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Dow 30 Stock Roundup: BA, MSFT, AAPL, MCD, PFE, V Earnings Impress

The Dow experienced a mixed week, losing momentum over the first few days before rebounding over the next two. Bond yields spiked following improved inflation and rate hike prospects leading investors to switch from equities to bonds. Such expectations were heightened after the Fed indicated that a rate hike in March was more or less certain. Financial blue-chips gained as a result, which, along with bullish earnings numbers helped the index gain over the latter half of the week.

Last Week’s Performance

The Dow increased 0.8% last Friday following better-than-expected earnings from Intel Corporation INTC. Additionally, the Dow posted a rise of more than 220 points. Meanwhile, U.S. GDP increased at a seasonally adjusted annual rate of 2.6% in the fourth quarter of 2017, following gains of more than 3% in the two previous quarters.

This marks the economy’s strongest stretch of growth since the expansion started in mid-2009. Additionally, during the week, U.S. Treasury Secretary Steven Mnuchin said that any weakness in the dollar was beneficial for trade. The ICE U.S. Dollar Index fell 1.5% for the week to settle at 89.07, following Mnuchin’s comments.

The index gained 2.2% over last week. Benchmarks registered their fourth straight weekly increase after the Senate gave its consent to pass a Bill that ends the recent government shutdown. Additionally, encouraging earnings results by The Travelers Companies, Inc. TRV, 3M Company MMM and Caterpillar Inc. CAT boosted markets.

The Dow This Week

The index decreased 0.7% on Monday, suffering its biggest one-day drop on Monday since Sep 5, 2017. These losses came following a shift in investment from equities to bonds after Treasury yields reached their best level since April 2014.

Expectations of an increase in growth and inflation boosted yield on the U.S. 10-year Treasury note, following which sectors like real estate and utilities that are considered as alternatives to bonds declined. Shares of Apple Inc. AAPL fell 2.1% on news that the tech behemoth has decided to halve its production target for the iPhone X in the first three months of the year.

The index lost 1.4% on Tuesday following slump in both healthcare and energy stocks. Blue-chips like Amazon.com AMZN, Berkshire Hathaway Inc. BRK.B and JPMorgan Chase & Co. JPM announced that they will together form a healthcare company in order to cut related costs for their U.S. employees.

This announcement weighed on the healthcare sector. Oil prices fell on Tuesday after U.S. shale production came in at 9,878,000 barrels per day, its highest level since Jan 7, 1983, per the EIA. Separately, higher rate environment and optimism of a steady economic growth and higher inflation weighed on bond prices.

The index increased 0.3% on Wednesday after two straight days of declines. Shares of The Boeing Company BA rose 4.9% settling at its best levels ever, after the aircraft manufacturer posted fourth-quarter earnings per share and revenues that beat expectations, which in turn boosted key indexes.

Meanwhile, the Federal Reserve opted to leave benchmark rates unchanged within the 1.25-1.5% range. Markets lost some of their gains after the Fed stated that inflation was likely to reach its desired level in the medium term and projected gradual increase in key rates.

The index gained 0.1% on Thursday even as investors switched from equities to bonds after Treasury bond yields continued to hover near their best levels since April 2014. However, rising rate hike prospects helped financial blue-chips The Goldman Sachs Group, Inc. GS and JPMorgan to gain 1.7% and 1%, respectively, which in turn boosted the Dow.

Components Moving the Index

Boeing reported adjusted earnings of $4.80 per share in fourth-quarter 2017, beating the Zacks Consensus Estimate of $2.91 by 64.9%. The bottom line reflected an improvement of 94% from $2.47 in the year-ago quarter. The upside was driven by record deliveries, strong performance as well as favorable tax reform of $1.74 per share.

The company's fourth-quarter revenues amounted to $25.37 billion, beating the Zacks Consensus Estimate of $24.83 billion by 2.2%. The top line also improved 9% year over year.

Zacks Rank #1 (Strong Buy) Boeing’s adjusted or core earnings per share expectation for 2018 are in the range of $13.80-$14.00. GAAP earnings are projected in the range of $15.90-$16.10 per share. The company currently expects 2018 revenues in the range of $96-$98 billion. (Read: Boeing Tops Q4 Earnings Estimates, Issues '18 Guidance)

Intel Corp. INTC reported fourth-quarter 2017 non-GAAP earnings of $1.08 per share, which beat the Zacks Consensus Estimate by 22 cents. The figure surged 36.7% from the year-ago quarter and 6.9% sequentially.

After adjusting for a one-time tax expense of $5.4 billion, as a result of the U.S. corporate tax reform, GAAP loss came in at 15 cents per share in the quarter.

Revenues totaled $17.05 billion, reflecting an increase of 4.1% year over year and 5.6% quarter over quarter. The figure beat the Zacks Consensus Estimate of $16.31 billion. After adjusting for the McAfee (formerly Intel Security Group) transaction, revenues increased 8%. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

McDonald's Corp. MCD posted robust results for the fourth quarter of 2017. Adjusted earnings per share (EPS) of $1.71 surpassed the consensus mark of $1.59 by 7.5% and improved 19% from the year-ago quarter (16% in constant currencies). McDonald's has a Zacks Rank #2 (Buy).

