We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The Dow declined over most of the week but for gains made on Wednesday, weighed down by a number of factors. Among these was familiar weakness in oil prices, following concerns about oversupply as well as weak demand. A decline in auto sales for the month of July led to fears about a reduction in consumer spending. Weak manufacturing data also weighed on investor sentiment. However, a rebound in oil prices and encouraging private employment data led to gains on Wednesday.
Last Week’s Performance
The index decreased 0.1% last Friday as upbeat tech earnings were offset by negative reports of energy firms and discouraging GDP data. Alphabet (GOOGL - Free Report) and Amazon (AMZN - Free Report) posted strong quarterly numbers. However, oil majors ExxonMobil Corporation (XOM - Free Report) and Chevron Corp. (CVX - Free Report) reported weak earnings results. The Dow closed in the red, but posted its sixth consecutive month of gains.
The “advance” estimate of second-quarter output of goods and services increased at an annual rate of 1.2%, which was lower than the consensus estimate of 2.6% growth. In the first quarter, real GDP increased 0.8%.
The index declined 0.1% over last week. McDonald’s Corp’s (MCD - Free Report) disappointing same-store sales data and The Coca-Cola Company’s (KO - Free Report) revenue miss weighed on the Dow. Meanwhile, heightened crude supply worries resulted in a sharp decline in oil prices, which eventually had a negative impact on the broader markets.
The index increased 2.8% over the month of July. Markets rebounded from the steep losses it suffered on Brexit woes, with U.S. stocks climbing to record highs. Corporate results came in better than expected, while reassuring domestic economic data raised confidence in the strength of the economy. Stocks also surged on stimulus hopes from central banks around the world to counter economic gloom.
The DowThisWeek
The index declined 0.2% on Monday as energy stocks slumped, after crude oil returned to bear market territory. Oversupply concerns and subdued demand were primarily responsible for dragging down oil prices. Weaker-than-expected manufacturing data also dented investor sentiment.
The ISM manufacturing index fell to 52.6 in July from 53.2 in June, signaling a slowdown in overall factory growth. Additionally, construction spending declined 0.6% to its lowest level in June since the same period last year.
The index lost 0.5% on Tuesday, dragged down by a decline in consumer discretionary stocks. These stocks were adversely affected by a drop in sales of major automakers in July which stoked concerns about a broad spending slowdown. The Dow closed in the red for the seventh straight session in a row for the first time since Aug 2015.
Meanwhile, oil prices continued to hover near three-month lows. Personal consumption expenditure rose 0.4% in June from a month earlier. The increase in outlays in June came in ahead of the consensus estimate of a rise by 0.3%. When adjusted for inflation, consumer spending rose 0.3%.
The Dow snapped seven straight sessions of losses to finish in positive territory on Wednesday. The index gained 0.2% on Wednesday aided by gains in energy and financial shares. A rebound in oil prices due to an unexpected drop in gasoline stockpiles boosted energy shares.
Meanwhile, a better-than-expected rise in private sector jobs was a shot in the arm for financial stocks. U.S. private employers added 179,000 jobs in July, above analysts’ expectations of around 170,000 jobs, according to the Automatic Data Processing, Inc. (ADP - Free Report) . Such an upbeat report strengthened the case for the Fed to hike rates this year.
The index declined a meager 0.02% on Thursday as investors refrained from making big bets ahead of Friday’s U.S. nonfarm payroll report. Hiring data will help gauge the strength of the economy and provide an insight into the path of further rate hikes.
Bank of England’s (BOE) big stimulus package did drag down the pound to new lows, but its effect on U.S. stocks remained more or less muted. Separately, factory orders declined sharply for the second straight month in June. Orders dropped 1.5% in June after falling 1.2% in May.
Components Moving the Index
ExxonMobil posted second-quarter 2016 earnings of 41 cents per share, widely missing the Zacks Consensus Estimate of 64 cents. The bottom line, also, deteriorated from $1.00 per share in the year-ago quarter. The impact of sharply lower commodity prices and weaker refining margins was partly offset by strong Chemical results.
