Earnings Watch: Dow components McDonald’s and Travelers disappoint on earnings, offsetting P&G and United Tech’s gains

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The four members of the Dow Jones Industrial Average that reported third-quarter earnings on Tuesday resulted in a net negative for the stock market, as disappointing numbers from McDonald’s Corp. and Travelers Cos. outweighed beats from United Technologies Co. and Procter & Gamble.

Travelers stock TRV, -7.13%, down more than 7% in morning trading, shaved about 70 points of the Dow, while McDonald’s shares MCD, -4.04%, down nearly 4%, cut it by about 53 points. That more than offset the combined 40 points that United Tech UTX, +1.26%  and P&G PG, +3.82% added.

McDonald’s stock took a tumble after profit and revenue fell short of estimates as the world’s biggest burger chain by revenue invested in technology and on promotions in an effort to draw in more customers and boost sales.

Chief Executive Steve Easterbrook said newly-upgraded stores were helping boost traffic and sales. The company also raised prices on certain menu items.

“Globally, our customers are rewarding our commitment of running better restaurants and executing our Velocity Growth Plan by visiting more often,” he said.

See also: Stocks up but off highs as Dow sees 100-point drag from McDonald’s and Travelers

MKM Partners analyst Brett Levy said a 20% rise in general and administration costs contributed to the weak profit number. He is expecting the company’s earnings call to focus on sales momentum through the quarter and whether management has seen a pick up since it ended. He also expects questions on the competitive landscape and views on 2020, “especially as the breakfast debate is now on the menu.”

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Insurer Travelers Cos. was another disappointment with the company’s profit falling sharply as it added to reserves to cover claims payments for lawsuits and jury awards. As one of the biggest providers of insurance to businesses, and of car and home insurance for individuals and families, its numbers are viewed as an indicator of how the broader insurance sector is faring.

Travelers said profit fell to $396 million, or $1.50 a share, down from $709 million, or $2.62 a share, in the year-earlier period. Adjusted per-share earnings came to $1.43 a share, well below the $2.35 expected by FactSet. Revenue climbed to $8.01 billion from $7.42 billion and net written premiums rose 7% to $7.57 billion.

Consumer goods giant Procter & Gamble beat earnings and sales estimates, boosted by “disproportionate growth” in the skin and personal care group, thanks to demand for premium brands like SK-II.

Click here for MarketWatch’s previews of major earnings: Earnings Watch and Earnings Outlook

For fiscal 2020, P&G revised its forecast for sales growth to 3% to 5% from growth of 3% to 4%. EPS is expected to grow 225% to 243%, with the comparison period “significantly depressed” by Gillette Shave Care impairment adjustments in fiscal 2019.

Gillette has been hurt by the popularity of online shaving clubs, a craze started by Dollar Shave Club, which offers a razor and supply of blades by mail every month for as little as $3.

Dollar Shave Club is now owned by Anglo-Dutch consumer goods company Unilever, while Harry’s Shave Club is the property of Edgewell Personal Care, after a $1.37 billion cash-and-stock deal announced in May.

P&G now expects adjusted EPS growth for fiscal 2020 in the range of 5% to 10% versus previous guidance for 4% to 9% growth.

United Tech, poised to combine with Raytheon Co. RTN, +1.41%, to form one of the world’s biggest aerospace companies, topped profit estimates and raised its adjusted per-share guidance for the year. The company narrowed its sales outlook to a range of $76.0 billion to $76.5 billion, which compares with prior guidance of $75.5 billion to $77.0 billion.

The Raytheon deal comes after the acquisition last year of another competitor, Rockwell Collins, and is part of an overhaul that will see the company split into three companies by next year, spinning off elevator maker Otis and cooling and heating equipment maker Carrier.

Among the other big names reporting Tuesday:

* Harley-Davidson Inc. HOG, +7.01%  cheered investors with a profit and revenue beat as it continues to promote motorcycle riding in the U.S. and expand overseas. The company said it is aiming to expand to 4 million total riders in the U.S. and to grow international business to 50% of motorcycle revenue, launch 100 new high impact motorcycles and to do it profitably and sustainably.

* Toy maker Hasbro Inc. HAS, -15.64%  disappointed with an earnings miss that sent its stock down more than 14%. The company blamed weakness in franchise brands and trade uncertainty.

“In the third quarter, the threat of and implementation of tariffs in certain instances impacted our shipments and our ability to fully meet demand,” Chief Executive Brian Goldner told analysts on the company’s earnings call, according to a FactSet transcript.

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* United Parcel Services Inc. UPS, -2.77%  beat on profit but was slightly short on revenue, despite a surge in overnight air deliveries driven by e-commerce activity. The company’s Chief Operating Officer Jim Barber, viewed as most likely to replace Chief Executive David Abney when the latter steps down, said he is retiring at the end of the year.

The stock fell almost 4% on the news as analysts noted he had played a key part in the company’s turnaround, having run the international business.

* Biogen Inc. BIIB, +26.20%  enjoyed a strong quarter, but the results was totally overshadowed by the news that the biotech will pursue FDA approval of its Alzheimer’s treatment aducanumab following a promising late-stage trial. The news sent the stock up a stunning 40% premarket, and up 27% in the regular session, putting it on track for its biggest one-day gain since April of 1999.

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* Kimberly-Clark Corp. KMB, -5.04%  shares took a nosedive, after it beat on profit but narrowly missed the revenue consensus. The maker of tissues and diapers raised its full-year adjusted EPS outlook to $6.75 to $6.90 from $6.65 to $6.80, but said it expects sales to be down slightly. On its earnings call, executives said global economic conditions suggest slower growth in 2020, according to a FactSet transcript.

The S&P 500 SPX, +0.09%  was up 0.2% and the Dow Jones Industrial Average DJIA, +0.17%   was up 37 points, or 0.1%.