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Dept. of Justice Sues to Stop AT&T, Time Warner Deal

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Tuesday, November 21, 2017

So the rhetoric appears to have actions backing it up, after all: upon the event of a massive $85.4 billion merger between AT&T (T - Free Report) and Time Warner , the U.S. Department of Justice (DoJ) said “no way.” This came a bit out of left field, as the deal was assumed to be vertical — not to encroach on monopolistic terrain, as the companies do not directly compete with one another — and thus considered viable by the business community, and especially shareholders of AT&T and/or Time Warner stock.

Considering that media companies are now competing on a massive scale with entertainment content providers like Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) , this merger appears to make sense in that it ups the ante for both media and telecommunications players going forward. In fact, some analysts saw this merger leading to M&A deals elsewhere across these industries, changing the entertainment access landscape radically, and for the foreseeable future.

Yet that’s not what we’re seeing now that the DoJ has gotten involved. Initially, those close to these companies assumed this was perhaps a rift between President Trump and Time Warner entity CNN, which the President has very vocally critical of both during the election campaign and during the first year of Trump’s term in office. But what the DoJ argues today is that consumer costs are likely to spike as AT&T would be able to charge “hundreds of millions of dollars more per year for Time Warner’s networks.” Basically, the DoJ is officially taking issue with antitrust laws, and that this merger may be in violation of them.

AT&T, for its part, maintains its vertical merger stance, pointing to the routine passage of such agreements in other industries without unraveling any antitrust issues. During the previous administration, Comcast (CMCSA - Free Report) was allowed to purchase NBCUniversal from General Electric (GE - Free Report) in 2011. We have yet to hear from President Trump on this matter today, but should tweets abound regarding CNN’s supposed “fake news” in response to AT&T’s pushback on this lawsuit — AT&T CEO Randall Stephenson said the suit “defies logic and is unprecedented” — we’ll know where the President stands personally on this matter.

Q3 Earnings Roundup

Campbell’s Soup (CPB - Free Report) missed earnings estimates by 5 cents per share to 92 cents ahead of today’s opening bell, while revenues of $2.16 billion also came up short of the $2.18 billion expected. The Zacks Rank #4 (Sell) company also ratcheted down earnings guidance going forward, and we are seeing Campbell’s shares selling off more than 7% in early trading. Shares are down more than 16% year to date. For more info on CPB’s earnings, click here.

Fellow processed food manufacturer Hormel (HRL - Free Report) beat bottom-line estimates by a penny to 41 cents per share. Quarterly sales were also better than expected, forking in $2.49 billion as opposed to the Zacks consensus $2.39 billion. The company also issued fiscal 2018 guidance from $9.40-9.80 per share (today’s reported quarter was for Q118). For more info on HRL’s earnings, click here.

Home improvement retailer Lowe’s (LOW - Free Report) also beat consensus estimates for its Q3 earnings report, putting up $1.05 per share on revenues of $16.77 billion that outpaced the $1.02 per share and $16.57 billion expected. This amounts to the first positive surprise in the past 3 quarters for the Zacks Rank #3 (Hold) company, with comps up 5.7% in the quarter. Shares are trading up in the pre-market roughly 2% at this hour. For more info on LOW’s earnings, click here.

Mark Vickery
Senior Editor

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