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Dow 30 Stock Roundup: AmEx, Goldman, IBM, JNJ, P&G, UNH Earnings Impress

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The Dow experienced a particularly volatile week as earnings results took center stage. The index gained on the week’s first two trading days thanks primarily to robust earnings and strong economic data as geopolitical tensions eased. However, the Dow declined over the next two sessions as earnings came in mixed and treasury yields surged to their highest level for the year.

Last Week’s Performance

The Dow declined 0.5% last Friday as earnings results of major banks failed to live up to investors’ high expectations. Also, panic selling took place as news about U.S. airstrike on Syria surfaced.

Moreover, investors were concerned about the possibility that Russia's lower house of parliament is considering a draft legislation allowing Kremlin to ban a list of U.S. products. This was in retaliation of recent U.S. sanctions on a group of Russian tycoons and officials.

The index gained 1.8% over last week. Gains came on the back of strong expectations for Q1 earnings in an otherwise volatile market.

Markets opened higher on Monday and continued its bull run on the next day after trade related tensions eased. The White House said trade disputes with China could be resolved by holding talks.

Markets closed lower on Wednesday after two days of gains, following President Donald Trump's tweet, warning Russia of a possible military strike on Syria. However, the Wall Street rebounded on Thursday as geopolitical tensions eased.

The Dow This Week

The index gained 0.9% on Monday driven by robust first-quarter 2018 earnings results and easing of geopolitical tensions at least for the time being. Notably, the blue-chip index closed above its 50-day moving average. Dow breached this psychological barrier for the first time since Mar 13 and closed above this level for the first time since Mar 9, indicating positive investor sentiment.

The index increased 0.9% on Tuesday supported by robust first-quarter earnings results and strong economic data. Notably, the blue-chip index closed at its highest level since Mar 16 and returned to positive zone for the year for the first time since Mar 20. Housing starts rose 1.9% while industrial production increased 0.5% in March.

The index lost 0.2% on Wednesday driven by a plunge in the share price of International Business Machines Corp (IBM - Free Report) . IBM reported impressive results, primarily due to a one-time tax gain. The investors were looking for greater profit as management is diversifying toward a cloud/artificial-intelligence company.

Moreover, the company also stated that its mainframe sales momentum may not continue in the rest of the year. Consequently, share price plunged 7.5%, marking the largest decline in five years. Meanwhile, energy stocks gained after a 2.9% surge in oil prices and transportation sector starts off a strong earnings session.

The index declined 0.3% on Thursday with real estate, consumer staples and technology stocks dragging down broader markets. Corporate earnings were a mixed bag even as treasury yields surged to their highest level for the year.

The day’s losses dragged the Dow into the red for the year once again. However, stocks managed to curb their losses toward the end of trading following reports that President Trump would not be the subject of a probe being conducted by Special Counsel Robert Mueller.

Components Moving the Index

American Express Company (AXP - Free Report) reported first-quarter 2018 adjusted earnings per share (EPS) of $1.86, beating the Zacks Consensus Estimate by 8.77%. Moreover, the bottom line witnessed a marked 38% year-over-year improvement. American Express has a Zacks Rank #3 (Hold).

Revenues came in at $9.7 billion, 0.47% ahead of the Zacks Consensus Estimate of $8.72 billion. The top line increased 12% year over year on higher Card Member spending, loans and fee income plus growth across the business lines.

Based on first-quarter results and solid trends for the remaining year, the company foresees full-year earnings per share at the high end of $6.90-$7.30 range. Revenues are expected to increase at least 8%. (Read: AmEx Q1 Earnings Top on Higher Card Member Spending)

The Goldman Sachs Group, Inc. (GS - Free Report) reported first-quarter earnings per share of $6.95, comfortably beating the Zacks Consensus Estimate of $5.67. Further, the bottom line witnessed 35% year-over-year improvement.

Goldman’s net revenues were up 25% year over year to $10 billion in the quarter under review. Moreover, the revenue figure handily outpaced the Zacks Consensus Estimate of $8.9 billion. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IBM delivered first-quarter 2018 non-GAAP earnings of $2.45 per share, which beat the Zacks Consensus Estimate by a nickel. Earnings per share (EPS) increased 4.3% from the year-ago quarter but plunged 52.7% sequentially.

