The Dow had a largely positive week, but for a significant
decline on Thursday. The blue-chip index hit an intraday record
high on Monday, before declining in the afternoon session.
The Dow achieved another intraday high on Tuesday, but had
gained only marginally by the end of the session. Several new deals
and upbeat results helped the blue-chip index register significant
gains on Wednesday. However, the Dow lost heavily on Thursday,
following international tensions and disappointing domestic data.
Markets recovered on Friday, following upbeat earnings results and
gains in bio-tech and Internet stocks. Friday's gains also helped
the Dow end the week modestly higher.
Components Moving the Index
General Electric Company
) reported strong second-quarter 2014 results with healthy
year-over-year increase in revenues and earnings backed by solid
industrial segment profit growth and margin expansion.
Operating earnings for the reported quarter improved to $3.9
billion or 39 cents a share from $3.7 billion or 36 cents a share
in the year-ago quarter. The increase in year-over-year earnings
was primarily attributable to top-line growth. Operating earnings
for the reported quarter were in line with the Zacks Consensus
On a GAAP basis, the company reported quarterly earnings (from
continuing operations) of $3.6 billion or 35 cents per share
compared with $3.3 billion or 31 cents in second-quarter 2013.
International Business Machines Corp.
) reported non-GAAP earnings of $4.32 per share in the second
quarter of 2014. Earnings per share (EPS) including acquisition and
retirement related adjustments jumped 34.2% from the year-ago
quarter and beat the Zacks Consensus Estimate by a penny.
The year-over-year growth in EPS was primarily driven by
better-than-expected revenue results, margin expansion due to
stringent cost cutting and aggressive share buyback.
Management also provided positive outlook for the second half of
2014.IBM forecasts fiscal 2014 operating earnings of at least
$18.00 per share, an estimated 6.0% increase from $16.99 reported
in 2013. Currently, the Zacks Consensus Estimate is pegged at
$17.93 for 2014.
IBM expects the software and services segment to grow aggressively
(mid single-digit) in the second half of 2014. Services segment
profitability is expected to grow in mid single-digit range, while
hardware profit is expected to stabilize over the rest of 2014.
Management expects EPS in single-digits and double-digits in the
third and fourth quarters, respectively, driven by better
performance across all the segments.
) announced it will eliminate up to 18,000 jobs over the next one
year, as it takes steps to build leaner business processes and
integrate Nokia Oyj´s handset unit. The restructuring will
significantly trim its workforce as the company attempts to
streamline the cost structure and thus boost the bottom line.
Microsoft will now lay off 14% of its current workforce, making
this the biggest round of job cuts in its history. The last time
Microsoft announced layoffs was in 2009, when 5% of its workforce
was eliminated in order to deal with the recession. This time
round, Microsoft will slash about 12,500 jobs from its Nokia
business, which is nearly half of the workforce inherited through
the Nokia acquisition in April.
) posted earnings of 55 cents per share, better than the Zacks
Consensus Estimate of 52 cents and management guidance. Profits
were up 44% sequentially and 41% year over year on growing volumes,
better mix and stronger margins. While the company continues to
make progress in the mobile segment, its fortunes are still tied to
the PC and data center segments, where market-driven factors and
new products like the Xeon E7 family drove results.
The PC Client Group, which continues to account for the largest
chunk of Intel's business (62%), now also includes gateway and STB
products. The adjusted revenues for the segment are up 9.1%
sequentially and 6.2% year over year.
Data Center, which generated 25% of quarterly revenue, saw units
and ASP up 9% and 11%, respectively from last year, with cloud,
networking HPC and enterprise revenue each up more than 15%.
Johnson & Johnson
) reported second-quarter 2014 earnings (excluding special items)
of $1.66 per share, well above the Zacks Consensus Estimate of
$1.54 per share. This was 12.2% above the year-ago earnings of
$1.48 per share.
Johnson & Johnson recorded growth on the back of strong pharma
product sales with newly launched products like Olysio performing
Johnson & Johnson's second quarter sales jumped 9.1%
year-over-year to $19.5 billion, beating the Zacks Consensus
Estimate of $18.9 billion. While operational factors favorably
impacted sales by 9.4%, currency fluctuations had a negative impact
Including one-time items, Johnson & Johnson reported second
quarter earnings of $1.51 per share, well above the year-ago
earnings of $1.33 per share.
UnitedHealth Group Inc.
) reported second-quarter 2014 operating earnings of $1.42 per
share, handily beating the Zacks Consensus Estimate of $1.25. This
also compares favorably with the year-ago earnings of $1.40 per
share. The earnings outperformance was driven by higher revenues
but partly offset by a higher tax rate.
Total revenue of $32.6 billion increased 7.2% year over year. The
revenue figure also surpassed the Zacks Consensus Estimate of $32.0
billion. Total operating cost came in at $30.0 billion, 7.2% higher
year over year due to higher medical operating cost and an
increased cost of product sold. Medical cost, which constitutes the
major portion of operating cost, also increased 6% year over year
to $23.5 billion.
JPMorgan Chase & Co.
braved the tough industry backdrop and seasonal softness with its
underlying strength and delivered a positive earnings surprise of
22.3% in the second quarter. The banking giant came out with
earnings of $1.59 per share, beating the Zacks Consensus Estimate
of $1.30. The number is marginally less than $1.60 earned in
the year- ago quarter.
Results exclude an after-tax legal expense of 13 cents per share.
Considering this one-time item, the company has earned $1.46 per
All business segments but for Consumer & Community Banking and
Corporate and Investment Bank, witnessed year-over-year improvement
in net income.
The Goldman Sachs Group, Inc.
's second-quarter 2014 earnings per share came in at $4.10,
outpacing the Zacks Consensus Estimate of $3.07. Moreover, results
were above the year-ago figure of $3.70.
Higher investment banking revenues and steady capital deployment
activities were the positives for the quarter. However, increased
expenses exhibited undisciplined expense management. Moreover,
lower trading revenues reflected an unstable economic environment
and market volatility.
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 over 0.3%.
Last 5 Day's Performance
6 Month Performance
This Week's Outlook
Stocks have had a largely positive week, but for Thursday's
losses. Upbeat earnings, new corporate deals and bullish economic
data have contributed to gains. However, international tensions
have cast a shadow over the markets. The impact of these external
factors will possibly be felt in the days ahead.
Some important reports are lined up this week. These include
data on housing, inflation, durable orders and jobless claims.
Earnings have also been on the positive side, contributing to gains
for stocks. If they continue to dominate proceedings, they may well
outweigh international concerns and push indices upward.
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JPMORGAN CHASE (JPM): Free Stock Analysis
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