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Dow 30 Stock Roundup: Caterpillar, DuPont, MCD, P&G Beat

The Dow enjoyed a strong week of gains, riding on stellar earnings results. The index declined on Monday due to a spike in bond yields, which dimmed the attraction of such safe haven stocks as telecom and utilities. But the index closed in the green on each successive day, closing Thursday at a record level. The Fed’s decision to refrain from raising rates at the end of its two-day policy meeting also lifted investor sentiment.

Last Week’s Performance

The Dow lost 0.2% last Friday after General Electric Company GE posted a decline in second-quarter earnings and revenues. Furthermore, decline in oil prices adversely affected energy shares, which in turn weighed on the broader markets. As per Petro-Logistics, OPEC is expected to increase crude production by 145,000 barrels per day (bpd) this month. Such expectations of an increase in production level amid oversupply concerns dragged oil prices lower.

The index declined 0.3% over last week. Dismal performance by IBM IBM and Goldman Sachs GS weighed on the Dow. Again, the Amazon-Sears deal adversely affected Home Depot HD, which in turn weighed on the Dow. Other benchmarks ended the week with gains.

The Dow This Week

The Dow declined 0.3% on Monday, largely due to the fact that bond yields increased, leading investors to exit in utilities and telecom stocks. Also, shares of Johnson & Johnson JNJ fell 1.5%, dragging down the blue-chip index. 

This was largely due to the fact that Merck and Co. MRK together with its South Korean partner Samsung Bioepis Co Ltd has started selling Renflexis, a less expensive alternative version of Johnson & Johnson's rheumatoid arthritis drug Remicade in the United States.

The index gained 0.5% on Tuesday following stellar earning results from McDonald's Corp. MCD and Caterpillar Inc. CAT. Oil prices rose following Saudi’s decision to curb oil exports to the US. There were broad gains for technology stocks as the tech rally continued.

The index increased 0.5% on Wednesday, boosted by strong earnings results and the Fed’s decision not to raise rates at the end of its two-day meeting. Splendid second quarter earnings from The Boeing Company BA helped close the Dow at a record high.

The Dow outperformed the two other benchmarks to close at a record high on Thursday, riding on a rally in shares of Boeing Company and Verizon Communications Inc. VZ. The blue-chip index gained 0.4%. However, technology stocks took a battering as shares of Apple Inc. AAPL swooned due to now familiar speculations about overvaluation of tech stocks.

Components Moving the Index

3M Company MMM reported strong second-quarter 2017 results with healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $1,583 million or $2.58 per share compared with $1,291 million or $2.08 per share in the year-earlier quarter. However, the reported earnings missed the Zacks Consensus Estimate by a penny.   

Net sales during the quarter were $7,810 million, up from $7,662 million in the year-ago quarter, but missed the Zacks Consensus Estimate of $7,879 million. Zacks Rank #3 (Hold) rated 3M raised its earlier guidance for 2017. (Read: 3M Slightly Misses Q2 Earnings Despite Organic Growth)

Caterpillar delivered another upbeat quarter with adjusted earnings per share of $1.49 in second-quarter 2017, logging a 37% improvement year over year and also ahead of the Zacks Consensus Estimate of $1.26. Revenues improved 9.6% year over year to $11.3 billion in the quarter, surpassing the Zacks Consensus Estimate of $10.9 billion.

Given the upbeat first-half performance, improved order activity and disciplined cost control, Zacks Rank #2 Buy-rated Caterpillar has hiked revenue guidance to the range of $42–$44 billion from the prior range of $38–$41 billion. (Read: Caterpillar Tops Q2 Earnings & Revenues, Raises View)

The Coca-Cola Company KO reported second-quarter 2017 adjusted earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of 57 cents by 3.5%. Net revenue declined 16% year over year to $9.7 billion due to currency headwinds and negative impact of structural items.

In 2017, Zacks Rank #2 (Buy)-rated Coca-Cola expects organic revenues to rise 3%. company expects adjusted EPS to decline 0–2% from the prior year’s comparable EPS of $1.91. (Read: Coca-Cola's Healthy Drive Helps Q2 Earnings to Beat)

Boeing reported adjusted earnings of $2.55 per share for second-quarter 2017, beating the Zacks Consensus Estimate of $2.32 by 9.9%. On a GAAP basis, Boeing reported earnings of $2.89 per share against loss of 37 cents per share in the year-ago quarter.

The company's revenues amounted to $22.74 billion in the reported quarter, missing the Zacks Consensus Estimate of $23.01 billion by 1.2%. The reported figure also declined 8.1% year over year. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DuPont DD recorded adjusted earnings of $1.38 per share in second-quarter 2017, up 11% from $1.24 per share a year ago. The results topped the Zacks Consensus Estimate of $1.29.  Zacks Rank #2-rated DuPont logged net sales of $7,424 million, up roughly 5% year over year on higher volumes. That also surpassed the Zacks Consensus Estimate of $$7,260 million. (Read: DuPont's Q2 Earnings & Revenues Trounce Estimates)

McDonald's posted robust results in the second quarter of 2017, wherein both the bottom and the top line outpaced the Zacks Consensus Estimate. Adjusted earnings per share (EPS) of $1.73 surpassed the Zacks Consensus Estimate of $1.62 by 6.8% and improved 19% from the year-ago quarter. McDonald's has a Zacks Rank #2.