The upside reflects stronger operating performance and G&A savings. Meanwhile, foreign currency translation had a positive impact of 4 cents per share on earnings in the quarter. Notably, adjusted earnings exclude the impact of a net tax cost associated with the Tax Cuts and Jobs Act of 2017.

Revenues of $5.34 billion beat the consensus mark of $5.26 billion by 1.5% but declined 11.4% year over year. The decline reflects the impact of the company’s strategic refranchising initiative. (Read: McDonald's Q4 Earnings Beat on Solid Comps Growth)

Pfizer, Inc. PFE reported fourth-quarter 2017 adjusted earnings per share of 62 cents, which beat the Zacks Consensus Estimate of 56 cents by 10.7%. The pharma heavyweight delivered revenues of $13.70 billion, which also beat the Zacks Consensus Estimate of $13.61 billion. Pfizer has a Zacks Rank #2.

Full-year sales for 2017 were $52.55 billion, flat year over year on an operational basis. Sales marginally beat the Zacks Consensus Estimate of $52.50 billion and were in line with the guidance range of $52.4 billion to $53.1 billion.

Adjusted earnings of $2.65 per share for the full year exceeded the Zacks Consensus Estimate of $2.60 as well as the guided range of $2.58 to $2.62. (Read: Pfizer Stock Falls Despite Q4 Earnings & Sales Beat)

Microsoft Corp. MSFT delivered second-quarter fiscal 2018 earnings of 96 cents per share, which beat the Zacks Consensus Estimate by 10 cents. The figure rallied 20% on a year-over-year basis.

Revenues of $28.92 billion increased almost 12% from the year-ago quarter (up 11% in constant currency or cc). Further, the figure marginally exceeded the Zacks Consensus Estimate of $28.35 billion. Revenues were positively impacted primarily due to strategic growth investments in cloud business and Artificial Intelligence (“AI”) along with robust sales implementation.

For third-quarter fiscal 2018, Zacks Rank #3 (Hold) Microsoft expects foreign exchange to increase revenues growth by 2 points, COGS growth by 1 point and operating expenses growth also by 1 point. (Read: Microsoft Surpasses Q2 Earnings & Revenues, Up Y/Y)

Apple reported first-quarter fiscal 2018 earnings of $3.89 per share, which beat the Zacks Consensus Estimate by 7 cents and increased almost 16% year over year. Sequentially, earnings jumped 88.2%.

Net sales increased 12.7% year over year and almost 68% sequentially to $88.29 billion, which comfortably surpassed the Zacks Consensus Estimate of $86.29 billion. Zacks Rank #3 Apple benefited from robust iPhone and Services segment revenue growth.

However, iPhone unit sales of 77.3 million missed the Zacks Consensus Estimate of 79.8 million. Apple Services (9.6% of sales) revenues of $8.47 billion also missed the consensus estimate of $8.65 billion.

For second-quarter fiscal 2018, revenues are projected between $60 billion and $62 billion. The Zacks Consensus Estimate is at $65.44 billion. Gross margin is expected within 38-38.5%, while operating expenses are projected within $7.6-$7.7 billion. (Read: Apple Q1 Earnings Beat, iPhone Unit Sales Down Y/Y)

Visa Inc. V posted earnings of $1.08 per share, soaring past the Zacks Consensus Estimate of 98 cents per share. Adjusted net income came to $2.54 billion for the quarter. The company saw consolidated revenue figures of $4.86 billion, just beating the Zacks Consensus Estimate of $4.81 billion and growing 9% year over year.

Zacks Rank #3 Visa reaffirmed its financial outlook for fiscal full-year 2018. The company expects net revenue growth in the high single digits and annual operating margin in the high 60s. (Read: Visa Posts Strong First Quarter Profit, Payments Volume Up 10%)

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 1.4%.

Next Week’s Outlook

A strong fourth-quarter performance has helped markets survive their initial hiccups this week. These losses were caused by a surge in bond yields, a phenomenon which is likely to bother investors in the days ahead as well. However, with the Fed delineating its plans fairly clearly, markets are likely to price in a March rate hike in the near term. Given such a backdrop along with bullish earnings and a strong economy, markets are likely to notch up fresh milestones in the days ahead.

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J P Morgan Chase & Co (JPM) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Pfizer, Inc. (PFE) : Free Stock Analysis Report
 
Boeing Company (The) (BA) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
3M Company (MMM) : Free Stock Analysis Report
 
Goldman Sachs Group, Inc. (The) (GS) : Free Stock Analysis Report
 
The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
 
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
Caterpillar, Inc. (CAT) : Free Stock Analysis Report
 
McDonald's Corporation (MCD) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
Visa Inc. (V) : Free Stock Analysis Report
 
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