Personal Finance

What Investors Missed in the Stock Market This Week


Investors and the media alike waited Friday to hear what Federal Reserve Chairwoman Janet Yellen had to say about the economy and the potential for an upcoming interest rate hike. In the grand scheme of things, what she had to say was positive.

"It's appropriate -- and I have said this in the past -- for the Fed to gradually and cautiously increase our overnight interest rate over time," Yellen said, according to MarketWatch. "And probably in the coming months, such a move would be appropriate."

The comments seem to signal that the U.S. economy is rebounding after what was a difficult first quarter.

The S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) managed to hold on to the week's gains, and finished 2.23% and 2.08% higher, respectively. With that in mind, here's a look at three companies making big moves this week.

Acquisition time

Arbor Pharmaceuticals, LLC kicked off the week by announcing it would acquire XenoPort, Inc. (NASDAQ: XNPT) for $7.03 per share in cash, worth a total equity value of roughly $467 million. That was a premium of about 60% to the closing price of XenoPort shares before the deal was announced, and it prompted shares to trade up to the premium.

In a press release, Ed Schutter, President and Chief Executive Officer of Arbor said:

We are pleased to be adding HORIZANT and the XenoPort pipeline to the growing portfolio of Arbor products. We believe that XenoPort's lead product HORIZANT offers patients and physicians a valuable treatment option for moderate-to-severe primary restless legs syndrome and postherpetic neuralgia. The XenoPort sales team has done an excellent job of growing HORIZANT, and we look forward to supporting them to continue this significant momentum.

For the most part, this seems like a good deal, as XenoPort had been making progress with Horizant -- an FDA-approved therapy for restless leg syndrome -- but it was still burning through cash, which is a problem that Arbor can help with.

Discount stores

One of the better S&P 500 performers of the week was Dollar Tree Inc. (NASDAQ: DLTR) . Its shares jumped 15% after the company posted first-quarter results.

The company's revenue grew 133.6%, to $5.09 billion, compared to the prior-year's first quarter, but much of that gain was due to $2.7 billion from Family Dollar, which it acquired last year. Meanwhile, same-store sales checked in with a more-familiar 2.3% gain at constant currencies.

Looking at Dollar Tree's bottom line, its net income checked in at $232.7 million, or $0.98 per share. Excluding tax benefits and acquisition costs, however, the company's diluted earnings per share jumped 25.4% compared to the prior year, to $0.89 per share.

With a solid start to 2016, the company estimates that its consolidated net sales for the second quarter will check in between $5.03 and $5.12 billion, assuming a low-single-digit increase in same-store sales. Dollar Tree also expects its diluted earnings per share to be between $0.66 and $0.72 per share. For context, analysts' expect Dollar Tree to post second-quarter earnings per share of $0.75 per diluted share on revenue of $5.09 billion.

Tech and auto combination

A Lexus self-driving car in testing. Image source: Toyota Motors.

Also this week, Toyota Motors (NYSE: TM) announced a partnership with ride-sharing company Uber.

"Ridesharing has huge potential in terms of shaping the future of mobility. Through this collaboration with Uber, we would like to explore new ways of delivering secure, convenient and attractive mobility services to customers," said Shigeki Tomoyama, senior managing officer of Toyota Motor Corporation, and president of the Connected Company, in a press release.

Toyota and Uber plan to create new leasing options that enable car buyers to lease their vehicles through Toyota Financial Services, and cover their monthly payments through earnings as Uber drivers. The two companies struck a partnership amid a flurry of such partnerships between major automakers and tech companies as the industry drives toward self-driving cars, ride sharing, and smart-mobility projects.

General Motors also made a substantial investment early in 2016 when it invested $500 million into Uber's competitor, Lyft. It seems as if Toyota is merely testing the waters, while GM is securing a more long-term and in-depth partner; but what's certain is that these deals will continue to increase in number as the industry is poised to evolve more over the next two decades than it has in the past century.

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was the best performing in the U.S. as reported by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations. Together, they've tripled the stock market's return over the last 13 years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

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*"Look Who's on Top Now" appeared in The Wall Street Journal in Aug. 2013, which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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