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Why Chesapeake Energy, Nordson, and Toll Brothers Jumped Today

By Dan Caplinger - May 24, 2016 at 5:23PM

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These stocks helped lead the market higher. Find out why.


Image source: Toll Brothers.

Tuesday sparked a strong move higher for the stock market. Investors reacted favorably to strong economic data showing solid gains in sales of new homes, and that provided confidence that the U.S. economy might be strong enough to withstand any potential headwinds from future interest rate increases from the Federal Reserve. The U.S. dollar rose in value against major foreign currencies, while prices of gold and silver market fell back as participants there reacted negatively to moves in other markets. Major market benchmarks posted gains of 1.25% to 2% on the day, but several stocks did even better, and Chesapeake Energy (CHKA.Q), Nordson (NDSN 0.25%), and Toll Brothers (TOL 0.88%) were among the best-performing stocks on Tuesday.

Chesapeake Energy jumped 11% after the long-struggling oil and gas exploration and production company said in an SEC filing that it had engaged in another transaction designed to exchange new shares of common stock for outstanding debt. The filing indicated that Chesapeake has issued or agreed to issue more than 37 million shares in exchange for about $166 million in aggregate principal amount due on four different issues of senior notes. The debt carries maturities or bondholder put rights dated between 2017 and 2019, and the move is helping to enhance Chesapeake's liquidity at a time when investors are getting increasingly optimistic about recent moves higher in the energy markets. By combining moves like this with asset sales and other efforts to control debt, Chesapeake will put itself in a better position to benefit if energy prices maintain and build on their gains.

Nordson soared 15% in the wake of its fiscal second-quarter financial report late Monday. The maker of precision adhesives managed to overcome a difficult economic environment to produce sales gains of 9% and a 43% jump in net income. Strength in the advanced technology segment as well as its adhesive dispensing systems business drove Nordson's overall gains, overcoming sluggish performance from the industrial coatings segment. In addition, Nordson gave an optimistic view of how it sees the remainder of the fiscal year going, and that news not only gave Nordson shareholders a boost in confidence but also suggested that conditions more broadly throughout the industry might be improving as well.

Finally, Toll Brothers finished up 9%. The premium homebuilder reported its fiscal second-quarter results Tuesday morning, which included a better than 30% rise in both net income and overall revenue. Home deliveries jumped above the 1,300 mark and net signed contracts came close to 2,000, while backlogs climbed by double-digit percentages to nearly 5,000, or $4.19 billion in value. Toll Brothers also said that it now expects to deliver between 5,800 and 6,300 homes during the full fiscal year, reaping an average of $820,000 to $850,000 per sale. Although the company said that it faced some temporary inventory availability issues in hot markets like California, Toll Brothers is still optimistic about the strength it's seeing in the housing market across much of the nation.

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Stocks Mentioned

Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
Toll Brothers, Inc. Stock Quote
Toll Brothers, Inc.
TOL
$44.60 (0.88%) $0.39
Nordson Corporation Stock Quote
Nordson Corporation
NDSN
$202.44 (0.25%) $0.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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