It's been a busy day for the market's most important tickers. No fewer than five of the 30 Dow (DJINDICES: ^DJI ) companies reported earnings either last night or this morning. If you had expected these news-heavy tickers to set the tone for the Dow's trading action, you may be disappointed. Three of the five missed analysts expectations -- yet the Dow is trading up today anyhow.
How did these five blue chips fare last quarter? Let's take a look at the Dow's biggest movers.
Image source: UnitedHealth Group.
Let's start with the day's biggest winner. Shares of health insurance giant UnitedHealth Group (NYSE: UNH ) have jumped 6.8% today on a combination of strong earnings and in-line sales. In the second quarter, revenue rose 12% year over year to $30.4 billion. Diluted GAAP earnings jumped 10% to $1.40 per share. Analysts were expecting sales of $30.5 billion and earnings of $1.25 per share.
Top 5 Blue Chip Companies To Own For 2015: Philip Morris International Inc(PM)
Philip Morris International Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Its international product brand line comprises Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris, and Red & White. The company also offers its products under the A Mild, Dji Sam Soe, and A Hijau in Indonesia; Diana in Italy; Optima and Apollo-Soyuz in the Russian Federation; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics, and Number 7 in Canada; Best and Classic in Serbia; f6 in Germany; Delicados in Mexico; Assos in Greece; and Petra in the Czech Republic and Slovakia. It operates primarily in the European Union, Eastern Europe, the Middle East, Africa, Asia, Canada, and Latin America. The company is based in New York, New York.
Advisors' Opinion:- [By Rupert Hargreaves]
After a�record�first half, tobacco stocks are now starting to pull back as the high-yield sector of the market is sold-off. During the first six and a half months of the year, Altria (NYSE: MO ) matched the S&P 500 with gains of 17.5%, while�Reynolds American (NYSE: RAI ) �climbed 24% and Philip Morris International (NYSE: PM ) �advanced�7.3%, all excluding dividends (the S&P 500 gained 18% over the same period). However, since the recent sell-off began, all three companies have wiped out most of their gains so far this year.��
- [By Selena Maranjian]
Other large-cap stocks didn't do quite so well over the last year but could see their fortunes change in years to come. Philip Morris International (NYSE: PM ) , for example, gained 5% and yields 4.1%. With domestic tobacco companies challenged by tightening regulations, rising taxes, and a shrinking smoking base, many have assumed that Philip Morris is the best bet in tobacco. But in the third quarter, it posted the weakest results, with volume taking a sizable drop and a strong dollar reducing its earnings. Bulls like its innovation and share buybacks.
- [By Maxx Chatsko]
However, you would be hard-pressed to find any connection between falling smoking prevalence and share performance at Reynolds American (NYSE: RAI ) , Lorriland (NYSE: LO ) , Phillip Morris (NYSE: PM ) , and Altria (NYSE: MO ) . These companies are some of the best performers in the past decade. In fact, Altria is the best-performing stock of the last half-century!
- [By Ben Levisohn]
Shares of Phillip Morris (PM) have been performing about as well as a soggy cigarette–but Morgan Stanley still hopes they will catch fire.
Agence France-Presse/Getty ImagesHow bad has performance of Phillip Morris been? Its shares have dropped 1.9% during the past 12 months, while American-focused Altria Group (MO) has gained 15%. British American Tobacco (BTI) has gained 3%, Reynolds American (RAI) has advanced 14%, and Lorillard (LO) has jumped 26%.
And now Morgan Stanley’s David Adelman and team have cut their earnings-per-share forecast for Phillip Morris by 11 cents thanks to the strong dollar, after cutting it by 41 cents six weeks ago. Adelman explains why:
While PM�� significant EM exposure has been an important driver of its 8%+ constant-currency 2008-2013 EBIT CAGR, recent weakness in a number of important EM currencies (e.g., Argentina, Turkey and Indonesia) will undoubtedly weigh on 2014 reported results. Further, it remains somewhat unclear the extent to which added Yen weakness will impact results, as PM�� F/X guidance already suggests that it was somewhat hedged on USD/Yen. Finally, with ~60% of its operating expenses denominated in ��ard dollar��currencies (USD, EUR and CHF), we have also incorporated a significant estimated transactional F/X impact (+40% of our $0.52/share est.).
