U.S. Stocks Rise as Dow Average Gains a Sixth Day on M&A Deals
U.S. stocks rose, sending the Dow Jones Industrial Average up for a sixth straight day, as takeover announcements bolstered investors’ optimism.
Beckman Coulter Inc. surged 10 percent as Danaher Corp. agreed to acquire the laboratory-equipment maker for $6.8 billion. Pride International Inc. rallied 16 percent after Ensco Plc said it will buy the drilling contractor for $7.3 billion. Wesco Financial Corp. added 1.8 percent as Warren Buffett’s Berkshire Hathaway Inc. won the backing of the company’s board to buy the 19.9 percent of stock it doesn’t own in the unit.
The Standard & Poor’s 500 Index rose 0.6 percent to 1,319.05 at 4 p.m. in New York, the highest since June 2008. The Dow added 69.48 points, or 0.6 percent, to 12,161.63, extending its longest stretch of gains since November. The Nasdaq-100 Index rallied 0.5 percent to 2,349.20, the highest since February 2001. The Russell 2000 Index gained 1 percent to 808.32, the highest since October 2007.
“Animal spirits are returning,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees $9.5 billion. “Companies have a lot of cash and they should continue to look at other companies. We’re going to see more M&A deals. That’s an indication of optimism about the economy. That bodes well for stocks.”
The gain in stocks last week pushed the Dow to its first close above 12,000 since June 2008 as earnings, an expansion of American manufacturing and a decrease in the unemployment rate overshadowed unrest in Egypt. About three-quarters of the companies in the S&P 500 that have reported quarterly results since Jan. 10 have topped analysts’ projections for per-share profit, according to data compiled by Bloomberg.
More U.S. companies are exceeding sales forecasts than any time in four years, helping extend the biggest stock-market rally since 1936. Caterpillar Inc. and United Parcel Service Inc., barometers for the economy because of their building and delivery businesses, are among the 72 percent of S&P 500 companies that reported more revenue last quarter than analysts estimated as of the end of last week, the largest proportion since at least 2006, according to data compiled by Bloomberg.
While U.S. earnings have surpassed Wall Street estimates for seven straight quarters, sales have trailed forecasts on average since 2008, as the U.S. ended its worst recession in seven decades and employers cut as many as 8.75 million workers. Penn Capital Management says unexpected revenue growth shows the economy is expanding enough that companies can stop firing people and closing plants.
‘Couldn’t Cut Anymore’
“You really did need top-line growth because the cost- cutting got to where you couldn’t cut anymore,” said Eric Green, a money manager at Penn Capital Management in Philadelphia, which oversees $5.6 billion. “But you’re seeing it now. Many companies are having that nice top-line growth, and as that goes up, it should have a magnified effect on earnings. It’s very positive for the equity markets.”
Global mergers and acquisitions increased to $668.3 billion in the fourth quarter, the highest since the third quarter of 2008, according to data compiled by Bloomberg data. So far in 2011, $207.9 billion of transactions have been announced, with 54 percent from deals targeting U.S. companies.
Beckman Coulter surged 10 percent to $82.65. Danaher will start a tender offer of $83.50 a share for all of Beckman Coulter’s outstanding stock within seven days, Danaher said today in a statement. The price represents a premium of about 45 percent to Beckman Coulter’s closing price on Dec. 9, the day before speculation of a sale began, Danaher said.
Pride International gained 16 percent to $39.80. Ensco said it will acquire the Houston-based company for $41.60 a share in cash and stock, creating the world’s second-largest offshore drilling company.
Wesco rose 1.8 percent to $387.50. Berkshire won the backing of Wesco’s board for a $547.6 million buyout. Buffett, 80, is seeking to simplify Berkshire’s holdings as he prepares the company for an eventual change of leadership. Omaha, Nebraska-based Berkshire has controlled Wesco for more than 25 years. Buffett, Berkshire’s chairman and chief executive officer, told Wesco in a letter that he wouldn’t proceed without the approval of the firm’s independent directors.
Financial shares had the biggest gain of 10 industries in the S&P 500, rising 1.5 percent as a group. American International Group Inc. rallied 5.5 percent to $42.18.
Loews Corp. jumped 4.5 percent to $43.27. The holding company run by New York’s Tisch family reported fourth-quarter profit excluding some items of $1.17 a share, topping the average analyst estimate by 34 percent, according to Bloomberg data. CNA Financial Corp. rose 8.8 percent to $30.19. The Chicago-based commercial insurer controlled by Loews posted fourth-quarter earnings that beat analysts’ estimates and said it resumed paying quarterly dividend at 10 cents a share.
Bank of America Corp. rose 2.7 percent to $14.67. The biggest U.S. lender by assets said it extended more than $685 billion in credit to individuals, small businesses, nonprofits and large companies in 2010. The bank extended $92 billion of credit to small and medium-sized businesses, exceeding its goal of $86 billion.
Genzyme Corp. gained 0.8 percent to $74.02. Sanofi-Aventis SA is still examining the books of the biotechnology company as it works toward a $19.2 billion takeover. Sanofi and Genzyme are discussing a price of about $74 a share plus potential additional payments tied to the performance of a Genzyme drug, and the boards were slated to meet yesterday, four people with knowledge of the plan said earlier. An announcement was possible as early as today, they said.
‘No Further Comment’
“As we have previously said, we’ve signed a confidentiality agreement with Genzyme and are continuing to review non-public information,” Jean-Marc Podvin, a spokesman for Paris-based Sanofi, said in a telephone interview yesterday. “We have no further comment.”
Chesapeake Energy Corp. advanced 4 percent to $31.27. The most-active U.S. natural-gas driller intends to raise $5 billion by selling its Fayetteville shale holdings and its stakes in two companies. It will use the money to cut debt.
UBS AG boosted its year-end projection for the S&P 500 by 100 points to 1,425, as the outlook for the economy and earnings improve. The previous estimate was for 1,325, the Zurich-based firm said in a note today.
“Our upgrade is primarily driven by a reacceleration in economic data, which should support stronger top- and bottom- line growth,” Jonathan Golub, chief U.S. market strategist, wrote in the note. “While typically earnings surprises decline as a recovery matures, current quarter results appear to show a reacceleration.”
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