Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



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

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

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%.

Forget Amex and Intel: Here's the one stock you must own for 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (0) | Recommend This Article (1)

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.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2798719, ~/Articles/ArticleHandler.aspx, 8/29/2015 9:43:26 PM

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...

Alex Dumortier

Alex Dumortier covers daily market activity from a contrarian, value-oriented perspective. He has been writing for the Motley Fool since 2006.

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:55 PM
^DJI $16643.01 Down -11.76 -0.07%
AXP $76.65 Down -0.23 -0.30%
American Express CAPS Rating: ****
INTC $28.42 Up +0.70 +2.53%
Intel CAPS Rating: ****