Merck's Stock Tops the Dow as Tyson Makes a Bold Bet for Hillshire Brands

Tyson Foods makes the biggest market-shaking news of the day with a $50 per share offer for Hillshire Brands.

May 29, 2014 at 2:30PM

The market rushed out of the gate with a strong start this morning, but stock momentum has faded and the Dow Jones Industrial Average (DJINDICES:^DJI) was struggling to hold on to a 21-point gain as of 2:30 p.m. EDT. Many of the index's blue-chip stocks were hanging near the breakeven mark on the day. That's not the case at Merck (NYSE:MRK), however, as the health-care stock has shot up 1.9% to the top of the Dow today. Meanwhile, Cisco has (NASDAQ:CSCO) bottomed out with a 1% drop. Let's catch up on what you need to know.

Will Merck deliver on its year-to-date gains?
Merck has been one of the Dow's top gainers in 2014, with the stock jumping 14% year to date. While the company released little news today, investors have rallied behind hopeful signs from its drug pipeline. Merck's ballyhooed cancer therapy MK-3475 has taken the spotlight this year, with peak sales estimates ballooning into the $2 billion to $3 billion range, but other prospects have also advanced. Earlier this month, Merck announced that it will push ahead in filing for regulatory approval for osteoporosis drug odanacatib later this year. Odanacatib had been on the slate for filing last year; while the yearlong delay frustrated investors, this is still a drug with billion-dollar annual sales potential. As 2014 moves on, this is one drug that Merck investors need to keep an eye on.

Fellow Dow stock Cisco has had its own strong year in jumping more than 12% so far in 2014, and its struggles today come despite optimistic signs from a new report. Tech research firm Gartner today reported global server shipment and revenue estimates for the first quarter; while many big names around the sector struggled, Cisco's numbers came out strong. According to Gartner, estimated worldwide server sales declined by more than 4% from the first quarter – but Cisco saw a whopping 37% global revenue growth in this niche.

Cisco Servers

Cisco's Convergence servers. Source: Wikimedia Commons.

Cisco still eats up less than 6% overall market share in the server market, according to the report. That represented a market share gain of 1.6 percentage points year over year, however. It's a good sign for a company that has struggled mightily with sales, having seen its overall revenue over the past nine months decline by nearly 4% year over year. Cisco has plenty of work to do, but today's Gartner release is a sign of improvement for a company that could use all the help it can get.

Outside of the Dow today, Tyson Foods (NYSE:TSN) stock jumped 6.2% after the company entered its own bid for highly coveted Hillshire Brands (NYSE:HSH). Hillshire itself for a gain of more than 17% after Tyson offered $6.8 billion in all for the maker of Jimmy Dean sausages and other products. A bidding war could be on hand: Tyson's offer comes after Pilgrim's Pride offered $45 per share for the company, but Tyson's $50 per-share bid could push Pilgrim's Pride to up its own offer. For Hillshire investors, Tyson's move is a fantastic development and part of a giant run-up over the past week. Keep an eye on where Tysons and Pilgrim's Pride go next, as it seems this acquisitions war isn't over yet.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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