IBM and GE Mask the Dow's Strength

All but six of the 30 Dow Jones Industrial Average (DJINDICES: ^DJI  )  components are higher today, but a quirk in the way the index is calculated has it slightly in the red. The Dow is a price-weighted index, which means that expensive stocks like IBM (NYSE: IBM  ) have an especially large impact on the index as a whole, so the stock's 8.1% loss today has cost the Dow more than 100 points. A broader look at stocks via the S&P 500 (SNPINDEX: ^GSPC  ) shows the market making significant gains today: The index is up 0.75% near the end of trading.

IBM's huge drop was driven by a disappointing first-quarter earnings report. Revenue fell 5% to $23.4 billion, and non-GAAP net earnings per share rose 8% to $3 per share. This fell short of expectations, but IBM said some large orders didn't close during the quarter, affecting the timing of recognized revenue. For the full year, the company expects non-GAAP EPS of at least $16.70, which is just below the current estimate of $16.77. I don't think this is so bad as investors think, but there has been a sell-off in tech any time a company reports disappointing numbers, and today is no exception. 

General Electric (NYSE: GE  ) is faring better than IBM, but it's nonetheless down a substantial 4% after releasing its own first-quarter earnings. Q1 revenue was flat, and a 16% jump in earnings to $3.53 billion, or $0.34 per share, wasn't enough to satisfy investors. Industrial revenue fell 5.7%, and investors are focusing on signs of a weak economy that showed in GE's report. Still, GE is trading at just 11 times 2013 estimates, and with the large pile of cash it made with the sale of NBCUniversal, shareholders should feel comfortable about the future of GE.

The surprise winner of the day is Microsoft (NASDAQ: MSFT  ) , which is up 3.4%. The company said revenue rose 17.8% in the quarter to $20.5 billion, while net income jumped 19% to $6.06 billion, or $0.72 per share. Both numbers beat estimates, and the company appears to be surviving the decline of the PC much better than expected. In fact, the Windows division saw revenue increase 23% thanks to upgrades to Windows 8, so Microsoft is beginning to transition consumers to its new products. The downfall of Microsoft has been called prematurely, and I think this stock is a great buy because of its profitable enterprise businesses and upside in mobile.

It's been a frustrating path for Microsoft investors, who have watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so be sure to claim a copy of this report now by clicking here.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2374206, ~/Articles/ArticleHandler.aspx, 7/24/2014 6:41:48 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement