Comcast/TWC Merger Unleashes the Bulls as the Dow Rises 64 Points

Still looking for love in the corporate world? Now that Pizza Hut is officially on OkCupid, Wall Street romance is a little more delicious. Speaking of hot, the Dow  (DJINDICES: ^DJI  ) ignored the crappy weather (and weak economic reports) to rise 64 points Thursday to start Valentine's Day on a hot note.

1. Comcast purchases Time Warner Cable for $45 billion
Talk about a blockbuster. The biggest cable TV provider in the world, Comcast (NASDAQ: CMCSA  ) , just became a lot bigger. Comcast is taking over Time Warner Cable (NYSE: TWC  )  to become an even larger leader in cable TV. The monster deal ends a bidder war between Comcast and Charter Communications -- but will it improve TWC's customer service? New York City hopes so.

I never was any good at Monopoly, but won't Comcast dominate American TV watchers everywhere with this new size? Maybe not, actually. Comcast and TWC didn't compete in any single zip codes, so this won't hurt competition in theory. It will create an estimated $1.5 billion of synergy savings (by cutting redundant costs), so investors were pumped.

If regulators allow the merger, Comcast will pay for it buy issuing new stock to TWC shareholders. It's actually a no-cash deal. TWC shareholders will get approximately three fresh, new Comcast shares in exchange for giving up their TWC. Time Warner stock jumped 7% to reflect the value of the 2.875 Comcast shares they're getting, and Comcast dropped a bit because so many new shares is diluting.

2. PepsiCo earnings jumps 9% in 2013
Pepsi doesn't have cuddly holiday Polar Bears, but it's got Beyonce commercials and 9% earnings growth during last year, to $6.7 billion. What's hotter than that? The soda and snack company PepsiCo (NYSE: PEP  ) announced earnings in line with Wall Street expectations, but the stock fell 3% Thursday.

Why the haters? Pepsi is increasing its quarterly payment to shareholders (i.e. the quarterly Dividend) by 15%, and plans for strong 2014 earnings growth of 7%.

Bottles, bottles, bottles. Wall Street thinks Pepsi has got too many of 'em. Unlike Coca-Cola  (NYSE: KO  ) , which separated it's boring bottling business from it's bubbly soda business, PepsiCo bottles its pop itself. And it announced Thursday it would not spin off the bottling business, cause it doesn't make financial sense. Investors booed this news with a 2% stock sell-off.

3. Cisco earnings impress, but stock drops 
You can't win them all. Cisco  (NASDAQ: CSCO  ) , the company behind almost every conference call phone in every office everywhere, reported $11.6 billion in sales, topping analysts' expectations. The communications equipment juggernaut also raised its dividend (the amount of cash it returns to shareholders) by $0.02 per share to $0.19 total. Gracias, Cisco.

So why did the stock drop? Shares of Cisco slipped 2.5% Thursday for two reasons. First, Cisco surprised investors by forecasting a 6% sales decline during the current quarter. And second, CEO John Chambers hinted that he might be leaving a tad earlier than expected for retirement.

The takeaway is that Cisco had a tough year. Sales were hurt during 2013 after the Snowden security leak, as foreign governments worldwide worried that Cisco's equipment was hacked by the NSA. That's not great publicity in the corporate world.

Friday:

  • Reuters/Umich Consumer Sentiment Poll
  • Fourth-Quarter Earnings Reports: Campbell Soup, World Wrestling Entertainment

MarketSnacks Fact of the Day: The first 'box of chocolates' is delivered by Richard Cadbury to his daughter on February 14th, 1868.

As originally published on MarketSnacks.com

 

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