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Dow 30 Stock Roundup: Chevron, Exxon, Apple Earnings Impress

The Dow continued to notch up gains during a week marked by key legislative developments. Initially investors were concerned over news that the House was considering a ‘gradual phasing-in’ of corporate tax rates.

However, markets received a boost after the Fed chose not to hike interest rate this month. Investor sentiment was buoyed further after House Republicans finally revealed a detailed framework of the new tax policy. Subsequently, the Dow hit its 55th record close for the year.

Last Week’s Performance

The Dow increased 0.1% last Friday. Such gains were powered a surge in the tech stocks with shares of Microsoft Corporation MSFT and Intel Corporation INTC contributing to most of the gains.

However, the blue-chip index pared gains due to losses for Chevron Corp. CVX and Merck & Co. MRK, shares of which declined 4.1% and 6.1%, respectively. Broader markets were also boosted after the third quarter GDP estimate of the U.S. economy came in above the consensus estimate.

The index increased 0.5% over last week, registering its seventh straight weekly gain. This was also the longest streak of weekly gains for the Dow since December last year. Broader markets gained as market watchers remained hopeful that the new tax code would be signed into policy soon.

Moreover, the House of Representatives cleared the budget blueprint with majority of the Republicans voting in favor of the move. Further, the ECB announced plans to extend the quantitative easing program.

The Dow This Week

The index lost 0.4% on Monday following reports from Bloomberg that the House was considering a ‘gradual phasing-in’ of corporate tax rates. This hurt investor sentiment and caused broad based losses for the markets.

Investors also eagerly awaited the announcement of the next Fed Chief, whose name President Trump is expected to reveal on Thursday. Meanwhile, markets also suffered after Paul Manafort was convicted in the Russian meddling case.

The index increased 0.1% on Tuesday following gains from shares of Apple Inc. AAPL. Meanwhile, the Consumer Confidence index logged its best reading in as many as 17 years. Last month, the Dow gained 4.3%, posting its seventh straight month of gains. Moreover, this was also the Dow’s longest streak of gains since April 2012.

The index gained 0.3% on Wednesday after the Fed chose not to hike interest rate this month. Moreover, the Fed offered a positive view about the U.S. economy and said that it has been improving at a ‘solid rate.’ Such comments boosted gains for the broader markets. Meanwhile, investors eagerly waited for President Trump to announce the name of the next Fed Chief. The ISM Manufacturing Index came in at 58.7 in October, down from 59.8 in September. Meanwhile, construction spending increased 0.3% to $1.22 trillion in September, up from 0.1% in August.

The index increased 0.4% on Thursday after House Republicans finally revealed a detailed framework for the new tax policy. Subsequently, the Dow hit its 55th record close for the year. Meanwhile, President Trump nominated Jerome Powell for the post of Fed Chief which led to broad based gains for the markets.

Components Moving the Index

Chevron reported third-quarter earnings per share of $1.03, higher than the Zacks Consensus Estimate of 99 cents and the year-ago profit of 68 cents. Quarterly revenue of $36,205 million surpassed the Zacks Consensus Estimate of $33,667 million and was up 20.1% year over year.

Zacks Rank #3 (Hold) Chevron’s total production of crude oil and natural gas increased 8.1% compared with last year’s corresponding period to 2,717 thousand oil-equivalent barrels per day (MBOE/d).

Chevron’s downstream segment achieved earnings of $1,814 million, a massive 70.3% higher than the profit of $1,065 million last year. (Read: Refining, Higher Oil Power Chevron's Q3 Earnings Beat)

ExxonMobil Corporation XOM posted third-quarter reported earnings of 93 cents per share, which surpassed the Zacks Consensus Estimate of 89 cents. Also, the bottom line improved from the year-ago quarter level of 63 cents.

Total revenue in the quarter increased to $66,165 million from $58,677 million in the year-ago quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $63,508 million.  

