Stocks wavered between gains and losses on Friday, but the best week in years for the major benchmarks ended on a generally positive note. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both posted small gains.
Today's stock market
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Health care stocks took a turn in the lead today, with the Health Care Select Sector SPDR ETF (NYSEMKT:XLV) climbing 0.7%. Rate-sensitive utility stocks rose as long-term interest rates eased; the Utilities Select SPDR ETF (NYSEMKT:XLU) added 0.9%.
As for individual companies, Deere & Company (NYSE:DE) reported a strong quarter and raised its outlook, while Arista Networks' (NYSE:ANET) guidance for 2018 sales didn't meet investors' high expectations.
Deere sees strong global demand
Deere & Company bulldozed analyst expectations when it released fiscal first-quarter results, and the stock rose 1.6%. Revenue grew 22.9% to $6.9 billion. Adjusted earnings per share came in at $1.31, more than double the $0.61 in the quarter last year. Including one-time charges due to the new tax law, Deere's per-share loss was $1.66. Wall Street was expecting adjusted EPS of $1.20 on sales of $6.4 billion.
Deere also raised its forward guidance. Now the company forecasts 2018 equipment sales to grow 29% in fiscal 2018 and 30% to 40% in the second quarter, and adjusted net income for the year to amount to $2.85 billion. Earlier the company had guided to 2018 net income of $2.6 billion on a sales increase of 22%.
Equipment sales for the quarter were actually below the company forecast from three months ago, but Deere said that sales were hindered by bottlenecks in the supply chain and logistical delays in shipping products to dealers as it tried to meet the strong demand. The company said the improved outlook reflects confidence that it is in position to fulfill demand caused by strengthening conditions in the world's agricultural and construction equipment markets.
Arista Networks shares plummet despite strong results
Arista Networks reported a better-than-expected fourth quarter but gave a forecast for the full year that didn't satisfy investors, and the stock plunged 19%. Revenue grew 42.7% to $468 million and non-GAAP earnings per share increased 64.4% to $1.71. That blew away the consensus estimate of $1.41 per share on sales of $453 million.
Non-GAAP gross margin improved from 64.4% last quarter to 65.9%. For the full year, sales increased 45.8% over 2016 and EPS soared 70%.
Looking ahead to Q1, Arista expects revenue between $450 million and $468 million, comparing favorably with the analyst consensus of $458 million. Non-GAAP gross margin is expected to fall between 63% and 65%, a slight decline sequentially. Where Arista might have triggered the stock price decline was in the conference call, when CFO Ita Brennan said that revenue will face some "tough comparables" in 2018 and that top-line growth will moderate to a "more typical" mid-twenties rate for the full year.
Investors have come to expect anything but "typical" as the company continues to ride the cloud computing wave and take share from industry giant Cisco Systems. Although the guidance for growth to moderate to that level was not new -- CEO Jayshree Ullal discussed it three months ago -- it was still below analyst expectations of 27.5% growth.
Ullal said growth in artificial intelligence will increase demand for bandwidth, and Arista, now the market share leader in 100 gigabit Ethernet switching, will be entering the 400 gigabit Ethernet market next year. Investors had bid up the stock based on hopes for better numbers this year, though, so shares dropped back to levels seen early last month.