Total revenue in the quarter decreased to $57,694 million from $74,113 million in the year-ago quarter. The top line also came in below the Zacks Consensus Estimate of $59,834 million.
Quarterly earnings for the upstream segment declined $1.7 billion from the second quarter of 2015 to $294 million. The downstream segment recorded profits of $825 million, down $681 million from the second quarter of 2015. The chemical unit contributed approximately $1.2 billion, which is $29 million lower than the second quarter of 2015. However, improved margins increased earnings by $150 million (read: ExxonMobil (XOM - Free Report) Misses Q2 Earnings & Revenue Estimates).
Chevron reported strong second-quarter earnings, buoyed by the success of its cost saving initiatives. The company reported earnings per share (excluding special items) of 49 cents, higher than the Zacks Consensus Estimate of 31 cents and the year-ago earnings of 30 cents.
However, quarterly revenue fell 27.4% year over year to $29,282 million and was unable to beat the Zacks Consensus Estimate of $29,799 million on weak crude prices and refining income.
Chevron’s total production of crude oil and natural gas edged down 2.6% from the year-earlier level to 2,528 thousand oil-equivalent barrels per day (MBOE/d). Chevron’s downstream segment achieved earnings of $1,278 million, 56.8% lower than the profit of $2,956 million last year.
Chevron spent $5,523 million in capital expenditures during the quarter, a considerable decline from the $8,724 million incurred a year ago (read: Chevron (CVX - Free Report) Overcomes Low Oil Prices to Q2 Earnings Beat).
Merck & Co. (MRK - Free Report) reported second-quarter 2016 earnings of 93 cents per share, surpassing the Zacks Consensus Estimate by a penny and increasing 8.1% from the year-ago period. Revenues for the quarter grew 1% to $9.8 billion, in line with the Zacks Consensus Estimate. Currency movement negatively impacted revenues by 2%.
Products like Keytruda, Cubicin and ProQuad performed well. New product, Keytruda, brought in sales of $314 million in the second quarter of 2016, up from $249 million in the first quarter of 2016. Merck’s Pharmaceutical segment posted revenues of $8.7 billion, up 2%. Merck’s animal health segment posted revenues of $898 million, up 7% from the year-ago quarter.
Merck raised the bottom end of its 2016 earnings guidance to $3.67–$3.77 per share, including an approximately 1% negative impact from foreign exchange. The revenue guidance was narrowed to $39.1–$40.1 billion, including an approximately 2% negative impact from foreign exchange (read: Merck (MRK - Free Report) Updates Outlook Following Q2 Earnings Beat).
Pfizer Inc.’s (PFE - Free Report) second-quarter earnings per share came in at 64 cents, a couple of cents above the Zacks Consensus Estimate and 14% above the year-ago earnings. Revenues were also well above expectations. Pfizer posted revenues of $13.1 billion, ahead of the Zacks Consensus Estimate of $12.9 billion and up 11% from the year-ago period.
While currency movement cut Pfizer’s second-quarter revenues by 3% ($302 million), operational growth was 13% ($1.6 billion). International revenues declined 1% to $6.8 billion. Meanwhile, U.S. revenues grew 27% to $6.3 billion.
Pfizer continues to expect earnings of $2.38–$2.48 per share on revenues of $51–$53 billion. The Zacks Consensus Estimate for earnings and revenues are currently $2.46 per share and $52.6 billion, respectively (read: Pfizer (PFE - Free Report) Tops on Q2 Earnings, Revenues, Maintains View).
The Procter & Gamble Company’s (PG - Free Report) fiscal fourth-quarter adjusted earnings of 79 cents per share beat the Zacks Consensus Estimate of 74 cents by 6.75%. However, the bottom line decreased 15% from the prior-year period. Excluding currency headwinds of 3 percentage points (pp), earnings per share declined 8% due to soft sales during the quarter.
