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The Morning Ledger: Investors Lose Appetite for Unprofitable Companies, Potentially Limiting CFOs’ Options |
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Good morning. Finance chiefs at unprofitable companies face waning interest from investors amid expectations that the Federal Reserve will raise interest rates this year, potentially limiting the funding options that some of these businesses have. Investors in recent weeks have been shedding speculative investments from tech stocks to cryptocurrencies. With their promise of higher returns, such investments thrived in the ultra-low-rate environment of 2021. But now that the U.S. central bank may raise interest rates as soon as March to combat inflation—a view that the Fed will likely signal today—investors are less comfortable with those investments. Therefore, equity raises or convertible bond sales by these companies might be less appealing to investors. [Continued below…] |
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The prospect of rising interest rates has hit the Russell 2000 small-cap index in particular due to its high proportion of small-caps that aren’t making money. Even with its 2.3% gain Monday, the Russell 2000 has dropped 17% since its record close in November. U.S. stock indexes on Tuesday closed lower after a tumultuous day of trading. Junk-rated corporate loans, however, are gaining favor with investors, which could make them more appealing to CFOs. Loan funds took in a record $2.25 billion in the week ended Jan. 19, despite one day being a market holiday, according to Refinitiv Lipper, a financial data firm. Assets in the funds have roughly doubled to $91.5 billion over the past year. AMC Entertainment Holdings Inc. is one of the companies that might struggle to refinance some of its debt following the recent selloff, analysts said. AMC’s stock has declined by 41% this year through Tuesday’s market close, a steeper drop than the broader market selloff hitting stocks and cryptocurrencies. While the company’s bonds had previously held up even as its shares slipped, on Monday the bonds dropped by several points. That indicates that even creditors, who enjoy a greater degree of protection from losses than stockholders, are getting skittish about the business. |
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Abbott Laboratories, AT&T Inc. and Intel Corp. are among the companies scheduled to release earnings today. |
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Warehouse Giant Prologis to Offer More Services, CFO Says |
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SEC Official: Financial Reports Shouldn’t Highlight Non-GAAP Measures Over GAAP |
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Many companies still give greater importance in their financial reporting to measures not defined under U.S. accounting rules than to those that are, Lindsay McCord, chief accountant for the Securities and Exchange Commission’s corporate-finance division, said at a legal conference Tuesday. “Prominence continues to be an issue,” Ms. McCord said. Some companies present full income statements that go beyond generally accepted accounting principles, or GAAP, despite the SEC’s stated objections, she said. Other businesses provide “pages and pages” of non-GAAP disclosure prior to the management discussion and analysis section of their financial filings, Ms. McCord said, adding such behavior could result in questions and comments from the securities regulator. —Mark Maurer |
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| GM plans to spend $4 billion to convert its Orion Assembly factory to build plug-in trucks. PHOTO: DUANE BURLESON/ASSOCIATED PRESS |
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General Motors Co. confirmed plans for a multibillion-dollar investment to produce electric pickup trucks in Michigan, giving the Great Lakes region a boost as competition intensifies between states to win a bigger role in the industry’s shift to battery-powered cars. The auto maker on Tuesday said it would convert a suburban Detroit factory into a center for the production of electric pickup trucks and build a battery-cell plant in Lansing, Mich. |
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| GE expects 2022 adjusted earnings of $2.80 to $3.50 a share, below the $4 a share projected by analysts, according to FactSet. PHOTO: ORE HUIYING/BLOOMBERG NEWS |
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General Electric Co. reported fourth-quarter revenue fell 3%, weighed down by supply-chain difficulties. Johnson & Johnson finished 2021 with its strongest quarter to date for Covid-19 vaccine sales, contributing to year-over-year revenue growth across the company. 3M Co. said rising N95 mask sales helped deliver higher-than-expected revenue in the materials company’s most recent quarter. Microsoft Corp. said its earnings continued to grow last quarter as its cloud services business stayed strong. Verizon Communications Inc. said limits on its 5G expansion haven’t hurt its ability to connect customers. |
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$3.51 billion | The total value of monetary settlements of U.S. securities class action lawsuits in 2021, up 7.6% from the prior year, according to Securities Class Action Services LLC, a subsidiary of proxy advisory firm Institutional Shareholder Services. |
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| Lockheed’s Thaad missile-defense system uses Aerojet rocket boosters. PHOTO: HANDOUT/REUTERS |
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The Federal Trade Commission on Tuesday filed an antitrust lawsuit that seeks to block Lockheed Martin Corp.’s planned $4.4 billion purchase of Aerojet Rocketdyne Holdings Inc., arguing the deal would harm rival defense contractors and lead to unacceptable consolidation in markets critical to national security and defense. |
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The pace of economic growth both in the U.S. and globally is likely to decline more sharply than previously expected, the International Monetary Fund says in its latest forecast, citing inflation, fallout from the Omicron variant and chronic supply-chain problems. The global economy will expand a predicted 4.4% this year, the IMF said Tuesday in its World Economic Outlook. That figure is down from an estimated 5.9% in 2021 and is a downgrade of one-half of a percentage point from its last projection in October. |
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U.S. home-price growth decelerated in November as months of fast-rising prices pushed some buyers out of the market. Surging demand for auto loans is benefiting banks during an otherwise lackluster time for their lending businesses. |
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Nielsen Holdings PLC, a New York-based marketing data company, named Henry Iglesias as corporate controller, effective Jan. 31. Mr. Iglesias was most recently vice president of financial planning and analysis and global sales finance at Tiffany & Co., the jewelry company. |
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Genuine Parts Co., an Atlanta-based automotive parts company, named Bert Nappier as CFO, effective May 2. Mr. Nappier was most recently executive vice president of finance and treasurer at FedEx Corp., a Memphis, Tenn.-based shipping company. He succeeds Carol Yancey, who plans to retire in May. |
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