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Dow 30 Stock Roundup: BA, INTC, MSFT, KO, V, PG Earnings Impress, 3M Disappoints

Swarup Gupta

The index suffered heavy losses in a week marked by mixed earnings numbers. The week started on a low key after China indicated that it would suspend stimulus measures and undertake structural reforms.

Strong first-quarter earnings numbers buoyed the index on Tuesday. However, disappointing results from key index components led to losses over the next two trading sessions.

Last Week’s Performance

The index gained 0.4% last Thursday on the back of strong economic and earnings data. Honeywell HON and Travelers Companies TRV beat both earnings and revenue estimates in the first quarter. American Express Co. AXP also beat on earnings. However, revenues came in at $10.4 billion, missing the Zacks Consensus Estimate by 1.2%.

Retail sales increased 1.6% in March, outpacing the consensus estimate of 0.9% rise. This was the highest monthly increase experienced since September 2017. Meanwhile, jobless claims for the week ended Apr 13 fell to a 50-year low.

The index increased 0.6% over last week. Strong first-quarter earnings data and robust economic data enhanced investors’ confidence in risky assets such as equities. However, concerns about global economic concerns remain despite strong economic data from China.

The Dow This Week

The index lost 0.2% on Monday as the positive impact of a surge in oil prices was partially negated by news that China may end economic stimulus and opt for structural reforms. Moreover, investors preferred to remain largely on the sidelines at the start of the busiest week of the first-quarter earnings season.

The index increased 0.6% on Tuesday buoyed by strong first-quarter 2019 earnings results. The Dow also remained at a striking distance from an all-time peak. Shares of The Coca-Cola Co. KO gained 1.7% after beating earnings and revenue estimates. Meanwhile, new home sales increased 4.5% in March to a seasonally adjusted annual rate of 692,000.

The index declined 0.2% on Wednesday following mixed financial results for the first quarter of 2019. Despite strong results, shares of Caterpillar Inc. CAT plunged 3.1% owing to a 4% drop in construction revenues in Asia Pacific region, especially in China. Management warned of a possible slowdown in its China business.

The index lost 0.5% on Thursday, shedding more than 100 points after shares of 3M Company MMM plummeted nearly 13% after missing earnings expectations. This was its worst performance since Oct 19, 1987, better known as Black Monday.

Sales also declined year-over-year. Meanwhile, the company also reduced its full-year outlook and revealed it was planning to lay off 2,000 employees worldwide.

Components Moving the Index

The Boeing Company BA reported adjusted earnings of $3.16 per share in first-quarter 2019, which outshined the Zacks Consensus Estimate of $3.11 by 1.6%. The bottom line, however, reflected a decline of 13% from $3.64 registered in the year-ago quarter. Boeing has a Zacks Rank #3 (Hold).

In the quarter under review, the company's revenues amounted to $22.92 billion, which exceeded the Zacks Consensus Estimate of $22.26 billion by 3%. However, the top line dropped 2% from the year-ago quarter’s figure of $23.38 billion. This decline was on account of lower 737 deliveries. (Read: Boeing Q1 Earnings Top, Down Y/Y on Lower 737 Deliveries)

Caterpillar delivered adjusted earnings per share of $2.94 in first-quarter 2019, surpassing the Zacks Consensus Estimate of $2.84. The figure improved 4% year over year driven by robust top-line performance despite higher manufacturing costs.

Revenues improved 5% year over year to $13.5 billion in the quarter under review, outpacing the Zacks Consensus Estimate of $13.4 billion. Sales increased 9%, 8% and 7% in Asia Pacific, Latin America and North America, respectively.

For 2019, Zacks Rank #3 Caterpillar expects earnings per share to range between $12.06 and $13.06, up from the prior range of $11.75 to $12.75. (Read: Caterpillar Tops Q1 Earnings Estimates, Hikes '19 View)

Intel Corporation INTC came out with quarterly earnings of 89 cents per share, surpassing the Zacks Consensus Estimate and year-ago earnings of 87 cents per share each. These figures are adjusted for non-recurring items.

Zacks Rank #3 Intel posted revenues of $16.06 billion for the quarter ended March 2019, surpassing the Zacks Consensus Estimate by 0.30%. This compares to year-ago revenues of $16.07 billion. (Read: Intel Q1 Earnings and Revenues Beat Estimates)

Coca-Cola’s first-quarter 2019 comparable earnings of 48 cents per share beat the Zacks Consensus Estimate of 46 cents. The bottom line also improved 2% from the year-ago period, driven by ongoing productivity efforts and disciplined growth strategies.

