Dow Jones Industrials: Earnings Week in Review

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow began its first earnings season of 2014 with a bang this week, as six members of the Dow Jones Industrials (^DJI 0.32%) presented their earnings reports this week. Within the financial industry, three companies reported, including JPMorgan Chase, Goldman Sachs, and American Express (AXP 1.32%). In addition, tech giant Intel (INTC -0.80%) stepped up with its report, as well as health-insurance leader UnitedHealth Group (UNH 1.14%) and industrial conglomerate General Electric (GE -2.46%). Let's find out how these companies fared this week.

Source: Yahoo! Finance.

Betting on the banks
JPMorgan saw its net income fall 16% from the previous year, with a modest drop in net interest income and a big rise in expenses weighing on earnings. Those expenses were largely due to settlement costs, and when you back out legal-related expenses, JPMorgan's pre-tax earnings actually climbed by 8%. Moreover, with the company growing its tangible book value by 5%, JPMorgan justified the big share-price gains it has enjoyed over the past year.

Goldman Sachs saw similar trends in its business, with net income falling 19% from the year-ago quarter. Big hits to trading revenues held back the bank's overall results, even though the company did well in beating estimates on both total revenue and on earnings. In particular, the fixed-income arena hurt Goldman, as rising bond rates have caused a big slowdown in bond issuance and made it more difficult to earn profits from bond trading.

But closing out the financial earnings scene, American Express soared after reporting that card use among its customers rose by 8% during the holiday quarter, pointing to solid activity from consumers during the important shopping season. In addition, AmEx's cost-cutting efforts have borne fruit, and net income doubled from year-ago levels along with rising returns on equity as well.

Beyond banking
Despite its positive performance for the week, Intel disappointed investors with its quarterly report. The chip giant missed earnings estimates by a penny per share, even though operating income managed to climb 12% from year-ago levels. Yet even though the PC business appears likely to continue to decline, Intel has enjoyed huge growth in cloud solutions, storage solutions, and networking products. The problem is that those growth figures come from relatively small bases, leaving the company with a lot of work to do before it can complete its transformation from being reliant on PCs.

UnitedHealth also delivered solid results that nevertheless left investors wanting more. Even with an 8% jump in revenue that pushed earnings up 18%, the main problem that UnitedHealth faces is uncertainty about reimbursement rates from Medicare. With much of its business coming from its Medicare Advantage program, UnitedHealth is vulnerable to government decisions about reimbursements, and even a 35% jump in revenue at its Optum unit wasn't enough to convince investors of UnitedHealth's future.

Finally, General Electric gave investors continued growth, with sales rising 3% and sending operating earnings up 20% for the quarter. The conglomerate continued its long-term goal of reducing its reliance on its GE Capital unit, with its industrial segment generating 12% profit growth on record backlog levels.

In the end, investors got reasonably good news on the earnings front from Dow component stocks this week. Even though the share-price performance didn't quite match up to investors' hopes, solid fundamentals could help prolong the bull market into the future even after earnings season is long past.