S&P 500, Dow, Nasdaq Soar Despite Inflation Data; Cisco, China Internets, Hotels Report Earnings: Weekly Review
The S&P 500 index, Dow Jones industrial average and Nasdaq composite continued to rebound, despite rising inflation pressures and Treasury yields, triggering a shift from market correction to confirmed uptrend. Cisco Systems ( CSCO ) reported strong earnings, along with Weibo ( WB ) and other China internets as well as several other top-rated tech stocks. Top-rated hotels were mixed after their reports. Chipotle Mexican Grill ( CMG ) hired Taco's chief to be its next CEO. Facebook ( FB ) showed signs of losing more young users to Snap ( SNAP )-owned.
Stock Market Confirms New Rally
[ibd-display-video id=3149744 width=50 float=left autostart=true] After plunging in the prior two weeks, the S&P 500 index, Dow Jones and Nasdaq composite surged in the latest week, shrugging off rising prices and the continued rise in Treasury yields. The market is back in an uptrend. Cisco hit a 17-year high on its results, outlook and buyback. Shopify (SHOP), Hubspot (HUBS) and Weibo ( WB ) also had good results. But Arista Networks (ANET) and LogMeIn (LOGM) fell Friday on guidance.
Cisco Beats, Guides Ups, Buys Back
Cisco Systems ( CSCO ) announced a $25 billion stock buyback , topped earnings forecasts, reported its first revenue gain in eight quarters and guided March quarter views higher. Aside from the new $25 billion buyback, Cisco plans to use some of the $67 billion in repatriated cash for a dividend hike. Cisco would have around $30 billion, including domestic cash on hand, for acquisitions. Cisco shares rose to a 17-year high.
Arista Networks Outlook Disappoints
Arista Networks handily beat Q4 earnings views with a 64% jump but revenue only edged estimates and its sales outlook for the March quarter and 2018 disappointed. Shares dived Friday after a 200% run-up the past year. Management forecast a sequential revenue decline in the March quarter, with the mid-point of revenue guidance implying 37% growth to $459 million, just above estimates of $457 million. Analysts said Arista set the expectation for "mid-20s" revenue growth in 2018 which is below the Street's 27.5%. The guidance could reflect stiffer competition from Cisco.
Shopify Earnings Jump
Shopify (SHOP) earned 15 cents a share in Q4 , up from no profit a year earlier, vs. estimates of 5 cents. Revenue jumped 71% to $222.8 million, topping consensus estimates of $208 million. The e-commerce software firm forecast Q1 and 2018 revenue above expectations. Shares edged up Thursday after surging to a record high ahead of earnings. Shopify surged 15% through Thursday.
Facebook Losing Young To Snapchat
Facebook ( FB ) is losing younger users to Snap ( SNAP )-owned Snapchat at an even faster pace than previously expected, said research firm eMarketer. It said Facebook is still adding monthly users overall, but older age groups are mainly responsible for the increase. Facebook will lose 2 million users under 25 in the U.S. this year while Snapchat will add 1.9 million, eMarketer predicts. Facebook's Instagram will still add teens and young adults.
Weibo, Sina, Baidu Top
Shares of China internet companies Weibo ( WB ) and parent Sina (SINA) both reported fourth-quarter results that largely topped estimates. Weibo is a social media company that has a Twitter ( TWTR )-like platform, while Sina offers a popular internet portal. Internet search leader Baidu (BIDU) also jumped on a fourth-quarter report that topped views, thanks to upside from online video and news feed advertising.
Oil Back Above $60
Diamondback Energy (FANG) and Occidental Petroleum (OXY) reported Q4 results above Wall Street estimates and plan to boost production this year as the International Energy Agency said U.S. crude output will overtake Saudi Arabia "soon" and "catch up to Russia by the end of the year." The Energy Information Administration said domestic oil production edged up to 10.27 million barrels per day from 10.25 million the prior week. OPEC sees global demand growth increasing by 60,000 barrels per day to 1.59 million, but expects U.S. production growth to outpace demand growth. Saudi Arabia called for production cuts by OPEC and Russia to continue through 2018. That, along with a stock market revival and a weak dollar, helped lift crude futures back above $60 a barrel.
Inflation Data Higher
The consumer price index and core CPI rose more than expected, pushing the 10-year Treasury above 2.9%, hitting fresh four-year highs. But core inflation is still just 1.8%. Markets priced in greater certainty of three Federal Reserve rate hikes in 2018, but still only about a 25% chance of a fourth hike. Meanwhile, January retail sales fell 0.3%, leading economists to mark down expectations for first-quarter GDP growth.
Bitcoin Back Above $10K As As Litecoin Stakes Claim
Bitcoin continued on its upward trajectory, breaking the $10,000 mark on Thursday after briefly undercutting the $6,000 mark in the prior week. Meanwhile, Litecoin vaulted more than 30% as anticipation builds for the launch of payment processor LitePay and an upcoming fork of its blockchain. Meanwhile IBM (IBM) warned Congress about overregulating digital currencies in case it has "unintended consequences" on blockchain technology.
