Dow 30 Stock Roundup: Disney, Exxon Beat; United Technologies Raises Dividend
The Dow enjoyed a week of significant gains, buoyed by rising oil prices. The blue-chip index ended Monday’s volatile trading session with solid gains after a rally in oil prices boosted energy shares. An increase in oil prices helped the Dow end in the green on Tuesday as well.
The Dow declined on Wednesday after the ECB refused to accept Greek bonds as collateral for central bank loans. However, the blue-chip index rebounded on Thursday, powered by a rise in oil prices and new deals. The Dow has surged 4.1% during the first four trading days.
Last Week’s Performance
Last Friday, the Dow slumped 1.5% after lower-than-expected fourth quarter GDP data dented investor sentiment. According to the “advance” estimate, GDP increased at an annual rate of 2.6%, less than the consensus estimate of an increase by 3.6%. This was also significantly lower than third quarter’s figure of 5%.
In contrast, Chicago PMI went up to 59.4 in January from December’s reading of 58.3. Energy shares were able to move north banking on surge in oil prices. Oil prices rallied following a big drop in U.S. rig counts as producers responded to abundant supply of oil.
For the week, the Dow lost 2.8%. Benchmarks ended in negative territory for the week due to decline in oil prices. Slump in oil prices offset the positive impact of the Federal Reserve’s encouraging view on economy and labor market.
For the month, the Dow declined 3.7%. In January, the World Bank reduced its global economic growth outlook for 2015 and 2016. Continuous plunge in oil prices also dampened investor confidence. Political uncertainty in Greece and Bill Gross’ dismal outlook for 2015 dented investor mood.
Dismal retail sales report coupled with disappointing economic data including ISM Services Index and factory order added to the bearish sentiment. Disappointing earnings results from key companies also had a negative impact on investor sentiment.
The Dow This Week
Markets ended Monday’s volatile trading session with solid gains after a rally in oil prices boosted energy shares. Oil prices climbed about 11% over the last two trading sessions following the perception that prices have touched the bottom.
An offer from Greece’s finance minister to end the standoff with its international creditors over the country’s debt was also welcomed by investors. Greece’s finance minister Yanis Varoufakis proposed to end the standoff between its international creditors by swapping the country’s debt obligations for new growth-linked bonds.
Meanwhile, the ISM Manufacturing Index reported its weakest reading in almost one year in January. However, construction spending came in 0.4% higher than the revised November estimate. The Dow gained 1.1%.
The blue-chip index gained for the second-straight session on Tuesday, rising 1.8%. A rally in oil prices helped energy shares settle in the green. Oil prices moved north due on Tuesday following BP p.l.c.’s (BP - Analyst Report) announcement of a cut in its capital expenditure by 13% to $20 billion. Additionally, a U.S. refinery strike increased prices for petroleum products on concerns of a possible shut down of fuel production. Oil
Meanwhile, upbeat monthly U.S. auto sales report also boosted investor sentiment. Domestic-made vehicle sales climbed to an annualized rate of 13.5 million in January Encouraging news emanating from Greece also added to the bullish sentiment.
Stocks finished mostly lower on Wednesday after the ECB refused to accept Greek bonds as collateral for central bank loans. However, the ECB’s emergency lending program will still allow Greek banks access to funds. The Greek central bank will have to bear the credit risk of the loan with a higher interest rate.
Meanwhile, oil prices snapped a four-session winning streak and settled in the red, hurting energy shares. Oil prices dropped sharply after the U.S. Energy Information Administration declared crude stockpiles increased by 6.3 million barrels for the week ending Jan 30. However, the Dow gained a meager 0.04%, banking on The Walt Disney Company’s (DIS - Analyst Report) upbeat quarterly results.
The Dow gained 1.2% on Thursday powered by a rise in oil prices and new deals. Rise in crude oil prices fueled gains in material and energy shares. Fresh monetary stimulus from China’s central bank along with rise in violence in an oilfield in Libya helped oil prices move north.
Additionally, Pfizer Inc.’s (PFE - Analyst Report) plan to acquire Hospira Inc. (HSP - Analyst Report) boosted healthcare stocks. Meanwhile, investors shrugged off discouraging news emanating from Greece. Germany dismissed Greece’s plea for bridge funding till the end of May that will give the country some time to negotiate new bailout conditions.
Components Moving the Index
The Walt Disney Company reported spectacular first-quarter fiscal 2015 results, wherein adjusted earnings per share of $1.27 were miles ahead of both the Zacks Consensus Estimate of $1.08 and the prior-year quarter adjusted figure of $1.04 per share. Disney’s shares were up 2.3% in the extended trading session on Tuesday.
Revenues came in at $13,391 million, up 9% year over year and way ahead of the Zacks Consensus Estimate of $12,852 million. Total segment operating income increased 17% to $3,545 million, based on strong performance across all divisions, particularly Consumer products, Studio, and Parks and Resorts segments.
