The stock market rally got an earnings boost, with Google parent Alphabet (GOOGL), Chipotle Mexican Grill (CMG), Texas Instruments (TXN) and Twitter (TWTR) among the big winners. But Boeing (BA) and Tesla (TSLA) were notable losers, while FANG stocks Amazon.com (AMZN) and Facebook (FB) struggled after earnings.
Stocks Hit Record Highs
The S&P 500 and Nasdaq composite hit record highs amid an earnings blitz, rising 1.7% and 2.3%, respectively, for the week. A number of top stocks breaking out into buy zones. The Dow Jones edged up 0.1% as Boeing (BA) and Caterpillar (CAT) were drags. Google, Chipotle, Texas Instruments and Twitter were big earnings winners, while Tesla tumbled. FANG stocks Amazon.com (AMZN) and Facebook (FB) undercut buy points, though the latter closed above its entry. Software and defense earnings were strong. Chip stocks had several winners but also some losers.
Google Soars On Blowout Earnings, Buyback
Google-parent Alphabet (GOOGL) reported Q2 adjusted EPS rose 21% to $14.21 while revenue grew 19% to $38.94 billion, beating views for EPS of $11.30 and sales of $38.16 billion. Google also announced a $25 billion stock buyback. Google said traffic acquisition costs, or what it pays to partner websites, rose less than expected. TAC rose 13% to $7.24 billion. Shares jumped Friday.
Facebook Cautions; Twitter, Snap User Growth Boom
Facebook (FB) reported better-than-expected second-quarter earnings views, but sees slowing revenue growth. Earlier, the company detailed its $5 billion privacy settlement with the FTC, which is imposing new restrictions on the social media giant. Facebook stock initially rose on earnings, but reversed lower to test a buy point. Twitter (TWTR) soared into a buy zone Friday on revenue, and user growth beat estimates. Snapchat-owner Snap (SNAP) reported a smaller-than-expected loss and strong revenue and user growth. Snap stock skyrocketed to a new 52-week high.
Amazon Earnings Miss
Amazon (AMZN) earnings rose 3%, the smallest gain in seven quarters and well below views. Revenue climbed 20% to $63.4 billion, slightly topping. Amazon Web Services revenue jumped 37% to $8.38 billion but was slightly behind estimates. Shares fell 1.6% Friday, dipping below a recent buy point.
Tesla Loss Soars On Weak Sales, Margins
Tesla (TSLA) lost $1.12 a share vs. views for a 40-cent loss. Revenue jumped 59% to $6.35 billion, below estimates of $6.4 billion. Gross margins were weaker than expected amid record production and Model 3 sedans sold at a relatively high price point. Capital spending and R&D outlays fell yet again, despite current and future projects. Shares plunged nearly 14% Thursday.
DOJ Begins Big Tech Antitrust Probe
The Justice Department confirmed it is reviewing Big Tech firms to see if they are stifling competition in online platforms. It's a new level of regulatory oversight for Facebook (FB), Amazon.com (AMZN), Google parent Alphabet (GOOGL) and Apple (AAPL). Meanwhile, the FTC is probing Facebook after finalizing a $5 billion privacy settlement with the social network. Investors took the DOJ antitrust review in stride.
Q2 Chip Earnings Are Mixed
Texas Instruments (TXN) and chip gear maker Teradyne (TER) became the latest chip companies with upbeat results and guidance, raising hopes for a late 2019 industry recovery. But other semiconductors, including Xilinx (XLNX) and STMicroelectronics (STM) had less-than-stellar results. Intel (INTC) reported better-than-expected earnings. Also, Apple (AAPL) agreed to buy Intel's smartphone modem business for about $1 billion, giving the iPhone maker the ability to design its own wireless chips. But Intel shares erased early Friday gains, closing down 1.1%.
Boeing Dives On Messy Q2, 737 Max Issues
Boeing (BA) warned that it could temporarily shut down production of its 737 Max jet if it doesn't return to service early in early Q4. CEO Dennis Muilenburg assured investors that an issue regarding a computer chip on the troubled jet is just a software problem. But the FAA is concerned the solution will require a hardware fix. Boeing reported a massive Q2 loss, with an after-tax charge of $4.9 billion. But Wall Street analysts excluded charges related to the 737 Max grounding and instead calculated an adjusted profit that beat estimates. Boeing told the Air Force that it would not compete for the Ground Based Strategic Deterrent (GBSD) contract “under the current acquisition approach” over concerns about the contract's fairness. Shares plunged below key support levels.
Defense Stocks
Lockheed Martin (LMT) said EPS climbed 16% to $5, beating views for $4.74, as revenue increased 7.7% to $14.43 billion, above views for $14.16 billion. Lockheed raised its 2019 EPS guidance but warned that the new outlook excludes “U.S. Government actions related to Turkey,” which will be ousted from the F-35 program. F-35 supplier Hexcel (HXL) topped Q2 earnings and revenue forecasts and raised its dividend and full-year profit guidance. Northrop Grumman(NOC) EPS rose to $5.06 as revenue grew 19% to $8.46 billion, beating analyst estimates. A top Air Force official said that Northrop is moving fast on the B-21 stealth bomber and that the first flight could happen in December 2021. General Dynamics (GD) EPS fell to $2.77 with revenue up 4%, both beating views. Raytheon (RTN) EPS rose to $2.92 and revenue climbed to $7.16 billion, beating estimates.
