Plus, United Airlines shares are down after the carrier reported its fifth consecutive quarterly loss, Canadian National Railway issued a competing bid for Kansas City Southern, and Gap is expanding its Athleta brand to Canada.
Stocks were lower at the open on Tuesday with the Dow dipping by 43 points, or 0.1%. The S&P 500 was down by nearly 0.1%, while the Nasdaq dropped 0.15%.
Johnson & Johnson’s earnings were overshadowed this morning by the European Medicines Agency issuing a warning of possible links to rare blood clot incidents with the company’s COVID-19 vaccine. The “EMA’s safety committee concluded that a warning about unusual blood clots with low blood platelets should be added to the product information for COVID-19 Vaccine Janssen,” the agency said in a press release. “Healthcare professionals and people who will receive the vaccine should be aware of the possibility of very rare cases of blood clots combined with low levels of blood platelets occurring within three weeks of vaccination.” Despite the warning, the EMA said the benefits of the shot outweighed the risks. On the earnings front, J&J reported $100 million in Q1 sales of the vaccine, even as it remains on hold by U.S. regulators. Overall, the company reported adjusted earnings per share of $2.59 on revenue of $22.32 billion, compared to estimates for earnings of $2.34 per share on revenue of $21.98 billion.
In other earnings news, Procter & Gamble delivered an earnings beat, reporting earnings per share of $1.26 on revenue of $18.1 billion, versus estimates for earnings per share of $1.19 on revenue of $17.9 billion. The consumer giant also announced that it is hiking prices on its baby care, feminine care, and adult incontinence products in September to respond to higher commodity costs. United Airlines’ shares are down more than 9% this morning after the carrier reported its fifth consecutive quarterly loss. The company posted a $1.36 billion net loss for the first quarter on $3.22 billion in revenue. “We’ve shifted our focus to the next milestone on the horizon and now see a clear path to profitability,” United Airlines CEO Scott Kirby said in an earnings release. “We’re encouraged by the strong evidence of pent-up demand for air travel and our continued ability to nimbly match it, which is why we’re as confident as ever that we’ll hit our goal to exceed 2019 adjusted EBITDA margins in 2023, if not sooner.”
Kansas City Southern shares are up more than 15% this morning after Canadian National Railway said it had offered to buy the railroad operator for around $30 billion, trumping a rival bid by Canadian Pacific announced last month. Either combination will create the largest North American railway by transaction volume, spanning from Canada, to the U.S., to Mexico. “We are surprised by this move given the healthy valuation Canadian Pacific had already offered to Kansas City Southern shareholders,” said Stephen analyst Justin Long in a note. “But we think Canadian National understood the competitive challenges this deal could present given the much broader geographic reach of the pro forma Canadian Pacific network.”
Gap announced that its bringing its Athleta athletic apparel brand to Canada, encroaching on rival Lululemon’s home turf, marking the first time the brand will expand outside of the U.S. The move is part of Gap’s overall strategy to grow Athleta to the point that it is bringing in $2 billion in net sales annually by 2023 after having surpassed the $1 billion mark last year. “International expansion is a key component of our growth strategy,” said Athleta CEO and President Mary Beth Laughton in a statement. Not to be outdone, Lululemon announced that it is getting into the resale business. The athletic apparel maker said that it will be piloting a trade-in program in California and Texas next month before expanding to an online resale program in June. Customers will be able to trade in gently used Lululemon items in store or by mail in exchange for a store gift card, while the returned items will be sold online.
And Tesla CEO Elon Musk tweeted a denial that the auto maker’s automated driving system was involved in a fatal crash in Spring, Texas over the weekend that is being investigated by the National Highway Traffic Safety Administration and the National Transportation Safety Board. Local police said in interviews that preliminary investigations showed that no one was behind the wheel of the 2019 Tesla Model S when it veered off the road, hit a tree, and burst into flames, sparking speculation that Tesla’s Autopilot feature may have been involved in the crash. Musk tweeted that “data logs recovered so far show Autopilot was not enabled & this car did not purchase FSD. Moreover, standard Autopilot would require lane lines to turn on, which this street did not have.”
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Knoll Inc (NYSE: KNL): Knoll shares jumped 36% yesterday after the office furniture maker announced that it will be acquired by rival Herman Miller in a cash and stock transaction valued at $1.8 billion. “This combination validates the strategic direction and our success in building a preeminent constellation of design-driven brands and leaders, and is a testament to the achievements of the entire Knoll team in bringing a contemporary perspective to how we work and live,” said Andrew Cogan, Knoll Chairman and Chief Executive Officer. “We believe this combination offers significant benefits to our shareholders, clients, dealers and associates. Our shareholders will receive immediate and certain value, as well as future upside potential through ownership in an industry leader with significant growth opportunities. Our clients, the design community and dealers will have access to an expanded, exceptional portfolio of brands through enhanced channels. And our associates will benefit as part of a larger and more diversified company with a shared design legacy.”