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Morgan Stanley's Shopping Spree Sends Stock Markets Higher; Domino's Gets Cooked

By Dan Caplinger – Oct 8, 2020 at 12:47PM

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Even Wall Street is excited about Wall Street's prospects.

Stocks continued to press higher on Thursday, lifted by optimism among market participants. Investors seem convinced that the federal government will step in to bolster the U.S. economy and that everything will work out fine with the presidential election, the COVID-19 pandemic, and the rest of the long list of worries out there right now. Just before 11:30 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.45%) was up 78 points to 28,382. The S&P 500 (^GSPC -0.03%) picked up 19 points to 3,439, and the Nasdaq Composite (^IXIC -0.52%) moved higher by 50 points to 11,415.

One of the big laggards in 2020 has been the financial sector, but that hasn't stopped Morgan Stanley (MS 1.09%) from making a big play to expand its business this year, and its latest deal sent a prominent money manager's stock soaring. Meanwhile, Domino's Pizza (DPZ -0.68%) has been a favorite among consumer stocks, but its share price moved lower after it reported earnings that didn't live up to expectations.

Wall Street sign in front of New York Stock Exchange.

Image source: Getty Images.

Picking up hundreds of billions in assets at a bargain price

Shares of Morgan Stanley moved higher by 1% Thursday morning. The company announced that it would buy asset management company Eaton Vance (EV), whose stock soared 48%.

The deal values Eaton Vance at roughly $7 billion. That looks like a bargain price for a company currently managing more than $500 billion in investor assets. After the merger is complete, Morgan Stanley's investment arm will have about $1.2 trillion in assets and produce roughly $5 billion in annual revenue. Add in Morgan Stanley's wealth management division, and assets under management jump to $4.4 trillion.

Eaton Vance shareholders will get a 50/50 payout in cash and stock, receiving $28.25 plus 0.5833 shares of Morgan Stanley stock for every Eaton Vance share they own. Eaton Vance will also pay a cash dividend of $4.25 per share before the merger closes.

Eaton Vance has worked hard to retain its leadership position in asset management, and Morgan Stanley's interest shows the value of its efforts. With this and its purchase of E*Trade Financial earlier this year, Morgan Stanley is becoming the force to be reckoned with on Wall Street.

Domino's gets sliced

Elsewhere, shares of Domino's Pizza were down 7%. The pizza giant's third-quarter financial results looked good, but they didn't live up to even higher expectations.

The numbers at Domino's certainly appeared appetizing. Revenue climbed 14% on a 17.5% rise in same-store sales in the U.S. market. International comps weren't quite as good but still managed a 6.2% gain from year-earlier levels. That helped send earnings per share up nearly 22% year over year.

However, investors had hoped that Domino's sales growth would prove to be more dominant than it did. Rival pizza chain Papa John's International reported even faster gains in revenue, suggesting that Domino's might be losing at least a small portion of its market share in the industry.

Still, Domino's shows no signs of giving up in its bid to keep expanding at breakneck speed. It opened 47 new stores in the U.S. and 162 locations internationally, bringing its total store count worldwide to more than 17,250. For those who see Domino's and its delivery services as the new standard for a post-coronavirus world, that's a promising sign of future success for the pizza king despite today's share price declines.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Domino's Pizza. The Motley Fool has a disclosure policy.

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