FleetCor — Or is it FeeCor or FleeceCor?

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As the truth about FleetCor (NYSE:FLT) becomes more apparent to regulators and its customers, the stock should hit a short-term price target of $100.

Citron analyzes a company who has become so insanely financially dependent on fleecing its own customers, that its financials are seriously imperiled and its valuation is totally out of touch with reality.

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Citron Exposes More Undisclosed Relationships at TransDigm

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What the Company and Its Analysts Call “A Game”
Is Actually Illegal

Price Target $140

Citron predicts that after this report makes its rounds, TransDigm’s (NYSE:TDG) days of exploiting and deceiving the Federal Government are numbered.

Valeant Pharmaceuticals has recently hit prices that some never thought imaginable. As Citron observes today, at $12 per share, that stock is down over 95% from its highs just months prior to Citron’s reporting on Philidor. The questions then turn to:

“How did so many ‘smart’ people get it so wrong?”

and

“When could this possibly happen again?”

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Citron Exposes the Vulnerability of Motorola Solutions — Price Target $45

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What would President Trump think ?
U.S. Law Enforcement Agencies Paying 5 TIMES the Prices
Motorola Charges EU Countries?

How Motorola Really Makes Its Money!

 While Motorola’s has many operating divisions, the bulk of its profits come from selling overpriced handsets into its single source contracts in the United States….taking advantage of both tax payers and the first responder community.  In fact, handset sales in the U.S. carry an 83.6% gross margin (see below), while device sales in Europe are at 9%.

Citron’s analysis shows that U.S. device (handset) sales are contributing a whopping 76.7% of Motorola’s bottom line!

As new technologies eclipse Motorola’s monopoly grip on its outdated U.S. first responder’s network, the company’s gravy train of egregious handset pricing will fall to competition.  In the current political environment, how long can Motorola’s “extreme lobbying” efforts protect it from competitive pressures?

Citron exposes the secret of the Motorola cash cow — gouging the U.S. Government.  

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Express Scripts: Rebate System is a Financial Engineering Kickback Scheme

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One company in the healthcare system that deserves to fall to the mighty sword of the new Trump administration is Express Scripts.  (NASDAQ:ESRX) has used their position as the nation’s largest PBM to make itself into

esrx-gotti

“The reason drugmakers sharply raise list prices without a corresponding increase in net price is that PBMs demand higher rebates in exchange for including the drug on their preferred-drug lists”

— Enrique Conterno, President, Eli Lilly diabetes business

 http://www.wsj.com/articles/insulin-prices-soar-while-drugmakers-share-stays-flat-1475876764

Rebates are pharma-speak for “Kickbacks”.

But Do Not Listen to Citron!  We are Biased!
All ESRX investors must read this devastating CMS bulletin, issued last week:

  • The rate of growth of PBM rebates from 2013-2015 is double the rate of growth of gross drug spending
  • Often, the Part D sponsor or its pharmacy benefits manager (PBM) receives additional compensation after the point-of-sale that serves to change the final cost of the drug for the payer, or the price paid to the pharmacy for the drug. Examples of such compensation include rebates provided by manufacturers and concessions paid by pharmacies.
  • As the growth of rebates and other price concessions places more of the burden on beneficiary cost-sharing, Medicare’s costs for these beneficiaries also grow.
  • The growing use of rebates and other price concessions has contributed to an important shift in how Part D spending is distributed across the final three phases of the part D benefit
  • Rebates and discounts biopharmaceutical companies pay to PBMs and payers do not directly reduce cost-sharing for these patients.

As Medicare drug costs spiral out of control, the percentage of pharma spending Express Scripts extracts from rebates is far greater than its peers, and expanding. This sum is now approaching $100 per person per year for every citizen in the U.S.  Ironically, ESRX diverts huge cash flows from companies that actually invest in innovative R&D into “kickbacks” for themselves.  They create no new or improved drugs.

The problem is so obvious we read in today’s WSJ:

“Merck has offered higher rebates and discounts to pharmacy-benefit managers so that they would keep Merck products on preferred-drug lists”

https://www.morningstar.com/news/dow-jones/us-markets/TDJNDN_201701274473/merck-reveals-details-on-us-drugpricing-practices.html

Conclusion:  It is simple math:  If ESRX loses 50% of its rebates, they lose 30% of EPS, and the stock goes straight to $45.

Our 2 cents…..without the rebate.

Could TransDigm be the Valeant of the Aerospace Industry?

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Wall Street:  Be Careful!  President Trump has become to Aerospace what Hillary was to Pharmaceuticals

 

President Trump has promised to end the long-standing, infuriating tradition of “sticking the US Government with tab”.  He has already made lowering prices for military aircraft a pillar of his transition into office.

President Trump has already met with the both Boeing and Lockheed Martin, who have promised to lower the prices for Air Force One and the F-35 fighter jet program.  These lower prices will no doubt trickle down to subcontractors.

While Boeing and Lockheed Martin have been the “poster children” of this policy initiative, everyone in the aerospace industry knows that one company stands out when it comes to egregious price increases foisted on the government:

TRANSDIGM  (NYSE:TDG)

TransDigm’s business model is to aerospace as Valeant was to the pharmaceutical industry. TransDigm acquires airplane parts companies (over 50 in total), fires employees, and egregiously raises prices.  This business model has made them a dominant supplier of airplane parts to the aerospace industry while burdening its balance sheet with sky-high debt load… sound familiar?

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