Software Earnings
ServiceNow (NOW) earnings rose 49%, easily beating, while revenue climbed 32% to $833.9 million, just beating. However, Q2 subscription revenue of $781 million fell just short, while Q3 subscription revenue also missed expectations. The enterprise software maker said adjusted earnings were 71 cents a share, up 49% from a year earlier, with revenue rising 32% to $833.9 million. Shares fell but slashed losses to a fraction.
Proofpoint (PFPT) reported Q2 earnings rose 58%, revenue 25% to $214.4 million and billings 17% to $232 million, all beating. The cybersecurity firm also guided higher for Q3 EPS. Shares cleared a buy point Friday.
Atlassian (TEAM) fiscal Q4 earnings rose 43% with revenue up 36% to $334.6 million, both topping modestly. The project-management and collaborative software maker gave in-line guidance for fiscal 2020. Shares jumped to a record high Friday.
Wix.com (WIX) reported Q2 adjusted EPS rose 17% to 34 cents, with revenue rising 27% to $185.4 million, vs. views for 18 cents and $184 million. But the website design firm said it expects to add in a range of 450,000 to 500,000 subscribers in 2019, down from earlier guidance of 550,000.
Cadence Design Systems (CDNS) earnings climbed 27% to 57 cents, beating by 4 cents. Sales rose 12% to $580 million, just above views. Cadence Design guidance was largely in line amid uncertainty over U.S. government policy on technology exports to China.
Payment Stocks
Card giant Visa (V) topped fiscal Q3 earnings and revenue estimates, even as it slightly downgraded its full-year profit forecast. Digital payments giant PayPal (PYPL) reported accelerating earnings growth, but shares fell on weak revenue and lowered full-year sales outlook. Meanwhile IBD 50 member Discover Financial (DFS) stock gapped up through its buy zone after beating on the top and bottom lines.
Chipotle, Starbucks, McDonald's
Fast-casual Mexican chain Chipotle Mexican Grill (CMG) topped Q2 forecasts, with same-store sales growth accelerating for a sixth straight quarter. Digital sales helped. Chipotle raised its full-year comps target. Starbucks (SBUX) quarterly results also topped estimates, helped by sales gains in the U.S. and China. The coffee chain hiked its full-year same-store sales and EPS outlook. McDonald's (MCD) met Q2 earnings estimates but U.S. same-store sales surged 5.7%, well above views. All three stocks hit record highs.
School Stocks
For-profit Chinese educator TAL Education (TAL) got a stock market caning after missing on earnings and delivering weak guidance. Meanwhile rival New Oriental Education & Technology(EDU) broke out despite mixed fiscal Q4 results amid strong enrollment growth.
Health Care IPOs Soar In Debuts
Health Catalyst (HCAT) and Livongo Health (LVGO) rose 50% and 36%, respectively, in their trading debuts. Health Catalyst sold shares at 26, raising $182 million. Livongo raised $356 million, pricing at 28. Both priced above expected price ranges.
Homebuilders Mixed
PulteGroup (PHM) triggered a sell-off in homebuilder stocks due to falling gross margins and slowing sales. But smaller M/I Homes (MHO) spanked earnings estimates, while home sale volume and closing prices were up. Meanwhile existing-home sales and the FHFA House Price Index were weaker than expected. New-home sales rose, but less than views.
Drug Earnings
Drugmakers overwhelmingly topped second-quarter earnings estimates. On Tuesday, Biogen(BIIB) popped after adjusted earnings swelled 58% while sales rose 8% to $3.62 billion. GlaxoSmithKline (GSK) earnings rose 5% and Alexion Pharmaceuticals (ALXN) earnings 27.5%. AstraZeneca (AZN) earnings rose 1% as sales grew 19% to $5.72 billion while Bristol-Myers Squibb (BMY) reported a 17% EPS gain as revenue advanced 10% to $6.27 billion.
News In Brief
Edwards Lifesciences (EW) reported second-quarter adjusted earnings of $1.38 per share, up 11%, and $1.09 billion in sales, rising 15%. Both metrics beat analyst estimates. Shares jumped.
Ford Motor (F) grew EPS 19% to 32 cents despite automotive sales slipping 0.4% to $35.76 billion. Ford stock plunged despite the all-around beat on weak guidance.
Coca-Cola (KO) increased EPS 3% to 63 cents as revenue rose 12% to $9.997 billion. Coca-Cola stock jumped on the modest beat, from support at its 10-week moving average.
United Technologies (UTX) posted a 12% jump in EPS to $2.20 as sales rose 18% to $19.63 billion, driven by aerospace. United Tech stock jumped on higher guidance and management comments that Boeing (BA) Max groundings may have a positive impact.
O'Reilly Automotive (ORLY) posted EPS of $4.51, up 5%, on sales of $2.59 billion, also up 5%. O'Reilly stock fell on an all-around miss and weak guidance.
CannTrust (CTST), a Canadian cannabis producer, plummeted further after Canadian media reported that executives were told about, or gave the OK to, unlicensed cannabis. CannTrust had already suspended shipments. Shares rebounded Friday after CannTrust fired CEO Peter Aceto and Chairman Eric Paul agreed to resign. Board member Robert Marcovitch was named interim CEO
TransUnion (TRU), one of the three big U.S. credit bureaus, reported better-than-expected Q2 earnings.
Columbia Sportswear (COLM) fell Friday despite the outdoor apparel maker crushing earnings views. Deckers Outdoor (DECK) plunged Friday even after the Ugg boots maker delivered an earnings beat and upped guidance.