Tuesday, January 31, 2017

Mixed markets on negative earnings reports

Dow lost 107 (but off the lows), advancers over decliners 3-2 & NAZ inched up 1.  The MLP index went up 1+ to the 329s & the REIT index added 2+ to the 339s.  Junk bond funds were flattish & Treasuries rose.  Oil went up in the 52s & gold gained 16 to over 1200.

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

Exxon Mobil, a Dow stock & Dividend Aristocrat, biggest profit miss in at least a decade is the starkest sign yet that major oil explorers remain mired in the deepest market slump in a generation.  After resisting the industry trend of discounting the value of oil & natural gas fields that turned into money-losers amid the 2½ year market slump, the company took a $2B hit on the value of some Rocky Mountain gas.  It was the 9th-straight qtr of year-over-year profit declines, the longest such streak since at least 1988.  The market collapse that crushed prices, dried up cash flow & prompted hundreds of thousands of job cuts across the industry aggravated the impact XOM felt from its own stillborn Russian drilling venture, domestic legal disputes over whether the company engaged in climate-science deception & the loss of its gold-plated credit rating.  The $2B writedown slashed Q4 EPS to 41¢ compared 67¢ a year earlier.  The result was more than 40% lower than the estimate, the widest gap in more than 10 years.  In his first month on the job, CEO Darren Woods is looking to deepwater drilling in South America & West Africa, gas exports in the South Pacific & shale riches in the Permian Basin beneath Texas & New Mexico to bolster reserves & improve production & profit outlook.  The company agreed 2 weeks ago to shell out as much as $6.6B to double its Permian drilling rights in its biggest transaction in 6½ years & XOM unveiled plans to boost full-year capital spending by 14% to $22B.  XOM also expects to follow thru with most of the 4.6B-barrel reserves reduction it warned about in Oct because depressed prices made some fields unprofitable to drill.  About 3.6B barrels of reserves in the Canadian oil sands & the equivalent of another 1B barrels in other North American fields could fall off company books if low energy prices persisted.  That would equate to 19% of reserves & would be the largest de-booking since the 1999 merger that created the company in its modern form.  The stock fell 97¢.  If you would like to learn more about XOM, click on this link:

Exxon’s Profit Miss Shows No One Immune From Market Ravages

Exxon Mobil (XOM)

Harley-Davidson said demand for motorcycles in the US continued to decelerate in 2016, so the famed motorcycle maker is embarking on an effort to bring new riders into the sport.  The company said it is focused on promoting motorcycle riding in the US, looking to expand its reach beyond the traditional motorcycle buyer.  CEO Matt Levatich said the plan reflects challenges in the US, as it braces for a “new normal” in the domestic market.  “Now more than ever, we’re not only in the business of building great motorcycles. We’re in the business of building riders,” Levatich said.  Bike brands have faced a shrinking US motorcycle market as their core customers get older & consumers choose to spend money on new vehicles instead.  Based on the latest data provided by HOG, US motorcycle registrations totaled 263K thru the first 3 qtrs of 2016, a 5.6% decline.  The company also has contended with competition from cheaper bikes.  Despite heavy discounts being offered, HOG has avoided getting into a price war.  In 2016, HOG achieved sales gains in Europe & other intl markets.  But retail sales in its home market fell 3.9% & shipments followed suit as HOG sought to reduce dealer inventories.  This year, the company expects worldwide motorcycle shipments to be flat to down modestly.  Dealers trained 65K people thru the company's Rider Academy program last year.  The company is also pitching its bikes to more young adults, women, African-Americans & Hispanics, Levatich said.  Sales of new Harley motorcycles to those demographics accounted for 40% of US retail sales in 2016, up from 34% in 2010.  “We’ll continue our demand-driving focus, but we need to do more—particularly in the U.S.—to drive industry growth and assure the vitality of the sport long-term,” Levatich said.  “Our long-term, 10-year strategy has the headlining goal to build the next generation of Harley-Davidson riders worldwide.”  Despite weaker demand across the industry, HOG picked up market share in the US & Europe.  Q4 EPS was 27¢ compared 22¢ in the same period a year earlier.  Revenue declined 6% to $1.11B.  The stock slumped 89¢.  If you would like to learn more about HOG, click on this link:

Harley-Davidson Seeks New Crop of Riders as U.S. Sales Stall

Harley-Davidson (HOG)

Gold climbed to tally a monthly gain of about 5.2%, their largest such gain since Jun.  A sharp decline in the $ & losses in US equities helped lift investment demand for the precious metal.  April gold rose $15.40 (1.3%) to settle at $1211.

Gold Futures Mark Largest Monthly Gain Since June

Under Armour tumbled the most in 9 years after its sales forecast missed the estimates by a wide margin, signaling that the sports-apparel maker's days of rapid growth may be drawing to a close.  Sales this year will increase as much as 12% to nearly $5.4B, the company said.  That trailed the $6.05B estimate & would be UA's smallest annual gain since it went public in 2005.  UA, which has doubled its sales about every 3 years, is now having a hard time maintaining that rapid growth.  While the company helped make moisture-wicking clothing a staple of gym-goers’ wardrobes, the increased popularity of athletic wear as everyday apparel has brought a raft of new competitors.  Investors may also have been rattled after the CFO Chip Molloy announced he was leaving for personal reasons.  He joined the company only a year ago.  Revenue rose just 12% to $1.31B last qtr.  That marked the smallest year-over-year gain since 2009 & trailed the $1.41B estimate.  EPS was 23¢, missing the 25¢ estimate.  The company cited multiple reasons for its weaker growth & said the trends will continue into this qtr, with sales expected to gain at a mid-single-digit percentage.  UA said a decline in people shopping across the retail industry caused an increase in discounting that hurt profitability.  CEO Kevin Plank also said that the bankruptcies of several large customers disrupted the North American market.  But Plank, who is also the founder, said UA is misfiring on its products and that it’s too focused on workout gear while the athleisure trend has people wearing athletic apparel in everyday life.  The stock plunged 5.87.  If you would like to learn more about UA, click on this link:

Under Armour Sinks After Dismal Forecast Rattles Investors

Under Armour (UA)

The stock market held up fairly well in what could have been a very ugly day.  News from DC was heavily negative.  And earnings were not pretty.  Dark clouds keep gathering in a stock market that is overbought long term.  As pointed out in the past, it needs a correction to get rid of nervous nellies.  The chart below shows the Dow is up a good 3K in the last year with only minor bumpers along the way.

Dow Jones Industrials


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