After a big two-day rally for the stock market, Wall Street began Tuesday morning on a fairly quiet note. Investors remain optimistic about prospects for the U.S. economy to fend off some of the challenges it has faced over the past two years, but they're also cognizant of the ongoing threats that could send markets reeling. As of 8 a.m. ET, futures on the Dow Jones Industrial Average (^DJI -0.31%) were down 47 points to 34,950, and S&P 500 (^GSPC -0.23%) futures had dropped 6 points to 4,499. However, Nasdaq Composite (^IXIC -0.09%) futures were up 15 points to 14,920.
United Parcel Service (UPS -1.06%) was the latest company to report its quarterly earnings results, and investors were generally pleased with the growth they saw from the shipping company. Meanwhile, telecom giant AT&T (T -1.24%) finally announced a move that will allow it to consolidate its growing media empire while giving investors the chance to decide which part of the company they'd prefer to own. Read on for the details below.
UPS is moving up
Shares of UPS were up nearly 7% in premarket trading Tuesday morning. The delivery service giant reported fourth-quarter results that were encouraging both for the company and for the overall state of the economy.
The baseline financial numbers for UPS were healthy. Revenue climbed 11.5% year over year to $27.8 billion. Net income soared from break-even performance in the same quarter in 2020, and after adjusting for extraordinary items, adjusted earnings of $3.59 per share were up 35% from year-ago levels.
UPS showed particular strength in its U.S. domestic segment, where sales rose more than 12% and operating profit soared 57%. International growth was slower, but the UPS supply chain solutions segment showed significant 38% gains in operating profit.
Moreover, the company sees 2022 remaining favorable for its business. Revenue should come in around $102 billion for the full year, and UPS expects to meet its 2023 margin and sales targets a year early. UPS decided to reward its shareholders with a massive dividend increase of nearly 50%, declaring a quarterly dividend of $1.52 per share.
Many look at UPS as a bellwether for levels of business activity in the economy. Based on today's numbers, UPS is signaling better times ahead in 2022 and beyond.
AT&T moves forward
Meanwhile, shares of AT&T dropped nearly 6%. Investors didn't see the company's planned spinoff of its WarnerMedia unit as a favorable outcome as it moves forward with its $43 billion deal to merge its media properties with Discovery (DISCA).
AT&T's announcement didn't really break much new ground, only clarifying some specifics in the transaction that it and Discovery had revealed last November. Under the terms of the deal, AT&T shareholders will receive 0.24 shares of Warner Bros. Discovery common stock per AT&T share owned. That will give current AT&T investors a combined 71% of the shares of the new entity.
However, AT&T did offer specifics about the dividend shareholders should expect after the merger takes place. The board of directors approved an expected after-closing annual dividend of $1.11 per share. The company believes a 40% payout of expected free cash flow will give it enough latitude to pursue strategic growth prospects while still providing shareholders with a stream of income. However, with the current annualized dividend rate of $2.08 per share, the 47% drop is far larger than the proportional loss of WarnerMedia assets would warrant and will cut its dividend yield from above 8% to less than 4.5%.
AT&T has seen its stock move steadily lower over the past five years. Unfortunately, the spinoff doesn't seem to be offering investors much hope for the future, and losing more of their dividend than expected is the last thing shareholders wanted to see.