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Dow 30 Stock Roundup: GE Plans Restructuring, JPM, Goldman, UNH Beat Estimates - Analyst Blog

The Dow experienced another volatile week, managing relatively lower gains. Stocks ended Monday’s trading session in the red as investors feared a stronger dollar and weaker oil prices may affect first quarter earnings results. The Dow gained on Tuesday, banking on gains in energy shares which were powered by a rise in oil prices.  

Markets ended higher on Wednesday following rise in oil prices and upbeat earnings results. The Dow experienced meager losses on Thursday following mixed economic data and Fed officials’ comments on rate hike. The Dow has gained 0.3% during the first four trading days.

Last Week’s Performance

Last Friday, the Dow gained nearly 0.6% following General Electric Company’s GE announcement of a restructuring and buyback plan boosted investor sentiment. General Electric’s decision to divest most of its financial service businesses and its plan to repurchase shares was welcomed by investors.

General Electric plans to sell a major portion of the assets of GE Capital Real Estate including $26.5 billion worth of office buildings and commercial real estate debt. Most of this will be bought by Wells Fargo & Company WFC and Blackstone Group BX.

Shares of GE surged 10.8% to $28.51 on Friday, its highest level since Sep 2008. While, GE was S&P 500's biggest percentage gainer, it also helped the Dow close above the 18,000 mark for the first time in April. 

For the week, the blue-chip index gained 1.7%. Stocks were helped by gains in energy shares due to rise in oil prices. Oil prices moved north, banking on strong German economic data and uncertainty over Iranian nuclear deal. Expectations on Iran taking longer time to increase oil exports and anticipation that rise in U.S. crude inventories is slowing down also boosted oil prices.

Weak jobs report also had a positive impact on investor sentiment as it raised hopes of a delay in interest rate hike. Job additions fell below 200,000 in March, bringing an end to the unbroken run of 12 such successive monthly gains. Adding to the bullish sentiment, New York Fed President William Dudley said the timing of hiking rates “will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated.”

Meanwhile, Fed minutes hinted at a possible rate hike this year. While “several” officials favored a rate hike in June, others opined a rate hike isn’t necessary until later this year as strong dollar and drop in oil prices will keep inflation rate lower. Separately, several new deals boosted investor confidence.

The Dow This Week

Stocks ended Monday’s trading session in the red as investors feared a stronger dollar and weaker oil prices may affect first quarter earnings results. Investors were also apprehensive about the timing of the Federal Reserve’s decision to hike federal funds rates.

Investors remained concerned about first quarter earnings results owing to stronger U.S. dollar.

The dollar gained on weak Chinese trade data. China’s trade surplus came in at $2.93 billion in March, well short of February’s trade surplus of $60.6 billion. Dismal Chinese trade data raised hopes of stimulus measures in China, which in turn boosted oil prices. The blue-chip index declined almost 0.5%.

The Dow gained 0.3% on Tuesday, banking on gains in energy shares which were powered by a rise in oil prices. Oil prices moved north on Tuesday after the U.S. Energy Information Administration forecasted U.S. shale production will decline by 45,000 bpd to 4.98 million bpd in May, its first monthly decline in four years.

Meanwhile, investors remained focused on mixed earnings results and weaker-than-expected retail sales. U.S. retail sales rebounded in March after declining in the previous three months. Retail sales gained 0.9% in March. However, this was lower than the consensus estimate of it rising by 1%. The gain was led by higher demand for auto sales. 

Markets ended higher on Wednesday following rise in oil prices and upbeat earnings results. While energy shares gained as domestic crude oil price closed at the highest level this year, investors cheered mostly positive first quarter earnings results.

The European Central Bank’s decision to keep interest rates unchanged while continuing with its asset purchasing program added to the bullish sentiment. ECB President Mario Draghi said the central bank’s stimulus program is “finally finding its root” through easier credit situations and lower interest rates. The blue-chip index gained 0.4%.

The Dow declined a meager 0.04% on Thursday ending a choppy trading session slightly lower following mixed economic data and Fed officials’ comments on interest rate hike. Privately-owned housing starts gained 2% to 926,000 in March from February’s revised tally of 908,000. However, this increase in housing starts was way behind the consensus estimate of a rise to 1,042,000.

Separately, building permits decreased at a rate of 5.7% in March. The Philadelphia Federal Reserve’s manufacturing index increased to 7.5 in April from 5 in March. Initial claims reached the highest level in six weeks during the second week of April.

Upbeat earnings results, well received initial public offerings and rise in oil prices failed to help benchmarks close in the green. Oil prices gained on Thursday following news that tribal forces have taken control of major oil terminals in Yemen. The turmoil in Yemen is expected to put a lot of pressure on supply levels.

Components Moving the Index

The Goldman Sachs Group, Inc. GS reported solid first-quarter 2015 earnings per share of $5.94, beating the Zacks Consensus Estimate by 42.1%. Results also compared favorably with the year-ago figure of $4.02.

