Consumer stocks are ending higher this afternoon with shares of
consumer staples companies in the S&P 500 gaining 1.1%. Shares
of consumer discretionary firms in the S&P 500 are climbing
In company news, Advance Auto Parts Inc. (
) is holding on to a 16.9% advance at $96.40, easing from its new
52-week high of $99.30 that followed the auto-parts retailer
announcing a deal to acquire privately held rival General Parts
International Inc. for $2.04 billion in cash.
The deal not only is receiving strong support from investors,
Moody's Investors Service weighed in by re-affirming AAP's
investment grade Baa3 credit rating, describing the acquisition as
a "value-adding and sensibly-priced transaction."
Also today, Bank of America raised its rating for AAP shares to
Buy from Neutral and increased its price target by $25 to $115 a
According to Moody's vice president Charlie O'Shea, the deal
boosts AAP scale as a retailer, adding over 2,700 Carquest outlets
now operated by General Parts, as well as expanding its commercial
and wholesale operations.
Moody's has a few cautionary observations, acknowledging the
deal - at least temporarily - will stress the company's credit
profile after taking on roughly $1.4 billion in new incremental
debt. AAP, however, has promised to quickly repay a substantial
portion of the financing from its free cash flow. It also will
likely suspend its stock buybacks until its credit metrics return
to pre-acquisition levels, Moody's said.
In other sector news,
(+) LUK, Prices $750-mln offering of 5.5% senior notes due 2023
at 98.641% of par. Net proceeds will be used to redeem the
company's 8.125% senior notes due 2015.
(-) SWK, Q2 earnings of $1.39 per share, ex items, trailing
forecasts by $0.01. Revenue rose 9.6% year over year to $2.8
billion, roughly in-line with analyst consensus. Also, R.W. Baird
lowers its rating for SWK to Neutral from Outperform.