P&G’s reported net sales of $16.1 billion narrowly beat the Zacks Consensus Estimate of $15.84 billion by 1.64%. The top line, however, declined 3% as currency headwinds hurt sales. P&G’s reported net sales of $16.1 billion narrowly beat the Zacks Consensus Estimate of $15.84 billion by 1.64%. The top line, however, declined 3% as currency headwinds hurt sales.
For fiscal 2016, core earnings per share dipped 2% to $3.67 and beat estimates of 96 cents. Net sales, including a negative 6 pp impact from foreign exchange and 2% from the combined impacts of Venezuela and minor brand divestitures, were down 8% to $65.3 billion.
The Cincinnati-based company expects organic sales growth of approximately 2% for fiscal 2017. Core earnings per share are expected to grow in mid-single digits as against the fiscal 2016 core earnings of $3.67 per share (read: Procter & Gamble (PG - Free Report) Q4 Earnings & Sales Beat Estimates).
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 declined 0.4%.
Ticker
Last 5 Day’s Performance
6-Month Performance
MMM
-0.1%
+15.9%
GS
-1.7%
+1%
IBM
+0.1%
+25.7%
HD
-1.4%
+16.9%
BA
-1.2%
+7.1%
UNH
+1%
+27.7%
MCD
-1.2%
+2.5%
TRV
+1%
+10.9%
JNJ
-0.8%
+23.2%
AAPL
+1.4%
+12.6%
Next Week’s Outlook
Oil prices have had a major impact on market proceedings this week. Additionally, two major reports have led to concerns about the broader economic environment as well as the strength in consumer spending.
Investors are now looking forward expectantly to official employment data to be released today. They are expected to provide significant indications about the rise in rates expected later this year. It is likely that this report will also have a major impact on stocks next week.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Dow 30 Stock Roundup: Merck & Pfizer Earnings Impress; Exxon & Chevron Disappoint
The Dow declined over most of the week but for gains made on Wednesday, weighed down by a number of factors. Among these was familiar weakness in oil prices, following concerns about oversupply as well as weak demand. A decline in auto sales for the month of July led to fears about a reduction in consumer spending. Weak manufacturing data also weighed on investor sentiment. However, a rebound in oil prices and encouraging private employment data led to gains on Wednesday.
Last Week’s Performance
The index decreased 0.1% last Friday as upbeat tech earnings were offset by negative reports of energy firms and discouraging GDP data. Alphabet (GOOGL - Free Report) and Amazon (AMZN - Free Report) posted strong quarterly numbers. However, oil majors ExxonMobil Corporation (XOM - Free Report) and Chevron Corp. (CVX - Free Report) reported weak earnings results. The Dow closed in the red, but posted its sixth consecutive month of gains.
The “advance” estimate of second-quarter output of goods and services increased at an annual rate of 1.2%, which was lower than the consensus estimate of 2.6% growth. In the first quarter, real GDP increased 0.8%.
The index declined 0.1% over last week. McDonald’s Corp’s (MCD - Free Report) disappointing same-store sales data and The Coca-Cola Company’s (KO - Free Report) revenue miss weighed on the Dow. Meanwhile, heightened crude supply worries resulted in a sharp decline in oil prices, which eventually had a negative impact on the broader markets.
The index increased 2.8% over the month of July. Markets rebounded from the steep losses it suffered on Brexit woes, with U.S. stocks climbing to record highs. Corporate results came in better than expected, while reassuring domestic economic data raised confidence in the strength of the economy. Stocks also surged on stimulus hopes from central banks around the world to counter economic gloom.
The Dow This Week
The index declined 0.2% on Monday as energy stocks slumped, after crude oil returned to bear market territory. Oversupply concerns and subdued demand were primarily responsible for dragging down oil prices. Weaker-than-expected manufacturing data also dented investor sentiment.
