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Dow 30 Stock Roundup: Disney Misses, Boeing Wins $37B China Order

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The Dow notched up minor gains over the week, before ultimately declining on concerns related to Trump’s tax proposals. Mergers and acquisitions related reports helped the index notch up fresh records even though movements continued to occur within a tight band. Ultimately, prospects of a delay in the implementation of tax cuts proposals dragged the index downward toward the end of the week.

Last Week’s Performance

The index gained 0.1% last Friday on the back of strong earnings performance from Apple Inc. (AAPL - Free Report) Better-than-expected earnings and favorable quarterly outlook from the tech giant led all the three key U.S. indexes to new record highs despite mixed jobs data. Additionally, the ISM services index hit its highest level in more than 12 years, which in turn boosted the broader markets.

The index gained 0.5% over last week. Benchmarks closed in positive territory for the week after the Fed chose not to hike rates this month. Moreover, the Fed offered a positive view about the U.S. economy and said that it has been improving at a ‘solid rate.’

Also, House Republicans finally revealed a detailed framework for the new tax policy, which also boosted sentiments. Additionally, upbeat earnings results also led the markets higher.

The Dow This Week

The index inched up by 0.04% on Monday following news of a possible merger between Broadcom Limited (AVGO - Free Report) and Qualcomm Incorporated (QCOM - Free Report) . This is the 26th trading day when all-time high was achieved by all the three key U.S. indexes in 2017, marking the highest number of record highs achieved in a single year. Additionally, optimism over President Trump’s tax cut plans and upbeat third quarter earnings also boosted investor sentiment.

The index once gained 0.04% on Tuesday to finish at a fresh record high. Weak profit forecasts from key stocks pulled the consumer discretionary sector downward, which in turn weighed on the broader markets. Also, decline in bond yields weighed on financials and concerns over the timing and implementation of Trump’s tax cut plans resulted in a small-cap stock selloff.

Meanwhile, reports emerged that The Walt Disney Company (DIS - Free Report) was in talks recently with Twenty-First Century Fox, Inc. (FOXA - Free Report) to acquire a large part of the latter’s entertainment business. Although, there is no certainty whether the deal will go through, shares of Walt Disney increased 1% following this development. Gains in Walt Disney boosted the blue-chip index to close on a new high.

The index increased 0.03% on Wednesday, settling at yet another all-time high even as Apple’s market value jumped over the $900 billion mark for the first time ever. However, concerns remained over the timing and implementation of Trump’s tax cut plans after Republicans lost elections to the governorship of Virginia and New Jersey on Tuesday. These factors, along with declining bond yields weighed on bank stocks.

The index declined by 0.4% on Thursday following concerns over a likely delay in the Trump administration’s tax cut plans. The Senate Finance Committee released a tax plan which aims to reduce corporate tax rate to 20% but not before 2019, in contrast to the 2018 deadline proposed by the House Republicans.

Although, investors turned jittery following concerns that tax cut may be delayed, markets curtailed some of the day’s declines after the House Ways and Committee passed a bill to reframe the tax reforms.

Components Moving the Index

Disney reported negative earnings surprise in the fourth-quarter fiscal 2017 after beating the estimate in the trailing three quarters. Moreover, the company’s top-line also missed the Zacks Consensus Estimate for the fifth straight quarter.

The company’s adjusted earnings in the reported quarter came in at $1.07 per share, missing the Zacks Consensus Estimate of $1.12 and also decreased 3% year over year. Moreover, revenues came in at $12,779 million, down 3% year over year and also missed the Zacks Consensus Estimate of $13,149 million.

The company’s disappointing results in the quarter was primarily caused by dismal performance of Media Networks, Studio Entertainment and Consumer Products & Interactive Media, which overshadowed growth at Parks and Resorts.

Even though the company reported dismal results, shares inched up nearly 1% during the after-hour trading session on Nov 10 after the company announced that it has sealed a deal with Rian Johnson, the director of The Last Jedi, to produce a brand new Star Wars trilogy.

Chevron Corporation (CVX - Free Report) recently announced that its Canadian unit is progressing with its shale play development in the East Kaybob region located in Duvernay formation of west-central Alberta. It will be the company's first shale play development in Canada.

Of the 330,000 acres in the formation, Chevron Canada holds 70% operating stakes, where it plans to start development in about 55,000 acres of the liquid-rich Duvernay. It has been almost eight years since the company registered its presence in Duvernay and is now one the biggest landholders in the basin.

Chevron used its experience of operating in the North American shale assets during appraisal drilling for the project. The company has yet to provide the financial details of the project, which is expected to come online during the second half of 2019.

Canadian shale plays – like Duvernay and Montney – continue to remain attractive to players like Chevron as it is much cheaper to drill and complete oil wells in these formations compared to the costly oil sands. Apart from the assets in the Duvernay formation, Chevron has stakes in the Liard and Horn River basins located in Western Canada. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Boeing Company (BA - Free Report) announced that it has won a $37 billion order to provide 300 planes to China Aviation Supplies Holding Company. This deal is among the several agreements concluded during President Trump’s state visit to China.

According to the state owned company, which is a lessor of airplanes to China’s airlines, the deal includes the supply of 40 B-777s and B-787s as well as 260 B-737s. Boeing has a Zacks Rank #3 (Hold).

However, some analysts opined that this agreement could overlap with a similar 300 plane deal struck during the Chinese president’s visit to the United States in 2015. The deal concluded at that time encompassed the supply of 50 wide body aircraft and 190 B-737s as well as the lease of another 60 B-737s.

General Electric Company (GE - Free Report) has inked three engine and aviation agreements worth $3.5 billion with Chinese partners during President Trump’s state visit to China, which is aimed at boosting trade between the United States and China. These agreements were finalized in the presence of Trump and Chinese president Xi Jinping.

Zacks Rank #5 (Strong Sell) GE signed a $1.4 billion deal for engines and repairs with Juneyao Airlines Co Ltd. The company also concluded an agreement to supply 80 Leap-1B engines to ICBC Leasing, which will be utilized in 40 Boeing 737 MAX Aircraft. Also, GE will also supply $1 billion worth turbines and related components to China Datang Group.

American Express Company (AXP - Free Report) has launched the Amex Advance platform which facilitates the delivery of personalized services using cutting edge machine learning techniques. The new platform will assist marketers in selecting specific target customer segments as well in measuring the effectiveness of their efforts.

Amex Advance enables secure analysis of closed loop Zacks Rank #3 American Express’ transaction data. Such data is analyzed with information sourced from partners as well as consumer data available publicly to generate insights regarding future buying patterns of a target audience from the U.S. population.

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 0.3%.


Last 5 Day’s Performance

6-Month Performance































Next Week’s Outlook

The likely delay in implementation of the Trump administration’s tax cut proposals will surely lead to a few hiccups for stocks in the weeks ahead. Investors have possibly priced in the impact of such tax relief measures and any unwelcome news will lead to losses in the short term. However, the current market rally is mostly a product of a resilient U.S. economy and strong earnings performances. It is likely that stocks will return to their winning ways after a brief interlude caused by such tax plan jitters.

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