Top US stocks to watch: Walgreens Boots, MKS Instruments and Micron

Walgreen Boots raises expectations, MKS Instruments to buy Atotech, Micron impresses with its outlook, Shell to ditch venture with ExxonMobil, McCormick and Sodexo up their guidance, and Krispy Kreme prices its IPO lower than expected while Bowlero outlines plans to go public.

USA (1)

Walgreens Boots Alliance

Walgreens Boots Alliance raised its full-year guidance and said it is aiming to deliver 10% EPS growth after delivering a strong set of results in the third quarter of its financial year.

Third-quarter sales jumped over 12% to $34.0 billion and it turned to EPS from continuing operations of $1.27 from the $2.05 loss booked the year before. That means sales in the first nine months of the financial year rose 7.2% to $98.2 billion and that EPS totalled $1.89 from an $0.18 loss the year before.

Walgreens Boots Alliance is now aiming to deliver EPS growth of over 10% over the full-year, having previously guided for ‘mid-to-high single digit growth’, and said it remains on track to deliver $2 billion worth of cost savings by the end of 2022 financial year.

MKS Instruments

Semiconductor tech maker MKS Instruments has agreed to buy chemicals specialist Atotech for $5.1 billion in cash and shares to combine the pair’s expertise in lasers, optics, motion and process chemistry that help power a wide range of electronics.

MKS will pay $16.20 in cash and issue 0.0552 of a share in the business for each Atotech share. MKS said the deal will help it deliver the next phase of products needed for advanced electronics quicker and cheaper, and also gives it access to Atotech’s recurring revenue streams.

MKS said the deal should boost earnings in the first year and deliver $50 million in annualised cost savings within 18 to 36 months. Combined, the pair will have annual revenue of around $3.8 billion.

Micron Technology

Micron Technology, which makes chips used for memory and data storage, reported record revenue and sales in the third quarter of its financial year after markets closed yesterday.

Revenue rose to $7.24 billion from $5.44 billion the year before. That was also $1 billion more than what it delivered in the previous quarter. GAAP diluted EPS rose to $1.52 from $0.71, but came in slightly below the $1.60 expected by analysts.

It said it expects revenue to rise to around $8.2 billion in the fourth quarter and that EPS should be around the $2.30 mark. That was better than the $7.8 billion expected by analysts.

ExxonMobil

Royal Dutch Shell is planning to quit its oil and gas producing joint venture with ExxonMobil, according to reports from Reuters.

The business, Aera, accounts for around 25% of California’s entire oil and gas production, churning out around 125,000 barrels of oil and 32 million cubic feet of natural gas each day. Shell is reported to have informed ExxonMobil that it intends to exit the venture as part of its divestment from fossil fuels in favour for new investments in renewables and energy provision.

McCormick & Co

Spices, seasoning and ingredients provider McCormick & Co reported lower earnings in the second quarter of its financial year but raised its guidance and said both revenue and profits should grow over the full-year.

Sales rose 11% in the three months to the end of May and increased 8% at constant currency. Operating income fell to $237 million from $257 million and EPS fell to $0.68 from $0.72. Results were hampered by the strong comparatives from the year before, when demand increased as the pandemic erupted. It said cashflow is expected to remain strong going forward and that it can continue to both cut debt and pay dividends.

McCormick & Co raised its guidance for the rest of the year and is now aiming for sales to grow by 11% to 13% (or 8% to 10% at constant currency). Operating income should grow by 6% to 8% from the $1.0 billion booked in 2020 and EPS should come in between $2.38 and $2.88 compared to the $2.78 booked the year before. It had previously said sales would grow by 8% to 10% and that operating income would be up by 5% to 7%.

Sodexo

Sodexo said revenue continued to grow strongly in the latest quarter to the end of May, prompting it to raise its guidance for the rest of the year.

The outsourcing company, known for providing food services and managing facilities, said revenue rose 14.7% in the third quarter to EUR4.48 billion, with organic growth coming in at 19%. All of its divisions reported strong growth varying from 9% from its work in hospitals to over 73% from its work in schools.

Sodexo said it expects to deliver organic sales growth of around 15% in the second half of the year and that underlying operating margins should remain stable at around 3.5%. Previously, it had said sales would grow by 10% to 15% and that the margin would be around 3.1%.

Philip Morris International

Tobacco giant Philip Morris International has agreed to buy nicotine gum maker Fertin Pharma for DKK5.1 billion, equal to around $820 million.

Fertin Pharma operates in Denmark, Canada and India and makes products like gums, pouches and liquefied tablets. Ultimately, its focus is on products that can deliver ingredients or medicines orally. The company delivered around $160 million in revenue in 2020.

Philip Morris has ambitious plans to wean itself of cigarettes and is aiming to make half of its revenue from smoke-free products by 2025. It has so far invested over $8 billion in next-generation products such as its e-cigarette brand IQOS.

PepsiCo

Soft drinks giant PepsiCo plans to cut the amount of sugar in its sodas and iced teas in Europe by 25% and launch a number of new nutritious snacks by 2025.

It plans to reformulate existing drinks and revert to lower-calorie sweeteners while launching new healthier products using its brands such as PopWorks and Lay’s Oven Baked crisps.

Krispy Kreme

Doughnut maker Krispy Kreme priced its IPO yesterday, announcing it is selling 29.4 million shares at $17 each, lower than previously expected.

The previous price range was between $21 to $24 per share and the lower price means it will start out life as a publicly-traded business with a valuation of around $2.7 billion.

Krispy Kreme shares are due to start trading on July 6.

Bowlero

Bowlero, the largest owner of bowling centres in the world, has announced plans to go public by merging with SPAC firm Isos Acquisition to raise up to $450 million for the business and earn an enterprise value of around $2.6 billion.

The company is planning to upgrade its existing centres, open new ones and acquire independent sites going forward as it hopes to bounce back strongly from being hit by the pandemic. It said it is expecting to deliver revenue of $859 million and Ebitda of $275 million in the 2022 financial year.

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