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Dow 30 Stock Roundup: Chevron, Disney Beat, UTX Unit Wins Boeing Contract

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The Dow endured a difficult week as geopolitical tensions in Ukraine weighed on indices. The blue-chip index started the week on a positive note, riding on positive earnings results and a rescue announced by Portugal’s central bank. However, the Dow declined on Tuesday as the Ukraine crisis eroded all of Monday’s gains.

The blue-chip index finished marginally higher on Wednesday even as two major merger deals failed and the Ukraine crisis intensified. But the Dow declined again on Thursday after tensions in the Middle East and Ukraine offset positive economic data. The Dow has lost 1.21% during the first four trading days.

Last Week’s Performance

The Dow dropped 0.4% last Friday after concerns about the timing of a rate hike by the central bank rates kept investors jittery. The blue-chip index registered its biggest weekly drop since Jan 24. Friday’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.

Investors remained concerned about wage inflation, since economic growth has been robust. Fears arose that such an increase might lead to a rise in federal funds rate sooner than anticipated.

For the week, the blue-chip index dropped 2.8%, posting its biggest weekly drop since the week ended Jan 24.  Benchmarks suffered their biggest losses in months on Thursday, following a default by Argentina, and a spike in US labor costs. Indices were also affected after the U.S. and the European Union expanded economic sanctions against Russia.

The Federal Open Market Committee (FOMC) stuck to its plan of steadily wrapping up the quantitative easing program. The Federal Reserve said the rate hike may take “considerable time” after the end of its bond buying program.

Investors also assessed Fed’s mixed view on the economy. The FOMC indicated that the economy has shown significant improvement in the second quarter as most of the economic indicators were on track. However, FOMC also said the labor market is facing problems of underutilization and the pace of recovery of the housing sector is slow.

On the economic front, pending home sales data was discouraging. A gauge of pending home sales numbers retreated in June after three consecutive months of solid growth. Positive second-quarter GDP, encouraging private sector hiring reports and upbeat consumer confidence data failed to lift the markets.

The Dow This Week

Benchmarks ended in the green on Monday buoyed by upbeat earnings results and announcement of a rescue plan by Portugal’s central bank. The Dow halted its four-day losing streak, gaining 0.5%. Markets were also boosted by steps to combat Portugal’s banking crisis. On Sunday, Portugal's central bank announced a rescue plan of Banco Espírito Santo (BES). BES had incurred loss of €3.58 billion in first half of 2014. This is the biggest loss in Portuguese banking history. However, weakness in the utilities sector offset some of the gains.

The Dow lost 0.8% or 139.81 points on Tuesday to settle in the red zone following reports that Russia has increased forces along its border with Ukraine. This three-digit decline eroded all of Monday’s gains. Investors’ apprehensions about a rate hike following strong economic data also weighed on markets. Positive data on the ISM Services Index and new orders for manufactured goods lifted the markets in the initial hours. However, gains were eroded as investors grew apprehensive about the prospect of a rate hike.

Benchmarks ended almost unchanged on Wednesday as tensions between Russia and Ukraine escalated and two high-profile merger deals failed. Russia is imposing restrictions on food imports from the U.S. and Europe.

Disappointing economic data from Europe also weighed on investor sentiment. Italy’s second quarter GDP data indicated the country had once again receded into a recession. Meanwhile, Germany’s manufacturing numbers declined. Industrial production output in the United Kingdom increased by a paltry 0.3% (month on month). These negative numbers indicate that growth in the major Eurozone economies are slowing down. Despite these factors, the Dow gained 0.1%.

The Dow declined 0.5% on Thursday as geopolitical tensions in Ukraine and Middle East offset upbeat earnings and weekly jobs data. NATO’s Secretary General and Ukrainian Prime Minister Arseny Yatseniuk discussed a potential alliance to support Ukraine in its conflict with pro-Russian separatists.

Meanwhile, the US is reportedly contemplating airstrikes against the Islamic State in Iraq and Syria (ISIS). Decelerating growth in European economy also dented investor sentiment. After adding almost 61 points in the initial hours, the Dow declined to its lowest level since April.

Components Moving the Index

Chevron Corp. (CVX - Free Report) reported strong second quarter results on higher oil prices, partially offset by falling production.

Earnings per share came in at $2.98, well above the Zacks Consensus Estimate of $2.68 and also improved from the year-ago profit of $2.77 per share. The company’s quarterly revenues increased 1% year over year to $57,938 million, outperforming the Zacks Consensus Estimate of $54,588.