LogMeIn Beats, Outlook Light
LogMeIn (LOGM) reported adjusted Q4 earnings that beat estimates while pro forma revenue topped views. For 2018, LogMeIn forecast profit of $5.48 a share, well above estimates of $4.90 a share but its March quarter and full-year revenue outlooks were a bit light . LogMeIn sold Xively, its Internet of Things business for web-connected devices, to Google for $50 million. LogMeIn completed a reverse merger with the GoToMeeting business of Citrix (CTXS) on Feb. 1, 2017. Shares, which had broken out earlier in the week, fell Friday morning undercutting its buy point intraday.
Chipotle Gets Taco Bell Seasoning
Chipotle Mexican Grill said Brian Niccol, CEO of Taco Bell, would become the fast-casual chain's chief executive in March. Shares sprinted higher on hopes Niccol - known for helping bring hits like Nacho Fries and Doritos Locos Tacos to Taco Bell's menu - might revive Chipotle's sales and traffic following food-safety issues. Meanwhile, Restaurant Brands International (QSR) said Burger King turned out strong Q4 sales, and the company more than doubled its dividend. Shake Shack (SHAK) said that by 2020, it planned to more than double its store count from last year's levels, while Q4 results beat views.
News In Brief
Wyndham Worldwide (WYN), Marriott International (MAR), Hilton (HLT) and Hyatt (H) all reported quarterly results that topped expectations.
HubSpot (HUBS) swung to a fourth-quarter profit as revenue jumped 39% to $106.5 million.. The Web marketing softward firm gave March quarter and full-year guidance above estimates. CFO John Kinzer will leave at the end of 2018. Shares shot up 13% through Thursday.
RingCentral (RNG) earned 7 cents a share in Q4, with revenue rising 34% to $140.5 million vs. estimates of 6 cents and $137 million. The cloud-based business communications software maker forecast 2018 adjusted earnings well above expectations. RingCentral leapt 19% as of Thursday's close.
General Dynamics (GD) will buy defense IT contractor CSRA (CSRA) for $6.8 billion plus $2.8 billion in assumed debt as the military contractor looks to increase its IT services for the Defense Department in the wake of increased defense spending.
SolarEdge (SEDG) shares vaulted 42% after reporting fourth-quarter earnings that beat and guided materially above the consensus estimate, while SunPower shares fell on disappointing earnings with a first-quarter revenue outlook below expectations.
NetApp (NTAP) beat quarterly earnings that beat views but gave commentary that implied a reduction in gross margins. NetApp fell 5% Thursday, but closed well off early lows and was still up slightly for the week.
Shares in cybersecurity firms Qualys (QLYS) and Mimecast (MIME) climbed on better-than-expected earnings . Qualys forecast March quarter profit above views. The company is investing in product marketing and sales capacity. Mimecast, an email security specialist, upped fiscal 2018 revenue guidance. CyberArk (CYBR) topped Q4 revenue and EPS views as it closed larger deals. CyberArk forecast in-line March quarter sales but EPS below estimates.
Chip-gear maker Applied Materials (AMAT) delivered better-than-expected fiscal first quarter sales and earnings, guided estimates higher for the current quarter, doubled its quarterly dividend and announced a new $6 billion share repurchase plan.
Universal Display (OLED), a provider of technology and materials for OLED displays, signed new long-term supply and license agreements with major customer Samsung. Shares rose.
Groupon (GRPN) saw EPS rise 33% to four cents in the fourth quarter, missing estimates, as revenue fell 7% to $873 million, beating views. Gross billings slipped 1% in 2017 to $5.65 billion.
Martin Marietta Materials (MLM) stock was on an upward trajectory after the building supplies giant outperformed earnings expectations on Tuesday. It help lift other stocks int he sector.
Coca-Cola (KO) reported better-than-expected profit and sales. Pepsico (PEP) also topped views, thanks to a 5% sales spike in its Frito Lay unit.
AmerisourceBergen (ABC) surged on reports that Walgreens Boots Alliance (WBA) may buy the rest of the drug distributor that it doesn't already own. Industry peers McKesson (MCK), Cardinal Health (CAH) and Owens & MinorOMI dropped on word that Amazon (AMZN) seeks to become a major medical supplier to hospitals.
CBS (CBS) notched 4% in Q4 profit growth to $1.15 a share as revenue rose 11.5% to $3.92 billion, and said it has nearly 5 million streaming subscribers. Shares are climbing back toward their 50-day line.
Sports apparel and footwear maker Under Armour (UAA) recorded breakeven earnings and 4.6% revenue growth to $1.365 billion vs. views for a penny a share and $1.308 billion. The stock rallied, retaking its 200-day moving average this week.
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