Still, Adelman kept Phillip Morris rated Overweight. He explains why:
Remain OW, as stock should benefit from recent weakness and achievable 2014 targets: After underperforming US Tobacco and Staples by 18% and 24%, respectively, in 2013, and with expectations already lowered to a conservative level of 6-8% currency-neutral underlying EPS growth in 2014, we believe current valuation of ~14.5x 2015e P/E and <10x EV/EBITDA remains attractive. We continue to view local-currency earnings risk as to the upside, particularly as no new issues have appeared to emerge entering 2014 (such as unforeseen outsized excise
Top 5 Blue Chip Companies To Own For 2015: Visa Inc.(V)
Visa Inc., a payments technology company, engages in the operation of retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services. It also offers a range of payments platforms, which enable credit, charge, deferred debit, debit, and prepaid payments, as well as cash access for consumers, businesses, and government entities. The company provides its payment platforms under the Visa, Visa Electron, PLUS, and Interlink brand names. In addition, it offers value-added services, including risk management, issuer processing, loyalty, dispute management, value-added information, and CyberSource-branded services. The company is headquartered in San Francisco, California.
Advisors' Opinion:- [By Sue Chang and Ben Eisen]
American Express Co. (AXP) �shares gained 3.6% while its competitor Visa Inc. (V) �rose 4.7%. American Express said late Thursday its fourth-quarter earnings jumped to $1.31 billion, or $1.21 a share, from $637 million, or 56 cents a share, a year ago. Excluding expenses, AmEx would have earned $1.25 a share. Revenue increased to $8.55 billion from $8.14 billion a year earlier.
- [By Jon C. Ogg]
International Business Machines Corp. (NYSE: IBM) is proving that it has very limited growth opportunities in new revenues. The only saving grace for the rest of us these days is that IBM is now no longer the largest DJIA stock since Visa Inc. (NYSE: V) is a DJIA stock.
- [By Teresa Rivas]
It�� been a good week for Visa�(V) and�MasterCard�(MA)��wo days in and they��e enjoyed two rounds of upgrades.
Today, the bullishness comes from Janney Montgomery Scott�� Thomas McCrohan and Leonard DeProspo, who boosted their ratings on both names to Buy.
For Visa, the upgrade came with a target price increase from $210 to $240 and they write that the recent selloff in the name provides an attractive entry point ��o own one of the better business models in payments.��They count the company�� powerful network, worldwide brand, and its role in influencing payment standards among its core strengths, and note that the increase of mobile payments has also served to increase the number of places where Visa is accepted.
They write that strong margin expansion in the past year and a half means that mid-to-high teens earnings per share growth is possible even if margins contract this quarter and next, as the company�� guidance suggests.
More thoughts below:
Changes to FANF fees beginning April 1, 2015. Last week, Visa modified its FANF pricing (Fixed Acquirer Network Fee) to include a 15 bps volume-based charge for sub-merchants of payment aggregators. Previously, payment aggregators only paid one lump sum payment of $40,000 per month, which created a cost advantage for aggregators versus traditional acquirers and ISOs that were required to pay a separate FANF fee per merchant location. The new FANF pricing is 15 bps of monthly volume, which translates into $30 million of incremental high-margin fee income for Visa based on $20 billion of aggregator volume.
Fiscal 2014 EPS guidance achievable. First quarter margins of 65.8% were a record, and were 230 bps above the previous record (FQ1-2012). FY 2014 EPS guidance calls for mid-to-high teen growth but assumes higher operating expense in 2Q and 3Q and ongoing F/X headwinds from current turmoil in emerging markets. Mid-to-high teen EPS growth appears reasonable gi
Top 10 Value Stocks To Own For 2015: McDonald's Corporation(MCD)
McDonald?s Corporation, together with its subsidiaries, operates as a worldwide foodservice retailer. It franchises and operates McDonald?s restaurants that offer various food items, soft drinks, coffee, and other beverages. As of December 31, 2009, the company operated 32,478 restaurants in 117 countries, of which 26,216 were operated by franchisees; and 6,262 were operated by the company. McDonald?s Corporation was founded in 1948 and is based in Oak Brook, Illinois.
