The bears may have to wait before they get their pullback. That’s how earnings season has shaped up so far.
Big technology companies like Facebook (FB) and Microsoft (MSFT) surged higher after beating estimates. Several major industrials and notable consumer stocks gained as well.
As usual, tech’s the main story. FB not only reported earnings and revenue above estimates. Its numbers also showed signs of advertisers migrating from the old news feed to the new Stories format. The 8 percent growth in monthly active users was another positive, suggesting traffic has stabilized after last year’s privacy scandals.
Facebook (FB) showing last summer’s downgap and recent “golden cross.”
MSFT was just pure growth — especially in its key Azure division. Analysts praised its strong profit margins and predicted more opportunities in the future as enterprises upgrade Windows and Server. That pushed MSFT’s market capitalization past $1 trillion for the first time ever.
Twitter (TWTR) is a lot smaller than FB, but its quarter also showed a rebound in the social-media space. “Monetizable” active users rose 11 percent, while improved technology resulted in an even-quicker 18 percent growth in revenue. Have the worst of the user losses passed for this company after it purged fake accounts?
PayPal (PYPL) is also riding a wave of optimism toward its new products. In this case, gains for the Venmo mobile-payments app caused investors to look past underwhelming revenue growth. It was the second straight quarter that the electronics-payment company shrugged off mediocre backward-looking results in hope of future growth.
Speaking of backward-looking, remember eBay (EBAY)? The online auction company hasn’t been on many people’s radar for years, but this week it beat estimates across the board and raised guidance. That could be a sign that its website changes and promotional listings are starting to drive sales.
Put them all together, and you may have several kinds of transformation stories playing out at the same time. Under Satya Nadella, MSFT is conquering the cloud it feared under Steve Ballmer. New advertising products are gaining traction at FB and TWTR. PYPL is going mobile with Venmo and now EBAY’s trying to reinvent itself. Will internal innovation, rather than sheer volume growth, become the new story for tech?
Several major industrial stocks reported. Some rallied on strong results, others drifted and one big name crashed.
Honeywell (HON), United Technologies (UTX) and Lockheed Martin (LMT) all beat across the board and issued strong guidance. Aerospace remains a major driver. Investors are also focused on UTX’s plans to split into three companies earlier next year.
But then you have 3M (MMM), whose earnings, revenue, outlook and orders were downright terrible. Weakness in the electronics, adhesives, industrial and Chinese markets all weighed. It was the second big miss in the last three quarters, resulting in the biggest one-day stock decline in a generation.
Two other major industrials, Caterpillar (CAT) and Boeing (BA), drifted after their results. Both have a lot of moving pieces going on. CAT has managed to keep revenue strong but is getting squeezed by higher costs. BA remains in limbo from the 737 MAX groundings.
Several well-known consumer companies also reported. The big ones, Coca-Cola (KO) and Procter & Gamble (PG), both beat estimates. KO pulled back after an initial rally, while PG declined on margin and currency worries. Investors may fear more foreign-exchange pressures in these giant multinationals if the U.S. dollar keeps running.
Hershey (HSY), however, ripped to a new all-time high as growth in Skinny Pop and Pirate Booty offsets candy weakness. Did you know this iconic chocolatier is turning into a low-carb snack company? Kimberly-Clark (KMB) also rallied after higher diaper prices lifted margins.
Ditto for Hasbro (HAS), whose toy sales received a boost from the Bumblebee film last Christmas.
Altria (MO) chart with 200-day moving average.
A major decliner in the consumer space, however, was Altria (MO). The once-steady-eddy tobacco stock had its biggest drop in almost two years as cigarette volumes continued to drop. Will the momentum bears pile in as its 200-day day moving average becomes resistance?
Some other lower-profile companies also pushed higher on their results. Here are a few:
Here are some other noteworthy stocks that fell after issuing their results:
AT&T (T) chart with 50- and 200-day moving averages.
This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 25/04/2019.
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