Image source: Getty Images
Strong earnings results pushed stocks higher on Wednesday as the Dow Jones Industrial Average (^DJI 0.67%) crossed the 20,000-point mark for the first time. It and the S&P 500 (^GSPC 0.87%) index both finished higher by more than 0.75%.
Today's stock market
|
Index |
Percentage Change |
Point Change |
|---|---|---|
|
Dow |
0.78% |
155.80 |
|
S&P 500 |
0.80% |
18.30 |
Data source: Yahoo! Finance.
Financial stocks were among the biggest gainers, which helped the Financial Select Sector SPDR ETF (XLF 1.21%) rise 1.6%. In the losing column, a tick down in the price of gold sent the leveraged Direxion Daily Gold Miners Bull 3X ETF (NUGT -8.96%) lower by 5%.
A few individual stocks did significantly better than the market on its record-notching day, including Boeing (BA 0.39%) and Seagate (STX).
Seagate's stabilizing business
Seagate shares spiked 15% following the hard drive specialist's strong quarterly results. Revenue ticked down slightly to $2.8 billion. Earnings, on the other hand, came in well above expectations at $1.38 per share. Consensus estimates had been targeting closer to $1.08 per share.
Image source: Getty Images.
The business benefited from several positive trends, including declining expenses and a shift toward higher-margin high-capacity drives. As a result, Seagate managed sharply improved profitability despite lower overall demand and weakening average selling prices.
"The company's product execution, operational performance, and financial results improved every quarter throughout 2016," CEO Steve Luczo said in a press release. In an accompanying presentation to investors, the company cited quarter-to-quarter gains in operating margin, from 1% in the first quarter, to 4%, 8%, and then 13% in the fourth quarter, as evidence of the stabilization of its business. Cash flow also rose to a near-record $656 million.
The surging profits are making Seagate's dividend safer. The payout now represents 81% of earnings over the last six months, compared to nearly 180% in the prior-year period. That ratio should continue falling now that the company expects to earn $4.50 per share in 2017 -- up from its $2.50-per-share forecast issued in early August.
Boeing's profit boost
Boeing was the Dow's biggest winner, rising 5% after its quarterly earnings announcement. Revenue fell 1% for the quarter and by 2% for the full year as its defense, space, and security segments declined. Profitability jumped, though, as operating margin nearly doubled to 9.4% of sales. That improvement was the biggest factor behind the industrial giant's 64% spike in operating earnings.
Image source: Boeing.
Management highlighted the improved operating and financial results that allowed Boeing to plow cash back into its business while increasing dividend payments and stock buyback spending. "We led the industry in commercial airplane deliveries for the fifth consecutive year," CEO Dennis Muilenburg said in a prepared statement, "and produced record operating cash flow, which fueled investment in innovation and our people and generated significant return to shareholders."
Looking ahead, Boeing expects to deliver as many as 765 commercial aircraft for $63 billion of revenue at a near-10% operating margin. A further $28 billion from its defense, space, and security segment should bring total sales to about $91 billion, or 4% below 2016's result.
Yet Boeing should produce far greater profits from that lower sales base. Executives are projecting earnings of $9.20 per share, up 27% from this past year's figure. Investors cheered that surprisingly high outlook by pushing the stock to a new record on Wednesday.
