Bloomberg News

S&P 500 Earnings Top Estimates at 77% Pace Led by Ford

July 25, 2014

Starbucks Corp. (SBUX:US), Ford Motor Co. (F:US) and American Airlines Group Inc. (AAL:US) posted profits that exceeded analysts’ estimates, benefiting in part from improved economies at home and abroad.

The automaker and the coffee-shop chain yesterday joined the 77 percent of Standard & Poor’s 500 Index companies that have beaten second-quarter projections, with more than 280 yet to report. Facebook Inc. (FB:US) closed at a record yesterday, one day after the social network said mobile advertising fueled sales.

Ford turned its first profit in three years in Europe, which is recovering from a recession. Starbucks reported a 23 percent gain in fiscal third-quarter profit after selling more food in the U.S. Yesterday’s results helped keep the S&P 500 and Dow Jones Industrial Average near record highs, with the U.S. recovering from a first-quarter economic contraction and poised to exceed 200,000 jobs for a sixth month.

“It’s good to see improvement in the economy translating into better earnings and helping the stock market,” Kevin Caron, who helps oversee $170 billion as a portfolio manager at Stifel Financial, said in an interview.

While the S&P 500 companies are running head of the first quarter’s 74 percent trend for beating estimates, yesterday’s results weren’t uniform. Caterpillar Inc. (CAT:US), the largest maker of mining machinery, forecast full-year profit and sales that trailed estimates and said there’s no sign of an upturn in the industry in 2014. Amazon.com Inc. (AMZN:US) reported its biggest quarterly loss since 2012 as Chief Executive Officer Jeff Bezos builds more distribution warehouses, adds grocery deliveries and develops new smartphones and tablets.

S&P 500 Record

The benchmark U.S. stock indexes, while near peaks, were little changed yesterday. The S&P 500 added 0.1 percent to a record 1,987.98 at the close. The Dow Jones Industrial Average slipped 2.83 points, or less than 0.1 percent, to 17,083.80.

Of S&P 500 companies that have reported so far, Menlo Park, California-based Facebook, Chicago-based Boeing Co. and New York-based aluminum maker Alcoa Inc. were among the 20 biggest positive earnings surprises.

The materials and technology industries are among those with the highest percentage of companies exceeding forecasts. Buoyed by the mobile ad sales, Facebook (FB:US) rose 5.2 percent to close at a record $74.98 yesterday, pushing its market capitalization to $194 billion.

Jobless Claims

“We’re getting a lot of good information and the earnings are conducive to a good stock market,” John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, said in an interview. “When you look across many different sectors you have very solid revenue growth.”

Stifel’s Caron said he seeing “nice momentum” in the U.S. economy after the first quarter’s contraction. The economy may have expanded at a 2.9 percent annual rate in the second quarter, according to the average economists’ estimate in a Bloomberg survey. “That’s good and it’s flowing through to the bottom line of companies.”

American Airlines and United Continental Holdings Inc. (UAL:US) both posted profits that beat analysts’ estimates. The carriers each said yesterday that they would buy back $1 billion in stock amid a turnabout after bankruptcies and consolidation.

A Labor Department report in Washington yesterday showed the number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level production since February 2006, reflecting what could be a pickup in auto making during a typically slow time of year.

Ford had record pretax operating income of $2.44 billion in North America in the second quarter, up from $2.3 billion last year. In Europe, it reported a $14 million pretax profit after a loss of $348 million last year. The automaker’s sales in Europe are up 6.6 percent this year as industrywide deliveries rose for the 10th consecutive month in June.

GM’s adjusted earnings before interest and taxes in North America fell to $1.39 billion from $1.98 billion, missing the $1.5 billion average estimate of four analysts. Excluding recall costs, the region’s adjusted Ebit rose to $2.4 billion, GM said.

To contact the reporter on this story: James Callan in New York at jcallan2@bloomberg.net

To contact the editors responsible for this story: Kevin Miller at kmiller@bloomberg.net James Callan, Stephen West


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Companies Mentioned

  • SBUX
    (Starbucks Corp)
    • $79.44 USD
    • -0.59
    • -0.74%
  • F
    (Ford Motor Co)
    • $15.03 USD
    • 0.22
    • 1.46%
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