Wednesday, July 24, 2019

Markets waver but techs are strong while investors digest earnings

Dow dropped 79, advancers over decliners 5-2 & NAZ rose 70.  The MLP index slid lower to to the 256s & the REIT index fluctuated in the 386s.  Junk bond funds crawled higher & Treasuries were purchased again.  Oil gave back 1 to the 55s & gold added 3 to 1424.

AMJ (Alerian MLP Index tracking fund)

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3 Stocks You Should Own Right Now - Click Here!

Boeing's (BA), A Dow stock, top executive is anticipating the firm will receive federal approval for a software update to fix the issues with the beleagured 737 Maz jet in Sep & deliveries to ramp back up in 2020, but stressed the timeline is in flux as regulators continue to scrutinize the manufacturer.  The Mar grounding of the Max fleet after 2 fatal crashes has reverberated thru the aviation industry.  Carriers previously extended the potential for flight cancellations until early Nov & are purchasing older aircraft to accommodate the delays in deliveries of the updated 737 that will extend well into next year.  The planemaker previously cut production to 42 Max jets each month.  That is expected to rise back up to 57 in 2020, according to CEO Dennis Muilenburg, but a delay in approval from the Federal Aviation Administration for the software patch could result in further production delays -- or even a full halt.  "Both within Boeing and our supply chain, we are using this time to improve the production system's health and stability," he told investors today.  “We might need to consider possible further (production) rate reductions or other options including a temporary shutdown of Max production.”  A temporary shutdown could be more effective from a production standpoint, argued Muilenburg, because it gives some suppliers time to "catch up to the master schedule."  And while increasing production from 42 to 57 jets a month would be a significant undertaking, Muilenburg argued it is doable given that the manufacturer was previously running at higher rates.  "That experience, that learning, that understanding gives us confidence in how we can rate back up and we factored that into our analysis as well," he added.  BA reported a Q2 loss per share of $5.21, much worse than the $1.87 that was expected & the largest loss in the company's history.  Meanwhile, revenue was $15.8B in the 3 months thru Jun, also less than predicted.  The company previously said it expected to take a $5B hit as a result of the Max grounding.  The stock tumbled 11.64.(3%).
If you would like to learn more about BA, click on this link:

Boeing CEO warns 737 Max production shutdown possible

Shares of Dow stock Caterpillar (CAT) plunged after the company posted disappointing Q2 results as higher material costs including tariffs & lower demand in China made a dent in its profit.  EPS was $2.83 versus the estimate for $3.12.  Revenue also disappointed with $14.432B reported compared to the $14.435B expected.  The heavy machinery manufacturer also lowered full-year earnings guidance to be at the lower & of previous range of $12.06-13.06, short of the estimate of $12.24.  The worse-than-expected results are partially due to the increase in manufacturing costs, which came from “higher material costs, including tariffs, variable labor & burden & warranty expense,” the company said.  Sales in Asia-Pacific declined because of the lower demand in China.  CEO Jim Umpleby believes demand from China will stabilize as the company takes action to compete against local rivals.  “Based on everything that we see we believe overall the market demand will be stable and we have mentioned the fact that we have some competitive pricing pressures from local competitors,” Umpleby said.  “We are suddenly taking steps to ensure our competitiveness long-term in China. We’re introducing a number of GC products that will help us compete as well but again, we feel good about our forecast there in China.”  The stock sank 6.19 (4%).
If you would like to learn more about CAT, click on this link:

Caterpillar drops after company cuts guidance, citing tariffs and lower demand in China

VF Corp's (VFC), a Dividend Aristocrat, quarterly revenue & earnings beat expectations & the company raised its full-year profit forecast, banking on growing demand for its brands such as Vans & North Face.  The company now expects full-year adjusted EPS from continuing operations to be $3.32-3.37, including an $20M  additional investment, compared with its previous forecast of $3.30-3.35.  The apparel maker spun-off its less-profitable jeans business, including Lee & Wrangler brands, in May into Kontoor Brands (KTB) to focus on the high-margin brands such as Vans & North Face.  Revenue from Vans, popular among skateboarders, jumped 20% in Q1, while that from North Face rose 9%.  Net revenue rose 6.3% to $2.27B, beating the estimate of $2.24B.  EPS fell to 12¢ from 40¢ a year earlier, primarily due to the spin-off of its jeans business.  Excluding items, EPS was 30¢, beating the estimate by a penny.  The stock went up 1.04.
If you would like to learn more about VFC, click on this link:

VF Corp raises full-year profit forecast after beating quarterly estimates

United Parcel Service (UPS) said demand for its Next Day Air & Ground services drove better-than-expected quarterly profit as large retailers rushed packages to online shoppers.  UPS, the world's biggest package delivery company, has been spending Bs of $s to make its network faster & more efficient.  Those investments — which include more automated package sorting facilities & new cargo planes — are driving down the cost of delivering small numbers of e-commerce packages to far-flung home addresses.  “We’ve got momentum here and we believe we can continue,” said CEO David Abney, who added that the company is at an “important turning point” in its nearly 112-year history.  Next Day Air volume surged an unexpected 30% in UPS' key domestic business during Q2, as Amazon (AMZN) & other large retailers adopted one-day shipping.  EPS rose to $1.94, compared with $1.71 a year earlier.  The forecast called for $1.92.  Revenue rose 3.4% to $18.05B.  The stock jumped up 9.12 (9%).
If you would like to learn more about UPS, click on this link:

UPS profit rises as e-commerce shipping speeds up

This was a big day for earnings & they came in mixed.  The biggest profile ones were from BA & CAT & they were gloomy.  One worry is that the early reports tend to be the better ones.  Earnings season may prove to be less than spectacular.  In the meantime, investors are waiting with baited breath, praying for a rate cut by the Fed next week.

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