Investors in these Fortune 500 companies took big risks and saw even bigger rewards in 2012.
Shareholders cheered when the nation’s fifth-largest airline by revenue officially became the world’s biggest airline, thanks to its merger with bankrupt American Airlines.
A judge approved the deal in February, which helped give US Airways shares another boost after they tripled in value since the start of 2012, shortly after it began pursuing the deal. US Airways also flew fuller planes and enjoyed cheaper fuel costs. In 2012, earnings jumped to $637 million — up dramatically from $71 million the previous year.
In the year ahead, the airline is expected to close its deal with American. US Airways Chief Executive Doug Parker is expected to serve as CEO of the new airline.
Despite Sprint’s enormous $4.3 billion loss in 2012, shares of the nation’s third-largest wireless carrier surged as executives tried to turn the business around, sparking a bidding war for its assets.
In October, Sprint Nextel agreed to sell a majority of the company to Japanese tech giant Softbank, a move most investors hailed as key for it to compete against larger rivals AT&T and Verizon. The $20 billion deal would also give Sprint the cash necessary to avoid bankruptcy if its ongoing network transformation plan doesn’t go well.
The company has long struggled to recover from the 2005 merger with Nextel. It has been spending billions of dollars to build a next-generation data network to support the latest smartphones like the Apple iPhone 5.
The deal with Softbank is expected to close later this year, but it may not end up happening. In April, Dish Network stepped up with an offer of $25.5 billion for control of Sprint. Softbank executives remain confident their bid will prevail.
Thanks to cheaper oil in 2012, this U.S. refiner cashed in and made investors happy. Shares more than doubled amid a refining rally spurred by abundant oil in the U.S.
Western Refining owns refineries in Texas and New Mexico. In November, its stock rose to the highest in five years as oil produced in Midland, Texas, continued selling at a record discount to the U.S. benchmark. The refiner also gained from a boost in oil production in West Texas’s Permian basin, which has helped push down crude prices in the region.
If prices remain low, investors may stay happy in 2013.
American Airlines parent AMR Corp continued to shed workers as part of its ongoing bankruptcy reorganization in 2012. The nation’s third-largest U.S. carrier by traffic also renegotiated leases, cut management and support staff and froze dozen of pension plans to lower costs.
While investors appeared convinced the company was serious about turning business around, AMR in April filed plans to exit bankruptcy. It plans to merge with rival U.S. Airways to form the world’s biggest airline.
Under the deal, AMR shareholders will receive a 3.5% equity stake in the new company.
Shares of the world’s largest maker of home appliances surged as America’s sluggish housing market turned the corner. This led to more demand for everything from washing machines to refrigerators.
Whirlpool saw earnings rise during the last months of 2012 as it cut costs and scaled back production.
If the housing market continues to recover, investors might see another decent year.
Its name may not be a household one, but this lesser known U.S. refiner has grabbed the attention of Wall Street. HollyFrontier made investors happy in 2012 with its strong cash flow. It also returned cash to shareholders by raising dividends and offering special payouts and share buybacks.
The company is relatively young, born out of a merger in July 2011 between Holly Corp. and Frontier Oil Corp. It operates five refining companies in the mid-continent, southwestern and Rocky Mountain regions.
Despite weaker sales, the nation’s third-largest office supply chain saw its stock rise in 2012 as executives cut costs by closing or shrinking stores. OfficeMax also focused on private label products to support the chain’s margins as it tried to turn the company around.
In the year ahead, OfficeMax likely won’t exist under that name. The chain in February agreed to merge with bigger rival Office Depot in an all-stock deal worth about $1.2 billion.
What the combined companies will be named is yet to be determined, but the merger pushed stocks for both companies higher. The deal is expected to save them hundreds of millions of dollars and generate plenty of cash and credit for the company.
Bank of America
Shareholders breathed a sigh of relief when regulators determined the nation’s second-largest bank had enough cushion money to prevent it from collapsing if the world was struck by another financial crisis.
Bank of America was one of the financial sector’s best performing stocks in 2012, with shares surging 109%. Investors grew confident it had the capital it needs to meet new international standards.
And unlike last year, when Chief Executive Brian Moynihan was embarrassingly rejected by regulators when he asked to raise dividends, there was less drama in 2012. Rather than hiking the bank’s penny-per-quarter payout or buy back shares, BofA plans instead to continue building capital as it works to absorb mortgage-related losses.
