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Dow 30 Stock Roundup: Apple Buys Workflow, J&J Wins European Label Expansion

Swarup Gupta

The Dow experienced a mixed week, with most of its gains coming from encouraging economic releases. The index moved lower on Monday after the Trump administration failed to pass a new healthcare legislation. A surge in consumer confidence helped the index end in the green on Tuesday. Broader market gains left the index untouched on Wednesday and it languished in the red. Ultimately, bullish GDP data helped the index move higher on Thursday.

Last Week’s Performance

The Dow declined 0.2% last Friday after the Trump administration failed to get enough support among Republicans to pass the new healthcare reform bill. Republicans pulled their bill due to shortage of votes. The failure to pass the healthcare bill raised doubts over Trump’s ability to push through his economic agenda, including tax reforms. Meanwhile, oil prices increased due to a spate of late day activity, but, fell on weekly basis.

For the week, the index declined 1.5%, registering its steepest decline since last September. Due to delay and failure of the passage of the healthcare bill, there was an adverse effect on investor sentiments which eventually led the benchmarks to finish in the red. Additionally, there was a record increase in domestic crude inventories, which in turn reduced oil prices and eventually dragged energy stocks down.

The Dow This Week

The index declined 0.2% on Monday following the failure of the Trump administration to pass the new healthcare bill through the House of Representatives. Investors remained skeptical about Trump’s ability to deliver on his pro-business economic agenda, including tax cuts, infrastructure spending and deregulation initiatives. Financial stocks moved, dragged down primarily by bank stocks, as investors remained doubtful about whether proposed tax cuts would at all take place.

The index gained 0.7% on Tuesday after consumer confidence surged to its highest level in more than sixteen years. Consumer confidence hit 125.6 in March, up from 116.1 in the previous month according to data from The Conference Board. Strong consumer confidence reading showed that the U.S. economy has improved significantly. Financial stocks gained following this economic release and energy stocks rose due to stronger oil prices.

The index lost 0.2% on Wednesday even as broader markets moved north, boosted primarily by energy and consumer discretionary shares. Energy shares gained due to increase in oil prices. Consumer discretionary shares gained following a surge in consumer confidence level. Improved consumer confidence is expected to make a positive impact on consumer spending.

The index gained 0.3% on Thursday, boosted by financials which surged following the release of strong GDP data. Fourth quarter’s final GDP reading exceeded estimates. An overall increase in consumer spending was accompanied by an increase in corporate profits. Also, initial claims numbers continued to decline. Meanwhile, investors kept a close watch on oil prices which soared on Thursday following Kuwait’s attempt to extend OPEC production cuts.

Components Moving the Index

Chevron Corporation CVX is set to divest its stake in its South Africa business to Asia’s largest oil refiner, China Petroleum & Chemical Corporation SNP, which is better known as Sinopec. With the deal, Sinopec will secure its first major refinery in the continent, keeping in line with its aim to expand in international markets.

Per the deal, Sinopec will acquire 75% controlling stake in Zacks Rank #3 (Hold) rated Chevron’s South Africa and Botswana assets including a 100,000 barrel per day oil refinery in Cape Town, a lubricants plant in Durban and a network of around 820 gas stations. The remaining 25% interest will be owned by local shareholders.

The deal is valued at $900 million and is subject to approval by regulatory authorities. Sinopec will continue with Chevron’s Caltex brand name for the retail fuel stations for around five years till it forms a rebranding strategy. (Read: Chevron to Sell South Africa Assets to Sinopec for $900M)

Apple Inc. AAPL recently acquired Workflow, a popular automation app, which allows users to group together varied number of actions to complete tasks. Workflow has been developed by Ari Weinstein and his team. The app won an Apple Design Award in 2015.

Per Techcrunch, Zacks Rank #3 rated Apple is likely to integrate the Workflow app with its Siri Application program interface (API) as well as its private APIs going forward. The integration will help in expanding the iOS ecosystem and improve app accessibility irrespective of the complexity of devices. (Read: Apple (AAPL) Acquires Workflow, to Integrate with SIRI)

The Walt Disney Company’s DIS board of directors kept faith on the company’s chairman and CEO, Robert A. Iger and extended his contract through Jul 2, 2019. Notably, this marks the third contract extension for Iger. But the question of Iger’s successor still lingers with no proper candidate vying for the coveted spot. This has been a hot topic of discussion in the media industry in the last few years.

