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DJ Global Equities Roundup: Market Talk

· 02/04/2021 15:00

The latest Market Talks covering Equities. Published exclusively on Dow Jones Newswires throughout the day.

1500 ET - Hershey saw "temporary market opportunities through the year" that led to declining prices for cocoa butter, one of the products the company uses to make candy, finance chief Steve Voskuil said in remarks tied to Hershey's 4Q report. Those dynamics "softened the impact of the increased investment associated with the living income differential this year," he adds. Hershey and some other candy companies have faced accusations that they have tried to avoid the income differential, a $400-a-ton surcharge on cocoa from West Africa that is meant in part to combat poverty. Hershey is fully participating in the differential program for 2020 and 2021, Voskuil says. (micah.maidenberg@wsj.com; @MicahMaidenberg)

1442 ET - A big rebound in the commercial truck market is under way. Cummins forecasts production of heavy-duty trucks in North America will increase by as much as 40% this year over 2019. Cummins supplies diesel engines for about one-third of all heavy-duty trucks built in North America. The engine maker predicts a full-year volume of 245K to 265K vehicles. That increase will be offset by lower sales of Cummins' engines in China where a red-hot truck market in 2020 is expected to cool later in the year. Cummins predicts revenue from its engine business to rise by 10%-14% this year. Shares down 1% at $233.13. (robert.tita@wsj.com; @bob_tita)

1422 ET - The Covid-19 pandemic, work-from-home orders, civil unrest and shifting preferences among some consumers to give up rentals as they buy homes made 2020 tough for apartment company AvalonBay Communities. Average rental rates for established markets were down 2.4% for 2020 compared with 2019, including a 7% drop in 4Q driven in part by weakness in New York City, San Francisco and Los Angeles. Yet the landlord has seen "early signs of stabilization with a steady improvement in occupancy followed by effective rents beginning to level off in all of our markets, " CEO TIm Naughton says. AvalonBay shares rise 3.1%. (micah.maidenberg@wsj.com; @MicahMaidenberg)

1153 ET - Bumble, which plans to sell 34.5M shares at $28 to $30 each in its Nasdaq IPO, looks reasonably priced, and shares could well move higher, Susquehanna says. Susquehanna sees most paying users of dating apps willing to pay for multiple app subscriptions, not just one. That could give Bumble room to coexist alongside Tinder, the market leader, especially given that Bumble's design promotes a differentiated, female-centric ecosystem. Overall, Match Group--owner of Tinder and OKCupid--is comparable and relative valuation of Bumble should be straightforward, with a premium going to the company that can manage faster growth, Susquehanna says. (matt.grossman@wsj.com; @mattgrossman)

1335 ET - "From our view, it looks like aerospace is finding bottom." So says Parker Hannifin CEO Tom Williams on a quarterly earnings call. The supplier's aerospace side is tied to both the commercial and military sectors, and covers engines, business aviation, helicopters, missiles and more, per an annual report. Commercial aviation, of course, has been hit dramatically by the pandemic. Parker Hannifin's aerospace business made up about 17% of sales during the company's F1H. Shares rise 2% to $276.57. (micah.maidenberg@wsj.com; @MicahMaidenberg)

1322 ET - Steak 'n Shake has engaged Guggenheim Securities as investment bank as the burger-and-milkshake chain prepares for restructuring negotiations with its lenders over a $153M loan that comes due next month, people familiar with the matter say. The move complements Steak 'n Shake's recent engagement of FTI Consulting Inc., which is serving as restructuring adviser, while Latham & Watkins LLP is legal counsel. The chain, which is focused on sit-down dining, has been heavily impacted by the coronavirus pandemic. (Alexander.Gladstone@wsj.com; @gladstonea)

1303 ET - Fred. Olsen Cruise Lines, a UK-based cruise operator, says it has scrapped all sailings until the end of June due to Covid-19 restrictions in England, affecting 14 sailings that had been due to restart beginning May 22. The sailing hiatus extension demonstrates the challenge cruise lines are facing in restarting voyages as they near a year of idle operations, even outside the US. "We are constantly reviewing our back in service dates in line with the latest government guidance, and working closely with CLIA and other industry bodies towards a return to sailing," says Managing Director Peter Deer. (dave.sebastian@wsj.com; @depsebastian)

1256 ET - The many SPACs coming to the market to hunt for clean-energy companies can help private-equity firms exit investments in the sector, says Mark McCall, a managing director at Lime Rock New Energy. The private-equity manager, which so far has raised more than $100M for its first clean-energy fund, backs companies such as Qmerit, an installer of electric vehicle-charging stations for car makers, fleet operators and property owners. "We're targeting smaller companies but also rapidly growing companies," McCall says. "Public-market investors are looking for growth. So, we may invest in companies that ultimately become targets for SPACs." (luis.garcia@wsj.com; @lhvgarcia)

1251 ET - Unilever will have to navigate commodity inflation and greater foreign-exchange effects this year, says the company's chief financial officer, Graeme Pitkethly, during an earnings call. "We are seeing quite a bit of commodity inflation and a larger foreign-exchange impact as we go into 2021, particularly in Latin America, in Turkey, in India, and in South Africa," he says. Specifically, Pitkethly says the inflation will be felt in tea, palm oil, liquid oils and in food ingredients, adding that the company expects mid-to-high single-digit commodity inflation in the first half, putting pressure on frugal consumers. (adriano.marchese@wsj.com)

1247 ET - Tapestry expects the spring delivery for its Kate Spade brand to be affected because of a cargo-ship incident last month. An A.P. Moller-Maersk A/S/ cargo ship lost several hundred containers in the Pacific Ocean while sailing though heavy seas from China to Los Angeles, the latest in a spate of incidents in which boxes carrying millions of dollars' worth of goods have gone overboard. The company expects sales to increase at a low double-digit rate in 3Q. "We are planning realistically as we continue to monitor the external environment in light of the recent resurgence of cases across the globe and the noted supply chain and logistics challenges impacting receipts," interim CFO Andrea Resnick says. Shares are up 4%. (dave.sebastian@wsj.com; @depsebastian)

1240 ET - Sara Nelson, the influential leader of the Association of Flight Attendants, cautions that requiring Covid-19 testing before all domestic flights would plunge some airlines into bankruptcy. "It would be devastating," she says, warning of more job losses than airlines are already planning. Lawmakers in both parties have questioned the wisdom of mandating testing prior to domestic flights during a committee hearing Thursday, arguing that it could divert testing supplies from more important uses and wouldn't address people traveling by train and bus. (alison.sider@wsj.com; @alyrose)

1218 ET - Cummins says its supply chains are being stretched from a combination of Covid-related inefficiencies and surging demand for its diesel engines that started in the second half of last year. "We've never seen an increase in demand that happened as quickly," says Chief Operating Officer Tony Satterthwaite. The company reports it had higher freight costs in 4Q that it expects will continue through the first half of this year. Cummins also is facing longer delivery times and reduced volumes of parts from suppliers whose output has been hampered by high employee absenteeism related to Covid-19. (robert.tita@wsj.com; @bob_tita)

(END) Dow Jones Newswires

February 04, 2021 15:00 ET (20:00 GMT)

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