Regional Banks BBT, STI Merge; Q4 Reports from TWTR, DNKN

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Thursday, February 7, 2019

This Thursday, as most Thursdays, we see new weekly results on Initial Jobless Claims; as this is also the heart o f earnings season, we see more companies reporting (calendar) Q4 earnings results this morning, with more to come after the closing bell. But the biggest news so far today is the merger of two regional U.S. banks: SunTrust STI and BB&T BBT , which is presenting investors a conference call regarding the bringing together of two relative equals.

The all-stock deal amounts to roughly $66 billion, which would bring about the 6th largest U.S. financial institution, provided this deal passes through regulatory authorities. SunTrust owners are planned to be paid nearly 1.3 BBT shares (per 1 STI share). This will amount to a 57%/43% BBT-STI split among ownership. Other regional banks look to be trading up somewhat in the early market on this news.

Both banks had been down around 5% year over year; with SunTrust now trading up 10% in today’s pre-market and BB&T up 5%. What traders are now considering is if there are other regional bank mergers on the negotiating table as of this major venture. It is unclear at this hour what, if any, labor force layoffs are expected to occur as a result of this deal.

Initial Jobless Claims came down significantly week over week, although still well outside our longer-term range of 200-225K claims we had been enjoying for more than a year. What was an unrevised 253K new claims reported a week ago has come down 19K to 234K in this lates t report . We are still well within the narrative of a robust workforce narrative in the U.S.; even at 253K this had been the case. It’s tough to know at this time whether we’ve buoyed up from our 200K levels permanently, or if this represents some shakeout from the 5-week U.S. government shutdown.

Continuing Claims fell also: 1.736 million dropped from 1.778 million reported a week ago – again higher than 52-week norms but still within line with strong employment. As we saw in last Friday’s non-farm payroll report from the U.S. government, January had brought more than 300K new jobs to the market; we expect things to remain relatively robust aside from shutdown-related jobless claims, which will (hopefully) be a thing of the past.

Q4 Earnings Roundup

Social media staple Twitter TWTR outperformed expectations on both top and bottom lines this morning. The Zacks Rank #1 (Strong Buy) company (prior to the earnings release) topped earnings expectations to 31 cents per share from the 25 cents estimated (and 19 cents a year ago). This marks earnings beats in 3 of the last 4 quarters. Revenues of about $909 million in the quarter outperformed the Zacks consensus by 4.5%.

However, shares of Twitter are down 7% in early trading this morning – on a down trading morning overall so far – based on what we may surmise as two things: lower Q1 revenue guidance and increased expenses going forward, as well as the lofty +19% gains Twitter has seen in its stock price since the beginning of the year. For more on TWTR’s earnings, click here.

Dunkin’ Brands DNKN , formerly known as Dunkin’ Donuts, also posted a beat on top and bottom lines this morning for its Q4 report: 68 cents per share versus 62 cents expected, on $319.62 million which outperformed estimates by 3.2% Dunkin’ has not missed earnings estimates since Q2 2017, and the company has topped revenue estimates in 2 of the past 4 quarters. Yet a 4.5% drop in pre-market trading reflects some investor concerns. Shares are up modestly year over year, but still within its 5-year trading high range. For more on DNKN’s earnings, click here.

Mark Vickery

Senior Editor

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