Apple, IBM results disappoint

Shares of both companies drop after hours. The Dow rises 81 points, its eighth gain in 12 days. Weakness in chip stocks keeps the Nasdaq in check. Oil moves higher; gold drifts.

By Charley Blaine Oct 18, 2010 1:56PM

Charley BlaineUpdated at 9:45 p.m. ET

 

Apple (AAPL) easily beat Street estimates for fiscal-fourth-quarter earnings, but shares sagged because of lower-than-expected iPhone sales and profit margins. 


Shares were down 6.1% to $298.50 after hours. The shares had risen to $318 in regular trading and hit a new intraday high of $319.

IBM (IBM) shares also were off 3.3% to $138.10 after hours after signings of service contracts appeared to disappoint investors. The declines for both stocks could affect markets on Tuesday. Futures trading suggests a down open on Tuesday, with tech shares leading the downturn.
The Apple and IBM results came as the Dow Jones industrials ($INDU) closed up 81 points to 11,144. That's about 60 points below the year's high of 11,205, set on April 26. The Standard & Poor's 500 Index ($INX) was up 9 points to 1,185, and the Nasdaq Composite Index ($COMPX) was up 12 points to 2,481. The Nasdaq-100 Index ($NDX.X) added 6 points to 2,104, after being down much of the day.

Apple earned $4.31 billion, or $4.64 a share, on revenue of $20.34 billion, up from $2.5 billion, or $2.53 a share, on revenue of $12.21 billion. Net income was up 70%, earnings per share were up 83% and beat the Street estimate of $4.06. Revenue was up $66.6 billion.

The company sold 3.89 million Macintosh computers, up 27% from a year ago; 14.1 iPhones, up 91% from a year ago; 4.19 million iPad devices and 9.1 million iPod music players, down 11% from a year ago.

The company said it expects fiscal-first-quarter revenue of $23 billion and earnings of $4.80. Wall Street has been expecting $5.04 a share and $22.2 billion, compared with earnings of $3.67 a share and $15.7 billion in revenue in the first quarter of the 2009-2010 fiscal year.

The company expects to announce a new operating system for its Macintosh computers on Wednesday.

The stock market rallied today in large part on expectations for Apple's results and as bank stocks rose with the help of better-than-expected results from Citigroup (C)

The major averages overcame weakness in chip and oil service stocks. Halliburton (HAL) earnings were a disappointment. Crude oil, however, moved higher, and gold was basically flat.


Among stocks making moves today:

  • AGA Medical Holdings (AGAM), up 40.7% to $20.70. St. Jude Medical (STJ) said it will buy AGA for $20.80 per share in cash and stock -- or about $1.3 billion. AGA Medical, with sales of $200 million, makes devices used to treat structural heart defects and other heart problems. St. Jude Medical was up 1.8% to $40.63.  
  • Allergan (AGN), up 5.5% to $72.61, third-best among S&P 500 stocks. The U.S. Food and Drug Administration approved Botox for the preventive treatment of chronic migraines in adults. That could nearly double the drug’s yearly sales to $2.3 billion.
  • Hasbro (HAS), up 3.8% to $46.81. The gain was fifth-largest among S&P 500 stocks. The world’s second-largest toymaker earned $1.09 in the third quarter, excluding one-time items. That beat the average analyst estimate by 5%.
  • Fluor (FLR), down 5.1% to $49.23. The big construction and engineering company cut its full-year earnings forecast to no more than $2.50 a share, down from its previous forecast of $2.90 to $3.20 a share.
  •  Rio Tinto (RIO) and BHP Billiton (BHP), down 1.5% to $65.44 and 0.2% to $82.26 in New York, respectively. The companies backed away from combining their Australian iron-ore operations into a joint venture that had been valued at $116 billion. The companies cited regulatory opposition in Australia.
Crude oil rose $1.83 to $83.08. Gold settled up 10 cents to $1,372.10 an ounce. Interest rates were lower, with the 10-year Treasury yield falling to 2.491% from 2.576% on Friday. The dollar was slightly lower against major currencies.

A boost to the market: The National Association of Home Builders' Housing Market Index jumped 3 points to 16 in October. Economists had expected the measure of homebuilder confidence to be unchanged at 13. 

That comes with a caveat. The index must be above 50 to be able to say homebuilders are optimistic. But the report did cite builder notes that they were starting to see more buyers looking at properties.

Homebuilding shares, however, were mostly lower.

Coming Tuesday: earnings from Goldman Sachs (GS), Bank of America (BAC), Johnson & Johnson (JNJ), Harley Davidson (HOG) and Yahoo (YHOO).

The Commerce Department will report on housing starts and building permits for September.

Citigroup cheers investors
Citigroup was up 5.6% to $4.17 after reporting $2.17 billion, or 7 cents a share, beating the Street estimate of 6 cents. Most of the earnings came because loan losses were reduced. That let the banking giant reduce its loan-loss reserve by some $2 billion. That flowed directly to the bottom line.

