Morning Brief: Glass Lewis Backs Ackman in ADP Fight

Shareholder advisory firm Glass Lewis & Co. is backing Pershing Square Capital Management’s three nominees to the board of Automatic Data Processing, including founder Bill Ackman. The nominees would bring “a fresh independent perspective, new ideas, recent and practical experience,” Glass Lewis said in Pershing Square’s October 23 announcement of the advisory firm’s support.

Glass Lewis said “ADP is underperforming its potential” and that Pershing Square’s transformation plan “would likely lead to the realization of superior financial performance and significantly greater value for ADP shareholders.” Pershing Square owns 8.3 percent of ADP’s shares, which rose almost 1 percent Monday to $117.01.

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Keith Meister’s Corvex Management boosted its stake in CenturyLink to 6.7 percent, according to a regulatory document. The activist hedge fund said in an updated 13D filing that it would continue reviewing its investment in the telecommunications giant and could take future action.

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UBS Group downgraded its rating on General Electric to “neutral” from “buy,” citing disappointing third-quarter results. The bank said in a research note the company’s dividend is at risk, calling it “unsustainably high.” UBS cut its dividend estimate by 30 percent and reduced its earnings estimates for 2017 through 2019. “While we recognize execution risk as GE works through its strategy, we think a lot of the negative sentiment is now in the stock and continue to think GE should trade in line with the market,” UBS said in the note. Earlier this month, GE elected Ed Garden, the chief investment officer at activist hedge fund Trian Fund Management, to its board of directors.

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Credit Suisse Group raised its price target for Honeywell International to $150, from $141, and lifted its earnings estimates following the company’s third-quarter earnings report. “Management did an admirable job of maintaining a sense of decorum amidst seemingly inflamed passions on the earnings call,” Credit Suisse told clients in a note. The bank pointed to the company’s “burgeoning organic sales profile within SPS (Safety and Productivity Solutions), and the ongoing consistency of restructuring/cost-reduction despite the brighter overall top-line outlook.”

Third Point, the activist hedge fund led by Dan Loeb, initiated a stake in Honeywell last year. “We were drawn to Honeywell because of the company’s strong businesses, portfolio optionality, untapped balance sheet, and change in leadership from one excellent CEO to another,” Third Point said in its third-quarter letter published October 20. The hedge fund likes Honeywell’s plans to split its homes and transportation units into separate companies by the end of next year. This “will result in greater focus on Honeywell’s core operations,” Third Point said. Shares of Honeywell rose less than 1 percent Monday to close at $145.92.