Please ensure Javascript is enabled for purposes of website accessibility

What Happened in the Stock Market Today

By Demitri Kalogeropoulos - Aug 19, 2016 at 4:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Why John Deere and Foot Locker stocks jumped as indexes declined on Friday.

Stocks ended the trading week with minor losses despite a few surprisingly strong quarterly earnings announcements. On Friday, the Dow Jones Industrial Average (^DJI 2.68%) and the S&P 500 (^GSPC 3.06%) indexes both fell slightly, leaving them unchanged over a week that was packed with earnings reports and a closely watched reading by the Federal Reserve on the U.S. economy's growth outlook.

Today's stock market:

Index

Percentage Change

Point Change

Dow

(0.24%)

(45)

S&P 500

(0.14%)

(3)

Source: Yahoo Finance.

Still, a few individual stocks bucked the down trend and made significant moves higher on Friday, including John Deere (DE 4.49%) and Foot Locker (FL 1.83%).

John Deere gets more profitable

Farm-equipment giant John Deere rose 13% on heavy trading volume after quarterly results trounced profit expectations. The bad news is that the company is still suffering from a brutal cyclical downturn in the agricultural industry.

Sales fell 11% in the latest quarter and are down 9% over the past nine months. "John Deere's performance reflected the continuing impact of the global farm recession as well as difficult conditions in construction equipment markets," CEO Samuel Allen said in a press release.

Image source: Getty Images.

However, the company is finding success at navigating through that tough selling environment. Each of its divisions produced operating profits this quarter, and its agriculture and turf division saw a 21% earnings spike thanks to higher prices, lower production costs, and decreased expenses. Thanks to that pricing and cost discipline, net income only fell 4% despite the double-digit drop in revenue. Allen credited management's success to "our efforts to develop a more durable business model and a wider range of revenue sources."

Deere left its sales forecast in place that calls for a 9% revenue drop. Earnings, meanwhile, got a big upgrade with net income projected to weigh in at $1.35 billion compared to the $1.2 billion management targeted in late May. Higher prices and lower costs are combining to make Deere significantly more profitable, and investors celebrated that change by biding shares higher on Friday.

Foot Locker speeds up the growth pace

Foot Locker's 11% jump pushed the stock into positive territory on the year, following strong second-quarter results. Sales growth accelerated to a 5% pace from 3% in the prior quarter thanks to solid demand across its basketball, running, and classic footwear categories. Executives also managed encouraging wins in the e-commerce and international sales channels.

Gross profit margin ticked higher, indicating that Foot Locker did a good job of selecting, stocking, and pricing inventory this quarter. Detracting from that gain was the fact that operating expenses rose slightly, thanks to continued investments in stores and the online selling infrastructure.

Image source: Getty Images.

Overall, the retailer produced a solid 7% boost in net income. And due to stock buybacks -- management spent $350 million on dividends and stock repurchases over the last six months -- that translated into a 12% spike in per-share earnings. Foot Locker's $0.94 per share of profit beat consensus estimates calling for $0.90 per share.

Trends change quickly in apparel and athletic footwear categories, but CEO Richard Johnson and his team believe they can effectively respond to those shifts while delivering mid-single-digit sales growth and double-digit profit gains for the full year. With this week's results, investors gained confidence in that aggressive forecast.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Deere & Company Stock Quote
Deere & Company
DE
$310.87 (4.49%) $13.36
Foot Locker, Inc. Stock Quote
Foot Locker, Inc.
FL
$29.55 (1.83%) $0.53
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,500.68 (2.68%) $823.32
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,911.74 (3.06%) $116.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.