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Dow 30 Stock Roundup: Boeing, Microsoft Beat; P&G, Caterpillar Miss

Published 02/01/2015, 02:12 AM
Updated 07/09/2023, 06:31 AM

The Dow experienced a mixed week, weighed down by disappointing earnings and the oil price slump. The blue-chip index gained marginally on Monday as continuing positive impact from the ECB’s monetary stimulus announcement offset concerns following Syriza’s win in Greece.

Disappointing earnings results dragged the Dow lower on Tuesday. The Dow declined again on Wednesday as lower oil prices offset the positive impact of the Fed’s encouraging comments on the economy. The blue-chip index rebounded on Thursday riding on a rebound in oil prices and positive earnings results. The Dow has lost 1.4% during the first four trading days.

Last Week’s Performance

Last Friday, the Dow closed in the red, losing 0.8%, as materials stocks finished in negative territory. Existing home sales gained 2.4% in December to seasonally adjusted annual rate of 5.04 million. However, the figure declined 3.5% year over year and also missed the consensus estimate of 5.07 million. Moreover, the flash Markit manufacturing purchasing managers index declined from 53.9 in December to 53.7 in January, witnessing its worst reading in a year.

However, benchmarks ended in the green for the week banking on ECB’s announcement of a quantitative easing program worth about 1.1 trillion euros to address risks of deflation in the Eurozone. Last Thursday, ECB President Mario Draghi said the bank will buy 60 billion euros a month in assets including both government and private sector bonds, and securities issued by European organizations. Over the week, the Dow gained 0.9 %.

Moreover, encouraging earnings results boosted benchmarks. Meanwhile, the Bank of Canada’s surprise rate cut added to the bullish sentiment. The Bank of Canada trimmed its interest rate by 25 basis points to 0.75% due to continuous slump in oil prices.

The Dow This Week

Markets ended Monday’s choppy session in the green as continuing positive impact from the ECB’s monetary stimulus announcement offset concerns following Syriza’s win in Greece. The election results raised worries about Greece’s exit from the Eurozone. However, the ECB monetary stimulus announcement gave markets enough ammunition to withstand the new Greece-centric worries.

Meanwhile, encouraging comments from OPEC's secretary-general helped the energy sector register solid gains. OPEC Secretary-General Abdullah al-Badri said oil prices could rebound sooner than expected. He said: “Maybe prices have reached a bottom…but I am sure the price will rebound.” The blue-chip index gained a meager 0.03%.

The Dow slumped 1.7% on Tuesday. Disappointing earnings results dragged down benchmarks on Tuesday to their biggest one-day losses in three weeks. Shares of Microsoft Corp plunged 9.3% after reporting weak revenue in the software segment in second quarter 2015. Moreover, Caterpillar Inc.’s shares dropped 7.2% after reporting a 20% decline in its fourth-quarter 2014 adjusted earnings. Additionally, shares of The Procter & Gamble Company declined 3.5% following disappointing results.

Moreover, discouraging durable orders numbers also had a negative impact on the markets. Durable orders declined 3.4% in December, in contrast to the consensus estimate of a 0.3% rise.

Stocks eroded initial gains to end in the red on Wednesday as another decline in oil prices offset the positive impact of the Fed’s encouraging comments on the economy. The Federal Open Market Committee (FOMC) also maintained it would remain “patient” before hiking interest rate. Moreover, The Boeing Company’s shares gained 5.4% after reporting 22.9% year-on-year jump in adjusted fourth-quarter 2014.

However, the U.S. Energy Information Administration (EIA) reported the highest level of inventories recorded in at least 80 years. Following the report, the prices of WTI crude oil and Brent crude oil plunged 4% and 2.3% to $44.45 per barrel and $48.47 a barrel, respectively. The Dow declined 1.1%,

The blue-chip index jumped 1.3% on Thursday riding on a rebound in oil prices and positive earnings results. The prices of WTI crude oil and Brent crude oil gained 0.2% and 1.3% to $44.53 per barrel and $49.13 a barrel, respectively.

