Most S&P Companies Topping Earnings Estimates
Third-quarter earnings are generally coming in better than expected so far, though investors aren't always focusing on the good news.
Reports from such blue-chip names as Intel and Coca-Cola were mostly positive, though a disappointing outlook from United Technologies and lackluster hardware sales from International Business Machines tempered optimism.
All told, 60 companies in the Standard & Poor's 500 Index have reported third-quarter earnings. Of those, 65 percent have topped average analyst estimates reported by Thomson Financial. Another 6.67 percent have matched estimates, while 28.33 percent have fallen short of expectations.
Investors appear to be relieved to see companies such as Intel and Coca-Cola have raised their earnings forecasts in the wake of their better-than-expected results.
Technology stocks, in particular, gained ground after reports from bellwethers Intel and Yahoo . Intel reported a 43 percent jump in third-quarter profits late Tuesday, topping expectations thanks to healthy demand from the personal computer market. Meanwhile, Yahoo surprised investors by reporting earnings of $151 million, or 11 cents a share, which was higher than the average analyst estimate of 8 cents a share reported by Thomson Financial. The Internet giant also was optimistic about the rest of the year.
Investors also were encouraged to see that JPMorgan's results were able to withstand the fallout from this summer's credit crunch.
Although JPMorgan had to record $1.64 billion in write-downs on leveraged loans and collateralized debt obligations, the company reported slightly higher quarterly profit Wednesday, fueled by gains from private-equity deals.
Net income was $3.4 billion, or 97 cents a share, up from $3.3 billion, or 92 cents a share, a year earlier.
A Boost to Dimon, Isdell
The bank's performance was a vindication for Chairman and Chief Executive Jaime Dimon, who joined the bank after his career path was blocked at Citigroup.
Coca-Cola Chairman and Chief Executive Neville Isdell continued to show evidence that he was the right man to turn around the Atlanta beverage giant.
Coca-Cola shares hit a 52-week high Wednesday after the company reported net income in the quarter ended Sept. 28 rose 13 percent to $1.65 billion, or 71 cents a share, from $1.46 billion, or 62 cents a share, a year earlier.
The results outpaced analyst estimates, which had called for earnings of 68 cents a share, according to Thomson Financial.
Stifel Nicolaus analyst Mark Swartzberg said Coke's earnings were of "good quality" and provided further evidence that a turnaround at the company continues. He raised his estimates for Coke's fourth-quarter earnings, as well as for this year and next year.
Estimates also will be rising for Altria Group, the parent of Philip Morris tobacco companies. The New York company posted quarterly profits that outpaced Wall Street estimates and raised its forecast for the full year, citing a lower tax rate, the weakness in the dollar and improved results at its Philip Morris International business.
Altria's net income fell to $2.63 billion, or $1.24 a share, from $2.88 billion, or $1.36 a share, a year earlier, due to the spinoff of Kraft Foods. The Kraft spinoff was the first step of a multistep corporate restructuring.
"We find today's results encouraging as the upside in the quarter was mostly driven by better-than-expected results, particularly for PMI," said Goldman Sachs analyst Judy Hong.
AMR , the parent of American Airlines, also topped analysts estimates as it cut capacity, raised fares and paid less for fuel. But a recent surge in the price of crude oil has cast some doubts over the airline industry as it struggles to continue building its recovery.
But investors were disappointed by the forecast issued by diversified manufacturer United Technologies . The company, which reported a 20 percent increase in quarterly earnings, raised the tightened its forecast in the upper-end of the range, but investors clearly were expecting more from the company given the strength of its latest results.
There also was some disappointment about IBM's results. The earnings were in-line with analyst estimates, but the reports showed some weakness in its hardware business.
Investors will be looking for more earnings reports from eBay, Washington Mutual and Allstate, among others, after the close of the market on Wednesday.