Chevron’s total production of crude oil and natural gas decreased by 1.4% from the year-earlier level to 2,545 thousand oil-equivalent barrels per day (MBOE/d).

Though the U.S. output augmented 1.2% year over year, Chevron’s international operations (accounting for 74% of the total) registered a 2.3% fall in volumes.

Chevron’s downstream segment achieved earnings of $721 million, lower than the profit of $766 million last year.

The Procter & Gamble Company (PG - Free Report) reported mixed fiscal fourth-quarter 2014 results. 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. Earnings increased 20% despite currency headwinds of 4 cents. Excluding currency headwinds, earnings increased 25%.

However, P&G’s net sales declined 1% to $20.16 billion due to currency headwinds and negative impact of divestitures. Top line narrowly missed the Zacks Consensus Estimate of $20.397 billion.

Fiscal 2014 revenues dropped 1% to $83.1 billion, missing the Zacks Consensus Estimate of $83.51 billion. The top-line increase was in line with management’s expectation. Organic sales grew 3%, at the lower end of the company’s guidance range of 3% to 4%.

Core earnings per share are expected to grow in a mid-single digit range in fiscal 2015. Net revenue growth is expected in the low single-digit range. Currency is expected to hurt revenues by 1%. However, organic sales are expected to increase in low-to-mid single-digit range.

The Walt Disney Company (DIS - Free Report) reported record third-quarter fiscal 2014 earnings. The company’s earnings came in at $1.28 per share, ahead of the Zacks Consensus Estimate of $1.17 and jumped 24% year over year.

Revenues came in at $12,466 million, up 8% year over year. Moreover, it surpassed the Zacks Consensus Estimate of $12,162 million. Total segment operating income increased nearly 15% to $3,857 million, based on strong performance across all divisions, particularly Studio Entertainment and Interactive segments.

Studio entertainment revenues rose 14% to $1,807 million. Interactive revenues for the quarter rose 45% to $266 million. Consumer products revenues increased 16% to $902 million. Media networks revenues increased 3% year over year to $5,511 million. This was attributable to a 1% rise in cable networks revenues to $3,942 million and 7% rise in broadcasting revenues to $1,569 million during the quarter. Parks and Resorts revenues rose 8% to $3,980 million.

United Technologies Corp.’s (UTX - Free Report) unit UTC Aerospace Systems won a contract extension from The Boeing Company (BA - Free Report) to design and manufacture nacelle systems for the 787 Dreamliner commercial jets.

UTC Aerospace also signed a Comprehensive Accessory Repair and Exchange (C.A.R.E.) program agreement for the Dreamliner fleet of Scoot Pte. Ltd., a Singapore-based low-cost long-haul airline.

Per the contract, UTC Aerospace’s Aerostructures unit will build the aerodynamic framework that will surround the jet engine for 787-10, the next variant in the Dreamliner series. Nacelle systems will be built for both the GE Aviation GEnx and Rolls-Royce Trent 1000 engine variants.

Additionally, UTC Aerospace will provide aftermarket support for the 787-10 nacelle systems through its worldwide network of MRO (maintenance, repair and overhaul) facilities and spares.

General Electric Company (GE - Free Report) recently offered an overview of its long-term investment plans in Africa.

General Electric intends to focus its investment on three strategic areas: infrastructure development, localized solutions and capacity building. The distributed power business of the company further extended its commitment to bring online 5,000MW of new electric generation capacity across six countries in association with the regional private and public sector players.

General Electric’s “Country-to-Company” agreement with the government of Nigeria will continue to develop infrastructure projects while transferring skills and technology to local talents. The company will also supply $650 million of energy equipment and $350 million worth of railway machinery to Angola. General Electric will invest $20 million over the next five years in health programs in Nigeria, Kenya, Ghana, Rwanda, Uganda, Malawi and Tanzania.

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 1%.


Last 5 Day’s Performance

6 Month Performance































Next Week’s Outlook

International factors have guided stocks over the week. They have dragged down indices on all days, but for Monday, when a plan to rescue Portuguese Bank BESlifted stocks. The crisis in Ukraine has weighed on markets for some time now. Dismal economic data from Europe have added to international headwinds. Tensions in the Middle East could also have a major impact on the markets in the days ahead.

Since most major companies have already released earnings figures, domestic economic data will now gain prominence. Next week has some key reports lined up. This includes reports on retail sales, business inventories, inflation and industrial production. If these are largely positive in nature, they could help stocks endure international tensions.

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