The results put the financial giant, which is 12% owned by U.S. taxpayers, one quarter closer to achieving its first annual profit after $29.3 billion in losses in 2008 and 2009.

Analysts were cheered by the report. David Trone of JMP Securities said the company produced "solid results in a tough environment."

Separately, Bank of America shares were up 3% to $12.34. The gain was the best among the 30 Dow stocks. The company said it had begun to prepare new affidavits for 102,000 pending foreclosure actions where court approval is required, applying new signatures to documents in 23 states.

By Oct. 25, a spokesman told The Wall Street Journal, the bank expects the new affidavits to be resubmitted to the courts, and foreclosure sales will resume in those states starting in November.

IBM shares drop, despite earnings beat
After the close, IBM said it earned $3.6 billion, or $2.82 a share, on revenue of $24.3 billion.

The earnings per share beat the consensus estimate of $2.75 and were up 17.5% from a year ago. Revenue was up 3.1% from a year ago and ahead of the Street estimate of $24.1 billion.

Shares, however, were down 3% to $138.50 from a regular close of $142.83. That may have more to do with buying the rumor and selling the news. The stock has risen 16.3% between a bottom on Aug. 26 and today's regular close.

A big issue appeared to be a disappointment in the signings for service contracts, down from a year ago. The company said, however, that one contract wasn't signed until after the close of the quarter and was worth $1.7 billion.

Energy prices -- New York close
 

Mon.

Fri.

Month chg.

YTD chg.
Crude oil 

$83.08

$81.25

3.89%

4.69%
(per barrel)











Heating oil

$2.2761

$2.2308

-6.72%

7.59%
(per gallon)











Natural gas 

$3.4310

$3.5350

-11.39%

-38.42%
(per mil. BTU)











Unleaded gasoline

$2.1515

$2.1038

5.22%

4.80%
(per gallon)











Retail gasoline

$2.8320

$2.8340

5.32%

7.31%
(per gallon; AAA)












Chips slip on Altera downgrade
Altera (ALTR), down 0.6% to $29.64, was downgraded by RBC Securities to "sector perform" from "outperform," with a $30 price target. The stock had been down to as low as $29.04.

Analysts expect the maker of programmable semiconductors to win fewer orders from Chinese communications equipment makers. The downgrade pulled most chip stocks lower.

The Philadelphia Semiconductor Index ($SOX) was off 1.2% to 353. Intel (INTC) was down 0.7% to $19.19.

Halliburton misses estimates

Halliburton's (HAL) shares were down  4.8% to $34.09 after its third-quarter profit missed expectations. Net income doubled, but its earnings from continuing operations of 55 cents per share fell short of analysts' estimates of 56 cents.


Rival Schlumberger (SLB), which reports results on Friday, was up a penny to $64.51.  


The Philadelphia Oil Service Index ($OSX) was off 0.5% at 208. The index is still up 6.8% on the year.


Short hits from the markets -- New York close
 
  Mon.

Fri.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.140%

0.140%

-6.67%

180.00%
5-year Treasury note 

1.118%

1.186%

-13.60%

-58.38%
10-year Treasury note

2.491%

2.576%

-1.31%

-35.18%
30-year Treasury bond

3.727%

3.727%

0.81%

-19.69%
Currencies







 

 
U.S. Dollar Index

77.137

77.268

-2.28%

-1.38%
British pound

$1.5939

$1.5990

1.39%

-1.47%
(in U.S. $)











U.S. $ in pounds

£0.6274

£0.6254

-1.37%

1.49%
Euro in dollars

$1.3996

$1.3980

2.46%

-2.35%
(in U.S. $)











U.S. $ in euros

€ 0.7145

€ 0.7153

-2.40%

2.41%
U.S. $ in yen 

81.37

81.42

-2.77%

-12.51%
U.S. $ in Chinese

6.67

6.64

-0.75%

-2.32%
yuan











Canada dollar

$0.987

$0.988

1.52%

3.75%
(in U.S. $)











U.S. dollar 

$1.014

$1.012

-1.49%

-3.61%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,372.10

$1,372.00

4.77%

25.17%
(per troy ounce)











Copper

$3.8550

$3.8390

5.57%

15.19%
(per pound)











Silver

$24.4130

$24.2880

11.88%

44.93%
(per troy ounce)











Wheat 

$6.9000

$7.0450

2.37%

27.42%
(per bushel)











Corn

$5.5725

$5.6300

12.41%

34.44%
(per bushel)











Crude oil 

$83.08

$81.25

3.89%

4.69%
(per barrel)










 
13Comments
Oct 18, 2010 3:26PM
avatar

who is tyler?

 

I think people need to have their own vision and hope for the future.  If you are waiting for a politician to give you one, you are going to be disappointed.

Oct 18, 2010 3:07PM
avatar

Oh my gosh.....what great news!  Citicorp earned 7 cents versus 6 cents, due to booking a small loss reserve.  And home builder confidence index soared from 13 to 16.  As Wall Street is rallying UP solely on these two items, which more than offsets the negative news on industrial production, we must agree with Wall Street that the economy has recovered and that there is no need for Helicopter Ben to keep interest rates near zero and print billions of new money.  Of course, the other assumption is that Wall Street continues to manipulate the media and the markets, allowing them to continue reaping billions of dollars in bonuses off naive investors.

