Tuesday, April 19, 2016

Markets rise cautiously on earnings

Dow went up 49, advancers over decliners more than 2-1 & NAZ fell 19.  The MLP index soared 18+ to the 289s (a 2016 high but still well below the highs in 2014) & the REIT index was fractionally higher in the 341s (near its highs last year).  Junk bond funds gained ground & Treasuries traded lower.  Oil is back to 41 & gold remained above 1250.

AMJ (Alerian MLP Index tracking fund)

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CLK16.NYM....Light Sweet Crude Oil Futures,M
Up ...1.23 ...(3.1%)

Live 24 hours gold chart [Kitco Inc.]

Johnson & Johnson, a Dow stock & Dividend Aristocrat, earnings beat estimates on strong sales of pharmaceuticals (its biggest division).  Drugs including Stelara, a psoriasis drug, & Xarelto, a blood thinner, were among the company’s major drug products that surpassed expectations.  Pharmaceutical sales have surpassed medical devices & consumer health products to become the biggest division.

EPS, excluding one-time items, were $1.68, beating the $1.65 estimate.  The company raised its 2016 sales & earnings forecast, saying that foreign exchange rates would increase sales.
  • Q1 sales grew less than 1% to $17.48B, compared with expectations for $17.49B.
  • EPS was $1.54, up from $1.53 a share, a year ago.  For 2016, sales will be $71.2-$71.9.  In January, the company projected sales of $70.8-$71.5B.
  • EPS will be $6.53-$6.68, compared with the past projection of $6.43-$6.58.
The stock rose 1.75.  If you would like to learn more about JNJ, click on this link:

J&J's Drug Sales Help Health Giant Beat Earnings Estimates

Johnson & Johnson (JNJ)

IBM, another Dow stock, will continue to aggressively invest in growth areas, despite suffering 16 straight quarters of declining revenue.  The largest technology services company reported its worst quarterly revenue numbers in 14 years with a 4.6% decline in sales to $18.68B in Q1, but it beat the estimate of $18.29B.  CEO & Senior VP Martin Schroeter said, “We invest quite heavily in what we call our strategic imperatives.”  “And our strategic imperatives really represent the areas our clients are moving to, the areas our clients are asking us to move them to.”  The latest strategy includes new cloud-based design, analytics capabilities & new ways of engagement with its own clients to maximize its growth potential.  Schroeter said the company has been very aggressive in acquisitions, spending $9B over the last 12 months.  “Now we are focus on building out a cloud platform that is global,” Schroeter said.  “We have a video offering in the IBM cloud that will allow not only the leaders, if you will, and those who are bringing videos like media entertainment companies through a cloud offering, but now we are bringing new clients onto these types of platform.”  The stock tumbled 8.53.  If you would like to learn more about IBM, click on this link:

IBM Focused On Cloud Despite Revenue Decline

International Business Machines (IBM)

UnitedHealth, another Dow stock, raised its expectations for 2016 profit, in part because of a more favorable tax rate that also helped it beat expectations for Q1.  Lower sales & administrative costs & a lower amortization of intangible assets also helped EPS rise 9¢ more than expected.  EPS rose to $1.67, up from $1.46  a year earlier.  On an adjusted basis, EPS was $1.81, compared with expectations for $1.72.  The company now expects 2016 adjusted EPS of $7.75-$7.95, up 15¢ from its previous estimate.  The increase is due to changes in the expected income tax rate, the company said.  Revenue rose to $44.53B from $35.76B, beating the estimate of $43.96B.  The stock went up $2.69.  If you would like to learn more about UNH, click on this link:

UnitedHealth Raises 2016 Earnings Outlook

UnitedHealth Group (UNH)

Earnings are not completely convincing.  So stocks are having a more difficult time finding buyers.  These reports are the first ones which tend to be better than ones that come later.  Dow is not far away from setting a new record.  But it is tired after its spectacular advance.  A correction could give it a ground floor for another advance.  That correction is long overdue.

Dow Jones Industrials


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