The broad-based S&P 500 (SNPINDEX:^GSPC) is literally swimming in earnings data today with a number of reports handily topping estimates and lending credence to investors' beliefs that the markets could go even higher -- and it just might have moved significantly higher had it not been for mixed economic data.
On one hand, March's durable goods report signaled ongoing strength in the demand for manufactured goods with a 2.6% increase. This follows a 2.1% jump from February, and continues a nice rebound from December and January when cold weather disrupted businesses across the U.S. With winter now in the rearview mirror, the hope is that manufacturing will continue to expand at a brisk pace.
On the other hand, weekly initial jobless claims figures hit a brick wall, rising nearly 8% to a seasonally adjusted 329,000. As Foolish contributor Justin Loiseau, who tracks these weekly data releases like a hawk, noted earlier today, the increase likely had to do with temporary layoffs right before Easter, and isn't likely indicative of a longer-term shift in unemployment. While I happen to agree wholeheartedly, investors weren't having it.
After all was said and done for the day, the S&P 500 managed to use a number of strong earnings reports to trudge higher by 3.22 points (0.17%) to close at 1,878.61. This marks the index's seventh gain in the past eight sessions.
Despite the relatively tame move in the S&P 500, orthopedic and implantable device maker Zimmer Holdings (UNKNOWN:ZMH.DL) led to the upside with an 11.5% gain after it announced its first-quarter results and the purchase of privately held Biomet. While Zimmer's quarterly results -- which showed a 2% increase in sales and a 6% boost in adjusted EPS-- were solid, it was the company' $13.35 billion purchase that excited investors. The acquisition of Biomet could help Zimmer achieve up to $270 million in cost synergies three years following the merger, and will be accretive to earnings within the first year. Furthermore, the increased diversity of its combined products should help improve its pricing power, as well as counteract an ongoing push by the government to slowly reduce Medicare reimbursements over time. This is certainly a name that health-care savvy investors will want to keep on their watchlists following this purchase.
Earnings, however, was the big story for semiconductor processing equipment manufacturing-and-servicing company Lam Research (NASDAQ:LRCX), which handily topped Wall Street's forecasts in the third quarter, and rose 11.5% on the day, as well. For the quarter, Lam reported a huge 39% increase in year-over-year revenue, to $1.23 billion, as well as a 10% increase in sequential revenue from the second quarter. Gross margin also improved 300 basis points, to 43.2% from the prior year, as adjusted EPS totaled $1.26, $0.10 better than Wall Street anticipated. Best of all, Lam issued fourth-quarter revenue guidance of $1.19 billion to $1.29 billion, which is markedly higher than the Street's consensus of $1.09 billion on adjusted gross margins of 45%-47%. With the need for mobile devices soaring, it's quite possible the demand for semiconductor processing equipment, while cyclical, could still have a few more years left in the tank. This means Lam could still be worth a look.
Finally, the largest company in the world, Apple (NASDAQ:AAPL), rose 8.2% after reporting surprisingly strong second-quarter results after the closing bell last night. During the quarter, Apple sold 43.7 million iPhones, 16.4 million iPad's, and 4.1 million Mac computers. This represented a 17% increase in iPhone sales and a 5% jump in Mac sales; however iPad sales dipped 16% year over year due to stiffer competition. Fortunately, higher iPhone sales were more than enough to lead Apple to report $45.6 billion in sales, a 4.7% increase from Q2 2013, as net income jumped to $10.2 billion, or an adjusted $11.62 per share, well ahead of the $10.18 consensus estimate on the Street. The company also boosted its share buyback program by $30 billion to a cumulative $90 billion, announced an 8% increase to its dividend, and disclosed a seven-for-one stock split. All in all, it was another great quarter for Apple, and there are few reasons I see why investors shouldn't be pleased with these results.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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