Wednesday, October 23, 2013

Lower markets on mixed earnings and profit taking

Dow was off 54, decliners over advancers 4-3 & NAZ dropped 22.  The MLP index fell 2+ to 459 after a run over the last 2 weeks & the REIT index was up pennies in the 284s.  Junk bond funds were higher & the 10 year Treasury yield rose 3 basis points.  Oil fell again, continuing its 6 week decline, & gold retreated.

AMJ (Alerian MLP Index tracking fund)

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CLZ13.NYM...Crude Oil Dec 13....96.91 Down ...1.39  (1.4%)

Live 24 hours gold chart [Kitco Inc.]

Boeing Co. 777 Aircraft Production

Photo:   Bloomberg

Boeing, a Dow stock, rose after boosting its 2013 profit forecast& beating Q3 estimates with an increase in jetliner deliveries.  Full-year EPS excluding some pension expense will be $6.50-$6.65, up from a range of $6.20-$6.40.  EPS on that basis were $1.80 for Q3, topping the $1.52 estimate.  Revenue & free cash flow are surging as it speeds the production tempo for single-aisle 737s, wide-body 777s & 787 Dreamliners, blunting the effect of a slowdown in military sales.  Monthly Dreamliner output will increase to 12 in 2016, up from a goal of 10 by the end of 2013, & reach 14 planes by decade’s end, BA said.  That will help clear a backlog of the 787-8 & -9 versions as it prepares to add the stretched -10 Dreamliner by the latter part of the decade & contribute to cash flow as customers get faster deliveries.  Revenue rose 11% to $22.1B, exceeding the $21.6B estimate.  Commercial sales increased 15% to $14B, with deliveries up 14% to 170 aircraft, while defense grew 3% to $8.05B.  This year, BA has used a profit measure dubbed core EPS that it said gives a clearer picture by adjusting for market fluctuations in pension expense.  Without the adjustment, EPS rose to $1.51, compared with $1.35 a year earlier.  BA generated $2.32B in free cash flow, almost doubling its year-earlier total.  The company held $15.9B in cash & marketable securities as of the end of the qtr, an 11% increase from its $14.3B balance in the previous qtr.  BA has been the best performing Dow stock this year & rose another 6.54 today.

Boeing Rises Most in Dow as Jets Drive Boost in Forecast

Boeing (BA)

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Eli Lilly & Co. Headquarters in Indianapolis, Indiana

Photo:   Bloomberg

Eli Lilly reported Q3 that beat estimates on cost cuts & higher sales of diabetes products.  EPS excluding one-time items were $1.11, beating the $1.04 estimate.  Sales rose 6% to $5.77B, compared with the $5.75B projection.  Brand-name pharmaceutical sales are finally starting to grow again after years of patent expirations shrank revenues as blockbusters including schizophrenia drug Zyprexa, faced cheaper copycat versions.  CFO Derica Rice said shareholders will reward the company over the long-term even as the company lagged its peers for now when it brings new drugs to market next year.  “It will be when we get those drugs across the finish line,” Rice said.  “The data looks promising, but they still have to go through the regulatory process.”  LLY, in Jul, said it planned to freeze wages for most workers & the company reported operating costs fell 2% to $3.03B from a year earlier.  Earlier this month, the company announced it was buying back $5B in shares, & has promised to meet sales goals of $20B for next year, compared with $22.6B in 2012.  It increased the lower end of its EPS forecast for next year, narrowing the range to $4.10-$4.15 from $4.05-$4.15.  The stock went up 16¢.

Lilly Profit Beats Analyst Estimates as Sales of Diabetes Drugs Increase

Eli Lilly (LLY)

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FedEx projects its busiest shipping day this holiday season will be Cyber Mon (Dec 2), with online retailers driving an 11% increase from 2012 to produce the company’s highest volume in history.  It forecasts more than 22M shipments will move through its global network on that day which is the earliest peak day since at least 2007.  For the past 6 years, the busiest day has fallen in the middle of Dec.  “What we’re clearly seeing is the effect of e-commerce,” Raj Subramaniam, executive VP of marketing & communications, said.  Cyber Monday was the 2nd-busiest day last year, Subramaniam said.  For the past 2 years, Cyber Monday has generated the most sales of any day in the week after Thanksgiving, according to ComScore.  The day’s volume totaled $1.5B last year, a 15% increase from 2011.  In Q2, e-commerce spending increased 18.4% from a year earlier, while total retail sales rose just 4.7% in that period, according to the Dept of Commerce.  FDX estimates more than 85M shipments for the entire week, Dec 1-7, a 13% increase from last year’s busiest week.  The company plans to hire more seasonal workers than last year, when it added 20K, to handle the additional volume.  The National Retail Federation forecasts holiday sales will increase 3.9% this year to $602B, even with economic uncertainty & customers taking a “conservative approach” to spending.  The stock was up 13¢.

FedEx Sees Holiday Shipments Peaking on Cyber Monday as E-Commerce Grows

FedEx (FDX)

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Stocks settled back after 2 weeks of gains without any economic backup.  Yes, the federal gov did not jump off a cliff but that was to be expected.  After all, gov employees need to get paid.  Earnings are giving a mixed picture with little encouragement from bellwether companies.  Because of late reporting, GDP for Q3 will be reported on Nov 11 & estimates are on the gloomy side.  Dow is still only 250 below its record reached last month, although many companies have had bigger drops from their 2013 highs.

Dow Jones Industrials

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