UnitedHealth, GE Earnings Pull the Dow in Opposite Directions

A big day for blue-chip earnings sees IBM and UnitedHealth's stocks take a plunge.

Apr 17, 2014 at 2:30PM
Daily Fool

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

General Electric Logo

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.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers