Dow 30 Stock Roundup: AXP, GS, UNH IBM Q4 Earnings Impress

The Dow traversed a holiday-shortened yet volatile week during which it surpassed the 26,000 mark. Markets remained closed on Monday due to Martin Luther King Jr. Day. Recent political tensions sent the Dow lower on Tuesday. Ultimately, the index closed above the 26,000 barrier for the first time on Wednesday. The index closed in the red on Thursday following concerns over the likelihood of a government shutdown.

Last Week’s Performance

The Dow gained 0.9% on last Friday after several major banks posted encouraging earnings results. Additionally, domestic retail sales increased for the fourth-straight month, by 0.4%, which had a positive impact on the consumer discretionary sector. Sales also rose 5.4% from the year ago level. Further, CPI and core-CPI gained 0.1% and 0.3%, respectively.

Meanwhile, a number of factors propelled oil prices upward. These include the OPEC-led production cut extension, lower inventory overhang and rising demand. Adding to the positive momentum, energy bodies OPEC and IEA recently raised global oil demand forecasts for 2018, helping to tighten the market significantly.

The index gained 2% over last week, marking its second straight weeks of gains. The Dow has also registered weekly rallies for seven out of the last eight weeks. The week started on an upbeat note following optimism over the strong market rally that began in 2018.

Markets gained traction during the latter part of the week after U.S. Treasury Yields declined following the auction of U.S. 30-year bonds. Moreover, Chinese officials denied reports that they were planning to cease purchase of U.S. Treasuries.

The Dow This Week

Markets remained closed on Monday due to Martin Luther King Jr. Day. On Tuesday, the Dow lost 7.68 points to close at 25,792.86. Recent political tensions weighed on sentiment despite strong quarterly earnings results.

The Dow posted its biggest reversal in a day since Feb 10, 2016 after briefly moving above the 26,000 mark for the first time. Additionally, oil prices fell after investors decided to lock in gains, which in turn weighed on the energy sector.

Strong earnings results led benchmarks to close in positive territory on Wednesday, with the Dow finishing above 26,000 for the first time. The index gained 1.3% settling at a new record high following the release of encouraging earnings results.

Additionally, in its Beige Book, the Fed provided an encouraging outlook about the U.S. economy, which in turn also boosted investor sentiment. The Dow also posted its best 11-trading day start for the first time in a year since 1987.

Meanwhile, shares of Apple Inc. AAPL rose 1.7% after the tech giant announced that it will pay a one-time repatriation tax of $38 billion and will raise its investment in the U.S. over the next five years.

The index lost 0.4% on Thursday following concerns over a likelihood of a government shutdown. Sectors like real estate and utilities, which are considered as alternatives to bonds, declined after yield on 10-year Treasury notes reached its highest level since 2014.

Additionally, increase in U.S. gasoline inventories and sharp rise in domestic crude production weighed on oil prices, which in turn led the energy sector downward. WTI and Brent crude decreased by 0.03% and 0.1% to $63.95 per barrel and $69.31 a barrel, respectively.

Components Moving the Index

American Express Company AXP reported adjusted earnings per share (EPS) of $1.58, beating the Zacks Consensus Estimate by 2.6%. Earnings witnessed a sharp 74% year-over-year improvement.

The company saddled a charge of $2.6 billion on account of estimated taxes on deemed repatriations of certain overseas earnings. The remeasurement of U.S. deferred tax assets and liabilities led to net loss of $1.41 per share compared with net income 88 cents per share a year ago.

Over the long haul the company, however, is sanguine about the tax reform and stated that it would invest up to $200 million more in 2018 than originally planned for customer-facing growth initiatives.

Revenues came in at $8.84 billion, 1.4% ahead of the Zacks Consensus Estimate of $8.72 billion. Top line increased 10% year over year on higher non-interest income and interest received on loans.

The company foresees 2018 earnings per share between $6.90 and $7.30, which represents 20% year over year increase (calculated at the midpoint). The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

International Business Machines Corp IBM reported fourth-quarter non-GAAP earnings of $5.18 per share, which beat the Zacks Consensus Estimate by a penny. Earnings per share was better than the year-ago figure by 3.4% and surged 56.9% sequentially.

Revenues of $22.54 billion surpassed the Zacks Consensus Estimate of $21.96 billion and increased 3.5% on a year-over-year basis. At constant currency (cc), revenues grew 1%. Moreover, revenues increased 17.7% sequentially.

IBM also provided EPS forecast for 2018. Non-GAAP EPS is anticipated to be at least $13.80. The Zacks Consensus Estimate for earnings is pegged at $13.86 per share.

