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Dow 30 Stock Roundup: Wal-Mart, Home Depot Beat on Earnings, Boeing Wins $1.32B Order from Juneyao

Swarup Gupta

The Dow notched up a record streak of gains over a holiday shortened week. Markets were closed on Monday to commemorate President’s Day. The index increased on Tuesday after key components posted encouraging earnings results. President Trump’s comments and his possible policy proposals continued to dominate proceedings and were primarily responsible for markets moving higher. Oil prices also moved higher, leading to gains for the energy sector.

Last Week’s Performance

The Dow gained marginally last Friday, increasing by 0.02% thanks to the euphoria surrounding President Donald Trump’s proposed market-friendly policies including the prospects of massive tax cuts and uptick in infrastructure spending. Gains in Kraft Heinz Co. KHC also helped the broader markets gain traction.

Shares of Kraft Heinz soared 10.7% after the company said it would continue to pursue a $143 billion bid for Unilever plc UL. Meanwhile, the Dow eked out gains to extend its record-setting winning streak into a seventh session.

For the week, the Dow advanced 1.8%. Optimism over President Trump’s proposed market-friendly policies including tax cuts, financial de-regulation and increase in infrastructure spending boosted all the three key indexes over the week.

The Dow This Week

Markets were closed on Monday to commemorate President’s Day. The index advanced 0.6% on Tuesday thanks to upbeat earnings reports from Wal-Mart Stores Inc.’s WMT and The Home Depot Inc. HD. The Dow logged its eighth straight session of closing records, its longest winning streak since Jul 20, 2016

President Donald Trump’s appointment of Lt. Gen. H.R. McMaster to be his national security adviser also boosted investors’ sentiment. Many consider McMaster to be the smartest and most capable army officer of his generation, someone who has led the troops in the 1991 Gulf War and the Iraq War.

The index gained 0.2% to close at an all-time high for the ninth straight session on Wednesday. The blue-chip index logged its best record setting streak in three decades. But, the broader market struggled after minutes from the Fed’s last meeting showed that the central bank is comfortable in hiking rates “fairly soon.” A pullback in the price of oil adversely affected energy companies.

The Dow closed about 30 points higher on Wednesday, with E I Du Pont De Nemours and Co DD contributing most of the gains. The company is poised to win an antitrust approval from European Union regulators for its $130 billion merger with Dow Chemical Co DOW. The regulator won’t seek third parties' views to the changes, a clear indication that it will approve the deal.

The index increased 0.2% on Thursday, gaining for the 10th consecutive session in a row despite concerns about unreasonable valuations and Trump’s likely fiscal stimulus measures. The Dow was boosted by healthcare majors Johnson & Johnson Inc. JNJ and Pfizer Inc. PFE, which gained 1.8% and 1.4%, respectively.

A surge in oil prices helped to lift the energy sector. Crude prices received a boost from fresh data which showed that inventories had increased by a smaller amount than was expected, by 600,000 barrels during the week ended Feb 17. As a result, Dow component Exxon Mobil Corp. XOM gained 1.1%.

Components Moving the Index

Wal-Mart’s fourth-quarter adjusted earnings of $1.30 per share beat the Zacks Consensus Estimate of $1.29 by 0.8% on higher comps. Total revenue of the retailer came in at $130.9 billion (including membership and other income). The figure beat the Zacks Consensus Estimate of $130.6 billion by 0.23% and increased 1.0% year over year.

Adjusted earnings in fiscal 2017 were $4.32 per share, which beat the Zacks Consensus Estimate of $4.31 by 0.23%. Total revenue came in at $485.9 billion (including membership and other income). The figure beat the Zacks Consensus Estimate of $485.1 billion by 0.16% and increased 0.8% year over year.

Zacks Rank #4 (Sell)-rated Wal-Mart expects earnings in the range of 90 cents to $1.00 per share for the 13-week period ending Apr 28. For fiscal 2018, the company expects adjusted earnings in the range of $4.20−$4.40 per share, assuming full-year effective tax rate around 32%. (Read: Wal-Mart (WMT) Q4 Earnings, Revenues Beat on Strong Comps)

In a separate development, Wal-Mart announced a 2% hike in its annual cash dividend to $2.04 per share. The annualized dividend now amounts to a dividend yield of 3.5%, based on Wal-Mart’s closing price of $71.45 as of Feb 21, 2017. (Read: Wal-Mart (WMT) Hikes Dividend, Boosts Shareholder Value)

Home Depot posted fiscal fourth-quarter earnings of $1.44 per share, which escalated 23.1% from $1.17 in the year-ago quarter and beat the Zacks Consensus Estimate of $1.33. Net sales advanced 5.8% to $22,207 million from $20,980 million in the year-ago quarter. However, the top line fell short of the Zacks Consensus Estimate of $21,806 million.

