Why IBM and American Express Will Move the Dow Tomorrow

The two Dow components will report their earnings after the bell Wednesday.

Apr 16, 2014 at 12:30PM

On Wednesday, the Dow Jones Industrials (DJINDICES:^DJI) hung onto their upward momentum from Tuesday's session, picking up more than 124 points by 12:30 p.m. EDT. So far, the overall mood surrounding earnings season has been generally positive, and this afternoon IBM (NYSE:IBM) and American Express (NYSE:AXP) will take their turns in giving investors their latest results and their reads on the future. What they say will have important implications for the tech and financial sectors, as well as for the broader market.

Both IBM and American Express will release their earnings after the market closes, with the companies both historically issuing their respective press releases just a few minutes after 4 p.m. EDT. Following their releases, each company will have a press conference, with IBM's scheduled to start at 4:30 p.m. EDT and American Express setting its webcast for 5 p.m. EDT.

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IBM investors are anxiously awaiting the tech giant's quarterly report, anticipating declines in both earnings and revenue. An earnings decline would be fairly unusual for IBM, which has done a good job of using share buybacks to boost earnings per share toward its long-established $20 target for 2015. But the main concern for IBM is that revenue has fallen substantially for a while now, with poor performance in the hardware sector weighing on the company's overall sales. Still, proponents of CEO Ginni Rometty's long-term strategic vision argue that falling revenue is fine as long as it comes via shifting from low-margin hardware sales toward higher-margin services-related revenue that can produce a bigger impact on the bottom line. IBM's recent move to sell part of its server business, along with a host of growth initiatives, will hopefully produce the results that shareholders want to see.


Meanwhile, American Express has the tough task of outpacing its card-network competitors, which have extremely high growth rates. Yet to its credit, American Express maximizes its profit opportunity by retaining a closed-loop model whereby it issues its own cards and establishes its own merchant network. Although the financial crisis showed that even American Express is vulnerable to severe downturns, the company's emphasis on higher-end customers reduces its credit risk compared to lower-end card issuers. With the explosion in interest in mobile-payment systems, AmEx's work to secure a spot in the mobile revolution will hopefully help produce more growth for the card giant.

IBM and American Express aren't the first companies in their respective sectors to announce quarterly results this season, but their insights will give investors who follow the Dow Jones Industrials vital information they can use to develop a more complete picture of their sectors and the economy as a whole. If the two companies offer surprises in either direction, you can expect the Dow Jones Industrials to respond on Thursday.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends American Express. The Motley Fool owns shares of International Business Machines. 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." 

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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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