Earnings Season in Full Swing

Stocks are mixed this morning as individual stocks react to earnings announcements. The Dow and S&P 500 are currently flat.

About 100 of the S&P 500 companies have reported second quarter results, and 80% have exceeded earnings (that is, profit) expectations. So far, companies in Healthcare and Financial sectors have the highest beat rates, suggesting that some out-of-favor areas of the stock market are beginning to rebound. I’ll summarize a few of today’s reports below.

Dahaher (DHR) reported second quarter results that impressed. Despite revenue falling 20% from the year-ago quarter, the stock is up 7% after the announcement. Why? Business has been slow and not surprisingly, the bar of investor expectations is set pretty low. But management said customer orders for lab consumables and bioprocessing work are improving. And the molecular testing business seems to gaining market share.

Lockheed Martin (LMT) stock rallied 4% after management reported better than expected second quarter results (revenue +9%, earnings +6%). And the second half of the year is tracking ahead of projections as well. The government has now resumed deliveries of the new F-35 fighter jet.

Coca-Cola (KO) also surprised with 3% sales growth and 8% earnings-per-share growth. Management raised its full-year outlook and noted particular strength in Latin America and Asia Pacific regions.

United Parcel Service (UPS) stock is down 13% after reporting disappointing second quarter results. Earnings (that is, profits) per share fell 30% from the year-ago quarter. The CEO said package delivery volume finally began to grow again in May. But demand is recovering slowly and UPS cut prices to try and win back business lost to competitors. At the same time, profit margins are down in the wake of an expensive new labor union contract. Not surprisingly, management is trying to reduce costs and recently cut 12,000 management jobs. The turnaround will take time.