Tuesday, October 21, 2014

Higher markets on home sales data

Dow rose 100, advances over decliners 4-1 & NAZ soared 72.  The MLP index jumped a very big 9+ to the 512s & the REIT index went up 1 to 308.  Junk bond funds rose & Treasuries retreated as stocks rose.  Oil is bouncing back from 80 & gold continued to climb.

AMJ (Alerian MLP Index tracking fund)

CLX14.NYM...Crude Oil Nov 14...83.84 Up ...1.13 (1.4%)

GCV14.CMX...Gold Oct 14......1,243.90 Down ...0.10  (0.0%)

Sales of previously owned US homes rose in Sep to the highest level in a year, adding to signs that residential real estate will be a plus for the economy.  Closings, which usually take place a month or 2 after a contract is signed, advanced 2.4% to a 5.17M annual rate, the National Association of Realtors reported.  Purchases rose 1.9% compared with the same month last year before adjusting for seasonal patterns.  Traction in the labor market & falling mortgage rates are helping underpin demand & providing a buffer for the economy as global markets slow.  Easier lending standards & faster wage gains would attract more buyers, including those making their first foray into homeownership.  The forecast called for sales to climb to a 5.1M annual rate.  The median price of an existing home rose 5.6% from Sep 2013 to $209K.  Appreciation was led by a 5.1% year-to-year advance in the South.  The market, “one year from now, two years from now, it will be better,” Lawrence Yun, NAR chief economist, told said.  “Job creation is good, we have low rates and more inventory is coming online.”  The number of previously owned homes on the market rose 6% from a year earlier, to 2.3M.  At the current sales pace, it would take 5.3 months to sell those houses, compared with 5.5 months at the end of the prior month.  Sales of existing single-family homes increased 2% to an annual rate of 4.56M from the prior month, the fastest pace in a year.  Purchases of multifamily properties, including condominiums, rose 5.2% to a 610K pace.  Of all purchases, cash transactions accounted for about 24%.  Distressed sales, comprised of foreclosures & short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 10% of the total.  First-time buyers accounted for 29% of the market for a 3rd month in Sep & they’ve represented less than 30% of all buyers in 17 of the past 18 months.

Coa-Cola, a Dow stock & Dividend Aristocrat, Q3 sales missed estimates & a $3B cost-cutting plan announced by CEO Muhtar Kent failed to satisfy investors.  Sales fell to $11.98B from $12B a year earlier, below the $12.1B estimate.  KO is struggling with sluggish intl growth & mounting concerns over obesity & artificial sweeteners.  After criticism that he wasn’t responding quickly enough to the slump, Kent vowed today to reduce expenses by $3B a year by 2019.  Sales volume declined 1% in North America, while global volume climbed 1%.  EPS fell to 48¢ from 54¢ a year earlier.  Excluding some items, EPS was 53¢, matching estimates.  As part of the plan to streamline the majority of company-owned distribution territories in North America will be sold back to independent bottlers by the end of 2017, with most of the rest being refranchised by 2020.  That’s an acceleration of a previously announced plan to sell the majority of the bottlers by 2020.  “We recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment,” Kent, 61, said.  Kent had pledged in Feb to trim $1B in costs by 2016.  The company’s board also reined in its stock-compensation plan, which some had seen as excessive.  As it reduces costs, KO also reset its expectations for sales growth, saying the economy would remain challenging through 2015.  The company lowered the bottom end of its long-term net revenue growth target to as low as 4% from 5%.  Coca-Cola retained its goal to grow EPS by a high single-digit percentage after this year.  The company had $20B in cash & short-term investments at the end of Q3, up from $18B at the end of Jun.  The company expects to spend $2.5B on stock repurchases this year.  KO woes have overshadowed a US market-share gain from the company’s "Share a Coke" program, which replaced its logo on bottles & cans with common names & phrases.  The stock sank 2.81 (6%).  If you would like to learn more about KO, click on this link:

Coca-Cola Shares Tumble as Cost Cuts Fail to Placate Investors

Coca-Cola (KO)

United Technologies, another Dow stock, beat Q3 profit estimates, led by rising sales in the aerospace & Pratt & Whitney jet-engine units.  “We had broad-based organic growth across the business, which is a little bit of a trend reversal,” CFO Greg Hayes said.  “There was good strength in the U.S. And Europe was not a disaster.”  Orders for Pratt’s new geared turbofan engine rose to 6.2K last quarter, Hayes said, & the US Army chose the Sikorsky helicopter division to help build a new vertical-lift aircraft.  Aviation is a focus for UTX after CEO Lousi Chenevert reshaped the company’s business lines around aerospace & building services.  Q3 EPS was $2.04.  Excluding one-time items, EPS of $1.82 exceeded the $1.81 estimate.  Sales rose in all of the businesses, led by the UTC Aerospace Systems unit which increased 6.7%.  Revenue from Pratt jumped 5.3%, & equipment orders boosted the Otis elevator unit 4.3%.  Companywide sales increased 4.6% to $16.2B, matching estimates.  UTX reiterated its 2014 EPS forecast of $6.75-$6.85.  The company raised its share buyback plan to $1.5B from $1.35B.  Cash & cash equivalents at the end of Q3 were $5B, up from $4.6B at end of 2013.  The company “achieved a number of significant program milestones” during the qtr, Chenevert said, including the first flight of Airbus Group’s A320neo using the geared turbofan engine.  The stock went up 15¢.  If you would like to learn more about UTX, click on this link:

United Technologies Profit Beats Estimates on Jet Engines

United Technologies (UTX)

Stocks are doing well again, KO aside.  Home sales data was encouraging & earnings are keeping investors happy.  Apple (AAPL) reported last night & the stock is up 2+ today.  That's a good gain, but short of spectacular.  A recovery in oil prices is helping the markets.  The MLP index is up an astounding 70 from its depths last week.  Stocks have a 4 day winning streak as bulls have taken control of the markets.

Dow Jones Industrials

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