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Dow 30 Stock Roundup: AmEx, XOM, PFE Beat on Earnings, CAT to Buy Back Shares

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The Dow had its worst week since Jan 24 last week. The blue-chip index declined marginally on Monday as investor weighed encouraging new deals and discouraging housing data.

The Dow dropped significantly on Tuesday after the U.S. and the European Union expanded economic sanctions against Russia. The blue-chip index declined once again on Wednesday after the Federal Reserve offered a mixed view on the economy.

The Dow registered its biggest one-day drop since Feb 3 on Thursday, following a default by Argentina and a spike in US labor costs. These concerns spilled over to Friday, dragging the Dow lower.

Last Week’s Performance

Benchmarks ended Monday’s choppy trading session little changed as investors assessed new deals and discouraging housing data. Economic data on pending home sales was disappointing. A gauge of pending home sales numbers retreated in June after three consecutive months of solid growth.

New deals helped offset discouraging pending home sales data. Investors also waited for the outcome of the Federal Open Market Committee’s (FOMC) two-day policy meeting, GDP data and Friday’s jobs report for July. The Dow lost a meager 0.1%.

The Dow lost 0.4% on Tuesday after a choppy session as the U.S. and the European Union expanded economic sanctions against Russia. New sanctions restrict Russia’s largest banks from raising funds from European Union countries and place a trade bar on arms. Geopolitical concerns overshadowed Tuesday’s better-than-expected corporate results and upbeat consumer confidence data. Consumer Confidence Index increased from 86.4 in June to 90.9 in July.

Benchmarks ended Wednesday’s choppy trading session little changed after the Federal Reserve offered a mixed view on the economy. The Fed trimmed the bond buyback plan yet again and will take “considerable time” after that to raise the federal funds rate. Positive second-quarter GDP had lifted markets in the initial hours.

According to the “advance” estimate by the Bureau of Economic Analysis, second quarter GDP increased at an annual rate of 4.0%, more than the consensus estimate of an increase by 3.2%. Private-sector employment report also turned out to be encouraging. However, the Dow dropped 0.2% by the close.

The Dow dropped 1.9% on Thursday, its biggest one-day drop since Feb 3, following a default by Argentina and a spike in US labor costs. Standard & Poor’s downgraded Argentina’s credit rating to "selective default" after the government failed to pay interest on $13 billion of restructured bonds within the deadline.

Meanwhile, investors were concerned about a possible rise in wage inflation, on the backdrop of a strong rebound in second-quarter GDP. Concerns about the European economy and Russia-Ukraine crisis also weighed on the benchmarks. The blue-chip index suffered its first monthly decline since January, losing 1.6%.

Benchmarks settled in the red zone on Friday as concerns about the timing of a rate hike by the central bank rates kept investors jittery. The day’s largely positive economic data could only lift the stocks momentarily as concerns from Thursday over a spike in US labor costs and a credit default by Argentina continued to weigh on investors.

Economic activity in the manufacturing sector expanded in July for the 14th successive month. The University of Michigan and Thomson Reuters’ final reading of consumer sentiment increased to 81.8 in July. Despite these reports, the Dow lost 0.4%, which dragged it into negative territory for 2014. The blue-chip index has dropped 0.5% year to date.

Components Moving the Index

American Express Co. (AXP - Free Report) , or AmEx, reported second-quarter 2014 operating earnings per share of $1.43, outpacing the Zacks Consensus Estimate of $1.38 and improving from $1.27 a share reported in the year-ago quarter

Improved consumer spending from AmEx cards and a lower share count helped the results. The company also recorded post-tax net gains of $409 million or 5 cents per share in the reported quarter from spin-off of business travel operations. However, the gains were partially offset by transaction-related costs, restructuring charges and contribution to AmEx Foundation. Consequently, net income from operations climbed 9% year over year to $1.53 billion from $1.41 billion in the year-ago period.

AmEx’s total billed business, or global card spending, continued to witness improvement in the U.S. and beyond increasing 9% year over year to $258.1 billion.

ExxonMobil Corporation (XOM - Free Report) posted second-quarter 2014 earnings of $2.05 per share, beating the Zacks Consensus Estimate of $1.91. The figure also rose 32% year on year driven by higher price realizations.

Quarterly revenues increased 5% year over year to $111.6 billion, beating the Zacks Consensus Estimate of $109.1 billion.

Quarterly earnings for the upstream segment were $7.9 billion, up $1,576 million year over year. The improvement was primarily driven by higher realizations, partly offset by lower production volumes and sales timing impact.

