Stocks dipped before noon on political news but generally recovered by the end of the day, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both closing close to even.
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Today's stock market
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Energy shares advanced on recovering oil prices, and the Energy Select Sector SPDR ETF (NYSEMKT: XLE) rose 0.5%. Financial stocks lost ground, with the Vanguard Financials ETF (NYSEMKT: VFH) off 0.6%.
As for individual stocks, PepsiCo, Inc. (NYSE: PEP) reported sales and profit growth that beat expectations but failed to move shares higher, and little biotech Arena Pharmaceuticals (NASDAQ: ARNA) saw a big jump in its stock price after reporting positive drug trial results.
Pepsi grows sales on higher prices
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PepsiCo kicked off the second-quarter earnings season for major companies by announcing results that beat analyst expectations. Revenue was $15.7 billion, up 2% from the previous year. Adjusted earnings per share, including a $0.06 gain from the sale of its minority stake in U.K. distributor Britvic, increased to $1.50, up 13%. Analysts were expecting EPS of $1.40 on revenue of $15.6 billion. The market was evidently unimpressed, though, and shares fell by 0.5%.
Organic revenue growth was 3% in constant currency, with most of that coming from pricing increases. Beverage volume declined 2% year over year while food and snack volume increased 2%. North America beverage volume continues to be a challenge for the company, with volumes flat and revenue up 2%. Frito-Lay in North America helped make up for that, though, with a 3% increase in net pricing leading to a revenue gain of 3%.
Core gross margin declined by 5 basis points and core operating margin increased 50 basis points, but would have declined 10 basis points were it not for the sale of Britvic. The company raised its guidance for full-year EPS from $5.09 to $5.13, due to a change in estimates of currency movements.
PepsiCo is struggling with changing consumer habits in North America that have halted growth in carbonated and sugary drinks across the industry. But the company has been able to selectively raise prices as well as promote premium products in both the beverage and snack food categories, and it's squeezing out gains in international markets.
Arena Pharmaceuticals announces a successful drug trial
Shares of Arena Pharmaceuticals soared over 41% today after the company announced results from a midstage trial of its experimental drug for pulmonary arterial hypertension (PAH), ralinepag. The study of 61 patients showed that those treated with the drug had a statistically significant improvement in a key measure of arterial pressure, and an improvement in 6-minute walk distance.
"The positive outcome of this Phase 2 trial in a contemporary PAH patient population is an important milestone in the development of ralinepag for the treatment of patients suffering from this grievous illness," said Preston Klassen, Arena's chief medical officer.
Arena is a small biotech that has only one drug currently on the market -- weight-loss drug Belviq -- that has not been very successful, and the company sold off rights to it earlier this year. Arena is focused on its drug development pipeline, including ralinepag and etrasimod. Neither of these drugs are anywhere near commercialization, so the biotech will need to rely on secondary offerings of stock in order to have the cash for the pivotal studies required to bring them to market, but investors are clearly more willing to take a chance on the company after learning that ralinepag is showing promise against the rare and life-threatening condition.
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