Stocks rose on Monday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both closing higher and the S&P ending the session within 0.6% of its record close in January.
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Strength in the airlines boosted transportation stocks, and the SPDR S&P Transportation ETF (NYSEMKT:XTN) added 1.5%. The retail sector also gained ahead of more earnings reports this week; the SPDR S&P Retail ETF (NYSEMKT:XRT) closed up 1.4%.
As for individual stocks, PepsiCo (NASDAQ:PEP) announced plans to buy SodaStream International (NASDAQ:SODA), and The Estee Lauder Companies (NYSE:EL) reported better-than-expected sales and profit growth.
PepsiCo doubles down on sparkling water
PepsiCo announced it plans to acquire Israel-based SodaStream International for $3.2 billion in cash, sending shares of the maker of counter-top beverage carbonation appliances up 9.4% to $142.11 and those of PepsiCo down 0.1%. PepsiCo is paying $144 per share for all of the outstanding shares of SodaStream in a deal that has been approved by the boards of both companies and is expected to close by January 2019.
The press release said that the price was a 32% premium to the 30-day volume weighted average price of SodaStream's shares, but shareholders of that company may not feel they are getting such a great deal. The stock had already posted a huge gain after reporting blowout results for the second quarter earlier this month. PepsiCo will have no trouble paying for the acquisition out of its $18.1 billion in cash and short term investments.
"SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio, while catalyzing our ability to offer personalized in-home beverage solutions around the world," said incoming PepsiCo CEO Ramon Laguarta.
The move could shore up PepsiCo's struggling North American beverage unit as tastes shift to healthier drinks. But SodaStream is also hugely popular in Europe and is the No. 1 sparkling water brand in volume in the world, giving PepsiCo a stronger position in a fast-growing consumer trend.
Estee Lauder continues to grow international sales
Cosmetics maker Estee Lauder reported results for its fiscal fourth quarter that beat expectations and shares jumped 3.4%. Net sales increased 13.9% to $3.30 billion, and adjusted earnings per share soared 19.6% to $0.61. Analysts were expecting the company to earn $0.56 on sales of $3.25 billion.
Sales were powered by the company's skin care line, which grew 26% in constant currency to $1.38 billion, and increased by double digits in every geographic region. Sales in the Americas climbed 2% in constant currency, but overseas sales were strong, with Europe, the Middle East, and Africa up 16% excluding currency effects and Asia-Pacific growing 24%.
Looking forward, the company gave cautious guidance for the next quarter, citing a change in accounting standards, a strengthening dollar, political uncertainties such as tariffs, and a decline in retail traffic in brick-and-mortar stores in the U.S. and U.K. Sales are forecast to increase between 5% and 6%, compared with the 7% analysts were expecting. Adjusted earnings per share is projected to be between $1.18 and $1.22, below the consensus estimate of $1.32, but that figure includes $0.10 to $0.11 of estimated negative impact from the accounting change and currency. For the full year, the company anticipates sales growth, excluding the effects of currency and the accounting change, of 7% to 8%.
With Estee Lauder's momentum seemingly on track and the company gaining global market share, investors were willing to look past the guidance and reaffirm their belief in the company's growth prospects.