The Daily Dow Approach, 10/17/97: The Daily Dow

The Daily Dow
Friday, October 17, 1997
by Robert Sheard

LEXINGTON, KY. (Oct. 17, 1997) -- Dow earnings continue to pour in this week, but the results over the last two days have been giving mixed signals to investors.

Yesterday MERCK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %> posted earnings per share of 99 cents versus 83 cents last year (a 19% increase), but that was a penny shy of what Wall Street expected. But perhaps more of concern is the suggestion that Merck's leading cholesterol drug is losing market share to competitor WARNER-LAMBERT's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLA)") else Response.Write("(NYSE: WLA)") end if %> offering. As a result, the stock took it on the chin yesterday.

Driven by strong overseas growth, COCA-COLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> met analyst expectations of 41 cents per share. Last year, Coke posted 39 cents in the same quarter. The best measure of Coke's growth is worldwide unit case volume, and the 11% gain posted this quarter surprised analysts. Coke had been predicting 9% or 10%, and has traditionally grown by 7% or 8%.

SEARS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> saw earnings rise by 27% for the quarter and beat the consensus expectations by a penny, posting 76 cents a share after special charges. Yet the stock was crushed yesterday, losing more than 10%. What's the story? Sears has had to raise its provision for bad debts and raised fears that delinquency rates in its credit card business are rising. After getting slapped on the wrist already this year for dunning credit card customers protected in bankruptcy, this is the last news investors wanted to hear. So much for the "softer side of Sears." The stock's plunge yesterday propelled the yield high enough that it became part of the High Yield Ten, replacing UNION CARBIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %>.

Today, McDONALD'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> was the latest victim to a strong U.S. dollar. The company warned that U.S. sales would be slower in the fourth quarter and that profits overseas are being sliced because of the currency exchange. With First Call estimates of 67 cents a share, McDonald's was only able to post 64 cents a share, a meager 3% gain over last year's result of 62 cents a share.

Have a Foolish weekend!

(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. ________________________________

1997 Foolish Four Model

Stock  Change   Last
--------------------
T    +1  1/2   45.25
GM   -   9/16  69.44
CHV  -2        84.00
MMM  -1  3/16  94.38

           Day   Month    Year
                  Day   Month    Year
        FOOL-4   +0.29%   2.35%  18.90%
        DJIA     -1.16%  -1.24%  21.69%
        S&P 500  -1.16%  -0.33%  27.46%
        NASDAQ   -1.93%  -1.11%  29.11%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     84.00    29.23%
   1/2/97  179 Gen. Motor    55.75     69.44    24.55%
   1/2/97  120 3M            83.00     94.38    13.70%
   1/2/97  479 AT&T          41.75     45.25     8.38%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  12852.00  $2907.00
   1/2/97  179 Gen. Motor  9979.25  12429.31  $2450.06
   1/2/97  479 AT&T       19998.25  21674.75  $1676.50
   1/2/97  120 3M          9960.00  11325.00  $1365.00


                             CASH   $1167.51
                            TOTAL  $59448.57