U.S. stocks traded higher Friday as the Dow Jones Industrial Average rose 10 points to 12447, the Standard & Poor’s 500 added 3.4 points to 1312 and the Nasdaq Composite gained 13 points to 2776. Among the companies whose shares are actively trading in the session are Google Inc. (GOOG), Clorox Co. (CLX) and Petrohawk Energy Corp. (HK).
Google (GOOG, $593.05, +$64.11, +12.12%) said Thursday its second-quarter earnings rose a surprisingly robust 36% on record revenue as the Internet giant experienced strength in its core search business and gained traction with its newer operations. The results lifted other Internet stocks, including Baidu Inc. (BIDU, $144.26, +$3.44, +2.44%) and Yahoo Inc. (YHOO, $14.86, +$0.23, +1.57%).
Clorox’s (CLX, $72.94, +$4.51, +6.59%) largest shareholder, Carl Icahn, offered to buy the household products maker in a deal he valued at $12.6 billion, but the activist investor urged the company’s board to seek a strategic buyer. Icahn’s bid, worth $76.50 a share in cash, values the stock at a 12% premium to Thursday’s close.
BHP Billiton Ltd. (BHP, $91.26, -$1.02, -1.11%) said Thursday it plans to acquire Petrohawk Energy ($38.23, +$14.74, +62.75%) for more than $12 billion in cash, giving the Anglo-Australian mining company access to large shale assets in Texas and Louisiana in one of the largest deals of the year. BHP will pay $38.75 per share, a 65% premium to Petrohawk’s closing price on Thursday.
The energy sector was the top performer in the S&P 500 following the news. Capital One Southcoast recommended longer-term investors buy energy companies that it sees as most likely to also get acquired, including Cabot Oil & Gas Corp. (COG, $67.74, +$5.14, +8.21%) and Range Resources Corp. (RRC, $58.83, +$3.73, +6.77%). Meanwhile, Canaccord Genuity assessed that about 60% of the takeout price’s value can be attributed to its Eagle Ford Shale exposure. Given this, the firm said all names exposed to the Eagle Ford Shale play are likely to be boosted by the deal, including EOG Resources Inc. (EOG, $100.51, +$3.80, +3.93%) and Goodrich Petroleum Corp. (GDP, $18.49, +$1.19, +6.88%).
Shares of other oil-and-gas companies also gained in the wake of the deal. Chesapeake Energy Corp. (CHK, $32.21, +$2.00, +6.62%), from which BHP in February agreed to buy assets, and Forest Oil Corp. (FST, $24.40, +$1.47, +6.41%), which focuses on drilling in areas rich in natural-gas liquids, both rose. SandRidge Energy Inc. (SD, $10.91, +$0.54, +5.21%), which has been a seller of assets the past year while moving more into higher-priced oil from natural gas, also traded higher.
Other Stocks In Focus:
Delaware-based public water utility Artesian Resources Corp. (ARTNA, $18.44, -$0.85, -4.40%) said its offer of 804,290 shares priced at $18.65, a 3.3% discount to its Thursday close.
Sterne Agee initiated coverage of Asia Entertainment & Resources Ltd. (AERL, $9.09, +$1.13, +14.19%) with a stock-investment rating of buy, noting that Macau VIP gaming should outpace market growth for multiple years. The firm also believes Asia Entertainment will increase its market share dramatically over the next three years as the Macau government’s limitations on VIP gaming room promoter licenses pose barriers to entry within its niche.
The sun is finally starting to shine on offshore drillers, Jefferies said, as it raised its stock-investment rating on Atwood Oceanics Inc. (ATW, $45.43, +$1.21, +2.74%), Noble Corp. (NE, $36.90, +$0.81, +2.24%) and Transocean Ltd. (RIG, $62.62, +$2.03, +3.35%) to buy from hold. The market is showing signs of a “more meaningful recovery and potential dayrate increases across multiple asset classes in the coming quarters,” the firm said, noting that jack-up companies have the most near-term dayrate upside as surging activity limits near-term availability and allows contractors to push pricing.
Capella Education Co. (CPLA, $44.40, +$0.77, +1.76%) acquired Resource Development International Ltd., a U.K. online-university operator, for GBP9.3 million ($14.9 million) to further its expansion into the international market.
Capital One Financial Corp. (COF, $48.14, -$0.61, -1.25%) said credit card delinquencies edged up during June, though charge-offs continued to decline for a seventh straight month.
Capstone downgraded its stock-investment rating on Cypress Semiconductor Corp. (CY, $20.46, -$0.35, -1.68%) to hold from buy, saying investors have begun to price in significant growth and it remains concerned about the impact of the semiconductor industry’s contraction, tablet contribution and other items on the company’s earnings for the December and March quarters.
Deutsche Bank cut its stock-investment rating on Diamond Foods Inc. (DMND, $74.97, -$1.26, -1.65%) to hold from buy, citing valuation. The firm said that while it believes in the “strategic logic behind the Pringles acquisition and management’s entrepreneurial approach to the snack category,” the recent stock performance and current valuation discount some of these positives.