Meanwhile, shares of McDonald's jumped 5.1% after announcing that CEO Don Thompson would step down from his post.

Additionally, jobless claims declined to their lowest level 14 years. This was the biggest decline in jobless claims number since Nov 2012.

Components Moving the Index

The Boeing Company delivered stellar fourth-quarter 2014 results on booming deliveries. The company reported adjusted fourth-quarter 2014 earnings of $2.31 per share, beating the Zacks Consensus Estimate of $2.07. The quarterly number rose an impressive 22.9% from $1.88 per share a year ago.

The company's revenues rose approximately 3% year over year to $24.5 billion in the reported quarter, comfortably surpassing the Zacks Consensus Estimate of $23.8 billion.

Full year 2014 revenues of $90.8 billion increased 5% from the year-ago level and were above the Zacks Consensus Estimate of $90 billion. Full year 2014 adjusted earnings came in at $8.60, up 21.6% year over year.

3M Company reported fourth-quarter 2014 net income of $1,179 million or $1.81 per share compared with $1,103 million or $1.62 in the year-earlier quarter. The reported earnings per share beat the Zacks Consensus Estimate of $1.79. The increase in earnings was driven by higher sales.

For full-year 2014, the company recorded net income of $4,956 million or $7.49 per share versus $4,659 million or $6.72 per share in the year-ago period. The reported earnings per share beat the Zacks Consensus Estimate of $7.45.

Net sales during the quarter were $7,719 million, up 2.0 % year over year but below the Zacks Consensus Estimate of $7,779 million. The year-over-year increase in sales was driven by 6.3% organic local currency sales growth and 0.1% impact of acquisitions, partially offset by currency impact of 4.4%.

For full-year 2014, revenues were $31,821 million compared with $30,871 million in the year-ago period. Full-year 2014 revenues missed the Zacks Consensus Estimate of $32,021 million.

AT&T Inc's (NYSE:T) adjusted earnings per share moved up 3.8% year over year to 55 cents, in line with the Zacks Consensus Estimate. However, the company reported net loss of $3.9 billion or loss per share of 77 cents in comparison with net income of $7 billion or $1.31 in the year-ago quarter.

Quarterly total revenue increased 3.8% year over year to $34,439 million but lagged the Zacks Consensus Estimate of $34,502 million.

Dupont (NYSE:DFT) posted adjusted earnings of 71 cents per share in the fourth quarter that was higher than 59 cents per share registered a year ago. It was in line with the Zacks Consensus Estimate.

Including one-time items, DuPont recorded earnings from continuing operations of 73 cents per share in the quarter versus 19 cents per share a year ago. Consolidated net income, as reported, jumped nearly four-fold year over year to $683 million or 74 cents per share from $185 million or 20 cents per share in the prior-year quarter.

For the full year, adjusted earnings were $4.01 per share, also matching the Zacks Consensus Estimate. Sales declined 3% year over year to $34.7 billion, missing the Zacks Consensus Estimate of $35.5 billion.

McDonald's Corporation's (NYSE:MCD) earnings for the fourth quarter beat the Zacks Consensus Estimate, while revenues missed the same.

Adjusted earnings of $1.22 per share beat the Zacks Consensus Estimate of $1.20 by 1.7%. However, it declined 13% year over year owing lower revenues and increase in interest expenses.

Revenues of $6.57 billion declined 7% year over year and missed the Zacks Consensus Estimate of $6.72 billion. The significant downside reflects sluggish performances in all its regions. The Asia/Pacific, Middle East and Africa (APMEA) region declined the most due to supplier issues in China.

Pfizer Inc posted fourth quarter 2014 earnings of 54 cents per share, a penny above the Zacks Consensus Estimate but 4% below the year-ago earnings. Revenues, which declined 3% to $13.1 billion, were above the Zacks Consensus Estimate of $12.9 billion.