The ISM manufacturing index fell to 52.6 in July from 53.2 in June, signaling a slowdown in overall factory growth. Additionally, construction spending declined 0.6% to its lowest level in June since the same period last year.
The index lost 0.5% on Tuesday, dragged down by a decline in consumer discretionary stocks. These stocks were adversely affected by a drop in sales of major automakers in July which stoked concerns about a broad spending slowdown. The Dow closed in the red for the seventh straight session in a row for the first time since Aug 2015.
Meanwhile, oil prices continued to hover near three-month lows. Personal consumption expenditure rose 0.4% in June from a month earlier. The increase in outlays in June came in ahead of the consensus estimate of a rise by 0.3%. When adjusted for inflation, consumer spending rose 0.3%.
The Dow snapped seven straight sessions of losses to finish in positive territory on Wednesday. The index gained 0.2% on Wednesday aided by gains in energy and financial shares. A rebound in oil prices due to an unexpected drop in gasoline stockpiles boosted energy shares.
Meanwhile, a better-than-expected rise in private sector jobs was a shot in the arm for financial stocks. U.S. private employers added 179,000 jobs in July, above analysts’ expectations of around 170,000 jobs, according to the Automatic Data Processing, Inc. (ADP - Free Report) . Such an upbeat report strengthened the case for the Fed to hike rates this year.
The index declined a meager 0.02% on Thursday as investors refrained from making big bets ahead of Friday’s U.S. nonfarm payroll report. Hiring data will help gauge the strength of the economy and provide an insight into the path of further rate hikes.
Bank of England’s (BOE) big stimulus package did drag down the pound to new lows, but its effect on U.S. stocks remained more or less muted. Separately, factory orders declined sharply for the second straight month in June. Orders dropped 1.5% in June after falling 1.2% in May.
Components Moving the Index
ExxonMobil posted second-quarter 2016 earnings of 41 cents per share, widely missing the Zacks Consensus Estimate of 64 cents. The bottom line, also, deteriorated from $1.00 per share in the year-ago quarter. The impact of sharply lower commodity prices and weaker refining margins was partly offset by strong Chemical results.
Total revenue in the quarter decreased to $57,694 million from $74,113 million in the year-ago quarter. The top line also came in below the Zacks Consensus Estimate of $59,834 million.
Quarterly earnings for the upstream segment declined $1.7 billion from the second quarter of 2015 to $294 million. The downstream segment recorded profits of $825 million, down $681 million from the second quarter of 2015. The chemical unit contributed approximately $1.2 billion, which is $29 million lower than the second quarter of 2015. However, improved margins increased earnings by $150 million (read: ExxonMobil (XOM - Free Report) Misses Q2 Earnings & Revenue Estimates).
Chevron reported strong second-quarter earnings, buoyed by the success of its cost saving initiatives. The company reported earnings per share (excluding special items) of 49 cents, higher than the Zacks Consensus Estimate of 31 cents and the year-ago earnings of 30 cents.
However, quarterly revenue fell 27.4% year over year to $29,282 million and was unable to beat the Zacks Consensus Estimate of $29,799 million on weak crude prices and refining income.
Chevron’s total production of crude oil and natural gas edged down 2.6% from the year-earlier level to 2,528 thousand oil-equivalent barrels per day (MBOE/d). Chevron’s downstream segment achieved earnings of $1,278 million, 56.8% lower than the profit of $2,956 million last year.
Chevron spent $5,523 million in capital expenditures during the quarter, a considerable decline from the $8,724 million incurred a year ago (read: Chevron (CVX - Free Report) Overcomes Low Oil Prices to Q2 Earnings Beat).
Merck & Co. (MRK - Free Report) reported second-quarter 2016 earnings of 93 cents per share, surpassing the Zacks Consensus Estimate by a penny and increasing 8.1% from the year-ago period. Revenues for the quarter grew 1% to $9.8 billion, in line with the Zacks Consensus Estimate. Currency movement negatively impacted revenues by 2%.
