The stock market was roughly flat on Wednesday morning, with a high volume of results on the earnings front keeping major benchmarks from making big moves. Just after 11:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was down 9 points to 26,647. The S&P 500 (SNPINDEX: ^GSPC) was up less than 1 point to 2,934, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) picked up 13 points to 8,134.
One of the most anticipated financial reports came from aerospace giant Boeing (NYSE: BA), which has labored under the strain of having had its 737 MAX aircraft grounded across the globe in the wake of two major fatal crashes. Meanwhile, Occidental Petroleum (NYSE: OXY) decided that it wouldn't give up on its aspirations to acquire Anadarko Petroleum (NYSE: APC), making a hostile bid in an effort to throw a wrench into Chevron's (NYSE: CVX) merger plans.
Boeing manages to hold its altitude
Shares of Boeing were higher by 1% after the aircraft manufacturer reported its first-quarter financial results. Boeing's numbers revealed greater exposure to the events of the past several months than many investors had expected, including a 2% year-over-year drop in revenue that helped contribute to 13% declines in both net income and core earnings per share.
Image source: Boeing.
From a financial standpoint, Boeing noted that lower deliveries of 737 aircraft than expected more than offset the upward effect of higher volume in its defense and services segments. The manufacturer did manage to deliver 149 commercial aircraft during the period, but that was down by nearly a fifth from the same period a year ago.
Yet investors seemed to take heart from a couple of developments. First, Boeing said that it's "making steady progress" in certifying a software update for the 737 MAX that's intended to resolve the issues that are believed to have contributed to the two recent crashes. As CEO Dennis Muilenburg explained, "We are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators, and the flying public." Also, backlog levels remain healthy at $487 billion, reflecting the resiliency of Boeing's order book.
Even so, some investors are concerned that Boeing chose to withhold any further guidance on financial results and suspend its stock repurchase program. Boeing's balance sheet is strong and has plenty of liquidity, but the aircraft manufacturer appears to be preparing for massive settlement payments that could force it to tap into its cash reserves.
An energy war
Shares of Occidental Petroleum dropped 3% following the energy company's decision to make a hostile bid to acquire Anadarko Petroleum. Anadarko's stock jumped 12% in the wake of the announcement as shareholders weighed the potential for a bidding war between Occidental and Chevron, which had previously made its own friendly acquisition bid.
Under the terms of the new deal, Occidental would pay $76 per share in cash and stock to Anadarko shareholders, split half and half with $38 in cash and 0.6094 shares of Occidental stock. The offer values Anadarko at roughly $38 billion, or $57 billion when you include the assumption of debt. Occidental termed its offer as a "superior proposal" to Chevron's bid, which included just $16.25 per share in cash and 0.3869 shares of Chevron stock for every Anadarko share.
Occidental CEO Vicki Hollub highlighted the complementary nature of the two companies' assets, as well as setting out the history that Occidental has had in pursuing Anadarko. The deal would create a powerhouse in the Permian Basin with the potential to reach the scale of a global energy leader.
However, industry analysts are skeptical that the hostile bid will win out. The synergies between Anadarko and Chevron are even more compelling in many investors' eyes, and that could lead to shareholders choosing Chevron even with Occidental offering a 20% premium to its rival's bid. Given the rise in Anadarko's stock above the value of the Chevron bid, though, at least some shareholders are hoping for a bidding war to erupt that could boost their profits from an eventual deal even further.
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