Stocks rose on Tuesday, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both closing at record highs.
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Rate-sensitive utility stocks fell and financial stocks were strong in anticipation of rising interest rates. The Utilities Select SPDR ETF (NYSEMKT: XLU) dropped 1.7% and the Financial Select Sector SPDR ETF (NYSEMKT: XLF) gained 1%.
As for individual stocks, Comcast Corporation (NASDAQ: CMCSA) announced it was pulling out of talks to acquire assets from Twenty-First Century Fox, and Casey's General Stores (NASDAQ: CASY) reported disappointing sales and profits.
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Comcast bows out of Fox deal
Reuters reported yesterday that Comcast has dropped out of negotiations to buy media assets from Twenty-First Century Fox, leaving a rumored deal between the latter and Walt Disney (NYSE: DIS) all the more likely. Comcast had reportedly been particularly interested in buying Fox's international television assets, Sky and Star India. Comcast investors were apparently relieved; the stock gained 2.8% on the news. Disney shares climbed a modest 0.6%.
"When a set of assets like Fox's becomes available, it is our responsibility to evaluate if there is a strategic fit that could benefit our company and our shareholders," Comcast said. "That is what we tried to do and we are no longer engaged in the review of those assets. We never got the level of engagement needed to make a definitive offer."
With Comcast confirmed to be out of the running, a deal between Fox and Disney could be coming sooner rather than later. Such an agreement could give Disney some new growth possibilities to help counteract challenges it's having with ESPN. The deal would give Disney access to a variety of movie and television content assets that could be monetized through the media giant's studio, theme park, and merchandising machines. It could also give the House of Mouse a majority stake in digital streaming service Hulu, Fox's regional sports networks, and the entertainment networks FX and the National Geographic Channel. Disney stock has risen over 9% since rumors of the deal surfaced early last month.
Casey's misses on sales, profits
Shares of Casey's General Stores fell 11.6% after the company reported fiscal second-quarter results that fell short of Wall Street's expectations. Revenue grew 12% to $2.15 billion and earnings per share fell to $1.28, compared with $1.44 last year. Analysts were expecting Casey's to earn $1.40 per share on sales of $2.16 billion.
Sales of fuel were near the top of the company's guidance for the full year, with an increase of 1.9% in same-store gallons sold. Groceries and other merchandise was toward the low end of guidance, with same-store sales growth of 2.5%. The problem area was prepared foods, which had same-store sales growth of 2.1%, compared with Casey's guidance of 4% to 6%. Last year the category had same-store sales growth of 5.1% in Q2.
Casey's had given a positive outlook for Q2 in last quarter's conference call, based on a strong August sales in all three categories, but in the call yesterday, company officials blamed weather in October for the disappointment, saying that there was a negative same-store customer count in the month.
The disappointment for Casey's investors is that declining growth in its highest-margin category of prepared food has been a trend, rather than a one-month phenomenon. Going into the fiscal year, the company gave guidance that growth for the category for the full year would be 5% to 7%. After the Q1 comp came in at 3.7%, guidance for the full year was decreased a point to 4% to 6%. After today's result, Casey's lowered the range 2 more percentage points to 2% to 4%, giving investors plenty of reason to wonder how long the downward trend will continue.
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Jim Crumly owns shares of Casey's General Stores and Walt Disney and has the following options: long January 2019 $80 calls on Walt Disney. The Motley Fool owns shares of and recommends Casey's General Stores and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.