This week's been packed with enough market-moving earnings reports to burn through your daily calorie allotment. The Dow Jones Industrial Average (DJINDICES:^DJI) jumped 78 points Wednesday on more major corporate headlines.
1. Time Warner turns down acquisition offer from 21st Century Fox
Time Warner (NYSE:TWX) has nothing to do with the ubiquitously hated Time Warner Cable, and maybe that's why Rupert Murdoch's 21st Century Fox (NASDAQ:FOX) company tried to buy the media company for $80 billion this week. The owner of the lucrative HBO and TNT channels, as well as Warner Brothers movies studios, Time Warner rejected the deal. That sent the stock flying Wednesday though.
Rupert Murdoch. His name sounds like a villain -- and he looks like one, too. The famous Australian-American capitalist founded, owns, and CEOs News Corp. -- the owner of The Wall Street Journal and other newspapers -- and 21st Century Fox. The man's got money -- his family's worth $14 billion -- and he usually gets what he wants.
The deal would have combined two huge movie studios, 20th Century Fox and Warner Brothers, as well as a bunch of successful TV channels, among them FX, HBO, TNT, and Fox News. The synergies of combining the two competing companies seem obvious, but Time Warner's CEO said there was no strategic plan. He turned down the flattering cash and Fox stock offer that valued the company at $80 billion, and he boasted about it on the company website.
Time Warner is "in play." On Tuesday the company was worth just $61 billion, according to its market capitalization (the number of shares multiplied by the share price). On Wednesday the stock rose 17% as the Fox offer blew up the company's perception by the market. Also, Fox could come back with a counteroffer of even more money. Basically, Time Warner just brought sexy back.
2. Yum! earnings drop on KFC and Pizza Hut sales
If only their quarterly performance tasted as good as their late-night tacos. Shares of Yum! Brands (NYSE:YUM), proud owner of Taco Bell, KFC, and Pizza Hut, dropped 2.5% in after-hours trading Wednesday following its earnings report. Revenue rose 10% from last year to $3.2 billion, just below the $3.24 billion Wall Street expected. Those numbers are not worth bingeing on.
What was the problem? Pizza. Sales at mediocre Pizza Hut dropped 3% last quarter, while competitor Domino's drops its prices and introduces (slightly better) options for those unfortunate enough to not be in the New York area for a pizza fix. Pizza Hut's new 8-inch "cookie pizza" may look cool, but savvy/overweight consumers know it's just a knockoff of the Papa John's version.
One thing tasted good for Yum!'s shareholders -- same-store sales in China jumped 15% last quarter. Half of Yum!'s revenues come from China, where it plans to open 700 new restaurants in 2015, but suffered a setback last year, when bird flu scares kept Asian diners from KFC locations.
The takeaway is that Yum!'s restaurants are getting bumped out of the fast-casual dining market like they're the not-cool kids -- even though they built the industry. Chipotle recently invested in fast-casual chain Pizza Locale, and Buffalo Wild Wings is scaling out PizzaRev. Now that they're on the menu, consumers and investors are changing appetites.
3. Federal Reserve's "Beige Book" highlights improving recovery (sans inflation scares)
Looking for a light summer beach read? Then let us introduce you to the Federal Reserve's "Beige Book." Eight times each year, a couple of weeks before its next policy-setting meeting, the central bank releases this assessment of the economy based on data from the 12 Fed districts.
The takeaway is that the Fed likes what it's seeing. The "Book" characterized a "moderately strong pace" of economic growth in every region, showing continued recovery improvement nationwide. Investors were more pumped to see that, despite the Fed's aggressive stimulus policy of pumping cash into the economy to boost economic growth, inflation is still in control.
As originally published on MarketSnacks.com
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