The downstream segment recorded profit of $711 million in the second quarter, up $315 million year over year.

The chemical unit contributed approximately $841 million to the company’s profits, up $85 million from the year-earlier quarter.

During the quarter, ExxonMobil generated cash flow from operations and asset sales of $12.8 billion. The company returned $6 billion to shareholders through dividends and share repurchases.

Merck & Co. (MRK - Free Report) reported second quarter 2014 earnings of 85 cents per share, beating the Zacks Consensus Estimate of 81 cents. Earnings rose 1.2% from the year-ago period.

Revenues for the quarter declined 1% to $10.9 billion. However, second quarter revenues were above the Zacks Consensus Estimate of $10.7 billion.

Including one-time items, second quarter 2014 earnings jumped 126.7% to 68 cents per share.

Merck expects to earn $3.43 - $3.53 per share on revenues of $42.4 billion - $43.2 billion. The guidance excludes the impact of the potential Venezuelan Bolivar devaluation that was previously included in the range. The guidance also takes into account a 6-9 cent dilution that could result from the upcoming sale of the Consumer Care segment.

The Zacks Consensus Estimate of earnings of $3.49 per share and revenues of $42.6 billion are within the guidance range.

Pfizer Inc. (PFE - Free Report) posted second quarter 2014 earnings of 58 cents per share, a couple of cents above the Zacks Consensus Estimate and 4% above the year-ago earnings. Revenues, which declined 2% to $12.8 billion, were above the Zacks Consensus Estimate of $12.4 billion.

Revenues were impacted by the loss of exclusivity of certain products including Detrol LA (in the U.S.), the expiry of the Spiriva collaboration in some countries and the Enbrel agreement.

The Procter & Gamble Company (PG - Free Report) reported mixed fiscal fourth-quarter 2014 results. The consumer products giant met its financial targets for the year and issued a positive outlook for the next fiscal year.

P&G’s fourth-quarter adjusted earnings (excluding restructuring cost and charges for European legal matters) of 95 cents per share beat the Zacks Consensus Estimate of 91 cents by 4.4%.

Moreover, earnings increased 20% in the quarter despite currency headwinds of 4 cents. Excluding currency headwinds, earnings increased 25%. P&G’s net sales declined 1% to $20.16 billion. Top line narrowly missed the Zacks Consensus Estimate of $20.397 billion.

Meanwhile, shares of company gained 3.0% on Friday after the world’s largest consumer products company said it will shed about half of its brands in order to increase sales. P&G was the biggest gainer among the Dow components.

Caterpillar Inc.’s (CAT - Free Report) shares edged up 0.5% to close at $104.69 on Tuesday after the company announced the purchase of approximately $2.5 billion of its common stock under an accelerated stock repurchase transaction.

Caterpillar entered into an agreement with Societe Generale Group (SCGLY) to purchase the shares. Per the agreement, Caterpillar will immediately deliver approximately 22 million shares based on current market prices.

The final number of shares to be repurchased and the aggregate cost per share to Caterpillar will be based on Caterpillar's volume-weighted average stock price during the term of the transactions. Caterpillar expects to complete the balance of the repurchase agreement in September.

Visa Inc. (V - Free Report) reported operating earnings for the quarter ended Jun 30, 2014 were $2.17 per Class A common share, outpacing the Zacks Consensus Estimate of $2.09 and the prior-year quarter figure of $1.88 per share. Operating net income jumped 11% to $1.36 billion from $1.23 billion in the year-ago quarter.

Total operating revenue was $3.16 billion, up 5.1% year over year and 7% on constant currency basis, and came in line with the Zacks Consensus Estimate. Higher card spending and modest performance across all segments boosted revenues. However, currency fluctuations in the U.S. offset growth by 2%, reflecting difficult comps for most of fiscal 2014.

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 lost 2.68%.


Last 5 Day’s Performance

6 Month Performance































This Week’s Outlook

Earnings had a limited impact on the fortunes of the Dow last week. As expected, economic data has had some influence on the fortunes of stocks. This includes data on home sales and private-sector employment, and an unexpected spurt in GDP growth. However, positive news on this front has failed to arrest losses.

Instead, comments from the Fed and international factors have guided stocks. A widely expected credit default from Argentina, expansion of sanctions on Russia and concerns about the European economy have weighed on markets. These factors are likely to guide stocks this week, unless key reports on factory orders and the services sector outweigh such concerns.

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