Ever since Iger’s appointment as CEO in 2005, Zacks Rank #3 rated Disney has scaled new heights and emerged as the world leader in the entertainment industry. (Read: Disney Shines Under CEO Iger, Contract Extended to 2019)

General Electric Company GE operating unit GE Aviation recently augmented its leading position in the market with the strategic acquisition of AirVault, for an undisclosed amount. Airvault is a privately-owned supplier of cloud-based digital records management. 

The transaction will enable GE Aviation to better serve its existing clients and optimize its operations for higher productivity. With data center operations in Dallas and Oklahoma City, AirVault offers ECM (enterprise content management) applications to carriers across the world. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

E. I. du Pont de Nemours and Company DD and The Dow Chemical Company’s DOW proposed merger received the European Union’s approval last week. The EU approval came after both Dow and Zacks Rank #3 rated DuPont committed to divest major portions of different businesses.

The EU approved the $130 billion merger that will see the two industry giants separate into three different publically traded companies focused on agriculture, material science, and the production and sale of specialty products. The Dow and DuPont merger is expected to lead directly to $3 billion in cost savings. (Read: $130 Billion Dow-DuPont Merger Finally Gains EU Approval)

Johnson & Johnson JNJ announced that the French health authority has granted approval to expand the label of its anaemia drug Eprex to include treatment of symptomatic anaemia in patients with low or intermediate risk myelodysplastic syndromes (MDS) in the mutual recognition procedure (MRP). The stock has a Zacks Rank #3.

Eprex is an erythreopoiesis stimulating agent (ESA) presently approved to treat certain types of anaemia, including chemotherapy-induced anaemia and anaemia due to chronic kidney disease. However, no ESAs have been approved until now to treat anaemia in patients with MDS. (Read: J&J (JNJ) Anaemia Drug Marketing Label Expanded in Europe)

Pfizer, Inc.’s PFE  rheumatoid arthritis (RA) drug, Xeljanz has received marketing approval in Europe.  Pfizer has a Zacks Rank #3.

The European Commission has approved Xeljanz (5 mg taken twice daily) to be used in combination with methotrexate (MTX) for the treatment of moderate-to-severely active RA in adult patients who have had an inadequate response to or cannot tolerate one or more disease-modifying antirheumatic drugs (DMARDs). Xeljanz has also been approved as monotherapy in case of intolerance to MTX or when treatment with MTX is inappropriate. (Read: Pfizer's Arthritis Drug Xeljanz Gets Marketing Nod in Europe)

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 0.2%

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+12.8%

+9.3%

GS

-3.1%

+43.6%

IBM

+0.7%

+10.3%

HD

-0.5%

14.4%

BA

+0.5%

+34.5%

UNH

-0.9%

+19.1%

MCD

-0.2%

+12.8%

TRV

-0.1%

+7.1%

JNJ

+5.5%

+4.9%

AAPL

+2.6%

+27.9%

Next Week’s Outlook

Failure to pass a new healthcare legislation has led to far reaching questions about the policy related future of the Trump administration. Significant expectation had built up over many of these proposals such as tax cuts and deregulation, which seems to be dissipating at this moment. Instead, the focus is now squarely on economic data, given the positive nature of consumer confidence and GDP numbers. If the clutch of economic releases lined up for next week is mostly similar in nature, stocks could continue to notch up gains in the days to come.

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Walt Disney Company (The) (DIS): Free Stock Analysis Report
 
China Petroleum & Chemical Corporation (SNP): Free Stock Analysis Report
 
Pfizer, Inc. (PFE): Free Stock Analysis Report
 
Johnson & Johnson (JNJ): Free Stock Analysis Report
 
E.I. du Pont de Nemours and Company (DD): Free Stock Analysis Report
 
Dow Chemical Company (The) (DOW): Free Stock Analysis Report
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
General Electric Company (GE): Free Stock Analysis Report
 
Chevron Corporation (CVX): Free Stock Analysis Report
 
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