Stocks opened the week with strong gains Monday. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both set record highs.
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News of a couple major acquisitions had biotech stocks soaring today; the SPDR S&P Biotech ETF (NYSEMKT: XBI) was up a huge 5.6%. Energy shares also rose, with the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) gaining 2.5%.
As for individual stocks, Halliburton (NYSE: HAL) help boost energy shares with an upbeat earnings report, and Sanofi (NYSE: SNY) announced the purchase of blood disease specialist Bioverativ (NASDAQ: BIVV).
Strong oil prices boost Halliburton results
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Oil services company Halliburton reported a strong fourth quarter and offered an optimistic outlook for 2018, lifting shares 6.4%. Revenue of $5.94 billion was up 48% from the period last year and 9% from Q3. Adjusted earnings per share from continuing operations jumped to $0.53. Analysts were expecting adjusted EPS of $0.46 on revenue of $5.63 billion. Halliburton took charges of $385 million for delays in collecting payments in Venezuela and $882 million on a writedown of tax assets due to the new tax law. Including these one-time, non-cash charges, the company posted a GAAP loss of $0.92 per share.
Higher oil prices have resulted in increased drilling activity in North America, where Halliburton gets most of its revenue. Revenue in North America was up 7% from last quarter to $3.4 billion. But international sales were strong, too, growing 11% sequentially, led by higher drilling activity in the Middle East and Latin America.
Looking forward, CEO Jeff Miller said, "I am optimistic about what I see in 2018. Commodity prices are supportive of increasing activity in North America and I am encouraged by the increase in tender activity and the positive discussions we are having with our international customers."
The recent rebound in oil prices has boosted oil stocks since mid-August. But the strength of Halliburton's business in Q4 beat the estimates of even the most optimistic analysts.
Sanofi pays a generous price to acquire Bioverativ
Shares of biotech Bioverativ soared nearly 62% today after French drug giant Sanofi announced it was acquiring the company for $105 per share in an $11.6 billion, all-cash deal. Sanofi stock fell 3.1% on the news.
Bioverativ became public a little under a year ago when Biogen spun off its hemophilia business. The company is profitable and growing, thanks to sales of hemophilia drugs Eloctate and Alprolix, and had revenue growth of 27% and net income of $68 million last quarter. Sanofi believes the acquisition will be immediately accretive to business earnings per share.
"With Bioverativ, a leader in the growing hemophilia market, Sanofi enhances its presence in specialty care and leadership in rare diseases, in line with its 2020 Roadmap, and creates a platform for growth in other rare blood disorders," commented Olivier Brandicourt, Sanofi's CEO.
The price tag on the deal, a 64% premium to Friday's closing price, certainly raised some eyebrows. Analysts estimate Bioverativ brought in $1.16 billion in revenue in 2017, meaning that Sanofi is buying the company for right around 10 times sales, a hefty price but not too far out of line with other recent biotech buyouts. With competition heating up in a hemophilia market that Sanofi estimates to be $10 billion annually, the move may prove to be prudent in the long run. In any case, it is the latest evidence that M&A activity is heating up in the biotech space.
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