Oct 19, 2010 7:46AM
avatar
Whether members have read much or little of The Federalist, the tea party movement's focus on keeping government within bounds and answerable to the people reflects the devotion to limited government embodied in the Constitution. One reason this is poorly understood among our best educated citizens is that American politics is poorly taught at the universities that credentialed them. Indeed, even as the tea party calls for the return to constitutional basics, our universities neglect The Federalist and its classic exposition of constitutional principles.
Oct 18, 2010 4:11PM
avatar
Dow up 80....on incredibly great news that Citicorp and optimism by home builders.  By golly, what more does Fed Chairman Bernacke need to know before he puts the printing presses away and starts raising interest rates so that savers can earn a good return on their CD or bonds.  Either Wall Street is wrong or the Federal Reserve....??
Oct 18, 2010 3:55PM
avatar
I think people need to have their own vision and hope for the future.  If you are waiting for a politician to give you one, you are going to be disappointed.

Amen to that!

As far as the markets being up, I also agree with NoPlaceToHide, futures were down pretty good this morning, then bad industrial production numbers come out and the market goes up!?  I recently heard some talking head on the news say that 80% of all the volume is flash trading.  This isn't a good indicator, especially since volumes have been down for quite some time now.  Regular investors are still pulling money out and sitting quietly on the sidelines.  Yep, the market is up alright, but it's not up based on confidence, optimism or fundamentals.


Oct 18, 2010 8:06PM
avatar

uvuv, r u kidding?  with the national debt at $13.5 trillion and climbing steadily, with the Pubs coming in and vowing to continue tax welfare for the rich, with the failed politics of the past three decades sending the entire global financial system to the brink of financial armageddon, and you think the two are not intricately intertwined?  puhleez.

capitalism + corruption

 

or

 

socialism + corruption

 

which of those two choices do you like best??

Oct 18, 2010 4:42PM
avatar

Another good old POMO day from 10 a.m. to 11:15 a.m. The Permanent Open Market Operation is pumping billions into the churn. The Citi earnings were all about less provisioning on loan losses, just like JPM. $ 1.99B less provisioning on $2.00B of "earnings" with revenue down........hardly a reason to expect these numbers are even close to accurate on loan losses. Expect the other banks to work the same game as JPM and Citi. 

 

It's all 100% manipulation and desperation now. It will work until it doesn't.

Oct 18, 2010 3:50PM
avatar
 i would like to discuss politics on occasion but over on this page we're supposed to talk about stocks or the economy.

uvuvu

Hasn't stopped anyone before.

 

who is tyler?
Good question. If Tyler ever visited the other room, he would probably ban everyone.Party
Oct 19, 2010 10:08AM
avatar

China is no longer a poor nation and is not deserving of it's MFN (Most Favored Nation) status.  China is a political, miltary, and financial threat to the U.S.  Remember, Dragons may be all mystical and then some...but they can roast you and eat without batting an eye.  Also, China views the U.S. as a serious threat at home and abroad and they are ever encroaching in our areas of influence and interest.  Plus we owe so much to China financially, that one flick of the wrist and the raising of interest rates on debt owed - the U.S. Financial Market plummets.   China is the new Soviet Union and i deserving of the title "The New Evil Empire."

 

As for you tea party nut jobs...the Constitution has not changed one iota, In fact, there are several elements of the Constitution that did not take into account the massive expansion of the U.S. population or the changes that have occurred over the last 200 plus years.  Small government...yeah right.  What planet are you all living on.  Small government for small population - bigger government for bigger population and an ever changing world.  You idiots are pathetic and are out of touch with reality.  It's just plain and simple math for you boneheads.   For the rest of you...it's time to wake up and smell the coffee!  There is a very strong need for in independent 3rd Party not affiliated to Republicans or Democrats to be used as a political check and balance for policy making.  Please note, I said policy making...not running a country so save your lecture on the Checks and Balances the Constitution is supposed to provide for running our government as a whole.   Semper and Fidelus 

Oct 18, 2010 7:24PM
avatar
The DOW futures are down 28 and the Nasdaq down 29.5 points.  ALL Apple and IBM.  Should be OK after tomorrow if there is a selloff as expected.
Oct 18, 2010 5:49PM
avatar
Island with a palm treeThe analysts  set the bar too high for apple that even as profitable it is, is having a hard time attaining it. I'll be a buyer at around aapl($260).Beer mug
Oct 18, 2010 4:21PM
avatar

The market should be up and would stay that way if it

was not artificially influenced by nay sayers on the economy ...  just to make a buck ...  day traders are doing more damage by one day making it go up to sell and down to buy.  This practice is going big time ( watch the last episode of 60 minutes )  with more sophisticated equipment.  They must have a big hold on politicians ,,,  this was suppose to be curtailed !!!

Oct 18, 2010 3:29PM
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