After two straight trading days of waffling around zero change, stocks finally picked a direction for the week: down. The S&P 500 (SNPINDEX:^GSPC) and the Dow Jones Industrial Average (DJINDICES:^DJI) ended up losing 0.6% and 0.3%, respectively, despite having been in the green for a good portion of the day. The S&P 500 is up 2% so far this year, while the Dow has registered an almost 4% drop.
With no major economic news on the calendar, investors stayed focused on the deluge of third-quarter earnings announcements. And these reports were the catalysts behind today's spike in shares of General Motors (NYSE:GM) -- and the stock dip that sent Chipotle (NYSE:CMG) into the red for the year.
General Motors posts record profitability
General Motors' investors were in a good mood today as shares spiked 7% higher and moved into positive territory for 2015. The auto giant just announced 55% higher third-quarter profit, after adjusting for special items. Reported sales slipped by 1% to $38.8 billion, but only because of foreign currency swings. After accounting for exchange rate moves, sales actually rose 6%.
There was plenty for shareholders to like in today's quarterly report. GM notched record profitability, with adjusted margin hitting 8%. It also gained share in the critical U.S. market thanks to strong sales of trucks, crossovers, and SUVs.
Meanwhile, return on invested capital nearly doubled to 26%, and cash flow improved from an $0.8 billion loss last year to an $0.8 billion gain in the quarter that just closed. "The third quarter was evidence of the earnings power of this company, as we continue to build on our track record for generating results and delivering on our financial commitments," said Chief Financial Officer Chuck Stevens.
GM reiterated its full-year outlook and said it expects steady growth to come from the U.S. and Chinese markets. Overall, management is optimistic about the potential for long-term profit growth. "We expect our earnings to accelerate in the next several years, with double-digit earnings-per-share growth," Stevens said.
Chipotle's growth slows again
Chipotle ended the day down 6% after falling by as much as 8% at one point.
In its third-quarter report posted on Tuesday afternoon, the restaurant chain revealed that growth is slowing. Comparable-store sales rose by just 2.6%, which marked the second straight deceleration this year. Comps were 4.3% in the second quarter and 10.4% in the first quarter. Chipotle managed a scorching 17% comps gain for fiscal 2014, but it isn't on pace to reach even double-digit gains this year.
Two other points detracted from an otherwise strong third quarter in which net income jumped higher by 11%. First, profitability shrank: Restaurant operating margin ticked lower by half of one percentage point, to 28.3% of sales. And second, the company posted a rare drop in throughput as it handled one fewer transaction, on average, across its store base during the peak lunch hour.
But quarterly wiggles aside, Chipotle's long-term business momentum looks strong. It's still one of the fastest-growing and most profitable restaurant chains around, a fact that management highlighted in Tuesday's conference call with Wall Street analysts. "With very difficult comparisons against the record year we had in 2014, we have continued to grow our business in a competitive environment while maintaining some of the best margins in the industry," CEO Steve Ells said.
Ells and his executive team plan to boost sales in the year ahead through initiatives like online ordering and delivery. They are also trying to instill a "sense of urgency" around getting throughput numbers growing again. However, their official view calls for comps growth to slow to a low single-digit pace in 2016.