Friday, October 24, 2014

Markets advance for the best week since 2013

Dow shot up 127 closing near the highs, advancers over decliners 3-2 & NAZ added 30.  The MLP index rose 1+ to the 512s & the REIT index rose fractionally in the 512s.  Junk bond funds were mixed to higher & Treasuries went up.  Oil fell back  to 81 & gold inched higher.

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CLZ14.NYM....Crude Oil Dec 14....80.94 Down ...1.15  (1.4%)

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Amazon's cloud division returned to growth after a hiccup earlier this year, as price cuts attracted new customers & spurred existing clients to spend more.  Q3 sales were $1.34B for a division it calls "North America, Other", up from $960M a year ago & $1.17 billion in Q2.  That’s the category that contains Amazon Web Services, or AWS, a strategically important cloud business that rents computing hardware & software products via the internet to customers worldwide.  The performance reverses a stumble in the previous period, when AMZN reported its first declining sales in the division outside of usual seasonal fluctuations.  The company is fighting increased competition from rivals which have slashed the prices of their cloud offerings this year.  The company also reduced AWS prices this year in response to rivals’ moves, which hurt revenue in the prior qtr.  Since then, AMZN has offered more services & upgraded more products.  CFO Thomas Szkutak said in that the company is pleased with the performance.  “We saw very good growth,” he added.  In 2013, AMZN reported sales of $3.72B in the category.  The company made $651.7M from advertising sales in North America last year, or 17.5% of the total revenue in that division.  Still, sales in the division are expanding at a slower rate on a year-over-year basis after peaking in 2011.  Revenue this time was up 39% from a year ago, but down from 57% growth last year.  AMZN also spent $1.38B on purchases of property & equipment, a portion of which goes to building AWS data centers, up from $1.04B a year ago.  With yesterday’s results, AMZN sales in the “North America, Other” category totaled $3.71B for the first 3 qtrs of the year, compared with $3.72B for all of 2013.  The stock plunged $26 (8%).  If you would like to learn more about AMZN, click on this link:

Amazon Cloud Division Returns to Growth Even as Company Misses Estimates (AMZN)

Procter & Gamble, a Dow stock & Dividend Aristocrat, plans to exit its Duracell battery business as part of CEO A.G. Lafley’s efforts to slim down the company.  PG will probably split the battery business into a stand-alone company & give shareholders the option of exchanging PG shares for stock in the new entity.  The company also posted fiscal Q1 profit that met estimates.  Lafley has been streamlining the company by cutting costs, selling its pet-food business & starting the process of jettisoning as many as 100 slow-selling brands.  EPS was 69¢, down from a year earlier.  Excluding some items, EPS was $1.07, matching the estimate.  PG maintained its forecast that organic sales, which exclude the effects of acquisitions, divestitures & foreign-currency exchange-rate fluctuations, would rise at a low- to mid-single-digit percentage rate this year.  However, the company said net sales, which don’t exclude those factors, would be little changed or rise by a low-single-digit percent, hurt by “significant negative” effects of currency fluctuations in fiscal Q2.  PG also reiterated its projection that profit excluding restructuring charges, impairments & other items would increase by a mid-single-digit percent, while saying net income would fall as much as 5% from a year earlier.  “The quarterly profile of earnings will be heavily influenced by the variation of foreign-exchange impacts from period-to-period,” the company said.  Q1 sales fell 0.2% to $20.8B, matching the projection.  Organic sales rose 6% in the company’s health-care business & 4% in the baby, feminine & family-care unit.  Sales by that measure were little changed in the grooming division, the fabric & home care unit as well as the beauty, hair & personal-care business.  Lafley has been working to cut $10B in costs thru 2016 & plow some of the savings back into developing new products.  CFO Jon Moeller said that the company expects to “significantly” exceed the goal.  The stock went up $1.93.  If you would like to learn more about PG, click on this link:

P&G to Jettison Duracell Business as CEO Streamlines Company

Procter & Gamble (PG)

Ford profit fell as it absorbed higher recall costs & lost production of its highly profitable F-150 pickup while converting a factory to build a new aluminum-bodied version.  Ford, which said last month it won’t achieve its 2014 profit goals, reported EPS of 21¢, down from 31¢ a year earlier.  Excluding one-time costs, EPS was 24¢, beating the 19¢ estimate.  A year earlier, Ford earned  45¢.  The automaker had to put some F-150 production on hiatus to prepare for the complicated switch to manufacturing with aluminum instead of steel.  While sales rose in China, pretax results were weaker in every automotive unit, except the Middle East & Africa, & recall costs reduced income from North America.  “The third quarter was challenging, but we remain absolutely focused on implementing our plan,” CEO Mark Fields said.  “That includes continued strength from North America, although down from recent years as we launch three times the number of products as last year.”  Costs to bring new models to market caused Ford to consume $700M in cash in Q3, its first negative cash-flow period since Q1-2010, CFO Bob Shanks said.  It also incurred $630M in recall costs & a $166M negative effect from a strong dollar.  Ford announced a month ago that pretax profits this year will fall to $6B, short of its goal of $7-$8B.  Fields also lowered expectations on profits for next year, as high costs to roll out the aluminum-bodied F-150 squeeze margins.  Ford said that efforts to introduce the F-150 this year are “on track.”  Ford had pretax operating income of $1.41B in North America in Q3, down from $2.3B a year earlier.  Its US market share declined to 15.1% from 16% a year earlier.  The stock fell 62¢.  If you would like to learn more about Ford, click on this link:

Ford Profit Slides Less Than Analysts Estimated on Chinese Sales Growth

Ford (F)

Dow had a good week, rising 420.  Earnings were generally favorable although the strong dollar has been hurting the big multi-nationals.  Dow is down  250 in Oct & could recoup that loss next week of the bulls are serious are taking control of the markets again.

Dow Jones Industrials

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