Major market benchmarks pulled back on Thursday, but managed to close above lows of the day. The Dow Jones Industrial Average (DJINDICES: ^DJI) lost less than 100 points, and the S&P 500 (SNPINDEX: ^GSPC) fell about half a percentage point.
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Financial stocks rebounded from recent weakness, with the SPDR S&P Bank ETF (NYSEMKT: KBE) up 1.9%. Consumer stocks were the weakest sector; the Consumer Staples Select Sector SPDR ETF (NYSEMKT: XLP) closed down 2.9%.
As for individual stocks, American Express (NYSE: AXP) reported better-than-expected earnings, while Philip Morris International (NYSE: PM) beat profit forecasts, but stoked concern about growth of its cigarette alternative products.
American Express jumps on higher profits
Shares of American Express soared 7.6% after the company released first-quarter results that solidly beat expectations. Revenue grew 11.6% to $9.72 billion, compared with analyst expectations for $9.46 billion. Earnings per share jumped 38% to $1.86, compared with the consensus estimate of $1.71.
Profit growth was strong across the board, thanks to higher card member spending, loan growth, and a lower tax rate. From a segment perspective, global commercial services led with net income growth of 35%, U.S. consumer services grew income by 30%, global merchant services profit was up 32%, and international consumer and network services jumped 15%. Taking out the impact of the lower tax rate, EPS still grew 19%.
Last quarter American Express announced it was suspending share repurchases for the first half of the year, and CFO Jeffrey Campbell expressed confidence in the conference call that the company will resume the buybacks in the second half. Company officials expect 2018 earnings to come in at the high end of previous guidance of $6.90 to $7.30. Analysts have been estimating $7.12.
"Our year is off to a good start with double-digit growth in billed business, revenues and earnings," said CEO Stephen J. Squeri in the press release. "Card Member spending grew 12 percent, and we acquired 3.5 million new cards across our global issuing business, reflecting in part the recent Hilton portfolio acquisition. Credit indicators are in line with our expectations, and the loan portfolio grew 16 percent."
It was a solid quarter, and taken with management optimism about the rest of the year, investors gave the stock a hefty bump up today.
Philip Morris shares take a big hit
Philip Morris reported first-quarter earnings that were above expectations, but a small miss on revenue and slowing growth of its iQOS heated tobacco products spooked investors, and the stock plunged 15.6%. Net revenue was up 13.7% to $6.9 billion and adjusted earnings per share grew 2% to $1.00. Analysts were looking for EPS of $0.90 on sales of about $7 billion.
Cigarette unit shipment volume fell 5.3%, while shipments of heated tobacco products more than doubled from the period last year, increasing 5.1 billion units to 9.6 billion. What made that shipment number for iQOS disappointing was the comparison with last quarter. In Q4, shipments of heated tobacco products increased 12 billion units to 15.7 billion. The company said device sales in Japan were lower than expected due to slower adoption by older, more conservative consumers. A plateau in Japanese sales was expected, but came earlier in the year than anticipated, according to management statements in the conference call.
Looking forward, the company raised full-year adjusted earnings guidance to a range of $5.25 to $5.40, thanks to a lower tax rate.
CEO Andre Calantzopoulos seemed optimistic that the long-term trend supports the company's goal of replacing cigarette sales with less harmful alternatives, and that the slowdown was a temporary phenomenon, but that failed to reassure investors today.
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