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Dow 30 Stock Roundup: 3M, DuPont, GE Beat; Coke Disappoints

Swarup Gupta

The index increased significantly over the week following strong gains during the first two trading sessions. The index surged on Monday following the victory of centrist candidate Emmanuel Macron in the first round of the French presidential election.

The index advanced by an identical margin on Tuesday, following the release of strong earnings reports and as expectation for possible tax reform grew. The Dow slipped on Wednesday following the release of Trump's outline for tax reform and only managed to inch up on Thursday.

Last Week’s Performance

The Dow declined 0.2% last Friday, as investors remained concerned on the outcome of the Presidential election in France. The recent surge in popularity experienced by euroskeptic Jean-Luc Melenchon, had unnerved investors with many expressing concern over a possible “Frexit”. Frexit is likely to spark turmoil as France is considered to be an integral part of both the Eurozone and the European Union.

Donald Trump’s encouraging comments on proposed tax reforms lifted investor sentiment, which helped to trim losses in the broader market. Meanwhile, existing-home sales in March increased to hit its highest pace in almost ten years.

During last week, the index advanced 0.5%. Benchmarks gained last week following the release of strong earnings reports and Treasury Secretary Steven Mnuchin's comments on Trump’s proposed tax reform plans. However, retail sales fell in March for two consecutive months, posting their worst two-month stretch in two years due to weak demand in automobile sector. Meanwhile, continuing jobless claims dropped 49,000 to 1.98 million, indicating the strongest U.S. labor market in recent years.

The Dow This Week

The index surged 1.1% on Monday following the victory of centrist candidate Emmanuel Macron in the first round of the French presidential election. Shares of JPMorgan Chase & Co. JPM JPM and Goldman Sachs (GS) surged 3.5% and 2.9% respectively which boosted the Dow. Meanwhile, investors kept a close watch on quarterly earnings results with tech majors scheduled to report later in the week.

The index advanced by 232.23 points, or 1.1% on Tuesday on Tuesday, following the release of strong earnings reports and as expectation for possible tax reform grew. Earnings for the Dow were particularly strong, with four of its five components exceeding expectations. The Nasdaq closed above 6,000 for the first time ever since its inception in 1971. Meanwhile, sales of newly-constructed homes in March increased 5.8% above its revised February rate.

The index lost 0.1% on Wednesday following the release of Trump's outline for tax reform. The plan promised to slash the top income tax rate from 39.6% to 35%. The new administration has also proposed to reduce the corporate tax rate from 35% to 15% along with an abolishment of the estate tax. Investors were disappointed as they had expected some more details about the tax-reform package. Meanwhile, market watchers kept a close watch on quarterly earnings results.

The index inched up marginally on Thursday after technology shares experienced gains. Meanwhile, energy shares experienced a notable fall following concerns over increasing U.S. production and the restart of Libya’s big Sharara oil field upset oil market watchers. Lack of details in President Donald Trump’s tax plan unveiled on Wednesday also pared some gains for the broader market.

Components Moving the Index

3M Company MMM started 2017 on a positive note with strong first-quarter results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $1,323 million or $2.16 per share compared with $1,275 million or $2.10 per share in the year-earlier quarter.                                                                                                       

The reported earnings exceeded the Zacks Consensus Estimate by 9 cents. Net sales during the quarter were $7,685 million, up from $7,409 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $7,515 million.

Zacks Rank #2 (Buy) rated 3M also raised its earlier guidance for 2017. The company anticipates 2017 GAAP earnings in the range of $8.70 to $9.05 per share, up from prior projections of $8.45–$8.80. This represents year-over-year growth of 7–11%, up from 4–8% expected earlier. (Read: 3M (MMM) Beats Both Q1 Earnings & Revenues, 2017 View Up)

The Boeing Company BA reported adjusted earnings of $2.01 per share for first-quarter 2017, beating the Zacks Consensus Estimate of $1.91 by 5.2%. Reported earnings were also up 15.5% from the year-ago figure of $1.74. Boeing has a Zacks Rank #3 (Hold).

The company's revenues amounted to $20.98 billion in the reported quarter, missing the Zacks Consensus Estimate of $21.44 billion by 2.1%. The reported figure also declined 7.3% year over year.

Boeing’s adjusted or core earnings per share expectation for 2017 are in the range of $9.20–$9.40, up from the prior guided range of $9.10–$9.30. GAAP earnings are now projected to be in the range of $10.35–$10.55 per share compared with the previous range of $10.25–$10.45. The company still expects 2017 revenues in the range of $90.5−$92.5 billion. (Read: Boeing (BA) Beats on Q1 Earnings, Updates 2017 Guidance)

The Coca-Cola Company KO failed to meet earnings expectations in the first quarter of 2017. Earnings also decreased year over year due to higher costs related to refranchising efforts in Coca-Cola's North America bottling operations. Further, Coca-Cola's total sales fell 11%, marking the eighth consecutive quarterly decline in revenue.