Advisors' Opinion:- [By Tamara Rutter]
For comparison, the S&P 500 currently commands a price-to-earnings ratio of 19. The excessive run-up in Noodles & Company's stock coupled with the fact that it is new to the public market make it a far riskier bet than rival fast-casual stocks such as McDonald's (NYSE: MCD ) . Not only is Mickey D's a well-established company with a proven track record of positive earnings, but it's also a "blue chip," which is considered one of the best stock categories for new investors.
- [By Dan Caplinger]
Co-CEOs Ronald Shaich and Bill Moreton have been an important part of what's gotten Panera to where it is today. Partnerships with high-quality food and beverage suppliers have helped Panera deliver more of what customers are looking for. Moreover, even though the company hasn't been the first-mover in many of its moves -- it chose the same supplier that McDonald's (NYSE: MCD ) uses for its gourmet coffee, and Starbucks (NASDAQ: SBUX ) first started emphasizing natural and organic food offerings -- Panera has been smart about taking those themes and applying them more specifically to its own business.
Top 5 Blue Chip Companies To Own For 2015: Chevron Corporation(CVX)
Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The Upstream segment involves in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as holds interest in a gas-to-liquids project. The Downstream segment engages in the refining of crude oil into petroleum products; marketing of crude oil and refined products primarily under the Chevron, Texaco, and Caltex brand names; transportation of crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It a lso produces and markets coal and molybdenum; and holds interests in 13 power assets with a total operating capacity of approximately 3,100 megawatts, as well as involves in cash management and debt financing activities, insurance operations, real estate activities, energy services, and alternative fuels and technology business. Chevron Corporation has a joint venture agreement with China National Petroleum Corporation. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005. Chevron Corporation was founded in 1879 and is based in San Ramon, California.
Advisors' Opinion:- [By Matt Thalman]
Coming in second place, after falling slightly more than 4%, is Chevron (NYSE: CVX ) . The big decline came on Friday, after reporting a 4% revenue drop and a 32% net earnings decline compared with the same quarter last year. Management said lower production and weak global fuel costs played a large role in the results. To counteract these types of problems in the coming year, management is looking to cut some $2 billion from its expenses. A high amount of uncertainty about where fuel prices and production levels will be six months to a year from now had investors concerned about the company's future earnings. Those are the types of risk that oil and gas investors always need to watch out for. �
Top 5 Blue Chip Companies To Own For 2015: International Business Machines Corporation(IBM)
International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company?s Global Business Services segment offers consulting and systems integration, and application management services. Its Software segment offers middleware and operating systems software, such as WebSphere software to integrate and manage business processes; information management software for database and enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management, and predictive analytics; Tivoli software for identity management, data security, storage management, and datacenter automation; Lotus software for collaboration, messaging, and so cial networking; rational software to support software development for IT and embedded systems; business intelligence software, which provides querying and forecasting tools; SPSS predictive analytics software to predict outcomes and act on that insight; and operating systems software. Its Systems and Technology segment provides computing and storage solutions, including servers, disk and tape storage systems and software, point-of-sale retail systems, and microelectronics. The company?s Global Financing segment provides lease and loan financing to end users and internal clients; commercial financing to dealers and remarketers of IT products; and remanufacturing and remarketing services. It serves financial services, public, industrial, distribution, communications, and general business sectors. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. IBM was founded in 1910 and is based in Armonk, New York.
Advisors' Opinion:- [By Jon C. Ogg]
The DJIA may be stuck in the mud because of its huge weighting of International Business Machines Corp. (NYSE: IBM) but the S&P 500 Index has now challenged and broken out to a new all-time high. One of the trends we identified that the D.C. settlement will not change is that this bull market in equities is likely to keep running higher and higher.
- [By Matt Thalman]
Furthermore, the Dow's most heavily weighted stock, IBM (NYSE: IBM ) , lost 1.11% this week. Combine that with all the Dow's losers this past week (the others were Alcoa, Intel, and Coca-Cola), and you get an index weighting of 26.17%. But with no weighting, seven stocks out of 30 would account for just 23.33% of the index.
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