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Thursday, October 22, 2015
Markets soar on earnings and hopes for more stimulus
Dow rose an amazing 320 (closing near the highs), advancers over decliners almost 3-1 (a little lower than the AM reading) & NAZ advanced 79. The MLP index sank 7+ to the 335s & the REIT index slid back 1+ to the 325s. Junk bond funds were higher along with stocks & Treasuries were also higher. Oil climbed in the 45s & gold was off a tad.
McDonald’s, a Dow stock & Dividend Aristocrat, soared after Q3 profit topped estimates, showing CEO Steve Easterbrook’s plan to turn around the chain is gaining traction. EPS
rose to 1.40, above the estimate of 1.27. And while revenue fell 5.3% to $6.62B,
that beat the $6.41B projection. Easterbrook has been working to take MCD back to basics since
ascending to the CEO position in Mar. He’s tweaked the menu, paring
back weaker-selling items while adding a few new offerings that have been hits with customers. The chain also has renewed a focus on providing
value for customers with a popular $2.50 meal. The changes helped
propel global same-store sales to their best performance in more than 3 years, with gains coming from all of its geographic divisions. Sales at
locations open at least 13 months rose 4% globally, topping the estimate for a 1.9% increase. US same-store
sales rose 0.9%, marking the best performance in
more than 2 years & beating the projection for a 0.2% decline.
Stock gains most in seven years
But MCD
still has a ways to go. The company may need to further simplify its
menu by removing more items, as well as continue to improve order speed & accuracy. And while it now has a national smartphone app, the chain
is still behind rivals for mobile ordering & pay. The
company also is facing a shifting fast-food landscape, as the competition is luring away millennials in search of better
ingredients. Others are winning over the burger crowd. To keep its
recent momentum going, MCD earlier this month started selling
breakfast items all day, a move customers had long urged the chain to
make. The chain has also tried to upgrade its food by toasting buns
longer & searing burgers differently to make them juicier. "Our
operational growth-led turnaround is focused on appealing to customers
in the areas that matter most to them -- great-tasting, high-quality
food, convenience and value," Easterbrook said. The
company expects positive same-store sales in Q4, he
said. Mike Andres, head of MCD US unit, said
earlier this month that the rollout of all-day breakfast went well. He added that the chain is now focused on creating a national
value-meal plan, a move to counter rivals’ discounts. The stock surged 8.33. If you would like to learn more about MCD, click on this link: club.ino.com/trend/analysis/stock/MCD?a_aid=CD3289&a_bid=6ae5b6f7
3M, another Dow stock & Dividend Aristocrat, will cut 1500 jobs in
a global restructuring effort as the company fights sluggish growth overseas & a strong US dollar that’s
crimping sales. The workforce pullback, about 1.7% of the
total, was announced along with a
reduction in the top end of the company’s 2015 profit forecast. MMM also
lowered its full-year revenue projection. The currency squeeze
highlights its dependence on intl business, which accounts for
about 2/3 of revenue, & echoed the experience of many US
manufacturers. “The
current economic growth environment remains challenging,” Chief
Executive Officer Inge Thulin said. The
restructuring plan is designed to make MMM “a stronger, more agile, more
focused company.” Since 2012, Thulin has emphasized organic growth in overseas markets &
new-product development. This year, he has reshaped MMM with deals that
include its largest-ever acquisition. Its restructuring
plan, which will result in a Q4 pretax charge of about $100M, will focus on reducing US overhead & retrenchment in
slow-growth intl markets. Excluding
restructuring costs, 2015 EPS will be $7.73-7.78. The previous high end of the range was 7.93. Q3 EPS of 2.05 topped the 2.00
projections. Organic
local-currency sales growth will be 1.5-2%, compared
with a previous projection of 2.5-4%. Quarterly sales
fell 5.2% to $7.7B, trailing the average estimate of $7.84B. Foreign currency translation trimmed sales by 7.4%. The stock gained 6.18. If you would like to learn more about MMM, click on this link: club.ino.com/trend/analysis/stock/MMM?a_aid=CD3289&a_bid=6ae5b6f7
Caterpillar, another Dow stock, reported a lower quarterly net profit as global machinery
sales fell during Q3 as worldwide construction activity,
mining & drilling for oil & gas remained severely weak. The company reported EPS of
62¢, down from 1.63
a year earlier. EPS excluding restructuring costs were 75¢,
compared with $1.72 in the same qtr a year earlier. Analysts
expected EPS of 78¢. The stock rose 1.98. If you would like to learn more about CAT, click on this link: club.ino.com/trend/analysis/stock/CAT?a_aid=CD3289&a_bid=6ae5b6f7
There was less backing up this rally that what many would like to see. Earnings have been good, because they were beating lowered estimates. The reports above show that all 3 mighty, global companies have major challenges going forward. Then there are all those prayers for extending low interest rates & throwing out more money, something the bulls like to see. They have clearly taken command of the stock markets as Dow is up 1.2K in Oct., not bad considering the abundance of fears at the start of the month.
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.4222742080100911)
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