TAST - Wall Street Lunch: Market Kicks Off The Week With Deals

2024-01-16 12:40:00 ET

Summary

• Synopsys to acquire Ansys for $19 billion in cash and $16 billion in stock.
• Restaurant Brands International to acquire Carrols Restaurant Group for $1 billion.
• SIXT strikes a deal with Stellantis for the purchase of up to 250,000 vehicles.

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The week kicks off with M&A in technology and fast food . (0:15) Boeing stock slumps below major technical support. (4:02) Barclays picks stocks for the second wave of AI . (5:05)

The following is an abridged transcript:

Our top story so far

It’s a big day for deals.

Ansys ( ANSS ) rose amid a report that Synopsys ( SNPS ) has finalized terms for acquiring the software company.

Synopsys will pay about $19 billion in cash and $16 billion in Synopsys stock for Ansys, according to a Reuters report citing people familiar with the matter. The deal will value Ansys at slightly less than $400 a share. The deal may take as long as 24 months to complete to give the companies time to gain antitrust clearance.

Burger King owner Restaurant Brands International ( QSR ) struck a deal to acquire Carrols Restaurant Group ( TAST ) in a deal with an aggregate total enterprise value of $1 billion. The deal price of $9.55 per share for Carrols represents a 23.1% premium to the stock’s 30-day volume-weighted average price.

Carrols is the largest Burger King franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated about $1.8 billion of system sales during the 12 months ended September 30, 2023. Carrols also owns and operates 60 Popeyes restaurants in six states.

And Car rental company SIXT ( SIXGF ) struck a deal with and Stellantis ( STLA ) for the purchase of up to 250,000 vehicles. The German company said the deal lays the foundation for further global expansion.

SIXT can buy up to 250,000 vehicles for its rental fleet in its corporate countries across Europe and North America over the next three years. First significant delivery volumes will take place as early as the first quarter of 2024 and will continue throughout the year.

In today’s trading

Stocks are lower to start the holiday-shortened trading week. The S&P is down slightly.

Treasury yields are moving higher following a move up in global rates on Monday after ECB officials pushed back on cuts coming soon. The 10-year yield ( US10Y ) is back above 4%.

Looking to economic data, the New York Fed’s Empire State Manufacturing Index saw an unexpected plunge in January. The index dropped to -43.7 from -14.5 in December. Economists had forecast a rise to -4.7.

Pantheon Macro economist Kieran Clancy says: "The plunge in the headline index, to its lowest level since May 2020, will no doubt generate alarmist headlines, but remember that month-to-month swings in the regional Fed manufacturing surveys are mostly noise."

We "see no clear catalyst for a sudden and severe collapse in manufacturing activity in January, given the previously flattish trend. Accordingly, we will await the full suite of regional Fed manufacturing surveys before drawing any firm conclusions."

Among active stocks

Financial earnings reports continued to roll in.

For Goldman Sachs (GS), Q4 2023 reflected continued restructuring as it continues to withdraw from its foray into consumer finance. CEO David Solomon called 2024 "a year of execution."

Q4 GAAP EPS of $5.48 edged up from $5.47 in Q3, beating the $3.93 consensus. Excluding items totaling $0.83 per share for the company's restructuring and FDIC special assessment, Q4 2023 earnings would have been $6.31.

Morgan Stanley ( MS ) posted better-than-expected Q4 net revenue as its Wealth Management and Investment Management businesses notched improvements from Q3. Institutional Securities revenue, though, dropped during the quarter as higher interest rates hurt M&A activity and suppressed equity and debt offerings.

And PNC Financial ( PNC ) issued guidance for 2024 net interest income and revenue that fell short of consensus estimates. The bank expects 2024 revenue to be flat to down 2% from 2023's $21.5 billion, with net interest income down 4%-5% and noninterest income up 4%-6%. That implies 2024 revenue of about $21.1 billion vs. consensus of $21.5 billion.

Meanwhile, Boeing ( BA ) was downgraded by Wells Fargo. Analyst Matthew Akers cut the stock to Equal Weight from Overweight, saying the aircraft maker faces greater risks of reaching plane-delivery goals as aviation authorities scrutinize its factories in the wake of the midair emergency with a 737 Max 9.

Shares of Boeing are down more than 5% and have lost more technical support, moving below their 100-day and 200-day moving averages.

In other news of note

Apple ( AAPL ) may have lost its crown as the world's most valuable company last week, but it has a new title it can claim: world's top smartphone maker .

Apple shipped more smartphones in 2023 than Samsung (SSNLF), according to research firm IDC. The firm estimated that Apple shipped 80.5 million units in the fourth quarter and 234.6 million throughout the year, ending the year with 20.1% of the market, ahead of Samsung's 19.4%.

Research firm Canalys also said Apple was 2023's top smartphone maker, ending the year with 24% of the market, according to its findings.

Samsung had held the title of the world's top smartphone maker since 2010.

And in the Wall Street Research Corner

Coherent (COHR), NXP Semiconductors (NXPI), Western Digital ( WDC ) and Camtek ( CAMT ) were upgraded at Barclays. The firm advised investors to buy the "second wave" of artificial intelligence.

Analyst Tom O’Malley says: "We think investor focus has already shifted to (2025) where we are rolling out numbers across our coverage and assuming a robust positive inflection for most end markets."

"Even factoring in a strong growth year in '25, there isn't a ton of low-hanging fruit at these levels. With this said, we are picking our spots into next year and prefer names levered to the '2nd Wave of AI.'"

In addition to the aforementioned stocks, Barclays also likes AMD ( AMD ) and Marvell Technology (MRVL).

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