It's been a busy day for the market's most important tickers. No fewer than five of the 30 Dow (^DJI 0.06%) companies reported earnings either last night or this morning. If you had expected these news-heavy tickers to set the tone for the Dow's trading action, you may be disappointed. Three of the five missed analysts expectations -- yet the Dow is trading up today anyhow.
How did these five blue chips fare last quarter? Let's take a look at the Dow's biggest movers.
Image source: UnitedHealth Group.
Let's start with the day's biggest winner. Shares of health insurance giant UnitedHealth Group (UNH 2.96%) have jumped 6.8% today on a combination of strong earnings and in-line sales. In the second quarter, revenue rose 12% year over year to $30.4 billion. Diluted GAAP earnings jumped 10% to $1.40 per share. Analysts were expecting sales of $30.5 billion and earnings of $1.25 per share.
UnitedHealth investors started the year in a skittish mood, haunted by the ghosts of sequestration and the implementation of Obamacare. But the stock started rising when UnitedHealth boosted its dividend and received an analyst upgrade in early June, and this earnings report proved the bullish analyst firm right (in the short term, at least). All told, shareholders have enjoyed a market-crushing 29% return in 2013 -- far above the Dow's 19% gain.
Image source: IBM.
The other winner is Dow heavyweight IBM (IBM -0.89%), whose pricey shares have risen 1.8%. Like UnitedHealth, Big Blue beat analysts' earnings targets in the second quarter despite a not-so-impressive revenue performance. Non-GAAP diluted earnings per share improved 8% to $3.91 on revenue that was down 3% year over year to $24.9 billion.
Big Blue pulled off this two-headed performance by doing well in high-margin segments like software sales and mainframe server systems. That made up for flat revenue in the BRIC bloc and other supposedly high-growth markets, not to mention poor results in the mid-tier server markets.
For the second half of the year, management said the backlog of service orders is the strongest IBM has seen in the last four years. Combined with strong software sales, that points to improving margins and a better revenue performance in the back half of 2013. As a result, IBM increased its full-year earnings guidance by $0.20 per share.
Investors took the good news to heart, but IBM shares still lag the Dow in 2013. There's plenty of work to be done in this turnaround story, and the second quarter only provided a few first steps on a long journey. Just remember: Past performance is no guarantee of future returns. Despite this year's disappointments and headwinds, IBM remains a 4-star CAPS stock (out of 5), and my own bullish CAPScall on the stock stays in place for the long run.
Image source: Intel.
On the other side of the coin, you'll find American Express, Verizon, and Intel (INTC -1.79%) holding the Dow back today. The biggest drag of them all came from Intel.
Shares of Verizon and American Express fell about 3% at today's low, while Intel is down 3.9% at the time of writing. In this trio, only Intel failed to grow its earnings and sales by at least 10% and 4%, respectively. The chip giant still delivered both top-line and bottom-line results within its original guidance, but investors were hoping for more.
In particular, the PC division reported 7.5% lower sales compared with the same period in 2012, which looks like bad news for smaller rival Advanced Micro Devices (AMD 0.69%). While Intel's performance was weak, it's still several percentage points stronger than the overall market's 11% swoon, according to industry watcher Gartner. With only two competitors fighting for slices of that shrinking market, it seems inevitable that AMD will report terrible results tonight. Intel's segment-leading performance must steal unit sales from the only other guy in the race.
Looking ahead, freshly appointed CEO Brian Krzanich promised to focus on "the best products for the fast-growing ultra-mobile market segment," which means doubling down on tablet and smartphone chips.
Before the report, I said that a big drop in Intel's share prices here might spell an investment opportunity. Well, the stock trades for just 11.6 times trailing earnings now, and I don't see the company falling apart. Krzanich has a plan for the increasingly mobile era, and servers will eventually bounce back. Intel shares may have underperformed the Dow so far in 2013, but they seem primed for a great long-term comeback. That's another bullish CAPScall that isn't going away -- and this time it's paired with a personal stake in Intel shares.
