It was a volatile opening to the week, as all three indexes were in the red this afternoon but finished the session strong, closing in positive territory on excitement over merger and acquisition deals in the pharmaceutical sector. The Dow Jones Industrial Average (^DJI -0.12%) closed up 87 points, or 0.5%, while the S&P 500 gained 0.3%. The sell-off in tech and momentum stocks continued, leading the Nasdaq to a worse finish, ending down 0.03%.
Among the deal news driving stocks higher were reports that Pfizer was putting together an offer to acquire Britain's AstraZeneca, which had rejected Pfizer's most recent $101 billion bid. Pfizer shares jumped 4.2% on the news to lead the Dow. Staying within the sector, Forest Laboratories said it had agreed to buy Furiex Pharamceuticals for as much as $1.46 billion, sending Furiex shares up 28%. Stocks generally respond positively to M&A activity as target companies are often at a large premium, and investors tend see the combinations as driving profitability and eliminating competition within an industry.
In the day's only economic report, pending home sales in March beat expectations, climbing 3.4% against projections of just a 1% gain, and improving from a 0.5% drop in February. The increase in contracts to buy homes was actually the first uptick in the category in nine months, a positive sign for a housing market that seems to have a hit slowdown following severe weather this winter.
Source: Flickr.com.
Buffalo Wild Wings (BWLD) was moving higher after hours today, up 5% following its earnings release. The restaurant with the slogan "Wings. Beer. Sports." posted a per-share profit of $1.49, better than estimates at $1.35, while revenues jumped 20.9% to $367.9 million, beating expectations at $363.2 million. Same-stores improved by a 6.6% clip at company-owned stores and 5% at franchised locations, an impressive pace considering that many retailers complained of results being affected by poor winter weather. Results were boosted by the Winter Olympics, which drew more people into its restaurants during the two-week event, and lower chicken wing costs. B-Dubs also lifted its earnings forecast for the year, saying it now expects 25% earnings growth up from a forecast of 20%. With plans to eventually triple its number of restaurants to 3,000, Buffalo Wild Wings shares look a strong long-term bet following today's report.
Elsewhere, shares of Herbalife (HLF 0.24%) were trading nearly unchanged after its earnings report came out this afternoon. The nutritional supplement provider that's been dogged by a recent federal investigation beat earnings estimates but said it would cut its dividend to step up its share buyback program. Herbalife posted an adjusted profit of $1.50 per share, well ahead of estimates at $1.30, as revenues grew 12% to $1.3 billion, beating expectations of $1.23 billion. The decision to suspend the dividend to fund buybacks indicate that management thinks the stock is undervalued, but this is a quintessential battleground stock, and taking a position with an investigation pending is risky. Still, based on its full-year EPS guidance of $6.10-$6.30, which it just lifted, the stock trades at a P/E of under 10, giving it plenty of room to run should the company be exonerated.
