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Dow 30 Stock Roundup: Apple, Coca-Cola, DowDuPont Earnings Impress

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The index experienced one of its better weeks in recent times, buoyed by strong earnings and hopes of a resolution to the U.S.-China trade conflict. Though the index suffered extremely volatile trading on Monday, it notched up gains from the very next session. President Trump’s hopes of sealing a great trade deal with China boosted indexes. Markets were also buoyed by strong results from big brand names.

Last Week’s Performance

The index declined 1.2% last Friday. Stocks plummeted once again on Friday, led by huge selloffs in technology and Internet shares, as markets continued to remain volatile. Moreover concerns that companies have witnessed peak earnings growth made investors jittery.

Shares of Microsoft (MSFT - Free Report) fell 1.2%. Also, shares of Caterpillar (CAT - Free Report) and Boeing (BA - Free Report) declined 0.5% and 1.2%, respectively. Disappointing earnings results from a few tech majors overshadowed data indicating that the economy continues to grow at a healthy pace. The U.S. economy grew 3.5% in the third quarter, surpassing analysts’ expectations.

The index lost 3% over last week. Markets remained volatile throughout the week, as stocks continued to take a beating owing to growing concerns of slowing global economic growth and rapidly rising interest rates.

This saw the Dow giving up all its gains for the year. However, a brief lift in sentiment following impressive results from a string of major companies helped markets on Thursday.

The Dow This Week

The index lost 1% on Monday in an extremely volatile trading session, during which it gained 352 points at its intraday high and was down 566 points at its intraday low. The swing of nearly 918 points was the index’s biggest intraday reversal since Feb 7.

The Dow briefly entered correction territory but managed to escape this zone recovering some of its losses at the close. Concerns about global trade and global economic growth dented investor confidence.

The index gained 1.8% on Tuesday, reversing its two-day losing streak. Wall Street recouped some of its losses for October following President Trump’s statement that he is expecting to seal a “great” trade deal with China. Chipset makers and transporters were the largest gainers. Consumer confidence hit an 18-year high in October, boosting investor confidence.

The index increased 1% on Wednesday on a winning note buoyed by strong third-quarter earnings results from major brand names. Shares of Facebook (FB - Free Report) and General Motors (GM - Free Report) gained 3.8% and 9.1% following impressive earnings results.

Wall Street witnessed its monthly worst performance this year in October. The Dow fell 5.1%, its biggest monthly drop since January 2016. The broad-based collapse in U.S. stock markets in October came after investors’ panicked on soaring yields on government bonds and the lingering trade-conflict with China.

Investors remained concerned about the continuation of aggressive monetary policy by the Fed. Moreover, geopolitical tensions with Saudi Arabia served to further dampen investor sentiment.

The index gained 1.1% on Thursday following indications that U.S.-China trade tensions could be resolved in the near term. The key catalyst for Thursday’s gains was a tweet from President Trump where he indicated that some progress had been made in trade negotiations with China’s president Xi Jinping.

The Dow has now gained 900 points over three days, all of which it has finished in the green. Shares of DowDuPont Inc. (DWDP - Free Report) gained 8.1%, its largest one-day increase since Dec 9, 2015, after posting bullish earnings results.  

Components Moving the Index

Apple Inc. (AAPL - Free Report) reported fiscal fourth-quarter earnings of $2.91 per share, beating the Zacks Consensus Estimate of $2.79 per share. This represents a 41% surge from earnings of $2.07 per share a year ago. These figures are adjusted for non-recurring items.

Zacks Rank #3 (Hold) Apple posted revenues of $62.9 billion for the quarter ended September 2018, surpassing the Zacks Consensus Estimate by 2.29%. This compares to year-ago revenues of $52.6 billion.

