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Dow 30 Stock Roundup: Boeing, Intel, Verizon, Visa Earnings Impress

Swarup Gupta
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Earnings Data Deluge

The index enjoyed yet another strong week of gains, buoyed by strong earnings and encouraging trade related developments. Second-quarter earnings continued to impress, delivering a strong boost to investor sentiment. Meanwhile, President Trump concluded an encouraging meeting with Jean-Claude Juncker. As a result, industrials surged, helping the Dow close in the green for three straight sessions.

Last Week’s Performance

The index closed nearly flat last Friday, losing 6.38 points. Stocks declined after Trump reignited fears about a trade war between the U.S. and its foreign counterparts. The U.S. President also showed immense displeasure with the Fed’s policy of hiking rates gradually. However, the day’s losses were limited due to strong Q2 earnings results.

The index gained 0.2% over last week. A rally in tech stocks coupled with strong second-quarter earnings results helped the blue-chip index and the broader S&P 500 close in the green. But as Trump upped the ante on trade tensions, investor concerns spiked, eventually dragging the risk sensitive Nasdaq Composite into the red.

The Dow This Week

The Dow lost 0.1% on Monday, marking the index’s third straight daily loss. Concerns about an impending global trade war and geopolitical conflicts dented investor’s confidence. 

The yield on benchmark 10-year US Treasury Note increased to 2.963%, its highest close in six weeks. Existing home sales fell 0.6% to a seasonally adjusted annual rate of 5.38 million units in June.

The index rebounded on Tuesday, gaining 0.8%. Stocks were lifted by a series of strong second-quarter earnings results. Corporate earnings across the board, especially Alphabet Inc.’s GOOGL results, lifted investor’s confidence. However, lingering tariff issues and geopolitical conflicts continue to hurt investor sentiment.

The index increased 0.7% on Wednesday recovering from a decline of more than 100 points in the early trading hours. Stocks eventually gained after President Trump announced that he has secured some concessions regarding bilateral trade between the United States and the European Union.

Although the details of the meeting are still not available, President Trump stated afterward that the United States and the EU will maintain a “close relationship” with “strong trade relations.” Trump’s statement reduced trade tensions between the United States and some of its closest political allies to a great extent.

The index increased 0.4% on Thursday, gaining more than 100 points during the session. Both the other benchmarks closed in the red, weighed down by losses in shares of Facebook Inc. FB. However, the blue-chip index defied the wider trend, buoyed by strong performance of industrial stocks as trade war concerns eased

Following Trump’s successful meeting with European Commission President Jean-Claude Juncker, Treasury Secretary Steven Mnuchin stated that the Trump administration is hoping to conclude an agreement in principle on NAFTA in the near future. Following these developments, major industrial stocks gained significantly, enabling the Dow to comfortably close in the positive territory.

Components Moving the Index

3M Company’s MMM reported second-quarter 2018 earnings of $2.59 per share, in-line with the Zacks Consensus Estimate. Also, earnings increased 15.1% from the year-ago tally of $2.25 (which excluded 33 cents per share of one-time gains).

In the quarter under review, Zacks Rank #4 (Sell) 3M Company’s net sales were $8,390 million, reflecting growth of 7.4% from the year-ago quarter. Also, the top line exceeded the Zacks Consensus Estimate of $8,317 million.

The company has revised down its adjusted earnings guidance for 2018 from $10.20-$10.55 to $10.20-$10.45 per share. Organic sales growth guidance has been maintained at 3-4% while free cash flow conversion has been pegged at 90-100%. (Read: 3M Company Posts In Line Q2 Earnings, Lowers '18 View)

The Boeing Company BA reported adjusted earnings of $3.33 per share for second-quarter 2018, beating the Zacks Consensus Estimate of $3.24 by 2.8%. The bottom line reflected an improvement of 34% from $2.49 in the year-ago quarter.

The company's second-quarter revenues amounted to $24.26 billion in the quarter, surpassing the Zacks Consensus Estimate of $23.98 billion by 1.2%. The top line also improved 5% year over year.

Zacks Rank #3 (Hold) Boeing currently expects 2018 revenues in the range of $97-$99 billion compared with the prior guidance of $96-$98 billion. However, the company continues to expect adjusted or core earnings per share in the range of $14.30-$4.50. (Read: Boeing Beats on Earnings in Q2, Hikes '18 Sales View)

The Coca-Cola Company’s KO second-quarter 2018 comparable earnings were 61 cents per share, surpassing the Zacks Consensus Estimate of 60 cents. The bottom line also improved 3% from the year-ago period, driven by ongoing productivity efforts. Coca-Cola has a Zacks Rank #4.

