Major benchmarks rose Wednesday after the Commerce Department reported that the U.S. economy expanded 2.1% in the third quarter, exceeding previous estimates. The Dow Jones Industrial Average (^DJI -0.41%) and the S&P 500 (^GSPC -0.61%) closed at new records, with biotech stocks up strongly again and the consumer discretionary sector making a nice gain.
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As for individual stocks, a positive earnings report from HP (HPQ -6.05%) didn't inspire investors focused on a takeover bid from Xerox, and Deere (DE -1.33%) warned about weak spending by U.S. farmers.
HP bolsters its case for rejecting Xerox bid
HP reported results for the fiscal fourth quarter that beat expectations, but investors are focused on the merger drama with Xerox, and shares slipped 1.4%. Revenue inched up 0.3% to $15.4 billion, which was better than the slight decline analysts were expecting. Adjusted EPS grew 11% to $0.60, $0.01 above the high end of earlier guidance.
The company's personal computer segment delivered 4% revenue growth, but as has been the case in earlier quarters, HP's printing business, and particularly its lucrative supplies business, was the weak point. Printing revenue fell 6%, with hardware unit sales down 9% and supplies revenue down 7%.
Xerox issued a letter yesterday confirming that it's launching an attempt at a hostile takeover, but HP wouldn't comment on the bid in the conference call with analysts. HP CEO Enrique Lores declared, "Our strategy is working," but investors seem less than convinced, and the positive Q3 results may weaken Xerox's case for its bid.
Deere sees a challenging year ahead
Shares of Deere dropped 4.3% after the company reported strong results for the fiscal fourth quarter but gave a downbeat forecast for next year. Net sales and revenue increased 5% to $9.9 billion and net equipment sales grew 4% to $8.7 billion when analysts were expecting 2% growth. Adjusted earnings per share fell 7% to $2.14, beating the analyst consensus by $0.01.
Net income for the fiscal year came to $3.25 billion, which was ahead of the $3.2 billion the company said in August to expect, but Deere cited challenges the company faced in the quarter. Trade tensions and poor growing and harvesting conditions this year have made farmers cautious about buying new equipment, and the company's leasing business had a sharp profit decline due to falling residual values.
Looking ahead, Deere sees the challenges continuing into 2020. The company projects net income to be between $2.7 billion and $3.1 billion, a decline of 11% at the midpoint, and an outlook that disappointed investors who were looking for growth next year.