Oil up, General Motors (GE) shares up on higher profits and AbbVie (ABBV) to buy Shire.

Bourbon & Bayonets / Friday, July 18th, 2014

Markets were heading slightly higher on Friday as worries intensified over rising global political tensions after a Malaysian plane was shot down over the Ukraine. Oil has risen nearly 2% following the news of new U.S. sanctions against Russia. The Ukraine is accusing pro-Russian separatists of shooting down the flight that was carrying 298 people. Ric Spooner, chief market analyst at CMC, said, “While initial trader reaction has been to sell first and ask questions later, the more considered approach will involve waiting for further insight into the likelihood of this tragic even triggering as escalation of the situation in Ukraine.”

Shares of General Electric (GE) were on the rise after the company reported a 13% rise in profits for the second-quarter. The company said that an increase in sales of their jet engine and oil equipment were partially attributed to rise. GE also said that they are expecting the initial public offering of their private-label credit-card business to launch at the end of this month. Their plans for the partial IPO of their retail finance business as a way to exit the business and cut down their overall GE Capital unit. The name of the new business will be called Synchrony Financial. This separation is part of a plan by the companies Chief Executive Officer, Jeff Immelt, to boost GE’s earnings from its industrials business to 75% by 2016. Tim Ghriskey, chief investment officer with Solaris Asset Management, said, “GE has always been a steady re-allocator of portfolio assets. It’s nice to see that pick back up… To me, that’s what can really move the stock.”

Shares of AbbVie Inc. (ABBV) were falling slightly after the company announced that they would be buying Shire in a $55 billion deal. AbbVie is a U.S. drug maker, while Shire is a Dublin-based company listed in London that make medicines to treat rare diseases. They have turned down four previous offers from ABBV. The move will allow AbbVie to cut their U.S. tax bill by relocating to Britain and will enable them to slash its dependence on the arthritis drug Humira. The company will loose its patent protection on the drug in 2016. AbbVie generates nearly 60% of their revenue from Humira. When the two companies combine, they will incorporate in Jersey, the Channel Islands. This will cut their tax bill from the current 22% they are paying to about 13%. Shire Chairman, Susan Kilsby, said, “We believe that this offer reflects the substantial value that we have already created for Shire’s shareholders and the strength of our future prospects.”

That’s all for today,

Warren Gates, Normandy Research

Leave a Reply

Your email address will not be published. Required fields are marked *