wall street

BAXTER INTERNATIONAL INC., $65.07, New York symbol BAX, is buying Gambro AB, a privately held Swedish company that makes dialysis products. Gambro’s main customers are hospitals and clinics. Its equipment nicely complements Baxter’s own dialysis products, which individuals use at home. Baxter can also use its large sales force to increase Gambro’s sales. Baxter will pay $4.0 billion for Gambro when the deal closes in the first half of 2013. That’s equal to 11% of Baxter’s $35.8-billion market cap....

YUM! BRANDS INC., $67.08, New York symbol YUM, fell 10% today due to weaker-than-expected sales in China. The company’s KFC, Pizza Hut and other restaurants in China account for 50% of its total sales, and 45% of its earnings. In the fourth quarter of 2012, Yum expects same-store sales in China will fall 4%. However, same-store sales should rise 4% at its other international outlets, and 3% in the U.S. Yum still expects to earn $3.24 a share in 2012, which is a 13% gain over 2011. However, this forecast fell short of the consensus forecast of $3.28. The stock trades at 20.7 times the new estimate. That’s still a reasonable p/e ratio in light of its long-term growth prospects: Yum expects earnings to grow by at least 10% in 2013....

BAXTER INTERNATIONAL INC. (New York symbol BAX; www.baxter.com) makes medical products, such as intravenous pumps and kidney dialysis equipment. It also makes vaccines and drugs. Half of its sales come from single-use products that need to be continually reordered. Demand for the company’s products continues to improve, particularly as an aging population needs more medical devices and drugs. Baxter’s sales rose 23.4%, from $11.3 billion in 2007 to $13.9 billion in 2011....

AGILENT TECHNOLOGIES INC., $36.88, New York symbol A, makes testing systems that help electronics companies improve their products. It also manufactures testing equipment for medical research labs. The company recently completed its $2.2-billion purchase of Dako, a Denmark-based private firm that makes cancer-detection equipment. Dako sells its products in over 80 countries and has $340 million of annual revenue. This acquisition pushed up Agilent’s revenue by 3.7% in its 2012 fiscal year, which ended October 31, 2012, to $6.9 billion from $6.6 billion in fiscal 2011. Equipment orders rose 1.6% from 2011....

SHERWIN-WILLIAMS CO., $151.57, New York symbol SHW, has agreed to buy privately held Consorcio Comex, S.A. de C.V., Mexico’s largest paint and coating maker. Comex sells its products through 3,300 stores in Mexico, 240 in the U.S. and 78 in Canada. Sherwin will pay $2.3 billion, including assumed debt, when the sale closes, probably in a few months. This is a big purchase for Sherwin, which has a $15.6-billion market cap (the total value of its outstanding shares). The company held cash of just $55.2 million, or $0.54 a share, on September 30, 2012, so it will likely have to borrow the funds it needs to complete this purchase. That would increase its long-term debt from $969.9 million to around $3.3 billion. Even so, that’s still a reasonable 21% of its market cap....

AT&T INC., $33.54, New York symbol T, plans to spend $14 billion over the next three years on upgrades to its wireless and wireline networks. That’s equal to 7% of its $190.5-billion market cap. These upgrades will expand the company’s high-speed fibre optic service to 75% of its home and business customers by the end of 2015. Replacing copper wire with fibre optic cable will also make AT&T’s high-speed Internet service faster and more reliable, and help it sign up more customers for its U-verse digital TV service. In addition, the company now says it will expand its 4G long-term evolution (LTE) wireless service to cover 300 million people in the U.S. by the end of 2014. That’s up from its current plan to reach 250 million by that time. LTE networks are up to five times faster than those in use today....

WESTERN UNION CO., $11.95, New York symbol WU, reported better-than-expected quarterly earnings this week. It also raised its dividend. However, the company cut its earnings forecast for all of 2012. That caused the stock to fall 33%. Western Union provides money transfer and foreign-exchange services in over 200 countries. In the three months ended September 30, 2012, the company’s earnings rose 12.4%, to $269.5 million from $239.7 million a year earlier. Western Union is an aggressive buyer of its own shares. Because of fewer shares outstanding, earnings per share rose at a faster pace of 18.4%, to $0.45 from $0.38....

From time to time, companies set up one or more of their divisions or subsidiaries as an independent company, then hand out shares in that company to their own shareholders, as a special dividend or “spinoff”. Many investors seem to view spinoffs as a nuisance, because they leave you with a tiny holding in a stock you didn’t choose and that you know little about. They may dump them as soon as they get a chance. On the other hand, a number of studies have shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years....

APPLE INC., $604.00, Nasdaq symbol AAPL, has announced that it will soon start selling the iPad mini, a smaller, cheaper version of its hugely popular iPad tablet computer. The iPad mini has a 7.9-inch touchscreen, compared to 9.7 inches for the regular iPad. The company also announced improvements to the full-sized iPad, as well as its iMac desktop and MacBook portable computers. Meanwhile, Apple earned $8.2 billion, or $8.67 a share in three months ended September 29, 2012. That’s up 24.2% from $6.6 billion, or $7.05 a share, a year earlier. Even so, the latest earnings missed the consensus estimate of $8.75 a share. Sales in the quarter rose 27.2%, to $36.0 billion from $28.3 billion. That beat the consensus sales estimate of $35.8 billion. The company sold 26.9 million iPhones, up 57.6% from a year earlier, while iPad sales of 14.0 million were up 26.2%. It also sold 4.9 million Mac computers (up 0.6%) and 5.3 million iPods (down 19.3%)....

“Theme investing” can pay off from time to time. Recent investment themes have included renewable energy and emerging markets such as China and India. Today’s most popular investment themes include social media. However, theme investing can turn out badly for investors, especially those who get in late or forget about investment quality....