S&P 500 Companies Signal Optimism as 74% Beat EstimatesCécile Daurat
United Technologies Corp. raised the lower end of its 2014 forecast today and McDonald’s Corp. gave an upbeat outlook for April, showing signs of optimism at U.S. corporations after factory production and the job market improved last month.
Comcast Corp., bucking the industry trend of losing cable-TV subscribers for a second quarter, Yum! Brands Inc. and Gilead Sciences Inc. were among the 74 percent of Standard & Poor’s 500 Index companies that have topped first-quarter analysts’ projections this season so far, according to data compiled by Bloomberg. About 77 percent have yet to report.
The rosier forecasts from United Technologies, the Hartford, Connecticut-based maker of aircraft parts, and McDonald’s, which predicted a second straight growth in monthly sales, show optimism was spread across sectors. So far financial companies are beating first-quarter earnings at a 77 percent rate and industrials -- led by General Electric Co. last week -- at a 82 percent pace, the data show.
United Technologies, which also beat first-quarter profit estimates today, gave signs that its bets on aviation and commercial building systems are starting to pay off.
“The sales environment is looking a little bit better and the cost cutting is bearing fruit,” said Christian Mayes, an analyst with Edward Jones & Co. in Des Peres, Missouri, who rates the stock as buy. “Investors got what they were looking for: the raised low-end of the guidance and the earnings beat.”
At Oak Brook, Illinois-based McDonald’s, the world’s largest restaurant chain, free McCafe coffee offered at domestic stores from late March into April and a new Clubhouse burger may be slowing diners’ rush to check out Taco Bell’s waffle tacos and other rivals’ new items. Although the moves are helping McDonald’s this month, they weren’t enough to lift first-quarter earnings, which fell short.
Gilead reported quarterly sales of its new blockbuster hepatitis C drug that beat estimates by more than $1 billion after the markets closed, a victory in the face of criticism over the treatment’s $1,000-per-pill price. By contrast, Amgen Inc., the world’s largest biotechnology company by sales, missed earnings predictions on lower-than-expected demand of its top drug, Enbrel, sending the shares down in late trading.
In the technology industry, AT&T Inc. and VMware Inc. both beat profit estimates, joining Netflix Inc., whose earnings came higher than predicted yesterday after the market closed. Netflix plans to increase prices for new customers reflected growing confidence that original shows like the political thriller “House of Cards” and exclusive movies will continue to attract new subscribers.
Economic indicators released yesterday signaled the pace of economic growth may be poised to snap back. The Conference Board’s index, a gauge of the outlook for the next three to six months, rose 0.8 percent in March, the most since November, after a 0.5 percent gain in February, the New York-based group said yesterday. The measure’s 6.1 percent advance over the past year is the biggest since July 2011.
Companies have been downgrading expectations coming into the season and analysts now estimate S&P 500 earnings rose 0.7 percent last quarter, according to data compiled by Bloomberg. That’s down from a 1.9 percent increase a month ago.
Among earnings that missed earnings estimates so far was also Google Inc. last week. The search engine company is struggling to keep up with a shift to advertising on mobile phones. Meanwhile International Business Machines Corp. posted earnings that matched and sales that were lower than projected amid declining demand for hardware and waning sales in developing countries.
Tomorrow’s reports include Boeing Co., Procter & Gamble Co. and Dow Chemical Co. before the market opens, followed by Qualcomm Inc. and Zynga Inc. in the afternoon.