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Why Dynegy, McKesson, and Deere Jumped Today

By Dan Caplinger – Updated May 19, 2017 at 4:32PM

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These stocks led the way higher on a strong day for the market. Find out why.

The stock market finished the week strong on Friday, with major benchmarks clawing back much of their lost ground from earlier in the week and finishing with gains of around half a percent. Investors seemed to regain their calm about the political situation in Washington as President Trump departed for the first overseas trip of his administration, and general optimism about the state of the economy both at home in the U.S. and globally reasserted itself going into the weekend. Additionally, stronger oil prices helped lift the market's mood. Good news from several important stocks also played a role, and Dynegy (NYSE: DYN), McKesson (MCK -1.06%), and Deere (DE -0.12%) were among the best performers on the day. Below, we'll look more closely at these stocks to tell you why they did so well.

Dynegy draws interest

Shares of Dynegy soared nearly 26% after reports from The Wall Street Journal indicated that the power production company might be the target of a potential acquisition bid. The report indicated that Vistra Energy (VST -1.72%), a Dallas-based peer in the electrical generation and distribution space, could be looking to expand its footprint. Despite the fact that Dynegy's headquarters are in Houston, the company has operations throughout the Ohio Valley and in the mid-Atlantic region, and that could add significant exposure to Vistra's heavily Texas-centered operations. If interest rate increases start pressuring stocks connected to the traditional utility business, then consolidation could be a reasonable answer, but investors will have to wait to see whether reports turn into action in the near future.

Dynegy worker.

Image source: Dynegy.

McKesson looks healthier

McKesson stock climbed 8% in the wake of the company's release of fiscal fourth-quarter financial results late Thursday. The drug distribution company said that sales climbed 4%, and a double-digit increase in earnings per share helped to calm concerns that had arisen in recent quarters about a potential growth slowdown. McKesson faces pressure from Washington, which has looked critically at drug prices and sought solutions for bringing them down in the future. Yet McKesson has made strategic moves to try to make the most of tough conditions in drug pricing, and shareholders seemed encouraged by the ways in which the company has tried to deflect negative commentary about its industry. Still, with anticipated earnings declines for fiscal 2018 compared to the just-ended year, McKesson will have to work toward sustaining its business going forward and finding new avenues for growth.

Deere mows down the competition

Finally, shares of Deere gained 7%. The heavy-equipment maker said that its fiscal second-quarter results showed signs of improving demand for farm and construction equipment, and that led to solid gains of 5% for worldwide sales and a gain of more than 60% in both its GAAP earnings and its equipment operations segment. The company saw one-time gains from the sale of an interest in its SiteOne Landscape Supply business, but Deere now anticipates a 9% boost in full-year equipment sales that should push net income up to $2 billion. With better conditions coming for the agriculture and turf segment and construction and forestry business, investors think that Deere is in a better position than ever to capitalize on a rebound in the global construction and farming industries going forward.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends McKesson. The Motley Fool has a disclosure policy.

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