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UnitedHealth, GE Earnings Pull the Dow in Opposite Directions

A big day across blue-chip earnings has shaken up the market, but all major indices crawled into the green in afternoon trading, with the Dow Jones Industrial Average (DJINDICES: ^DJI  )  up 12 points as of 2:30 p.m. EDT. A few companies have separated from the index's other member stocks with big movements. General Electric  (NYSE: GE  )  has risen to the top of the Dow after its earnings report gave investors a lift, while UnitedHealth Group (NYSE: UNH  ) and IBM (NYSE: IBM  )  plunged on the day after failing to impress. Let's catch up on what you need to know.

GE's big businesses keep growing

Source: Wikimedia Commons

While GE's stock was up 2.3% today, the company's quarterly net earnings of $0.30 cents per share was down from the year-ago's $0.34, when the sale of the company's NBCUniversal group made a big one-time impact. Adjusted for one-time items, GE's $0.33 per share earnings result managed to top analyst expectations, although revenue declined by 2.1% to fall below projections. However, industrial revenue jumped by 8%, a great sign for the company's core businesses as American industry slowly churns back to life after years of post-recession slump. The company's oil and gas and aviation units have become the biggest draws for investors, as the two divisions posted revenue gains of 27% and 14%, respectively, for the quarter. GE' has done a good job keeping its order backlog growing, and concentrating on its core businesses should help this reliable stock pick up steam in coming quarters.

Dow loser IBM, on the other hand, hasn't had much to celebrate today. The company's revenue slipped nearly 4% year over year in the last quarter, according to numbers released following the closing bell yesterday. The stock has dropped 3.2% so far today. Hardware sales have taken a huge bite out of IBM's progress, with the unit's revenue collapsing by 23% for the quarter. Even more concerning for growth-minded investors is IBM's failure to spark any growth in China -- or even maintain its sales there. Chinese sales declined by 20%, and if IBM can't rebound in the world's second-largest economy, it'll be hard-pressed to generate earnings growth in the near future with hardware on such a precipitous decline.

UnitedHealth's stock has dropped 3.5% so far today to join IBM at the bottom of the Dow. The insurer said earnings fell by 7.8%, a victim of the Affordable Care Act's broad changes to the health care landscape. Still, UnitedHealth drove revenue higher by 4.5%; while that failed to meet analyst projections, the company has grown its subscription base by more than 6% for the year, now boasting 44.7 million health insurance members.

The company blamed the Affordable Care Act for a whopping $0.30 of cost per share for the quarter. UnitedHealth has roughly 3 million Medicare Advantage members, and investors should expect cuts to the program to continue to bite into the company's earnings. However, UnitedHealth also will have to keep medical costs falling as a portion of revenue if it wants to satisfy earnings-minded analysts and Wall Street. Medical costs have outpaced revenue in growth as of late, and while UnitedHealth did bring its medical loss ratio down by 0.2 percentage points for the quarter, investors should wait on sustained success to see the outcome of the Affordable Care Act on costs over time. Unitedhealth's still among the top stocks in health care, but such a sweeping change to the industry landscape warrants caution.

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Dan Carroll

Dan began writing for the Motley Fool in 2012. He is a health care specialist who also follows the defense industry along with tracking the broader U.S. and international markets.

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Related Tickers

9/4/2015 4:30 PM
^DJI $16102.38 Down -272.38 -1.66%
GE $24.00 Down -0.51 -2.08%
General Electric C… CAPS Rating: ****
IBM $143.70 Down -3.08 -2.10%
International Busi… CAPS Rating: ****
UNH $112.36 Down -1.63 -1.43%
UnitedHealth Group CAPS Rating: *****