The Goldman Sachs Group, Inc. GS reported adjusted earnings per share of $5.68, comfortably beating the Zacks Consensus Estimate of $4.90. Further, the bottom line witnessed 11.8% year-over-year improvement. Notably, results, including income tax expense related to the tax reform of $4.4 billion, reported net loss of $1.93 billion or $5.51 per share.

For full-year 2017, adjusted net income per share of $19.76 came in higher than the year-ago earnings of $16.29. Earnings also surpassed the Zacks Consensus Estimate of $18.98.

For full-year 2017, the company’s reported revenues of $32.1 billion were up 5% year over year. Moreover, revenues managed to beat the Zacks Consensus Estimate of $31.8 billion.

Zacks Rank #3 (Hold) Goldman’s net revenues were down 4% year over year to $7.8 billion in the quarter under review. However, the figure handily outpaced the Zacks Consensus Estimate of $7.6 billion. (Read: Goldman Q4 Earnings Impressive, Tax Expense Recorded)

UnitedHealth Group Inc. UNH came up with earnings of $2.59 per share, beating the Zacks Consensus Estimate of $2.50. Earnings also rose 22.7% year over year. Higher revenues, strength in both its segments, UnitedHealthcare and Optum, and membership growth led to the outperformance.

The company enjoyed a non-cash benefit of $1.22 per share from the revaluation of its net deferred tax liability, as a result of the recent tax reform. UnitedHealth recorded revenues of $52.1 billion, which surpassed the Zacks Consensus Estimate of $51.5 billion. Also, it compared favorably with the year-ago figure of $47.5 billion.

Zacks Rank #2 (Buy) UnitedHealth revised its 2018 financial outlook to reflect the effects of the U.S. corporate tax law changes. It now expects 2018 net earnings of $11.65 to $11.95 per share and adjusted net earnings of $12.30 to $12.60 per share. (Read: UnitedHealth Beats on Q4 Earnings, Revises 2018 View)

JPMorgan Chase & Co. JPM reported fourth-quarter 2017 earnings of $1.76 per share, which handily surpassed the Zacks Consensus Estimate of $1.69. Results exclude one-time tax related charge of $2.4 billion or 69 cents per share. JPMorgan has a Zacks Rank #2.

Solid loan growth (driven mainly by improved credit card loans) and higher interest rates supported net interest income growth. Further, rise in investment banking fees and stable equity trading income supported the top line.

Managed net revenues of $25.5 billion for the quarter were up 5% year-over-year. Also, it compared favorably with the Zacks Consensus Estimate of $25 billion.

Rising rates, loan growth and increase in auto lease revenues were the main reasons for the improvement. These were partially offset by lower trading revenues and mortgage banking fees. (Read: JPMorgan Q4 Earnings Beat Thanks to Investment Banking)

Chevron Corporation CVX has announced plans to resume drilling activities in the Kurdistan Region in Iraq. This has become possible following easing political tensions between the semi-autonomous Kurdistan Region and the federal government of Iraq. The company had called off operations in the region in October 2017 owing to increasing disputes.

Post the Kurdistan independence referendum (September 2017), which was strongly opposed by the Iraqi government, the latter seized the oil fields in Kirkuk and Kirdustani regions. The move reduced the revenues of the region to half owing to the loss of over 350,000 barrels of oil production per day, raising supply concerns in the region.

However, with the dispute abating of late, Zacks Rank #3 Chevron has started to take necessary steps to remobilize staff and equipment in the region to recommence operations at the Sarta 3 block in Kurdistan.

Chevron is the chief operator of the block holding 80% interest in the Sarta product-sharing contract (PSC). It also operates at the Qara Dagh field with an 80% PSC. The two blocks cover a combined area of 279,000 net acres. (Read: Chevron to Resume Drilling Operations in Kurdistan)

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 1.1%.

Next Week’s Outlook

Markets continue to move ever higher, creating new milestones on the way, despite recent hiccups. The most recent of these is the specter of a government shutdown, which continues to linger uncomfortably. Stocks would certainly face reverses if that such an event indeed occurs. However, if the Senate is able to achieve a consensus there is little to stop stocks from mopping up further gains, powered by the fourth quarter’s bullish earnings performance.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>  

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
 
International Business Machines Corporation (IBM) : Free Stock Analysis Report
 
J P Morgan Chase & Co (JPM) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Goldman Sachs Group, Inc. (The) (GS) : Free Stock Analysis Report
 
American Express Company (AXP) : Free Stock Analysis Report
 
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research