Wednesday, January 22, 2014

Lower Dow on mixed earnings

Dow sank 64, advancers ahead of decliners 5-4 & NAZ added 3.  The MLP index went up 1+ to the 461s & the REIT index gained 1+ to the 275s.  Junk bond funds were strong while Treasuries eased back.  Oil advanced for a 3rd day on speculation that US gov data will show inventories of distillate fuel fell as heating demand gained.  Gold eased back, stuck in the low 1200s.

AMJ (Alerian MLP Index tracking fund)

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CLH14.NYM...Crude Oil Mar 14...95.68 Up ...0.71 (0.8%)

GCF14.CMX...Gold Jan 14.......1,240.10 Down ...2.20  (0.2%)

A Pure Power PW1500 Aircraft Engine

Photo:   Bloomberg

United Tech, a Dow stock, Q4 earnings beat the estimate thanks to a last-minute deal with Canada to delay delivery of 8 military helicopters that would have resulted in losses.  Postponing the handover of the unprofitable aircraft produced added 6¢ to EPS.  EPS from continuing operations rose 53% to $1.58, topping the $1.53 estimate.  CEO Louis Chenevert is reshaping the company to focus on commercial construction & aerospace.  He combined Otis Elevator with the fire & security units last year after completing the purchase of Goodrich in 2012.  Sikorsky Aircraft won a contract in 2004 to provide search-and-rescue & anti-submarine warfare helicopters to the Canadian gov.  The program has suffered several delays after Canada said the aircraft didn’t meet specifications.  The 2 sides reached an agreement on Dec 31 to negotiate new terms for the contract.  The company will lose about $14M per helicopter, Greg Hayes, CFO, said.   “I’m happy we’re engaging with the customer and making progress,” Chenevert said.  “This has been an ongoing challenge for the last few years and we have visibility into delivering eight aircraft in the back end of 2014.”  Revenue rose 1.9% to $16.8B, trailing the $17.1B average.  Sales at Otis increased 4.3% to $3.3B, while Pratt & Whitney sales rose 5.1% $4.1B.  UTX affirmed its forecast for 2014 EPS of $6.55-$6.85.  The company plans to repurchase $1B of its stock this year, down 17% from 2013, & will budget another $1B for acquisitions, 6X last year’s expenditure.  The stock rose 1.08.

United Technologies (UTX)

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Coach fell the most in 3 months after saying sales at North American stores dropped twice as much as analysts estimated during the holiday shopping season, & the retailer also reported quarterly profit & revenue that trailed projections.  Results, which were also hurt by competition in the handbag segment, came in a holiday season that saw many US retailers resorting to profit-eroding promotions to draw reluctant shoppers.  Sales at North American stores open at least a year fell 14% in its fiscal Q2 as shoppers’ mall visits declined.  Analysts had projected a 6.8%.  EPS dropped to $1.06 from $1.23 last year.  The estimate  was for $1.11.  Revenue fell 5.6% to $1.42B, trailing the $1.48B estimate.  The company warned in Nov that its customers planned to spend 4% less during the important year-end season.  CEO Victor Luis, who cam on board earlier this month, is turning COH into a lifestyle brand by adding new bags, fashion shoes, outerwear & other accessories.  He has revamped its design team, which will be participating in New York fashion week in Feb for the first time, hosting presentations for the new collection for the fall season.  The stock sank 3.37% (6%)

Coach Drops After North American Holiday Sales Tumble

Coach (COH)

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Texas Instruments predicted profit that may fall short of estimates as the company cuts 1100 jobs & departs the mobile-phone chip business.  Q1 EPS will be 36-44¢, including restructuring costs, on sales of $2.83-$3.07B.  Analysts were projecting EPS of 44¢ on revenue of $2.96B.  TXN is reducing costs in areas of lackluster growth & eliminating positions in Japan & its embedded processing unit.  The company is coming off 3 straight years of declining sales caused by its withdrawal from the mobile-phone modem business & is implementing changes to reignite growth.  “I’m more optimistic than I have been at the start of any of the last four years,” CFO Kevin March said.  “I’m not giddy or anything, but everything’s shaping up to be a better start to 2014.”  The job cuts, amounting to more than 3% of the workforce, resulted in a charge of about $80M, including $49 in Q4.  The move will lead to annual savings of $130M by the end of 2014.  EPS in Q4 doubled to 46¢ from 23¢ in the same period a year earlier, when the company recorded costs tied to an acquisition & job cuts.  Sales rose 1.6% to $3.03B.  Analysts estimated EPS of 46¢ on $2.99B of sales.  The stock went up 76¢.

Texas Instruments Cuts 1,100 Jobs, Predicts Profit That May Miss Estimates

Texas Instruments (TXN)

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Stocks continue mixed to lower as has been the story in the new year.  Earnings are not stellar & sluggish sales is a nagging problem in many reports.  Dow has fallen 225 in Jan & looks like it wants to give a negative signal for the year.  A decline in Jan for the month will indicate a down market for the year.

Dow Jones Industrials

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