Stocks Higher

Components UnitedHealth, Johnson & Johnson Drive Dow to Triple-Digit Opening Gains

The major U.S. equity indexes are expected to open sharply higher on the back of strong earnings from UnitedHealth Group and Johnson & Johnson. Shortly before the cash market opening, the blue chip Dow Jones Industrial Average is trading about 180 points higher. The benchmark S&P 500 Index and the technology-based NASDAQ Composite are also posting solid gain in the pre-market session.

Strong Earnings Across Multiple Sectors

UnitedHealth Jumps Nearly 3%

The biggest surprise today was the strong earnings report from UnitedHealth. Shares jumped nearly 3% after the company reported better-than expected earnings and revenue. The company also raised its earnings guidance for the full year.

The largest U.S. health insurer’s results were driven by strength in its Optum unit, as well as a rise in memberships for its health plans.

UnitedHealth also raised its full-year adjusted earnings forecast to between $14.50 and $14.75 per share from its prior view of $14.40 to $14.70.

Johnson & Johnson Feels Effect of Legal Costs

Mounting legal costs weighed on the company’s first quarter profits, which dropped 14% as it fights thousands of lawsuits over its talc baby powder.

Nevertheless, the health company giant reported better-than-expected earnings, driving its shares up 1.2% in premarket trading.

J&J reported first-quarter net income of $3.75 billion, or $1.39 per share, down 14% from $4.37 billion, or $1.60 per share a year earlier. When adjusted, J&J earned $2.10 per share, above the $2.03 per share expected by analysts surveyed by Refintiv. The company said that more than half of its revenue came from prescription drug sales, which rose by more than 4%.

Bank of America Shares Falter

Bank of America shares are expected to open the cash market lower despite the company reporting record profits. The bank said first-quarter profit rose 6% to $7.3 billion, or 70 cents a share, exceeding analysts’ estimate of 66 cents a share. Revenue was roughly unchanged from a year earlier at $23 billion, essentially meeting analysts’ estimates.

Shares declined after executives said the lender’s net interest income would grow at half the rate of last year. Shares were further pressured after Chief Financial Officer Paul Donofrio issued guidance on net interest income during a Tuesday conference call with analysts. He said that net interest income grew 6% last year under more favorable conditions.

“The economy is expected to grow more moderately in 2019 and rate expectations have been lowered, plus we have some reasonable headwinds in Q2,” Donofrio said.

Good Results So Far

Despite earlier warnings of the worst earnings season since 2016, the corporate earnings season is off to a strong start. Nearly 84% of the S&P 500 companies that have reported so far have beaten analyst earnings expectations, FactSet data shows.

 

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.