A Major Acquisition and Other News Ahead of the Holiday Weekend

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Before U.S. markets opened on Friday, the Bureau of Economic Analysis released its personal income and spending report for November. The core PCE index, excluding food and energy, increased by 0.1% month over month. The overall PCE index fell 0.1% month over month, the first time in more than two and a half years that the index has posted a monthly decline.

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Friday’s big deal

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Bristol-Myers acquires Karuna for $14 billion.

Bristol-Myers Squibb Co. (NYSE: BMY) announced early Friday that it will acquire drug developer Karuna Therapeutics Inc. (NASDAQ: KRTX) for $330 per share in cash. Bristol-Myers’s price reflects a premium of more than 53% to Karuna’s closing price on Thursday. The total value of the deal is $14 billion, excluding $1.3 billion in Karuna’s cash.

Nike earnings disappoint

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A disappointing outlook has sent Nike stock into a tailspin

Athletic shoe and gear maker Nike Inc. (NYSE: NKE) reported second fiscal quarter results after markets closed Thursday. The Dow 30 component beat both the consensus estimates for EPS and revenue. Revenue came in 21% above the estimate and the year-ago result, but revenue was barely $9 million higher (0.0067%) than an estimate of $13.39 billion. Not exactly thrilling.

The company said it is looking for ways to cut $2 billion from costs over the next three years. Nike expects restructuring costs of $400 to $450 million related to severance costs in the current quarter.

What really gave investors agita was CFO Matthew Friend’s comment: “As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management.” Nike stock tumbled by as much as 11% in after-hours trading Thursday.

Micron jumps on earnings

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Micron’s earnings gave the stock a boost.

After markets closed Wednesday, Micron Technology Inc. (NASDAQ: MU) reported results for its first fiscal quarter of 2024. The memory chip maker beat the revenue estimate by 2% and topped the year-ago first-quarter total by 15.7%. Micron raised guidance in late November and beat even those raised numbers.

To top off a solid beat, Micron issued second-quarter revenue guidance to a range of $5.1 to $5.5 billion, above the consensus estimate of $5.05 billion. Micron also expects to report an adjusted net loss per share of $0.21 to $0.35, well below the consensus estimate for a loss per share of $0.61. In the first quarter, Micron reported an adjusted loss per share of $0.95.

CEO Sanjay Mehrotra noted that “strong execution and pricing” drove first-quarter results and Micron expects its “business fundamentals to improve throughout 2024.” The company, Mehrotra noted, is “well positioned to capitalize on the immense opportunities artificial intelligence is fueling across end markets.”

Micron stock closed up almost 9% Thursday at $85.48 after posting a 52-week high of $86.02 earlier. The stock’s 52-week range is $48.43.

Carnival beat estimates

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Carnival continues its recovery from the COVID-19 pandemic.

Cruise ship operator Carnival Corp. & plc (NYSE: CCL) reported a 41% year-over-year revenue increase before markets opened Thursday morning. The net loss per share came in at $0.07, much better than the consensus estimate for a loss of $0.13.

Fiscal 2023 revenue reached an all-time high of $21.6 billion. Cash from operations totaled $4.3 billion, and adjusted free cash flow totaled $2.1 billion. Carnival also reduced its debt by $4.6 billion during the 2023 fiscal year and ended the year with $5.4 billion in liquidity.

Company guidance did not strengthen Carnival’s story. For the first quarter of the 2024 fiscal year, the company guided a net loss of $0.22, worse than the consensus estimate for a loss of $0.13. The forecast for adjusted EBITDA for the quarter is $800 million, below the consensus estimate of around $874 million.

For the full year, Carnival guided EPS at $0.93, equal to the consensus estimate. Adjusted EBITDA guidance for the full year is approximately $5.6 billion, slightly above the consensus estimate of $5.46 billion.

The stock added more than 6% in Thursday trading to close at $19.19. Carnival stock’s 52-week range is $7.53 to $19.55.

That’s Entertainment!

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Hard to believe a tie-up between Warner Bros. and Paramount will get through regulators.

Warner Bros. Discovery Inc. (NASDAQ: WBD) David Zaslav and Paramount Global (NASDAQ: PARA) CEO Bob Bakish reportedly met Wednesday to discuss a potential merger of their two companies. Warner Bros. Discovery owns cable channels CNN, HBO, TNT, TBS, among others. Paramount owns CBS, Comedy Central, and a host of top movie franchises. Those would be Terminator, Top Gun, and Mission: Impossible.

Zaslav has already had a conversation with Shari Redstone, who owns a controlling stake in Paramount, about a potential merger. There is no report of what Redstone had to say, but it seems certain that she must at least have told Zaslav to knock himself out.

Apparently, Zaslav and Bakish think they can avoid antitrust regulators and create a strong competitor to Disney and Netflix. Maybe, but we’d say the odds are against a merger.

Investors weren’t sanguine either. Paramount stock closed down 2.8% Thursday, and Warner stock dropped 1.5%.

A union at Wells Fargo

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Workers at a Wells Fargo branch office in New Mexico voted for unionization.

Earlier this week, employees of a Wells Fargo & Co. (NYSE: WFC) bank in Albuquerque, New Mexico, have voted to form a union. The bankers and tellers voted to join the Communication Workers of America (CWA).

CWA already represents workers at communications giants AT&T, Verizon, the New York Times, and the Wall Street Journal, as well as American Airlines and United Airlines.

According to a press release, the union victory in Albuquerque is “the first at a megabank in decades.” Workers at a Wells Fargo branch in Daytona Beach, Florida, have already filed with the NLRB for an election.

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