First-quarter 2016 adjusted earnings of the company were 43 cents per share, shy of the Zacks Consensus Estimate of 44 cents by 2.3%. Net revenue declined 11% year over year to $9.12 billion due to currency headwinds and the negative impact of structural items.

In 2017, Zacks Rank #3 rated Coca-Cola expects organic revenues to rise 3%.The company expects adjusted EPS to be down 1% to 3% from the prior year’s comparable EPS of $1.91. (Read: Coca-Cola (KO) Q1 Earnings Miss, Refranchising Costs Hurt)

DuPont DD recorded adjusted earnings of $1.64 per share in the first-quarter 2017, up 30% from $1.26 per share a year ago. The results topped the Zacks Consensus Estimate of $1.38. DuPont logged net sales of $7,743 million, up roughly 5% year over year on higher volumes and local prices. That also surpassed the Zacks Consensus Estimate of $7,539 million.

DuPont expects earnings per share (on a reported basis) for first-half 2017 of around $2.42, a decline of roughly 5% from the prior year. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Electric Company GE reported relatively strong first-quarter 2017 results. GAAP net earnings from continuing operations for the reported quarter were $858 million or 10 cents a share compared with $248 million or 3 cents a share in the year-ago quarter. Operating earnings (including industrial and other verticals) for the reported quarter beat the Zacks Consensus Estimate by 4 cents. The stock has a Zacks Rank #3.

Total consolidated revenue for the reported quarter decreased 1% year over year to $27,660 million but surpassed the Zacks Consensus Estimate of $26,362 million. For 2017, the company continues to anticipate operating earnings to be within $1.60–$1.70, with organic growth of 3–5%. (Read: GE Beats Both Q1 Earnings & Revenues, Affirms 2017 View)

McDonald's Corp. MCD posted robust results in the first quarter of 2017, wherein both the top- and the bottom line outpaced the Zacks Consensus Estimate. Earnings per share (EPS) of $1.47 surpassed the Zacks Consensus Estimate of $1.32 and improved 18% from the year-ago quarter. McDonald's has a Zacks Rank #3.

Revenues of $5.68 billion declined 4% year over year, mainly due to the impact of refranchising and currency headwinds. However, revenues surpassed the Zacks Consensus Estimate of $5.48 billion by nearly 4%. (Read: McDonald's (MCD) Tops Q1 Earnings on Solid Comps Growth)

The Procter & Gamble Company’s PG fiscal third-quarter adjusted earnings of 96 cents per share beat the Zacks Consensus Estimate of 94 cents by 2.1%. The bottom line also increased 12% from the prior-year quarter. P&G’s reported net sales of $15.61 billion missed the Zacks Consensus Estimate of $15.71 billion by 0.7%.

The Cincinnati, OH-based company maintained its organic sales growth projection in the range of 2–3% for fiscal 2017. Zacks Rank #3 rated P&G expects all-in sales growth to remain down 1% to flat (earlier flat) for fiscal 2017. (Read: Procter & Gamble (PG) Tops Q3 Earnings Estimates, Sales Dip)

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 gained 1.95%

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+2.7%

+18.3%

GS

+3.2%

+27.5%

IBM

-1.1%

+5.1%

HD

+5.1%

+26.3%

BA

+2%

+28.1%

UNH

+1.8%

+24.4%

MCD

+5.0%

+25.7%

TRV

+2.9%

+12.7%

JNJ

+1.5%

+7.3%

AAPL

+0.5%

+26.4%

Next Week’s Outlook

A strong earnings season has helped boost stocks significantly over this week. With future releases also expected to maintain the same positive tone, markets are likely to move higher over the near future as well. However, crucial economic data, starting with today’s GDP release, are slated for release over the next few days. The nature of these releases is likely to influence the direction of stocks in a major way in the sessions to come.

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Boeing Company (The) (BA): Free Stock Analysis Report
 
Coca-Cola Company (The) (KO): Free Stock Analysis Report
 
E.I. du Pont de Nemours and Company (DD): Free Stock Analysis Report
 
3M Company (MMM): Free Stock Analysis Report
 
General Electric Company (GE): Free Stock Analysis Report
 
McDonald's Corporation (MCD): Free Stock Analysis Report
 
Procter & Gamble Company (The) (PG): Free Stock Analysis Report
 
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