Apple’s total iPhone unit sales climbed from 46.7 million to 46.9 million. This marked nearly flat growth and fell short of our NFM estimate that projected 46.954 million. However, iPhone revenues surged 29% from $28.8 billion in the fourth quarter of 2017 to $37.2 billion, which blew past our $35.7 billion estimate. (Read: Breaking Down Apple's (AAPL - Free Report) Q4 iPhone Sales, Services Growth & More)

Shares of Apple declined 6.5% in after-hours trading after it released sales projections of $89 billion to $93 billion for fiscal first-quarter 2019. Estimates for this period, which represents the holiday season came in well below most estimates.

The Coca-Cola Company’s (KO - Free Report) third-quarter 2018 comparable earnings were 58 cents per share that surpassed the Zacks Consensus Estimate of 55 cents. The bottom line also improved 14% from the year-ago period, driven by ongoing productivity efforts and disciplined growth strategies. Coca-Cola has a Zacks Rank #3.

Revenues of $8,245 million beat the Zacks Consensus Estimate of $8,227 million. However, net revenues declined 9% year over year due to 13% adverse effect from the refranchising of company-owned bottling operations.

However, organic revenues grew 6%, aided by concentrate sales improvement of 4% and price/mix growth of 2%. In 2018, organic revenues are expected to rise by at least 4%. The company expects adjusted EPS to grow 8-10% from the prior year’s comparable EPS of $1.91. (Read: Coca-Cola Tops Q3 Earnings & Revenues, Retains View)

Pfizer, Inc. (PFE - Free Report) reported third-quarter 2018 adjusted earnings per share of 78 cents, which beat the Zacks Consensus Estimate of 76 cents. Earnings rose 16% year over year.

The pharma heavyweight recorded revenues of $13.3 billion, which came in line with the Zacks Consensus Estimate. Revenues rose 1% from the year-ago quarter on a reported basis. On an operational basis, excluding the impact of currency, revenues rose 2% year over year.

Pfizer narrowed its earnings as well as sales expectations for the full year. Revenues are expected in the range of $53.0 billion to $53.7 billion compared with of $53.0 billion to $55.0 billion previously. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DowDuPont recorded earnings (on a reported basis) from continuing operations of 21 cents per share for third-quarter 2018, compared with 33 cents per share it logged in the comparable quarter a year ago.

Barring one-time items, earnings came in at 74 cents per share for the third quarter that topped the Zacks Consensus Estimate of 71 cents. DowDuPont raked in net sales of $20,123 million for the reported quarter, up 10% from the year-ago adjusted sales. It fell short of the Zacks Consensus Estimate of $20,305 million.

Zacks Rank #3 DowDuPont achieved cost synergy savings of more than $450 million in the third quarter. The company raised its cost synergy commitment to $3.6 billion from its earlier expectations of $3.3 billion. Moreover, it increased the expected year-over-year savings for 2018 to $1.5 billion from $1.4 billion. (Read: DowDuPont Earnings Top Estimates in Q3, Revenues Lag)

International Business Machines Corporation (IBM - Free Report) recently entered into a definitive agreement to acquire Red Hat, Inc. (RHT) for approximately $34 billion in cash. The company anticipates Red Hat buyout to improve its revenue growth, free cash flow and gross margin within 12 months of completion. IBM also anticipates Red Hat buy to aid it in sustaining robust dividend growth.

With the buyout, Zacks Rank #3 IBM intends to provide enterprises with market-leading hybrid cloud platform enabling them to shift their business applications seamlessly to the cloud.

IBM anticipates completion of the deal in the latter half of 2019 through a combination of cash and debt. Consequently, Red Hat shareholders will obtain $190.00 per share in cash, approximately 62.8% premium over the $116.68 price on Oct 26, 2018, after market close. (Read: IBM to Enhance Hybrid Cloud Platform With $34B Red Hat Buy)

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 gained 2.8%.

Next Week’s Outlook

October has been an extremely cruel month for stocks. But third-quarter earnings are finally leading to gains for equity markets. Strong results from big brand names are helping broader markets move higher.

Meanwhile, trade tensions are receding following indications from President Trump that he is close to reaching a trade deal with China. With economic data continuing to remain strong, November promises to be a far better month for equity markets.

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