2 Dow Stocks to Watch on Friday: American Express and Intel

Two blue-chip names, American Express and Intel, report their fourth-quarter results

Jan 16, 2014 at 7:02PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks retreated from their all-time high on Thursday, as the S&P 500 fell 0.1%. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) was down 0.4%.

Two Dow components, Intel (NASDAQ:INTC) and American Express (NYSE:AXP), reported results for the fourth quarter after the closing bell. As bellwethers for different segments of the economy, technology investment and consumer spending, respectively, both reports were instructive:

With regard to American Express, forget the misleading headlines that include "American Express profit doubles" – here are the headline numbers that are actually meaningful:

  • Quarterly revenue of $8.55 billion was exactly in line with Wall Street expectations, as provided by the Thomson Financial Network.
  • Adjusted earnings-per-share (EPS) of $1.25, which exclude restructuring and litigation expenses and other items, missed analysts' consensus estimate by $0.01 – the first miss in at least two years. Nevertheless, that EPS figure represents a 15% increase over the year-ago period.

In a statement, CEO Kenneth Chenault said "We ended the year on a strong note, with cardmember spending up 8 percent despite mixed reports during the holiday shopping season." Amex's resilience in the fourth quarter is consistent with its focus on relatively well-heeled consumers, and suggests that wealthier Americans are beginning to gain confidence in the economic recovery.

As far as confidence in American Express's stock is concerned, when it's selling at nearly 17 times next 12 months' earnings-per-share estimate, and yielding a mere 1.1% in terms of its dividend, I think there are better opportunities among large-capitalization blue chip names.

One of those names happens to be Intel. As with American Express, revenues were essentially in line with Wall Street's expectations ($13.8 billion vs. $13.72 billion); but fourth-quarter earnings per share of $0.48 fell short of the $0.52 consensus estimate.

During the earnings conference call, CFO Stacy Smith told investors and analysts that "relative to our expectations at the beginning of the quarter we saw higher PC Client Group revenue slightly offset by slower growth in our Data Center Group."

That observation is unnerving, because the PC business is the one experiencing a secular decline, while the data center business is meant to be a growth driver. Back in October, Ms. Smith had said, "Don't pin me down to exactly 10% growth [for the Data Center Group], but we're going to be within spitting distance of that for the year." Instead, full-year growth came in at just 7%.

Nevertheless, at just 14 times next 12 months' earnings-per-share estimate, Intel's valuation isn't terribly demanding, and the shares yield 3.5%.

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Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on Twitter @longrunreturns. The Motley Fool recommends American Express and Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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