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Dow 30 Stock Roundup: Impressive INTC, MMM, V, UTX Earnings, BA, CAT Disappoint

Swarup Gupta

The Dow started the week on a high note but trended lower as lackluster earnings numbers flowed in. A dismal earnings performance from The Boeing Company BA, primarily due to lower 737 deliveries, led to losses for the index on Wednesday and Thursday. Fears that the Federal Reserve may not be as dovish on policy as its European counterpart also weighed on investor sentiment.

Last Week’s Performance

The index declined 0.3% on Friday after a The Wall Street Journal stated that Fed officials would reduce the benchmark interest rates by only a quarter percentage point after its next meeting.

Most investors were expecting that rates would be reduced. Losses for the 30-stock index were broad-based. Shares of UnitedHealth Group UNH decreased 1.5% and weighed on the Dow.

The index lost 0.6% over last week. A top Fed official said that trimming rates at the first sign of economic distress is an effective tactic for the central bank, especially when benchmark rates are already so low. Investors took it as a sign of easier monetary policy ahead, and geared up for rate cuts.

President Donald Trump expressed his doubts about a near-term solution to the lingering trade battle between the United States and China. Meanwhile, major banks reported sold second-quarter results although investors remained cautious about the possibility of an overall decline in earnings during the second quarter.

The Dow This Week

The index gained 0.1% on Monday following a broad-based rally in the tech stocks. Further, President Trump struck a deal with the leaders of the U.S. Congress to extend the debt limit by two years. Shares of Apple AAPL and Intel INTC increased 2.3% and 2.2%, respectively, and supported gains for the Dow.

The index increased 0.7% on Tuesday following renewed optimism about a U.S.-China trade deal in the near term. Further, a deal between Trump and congressional leaders extended the debt limit by two years. The Dow ended at its highest level since Jul 15. Further, this also marked its second highest close in history.

The index declined 0.3% on Wednesday even as broader markets trended higher following a rally in semiconductor stocks. The Dow’s lackluster performance on Jul 24 is largely the outcome of Boeing and Caterpillar Inc.’s CAT quarterly earnings, which failed to meet analyst expectations.

The index lost 0.5% on Thursday, primarily due to a near 4% decline in shares of Boeing, which continued to decline on dismal earnings numbers. This was the worst day for the blue-chip index since Jun 25.

Lackluster second-quarter earnings and concerns that the Fed may not be as dovish as expected going forward was the primary reason for a decline in broader markets. Such fears arose after the ECB took a heavily dovish position on monetary policy recently.

Components Moving the Index

Intel Corporation INTC posted second-quarter earnings of $1.06 per share, beating the Zacks Consensus Estimate of 89 cents per share. This compares to earnings of $1.04 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 19.10%. A quarter ago, it was expected that this world's largest chipmaker would post earnings of 87 cents per share when it actually produced earnings of 89 cents, delivering a surprise of 2.30%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Zacks Rank #4 (Sell) Intel posted revenues of $16.50 billion for the quarter ended June 2019, surpassing the Zacks Consensus Estimate by 5.79%. This compares to year-ago revenues of $16.96 billion. The company  topped consensus revenue estimates three times in the last four quarters. (Read: Intel Beats Q2 Earnings and Revenue Estimates)

3M Company MMM reported better-than-expected results for the second quarter of 2019, with earnings and sales surpassing respective estimates by 7.8% and 1.9%. The company’s earnings beat in this quarter is an improvement from the negative earnings surprise of 10.80% recorded in the first quarter of 2019.

Its adjusted earnings in the reported quarter were $2.20 per share. The quarter’s earnings surpassed the Zacks Consensus Estimate of $2.04. However, its bottom-line results decreased 28.3% year over year due to weak sales, rise in costs of sales and decline in operating results.

In the quarter under review, Zacks Rank Zacks Rank #4 3M’s net sales were $8,171 million, reflecting a decline of 2.6% from the year-ago quarter. However, the company’s net sales surpassed the Zacks Consensus Estimate of $8,021 million. (Read: 3M Q2 Earnings and Sales Beat Estimates, Down Y/Y)

Visa Inc. V reported third-quarter fiscal 2019 earnings of $1.37 per share, beating the Zacks Consensus Estimate by 3.1%. Also, the bottom line improved 14% year over year. The results were driven by growth in payments volume, cross-border volume and processed transactions. Visa has a Zacks Rank #3.

