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Dow 30 Stock Roundup: Disney Earnings Impress, Pfizer's Cancer Drug Gets CHMP Nod

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The index endured a mixed week after trade war fears reemerged. Technology stocks were the star performers of the week’s first trading day. Strong earnings numbers also played their part, boosting stocks on Tuesday. But disappointing results from videogame makers and fresh trade war fears led the index to close in the red on the next two trading sessions.

Last Week’s Performance

The index increased 0.3% last Friday after the release of stellar economic data boosted investor sentiment. This also signified that the 35-day partial government shutdown has failed to have much of an impact on the U.S. economy.

Gains for the 30-stock index were buoyed by increase in shares of Chevron Corporation (CVX - Free Report) , Exxon Mobil Corporation (XOM - Free Report) and Merck & Co., Inc. (MRK - Free Report) which gained 3.2%, 3.6% and 2.7%, respectively, after reporting better-than-expected quarterly earnings results.

The index gained 1.3% last week, posting its sixth straight week of gains. This was its longest such streak since November 2017 when it gained for eight straight weeks.

Strong fourth-quarter earnings results boosted investors’ confidence in risky assets like equities. The Fed kept the federal funds target rate unchanged and adopted a dovish monetary stance. Meanwhile, Caterpillar Inc. (CAT - Free Report) posted dismal earnings in the fourth quarter of 2018.

Also, NVIDIA Corporation (NVDA - Free Report) lowered quarterly guidance citing China’s economic slowdown, which weighed on the broader markets. Further, Trump stated that he was doubtful that a border-wall funding deal could be reached, reigniting shutdown fears.

The Dow This Week

The index gained 0.2% on Monday buoyed by the strong performance of technology stocks. The FAANG group stocks registered a particularly strong performance. Moreover, solid fourth-quarter earnings results boosted investors’ confidence in risky assets like equities.

The index increased 0.7% on Tuesday supported by strong fourth-quarter 2018 earnings. Moreover, investors waited for President Trump’s State of The Union address to be delivered late in the evening.

The index lost 0.1% on Wednesday following disappointing earnings results from videogame companies. Moreover, investors failed to get any clear cut picture about the government’s future course of action from President Trump’s State of The Union address.

The index declined 0.9% on Thursday after the U.S.-China trade disputes intensified. The broad-based market decline was further aggravated following the European Commission’s lowering of its economic growth projection forecast for of the European Union.

Components Moving the Index

The Walt Disney Company (DIS - Free Report) reported first-quarter fiscal 2019 adjusted earnings of $1.84 per share that comfortably beat the Zacks Consensus Estimate of $1.57. However, the figure declined 2.6% from the year-ago quarter. Disney has a Zacks Rank #3 (Hold). 

Revenues of $15.30 billion almost remained flat with the year-ago quarter. The figure surpassed the consensus mark of $15.18 billion. Strong performance of Media Networks and Parks, Experiences & Consumer Products primarily led to top-line growth.

Second-quarter fiscal 2019 operating income will have a negative impact of $200 million due to continued investments in ESPN+ and Disney+. (Read: Disney's Q1 Earnings and Revenues Surpass Estimates)

Pfizer Inc. (PFE - Free Report) announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has given a positive opinion, recommending marketing approval of its new lung cancer medicine, Vizimpro (dacomitinib).

Zacks Rank #4 (Sell) Pfizer is eyeing approval of Vizimpro (45 mg), an EGFR tyrosine kinase inhibitor, in Europe for the first-line treatment of metastatic non-small cell lung cancer (NSCLC) in patients with EGFR activating mutations. The CHMP’s decision will now be reviewed by the European Commission, which mostly follows the same.

Vizimpro was approved in the United States last September. The drug holds immense sales potential as EGFR-mutated non-NSCLC is a disease that is associated with low overall survival rates. (Read: Pfizer's New Lung Cancer Drug Vizimpro Gets CHMP Nod)

The Goldman Sachs Group (GS - Free Report) plans to hold back distribution of bonuses worth at least $7 million to the top executives until investigations related to the Wall Street biggie’s role in the 1MDB scandal are completed.

