Wall Street’s main stock were a mixed bag as investors were weighing the prospect of a coronavirus stimulus package and latest data pointed to a slow recovery in the labor market.
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US Labor Department data showed that initial applications for state unemployment benefits fell 19,000 to a seasonally adjusted 793,000 in the week ended Feb. 6. Economists polled by Reuters had forecast 757,000 claims for the week. Data for the earlier week was revised upwards and showed 33,000 more claims were registered than previously reported.
The tech-heavy Nasdaq Composite Index edged 0.2% higher and the Dow Jones Industrial Average declined 0.3%. The S&P 500 Index retreated 0.1%.
In M&A news, shares of Kraft Heinz jumped more than 5% after the tomato ketchup maker closed a deal to sell its nuts business to Hormel Foods in a cash deal valued at $3.35 billion. The transaction includes most products sold under Kraft Heinz’s Planters brand, which mainly sells single variety and mixed nuts, trail mix, Nut-rition products, Cheez Balls, and Cheez Curls, as well as Corn Nuts branded products. The deal is expected to close in the first half of 2021, pending regulatory approval. Kraft Heinz CEO Miguel Patricio said, “As we move forward, we plan to continue deleveraging as we explore accretive investments to accelerate our strategy.”
In energy consolidation news, shares of ARC Resources soared 5.4% after clinching a deal to buy Seven Generations Energy Ltd. for C$8.1 billion, inclusive of net debt, to create Canada’s largest condensate producer. Under the terms of the agreement, Seven Generations shareholders will receive 1.108 common shares of ARC for each share of Seven Generations held. Upon closure of the transaction, which is expected in the second quarter of 2021, ARC shareholders will own 49% of the combined company. The combined company plans to pay a quarterly dividend of $0.06 per share, subject to the approval of the Board of Directors
Tyler Technologies, an integrated software and technology services provider, has snapped up NIC in a cash-deal worth $2.3 billion. Per the terms of the deal, Tyler will pay $34 for each share of the Kansas-based digital government solutions and payments company. The price tag represents a 14% premium to NIC’s closing price on Feb. 9. Tyler will finance the transaction using $700 million cash in hand and new debt. The deal is expected to be accretive to Tyler’s adjusted earnings and EBITDA, recurring revenue mix, and free cash flow per share, in 2021.
More investors piled into Pacific Biosciences stock. Shares surged another 9% after closing 16% higher on Feb. 10 as the gene sequencing company announced a $900 million investment from SB Management, a subsidiary of SoftBank Group. As part of the investment, SoftBank will buy $900 million in convertible senior notes due 2028 with an initial conversion price of $43.50 for each share of Pacific Bio. Cantor Fitzgerald analyst Kyle Mikson said that “…the investment from SoftBank would significantly increase PACB’s cash position (to over $1 billion from about $300 million currently) and help fund the company’s growth objectives.”
In earnings news, Coca-Cola posted a better-than-expected 4Q profit, driven by an expansion of adjusted operating margin and prudent cost management. However, the resurgence of coronavirus cases in many parts of the world has kept the beverage company’s global unit case volume trends under pressure. Coca-Cola’s 4Q adjusted earnings increased 6.8% to $0.47 per share on a year-over-year basis and beat Street estimates of $0.42 per share. Adjusted net operating revenues decreased 5.5% to $8.6 billion, falling shy of analysts’ expectations of $8.63 billion. Shares advanced 2%.
Meanwhile, shares of PepsiCo slipped 1.1% as the beverage company forecasted a mid-single-digit increase in organic revenue and a high single-digit increase in earnings in constant currency terms for fiscal 2021. During fiscal 2020, PepsiCo’s revenue rose to $70.37 billion from $67.16 billion year-on-year. Earnings climbed 2% in constant currency terms to $5.52 per share during the same comparative period. Additionally, the soft drink company ramped up its annual dividend by 5% to $4.30 per share.
Cereal giant Kellogg Co. reported 4Q EPS of $0.86 that fell short of analysts’ estimates of $0.89. Revenue rose by 7.5% year-on-year to $3.46 billion but came in slightly below the $3.5 billion Street forecast. For this year, Kellogg expects organic net sales to decline by around 1%, while adjusted EPS is projected to grow by around 1%. Net cash from operating activities is anticipated to be around $1.6 billion with capex of around $0.5 billion and cash flow of about $1.1 billion. Shares retreated 1.8%.