Revenues of $8,020 million surpassed the Zacks Consensus Estimate of $7,890 million and increased 5% year over year. For 2019, the company continues to estimate organic revenue growth of nearly 4%. (Read: Coca-Cola Stock Rises on Q1 Earnings and Sales Beat)

The Procter & Gamble Company PG reported third-quarter fiscal 2019 of $1.06 per share, which improved 6% year over year and outpaced the Zacks Consensus Estimate of $1.04. Meanwhile, currency-neutral core earnings per share (EPS) increased 15%.

Procter & Gamble reported net sales of $16,462 million, which outshined the Zacks Consensus Estimate of $16,407.6 million. The top line also rose 1% year over year.

The company now projects all-in sales growth of flat to up 1%, including an adverse impact of 3-4 percentage points from foreign currency and a modest gain from acquisitions and divestitures. (Read: Procter & Gamble Q3 Earnings & Sales Beat Estimates)

Microsoft Corporation MSFT delivered third-quarter fiscal 2019 earnings of $1.14 per share, which beat the Zacks Consensus Estimate of $1.00 per share. The figure surged 20% on a year-over-year basis.

Revenues of $30.57 billion increased 14% from the year-ago quarter (up 16% in constant currency or cc). The figure also surpassed the Zacks Consensus Estimate of $29.78 billion.

Commercial cloud revenues were $9.6 billion, surging 41% year over year (43% at cc), reflecting solid growth in the United States, Western Europe, the U.K. and Germany.

For the fourth quarter of fiscal 2019, commercial unearned revenues are expected to increase 36-37% sequentially, while commercial cloud gross margin is expected to improve at a moderate pace. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Technologies Corporation UTX reported better-than-expected first-quarter 2019 results. Quarterly adjusted earnings came in at $1.91 per share, surpassing the Zacks Consensus Estimate of $1.75. The bottom line was also higher than the year-ago figure of $1.77.

Revenues came in at $18,365 million, up 20.5% year over year. The top line also outpaced the consensus estimate of $18,068 million. The company has revised 2019 earnings view to $7.80-$8.00 per share from the prior guidance of $7.70-$8.00.

For 2019, Zacks Rank #3 United Technologies continues to expect revenues between $75.5 billion and $77 billion. Notably, the company expects 3-5% organic sales growth in 2019. (Read: United Technologies Q1 Earnings Top, EPS View Revised)

Verizon Communications Inc. VZ reported first-quarter earnings of $5,032 million or $1.22 per share compared with $4,545 million or $1.11 in the year-ago quarter. Excluding non-recurring items, adjusted earnings were $1.20 per share compared with $1.17 in the year-earlier quarter and beat the Zacks Consensus Estimate by 3 cents. Verizon has a Zacks Rank #3.

Consolidated GAAP revenues increased 1.1% year over year to $32,128 million and missed the Zacks Consensus Estimate of $32,165 million. For full-year 2019, Verizon’s adjusted earnings per share are now likely to increase by low single digits compared to a relatively flat trajectory expected earlier. (Read: Verizon Q1 Earnings Beat on Wireless Strength, View Up)

Visa Inc. V reported second-quarter fiscal 2019 earnings of $1.31 per share, beating the Zacks Consensus Estimate by 5.65%. Also, the bottom line improved 18% year over year. Net operating revenues of $5.5 billion beat the Zacks Consensus Estimate by 1.9% and were up 8.5% year over year.

Annual net revenues are expected to grow in low double digits on a nominal basis, with approximately 1% of negative foreign currency impact and minimum impact from the new revenue accounting standard. Zacks Rank #3 Visa reiterated its guidance for 2019. (Read: Visa's Q2 Earnings Beat on Increased Business Volumes)

3M’s first-quarter adjusted earnings of $2.23 per share. Earnings — excluding 72 cents per share of litigation related-charges — lagged the Zacks Consensus Estimate of $2.50. Net sales were $7,863 million, reflecting a decline of 5% from the year-ago quarter.

For 2019, Rank #4 (Sell) 3M revised down adjusted earnings guidance from $10.45-$10.90 to $9.25-$9.75 per share. Organic sales growth guidance has been revised from 1-4% to (1)-2%. (Read: 3M Lags Q1 Earnings and Sales Estimates, Lowers View)

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 past six months. Over the last five trading days, the Dow has declined 0.1%.

Next Week’s Outlook

Dismal first-quarter results, from 3M and Caterpillar’s losses in the Asia Pacific region weighed heavily on the index this week. This has negated the impact of a strong showing from tech stocks. Global concerns, such as the state of China’s economy have deepened losses for the index. However, if economic releases, such as Friday’s crucial GDP report are encouraging, the Dow could return to its winning ways next week.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Coca-Cola Company (The) (KO) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Honeywell International Inc. (HON) : Free Stock Analysis Report
United Technologies Corporation (UTX) : Free Stock Analysis Report
3M Company (MMM) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
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