Tuesday, July 21, 2015

Markets decline on disappointing earnings

Dow tumbled 181, decliners slightly ahead of advancers & NAZ fell 15 from its record close yesterday.  The MLP index recovered a measly 3+ to the 383s & the REIT index lost pennies in the 317s.  Junk bond funds were mixed to lower & Treasuries were higher.  Oil rose above 51 & gold is hanging in above 1100.

AMJ (Alerian MLP Index tracking fund)

CLQ15.NYM...Crude Oil Aug 15...50.33 Up ....0.18 (0.4%)

GCN15.CMX...Gold Jul 15........1,104.00 Down ...2.70  (0.2%)

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IBM, a Dow stock, reported its 13th consecutive fall in quarterly revenue, as it continued to shed low-margin businesses and the strong dollar weighed on results.  It's deep in transition, & has been selling businesses such as low-end servers, cash registers, & semiconductors to focus on high-growth areas like security software, cloud services & data analytics.  The company, which sold its x86 server business to Lenovo last year, continued realigning its operations with the sale of its loss-making semiconductor unit this month.  Total revenue fell to $20.81B in Q2, from $24.05B a year earlier, missing the estimate of $20.95B.  IBM, which gets more than half its revenue from overseas, said its quarterly results were also hurt by a strong dollar.  The dollar has risen more than 21% against a basket of currencies in the past 12 months.  EPS dropped to $3.50 from $4.12 a year earlier.  Excluding items, EPS was $3.84, beating the estimate of $3.78.  The stock dropped 8.80.  If you would like to learn more about IBM, click on this link:

Big Blue Reveals Mixed Second Quarter

International Business Machines IBM)

United Technologies, another Dow stock, sales fell 5% in Q2 because of weakness in the Otis elevator unit & the negative effect of the strong dollar.  "With six months of trends behind us, it is now clear the commercial aftermarket at UTC Aerospace Systems will be significantly below our expectations for the year," CEO Greg Hayes said.  "This, along with continuing softness in Otis Europe and a slowing China, led us to reassess our 2015 outlook for UTC Aerospace Systems and Otis."  For the year, the company expects operating profit at aerospace systems to be down $25-$75M & at Otis to be down the same amount at constant currency.  Including the negative impact of foreign exchange, it expects profit at the Otis elevator unit, which makes a large amount of its profits in Europe, to be down $300-$350M.  UTX earlier this week sold its Sikorsky helicopter unit for $9B.  It now expects EPS of $6.45-$6.60 for the year from operations, including Sikorsky.  This is down from its previous expectations of $6.55-$6.85.  Sikorsky helicopter sales fell to $1.69B from $2.38B a year earlier.  Otis sales fell to $3.1B from $3.37B.  Sales in the Pratt & Whitney grew to $3.68B from $3.59B.  Overall, EPS was $1.73, down from $1.84 last year.  Total sales fell to $16.33B from $17.19B.  Excluding restructuring costs & other items, EPS was $1.81.  Foreign currency had a negative impact of 6¢.  Analysts had predicted $1.71 & revenue of $16.5B.  The stock sank 7.63.  If you would like to learn more about UTX, click on this link:

United Technologies Falls on China, Strong Dollar

United Technologies (UTX)

Verizon, another Dow stock, profit edged in above expectations in Q2, while its subscriber growth was again propped up by tablet additions.   Revenue narrowly missed expectations.  The wireless carrier added 1.1M mainstream wireless subscribers, coming in above the 1.06M net additions expected.   But VZ leaned heavily on tablets for growth, continuing a recent trend for the industry, adding a net 852K tablets.  Verizon has faced tougher competition as rivals have offered more generous deals & paid subscribers to switch.  EPS was $1.04, up from $1.01 a share a year earlier.  Revenue grew 2.4% to $32.2B.  Analysts had forecast $1.01 & $32.5B in revenue.  In Q2, VZ added a net 26K FiOS video subscribers & a net 72K FiOS Internet subscribers.  It has been licensing programming aimed primarily at millennials & younger viewers ahead of the launch of its mobile video service later this year.  Verizon's recent $4.4B acquisition of AOL was in part to support the advertising feature of its mobile video service.  The stock dropped 1.30.  If you would like to learn more about VZ, click on this link:

More Subscribers Boost Verizon Revenue

Verizon (VZ)

3 Dow stocks disappointed with weak earnings.  What is there to say?  Times are tough even though the popular stock averages are sitting close to record highs & almost triple the lows from 6 years ago.  Another Dow stock, Apple (AAPL), reports tonight & that will be a big test for tech stocks.  Qualcomm (QCOM), another tech biggies, will be laying off several thousand workers.  The IRS is looking at the tax advantage status of MLPs which is part of the recent for their recent weakness.  Dow is back below 18K & hasn't strayed far from that level all  year.  GDP growth data for Q2 should be out soon.
Dow Jones Industrials


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