Wednesday, April 22, 2015

Higher markets on earnings and economic data

Dow rose 88, advancers over decliners 4-3 & NAZ gained 21.  The MLP index slipped a fraction in the 442s & the REIT index was fractionally higher to go over 330.  Junk bond funds continued mixed & Treasuries dropped today.  Oil & gold continued weak.

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McDonald’s, a Dow stock & Dividends Aristocrat, CEO Steve Easterbrook promised to give details of his comeback plan for the struggling chain next month, following another qtr of declining sales & profit.  “We are developing a turnaround plan to improve our performance and deliver enduring profitable growth,”  Easterbrook said.  “We look forward to sharing the initial details of this plan on May 4.”  Part of the strategy will include shutting about 350 underperforming restaurants this year, mostly in the US, Japan & China.  That comes in addition to 350 locations worldwide that MCD announced plans to close in Jan.  The company also will be selling a new sirloin burger in the US, positioned as a premium item.  The prospect of a comeback plan placated investors after profit missed estimates & the company posted a 6th straight qtr of decreasing US sales.  The chain has been struggling to pull itself out of a US sales slump, made worse by fierce competition & a shift toward healthier eating habits.  Easterbrook, who took over in Mar, also is taking steps to improve the image.  That includes boosting pay at company-owned restaurants & curbing the use of antibiotics in its chicken.  But, excluding some items, EPS was $1.01, below the estimate of $1.06.  US same-store sales fell 2.6%, worse than the 2.1% decline projected.  They had dropped 1.7% in Q4.  EPS tumbled to 84¢, down from $1.21 a year earlier.  Revenue fell 11% to $5.96B.  Globally same-store sales dropped 2.3%, also missing the estimate for a 1.8% decline.  MCD expects to report another drop for Apr as well.  In an effort to bounce back, it is trying to simplify its menu, sell healthier meals & let diners customize burgers.  It’s also banking on the strength of its morning menu, which accounts for about 25% of domestic sales.  The company has begun experimenting with selling breakfast all day in 94 stores in the San Diego area.  The test, which includes Egg McMuffins, hotcakes & sausage burritos, may help the chain lure diners from competitors that have recently started selling or expanded morning food offerings.  The stock rose 2.97.  If you would like to learn more about MCD, click on this link:

McDonald’s Vows to Unveil Turnaround Plan as Slump Persists

McDonald's (MCD)

Coca-Cola, another Dow stock & Dividend Aristocrat, posted its first quarterly sales gain in 2 years after higher drink prices helped make up for sluggish demand.  The sales increase helped propel EPS to 48¢, excluding some items, ahead of the 42¢ estimate.  CEO Muhtar Kent, facing stagnant sales overseas & changing tastes at home, has ramped up marketing & cut costs to ride out the turbulence.  He’s also raised prices on the company’s beverages, helping boost revenue 1.3% to $10.7B, topping estimates & marked the first gain since Q4-2012.  “Strong pricing, particularly in North America, has continued into this year,” CFO Kathy Waller said.  “Developed markets are very much going to be focused on pricing and revenue.”  Higher retail shelf prices & an increased mix of more profitable drinks lifted pricing 3% globally.  While sales volume in the key North America market was little changed, the company boosted pricing there by 2%.  EPS was 35¢.  The company repeated its forecast that EPS this year will grow by a mid-single-digit percentage, excluding the effects of foreign-currency exchange-rate fluctuations.  Currencies hurt income before taxes 6 percentage points & will reduce profit by that measure by 7 percentage points for the year.  Global sales volumes rose 1%, led by a 4% gain in Eurasia & Africa.  European volume rose 1% & Latin America was unchanged.  “We’re operating in a very challenging environment,” Kent said.  “Cautious recovery in the U.S. is offset by our relatively sluggish expansion in Europe and Japan, as well as weaknesses in emerging markets, notably Brazil and Russia as well as China.”  Among its brands, global volume grew 1% for Coca-Cola, 4% for Sprite, 5% for Coke Zero & 3% for Fanta. The worst performance was a 6% drop for Diet Coke, which has been stung by a growing aversion to artificial sweeteners in the US.  Kent has since sped up the bottling divestitures, announced more cost cuts & trimmed the compensation plan.  The stock went up 53¢.  If you would like to learn more about KO, click on this link:

Coca-Cola Profit Tops Estimates

Coca-Cola (KO)

Boeing, another Dow stock, delivered more commercial airliners in Q1, offsetting sluggish results in the defense side of its business & pushing EPS up 38%.  EPS topped expectations, but revenue was below forecasts, & production costs of the Boeing 787 jet continued to pile up.  The company is benefiting as airlines use some of their record profits to buy new & more fuel-efficient jets.  Executives predict that increased travel, new routes & airline growth will bolster plane sales for years to come as.they brush aside concern that falling oil prices could undercut demand or cause airlines to delay purchases.  "These remain very good times for our industry," CEO Jim McNerney said, & added demand for planes is tightly related to airline profits.  Lower oil prices since last summer have not changed the airlines' plans to upgrade their fleets.  BA delivered 184 airliners, up from 161 last year, with 2/3 of them for the venerable 737 jet, a workhorse on short & mid-range routes around the world.  Meanwhile, orders minus cancelations rose by a net of 110, & Boeing now has 5.7K orders on its books.  About half are for an upcoming version of the 737.  The backlog is valued at $495B.  EPS was $1.87.  Excluding $113M in pension expenses, adjusted EPS was $1.97, beating the $1.81 forecast.  A year earlier, adjusted profit was $1.76 per share.  Revenue rose 8% to $22.15B, short of the $22.63B expected. 
The company reaffirmed its forecast for full-year EPS of $8.20-$8.40 & revenue of $94.5-$96.5B.  As in recent qtrs, it was a tale of 2 very different business segments:
— Earnings from commercial airplanes rose 8% on a 21% jump in revenue (2/3 of profit & sales).
— The defense & space business declined, with earnings down 4% & revenue off 12%, as tight defense budgets cut into sales.
The stock fell 2.14.  If you would like to learn more about BA, click on this link:

Boeing tops 1Q profit forecasts, airplane deliveries riseAP

Boeing (BA)

Of the S&P 500 companies that have reported so far in earnings season, 72% posted earnings above expectations.  Of course many of those estimates were lowered going into earnings season.  US home resales rose as more homes came on the market, a sign of strength in housing ahead of the spring selling season.  This kind of news brought out buyers.  In late Dec, when it first reached 18K, the markets were waiting for 2014 annual earnings.  Since then, no advance.  Dow has been treading water for 4 months.

Dow Jones Industrials

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