Tuesday, April 28, 2015

Markets rise cautiously on earnings

Dow advanced 72, advancers ahead of decliners 3-2 & NAZ dropped 4.  The MLP index fell 1+ to the 445s & the REIT index lost a fraction to 331.  Junk bond funds inched higher & Treasuries pulled back.  Oil slid below 47 (but near its highs for 2015) & gold is back over 1200.

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CLM15.NYM....Crude Oil Jun 15....57.15 Up ...0.16 (0.3%)

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US single-family home prices rose in Feb from a year earlier, led by strong increases in the western half of the US.  The S&P/Case Shiller composite index of 20 metropolitan areas gained 5% in Feb on a year-over-year basis, besting Jan's downwardly revised gain of 4.5%.  This was also above a poll that forecast a rise of 4.7%.  Denver & San Francisco reported the highest year-over-year gains, with prices increasing 10% & 9.8%, respectively, over the last 12 months.  "Home prices continue to rise and outpace both inflation and wage gains," said David Blitzer, chairman of the Index Committee for S&P Dow Jones Indices.  "While nationally, prices are recovering, new construction of single family homes remains very weak despite low vacancy rates among both renters and owner-occupied homes."

Home Prices Rise in February  

United Parcel Service reported a higher quarterly net profit due to price increases & productivity improvements, & reaffirmed its earnings outlook for 2015.  Profitability improved across all of its business segments, though revenue growth in its supply chain & freight business was slowed by a strong dollar & lower fuel surcharges.  The delivery company posted EPS or $1.12, up from 98¢ a year earlier.  Analysts had expected EPS of $1.09.  UPS posted revenue of $14B, below the $14.3B estimate.  The company continues to expect EPS of $5.05-$5.30 for 2015 while analysts predicted EPS of $5.15.  The profit beat came after a difficult Q4 in which the company overspent in preparation for a holiday peak season package surge that failed to materialize.  UPS said revenue at its key domestic US package service rose to $8.8B, up 3.5% from $8.5B in the year-ago period.  Revenue per package rose 1.3%, aided by a change in "dimensional weight pricing."  The new pricing system punishes e-commerce vendors for using excessive packaging for small items & taking up too much space on package delivery vehicles.  The stock rose 3.34.  If you would like to learn more about UPS, click on this link:

UPS Books First Quarter Bottom Line Beat

United Parcel Service (UPS)

Ford Q1 profit fell 7%, missing forecasts, as intl markets continued to dampen earnings.  Ford said EPS dropped a penny to 23¢.  Pretax operating profit came in at $1.4B, or 23¢ & analysts were looking for higher earnings of 26¢.  Sales were down 6% at $33.9B, which matched the forecast.  Like other multinationals, Ford is seeing a negative impact from a stronger dollar that hurts profits overseas.  The strong dollar & weak economic conditions in Europe & South America continued to put pressure on its operations in those regions.  Its tax rate was higher than anticipated.  Europe remained an uphill battle, due in part to ongoing struggles in Russia.  Ford reported a European loss of $185M, versus a $194M loss a year earlier.  Europe has been a problematic area for the auto industry, although sales in Western Europe are beginning to gain steam.  The loss in South America was $189M, better than a year-ago loss of $510M.  But the automaker lowered its expectations moving forward.  Results in South America should improve, rather than “substantially improve,” Ford said.  CEO Mark Fields suggested progress in South America will depend on stabilization in the market.  Ford posted losses of $1.2B in the region last year.  “We do expect (South America) to be a positive contributor to our profits in the future,” Fields said.  In North America, pretax earnings fell 11% to $1.34B & operating margins narrowed to 6.7% from 7.3%.  Pretax earnings in Asia Pacific declined to $103M from $291M.  Ford recently launched its Lincoln luxury brand in China & plans to buy a factory there for about $1B.  Despite early struggles, Ford stuck with its guidance for 2015 pretax earnings of $8.5-$9.5B.  The company also raised its outlook for North American margins to 8.5%-9.5%, up from prior guidance of 8%-9%.  The stock went up 16¢.  If you would like to learn more about Ford, click on this link:

Ford Profit Dragged Down by Overseas Markets 

Ford Motor (F)

stock chart

Stocks continued to meander although there was some enthusiasm for buying from earnings reports.  The early word is that earnings in Q1 might just eke out a gain although sales should be down on the order of 3%.  But tomorrow brings results from the FOMC meeting & maybe guidance about the rate increase.  GDP data will also be released.  That will be a big day for the markets when they show how the news is handled..

Dow Jones Industrials

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