While foreign exchange rates cut Pfizer’s fourth quarter revenues by 3% ($449 million), operational growth was negligible ($9 million). International revenues declined 5% to $8.1 billion. Meanwhile, U.S. revenues declined 1% to $5 billion.

Full year earnings improved 2% to $2.26 per share. Revenues declined 4% from the year-ago period to $49.6 billion.

United Technologies Corporation delivered stellar fourth-quarter 2014 results banking on healthy margin improvement and six consecutive quarters of organic sales growth. The company reported fourth-quarter 2014 net income of $1,473 million or $1.62 per share, up from $1,463 million or $1.58 in the year-ago quarter.

Total revenue for the fourth quarter edged up 1.4% year over year to $16,996 million. Revenues missed the Zacks Consensus Estimate of $17,120 million.

For full-year 2014, United Technologies reported net income of $6,220 million or $6.82 per share, considerably up from $5,721 million or $6.21 in the prior year. Total revenue for full-year 2014 improved to $65,100 million from $62,626 million in 2013.

Microsoft brought in 71 cents per share on revenues of $26.5 billion, topping the estimates of 70 cents and $26.05 billion, respectively. The earnings per share also accounts for a two-cent per share hit on the bottom line on integration and restructuring expenses.

Devices and Consumer revenue grew 8% to $12.9 billion for the quarter. Surface Pro 3 sales and those of its accessories rose 24% to $1.1 billion. Search advertising was another big grower, up 23% in the quarter.

Commercial cloud revenue gained 114%, resting largely on Office 365 sales, as well as Azure and Dynamic CRM contributions. Its average annual run rate is $5.5 billion.

Procter & Gamble (NYSE:PG) missed the Zacks Consensus Estimate for both earnings and sales in second-quarter fiscal 2015 — for the second quarter in a row. Moreover, the consumer goods giant lowered full-year expectations to reflect the “unprecedented currency devaluations”.

P&G’s second-quarter adjusted earnings of $1.06 per share lagged the Zacks Consensus Estimate of $1.14 per share by 7%. P&G’s net sales declined 4% to $20.16 billion. The top line narrowly missed the Zacks Consensus Estimate of $20.70 billion.

Earnings declined almost 8% annually including currency headwind of 16 cents per share. Excluding currency headwinds, earnings increased 6% on the back of pricing and mix gains, and productivity savings.

Caterpillar (NYSE:CAT) reported a 20% decline in its fourth-quarter 2014 adjusted earnings to $1.35 per share due to a muted mining environment, and lower prices of oil and key mined commodities, particularly copper, coal and iron ore.

Results lagged the Zacks Consensus Estimate of $1.55. Revenues declined 1% year over year to $14.2 billion in the quarter but beat the Zacks Consensus Estimate of $14.1 billion.

Caterpillar’s fiscal 2014 adjusted earnings came in at $6.38, which increased 7% from $5.97 in the prior fiscal, but fell short of the Zacks Consensus Estimate of $6.55. Including one-time items, earnings came in at $5.88, rising 2% from $5.75 in fiscal 2013.

Performance of the Top 10 Dow Companies

The table given below shows the price movements of the 10 largest components of the Dow, which is a price weighted index, over the last five days and during the last six months. Over the last five trading days, the Dow has lost 0.5%.

Ticker

Next Week’s Outlook

Stocks have taken losses this week, with disappointing earnings and the familiar specter of the oil price slump guiding markets. In comparison, foreign developments have only had a limited impact on market proceedings. Earnings are expected to provide stocks with direction next week with several key companies slated to report results.

However, a clear relationship between oil prices and the fortunes of stocks has emerged, which continues to be a cause for concern going forward. At the same time, economic reports have also impacted market direction.

Several important economic reports are scheduled for release over the next few days. Starting with today’s all-important GDP report, data on manufacturing, services, personal spending, factory orders and unemployment rate will be released next week. Any positive indications on this front would provide a much needed boost to stocks going forward.

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