Products like Keytruda, Cubicin and ProQuad performed well. New product, Keytruda, brought in sales of $314 million in the second quarter of 2016, up from $249 million in the first quarter of 2016. Merck’s Pharmaceutical segment posted revenues of $8.7 billion, up 2%. Merck’s animal health segment posted revenues of $898 million, up 7% from the year-ago quarter.
Merck raised the bottom end of its 2016 earnings guidance to $3.67–$3.77 per share, including an approximately 1% negative impact from foreign exchange. The revenue guidance was narrowed to $39.1–$40.1 billion, including an approximately 2% negative impact from foreign exchange (read: Merck (MRK - Free Report) Updates Outlook Following Q2 Earnings Beat).
Pfizer Inc.’s (PFE - Free Report) second-quarter earnings per share came in at 64 cents, a couple of cents above the Zacks Consensus Estimate and 14% above the year-ago earnings. Revenues were also well above expectations. Pfizer posted revenues of $13.1 billion, ahead of the Zacks Consensus Estimate of $12.9 billion and up 11% from the year-ago period.
While currency movement cut Pfizer’s second-quarter revenues by 3% ($302 million), operational growth was 13% ($1.6 billion). International revenues declined 1% to $6.8 billion. Meanwhile, U.S. revenues grew 27% to $6.3 billion.
Pfizer continues to expect earnings of $2.38–$2.48 per share on revenues of $51–$53 billion. The Zacks Consensus Estimate for earnings and revenues are currently $2.46 per share and $52.6 billion, respectively (read: Pfizer (PFE - Free Report) Tops on Q2 Earnings, Revenues, Maintains View).
The Procter & Gamble Company’s (PG - Free Report) fiscal fourth-quarter adjusted earnings of 79 cents per share beat the Zacks Consensus Estimate of 74 cents by 6.75%. However, the bottom line decreased 15% from the prior-year period. Excluding currency headwinds of 3 percentage points (pp), earnings per share declined 8% due to soft sales during the quarter.
P&G’s reported net sales of $16.1 billion narrowly beat the Zacks Consensus Estimate of $15.84 billion by 1.64%. The top line, however, declined 3% as currency headwinds hurt sales. P&G’s reported net sales of $16.1 billion narrowly beat the Zacks Consensus Estimate of $15.84 billion by 1.64%. The top line, however, declined 3% as currency headwinds hurt sales.
For fiscal 2016, core earnings per share dipped 2% to $3.67 and beat estimates of 96 cents. Net sales, including a negative 6 pp impact from foreign exchange and 2% from the combined impacts of Venezuela and minor brand divestitures, were down 8% to $65.3 billion.
The Cincinnati-based company expects organic sales growth of approximately 2% for fiscal 2017. Core earnings per share are expected to grow in mid-single digits as against the fiscal 2016 core earnings of $3.67 per share (read: Procter & Gamble (PG - Free Report) Q4 Earnings & Sales Beat Estimates).
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 declined 0.4%.
Ticker
Last 5 Day’s Performance
6-Month Performance
MMM
-0.1%
+15.9%
GS
-1.7%
+1%
IBM
+0.1%
+25.7%
HD
-1.4%
+16.9%
BA
-1.2%
+7.1%
UNH
+1%
+27.7%
MCD
-1.2%
+2.5%
TRV
+1%
+10.9%
JNJ
-0.8%
+23.2%
AAPL
+1.4%
+12.6%
Next Week’s Outlook
Oil prices have had a major impact on market proceedings this week. Additionally, two major reports have led to concerns about the broader economic environment as well as the strength in consumer spending.
Investors are now looking forward expectantly to official employment data to be released today. They are expected to provide significant indications about the rise in rates expected later this year. It is likely that this report will also have a major impact on stocks next week.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>