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Dow 30 Stock Roundup: AmEx, Goldman, JPMorgan Beat

The Dow continued to trade within a tight band during a week dominated by earnings. Investors refrained from posting big bets on Monday, leading to the index ending mostly unchanged. Earnings results guided the Dow’s fortunes over the next two trading days of the week. However, it was a deal between two retailing majors which led to losses for a key component, and hence for the index itself on Thursday.

Last Week’s Performance

The Dow closed at a record high for the third time in a row last Friday. The 30-stock index registered its 25th record close for this year, increasing by 0.4% as tech stocks gained. JPMorgan Chase & Co. JPM, Citigroup C and Wells Fargo WFC all posted better-than-expected earnings results.

But shares of these banking-behemoths fell after reporting decline in trading sales. Investors also digested a couple of poor economic reports on retail sales and inflation, which led market participants to believe that the Federal Reserve may turn dovish.

The index gained 1% last week even as all major benchmarks posted solid gains. The indexes overcame a series of bottlenecks from tech overvaluation fears to Russia’s involvement in the U.S. election to climb back into record territory.

The Dow This Week

The index declined a meager 0.04% on Monday as investors refrained from placing big bets ahead of a busy earnings week. Investors geared up for key quarterly earnings results of major players that were slated for release during this week.

The index declined 0.3% on Tuesday weighed down by The Goldman Sachs Group, Inc. GS. Shares of the banking behemoth slipped after reporting a staggering 40% drop in second-quarter bond trading revenue. Meanwhile, shares of Netflix, Inc. NFLX hit a record high following larger than expected subscriber additions in the second quarter. Netflix’s gains helped other benchmarks close in the green.

The Dow gained 0.3% on Wednesday. Benchmarks closed at record highs on Wednesday boosted partly by broad-based gains in technology shares. Meanwhile, IBM Corp’s IBM disappointing quarterly results limited the Dow’s advance. Nevertheless, the blue-chip index still managed to finish at a record high.

The deal between Sears Holdings Corp. SHLD and Amazon.com Inc. AMZN weighed on home improvement retailers on Thursday. This in turn dragged the Dow 0.1% lower after Home Depot Inc HD lost 4.1%. However, shares of Microsoft Corp. MSFT gained momentum on expectations of better-than-expected quarterly results, banking on strong cloud performance and tax benefits.

Components Moving the Index

American Express Company AXP reported adjusted earnings per share (EPS) of $1.47 beating the Zacks Consensus Estimate by a cent. However, earnings witnessed a sharp 30% year-over-year decline. The stock has a Zacks Rank #3 (Hold).

Better-than-expected results were mainly backed by a lower tax rate and the effect of share buyback. However, when comparing year-over-year, the bottom line suffered as the year-ago earnings reflected the $1.1 billion gain recorded from the sale of the Costco Wholesale Corp. COST co-brand portfolio.

The company reaffirmed its earlier EPS guidance of $5.60–$5.80 for 2017. Revenues came in at $8.3 billion, slightly ahead of the Zacks Consensus Estimate of $8.2 billion and up 1% year over year. (Read: American Express Q2 Earnings Beat, 2017 View Intact)

Goldman Sachs reported earnings per share of $3.95, beating the Zacks Consensus Estimate of $3.36. Further, the bottom line witnessed 6% year-over-year improvement. Zacks Rank #5 (Strong Sell)-rated Goldman’s net revenue edged down 1% year over year to $7.89 billion in the quarter under review. However, revenues outpaced the Zacks Consensus Estimate of $7.57 billion.

Results were primarily driven by higher equities revenues and low expenses. However, lower fixed income revenues were a headwind. Notably, the quarter witnessed challenging market-making environment, reduced levels of volatility and low client activity levels. (Read: Goldman's Equities Revenue, Low Costs Drive Q2 Earnings)

IBM reported second-quarter 2017 non-GAAP earnings of $2.97 per share, which increased 0.7% from the year-ago quarter and beat the Zacks Consensus Estimate by 24 cents (8.8%).

Revenues of $19.30 billion missed the Zacks Consensus Estimate of $19.49 billion and decreased 4.7% year over year. At constant currency (cc), revenues declined 3%. However, revenues improved 6.2% sequentially.

