Stocks dipped on Tuesday, with the Dow Jones Industrial Average (^DJI -0.12%) and the S&P 500 (^GSPC -0.58%) indexes each finishing lower by less than 0.25%.
Today's stock market
|
Index |
Percentage Change |
Point Change |
|---|---|---|
|
Dow |
(0.24%) |
(50.81) |
|
S&P 500 |
(0.12%) |
(2.91) |
Data source: Yahoo! Finance.
Financial stocks were the most heavily traded sector, and the popular Financial Select Sector SPDR ETF (XLF 0.25%) trailed the broader market by declining 0.7%. Gold prices fell to help the VanEck Vectors Gold Miners ETF (GDX 1.57%) shed 1.5%.
As for individual stocks, Atwood Oceanics (ATW) and Multi-Color Corporation (LABL) made market-leading moves following major news.
Image source: Getty Images.
Atwood Oceanics' buyout
Atwood Oceanics stock leaped 24% after the offshore driller agreed to be purchased by Ensco. The terms of the deal spell out a $7 billion all-stock transaction through which Atwood Oceanics shareholders will receive 1.6 shares of Ensco for each share of their company. That translates into a 33% premium for Atwood Oceanics shares over the prior closing price. However, because Ensco shares fell 5% on the news, the actual price jump was significantly less on Tuesday.
Image source: Getty Images.
In a press release, executives explained the rationale behind the move. "The combination of Ensco and Atwood will strengthen our position as the leader in offshore drilling across a wide range of water depths around the world," Ensco CEO Carl Trowell said. Specifically, the acquisition bulks up the company's portfolio by adding premium jackup fleets, Trowell noted. As for the terms that management agreed to, which will leave Atwood Oceanics shareholders with 31% ownership of the combined entity, executives said "the purchase price for these assets represents a compelling value to our shareholders."
The two companies aim to save roughly $65 million in costs annually once the merger is completed. In the meantime, investors can expect Atwood Oceanics' share price to rise and fall with movements in Ensco's stock now that their valuations are locked together.
Multi-Color profits
Shares of premium label specialist Multi-Color gained 5% after the company posted surprisingly strong fourth-quarter earnings results. Organic growth accelerated to a 5% pace from 4% in the prior quarter, and that metric was further boosted by acquisitions that accounted for a 3% bump in sales gains. Altogether, the company's $244 million of revenue beat the consensus estimate, which was targeting $236 million.
Multi-Color managed increased profitability, too, with gross profit jumping 11% thanks to spiking volume in the core U.S. market. Gross margin improved to 22% of sales from 21.4% a year ago, and that success allowed the company to generate $0.98 per share of profit, up 40% after accounting for one-time shifts.
Executive Chairman Nigel Vinecombe chose to focus his comments on management's forecast for the coming year. "Fiscal 2018 provides further organic revenue growth opportunities in the 3-5% range," he said in a press release, "and increased acquisitions revenue opportunities with our lowest leverage in over five years."
That aggressive outlook implies accelerating growth ahead to build on this past year's 3% expansion pace. Multi-Color appears set to ramp up its acquisition moves in fiscal 2018, too, now that debt has declined to less than three times non-GAAP adjusted earnings. These strategic purchases have bolstered its industry coverage lately while pushing margins higher. At attractive prices, further buyouts could help keep sales growth chugging along.