As on the first two days of the week, U.S. stocks opened little changed on Wednesday (with a downward bias this time, however), with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) down 0.12% and 0.08%, respectively at 10:20 a.m. EDT. Dow components, Boeing (NYSE:BA) and Procter & Gamble (NYSE:PG) reported first-quarter results this morning, and technology heavyweights Apple and Facebook are to release their earnings this afternoon after the market close.
Boeing's stock performed tremendously in 2013, shaking off concerns related to its flagship aircraft -- the technologically sophisticated, but manufacturing-challenged 787 Dreamliner -- to rise 85%. In 2014, however, the stock has hit a bit of an air pocket, losing 6%. Last year's gains may have something to do with that fall, as they pushed the shares' valuation up to a level that I'd qualify as well-fed. Nevertheless, investors are cheering the aircraft manufacturer's earnings results this morning, pushing the stock closer to breakeven for the year (Boeing shares are up 1.7% at 10:20 a.m. EDT.)
Boeing beat Wall Street's expectations on revenue by 12%, while adjusted earnings per share came in at $1.76 versus a consensus estimate of $1.56. However, this "beat" illustrates the rather contrived corporate/Wall Street earnings waltz; indeed, only three months ago, the consensus estimate was $1.78 -- $0.02 above Boeing's result. And on it goes, as Boeing today lifted its guidance range for the full year from $7-$7.20 to $7.15-$7.35. The $7.25 midpoint of the new range is just below the $7.29 analysts' consensus estimate going into the report.
Boeing is a great company with an enviable position as one of two companies in a global duopoly (and arguably the better of the two). However, at 17.5 time next 12 months' earnings-per-share estimate, the shares offer no better than adequate value. That's not awful in this overheated market, but it's hardly worth salivating over. If you already own the shares, you can continue to hold them quite happily; if you don't, I expect there will be better opportunities to open a position.
Yesterday evening, I highlighted comments from an investor letter written by activist hedge fund manager David Einhorn, according to which "now there is a clear consensus that we are witnessing our second tech bubble in fifteen years." Another respected activist investor, Jeff Ubben of ValueAct Capital, took his turn yesterday to single out the technology industry in general and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) in particular -- not for overvaluation this time, but for governance practices.
Speaking at an investor conference in New York on Tuesday, Ubben said that "Jamie Dimon [chairman of JPMorgan Chase] gets hauled over the coals in New York for his $20m, but [Google Chairman] Eric Schmidt presides over four board meetings and gets paid $100m," referring to Schmidt's 2011 compensation package, which totaled $101 million. "What comes out of Google 10 years from now is probably dysfunctional."
Ubben -- who is not a quick-flip activist -- has a point. Google's governance structure -- including the newly created nonvoting Class C shares -- does not bother me too terribly at this time. However, I'll admit it constitutes an ongoing risk and one that needs to be carefully monitored.