Black Friday Earnings Reports

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During the week ending on the 25th anniversary of the worst one-day drop ever for the U.S. stock markets a slew of earnings announcements were made. Many were disappointing. There were a few bright spots though.

On "Black Monday," October 19, 1987, the Dow Jones Industrials Average lost about a quarter of its value, temporarily interrupting one of the great bull market runs in history.

<img src="http://media.ycharts.com/charts/4642632ca3f385aea869974fb2c19ded.png" />

Dow Jones Industrial Average data by YCharts

 

"Black Friday" Oct. 19, 2012 also saw a drop in the Dow although it was only 1/15th as bad. Mostly negative reports running up to that day indicated to some investors that slowing economic growth was finally impacting the top and bottom lines of large, blue-chip companies. For the first time in three years aggregate earnings growth was poised to be lower. 

Technology stocks took a particularly big hit.

Google's (NASDAQ: GOOG) earnings grew but were below analyst expectations. Where do they get those expectations anyway? Revenue increased by 45% year-over-year to greater than $14 billion for the first time ever. As CEO Larry Page said in the earnings conference call "not bad for a teenager." Google has existed for 14 years. Several other business metrics such as "cost per click" did not meet their targets. Overall, it was bad news for the company.

The stock slid by 8% on the day that the announcement was made and a further 2% on Black Friday. Earlier in the month the stock had hit an all-time high and the company had jumped up in the market cap rankings.

There was also an embarrassing glitch in the release of the financial information. The company responsible did so several hours before it was scheduled to do it after the market closed for the day. A host of institutions have downgraded Google stock. 

International Business Machines (NYSE: IBM) also reported less than stellar results and lowered future guidance. The company said revenue dropped by 5.4% and its global business services segment suffered. Earnings were $3.36 per share as compared to $3.23 last year. The growth rate was below estimates. The stock immediately dropped by about 5%. It too had hit an all-time high recently. 

Before the bell on Friday, McDonald's Corp (NYSE: MCD) released results for the 3rd quarter. Earnings per share declined year-over-year from $1.47 to $1.43. Analyst consensus estimates had pegged EPS to be $1.45. Excluding currency fluctuations revenue was up 4%.

The company predicted lots of headwinds going forward and reduced guidance in many areas. CEO Don Thompson said the company intends to take steps to improve profitability by such measures as emphasizing their dollar menu over the extra value offerings in future advertising efforts. 

Shares tumbled over 4% after rising over the past month or so. 

A bright note during the week was the performance of Johnson and Johnson (NYSE: JNJ). The company reported higher earnings than the same period last year and diluted EPS increased by 0.8%, which beat expectations. Would it have been a problem if they came in at 0.6% or 0.5%? Revenues also grew, by 6.5%, which beat the consensus estimates. The pharmacy portion of their business was significantly stronger than the consumer portion. People must be buying fewer Band Aids and Tylenol. Shares went higher after the news but declined later in the week along with the broader market.

Of course the bull (or bear) in the china shop is Apple (NASDAQ: AAPL). The tech giant will announce earnings on October 25, two days after the company is expected to unveil a smaller version of its tablet computer, the iPad "mini."

There has been speculation, some of it wildly pessimistic in my mind, about what Apple will report. Some analysts were trying to use information gleaned elsewhere, such as earnings announcements from wireless carriers, to try to discern how many new iPhones were sold at the end of the quarter. Looking back at similar pronouncements in the past I observed that most of them seemed to be way off and underestimated actual performance. Let's just wait until CEO Tim Cook gives us the numbers. 

So I think that somehow we will survive the Black Friday that just occurred as we have the Black Monday all those years ago. Since that fateful day the Dow has increased by an average of 8.6% per year. I'd bet that on October 19, 2037 the Dow will be up rather than down. 

<img src="http://media.ycharts.com/charts/764ff710569b039cb40841c9b5787382.png" />

Dow Jones Industrial Average data by YCharts

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Mathman6577 owns shares of Apple, Johnson & Johnson, McDonald's, and International Business Machines. The Motley Fool owns shares of Apple, Google, International Business Machines, Johnson & Johnson, and McDonald's. Motley Fool newsletter services recommend Apple, Google, International Business Machines, International Business Machines, Johnson & Johnson, and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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