Stocks have boomed to kick off the new week as the Dow Jones Industrial Average (DJINDICES:^DJI) has gone on a tear since the opening bell sounded. As of 2:15 p.m. EDT, the Dow has jumped 125 points, with all but a handful of its 30 member stocks in the green so far. Today's biggest stock stories have come from outside the Dow Jones, however, after Citigroup (NYSE:C) walloped Wall Street earnings forecasts and Abbott Labs (NYSE:ABT) and generic-drug maker Mylan (NASDAQ:MYL) agreed to a big deal. Let's catch up on what you need to know.
Citi keeps earnings season rolling
Citigroup topped earnings expectations in its second-quarter results, pushing the bank stock higher by 3% on the day. The company's $1.24 in adjusted per-share net earnings soundly smashed average analyst projections of $1.05, and trading revenue at Citigroup fell less than expected, declining 16% year over year after company leadership had projected a much wider loss.
However, Citigroup's $7 billion settlement with the Department of Justice has dominated the news on this big bank today. The company's agreement with the government will resolve potential lawsuits against the bank regarding the sale of mortgage securities before the 2008 financial crisis. Citi noted that the deal, which includes a cash penalty of $4 billion, cost the company $3.8 billion in pre-tax earnings for the second quarter. That slammed the firm's unadjusted earnings today -- Citi managed net income of only $181 million, a giant drop-off from the quarter a year ago -- but the settlement will allow the bank and its investors to move on from the storm cloud of government investigation.
Elsewhere around the market today, Abbott Labs is making waves around Wall Street, although the health care stock has climbed just 0.8% on the day. Abbott agreed to sell part of its established drug business to generic-drug giant Mylan in a deal worth more than $5 billion. It's an important step forward for Abbott and its investors, as the company's generic-drug business has been a drag on growth lately. In the first quarter, the unit saw sales decline by more than 6% year over year, hit hard by currency exchanges, as Abbott's generics business operates solely outside of the U.S.
Even on operational growth, however, the business saw sales slip by nearly 1% year over year, making it Abbott's second-worst-performing unit for the quarter after nutritionals, which were largely affected by a supplier recall. In the long term, the generics business isn't a growth driver for Abbott or its shareholders, and selling off part of the unit will allow the company to focus on higher-growth areas such as diagnostics and nutrition.
It's also a great deal for Mylan, however. The company plans to combine its existing business with the assets it picked up from Abbott to launch a new company incorporated in the Netherlands. There, Mylan projects it will lower its tax rate from 25% to around 21% in the first full year of operations, with further tax reductions likely to come down the road. Mylan expects the purchase to add nearly $2 billion worth of revenue to the company's portfolio once the deal is closed, helping the company gain more traction outside of the U.S. In all, it's a sound deal for both parties -- and for shareholders of each.