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PPI Joins Q4 Reports for JPM, WFC & More; Big Day for Data

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Tuesday, January 15, 2019

At long last, we finally see our first pre-market of the new calendar year with multiple earnings reports from major companies in the S&P 500. We even get new data on the Producer Price Index (PPI) this morning, as well as Empire State results for January. In short, we’re glad to bring you more news than speculation this Tuesday morning.

There is even breaking news currently, with the announcement that Microsoft (MSFT - Free Report) and Walgreens Boots Alliance (WBA - Free Report) have joined forces in addressing Med-Tech issues, with Walgreens moving most of its digital health center kiosks and other tech infrastructure to Microsoft’s Azure platform. This is the second big partnership in the past six months for Microsoft, which struck a similar partnership with Walmart (WMT - Free Report) last summer.

No price tag has yet been affixed to this transaction, although reports are it will be a 7-year deal — even longer than the 5 year allegiance Microsoft and Walmart had earlier agreed to. Both stocks are up only marginally directly following this announcement.

December PPI disappointed investors compared to estimates: -0.2% on the headline was lower than the -0.1% expected, and even further below the unrevised +0.1% recorded for November. Year over year, we see 2.7% growth on the headline, and 2.8% subtracting volatile food and energy costs. These figures are more or less in-line with expectations, but are certainly something to keep an eye on, especially considering the partial government shutdown is now in its fourth consecutive week, making it the longest U.S. government shutdown in history.

In fact, analysts are now beginning to discount GDP growth for Q1 due to the ongoing shutdown, which does not appear to be any closer to a resolution even this many weeks later. A full 10 basis points per week is now reportedly being subtracted from White House growth estimates in the quarter, with the understanding that not only 800K furloughed government workers are being affected, but private businesses providing goods and services to those government entities are also showing signs of weakness.

The New York-based Empire State index for January also posted a lower-than-expected headline number: just 3.9, down from the upwardly revised 11.5 from December and well beneath the 21.4 read we saw for November. The Empire State survey is notoriously volatile, of course, relying on economic data from just one U.S. state. Then again, New York is one of the largest states in the union by population, with some of the richest and most diverse economic sectors in the U.S., which is why this index considered an important metric.

Q4 Earnings Season Provides Mixed Results

Currently, Q4 earnings season is heating up in earnest, with two top Wall Street banks and two other sector leaders bringing results ahead of the opening bell. To start with, JPMorgan (JPM - Free Report) missed on its bottom line, posting $1.98 per share on $26.1 billion in revenues for the quarter — notably down from the $2.20 per share and $26.7 billion Zacks analysts had been expecting.

While this revenue figure is up from the year-ago level of $24.5 billion, missing earnings estimates is not a familiar place for JPMorgan. In fact, this is the first earnings miss since Q3 2015 — 13 quarters ago. Fixed Income investing falling 16% was the first culprit noted upon the earnings release. For more on JPM’s earnings, click here.

Wells Fargo (WFC - Free Report) beat bottom line estimates by 4 cents to $1.21 per share, but its revenue in Q4 came up 2.7% short, to $20.98 billion. This is Wells’ second straight earnings beat in what has been a challenging last couple years for the Zacks Rank #4 (Sell)-rated company. For more on WFC’s earnings, click here.

UnitedHealth (UNH - Free Report) also put up Q4 numbers in today’s pre-market, with the Zacks Rank #2 (Buy)-rated company beating on the bottom line by 8 cents to $3.28 per share. Revenues slightly outperformed expectations to $58.42 billion. A quick look at the Zacks surprise chart for UnitedHealth shows something quite uncommon: 21 straight quarters of earnings beats, going back to Q4 2014 — 5 full years ago. For more on UNH's earnings, click here.

Another Zacks Rank #2-rated company, Delta Air Lines (DAL - Free Report) , also beat on the bottom line: $1.30 per share versus the $1.27 expected. However, its $10.74 billion in revenue generated for the quarter os down 0.8% from the Zacks consensus estimate. Even though share prices have taken a hit of late, Delta has not missed earnings expectations since Q2 2017. For more on DAL’s earnings, click here.

Mark Vickery
Senior Editor

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