Further, in its annual filing, Zacks Rank #5 (Strong Sell) Goldman disclosed that it has added a new forfeiture provision in its annual compensation plans that would give it the permission to reduce the size of the “award prior to payment and/or forfeit the underlying transfer-restricted shares."

This would primarily impact the current Chief Executive David Solomon and former head Lloyd Blankfein, if the outcome of ongoing probe turns out to be negative. (Read: Goldman to Withhold Top Executives' Pay Until 1MBD Resolves)

The Procter & Gamble Company (PG - Free Report) , popularly known as P&G, has acquired a private company — This is L. — which produces period products with natural ingredients. The financial terms of the deal remained under covers.

The L. brand portfolio mainly includes feminine hygiene products like high-quality tampons, pads, liners and wipes made of organic cotton. The company also produces condoms.

The acquisition fully compliments the company’s Always and Tampax brands for women. P&G believes that the addition of the L. brand’s products to its Feminine Care business will not only aid growth but also improve its exposure in the naturals segment. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chevron reported earnings per share of $2.06, surpassing the Zacks Consensus Estimate of $1.87 and also significantly improving from the year-ago profit of 73 cents. Quarterly revenues of $42.3 billion also beat the Zacks Consensus Estimate of $41.6 billion and were up 12.5% year over year.

The largest oil producer in the United States delivered $9.1 billion in cash flow from operations during the quarter. Notably, cash flow in the full year of 2018 totaled $30.6 billion versus $20.3 billion in 2017.

Zacks Rank #3 Chevron hiked its dividend by 7 cents per share to $1.19 per share, payable on Mar 11, 2019 to its shareholders as of Feb 15, 2019. The integrated giant also repurchased shares worth $1 billion during the fourth quarter. (Read: Chevron Q4 Earnings Beat on Record Output, Dividend Up)

Exxon Mobil reported fourth-quarter 2018 earnings of $1.51 per share after adjusting non-recurring items, which surpassed the Zacks Consensus Estimate of $1.08. The bottom line also improved from the year-earlier adjusted figure of 88 cents.

Total revenues of $71,895 million missed the Zacks Consensus Estimate of $74,177 million. However, the top line improved from $66,515 million recorded a year ago.

During the quarter, Zacks Rank #5 (Strong Sell) ExxonMobil generated cash flow of $9.5 billion from operations and asset divestments, up from $8.8 billion in the year-ago quarter. It also returned $3.5 billion to its shareholders through dividends. (Read: ExxonMobil's Q4 Earnings Beat on Downstream Strength)

Merck reported fourth-quarter 2018 adjusted earnings of $1.04 per share, which beat the Zacks Consensus Estimate of $1.03. Earnings rose 6% year over year (up 11% excluding the impact of currency). Merck has a Zacks Rank #3.

Including acquisition- and divestiture-related costs, restructuring costs and certain other items, earnings per share were 69 cents against a loss of 39 cents in the year-ago quarter.

Revenues for the quarter rose 5% year over year to $11 billion, beating the Zacks Consensus Estimate of $10.93 billion. Currency movement negatively impacted revenues by 3%. Excluding currency impact, sales rose 8% year over year.

Full-year 2018 sales rose 5% to $42.3 billion, marginally beating the Zacks Consensus Estimate of $42.2 billion. Revenues were within the guided range of $42.1 billion to $42.7 billion

Adjusted earnings for 2018 were $4.34 per share, ahead of the Zacks Consensus Estimate of $4.33 and up 9% year over year. Earnings were within the guided range of $4.30-$4.36 per share. (Read: Merck Beats on Q4 Earnings & Sales as Keytruda Shines)

Performance of the Top 10 Dow Companies

The table given below shows the price movement 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 past five trading days, the Dow has gained 0.5%.

Next Week’s Outlook

Fourth-quarter earnings have been a mixed bag, resulting in an increase in volatility over this trading week. For instance, disappointing earnings numbers flowed in from videogame makers, while chip stocks registered a strong showing.

Meanwhile, investors found little to rejoice in the State of the Union speech, which was woefully short on details. At the same time, trade war fears have reemerged with a lasting truce before Mar 1 looking increasingly elusive. Clearly, after a robust showing in January, investors will have to contend with heightened volatility in the weeks which lie ahead.

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