S&P 500, Nasdaq Hit Highs As Amazon, Alphabet, Microsoft, 3M Jump, Celgene, Boeing Falter: Weekly Review
The S&P 500 index and other major averages moved sideways near record highs amid the heaviest week of earnings season. Amazon (AMZN), Alphabet (GOOGL), 3M (MMM) and Caterpillar (CAT) were big winners. Celgene (CELG), Boeing (BA) and Baidu (BIDU) were notable losers.
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Stocks Tread Water Amid Earnings Flood
The Dow industrials rose modestly through Thursday, just below record highs, while the S&P 500 index and Nasdaq composite edged lower. But strong earnings from big-cap techs such as Amazon (AMZN), Alphabet (GOOGL) and Microsoft (MSFT) pointed to the Nasdaq and S&P 500 erasing their weekly losses. Celgene (CELG) and several other biotech stocks sold off on earnings and guidance during the week. So did Boeing (BA) and several defense giants. Treasury yields rose to multi-month highs amid solid economic data, the European Central Bank voting to taper its bond buys and President Trump's looming decision over who will be the next Federal Reserve chief.
Amazon Crushes Views On AWS Growth
Amazon (AMZN) shares soared after the e-commerce leader reported third-quarter adjusted earnings per share of 52 cents vs. views for 1 cent. Revenue rose 34% to $43.7 billion, including $1.3 billion Whole Foods Market, an acquisition that Amazon completed on Aug. 28. Amazon Web Services revenue soared 42% and accounted for well over 100% of operating profit.
Amazon soared 9% early Friday.
Google Back In Buy Zone
Google-parent Alphabet (GOOGL) vaulted to an all-time high after the internet giant' Q3 profit smashed estimates. Google said that GAAP earnings were $9.57 a share, up 32% from a year ago, with revenue jumping 24% to $27.77 billion, topping consensus estimates. Google's traffic acquisition costs, what it pays partner websites to carry ads, rose 23% to $5.5 billion, Alphabet said. Growing TAC has been an overhang on Google stock. But shares rose nearly 5% on Friday, back above a a buy point.
Boeing's Tanker Woes Grow, Guidance So-So
Boeing (BA) took a $329 million charge on its KC-46 refueling tanker during Q3, bringing total cost overruns to $2.9 billion before taxes and $1.9 billion after taxes. Despite the charge, the aerospace giant raised full year cash flow outlook and its full-year core EPS to $9.90-$10.10 from a prior view of $9.80-$10.00. But the EPS midpoint is still under analyst views. Boeing's Q3 EPS fell 22.5% to $2.72, but topped forecasts for $2.65, while revenue rose 1.7% to $24.31 billion, above estimates. Boeing shares retreated 2% through Thursday.
Dow's Caterpillar, 3M Soar On Earnings
Blue chips Caterpillar (CAT) and 3M (MMM) throttled earnings estimates, hiked guidance and made clear that the global economy has shifted into higher gear. Caterpillar earned $1.95 a share, up 129% from a year ago and 68 cents ahead of estimates, as revenue leapt 25% to $11.4 billion. The construction-equipment firm's 2017 earnings guidance of $6.25 a share was 96 cents ahead of prior estimates. 3M saw broad growth in its industrial, health care, and electronics and energy segments. After beating Q3 EPS by 12 cents, 3M said it expects full-year EPS of $9-$9.10, up from an earlier outlook of $8.80-$9.05. Through Thursday, Caterpillar rose more than 4% and 3M over 5%.
Defense Earnings Mixed
Lockheed Martin (LMT) raised its full-year outlook for earnings and revenue but cut its guidance on sales for its aeronautics unit. The defense giant missed Q3 estimates. Northrop Grumman (NOC)also raised its 2017 EPS outlook after reporting Q3 results above Wall Street estimates. The Global Hawk maker announced that it wouldn't submit a bid for the Navy's unmanned tanker competition, despite being seen as a major player. Raytheon (RTN) reported mixed Q3 results, but also raised its full year EPS outlook, however the raised guidance is still below analyst consensus. General Dynamics' (GD) quarterly results beat views.
Lockheed, Raytheon and General Dynamics shares fell while Northrop rallied.
Biotech Stocks Fall On Earnings
Biogen (BIIB) slid Tuesday despite beating top- and bottom-line expectations after U.S. sales of Spinraza lagged views Amgen (AMGN), Sarepta Therapeutics (SRPT) and Vertex Pharmaceuticals (VRTX) delivered across-the-board beats on their third-quarter reports late Wednesday and upped their 2017 sales guidance. But Amgen sank after sales of its top drug, Enbrel fell 6% year over year while Vertex said two late-stage cystic fibrosis trials failed. Celgene (CELG) crashed 16% Thursday after revenue missed on Otezla sales that lagged the consensus by 26%, leading the biotech to cut 2017 and 2020 sales guidance. Alexion Pharmaceuticals (ALXN) fell on weak sales. Gilead Sciences (GILD) topped sales and adjusted earnings views late Thursday, though hepatitis C drug sales declined by a third to $2.2 billion and narrowly missed estimates.
Microsoft Beats Fiscal Q1 Views, Guides Higher
Software giant Microsoft (MSFT) raced past Wall Street's targets for the September quarter and pointed to sales above views in the December quarter, sending its stock to record high territory Friday. Microsoft earned 84 cents a share, up 17% year over year, on sales of $24.54 billion, up 12%, in its fiscal first quarter. Analysts expected 72 cents and $23.56 billion. Microsoft credited growth in cloud-computing businesses.
