Despite Strong Earnings, UnitedHealth and Goldman Sachs Take Down the Dow

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.

Earnings season is a time for joy and disappointment across the market, and today's trending decisively toward the latter on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) . As of 2:30 p.m. EST, the Dow's down more than 75 points, with most member stocks in the red -- though two big names that are sinking after releasing earnings today have particularly driven the Dow's fall. Let's catch up on what you need to know about Goldman Sachs  (NYSE: GS  )  and UnitedHealth Group  (NYSE: UNH  ) .

Big banks take a step back
Bank stocks got off to a good week with strong results from two big names in the financial industry, but Goldman's putting a damper on that enthusiasm today. The stock's down 2.2% in midafternoon after the bank reported that net earnings fell 19% year over year in the fourth quarter. That mark topped analyst projections, as did the company's revenue, which fell nearly 5% for the quarter. Yet even with these positive results overall, color investors unimpressed.

It doesn't help that Goldman Sachs' FICC trading segment saw revenue fall 15% year over year for the quarter. Goldman cited slow progress in the financial world last year as the regulatory climate grows stricter. Trading revenue falling isn't a problem that hit solely Goldman in the industry: Rival Citigroup (NYSE: C  ) posted its own fourth-quarter results today, and like Goldman, the bank saw a big fall in trading revenue. Citi's trading revenue declined 15% year over year and dragged the company's top and bottom lines below analyst expectations. So in comparison, Goldman's sluggishness isn't too bad a result for investors.

The company's equities revenue also saw a big slide, and while there were a few bright spots in Goldman's quarter -- notably investment banking revenue, which surged 22% year over year -- Goldman will need to adjust to the tighter oversight over the banking industry. Still, this is one of the biggest names in finance, and Goldman is hardly damaged in the long term due to 2013's regulatory tightening. Expect this organization to bounce back fast.

Today's biggest Dow loser is UnitedHealth, as the big insurer's stock has fallen 2.6% on the day after its own earnings release. UnitedHealth's fourth-quarter earnings jumped by 18% year over year to beat expectations, while the company's revenue climbed 8%. Importantly in the Obamacare climate of health insurance, UnitedHealth's membership base increased by 170,000 new customers.

So why's UnitedHealth down so big today? Look to 2015 as to why investors are spooked: UnitedHealth warned that cuts to Medicare rates, particularly for Medicare Advantage, could hit the company hard in 2015 and lead to limited earnings growth for the year. While UnitedHealth expects Medicaid to grow strongly in the near future -- indeed, Medicaid membership has surged since Obamacare has launched late last year -- Medicare cuts in 2014 already have sent up red flags to industry observers about possible rising costs. The 2015 situation still is in flux, but sharp cuts to the program could lead to more pessimism from UnitedHealth and the insurance industry.

How you can top your own profit expectations and secure your financial future
Earnings season doesn't always impress even with strong results, as Goldman and UnitedHealth have shown today. Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.


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

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: 2798203, ~/Articles/ArticleHandler.aspx, 8/29/2014 2:28:31 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...


Advertisement