Better-than-expected results were primarily attributable to a record top-line performance. The company’s net revenue is the highest generated over the last four years.

Net revenue increased 14% year over year to $10.62 billion for the quarter. Moreover, revenues beat the Zacks Consensus Estimate of $9.33 billion.

Concurrent with the earnings release, the company announced an 8.33% hike in its quarterly dividend. Goldman declared a quarterly dividend of 65 cents, payable on Jun 29, 2015 to shareholders of record as on Jun 1.

Intel Corp. INTC reported first quarter earnings including intangibles amortization and restructuring charges of 41 cents, ahead of the Zacks Consensus Estimate of 40 cents.

Intel’s reported revenue was $12.78 billion, in line with the revised guidance range of $12.8 billion (+/-$300 million). However, it short of the Zacks Consensus of $12.83 billion. Quarterly revenue was down 13.2% sequentially and consistent with the year-ago quarter.

Intel expects second-quarter revenues at around $13.2 billion (+/-$500 million), up 3.3% sequentially and down 40.6% from the Jun quarter of 2014.

Johnson & Johnson JNJ, the first among the large health care companies to report first quarter 2015 results, beat earnings expectations yet again. The company’s first-quarter 2015 earnings (excluding special items) were $1.56 per share, 4 cents above the Zacks Consensus Estimate of $1.52 per share but 4.3% below the year-ago earnings.

First quarter sales of $17.4 billion were just above the Zacks Consensus Estimate of $17.3 billion. However, revenues declined 4.1% from the year-ago period. First quarter sales increased 5.9% in the domestic market. Meanwhile, international sales declined 12.4%, consisting of 0.8% operational growth and 13.2% negative currency impact.

J&J lowered its earnings outlook for 2015 to $6.04 - $6.19 per share (previous guidance: $6.12 to $6.27 per share). Negative currency movement was the main reason for the reduced outlook. The Zacks Consensus Estimate currently stands at $6.18 per share.

JPMorgan Chase & Co. JPM posted first-quarter 2015 earnings of $1.45 per share, beating the Zacks Consensus Estimate of $1.39. The bottom line also improved 13.3% over the year-ago earnings of $1.28 per share.

The primary factor affecting the results was an after-tax legal expense of $487 million. This caused a 13 cents per share earnings decline. This confirms that the company is on track to pay its pending legal charges. 

These aside, JPMorgan’s operating expenses were down substantially, depicting that its cost-saving initiatives are paying off. Also, overall expenses showed a sequential improvement.

Managed net revenue of $24.8 billion in the quarter was up 4% from the year-ago quarter. It also compared favorably with the Zacks Consensus Estimate of $24.4 billion.

UnitedHealth Group Inc. UNH reported first-quarter 2015 earnings of $1.46 per share, beating the Zacks Consensus Estimate of $1.33. Earnings grew 32.7% year over year.

UnitedHealth posted revenues of $35.8 billion, up 12.9% year over year and ahead of the Zacks Consensus Estimate of $34.7 billion. The increase was an outcome of business expansion in both health care benefits and health care services. Strong results from Optum reflected solid performance by its health services business while the UnitedHealthcare segment also contributed to growth.

Following a better-than-expected first-quarter performance, UnitedHealth pulled up its guidance for 2015. It now projects 2015 revenues of approximately $143 billion, an increase of $2 billion from the previous outlook. Earnings per share are forecasted in the range of $6.15 to $6.30, up from the previous guidance of $6.00 to $6.25.

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 1.9%.

Ticker

Last 5 Day’s Performance

6-Month Performance

GS

+4.6%

+16%

MMM

+1.9%

+22.8%

IBM

+1.7%

-9.3%

BA

+1.8%

+26.3%

AAPL

+0.7%

+31.1%

UNH

+3.6%

+42.4%

UTX

+0.3%

+18.4%

HD

-1%

+27.6%

TRV

+0.9%

+18.4%

CVX

+4.6%

-0.8%

Next Week’s Outlook

The blue-chip index’s swings this week have been dictated by oil prices and the dollar. Rate hike speculation and economic data have also had a considerable impact on stocks. Given the current economic scenario and comments from Fed officials, it seems a rate hike is not in the cards in the near future. Additionally, oil prices have rebounded leading to a resurgence in energy shares.

Meanwhile, earnings have come in largely positive while mixed economic data has acted as a dampener. Next week features relatively fewer economic reports, but these are crucial. This is because these indicators are having a significant impact on stocks. Home sales, durable orders and jobless claims numbers are the reports to look out for. In case these numbers are largely positive, stocks may notch up steady gains in the days ahead.

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JPMORGAN CHASE (JPM): Free Stock Analysis Report
 
INTEL CORP (INTC): Free Stock Analysis Report
 
BLACKSTONE GRP (BX): Free Stock Analysis Report
 
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
 
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
 
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
 
GOLDMAN SACHS (GS): Free Stock Analysis Report
 
GENL ELECTRIC (GE): Free Stock Analysis Report
 
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