Net operating revenues of $5.8 billion beat the Zacks Consensus Estimate by 1.7% and were up 11% year over year or 13% on a constant-dollar basis. This upside was primarily driven by an increase in all the components of net revenues such as service, data processing, international transaction revenues and others. (Read: Visa Q3 Earnings and Revenues Beat on Volume Growth)

United Technologies Corporation UTX reported better-than-expected second-quarter 2019 results. Quarterly adjusted earnings came in at $2.20 per share, surpassing the Zacks Consensus Estimate of $2.04. The bottom line was also higher than the year-ago figure of $1.97.

Revenues came in at $19,634 million, up 17.5% year over year. The top line also outpaced the consensus estimate of $19,459 million. The rise was driven by 6% contribution from organic sales growth and 13% positive impact of acquisitions, partially offset by 1% negative impact of currency translation. The stock has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Travelers Companies, Inc.’s TRV second-quarter 2019 core income of $2.02 per share missed the Zacks Consensus Estimate of $2.27 by 11%. However, the bottom line improved 11.6% year over year. Net investment income increased 8.9% year over year to $648 million.

Zacks Rank #3 Travelers’ total revenues rose 5% from the year-ago quarter to $7.8 billion. Net written premiums grew 4% year over year to a record $7.5 billion owing to increase in each of the business segments, namely Business and International Insurance, Bond & Specialty Insurance and Personal Insurance. (Read: Travelers' Q2 Earnings Miss Estimates But Rise Y/Y)

Boeing incurred adjusted loss of $5.82 per share for second-quarter 2019 against the year-ago quarter’s earnings of $3.33. This year-over-year downside was primarily on account of the $4.9 billion charge in relation to the grounding of 737 Max jets and its delayed delivery. Boeing has a Zacks Rank #3.

Excluding the one-time impact of $8.74 per share related to 737 Max issues, the company posted earnings of $2.92 per share. This compares favorably with the Zacks Consensus Estimate of earnings of $1.85.

Furthermore, the company incurred GAAP loss of $5.21 per share against earnings of $3.73 registered in the second quarter of 2018.

In the quarter under review, Boeing’s revenues amounted to $15.75 billion, which missed the Zacks Consensus Estimate of $17.98 billion by 12.4%. The top line also plunged 35% from the year-ago quarter’s figure of $24.26 billion. (Read: Boeing Q2 Earnings Down Y/Y on Lower 737 Deliveries)

Caterpillar reported second-quarter 2019 adjusted earnings per share of $2.83 lagging the Zacks Consensus Estimate of $3.12. The figure also declined 5% from the prior-year quarter’s adjusted earnings per share of $2.97. Caterpillar has a Zacks Rank #3.

Higher manufacturing costs, lower construction equipment sales in Asia-Pacific primarily dragged down by China and weak sales at the company’s energy and transportation segment weighed on the results.

Revenues improved 3% year over year to $14.4 billion in the quarter under review, missing the Zacks Consensus Estimate of $14.5 billion. (Read: Caterpillar Q2 Earnings & Revenues Miss Estimates)

American Express Co. AXP second-quarter 2019 earnings of $2.07 per share surpassed the Zacks Consensus Estimate by 0.98% and were up 12.5% year over year. Total revenues of $10.8 billion beat the Zacks Consensus Estimate by 0.14% and were up 8.4% year over year. American Express has a Zacks Rank #3.

This is the eighth straight quarter in which the company posted foreign exchange adjusted revenue growth of more than 8%. This growth continues to be driven by a well balanced mix of spending, fees and loans spread across geographies and customer segments. (Read: American Express Q2 Earnings & Revenues Beat, Up Y/Y)

Performance of the Top 10 Dow Companies

The table given below shows the price movement of the 10 largest components of the Dow, which is a price-weighted index, over the past five days and during the last six months. Over the past five trading days, the Dow has lost 0.1%.

Next Week’s Outlook

Stocks are likely to rise if Friday’s GDP numbers are robust. However, next week’s trading will likely be dominated by the two-day policy meeting of the Federal Reserve.

Investors have already factored in a rate hike and stocks are unlikely to rise drastically if such a decision is announced. However, in case the extent of the reduction fails to meet market expectations, stocks will likely trend lower toward the end of next week.

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The Boeing Company (BA) : Free Stock Analysis Report
Apple Inc. (AAPL) : 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
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
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