Extreme Networks Inc. (EXTR, $3.56, +$0.16, +4.71%) unveiled plans to consolidate about 110 jobs as part of a restructuring effort it says will lower fiscal-fourth quarter earnings but save costs in the long run. The Ethernet-network provider lowered its fourth-quarter earnings estimate to a range of 1 to 2 cents a share, excluding stock-based compensation and restructuring charges, but lifted its revenue projection to between $88 million and $90 million.
First Horizon National Corp. (FHN, $9.80, +$0.32, +3.38%) reported its second-quarter profit more than doubled as loan-loss provisions declined sharply from a year ago, but revenue slumped on a drop in total loans.
Night-vision goggle maker Flir Systems Inc. (FLIR, $28.63, -$3.48, -10.84%) predicted profit would fall in the second quarter as continued weak government demand weighed on revenue.
Genesis Energy LP (GEL, $26.03, -$1.32, -4.83%) said its upsized sale of about 8.5 million common units priced at $26.30, a 3.9% discount to its Thursday close, as it raises funds for its pending acquisition of Florida Marine Transporters Inc.’s black oil barge transportation business and other purposes.
Genuine Parts Co.’s (GPC, $57.33, +$2.21, +4.01%) second-quarter earnings rose 22% and topped analysts’ estimates as the replacement-parts provider continued to see higher sales in all of its segments.
Caris & Co. cut its stock-investment rating on Inter Parfums Inc. (IPAR, $23.47, -$0.67, -2.78%) to average from buy, saying the share price is now nearly fully reflecting the best-case earnings scenario for the perfume and cosmetics manufacturer.
Toy maker Mattel Inc.’s (MAT, $27.62, +$0.83, +3.10%) second-quarter earnings rose 56% and beat analysts’ estimates, due in part to the strong performance of Cars 2 merchandise. The results helped lift shares of fellow toy maker Hasbro Inc. (HAS, $42.05, +$0.74, +1.79%).
BMO upgraded its stock-investment rating on Patriot Coal Corp. (PCX, $22.89, +$1.05, +4.81%) to market perform from underperform, forecasting a rise in metallurgical coal prices due to strong demand led by China, supply disruptions and cost-push inflation. The firm says Patriot’s valuation appears attractive relative to peers in the long term, but near-term Patriot is extremely leveraged to changes in coal pricing due to the company’s low margins. As legacy thermal contracts roll off in 2012-2013, margins are expected to improve, it said.
Jefferies downgraded its stock-investment rating on Qlik Technologies Inc. (QLIK, $30.16, -$3.55, -10.53%) to hold from buy, citing high expectations and valuation. The firm said conversations with some partners indicate deal slippage at the software company was higher than expected.
Ralcorp Holdings Inc. (RAH, $84.97, -$1.65, -1.90%) is splitting up its Post Foods cereal and private-label food businesses, throwing a curve ball into ConAgra Foods Inc.’s (CAG, $25.84, -$0.42, -1.60%) attempt to buy the entire company. Later Thursday, ConAgra indicated it wasn’t swaying from its proposal to buy the company, saying that it had seen Ralcorp’s announcement and that its proposed takeover continued to be in the best interests of Ralcorp’s shareholders.
Seattle Genetics Inc.’s (SGEN, $18.16, -$2.17, -10.67%) shares slumped despite getting FDA panel support for conditional approval of two uses of its blood cancer drug Adcetris. Most on the Street see the news as positive with some concerns about the potential need to modify an ongoing late-stage confirmatory trial that would likely be required for full approval. At the meeting, FDA also said Seattle Genetics needs to work out plans for additional studies prior to the late-August approval deadline.
Wells Fargo raised its stock-investment rating on SM Energy Co. (SM, $77.30, +$5.16, +7.15%) to outperform from market perform, saying it believes the company can exploit its Eagle Ford position to post better-than-expected 2012 earnings and production growth. The firm said it also sees the Petrohawk sale helping SM Energy shares, though it maintains it was already in the process of upgrading the company prior to the sale announcement.
Towerstream Corp.’s (TWER, $4.04, -$0.06, -1.46%) offering of 9 million shares priced at $4, a 2.4% discount to Thursday’s close. Towerstream, a provider of fourth-generation wireless service in the U.S., had said it would use the proceeds to fund the deployment and expansion of its Wi-Fi network, as well as potential acquisitions.
Real-estate investment trust Two Harbors Investment Corp.’s (TWO, $10.21, -$0.30, -2.82%) public offering of 42 million common shares priced at $10.15, a 3.4% discount to Thursday’s close.
Valmont Industries Inc.’s (VMI, $107.20, +$6.00, +5.93%) second-quarter profit more than doubled as sales jumped in all its major segments, led by strong demand in its agriculture business. Results easily topped Wall Street expectations.
Biopharmaceutical developer Vical Inc. (VICL, $4.50, +$0.20, +4.65%) said it would get a $130 million upfront payment from Japan’s Astellas Pharma Inc. (4503.TO, ALPMY) in a new licensing deal to develop and sell its TransVax vaccine.