Revenues of $19.07 billion outpaced the Zacks Consensus Estimate of $18.72 billion and climbed 5.1% on a year-over-year basis. However, revenues declined 15.4% sequentially. At constant currency (cc), revenues remained flat at $18.20 billion.

Zacks Rank #3 IBM reiterated EPS forecast for 2018. Non-GAAP EPS is expected to be at least $13.80. Almost 40% of this figure is expected in the first half of 2018, which means EPS of at least $3.07 in the second quarter of 2018. The Zacks Consensus Estimate is currently pegged at $3.01. (Read: IBM Beats on Q1 Earnings & Revenues, Reiterates '18 Outlook)

Johnson & Johnson’s (JNJ - Free Report) first-quarter 2018 earnings came in at $2.06 per share, beating the Zacks Consensus Estimate of $2.01 and increasing 12.6% from the year-ago period.

Adjusted earnings excluded amortization expense and some special items. Including these items, J&J reported first-quarter earnings of $1.60 per share compared with earnings of $1.61 in the year-ago period.

Sales came in at $20 billion, beating the Zacks Consensus Estimate of $19.48 billion. Sales also increased 12.6% from the year-ago quarter, reflecting an operational increase of 8.4% and a positive currency impact of 4.2%.

Zacks Rank #3 J&J still expects 2018 adjusted earnings per share in the range of $8.00 - $8.20, reflecting an operational growth rate between 6.8% and 9.6%. However, now it expects revenues in the range of $81.0 to $81.8 billion, higher than $80.6 billion to $81.4 billion. (Read: J&J Tops Q1 Earnings Estimates, Raises Sales Guidance)

The Procter & Gamble Company (PG - Free Report) reported fiscal third-quarter core earnings of $1.00 per share beat the Zacks Consensus Estimate of 98 cents by 2%. The bottom line increased 4% from the prior-year quarter.

Zacks Rank #3 P&G’s reported net sales of $16.3 billion surpassed the Zacks Consensus Estimate of $16.2 billion. The top line grew 4% from the year-ago level, given strong sales from its beauty, and fabric and homecare businesses.

The Cincinnati, Ohio-based company maintained its projection for the year and expects organic sales growth in the range of 2-3% for fiscal 2018. However, P&G expects organic sales to be at the low end of the range. All-in sales growth is expected to be about 3%. (Read: Procter & Gamble Q3 Earnings Top Estimates, View Raised)

UnitedHealth Group Inc. (UNH - Free Report) reported first-quarter 2018 earnings of $3.04 per share, beating the Zacks Consensus Estimate of $2.92. The bottom line also rose 28.3% year over year.

UnitedHealth recorded revenues of $55.2 billion, which outpaced the Zacks Consensus Estimate of $54.9 billion. Moreover, the top line compared favorably with the year-ago figure of $48.7 billion.

UnitedHealth revised its 2018 financial outlook on the back of solid first-quarter results. It now expects current-year net earnings of $11.70-$11.95 from $11.65-$11.95 per share, estimated earlier. Adjusted net earnings have been raised to $12.40-$12.65 from the previously projected $12.30-$12.60 band. (Read: UnitedHealth Q1 Earnings & Revenues Top, View Lifted)

JPMorgan Chase & Co. (JPM - Free Report) reported first-quarter 2018 earnings of $2.37 per share, which handily outpaced the Zacks Consensus Estimate of $2.28. The reported figure was up 44% from the prior-year quarter. JPMorgan has a Zacks Rank #3.

Net revenues as reported were $27.9 billion in the quarter, up 12% from the year-ago quarter. Also, it topped the Zacks Consensus Estimate of $27.8 billion. Rising rates, loan growth and increase in trading revenues were the main reasons for the improvement. These were partially offset by lower investment banking revenues. (Read: JPMorgan Q1 Earnings Beat on Better Rates and Trading)

Performance of the Top 10 Dow Companies

The table given below shows the price movements of the 10 largest components of the Dow, which is a price weighted index, over the last five days and during the last six months. Over the last five trading days, the Dow has gained 0.5%.

Next Week’s Outlook

Tensions related to trade disputes seem to have firmly receded into the background at this point. The focus is now squarely on earnings which are more of a mixed bag than was earlier estimated. However, the only real worry investors have at this point is the ongoing spike in treasury yields. If major earnings releases lined up for next week manage to satisfy investor expectations, the Dow could soon return to its winning ways.

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