×

Topline Misses Hurt Stocks

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

A surprising rise in June building permits offset another dismal housing starts number. June housing starts fell a more-than-expected 5 percent to its lowest level since October 2009. June Housing Starts fell a more-than-expected 5 percent to its lowest level since October 2009. Making matters worse, May’s already poor reading was revised downwards.

Clearly weighing on stocks Tuesday morning is the latest batch of earnings — featuring a number of topline disappointments:

a) IBM earnings beat estimates ($3.39 vs. $2.58 consensus), but revenues fell short of expectations. Also weighing on the stock, a disappointing 12 percent decline in contract signings. Guidance for the full-year was raised due to a strong first half, but still remains fairly conservative. IBM expects 2010 earnings of “at least $11.25,” implying 2nd half earnings of at least $6.67. However, that would be a little shy of the Street’s 2nd half estimates of $6.69.

b) Texas Instruments earnings were inline with estimates as margins jumped nearly 10 percentage points, but the stock is falling as its top line missed expectations. CEO Rich Templeton noted, "orders were strong in the quarter, backlog increased and we expect to grow revenue again in the third quarter.”

The semiconductor company provides solid guidance however, with earnings seen between $0.64 and $0.74 above consensus of $0.64 on revenue guidance of $3.55 billion-$3.85 billion vs. $3.59 billion consensus.

c) Goldman Sachs earnings topped estimates ($2.75 vs. $2.08 consensus), but it too missed revenue estimates. Weighing heavily: equities trading revenues plunged 62 percent, while investment banking revenues dropped 36 percent from a year ago. CEO Lloyd Blankfein noted, "the market environment became more difficult during the second quarter and, as a result, client activity across our businesses declined."

d) Johnson & Johnson reported inline earnings, but revenues were weak. Particularly disappointing were sales from its U.S. consumer and pharmaceutical divisions, which saw declines of 14 percent and 2 percent, respectively.

The healthcare company also lowered 2010 guidance to $4.65-$4.75, below estimates of $4.81 due to recent medicine recalls.

Two bright spots on the earnings front today:

1) Whirlpool’s results far exceeded estimates ($2.82 vs. $2.13 consensus) on higher appliance shipments and improved margins. Revenues were helped by strong sales in Asia and Latin America. Guidance for the full year was raised to $9.00-$9.50 vs. $8.67 consensus.

2) UnitedHealth beats estimates ($0.99 vs. $0.75 consensus) as the healthcare company effectively contained its medical costs in the quarter. Revenues also exceeded the Street’s expectations as a jump in Medicaid membership (up 16 percent) and Medicare Advantage membership (up 17 percent) helped.

The company also raises full-year guidance for the second time, and now expects earnings of $3.40-$3.60, above estimates of $3.33.

_____________________________
Bookmark CNBC Data Pages:

_____________________________

_____________________________

Questions? Comments? tradertalk@cnbc.com