Revenues of $6.05 billion declined 3% year over year, mainly due to the impact of the company’s strategic refranchising initiative. At constant currency, the figure declined 2%. However, the same surpassed the Zacks Consensus Estimate of nearly $6 billion by nearly 1%. (Read: McDonald's Tops Q2 Earnings on Solid Comps Growth)

General Electric reported second-quarter 2017 earnings of 28 cents per share, which beat the Zacks Consensus Estimate by 3 cents. Total consolidated revenue for the reported quarter decreased 12% year over year to $29,558 million but surpassed the Zacks Consensus Estimate of $29,123 million. GE has a Zacks Rank #5 (Strong Sell)

General Electric reaffirmed its guidance for 2017. The company continues to anticipate operating earnings to be within $1.60–$1.70, with organic growth of 3–5%. (Read: GE Excels Q2 Earnings & Revenue Estimates, Affirms 2017 View)

The Procter & Gamble Company PG fiscal fourth-quarter core earnings of 85 cents per share beat the Zacks Consensus Estimate of 78 cents by 9%. The bottom line also increased 8% from the prior-year quarter. P&G’s reported net sales of $16.08 billion surpassed the Zacks Consensus Estimate of $16.00 billion. The top line, however, remained unchanged compared with the year ago level. Procter & Gamble has a Zacks Rank #3.

The Cincinnati, OH-based company expects its organic sales growth in the range of 2–3% for fiscal 2018. The core earnings per share growth is projected at 5–7% compared with fiscal 2017 core earnings of $3.92 per share. (Read: Procter & Gamble Tops Q4 Earnings & Revenue Estimates)

United Technologies Corporation UTX reported second-quarter 2017 earnings of $1.85 per share, beating the Zacks Consensus Estimate of $1.77. The bottom line also came in 1.6% higher than the year-ago tally. Net sales in the reported quarter came in at $15.28 billion, outpacing the Zacks Consensus Estimate of $15.18 billion. In addition, the top line came in 2.7% higher than the prior-year figure. 

Zacks Rank #3 rated United Technologies raised the lower end of its full-year 2017 earnings guidance. Adjusted earnings are currently anticipated to lie within the $6.45–$6.60 per share range, as against the previously estimated range of $6.30−$6.60. (Read: United Technologies Tops Q2 Earnings, Lifts 2017 View)

Verizon posted second quarter 2017 adjusted earnings of 96 cents per share, in line with the Zacks Consensus Estimate. Total revenue increased 0.1% year over year to $30,548 million beating the Zacks Consensus Estimate of $29,907 million. Verizon has a Zacks Rank #3.

Total operating expenses in the second quarter of 2017 were $22,316 million, down 14.1% year over year. Operating income came in at $8,232 million compared with $4,554 million in the year-ago quarter. (Read: Verizon Q2 Earnings In Line, Revenues Beat Estimates)

Visa Inc. V reported third-quarter fiscal 2017 (ended Jun 30, 2017) earnings of 86 cents per share, beating the Zacks Consensus Estimate of 80 cents. Also, the bottom line improved 25% year over year. Net operating revenue of $4.6 billion surpassed the Zacks Consensus Estimate of $4.4 billion. Also, revenues climbed 26% year over year. Visa has a Zacks Rank #3.

For fiscal 2017, Visa largely reaffirmed its guidance. Adjusted earnings per share growth are projected to be 20% on a normal dollar basis. (Read: Visa Beats on Q3 Earnings and Revenues, Tweaks View)

Microsoft Corporation MSFT reported fourth-quarter fiscal 2017 earnings of 98 cents per share, which beat the Zacks Consensus Estimate by 27 cents. Earnings per share (EPS) increased 42% (43% in constant currency or CC) on a year-over-year basis and 34.2% on a sequential basis.

Revenues (adjusted for Windows 10 deferrals and impairment & restructuring charges) of $24.70 billion increased 4.9% sequentially and 9.1% from the year-ago quarter (up 10% in CC). Further, it exceeded the Zacks Consensus Estimate of $24.19 billion. (Read: Azure, Office 365 Help Microsoft to Top Q4 Earnings)

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 1.1%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

-7.1%

+14%

GS

-0.1%

-5.3%

IBM

-1.6%

-17.5%

HD

-0.3%

+6.7%

BA

+12.8%

+45.6%

UNH

-1.6%

+16.6%

MCD

+1.6%

+27.6%

TRV

+0.1%

+7.1%

JNJ

-3.7%

+15.7%

AAPL

-2.7%

+25.1%

Next Week’s Outlook

Most Dow component earnings have been bullish in nature, in keeping with the tone of the rest of the second quarter earnings results. With a bunch of key earnings out of the way the shift will turn somewhat toward economic data. Following the release of GDP data today, which came in better than expected, markets are likely to focus on economic fundamentals. Given that growth is slated to pick up in the second half of the year, stocks are likely to receive further catalysts for gains in the days ahead.

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International Business Machines Corporation (IBM): Free Stock Analysis Report
 
Johnson & Johnson (JNJ): Free Stock Analysis Report
 
Merck & Company, Inc. (MRK): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
Boeing Company (The) (BA): Free Stock Analysis Report
 
Coca-Cola Company (The) (KO): 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
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
3M Company (MMM): Free Stock Analysis Report
 
United Technologies Corporation (UTX): Free Stock Analysis Report
 
General Electric Company (GE): Free Stock Analysis Report
 
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
 
Caterpillar, Inc. (CAT): Free Stock Analysis Report
 
McDonald's Corporation (MCD): Free Stock Analysis Report
 
Procter & Gamble Company (The) (PG): Free Stock Analysis Report
 
Visa Inc. (V): Free Stock Analysis Report
 
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