former Trump administration officials who worked on energy policy.

“There are too many things in there that are too important to too many constituencies” to throw out the law, said Sen. Kevin Cramer (R., N.D.).

A clash between Trump and congressional Republicans over the fate of the IRA would mark a high-stakes showdown determining the fate of hundreds of projects, billions of dollars and tens of thousands of jobs. It would pit Trump against some of his staunchest oil-and-gas supporters, who have plowed money into projects funded by the climate law, while presenting another test of how hard GOP lawmakers are willing to push back against the president-elect.

With a majority of just about a half dozen seats in next year’s House and a 53-47 margin in the Senate, the IRA repeal is one of a number of Trump pledges that might fizzle out.

“It looks like flow batteries are finally about to take off with interest from China,” said Michael Taylor, an energy analyst at the International Renewable Energy Agency, an international group that studies and promotes green energy. “When China starts to get comfortable with a technology and sees it working, then they will very quickly scale their manufacturing base if they think they can drive down the costs, which they usually can.”

This is what the power plants of the future may look like: Instead of stashing coal and gas next to boilers or combustion turbines, they’ll use electrons to store energy inside of giant batteries...

Inside a sprawling two-story warehouse, HEPCO Network is storing electricity in 130 gleaming steel and plastic tanks. They can stockpile enough energy to power more than 27,000 Japanese homes for four hours.

Each 10,000-gallon tank holds tiny particles of the metal vanadium, which float around in water. This metallic soup holds the key to hoarding energy in massive quantities.

Vanadium is a shape-shifter. If you add or remove electrons from its atoms the element’s electrical charge will become more positive or negative, and its color changes from purple to green, blue and yellow. The metal’s rainbow color palette led Swedish chemist Nils Gabriel Sefstrom to name the element after Vanadis, the Scandinavian goddess of beauty. But vanadium’s ability to change its charge is what makes it so useful in a battery...

Flow batteries are designed to tap giant tanks that can store a lot of energy for a long time. To boost their storage capacity, all you have to do is build a bigger tank and add more vanadium. That’s a big advantage: By contrast, there’s no easy way to adjust the storage capacity of a lithium-ion battery — if you want more storage, you have to build a whole new battery.

The flow batteries in this plant are designed to store energy for about four hours of use, which is on par with lithium-ion batteries. But Sumitomo Electric says it expects future projects will aim to double that duration to eight to 10 hours. That’s about what they’d need to last overnight when solar panels are dormant, or to fill in the gaps between gusts of wind.

Music By John Williams
Rating: PG
Runtime: 1h 46min
Release Date: November 1, 2024
Genre: Documentary, Music

From his early days as a jazz pianist to his 54 Oscar® nominations and five wins, the documentary takes an in-depth look at Williams’ countless contributions to film, including many iconic franchises, as well as his music for the concert stage and his impact on popular culture. The film features interviews with artists and filmmakers whose lives have been touched by his timeless music. Directed by award-winning filmmaker and best-selling author Laurent Bouzereau, the documentary is produced by Steven Spielberg, Brian Grazer, Ron Howard, Darryl Frank, Justin Falvey, Sara Bernstein, Justin Wilkes, Meredith Kaulfers, Kathleen Kennedy, Frank Marshall, Laurent Bouzereau, with Markus Keith and Michael Rosenberg serving as executive producers.