M&A Smorgasbord for NextEra, Plus Earnings Results from Exxon, AbbVie, 2 Other Companies

The Nasdaq and all other major indexes are in the red this morning despite tech heavyweights Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG) reporting strong results since yesterday’s market close. Meanwhile, shares of NextEra Energy Inc (NYSE:NEE), Exxon Mobil Corporation (NYSE:XOM), AbbVie Inc (NYSE:ABBV), Town Sports International Holdings, Inc. (NASDAQ:CLUB), and Cypress Semiconductor Corporation (NASDAQ:CY) are each trending on earnings and M&A news. Let’s take a closer look at why the five stocks are in the spotlight and see how the best hedge funds in the world have been trading each stock.

At Insider Monkey, we track over 765 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

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NextEra Engages in a Little M&A

NextEra Energy Inc (NYSE:NEE) is in the spotlight after making several M&A moves today. Firstly, the company agreed to sell its gas generating assets in Pennsylvania to Starwood Energy for total consideration of $760 million and net proceeds of $255 million after the repayment of existing project-related financing. That transaction is expected to close in the fourth quarter. Secondly, NextEra agreed to acquire Energy Future Holdings’ 80% indirect interest in Oncor Electric Delivery in a deal that implies a total enterprise value of around $18.4 billion. NextEra expects the deal to be accretive and to help the company grow adjusted EPS at or near the top-end of its previously announced 6-to-8% growth through 2018, using 2014 as a base. Jim Simons‘ Renaissance Technologies raised its stake in NextEra Energy Inc (NYSE:NEE) by 61% to more than 1.1 million shares during the first quarter.

Exxon Mobil Misses the Mark

Exxon Mobil Corporation (NYSE:XOM) shares are off by almost 3% today after the oil giant reported second quarter earnings of $0.41 per share on revenue of $57.7 billion. Analysts were expecting $0.23 per share and $2.53 billion more, respectively. Upstream earnings clocked in at $294 million for the period, while Exxon’s chemical earnings saved the day by adding $1.2 billion to its bottom-line. Exxon’s downstream earnings amounted to $825 million, off by $681 million from the second quarter of 2015 due to weaker refining margins. 60 funds tracked by Insider Monkey had long positions in Exxon Mobil Corporation (NYSE:XOM) at the end of the first quarter, down by eight funds from the end of the fourth quarter of 2015.

On the next page we examine how AbbVie, Town Sports International Holdings, and Cypress Semiconductor performed during their latest quarters.

AbbVie Beats Expectations

Drug company AbbVie Inc (NYSE:ABBV) beat both bottom- and top-line estimates with its second quarter EPS of $1.26 and revenue of $6.4 billion (up by 17% year-over-year), pushing its shares up by over 2% this morning. The analysts’ consensus estimates were for EPS of $1.20 and $6.2 billion in revenue. Operating margin clocked in at 43.9% on an adjusted basis, while HUMIRA sales grew by 17.4% globally. Guidance was strong, as management raised its full year 2016 adjusted EPS outlook to $4.73-to-$4.83 from $4.62-to-$4.82. The number of funds in our system with holdings in AbbVie Inc (NYSE:ABBV) fell by five quarter-over-quarter to 65 by the end of March.

Town Sports in the Green Despite Weak Results

Nano-cap Town Sports International Holdings, Inc. (NASDAQ:CLUB) reported a loss of $0.79 per share on revenue of $100.94 million for its second quarter, widely missing the consensus EPS estimate by $0.58, while falling $0.85 million short on the revenue front. Total member count decreased by 2,000 to 551,000 while membership monthly attrition averaged 3.5%. Adjusted EBITDA was $9.6 million. Five top funds owned shares of Town Sports International Holdings, Inc. (NASDAQ:CLUB) at the end of March. Those shares have gained 3.54% today.

Cypress Earnings In-Line

Cypress Semiconductor Corporation (NASDAQ:CY) shares have bounced 1.16% higher today after the company reported in-line earnings of $0.12 per share and slightly higher-than-expected revenue of $456.37 million (beating the consensus mark by $1.22 million). Management is ahead of schedule in terms of realizing synergies from its Spansion merger and non-GAAP margin was 37.8% for the quarter, up from 36.9% in the first quarter of 2016. Adjusted EPS for the third quarter is  expected to be in the range of $0.12-to-$0.162 , while revenue is seen coming in between a range of $510 million and $540 million. Of the 766 active funds that we track, 13 funds owned $254.46 million worth of Cypress Semiconductor Corporation (NASDAQ:CY) shares on March 31, a large decline from 24 funds owning $575.11 million in Cypress holdings on December 31.

Disclosure: None