CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended July 19, investment grade funds posted a net inflow of $3.817m down from $2.299bn the prior week. This marks 31 straight weeks of inflows and inflows in 67 of the last 72 weeks. Per Lipper data, the year-to-date net inflow into investment grade funds was $75.222bn. According to Bloomberg, investment grade corporate issuance for the week was $47.7bn. Through the week, YTD total corporate bond issuance was $794.085bn, which is down 3% when compared to 2016.

(Bloomberg) Abbott Boosts Full Year Forecast as Deals Fall Into Place

• The company raised its full-year guidance after showing strength in its pain control and diabetes businesses. Abbott closed its $29 billion deal for St. Jude Medical in January, doubling the size of its medical technology division and expanding beyond devices used to clear clogged heart arteries. Its diagnostics business, about to swell with the addition of Alere Inc. after a protracted battle, is showing strength as well.
• The legacy St. Jude business grew at about a 4 percent pace in the quarter, after breaking even for the past four years, Abbott Chief Executive Officer Miles White said during a conference call with analysts. That trend should continue or accelerate, he said, as the company continues to roll out new products like an MRI-safe defibrillator, helping it regain sales lost to rivals that already offer the technology.
• “Our forecast, or deal model, was built on the expectation of sequential improvement in their sales going forward,” he said. “We are seeing that.”
• The smaller operations secured by the St. Jude deal are posting the greatest gains. Demand for devices to control pain propelled growth of 49 percent, while sales of tools that deal with the heart’s electrical pathways rose 10 percent. The company’s focus on diabetes, with Bigfoot Biomedical picking Abbott’s Freestyle Libre for its artificial pancreas, yielded 21 percent growth.
• The outsized performances are easing the pain caused by slowing markets in the company’s former key industries, like heart stents, which was down 6 percent, and devices like pacemakers and defibrillators, which fell 9.2 percent.
• Abbott raised its full-year guidance range to $2.43 to $2.53 per share, excluding some items. That’s up from a previous forecast of $2.40 to $2.50 per share.

(WSJ) Lessons From Microsoft’s Success in the Cloud

• Microsoft Corp.’s success in the cloud is driving the growth of the overall business. That’s because it is the business. Cloud isn’t a satellite orbiting around the data-center sun. The numbers speak for themselves. As the Journal’s Jay Greene reports, Microsoft’s “Intelligent Cloud segment, which includes Azure, rose 11% to $7.4 billion. In the Productivity and Business Processes segment, which includes the Office franchise, revenue climbed 21% to $8.4 billion.”
• Microsoft doesn’t disclose revenue figures Azure and Office 365, but it said revenue from these businesses rose 97% and 43% respectively, surprising CFO Amy Hood. “Azure was the primary source of our outperformance in the quarter,” she said in an interview. “It’s higher than I was expecting.”\
• Microsoft has gained traction in the cloud, one might argue, because it has accepted the idea that it isn’t the only platform that customers use. CIOs employ other clouds and they still have plenty of use for the data center. Microsoft has crafted a hybrid approach around those customer intentions. More recently, it has looked to build data and intelligence into its cloud infrastructure, platforms and applications. As the Journal notes, “Microsoft is working to connect its business products to LinkedIn, giving sales representatives using its Dynamics software, for example, tools to easily mine the professional social network to prospect for leads.” As this process continues, expect the cloud to fade into the background, much as the electric grid has faded into the background. In a few years, we won’t think about cloud computing any more than we think about “electrical toasters.” The cloud will be an invisible and ubiquitous dimension of most elements of business.

(Bloomberg) Scripps Talks Said to Be Advanced, Deal Soon as This Month

• Negotiations to acquire media company Scripps Networks Interactive Inc. are advanced and a deal could be announced as soon as this month, people familiar with the matter said.
• Both Discovery Communications Inc. and Viacom Inc. are vying to buy Scripps, and are likely to fund the deal with a mixture of cash and shares, the people said, asking not to be identified as the details aren’t public. No final decisions have been made and talks may still fall apart, they said.
• Shares in Scripps rose as much as 4.1 percent in New York to a high of $80.02. They had already climbed about 14 percent this week on news of the possible combinations, giving the Knoxville, Texas-based company a market valuation of about $10 billion. Viacom was up less than 1 percent to $36.31 at 2:40 p.m., while Discovery fell less than 1 percent to $26.98. Representatives for Discovery, Viacom and Scripps declined to comment.
• Buying Scripps could help the larger media companies cut costs, gain negotiating leverage with distributors and expand internationally as their U.S. TV businesses faces new pressures. Network owners are grappling with a decline in subscriptions for cable and satellite services as they lose viewers to online video services and social networks.

(Bloomberg) BNY Mellon Ups Revenue View, Shows 2Q Momentum: Earnings Outlook

• Post-2Q Earnings Outlook: BNY Mellon showed a further acceleration in revenue in 2Q, with trends in fee income and managed assets boding well for 2H.
• Fee growth of 4% for investment services and 6% in investment management marks another rise after 1Q’s pickup, while both assets under custody and management hit record levels.
• The updated 2017 view includes spread income growth at the high-end of its prior 4-6% range and a cost rise of about 1%, with a caveat that this would be “challenging.”