Stocks edged into positive territory twice on Monday but ended the trading session with minor losses. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) indexes both fell by less than 0.5%.
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United States Oil Fund ETF (NYSEMKT:USO) ticked down, right on pace with a slight drop in crude oil prices to below $50 per barrel. Meanwhile the SPDR Select Financial Sector Fund (NYSEMKT:XLF) fell 0.4% on heavy trading as investors adjust their outlook for financial stocks to account for the earnings results coming in from the world's biggest banks.
Bank of America manages profit growth
Bank of America's stock held roughly flat after the financial titan posted surprisingly strong earnings numbers. Revenue rose 3% to $21.6 billion and earnings jumped 8% to $0.41 per share. Consensus estimates, in contrast, were targeting $21 billion of revenue and profit of $0.33 per share, so it was a solid beat on both counts. "Strong client activity and good expense discipline combined to drive positive operating leverage as we continue to optimize and strengthen our balance sheet," Chief Financial Officer Paul Donofrio said in a press release.
Steady growth in B of A's loan portfolio helped push revenue higher this quarter, as did a spike in client activity in the global markets division. In fact, a 32% surge in fixed income sales produced a double-digit increase in revenue from that segment. Investors can also be pleased in the fact that tangible book value rose by 11%.
On the other hand, Bank of America's average return on assets weighed in at 0.9%, below the company's 1% target, thanks to the combination of a low interest rate environment and increased regulatory costs that's holding earnings down.
It's good news for shareholders that the bank can produce strong profit growth in that environment, and it points to significantly higher earnings if and when the Federal Reserve takes additional steps toward boosting interest rates.
Hasbro prepares for the holidays
Hasbro spiked 7% after announcing banner quarterly earnings results. Sales soared 14% to $1.7 billion and net earnings jumped 24% to $258 million, or $2.03 per share. Both the sales and profit figures were all-time records for the toys and games specialist. "The Hasbro team delivered a tremendous third quarter," CEO Brian Goldner said in a conference call with investors.
The biggest contributor to Hasbro's success this quarter was its extremely profitable partnership with Disney (NYSE:DIS). In fact, toys tied to the Disney Princess and Disney Frozen lines pushed the girls category higher by 57%. The boys and games categories both contributed gains as well, but with growth of just 2% and 13%, respectively. Hasbro's core franchises, which include company-owned assets like Nerf, Transformers, and Play-Doh, ticked up by 2%.
The company's inventory level jumped up by 36%, which raises the risk that it is holding too much product heading into the critical holiday shopping season. However, executives said the buildup was entirely due to growing sales momentum and is limited to the brands that are selling especially well. "The overall quality of this inventory is good," Chief Financial Officer Deb Thomas told investors, "and our inventory availability has improved from this point last year."
So Hasbro is positioned to rake in profits during what's likely to be a strong year for the toys and games industry, with a major assist from The House of Mouse.