Evening Dow Report: IBM Adds to the Earnings Carnage Late

The Dow Jones Industrials fell on a rising day for the broader stock market. Find out why IBM's results after the bell could send the Dow even lower tomorrow.

Jan 21, 2014 at 9:01PM

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.

For the second session in a row, the Dow Jones Industrials (DJINDICES:^DJI) moved in the opposite direction of the broader stock market. Today, the Dow got the short end of the stick, with the average falling 44 points after all the companies that reported earnings this morning posted substantial losses. Tomorrow, that trend might continue, given the results that IBM (NYSE:IBM) released after the close tonight. Yet a big gain in Coca-Cola (NYSE:KO) and an offsetting loss from Goldman Sachs (NYSE:GS) show the disparate trends that Dow investors have to deal with right now.

IBM's results earlier this afternoon weren't what investors had wanted to see, with the stock falling almost 3% in after-hours trading following the company's afternoon conference call. The company predictably reported a 6% jump in net income, with earnings per share posting an even healthier rise of almost 12% thanks to the tech giant's ongoing efforts to buy back shares. But a 5.5% drop in revenue was even worse than investors had expected, as hardware-division sales fell by more than a quarter and even its services division saw a 3.6% decline in sales. Until IBM can reassure investors that it can grow in the increasingly competitive tech space, success in meeting the adjusted earnings-per-share goal of $20 by next year will represent a Pyrrhic victory.

Yet some of the moves based on earnings today didn't make all that much sense, with some companies beating estimates but still moving downward. That was also the case beyond the earnings realm, as Coca-Cola's 1.6% jump came without any apparent news justifying the move. Dividend investors are undoubtedly attracted to the soft-drink giant's shares, given their nearly 3% yield and consistent dividend growth. But it's hard for value investors to follow suit, with earnings multiples above 20 and growth prospects still in question. Shareholders will have to wait and see whether Coke can get its growth back before making a final decision about the stock.

For Goldman, meanwhile, today's 1.75% loss came as even the company itself seems to be nervous about prospects for the stock market. Last week's warning from Goldman analyst David Kostin pointed to high multiples on the S&P 500, noting that in order to advance from here, stocks would have to build on fundamental earnings growth rather than multiple expansion. Yet even with Goldman trading at just 11 times trailing earnings, investors seem scared that it's only a matter of time before Goldman and other financial stocks that have seen such huge gains in recent years will have to pull back.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Coca-Cola and Goldman Sachs and owns shares of Coca-Cola and IBM. Try any of our Foolish newsletter services free for 30 days. 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.

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.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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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