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U.S. stocks eked out small gains on Tuesday, while the benchmark S&P 500 snapped a four-day losing streak. The S&P 500 closed up less 3.15 points, or 0.2%, to 2,081.74. The Dow Jones Industrial Average tacked on 27.53 points, or 0.2%, to 17,758.34. The Nasdaq Composite ended the day down 12.06 points, or 0.2%, at 5,083.24.
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McDonald’s Corp.’s corporate credit rating was downgraded one notch on Tuesday to BBB+ from A- at Standard & Poor’s, which cited the fast food giant’s plan to issue more debt to fund returns of cash to shareholders. The outlook is stable, S&P said. The new rating leaves McDonald’s debt at three notches above “junk” status. Earlier Tuesday, McDonald’s said it would finance about $10 billion in cash returns to shareholders by issuing debt, acknowledging that the announcement would likely lead to a credit downgrade. “Overall, we believe this approach
marks a significant and rapid shift in financial policy for the company,” S&P said in a statement. “We would lower the rating if the company increases its return of capital to shareholders beyond current planned levels while experiencing limited improvement in customer response (improved traffic and positive comparable sales in the U.S. for example) during the next year to 18 months.” The stock, which tacked on 0.2% in afternoon trade, has soared 21% year to date, while the Dow Jones Industrial Average has slipped 0.4%.
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Susquehanna Analysts said Tuesday that they believe Square is “fairly valued” with its initial offering price range of $11 to $13, though the price range puts it below its private valuation. With an expected 27 million shares to be sold, that price range would value Square at about $3.9 billion, below its $6 billion valuation as a private company. Though the analysts say the product is “disruptive” and should command a premium price, Square faces a lot of competition and hasn’t proven its business model. “The company has yet to prove that it can turn the business profitable,” the analysts say. Additionally, the analysts say they’re concerned about Chief Executive Jack Dorsey’s ability to focus on Square, given his role as CEO of Twitter as well.
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Alibaba Group Holdings surpassed $5 billion in gross merchandise volume within the first 90 minutes of Single’s Day, a massive day of promotions for online sales in China held annually on Nov. 11, similar to Cyber Monday in the U.S. Last year, the company hit just $2 billion in sales in the first hour. It then went on to process $9 billion in total sales, with 42.6% of gross merchandize volume coming from mobile devices. This year, the company is expecting a greater percentage of buyers to come from mobile devices. Shares of Alibaba ticked up 0.5% to $81.74 in recent trade. They are down more than 31% from 12-months ago, underperforming the S&P 500, up 2%.
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Automatic Data Processing Inc. said Tuesday it will raise its quarterly dividend by 4 cents a share, or 8.2%, to 53 cents a share. The new dividend will be payable on Jan. 1, 2016 to shareholders of record on Dec. 11. At current share prices, the new annual dividend of $2.12 a share would represent an annual dividend yield of 2.45%, compared with the S&P 500 dividend yield of 2.12%, according to FactSet. The human resources consultant’s stock, which was down 0.3% in afternoon trade, has gained 3.7% year to date, while the S&P 500 has tacked on 1%.
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McDonald’s Corp. said Tuesday it has reviewed and decided not to pursue a Real Estate Investment Trust spin-off transaction, viewing such a deal as too risky. Chief Executive Steve Easterbrook told analysts at an investor meeting that the company is raising its refranchising target to 4,000 restaurants through 2018, with a new long-term goal to become 95% franchised. The company is also planning to return about $30 billion to shareholders in the three-year period through end 2016, and announced a 5% increase in its quarterly dividend to 89 cents a share. The company will finance $10 billion in cash returns by issuing debt. “After a thorough evaluation over the last few months, we are optimizing our capital structure by adding a meaningful amount of additional debt,” said Chief Financial Officer Kevin Ozan. He acknowledged that the company’s credit rating would likely be downgraded as a result. The company said it expects positive same-store sales for all of its business segments in the fourth quarter and will target system-wide sales growth of 3% to 5% over the longer term. Shares rose 0.3% in recent trade, and are up about 20% in the year so far, while the Dow Jones Industrial Average is down 0.6%.
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The U.S. Energy Information Administration on Tuesday raised its forecast for 2015 West Texas Intermediate crude prices to $49.88 a barrel from a previous forecast of $49.53. It also lowered its 2016 WTI price forecast to $51.31 from $53.57. The EIA also said it expects U.S. crude-oil output of 9.29 million barrels a day this year, up from a prior estimate of 9.25 million barrels, but it cut its 2016 production estimate to 8.77 million barrels a day from 8.86 million. December crude was up 31 cents, or 0.7%, at $44.18 a barrel on Nymex.
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Shares of several solar companies posted steep losses Tuesday in sympathy with steep falls for shares of SunEdison and SunEdison’s yieldcos, TerraForm Power Inc. and TerraForm Global Inc. , after mixed third-quarter results. Top decliners included Canadian Solar Inc. , First Solar Inc. , and SunPower Corp. Canadian Solar reported better-than-expected results earlier Tuesday but markets seemed to discount that. Canadian Solar reported adjusted earnings of 79 cents a share; analysts polled by FactSet had expected adjusted EPS of 29 cents a share.
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Engine maker Cummins Inc. said Tuesday its board has approved a $1 billion share buyback program, which it will commence once it has completed an earlier $1 billion program, that was approved in July 2014. The company unveiled the program at an investor meeting during which it discussed its plans to drive profitable growth. The company said challenging conditions in some of its markets will reduce 2016 revenue by 5% versus 2015. The company is planning cost cuts, as well as investments in select opportunities and deals. Shares fell 2% in afternoon trade, and are down 28% in the year so far, while the S&P 500 has gained about 1.5%.
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Fidelity lowered the value of its stake in photo-sharing app Snapchat by 25% in the third quarter, according to research firm Morningstar. The fund lowered the value to $22.91 per share as of Sept. 30 from $30.72 per share as of in June and March of 2015. Snapchat was valued at $16 billion in May, according to The Wall Street Journal, but has only recently started efforts to monetize the platform. Fidelity said it does not comment on individual companies.
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