Monday was tough sledding right out the gate for major indices other than NASDAQ which has fully regained its mojo and is back to move upward on autopilot. 

The session was marred by punishing reactions to slight misses, whether on the top or bottom lines.  Illinois Tool Works (ITW) was hammered (I love the company and I think the stock is oversold), and Hasbro (HAS), in part because the shares were already up a lot.  

The shining stars of the session were community banks, led by Citizens (CFG), SunTrust (STI), Zions (ZION), KeyCorp (KEY) and M&T (MTB) banks.  I like this niche of the financial market as a proxy for a real America, but the deck is still stacked for big Wall Street banks. 

This isn’t why U.S. existing homes came in below estimates that would seem to fall on the shoulders of young adults.

Millennials on the Move?

So, it appears that young kids aren’t buying toys, and millennials aren’t buying motorcycles or homes; they are renting recreational vehicles and having wonderful weekends.

In June, existing home sales came in at an annual rate of 5.52 million from 5.62 in May. The number was up 0.7% from a year ago, but it’s the second slowest rate of growth thus far in 2017. 

Median prices climbed to $263,800 +6.5% from a year earlier.

Trends

• Median prices have been up 64 straight months on a year-to-year basis.
• Supply, 1.96 million and has declined 22 consecutive months on a year-to-year basis.
• First-time buyers dipped to 32% of the total from 33%, and it still remains well below levels indicative of a healthy market.

Young adults must step up.  In fact, while many millennials are stuck with a lot of student debt, those with only a high school degree, are twice as likely to be living with mom and dad (especially men). The trend break-down is the same with Generation X (Gen X) except for the degree of the problem, which adds credence to growing evidence that older millennials are moving out faster.

All this attention to millennials now is because it’s the largest age demographic in the nation, and they must step up to keep the pace of prior generations. According to FactSet, this earnings season has seen 12 companies that have to deal with questions about those young adults. It’s going to happen more and more and become a determining factor on where these shares go.

 

Today’s Session

Big name companies are rolling out earnings results this morning, and right now, the heavy-hitters are swatting homeruns but also underscoring the importance of global markets for US wealth-generation.

McDonald’s (MCD) Citing strong traffic gains in all segments, the company saw U.S. comp sales of 3.9%, well above the 2.9% consensus.  Global comp store sales +6.6%.

Caterpillar (CAT) simply crushed Wall Street consensus. 

• Revenue $11.33 billion versus consensus $10.96 billion
• Earnings Per Share $1.49 versus consensus $1.26 billion
• FY17 guidance, company now sees upper end of revenue at $44.0 billion and eps $5.00 compared to prior guidance $41.0 billion and $3.75, respectively.

Construction $4.93 billion +11%

• North America Energy & Transportation $1.98 billion +10%
• Globally Resource $1.76 billion +21% 

Geographic Sales

• North America $2.31 billion +3%
• Latin America $364 million +31%
• EAME $964 million -5%
• Asia/Pacific $1.28 billion +44%

United Technologies (UTX) had a solid beat this morning with precision execution across the board and higher guidance for the fiscal year.  The red flag was operating margins, but overall business and execution is solid.

Organic Sales

• Otis +1%
• Climate +5%
• Pratt & Whitney +6%
• Aerospace -1%

Operating Margins

• Otis 17.4/18.8
• Climate 18.5/19.6
• Pratt & Whitney 9.9/10.1
• Aerospace 15.9/15.7

Google/Alphabet is a loser this morning after a rare miss.  The company has missed on occasion, the stock got hit and the stock came roaring back. The street seems to understand that script is probably still intact.  So while it will open lower, and drag some tech along, the rest of the market is poised to rocket out the gate.

Comments

I appreciate the clear and concise commentary. Al Holden on 7/25/2017 5:22:43 PM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.