The Daily Dow
Wednesday, July 23, 1997
by Robert Sheard
LEXINGTON, KY. (July 23, 1997) -- Dow stocks were two-one-and-two in earnings news today. CHEVRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHV)") else Response.Write("(NYSE: CHV)") end if %> and UNITED TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UTX)") else Response.Write("(NYSE: UTX)") end if %> bested Wall Street expectations, DUPONT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DD)") else Response.Write("(NYSE: DD)") end if %> and ALLIEDSIGNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %> posted earnings in line with estimates, and MINNESOTA MINING & MANUFACTURING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %> missed estimates by a couple of pennies. Today's results are typical of this quarter's earnings so far, with more Dow stocks beating estimates than not.
Let's look at the Dow stocks closest to the Foolish Four strategy first. Chevron posted the best earnings surprise of the bunch, beating analyst expectations by 16%. The company recorded earnings of $1.28 a share while analysts only expected $1.10. In terms of operating earnings (excluding special items) Chevron's results were 20% better than last year. The key to Chevron's solid performance was its control over expenses, which helped offset lower oil and natural gas prices.
The other current Foolish Four holding didn't fare as well, however. 3M posted earnings of $1.01 a share, but Wall Street was expecting $1.03. Profits increased 9.7% over last year's level on an increase in sales of just 8.4%. The company's satisfied, however, that the second half of 1997 will bring continued strong growth. Obviously the Street assumed the company was further along with management's growth measures than it was. Nevertheless, 3M only missed its number by 2% -- nothing fatal.
DuPont, which sits in the current Foolish Four rankings these days, met analyst expectations with its $1.01 a share. Net income rose 13%, chiefly because of strength in DuPont's petroleum unit, Conoco. DuPont management feels that earnings for the year are likely to set another record.
A strong performance in its jet-engine business (Pratt & Whitney) helped United Technologies record a 17% gain in second-quarter profits. Posting $1.17 a share, United Tech beat Wall Street estimates by three cents a share, despite losing some four cents a share to detrimental currency translations. As a result of the good performance, the company was able to reduce its net debt to $320 million and its net debt to capital to 7%. That shaved the debt by 60% and reduced the debt to capital ratio from 16% a year ago.
And finally, AlliedSignal posted earnings right in line with analyst estimates of $1.08 a share. Allied's aerospace and engineering materials divisions helped the company to its 16% gain in earnings over last year's second quarter. In addition, the company set a 2-for-1 stock split which should take effect on September 16.
[Note: In yesterday's Foolish Four column I had a brain melt and mentioned
that a 14 P/E multiple on next year's earnings estimates would drop the Dow
200 points. I intended to say 1,200 points, of course, but overlooked the
typo. After the late rally yesterday, it should really be 1,300 points, but
a 100-point difference with the Dow at 8,000 doesn't mean much between friends,
does it? Sorry for any confusion.]
(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________
Stock Change Last -------------------- T - 3/16 35.69 GM +1 1/4 59.00 CHV - 7/8 76.75 MMM -1 7/8 98.44
Day Month Year
FOOL-4 -0.43% 1.75% 3.96%
DJIA +0.33% 5.30% 25.43%
S&P 500 +0.28% 5.81% 26.44%
NASDAQ +0.24% 8.71% 21.43%
Rec'd # Security In At Now Change
1/2/97 120 3M 83.00 98.44 18.60%
1/2/97 153 Chevron 65.00 76.75 18.08%
1/2/97 179 Gen. Motor 55.75 59.00 5.83%
1/2/97 479 AT&T 41.75 35.69 -14.52%
Rec'd # Security In At Value Change
1/2/97 120 3M 9960.00 11812.50 $1852.50
1/2/97 153 Chevron 9945.00 11742.75 $1797.75
1/2/97 179 Gen. Motor 9979.25 10561.00 $581.75
1/2/97 479 AT&T 19998.25 17094.31 -$2903.94
CASH $767.60
TOTAL $51978.16