Zacks Rank #3 rated IBM reiterated forecasts for 2017. Non-GAAP earnings are expected to be at least $13.80 per share. The company now anticipates free cash flow to remain flat over 2016. (Read: IBM Beats on Q2 Earnings, Q3 Revenue Outlook Unimpressive)

UnitedHealth Group Inc. UNH reported second-quarter net operating earnings per share of $2.46, comfortably beating the Zacks Consensus Estimate of $2.38 and increasing 25.5% year over year. Zacks Rank #2 (Buy) rated UnitedHealth posted net revenue of $50.1 billion, in line with the Zacks Consensus Estimate. Revenues were up 7.7% year over year.

The company raised its outlook for 2017 GAAP net earnings to a range of $9.20 to $9.35 per share (previous guidance $9.10 to $9.30) and adjusted net earnings to a range of $9.75 to $9.90 per share (versus previous guidance of $9.65-$9.85). The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Johnson & Johnson JNJ second-quarter 2017 earnings came in at $1.83 per share, beating the Zacks Consensus Estimate of $1.79 and increasing 5.2% from the year-ago period. Including one-time items, J&J reported second-quarter earnings of $1.40 per share, down 2.1% from the year-ago period.

Sales came in at $18.84 billion, missing the Zacks Consensus Estimate of $18.89 billion by 0.3%. Sales increased 1.9% from the year-ago quarter, reflecting an operational increase of 2.9% and a negative currency impact of 1%.

J&J raised its earnings guidance for 2017 and increased the lower end of its sales outlook. J&J expects 2017 adjusted earnings per share in the range of $7.12 - $7.22, including currency impact, compared with $7.00 - $7.15 expected previously. The revenue guidance is in the range of $75.8 billion to $76.1 billion compared with $75.4 billion to $76.1 billion expected previously. (Read: J&J Beats on Q2 Earnings, Lags Sales, Ups 2017 View)

The Travelers Companies, Inc.’s TRV second-quarter 2017 core income of $1.92 per share missed the Zacks Consensus Estimate of $2.07 by 7.2%. Also, the bottom line deteriorated 12.7% year over year.

Total revenue of Zacks Rank #4 (Sell) rated Travelers improved nearly 5.9% from the year-ago quarter to $7.2 billion. Revenues surpassed the Zacks Consensus Estimate of $6.9 billion. (Read: Travelers Q2 Earnings Miss, Revenues Beat Estimates)

JPMorgan Chase reported second-quarter 2017 earnings of $1.82 per share, which easily surpassed the Zacks Consensus Estimate of $1.57. Also, the figure reflects a 17% rise from the year-ago period. Notably, the results included a legal benefit of $406 million. The stock has a Zacks Rank #2.

Managed net revenue of $26.4 billion in the quarter was up 5% from the year-ago quarter. Also, it compared favorably with the Zacks Consensus Estimate of $24.8 billion. Solid loan growth and higher interest rates supported net interest income. Further, investment banking fees recorded a rise. (Read: JPMorgan Q2 Earnings Beat on Loan Growth, Higher Rates)

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 0.3%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+0.5%

+19%

GS

-3.8%

-4.3%

IBM

-3.8%

-13.4%

HD

-3.9%

+8.4%

BA

+0.3%

+31.8%

UNH

+2.8%

+20.7%

MCD

-0.6%

+26.1%

TRV

-0.3%

+5.6%

JNJ

+3.4%

+19.6%

AAPL

+1.9%

+25.3%

Next Week’s Outlook

The Dow’s fortunes are likely to be guided by earnings results over the upcoming week as well. It is also safe to assume that policy related developments will not have a major impact on market proceedings in the near future. In such an event, investors will turn toward key economic releases for guidance in the days ahead. Among the releases scheduled for next week is data on housing, durable orders and GDP. These reports are likely to influence market direction heavily in the days ahead.

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International Business Machines Corporation (IBM): Free Stock Analysis Report
 
J P Morgan Chase & Co (JPM): Free Stock Analysis Report
 
Wells Fargo & Company (WFC): Free Stock Analysis Report
 
Citigroup Inc. (C): Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
Netflix, Inc. (NFLX): Free Stock Analysis Report
 
Johnson & Johnson (JNJ): Free Stock Analysis Report
 
Home Depot, Inc. (The) (HD): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
 
American Express Company (AXP): Free Stock Analysis Report
 
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
 
UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
 
Costco Wholesale Corporation (COST): Free Stock Analysis Report
 
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