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What Happened in the Stock Market Today

By Demitri Kalogeropoulos – Oct 5, 2016 at 5:41PM

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Why Twitter and Constellation Brands stood out as indexes rose on Wednesday.

Image source: Getty Images.

Stocks posted moderate gains on Wednesday, with the Dow Jones Industrial Average (^DJI 0.92%) and the S&P 500 (^GSPC 0.61%) indexes both adding less than 1%.

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Data source: Yahoo! Finance.

Commodity price swings produced big moves in a few exchange-traded funds. A 2% pop in oil prices to just below $50 per barrel helped the United States Oil Fund ETF log a 2% gain. Meanwhile, the heavily leveraged gold fund Direxion Daily Gold Miners Bull ETF rose by 2% to reclaim just a small portion of the prior day's 26% plunge.

Individual stocks that stood out in Wednesday's action included social media giant Twitter (TWTR) and beer and wine specialist Constellation Brands (STZ 2.04%).

Twitter buyout chatter

Buyout rumors continued to power a surging stock price for Twitter, which gained 6% to push into positive territory for the year. The social media specialist could receive multiple bids this week, according to a new report from The Wall Street Journal. Tech giant is likely to be in the running, as its CEO Marc Benioff is said to be keen on acquiring Twitter. Benioff described the company as an "unpolished jewel," the Wall Street Journal said.

"Jewel" is the debatable part of that compliment. After all, Twitter last posted just an 18% boost in advertising revenue compared to Facebook's 60% bounce. Its user growth and engagement metrics have also lagged the social media leader, and the service is still far from the accessibility target that CEO Jack Dorsey has laid out. "We remain focused on improving our service to make it fast, simple and easy to use," Dorsey told investors in late July.

Twitter does have a mountain of data that a company like Salesforce could monetize. Additionally, as its recent partnership with the NFL demonstrates, the media platform has encouraging potential as live video becomes more important to social media interactions. These positives could attract several corporate buyout suggestions, but investors are better off focusing on the company's weak growth trends and management's progress at improving them.

Constellation Brands' beat and raise

Alcoholic beverage marketer Constellation Brands pushed further into record territory on Wednesday after posting strong fiscal second-quarter earnings results. Sales growth accelerated to a 17% pace from the prior quarter's 15% jump. The same trend held for operating income, which surged higher by 24% versus a 21% rise in the fiscal first quarter. Profit margin jumped by nearly 2 percentage points to reach 31% of sales. "The strong consumer demand for our portfolio continues to propel our business," CEO Rob Sands said in a press release.

Image source: Getty Images.

Specifically, the company enjoyed a 15% bounce in beer sales as its Corona Extra and Modelo Especial brands continued to gain market share. The wine and spirits segment of the portfolio also saw hefty gains, rising 8% thanks to strength in its core brands. Finally, Constellation's acquisition of Meiomi and The Prisoner wine brands contributed to the sales growth and improved profitably.

The company raised its outlook for the year to account for the surprisingly strong recent operating trends. Earnings are now projected to come in at $6.38 per share rather than the $6.20 per share that executives forecast three months ago. Free cash flow also got a big upgrade, and should weigh in at $425 million compared to the $300 million previously forecast.

That leaves shares valued at a pricey 27 times projected earnings. Yet Constellation Brands continues to make a strong case for its premium valuation by posting market-thumping sales and profit growth.

Demitrios Kalogeropoulos owns shares of, and The Motley Fool owns shares of and recommends Facebook. The Motley Fool owns shares of and recommends Twitter. The Motley Fool recommends 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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