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What Happened in the Stock Market Today

By Demitri Kalogeropoulos – Sep 14, 2016 at 4:47PM

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Why Vitae Pharmaceuticals and Cracker Barrel shares made big moves on Wednesday.

Image source: Getty Images.

Stocks had a relatively quiet session on Wednesday. After three consecutive days of volatile trading, the Dow Jones Industrial Average (^DJI 0.07%) and the S&P 500 (^GSPC 0.05%) index both fell just slightly.

Today's stock market

Index

Percentage Change

Point Change

Dow

(0.18%)

(32)

S&P 500

(0.06%)

(1)

Data source: Yahoo! Finance.

As for individual stocks, Vitae Pharmaceuticals (NASDAQ: VTAE) and Cracker Barrel (CBRL 0.10%) each made large moves on Wednesday behind unusually high trading volume.

Vitae Pharmaceuticals takes a buyout

Vitae Pharmaceuticals shares more than doubled after it accepted a buyout offer from Allergan (AGN) for $21 per share. The all-cash deal values Vitae at nearly 160% above its prior closing price -- yet only about 15% higher than where it started off this year.

Image source: Getty Images.

Still, shareholders of both companies are likely happy about this result. For Allergan, the merger boosts its dermatology pipeline with several promising treatments for psoriasis, a skin condition that affects over 7 million Americans, that could soon pass regulatory approval.

"The acquisition of Vitae is a strategic investment for Allergan that adds strength and depth to our innovative medical dermatology franchise," Allergan CEO Bent Saunders said in a press release.

Vitae, meanwhile, gains massive resources to help fund further development of its treatments and marketing of them should they prove commercially viable, all without the need to raise cash through debt or additional stock offerings. At its last update, Vitae's management said the company had enough cash on hand to keep the lights on until 2018.

The board of directors of both companies agreed to this purchase. That, plus the significant premium Allergan has committed to it, makes it unlikely that a competing bid will come in above the deal's $21 price tag. So Vitae shareholders might want to sell their stock and put the funds to work elsewhere rather than wait for shares to convert into cash when the deal closes sometime in the next few months.

Cracker Barrel sees slowing growth ahead

Cracker Barrel's stock fell 6% following the food and retailing chain's fiscal fourth-quarter earnings report. Top-line growth was strong, with comparable-store sales rising by 3.2% at its restaurants and by 3.5% at its retailing segment. The restaurant growth was especially good news since it marked an improvement over the prior quarter's 2.3% uptick. Profitability ticked higher, which helped the company generate an 8% earnings improvement to $2.12 per share.

Image source: Cracker Barrel.

Yet Cracker Barrel didn't completely dodge the slowdown that has pinched peers in the casual-dining industry. Customer traffic fell by more than 1%, which left higher prices responsible for the entire sales growth uptick. Management warned investors to expect a bumpy operating ride for the coming year, too. "We anticipate ongoing challenges in the industry during fiscal 2017," CEO Sandra Cochran said in a press release.

To that end, Cracker Barrel sees profitability slipping from this year's 10.4% down to 9.8% at the midpoint of guidance for fiscal 2017. Sales growth will also tick down 1% to 2%. Consensus estimates on both the top and bottom lines were more aggressive, and so the stock fell as Wall Street came to terms with the fact that operating results will be pressured over the short term.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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Stocks Mentioned

Cracker Barrel Old Country Store Stock Quote
Cracker Barrel Old Country Store
CBRL
$114.08 (0.10%) $0.12
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,873.67 (0.07%) $40.51
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,965.79 (0.05%) $1.85
Allergan Stock Quote
Allergan
AGN

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

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