Wall Street’s main indexes kicked off the week with declines as a new coronavirus variant in the UK and the renewal of lockdown restrictions fueled investor concern about the prospect of a recovery of the economic crisis.
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The Dow Jones Industrial Average slipped 0.1%. The S&P 500 Index fell 0.6%. and the tech-heavy Nasdaq Composite Index was down 0.5%.
On the earnings front, Nike jumped more than 5% after the athletic apparel giant reported better-than-expected 2Q results. Nike’s revenues of $11.2 billion surpassed analysts’ expectations of $10.6 billion and rose 9% year-over-year. The outperformance was driven by strong digital sales growth of 84% and higher revenue growth across all geographies, especially Greater China. Adjusted earnings increased 11.4% to $0.78 per share year-over-year, exceeding the Street’s estimates of $0.63 per share. Guggenheim analyst Robert Drbul, who has a Buy rating on the stock, commented: “The brand commands dominant market share, which we expect will grow materially from here as digital scales further, new product innovation remains robust, and heavy investment behind key growth drivers continues, while some global peers operate more cost-consciously in an uncertain environment.”
Royal Dutch Shell shed 6% as the oil giant updated investors that it expects post-tax charges relating to impairments, asset restructuring and onerous contracts to be between $3.5 and $4.5 billion in the fourth quarter. In addition, Shell said that it anticipates adjusted earnings for its corporate segment to be a net expense of $900 – $975 million for the fourth quarter, impacted by unfavorable movements in deferred tax positions. Separately Royal Dutch Shell announced the sale of a 26.25% stake in Queensland Curtis LNG (QCLNG) Common Facilities to Global Infrastructure Partners Australia, for $2.5 billion.
In M&A news, shares of Diamondback Energy dropped 5.4% after announcing an agreement to buy crude oil and natural gas exploration company QEP Resources in an all-stock deal valued at $2.2 billion. The purchase consideration consists of 0.05 shares of Diamondback common stock for each QEP share, representing an implied value of $2.29 per share paid to each QEP stockholder based on Diamondback’s closing price on Dec. 18. QEP shares, which closed at $2.31 on Friday, fell 6.5% in today’s trading. Diamondback, which is engaged in hydrocarbon exploration, said it expects the transaction to be accretive to 2021 per share metrics including, cash flow, free cash flow, and leverage. In addition, the company estimates that the deal will generate cost synergies of between $60 million to $80 million.
International Business Machines announced that it will snap up Finland-based startup, Nordcloud, a European leader in cloud implementation, application transformation and managed services, for an undisclosed sum. The deal is expected to strengthen IBM’s cloud migration and transformation offerings and help accelerate the adoption of its hybrid cloud platform. IT industry analysts estimate the market for cloud professional services will exceed $200 billion by 2024. IBM shares depreciated almost 3%.
Meanwhile, investors piled into Rent-A-Center stock, pushing the shares up 14% as the omnichannel lease-to-own (LTO) provider announced the acquisition of Acima Holdings for $1.65 billion. The deal comprises payment of “$1.273 billion in cash and approximately 10.8 million shares of Rent-A-Center common stock currently valued at $377 million.” Rent-A-Center said that it has obtained debt financing of $1.825 billion from J.P. Morgan Securities LLC, HSBC Securities (USA) Inc, and Credit Suisse for the transaction.
Agios Pharmaceuticals popped 28% after the biotech company inked a deal to sell its cancer business to France-based Servier, for up to $2 billion. Agios will receive an upfront cash payment of $1.8 billion and $200 million in potential future milestone payments for an experimental brain cancer treatment. It will also be eligible for royalty payments on the net US sales of their drugs. The company expects to conclude the deal in the second quarter of 2021.
In other healthcare news, Novartis declined 3.4% after the Swiss drugmaker said that the US Food and Drug Administration (FDA) did not approve its new drug application (NDA) for inclisiran used in the treatment of patients with elevated low-density lipoprotein cholesterol. The FDA stated in a response letter that it cannot approve the NDA for inclisiran by the Prescription Drug User Fee Act (PDUFA) action date set for December 23, due to “unresolved facility inspection-related conditions.” Novartis Chief Medical Officer, John Tsai, said “Novartis is confident in the quality of the regulatory submission for inclisiran, which includes a robust body of evidence related to efficacy and safety. We look forward to meeting with the FDA and our third-party manufacturing partner to discuss the feedback received and next steps.”
Last, but not least, electric vehicle company, Xpeng is making a foray into the European market. The Chinese EV company announced the first delivery of 100 Xpeng G3 smart electric SUVs EVs to customers in Norway. The move marks Xpeng’s first market outside of China. “Our launch in Europe comes just as consumers are shifting in increasingly large numbers to more sustainable personal transport, and at a tipping point where governments around the world are stepping up their zero emission efforts. We look forward to being a significant driver in accelerating that transition,” said Xpeng CEO He Xiaopeng. Shares rose less than 1%.