Revenues of $8.9 billion outpaced the Zacks Consensus Estimate of $8.6 billion. However, net revenues declined 8% year over year due to a 15% adverse effect from the refranchising of company-owned bottling operations.

In 2018, organic revenues are expected to rise at least 4%. The company expects adjusted EPS to grow 8-10% from the prior-year’s comparable EPS of $1.91.

Intel Corporation INTC reported second-quarter 2018 earnings of $1.04 per share, beating the Zacks Consensus Estimate of $0.99 per share. This compares to earnings of $0.72 per share a year ago.

The company posted revenues of $16.96 billion for the quarter ended June 2018, surpassing the Zacks Consensus Estimate by 0.31%. This compares to year-ago revenues of $14.76 billion. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

McDonald's Corporation MCD reported second-quarter 2018 adjusted earnings per share of $1.99, surpassing the Zacks Consensus Estimate of $1.92 by 3.6% and increased 15% from the year-ago quarter (12% in constant currencies). McDonald's has a Zacks Rank #3.

Revenues of $5,353.9 million outpaced the consensus mark of $5,315 million by 0.7% but declined 12% year over year. The downturn reflects the impact of the company’s strategic refranchising initiatives. On a constant-currency basis, the metric declined 14% on a year-over-year basis. (Read: McDonald's Q2 Earnings & Revenues Surpass Estimates)

United Technologies Corporation UTX reported second-quarter 2018 earnings of $1.97 per share, beating the Zacks Consensus Estimate of $1.85 per share. The reported figure also came in higher than the year-ago tally of $1.85 per share. United Technologies has a Zacks Rank #2 (Buy).

Revenues for the quarter came in at $16.71 billion, surpassing the Zacks Consensus Estimate of $16.26 billion by 2.71%. Revenues also increased 9.3% from the year-ago figure of $15.28 billion. 

The company has raised its 2018 earnings view to $7.10-$7.25 per share from the prior guidance of $6.95-$7.15 per share. Revenue for the full year is predicted to lie in the $63.5-$64.5 billion range, estimating organic growth rate of 5-6%. (Read: United Technologies Q2 Earnings Top, '18 EPS View Up)

Verizon Communications Inc. VZ continued its solid performance in second-quarter 2018, primarily led by the wireless business. Excluding non-recurring items, adjusted earnings were $1.20 per share compared with 96 cents in the year-earlier quarter and comfortably exceeded the Zacks Consensus Estimate of $1.14.

Consolidated GAAP revenues increased 5.4% year over year to $32,203 million on the back of a solid performance in the wireless business and exceeded the Zacks Consensus Estimate of $31,718 million.

For full-year 2018, Zacks Rank #2 Verizon reiterated its earlier guidance and continues to expect both GAAP revenues and adjusted earnings per share to increase by low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. (Read: Verizon Beats Q2 Earnings on Healthy Top-Line Growth)

Visa Inc. V reported third-quarter fiscal 2018 (ended Jun 30, 2018) earnings of $1.20 per share, beating the Zacks Consensus Estimate by 11.11%. Also, the bottom line improved 39% year over year. Net operating revenues of $5.2 billion surpassed the Zacks Consensus Estimate of $5.08 billion. Also, revenues climbed 1.5% year over year.

Zacks Rank #3 Visa expects annual net revenue growth in low double digits on a nominal basis, with approximately 1% of positive foreign currency impact. The company projected earnings per share growth of high-50s (versus mid-60s earlier) on a GAAP nominal dollar basis. (Read: Visa Q3 Earnings and Revenues Beat, Updates Guidance)

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 2%.

Next Week’s Outlook

The Dow has registered strong gains this week, bucking the wider market trend, particularly on Thursday. The fact that Facebook is not one of its components has helped the index ward off heavy losses. Meanwhile, improving U.S.-EU trade relations has helped industrials notch up gains, delivering a further fillip to the index.

Second quarter earnings will likely boost the index further in the week ahead. If crucial economic reports, such as the one on GDP, are equally encouraging, the index is likely to maintain its steady ascent in the days ahead.

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Facebook, Inc. (FB) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
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
3M Company (MMM) : Free Stock Analysis Report
United Technologies Corporation (UTX) : 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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