Moynihan is leading the bank through a long-term cost-cutting program, where it would save $1.5 billion a quarter by the end of 2013 and $2 billion annually through the middle of 2015.
After the economic doldrums of the Great Recession, the many giants in the U.S. construction industry looked to replace their fleets of equipment spanning from cranes to aerial platforms.
And Terex gained from the renewed demand. The Westport, CT-based construction equipment maker reported stronger earnings in 2012. And while many U.S. firms held off on hiring, Terex hired about 500 workers at Washington plants to meet demand from customers replacing aging machinery.
While many cost-conscious shoppers may have pulled back from spending, Dillard’s gained amid a weak economic recovery.
The Little Rock, Ark.-based department store chain, which competes with retailers such as Macy’s and Kohl’s, sells clothing, accessories, shoes and cosmetics. It caters to middle class and affluent shoppers, and it has fared better than those focused on price sensitive shoppers.
The oil refining and transportation company has focused on returning cash to shareholders via stock buybacks and dividends, a move that sent the stock soaring in 2012. The company returned $1.4 billion to shareholders via stock buybacks and issued $407 million in dividends.
Shares doubled in 2012 and total return for the year was 94%, according to the company’s annual report.
The oil refining company has a history of growing through acquisitions, and in 2012 it bought BP’s refining and marketing business in southern California for $2.5 billion. The deal, which is pending an antitrust review, should increase Tesoro’s refining capacity by nearly 40% and allow the company to be a dominant player in the state. The shares moved higher after the acquisition was announced.
Avis Budget Group
U.S. travel increased last year thanks to a stronger economy, helping the car rental giant see record revenue of $7.4 billion in 2012, up 25% from the previous year, as well as record earnings per share of $2.72.
The company announced a plan to expand into new markets — as evidenced by the acquisition and integration of Avis Europe — all while aggressively cutting costs. This January, Avis bought the car sharing service Zipcar, which targets a younger, urban customer, a deal that helps keep Avis competitive in a rapidly consolidating industry.
The bio-pharmaceutical company’s HIV treatments helped propel the stock higher in 2012. The treatment Truvada became the first medication approved by the FDA to be used to reduce the risk of HIV infection, and the government approved Stribild, a tablet that combines four medications into a complete, one-a-day HIV treatment.
Last year Stribild, along with Gilead’s other HIV treatments Atripla and Complera hit nearly $4 billion in sales. Overall, the company’s revenue jumped 16% to $9.7 billion.
The specialty chemical company focused on its $3.4 billion acquisition of Solutia, a chemical maker that gave the largely US-centric Eastman a presence in emerging markets like China. (Prior to the deal, more than half of Eastman’s sales came from North America.) The company estimated that the deal would create 10% annual revenue growth in Asia over several years.
Eastman executives also told investors that it would generate more than $2 billion in free cash flow between 2012 and 2015, which it could use to acquire more businesses and expand into other fast-growing markets.
Community Health Systems
The hospital operator got a boost when a piece of the Affordable Care Act — also known as Obamacare — was upheld by the Supreme Court last summer. The provision upheld by the court requires individuals to buy insurance if they aren’t covered by their employers. After the ruling, investors expected hospitals to benefit because more insured Americans would mean more patients for hospitals, specifically more patients who could pay their bills.
Shares of the paint maker rose in 2012 as the housing market began to show signs of recovery. Investors bet that existing owners and home builders would create demand for paint and other home improvement-related products.
In a move sure to please shareholders, the company raised its quarterly dividend to 50 cents from 39 cents, an increase of 28%. Sherwin-Williams has raised its dividend every year for 34 years.
This company, which makes custom software to help government clients like NASA manage logistics, spent 2012 focusing the business on technology and services. To that end it laid off employees and sold its credit service unit to Equifax for $1 billion. The company said it would use some of the proceeds to buy back stock and to fund the corporate pension plan, and investors approved.
This big name in consumer products, with brands including Coleman, Sunbeam, Mr. Coffee, Rawlings, and First Alert, saw earnings per share increase by over 20% in 2012.
While a nascent economic recovery and improved consumer sentiment certainly helped Jarden, investors approved of the company’s decision to buy back more than $550 million worth of its own stock.
Shares of this engineering and construction company soared when it was announced in July that it would be acquired by the infrastructure company Chicago Bridge & Iron in a deal that valued Shaw at about $3 billion. While investors worried that Chicago Bridge & Iron was overpaying, Shaw shareholders were likely pleased with the deal.