ExxonMobil Corp. (XOM - Analyst Report) posted fourth-quarter 2014 earnings of $1.56 per share, beating the Zacks Consensus Estimate of $1.33. The bottom line, however, decreased from $1.91 in the year-ago quarter. Total revenue in the quarter decreased from $110.9 billion in the year-ago quarter to $87.3 billion. The top line also came below the Zacks Consensus Estimate of $92.7 billion.
Full-year 2014 earnings came in at $7.60 per share, ahead of the Zacks Consensus Estimate of $7.51 and higher than the year-ago earnings of $7.37 per share. Total revenue in the full year decreased to $411.9 billion from $438.3 billion in 2013. It also came below the Zacks Consensus Estimate of $413.5 billion.
Merck & Co. (MRK - Analyst Report) reported fourth quarter 2014 earnings of 87 cents per share, beating the Zacks Consensus Estimate of 85 cents. Earnings, however, declined 1.1% from the year-ago period.
Revenues for the quarter declined 7% to $10.482 billion but surpassed the Zacks Consensus Estimate of $10.41 billion. While currency movement negatively impacted revenues by 3%, patent expiries and divestitures impacted revenues by 7%. Full year earnings remained flat at $3.49 per share. Full-year revenues declined 4% to $42.2 billion.
United Technologies Corp. (UTX - Analyst Report) recently announced an 8.5% year-over-year hike in its quarterly dividend payout to 64 cents per share or $2.56 on an annualized basis. The increased dividend will be payable from first-quarter 2015 on Mar 10 to shareholders of record as of Feb 13.
Based on the closing price of $116.58 on Feb 2, 2015, the proposed dividend affirms a yield of 2.2%. A steady dividend payout is part of the long-term strategy of United Technologies to provide attractive risk-adjusted returns to its stockholders. In addition, healthy dividend increases at periodic intervals have been one of United Technologies’ high points.
The Boeing Company (BA - Analyst Report) declared that Japan’s All Nippon Airways (“ANA”) has committed to buy three units of the 787-10 Dreamliner and five units of the Next-Generation 737-800. The deal is valued at roughly $1.4 billion at list prices.
ANA, the launch customer of Boeing’s 787 fleet, has received deliveries of 34 787 airplanes till date, with 46 orders yet to be delivered. With this commitment, it will become the first Asian airline to operate an entire family of the Dreamliners.
Chevron Corp.’s (CVX - Analyst Report) fully owned affiliate of U.S. energy giant Chevron Mauritania Exploration Limited has entered into a deal with upstream energy player Kosmos Energy Ltd. (KOS - Snapshot Report).
Per the agreement, the Chevron subsidiary will acquire a 30% non-operated working interest in Blocks C8, C12 and C13 located off the coast of Mauritania. The deal is however dependent on the authorization of the country’s government.
Following the completion of the transaction, Kosmos Energy will have 60% ownership in the three blocks and will stay as the operator. The remaining 10% interest will be under the possession of the country’s national oil company Société Mauritanienne des Hydrocarbures et de Patrimoine Minier as before.
The three blocks are situated below water at a depth of 5,249−9,842 feet where it is spread over an area of 6.6 million gross acres. With its 30% interest in the three blocks, Chevron hopes to be the operator if there is any commercial discovery during exploration of the area.
Pfizer Inc.’s breast cancer drug, Ibrance (palbociclib) received accelerated approval from the FDA to be used in combination with Novartis’ (NVS - Analyst Report) Femara (letrozole) for the first-line treatment of postmenopausal women with estrogen receptor-positive, human epidermal growth factor receptor 2-negative (ER+/HER2-) advanced breast cancer as an initial endocrine-based therapy for their metastatic disease.
This makes Ibrance the first CDK 4/6 inhibitor to be approved by the FDA. Approval came more than two months ahead of schedule. Pfizer’s shares were up 1.2% on the news.
The accelerated approval was based on positive data from the phase II PALOMA-1 study. Results from the study revealed that a combination treatment of Ibrance and Femara led to a statistically significant improvement in progression-free survival (20.2 months) versus Femara alone (10.2 months).
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 1.2%.
Ticker |
Last 5 Day’s Performance |
6-Month Performance |
V |
+5% |
+28.8% |
IBM |
+1.3% |
-15.6% |
GS |
+0.1% |
+6.6% |
MMM |
+1.5% |
+19.1% |
BA |
+10.4% |
+22.5% |
CVX |
+2.3% |
-12.5% |
UTX |
+0.1% |
+14.4% |
XOM |
+1.6% |
-5.9% |
MCD |
+5.3% |
+0.9% |
CAT |
-2.4% |
-17.7% |
Next Week’s Outlook
Rising oil prices have helped stocks chalk up significant gains this week. The perception that oil prices have hit rock bottom has gained strength. Additionally, a series of international events have helped prices move higher. Factors as disparate as a refinery strike and monetary stimulus from China’s central bank have fueled these gains.
Though prices remain volatile, they have been trending higher recently. It is likely that they may continue to guide markets in the days ahead. Economic data has come in mixed this week and has failed to make any major impact on the markets. Data on retail sales data is possibly the key economic report scheduled for release next week. Any good news on this front is likely to help stocks move higher over the next few days
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