Dow 30 Stock Roundup: Nike Earnings Disappoint, Walgreens Boots Margins Drop

The index suffered a disappointing week, declining over three straight trading sessions. Investors remained wary ahead of a crucial meeting between Presidents Trump and Xi at the G-20 summit in Japan. Investor sentiment was further dampened after Fed Chair Jerome Powell indicated that the central bank is yet to decide on whether a rate cut should take place in July.

Last Week’s Performance

The index fell 0.1% last Friday as chip stocks weighed on the markets following U.S. Department of Commerce' ruling in which five more Chinese companies were banned from doing business with the United States. Shares of Disney (NYSE:DIS) dipped 1.3% and weighed on the Dow.

However, the index gained 2.4% over last week. Moreover, it is estimated that if the markets extend their month-to-date gains into the last week of this month, the Dow is on track to exhibit its strongest performance for June since 1938.

The Federal Reserve kept the federal fund target rate unchanged while giving a clear indication that the central bank might cut rates at least once this year. The ECB had also given a strong indication of a near-term rate cut a day earlier.

Assurance of pursuing accommodative monetary policies from two major central banks boosted investors’ confidence in equities. Moreover, geopolitical tensions with Iran resulted in a rally in energy stocks.

The Dow This Week

The index gained 8.41 points on Monday as investors waited for a crucial meeting between Presidents Trump and Xi this week. Moreover, the Iranian crisis intensified as U.S. government imposed fresh sanctions on the oil-rich country. Consequently, gold prices soared as investors shifted to safe-haven precious metals.

The index moved down 0.7% on Tuesday after Powell stated that the central bank remained undecided about reducing the benchmark interest rate. The Dow dipped 179 points to post its worst single-day drop since May 31. Powell stated that the Fed was carefully monitoring the economy in order to avoid lowering interest rates in haste.

The index lost 0.04% on Wednesday as investors remained uncertain of a positive outcome to the G-20 summit. Initial optimism over a near-term trade deal faded after Trump suggested that would be happy to collect tariffs from China if the countries are unable to reach an agreement.

The Dow slipped 10.24 points, or less than 0.1%, marking its third consecutive decline. This is its longest stretch of losses since the five-session decline ended Mar 8. In doing so, it moved against broader markets, which were boosted by bank stocks which gained ahead of the release of Fed stress test results.

Components Moving the Index

NIKE, Inc. (NYSE:NKE) reported quarterly earnings of 62 cents per share, missing the Zacks Consensus Estimate of 66 cents. This compares to earnings of 69 cents per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents a negative earnings surprise of 6.06%. A quarter ago, it was expected that this athletic apparel maker would post earnings of 63 cents per share when it actually produced earnings of 68 cents, delivering a positive surprise of 7.94%. This is the first time in four quarters that the company has missed the consensus mark for earnings.

Zacks Rank #3 (Hold) Nike posted revenues of $10.18 billion for the quarter ended May 2019, surpassing the Zacks Consensus Estimate by 0.29%. This compares to year-ago revenues of $9.79 billion. The company has topped revenue estimates over each of the last four quarters. (Read: Nike Misses Q4 Earnings Estimates)

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) reported adjusted earnings per share of $1.47 for third-quarter fiscal 2019, down 3.9% year over year (down 2.4% at constant exchange rate or CER). However, the figure exceeded the Zacks Consensus Estimate by 3.5%.

On a reported basis, net earnings came in at $1 billion, reflecting a 23.6% decline from the prior-year quarter. Reported earnings came in at $1.13, down 16.2% on a year-over-year basis.

This Zacks Rank #4 (Sell) company recorded total sales of $34.59 billion in the third quarter, up 0.7% year over year and 2.9% at constant exchange rate or CER. The top line edged past the Zacks Consensus Estimate of $34.53 billion. Gross profit in the reported quarter fell 4.2% year over year to $7.45 billion. However, gross margin contracted 111 basis points to 21.5%. (Read: Walgreens Boots Q3 Earnings Top Estimates, Margins Dip)

UnitedHealth Group, Inc. (NYSE:UNH) might buy the healthcare payments company Equian for nearly $3.2 billion, per multiple sources.

Equian delivers payment integrity solutions through proprietary content, enabling technology and highly responsive customer service. The company analyzes healthcare and insurance data to ensure that payments are fair, accurate, and paid by the correct party — resulting in billions of dollars of savings.

This buyout will allow Zacks Rank #3 UnitedHealth to add a new niche business to its health services segment, Optum, which deals in health management and engagement, health financial services, health IT, benefit operations, care operations and pharmacy care services. Over the years, Optum has grown to contribute an increasing proportion of total revenues. (Read: UnitedHealth to Buy Equian & Foray into Healthcare Payments)

Pfizer Inc. (NYSE:PFE) announced that the European Commission has approved its PARP inhibitor, Talzenna (talazoparib) for BRCA-mutated advanced breast cancer in previously-treated patients.

The drug is approved as monotherapy for treating locally advanced or metastatic breast cancer patients with HER2 negative, germline breast cancer susceptibility gene (gBRCA)1/2-mutations. Patients must have received prior treatment with an anthracycline and/or a taxane in the (neo) adjuvant setting or they should be ineligible for treatment with anthracycline/ taxane.

The drug is also approved for use in patients with HR+ breast cancer who have received prior endocrine-based therapy or are unsuitable for endocrine-based therapy. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Home Depot, Inc. (NYSE:HD) posted first-quarter fiscal 2019 earnings of $2.27 per share, up 9.1% from $2.08 registered a year ago. The bottom line also beat the Zacks Consensus Estimate of $2.16. Home Depot has a Zacks Rank #3.

Net sales grew 5.7% to $26,381 million from $24,947 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $26,298 million. While the company's overall comps increased 2.5%, comps grew 3% in the United States. (Read: Home Depot Earnings & Sales Surpass Estimates in Q1)

Visa Inc. (NYSE:V) recently entered into a definitive agreement to purchase the token services and ticketing businesses — formerly called Bell ID and Ecebs LTD — from Rambus (RMBS). However, the deal is subject to certain closing conditions.

The consolidation of Zacks Rank #3 Visa’s network tokenization abilities with Rambus’ local and account tokenization technology is expected to lead to secure and safe transactions across international commerce. Visa is one of the market-leading companies in tokenization technology that swaps sensitive payment information with a unique identifier, also known as token. (Read: Visa to Acquire Token and Ticketing Businesses From Rambus)

International Business Machines (NYSE:IBM) and Cloudera (NYSE:CLDR) have entered into an agreement to built go-to-market initiative, which is aimed at bringing big data and AI solutions to users across the open Apache (NYSE:APA) Hadoop ecosystem. IBM has a Zacks Rank #3.

The initiative is aimed at managing big data workloads across multi-cloud, edge architectures and hybrid on-premises to help customers manage their data and access analytical and decision-making applications. (Read: IBM Partners With Cloudera to Bolster Big Data Solutions)

Performance of the Top 10 Dow Companies

The table given below shows the price movement of the 10 largest components of the Dow, which is a price-weighted index, over the last five days and during the past six months. Over the last five trading days, the Dow has lost nearly 1%.

Next Week’s Outlook

Markets are facing difficult times with hopes of a near-term trade deal fading. While several investors remain hopeful, others are skeptical about the chances of an agreement between the United States and China, given that Trump maintains his belligerent stance. If the two countries make progress at the G-20 summit, markets should resume their ascent.

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