Intel Up, AMD Down On Q3 Earnings
Investors cheered Intel (INTC), STMicroelectronics (STM) and Teradyne (TER) after their September-quarter earnings reports, but jeered Advanced Micro Devices (AMD) and Ultra Clean Holdings (UCTT). Intel topped Wall Street's targets for third-quarter sales and earnings and guided analysts higher for the current quarter. Rival AMD delivered better-than-expected third-quarter results, but disappointed with its guidance for a flat gross profit margin in the current quarter. The biggest loser was Ultra Clean, which plummeted 21% on Thursday after mixed third-quarter results.
GM Now, GM Forever
General Motors' (GM) Q3 EPS fell 23% to $1.32 as revenue shrank 21% to $33.62 billion, amid a broad slowdown in U.S. car sales, a planned reduction in fleet sales, and a retreat from certain European, African and Asian markets. But the results crushed forecasts for EPS of $1.07 on revenue of $31.6 billion. GM also guided full-year earnings above the consensus. GM shares have been rallying as investors see the automaker combining strong profits now while being in the lead pack for autonomous driving and electric cars. Ford (F) earnings surged 65% to 43 cents, as revenue rose 1.4% to $36.45 billion, with automotive revenue at $33.65 billion, topping estimates for EPS of 33 cents and revenue of $32.92 billion. Management narrowed its 2017 profit outlook, which remained above consensus. Fiat Chrysler (FCAU) reported mixed results.
Chinese School Operators Dive On Earnings
China-based school operator Tal Education (TAL) fell short of earnings estimates by a penny, reporting flat EPS of 10 cents, but revenue climbed 68% to $455.7 million and enrollments more than doubled. Q3 outlook was in line with forecasts. Fellow heavyweight New Oriental Education (EDU) turned in mixed results but better-than-expected Q2 guidance. Tal Education plunged nearly 21% through Thursday and New Oriental almost 11%.
Burgers, Deals Trump Queso Quagmire
McDonald's (MCD) same-store sales beat estimates, helped by $1 drinks and its line of Signature Crafted sandwiches, but it sees thinner margins as it invests in training and technology. A 2-for-$6 Whopper deal at Burger King likely helped comps of its owner, Restaurant Brands (QSR), though its shares reversed lower from a record high Friday. Cost cuts and a promotional switch to boneless wings helped Buffalo Wild Wings (BWLD) fly nearly 20% Thursday, even as the sports bar chain contends with elevated prices of traditional chicken wings and questions over its CEO transition. Chipotle Mexican Grill (CMG) shares crashed on concerns its sales recovery, higher menu prices next month and plans to slow new-store additions next year.
Visa Strong Despite U.S. Retail Worries
Visa (V) fiscal fourth-quarter results beat on the top and bottom line, helped by solid payment and cross-border volumes and a strong showing from Visa Europe. The payment volume growth was strong in countries like Russia, India and Australia and came despite worries over the state of U.S. retail, a Mizuho analyst noted.
T-Mobile US (TMUS) and Sprint (S) called off earnings calls to avoid M&A discussion, raising speculation that a merger announcement between them could come in November, despite regulatory hurdles. T-Mobile added 595,000 postpaid phone subscribers in the September quarter, while Sprint added 279,000. AT&T (T) lost 97,000 as it reported flat profit and a 3% revenue drop. AT&T says it expects the $85 billion purchase of Time Warner (TWX) to close by year end. Some analysts say the sell-off in AT&T was related to equity dilution expected from the TWX deal. AT&T is issuing stock to finance half of the deal. On the plus side, analysts say all four carriers, including No. 1 Verizon (VZ), have been restrained in promotions for the soon-to-be released high-end Apple (AAPL) iPhone X, which could improve margins for the December quarter.
Cable TV firms Comcast (CMCSA) and Charter (CHTR) reported higher video subscriber losses and lower broadband customer additions. Comcast had lowered guidance in early September, sending its stock down 10% ahead of Q3 earnings. Charter stock fell after it disclosed similar trends. The companies aim to hike prices on broadband services as video subscribers switch to internet TV. Charter added 249,000 broadband customers vs. estimates of 335,000. Charter acquired Time Warner Cable last year. Comcast added 182,000 broadband customers in Q3 vs. 288,000 a year earlier.
News In Brief
Baidu (BIDU) crushed third-quarter earnings estimates, but the Chinese search engine giant gave weak Q4 guidance. Shares plunged Friday morning.
Seagate Technology (STX) soared 9% through Thursday after the disk-drive manufacturer reported quarterly earnings that topped consensus estimates.
Cisco Systems (CSCO) acquired BroadSoft (BSFT), a maker of communications software for telecom companies, for $1.9 billion including debt, or $55 a share. Cisco passed on buying RingCentral (RNG), a rival software firm.
Fortinet (FTNT) swooned early Friday after the maker of computer security software forecast December-quarter revenue of $408 million, below expectations of $417 million. September quarter results beat views.
Grubhub (GRUB) reported third-quarter earnings that beat estimates and provided fourth-quarter guidance that also topped views. Shares surged nearly 13% through Thursday, breaking out to a buy point
TD Ameritrade (AMTD) topped earnings views with a 29% gain, as revenue growth accelerated for a fourth straight quarter. Shares of the online brokerage rose to a record high.
ServiceNow (NOW) reported Q3 earnings and revenue that topped expectations but billings growth disappointed. Shares in the enterprise software provider fell after its earnings release but then rebounded to close up Thursday. On the earnings call, management indicated that Q4 is off to a "strong start" aided in part by a few more deal closings than normal being pushed into the December quarter.
Whirlpool (WHR) crashed 11.5% through Thursday after weak earnings and news that Sears would no longer sell its appliances.
Twitter (TWTR) shares soared 18.5% Thursday on better-than-expected adjusted earnings, a rise in monthly users and a forecast for possible GAAP profit in Q4.