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Stocks Mostly Higher After Earnings

Kevin O'Shaughnessy

U.S. Market
Stocks were up at midday as global markets continued to digest a number of corporate-earnings reports.

No major economic data were scheduled for release Wednesday, but Treasuries rose amid global concerns about conflicts in Ukraine and Gaza.

The Dow was down 0.1% at midday, but the S&P 500 and the Nasdaq had gained 0.2% and 0.5%.

Stocks on the Move
After Tuesday's closing bell, Apple (AAPL) reported solid third-quarter earnings and gave investors a fourth-quarter outlook that was relatively in line with Morningstar analysts' expectations. However, the bigger story continues to revolve around buzz for Apple's upcoming products (iPhone 6, new iPads, and a possible iWatch). Management has set a bullish tone for its product pipeline and for revenue growth this holiday season. Shares were up 2.8% at midday.

Also after market close Tuesday, Microsoft (MSFT) posted an 18% increase in revenue to $23.4 billion. Profitability was dragged down by the new phone hardware business stemming from the Nokia (NOK) acquisition, as operating income of $6.5 billion would have been $692 million higher excluding Nokia. Aside from the generally positive results for the quarter, management's cost-cutting, restructuring, and strategic moves should make Microsoft a leaner, more focused organization as it hopes to regain lost ground in mobile devices and the cloud, say Morningstar analysts. Shares were 0.9% higher at midday.

PepsiCo's (PEP) second-quarter results reflected continued emerging-market gains, positive net pricing, and solid profitability. Given the firm's strong results during the first half of the year, management raised its estimated full-year earnings per share growth rate to 8% (on an adjusted basis) from 7%; including a forecast 4% negative impact from currency effects, this implies earnings per share of $4.55, in line with Morningstar analysts' $4.53 estimate. The analysts continue to believe Pepsi’s competitive advantages will support further pricing power and profitability expansion. Shares were 2.7% higher at midday.

Boeing's (BA) second-quarter total sales increased 1% to $22 billion, and operating earnings improved 4% to $1.8 billion. Commercial sales advanced 5% as deliveries ramped up 7% to 181 aircraft from 169 last year. Military sales were down 5% from fewer aircraft and lower volumes across the system. Importantly, Boeing was awarded orders for 44 aircraft on the F-18 platform. Shares, however, were down 2.5% at midday

Foreign Markets
Stocks overseas were mostly higher. The Shanghai Composite gained 0.1%, and the Hang Seng rose 0.8%. The Nikkei 225, however, was down 0.1%.

In Europe, the FTSE 100 was flat, but the Paris CAC and the DAX were each 0.2% higher.