The stock market was broadly higher by early Wednesday afternoon, helped along by a flood of earnings reports. The Dow Jones Industrial Average (^DJI +1.38%) was up 0.33% at 12:30 p.m. EDT, trailing the other major indices.
Negotiations over a new stimulus bill continued Wednesday, with President Donald Trump suggesting that Democrats and Republicans were nowhere close to striking a deal. With the supplemental federal unemployment benefit set to end this month, a failure to pass new stimulus measures soon could derail the economic recovery.
Contributing to the Dow's underperformance on Wednesday were Boeing (BA +1.69%) and Visa (V +0.94%). Boeing badly missed analyst estimates for its second-quarter results, and it announced new production cuts to cope with depressed demand for commercial airplanes. Visa's earnings report was more of a mixed bag, featuring a double-digit decline in payments volume.
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Boeing misses estimates, cuts production further
Airplane manufacturer Boeing is dealing with the dual crises of the continued grounding of its 737 MAX planes and decimated demand for air travel due to the pandemic. Sales were down 25% in the second quarter to $11.8 billion, missing the average analyst estimate by $1.14 billion. Adjusted earnings per share came in at a loss of $4.79, a whopping $2.26 worse than analysts were expecting.
Boeing delivered just 20 commercial airplanes in the second quarter, down from 90 in the prior-year period. The company has a backlog of 4,500 commercial airplanes worth $409 billion.
"To align to the sharp reduction in commercial market demand in light of COVID-19, the company is taking several actions including further adjusting commercial airplane production rates and reducing employment levels," read the company's earnings release. Boeing plans to reduce 787 production to six per month in 2021 while gradually reducing the combined production rate for the 777 and 777X to two per month.
With the pandemic nowhere near under control in the United States, it might take years for air passenger volumes to fully recover, and the recovery in commercial airplane demand could take longer. While passenger volumes have bounced back since bottoming out earlier this year, the number of travelers going through TSA checkpoints has stagnated over the past month at a greatly reduced level.
Boeing stock was down about 2.5% by early Wednesday afternoon. Shares now sit about 57% below their 52-week high.
Visa reports slump in payments volume
Visa's fiscal third quarter, which included the bulk of the stay-at-home orders in the United States due to the pandemic, featured double-digit declines in revenue, net income, payments volume, and processed transactions.
Revenue of $4.8 billion was down 17% year over year, falling just shy of the average analyst estimate. Service revenue, which is recognized based on payments volume for the previous quarter, was flat at $2.4 billion. Adjusted EPS of $1.06 beat expectations by $0.02, but it was down 23% from the prior-year period.
Total payments volume was down 10% in the quarter, with processed transactions down 13%. Cross-border volume tumbled 37%, with a 47% decline excluding transactions within Europe.
The situation improved for the credit card company throughout the third quarter. The relaxing of stay-at-home orders in the U.S. drove a meaningful improvement in payments volume, with card-present spending trending higher. E-commerce spending excluding travel remained elevated as consumers continued to favor online purchases. The cross-border picture was cloudier, with volumes only marginally improving as the quarter progressed.
Shares of Visa were down about 0.6% by early Wednesday afternoon on the earnings news. The stock remains roughly 8.6% below its 52-week high.