Zacks Rank #3 (Hold) rated Home Depot’s adjusted earnings for fiscal 2016 came in at $6.45 per share, up 18.1% year over year and ahead of the Zacks Consensus Estimate of $6.34. Net sales for the fiscal jumped 6.9% year over year to $94,595 million and cruised ahead of the Zacks Consensus Estimate of $94,161 million.

Following the robust fiscal 2016 performance, Home Depot initiated guidance for fiscal 2017. The company project both sales and comps to grow about 4.6%. Diluted earnings per share are expected to increase 10.5% to $7.13, including share repurchases worth nearly $5 billion. (Read: Home Depot (HD) Tops Q4 Earnings, Updates Capital Strategy)

Verizon Communications VZ has announced it will be acquiring Yahoo’s YHOO core internet business at a discount of $350 million for $4.48 billion. The discount is $50 million greater than initially expected.

The newly negotiated deal, expected to close in the second quarter of this year, is due to two irreversible data breaches Yahoo announced in the latter half of 2016. Over one billion users have been impacted, making the breaches the largest ever discovered on the internet.

Yahoo is currently facing multiple law suits on the account of negligence. In virtue of the deal taking place, Yahoo and Zacks Rank #3 rated Verizon will split the respective legal costs while Yahoo is arguably facing the biggest penalty in taking a $350 million hit in being acquired. (Read: Verizon Trims $350 Million Off of Yahoo Merger)

The Boeing Company BA has received an order for five 787-9 Dreamliners from Juneyao Airlines, a major private carrier based in Shanghai, China. Value of the airplanes at current list prices comes to nearly $1.32 billion. However, it goes without saying that the carrier will surely enjoy a substantial discount on this amount.

The order marks the airline's first order of Boeing’s planes and also the first wide-body airplane order. Juneyao Airlines also has options to buy five more 787-9s, as per the terms of agreement. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Technologies Corp. UTX operating unit Carrier recently collaborated with AT&T to incorporate the latter’s wireless connectivity on commercial HVAC (Heating, ventilation and air conditioning) equipment in its Smart Service solution.  

The Carrier SMART Service is a dynamic, proactive strategy for enhanced equipment and system management. The inclusion of Zacks Rank #3 rated AT&T’s network will help collect and analyze chiller operating performance for delivering pro-active service solutions. (Read: UTX's Affiliate Collaborates with AT&T to Boost Portfolio)

Apple Inc.’s AAPL smartphone unit sales outpaced that of Samsung in the fourth quarter of 2016, according to reports. According to data released by Gartner, Zacks Rank #3 rated Apple unit sales outnumbered Samsung by 256,000.

The global smartphone market share of the iPhone maker is 17.9%, just 0.1% higher than Samsung. The report further adds that the last time Apple recorded the highest unit sales was in the fourth quarter of 2014. (Read: Apple (AAPL) Becomes Highest Smartphone Seller after 8 Quarters)

Pfizer Inc. announced that its Biologics License Application (BLA) for leukemia candidate inotuzumab ozogamicin has been accepted for priority review by the FDA.

Inotuzumab ozogamicin is being evaluated for the treatment of adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia (ALL). With the FDA granting priority review, a response should be out by Aug 2017. (Read: (Read: Pfizer's Leukemia Candidate Gets Priority Review in U.S.)

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 0.9%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+3%

+4.3%

GS

+0.6%

+52%

IBM

NA

+14.2%

HD

+1.7%

+7.1%

BA

+4.4%

+32.7%

UNH

-0.9%

+16.3%

MCD

+1.8%

+11.7%

TRV

+1.1%

+4.5%

JNJ

+3.4%

+2.5%

AAPL

+0.6%

+26.4%

Next Week’s Outlook

The blue-chip index last registered 10 consecutive record closes in 1987. In case record finishes are not considered, the last time the index gained over 10 successive sessions was in Mar 2013. It is quite likely that stocks may enter a short cooling off period after such a long stretch of gains. At the same time, such a hiatus is likely to be brief, given that investors continue to have faith in the new administration’s policies. In such a situation, catalysts with a more fundamental nature, such as data on durable orders, housing and GDP will play an important role in determining market movement in the week ahead.

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Yahoo! Inc. (YHOO): Free Stock Analysis Report
 
Pfizer, Inc. (PFE): Free Stock Analysis Report
 
Johnson & Johnson (JNJ): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
Boeing Company (The) (BA): Free Stock Analysis Report
 
Home Depot, Inc. (The) (HD): 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
 
United Technologies Corporation (UTX): Free Stock Analysis Report
 
Unilever PLC (UL): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report
 
The Kraft Heinz Company (KHC): Free Stock Analysis Report
 
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