Morning Brew: Bank of America Predicts S&P 500 Upside, Kraft Heinz Approves $3B Buyback

Bank of America Predicts S&P 500 Upside, Kraft Heinz Approves $3B Buyback

  • Bank of America Predicts S&P 500 Upside, Kraft Heinz Approves $3B Buyback
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Bank of America's global research team has outlined 10 key investment themes for 2024, forecasting a 10% rise in the S&P 500 (SP500), alongside potential interest rate cuts and Brent oil averaging $90 per barrel. The themes include a global shift to rate cuts, a growth scare before a more bullish outlook, less optimism on Eurostoxx compared to the S&P 500, commodities restocking, persistent Japan inflation with market upside, emerging markets benefitting from rate cuts and a peaking dollar, seeking quality yield in credit, slowing US investment spend as a drag on growth, elevated US 10-year yields due to deficits and geopolitics, and rising policy uncertainty.

Kraft Heinz Company (KHC, Financial) saw its shares increase by over 2% after its Board of Directors approved a share repurchase program. The company is authorized to buy back up to $3 billion of its common stock through December 2026. The repurchase plan is part of a capital allocation strategy that includes disciplined capital spending, organic growth investments, attractive dividend payments, and maintaining a targeted Net Leverage of 3.0x. CEO Miguel Patricio expressed confidence in the company's strategy and considered its shares an attractive investment opportunity.

L3Harris Technologies (LHX, Financial) announced the sale of its commercial aviation solutions business to private-equity firm TJC for $800 million, which includes a $700 million cash purchase price and a $100 million earnout. The valuation is approximately 15 times the last-12-month EBITDA. The business unit employs about 1,450 people and provides various aviation-related services. L3Harris plans to use the proceeds to repay debt, aligning with its capital allocation priorities and debt leverage objectives.

Activist investor Elliott Investment Management has taken a significant stake in Crown Castle (CCI, Financial), exceeding $2 billion, and is advocating for board changes and other strategic reviews, particularly of its fiber business. Crown Castle's shares rose 4.3% in premarket trading following the news. Elliott's letter to the board criticized the company's leadership and strategy, calling for a comprehensive review of its operations and financial policies.

Black Friday sales reports indicated strong sales volumes and less severe discounting than anticipated. Analysts observed that promotions began as early as mid-October, with inventory levels well-managed and average price reductions of 30%-40%. Bank of America highlighted solid traffic at Walmart (WMT, Financial), Target (TGT, Financial), and Costco (COST, Financial), with Walmart and Target seeing strong sales in electronics, toys, and groceries. Abercrombie & Fitch (ANF) also reported healthy full-price selling.

RedHill Biopharma (RDHL, Financial) shares surged nearly 100% pre-market after receiving a five-year market exclusivity grant from the FDA for its drug Talicia. The exclusivity is in addition to the three years granted upon approval, with protections extending to 2034. Talicia is indicated for the treatment of Helicobacter pylori infection in adults.

Shopify Inc. (SHOP) reported a Black Friday sales record with $4.1 billion in sales from businesses worldwide, marking a 22% increase over the previous year. Peak sales reached $4.2M per minute, with notable increases in sales through Shopify POS and an average cart price of $110.71. The top selling countries were the U.S., U.K., and Canada, with Los Angeles, New York, and London being the top selling cities.

AbbVie (ABBV, Financial) and Genmab (GMAB, Financial) announced that their lymphoma drug candidate epcoritamab received breakthrough therapy designation from the U.S. FDA for relapsed or refractory follicular lymphoma. The European Medicines Agency also validated a type 2 application for the same indication, potentially marking the second conditional approval for epcoritamab in the EU.

Tesla (TSLA, Financial) has filed a lawsuit against the Swedish Transport Agency following a strike that disrupted the delivery of license plates for its vehicles. The lawsuit comes amid growing worker unrest in Sweden, where Tesla faces challenges from the metalworkers' union IF Metall. Tesla is known for its non-unionized global workforce and has several service centers in Sweden.

Memory prices have seen a sharp increase, which could benefit Western Digital (WDC, Financial) and Micron Technology (MU, Financial). The rise is attributed to PC and smartphone restocking and lower factory utilization. Morgan Stanley analysts suggest that Micron may preannounce a better-than-expected quarter, and Western Digital's recent earnings could reflect improved pricing in the next quarter.


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