Quarterly earnings at the upstream segment were $1.6 billion, showing an improvement of $947 million from the year-ago quarter. The downstream segment recorded profits of $1.5 billion. The reported figure is $303 million higher than the July-September quarter of 2016. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple reported fiscal fourth-quarter 2017 results wherein earnings per share and revenues of $2.07 and $52.6 billion easily beat the Zack Consensus Estimate of $1.87 and $51.2 billion, respectively. On a year-over-year basis, the metrics grew 24% and 12%, respectively. Apple has a Zacks Rank #3.

Steady iPhone sales (higher average selling price was a big factor) along with a spurt in Services segment and a resurgent Macs and iPad business backed the impressive results.For fiscal first-quarter 2018, gross margin is expected within 38–38.5%, while operating expenses are projected within $7.65–$7.75 billion. Other income/ (expense) is likely to be $600 million, while tax rate is expected to be 25.5%. (Read: Apple Q4 Earnings Impress, iPhones & Services Lead)

Merck reported third-quarter 2017 adjusted earnings of $1.11 per share, which beat the Zacks Consensus Estimate of $1.03 by 7.8%. Earnings rose 3.7% year over year. Among other items, adjusted earnings exclude a charge related to its new oncology collaboration with Britain's AstraZeneca (AZN).

Revenues for the quarter declined 2% year over year to $10.33 billion. Sales also missed the Zacks Consensus Estimate of $10.51 billion. Currency movement positively impacted revenues by 1%. Excluding currency impact, sales declined 3% year over year.

Zacks Rank #3 Merck raised its previously issued adjusted earnings guidance while raising its sales guidance marginally – for the second time this year. The company expects adjusted earnings in the range of $3.91–$3.97 compared with $3.76–$3.88 expected earlier.

Revenues are expected in the range of $40.0 billion – $40.5 billion compared with the earlier forecast of $39.4 billion – $40.4 billion, including negative currency impact of less than 1%  (versus approximately 1% previously). (Read: Merck Q3 Earnings Top, Sales Lag, Keytruda Stays Strong)

Pfizer, Inc. PFE reported third-quarter 2017 adjusted earnings per share of 67 cents, which beat the Zacks Consensus Estimate of 65 cents by 3.1%. Earnings also rose 10% year over year driven by slightly higher sales and lower costs and share count.

The pharma heavyweight delivered revenues of $13.17 billion, which were in line with the Zacks Consensus Estimate. Revenues rose 1% from the year-ago quarter on a reported as well as operational basis.

While Zacks Rank #3 Pfizer raised its adjusted earnings guidance, it tightened the revenue expectations for the year. Revenues are expected in the range of $52.4 billion to $53.1 billion compared with $52 billion to $54 billion expected previously. The Zacks Consensus Estimate is pegged at $52.65 billion.

Adjusted earnings per share are expected in the range of $2.58 - $2.62 compared with $2.54 - $2.60 expected previously. The Zacks Consensus Estimate is pegged at $2.56 per share. (Read: Pfizer Beats on Q3 Earnings, Raises 2017 EPS View)

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 0.8%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+4.9%

+18.2%

GS

+0.9%

+9.7%

IBM

-5.4%

-3.6%

HD

-0.5%

+5.0%

BA

-0.8%

+43.2%

UNH

+1.7%

+31.9%

MCD

+1.1%

+19%

TRV

+1.0%

+11.9%

JNJ

-1.7%

+13.1%

AAPL

+7.6%

+14.0%

Next Week’s Outlook

In recent weeks markets have been buoyed by a record third quarter earnings season and encouraging news on the legislative front. Most of the economic data released last month has also been encouraging in nature. There have a few worries on that front during the early days of the ongoing month, but this is likely to be only an aberration. Given the current state of affairs, markets should continue to notch up new records in the week ahead.

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Pfizer, Inc. (PFE): Free Stock Analysis Report
 
Merck & Company, Inc. (MRK): Free Stock Analysis Report
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
Chevron Corporation (CVX): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
Intel Corporation (INTC): Free Stock Analysis Report
 
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