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Oct. 22, 2019, 5:48 p.m. EDT

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

Hasbro battered as earnings disappoint, but Harley-Davidson soars almost 7% after a profit and sales beat

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By Ciara Linnane, MarketWatch


MarketWatch photo illustration/iStockphoto
Two up, two down

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 /zigman2/quotes/206313935/composite TRV +0.19% , down more than 8%, shaved about 70 points of the Dow, while McDonald’s shares /zigman2/quotes/203508018/composite MCD -0.50% , down 5%, cut it by about 53 points. That more than offset the combined 40 points that United Tech /zigman2/quotes/203237915/composite UTX -0.44%  and P&G /zigman2/quotes/202894679/composite PG -0.31% 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.”

In case you missed it: China casts a long shadow over stocks as earnings season opens this week

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.

/zigman2/quotes/206313935/composite
US : U.S.: NYSE
$ 133.54
+0.25 +0.19%
Volume: 1.32M
Nov. 11, 2019 6:30p
P/E Ratio
14.99
Dividend Yield
2.46%
Market Cap
$34.40 billion
Rev. per Employee
$996,151
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/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 192.64
-0.97 -0.50%
Volume: 2.75M
Nov. 11, 2019 6:30p
P/E Ratio
25.30
Dividend Yield
2.60%
Market Cap
$145.81 billion
Rev. per Employee
$100,120
loading...
/zigman2/quotes/203237915/composite
US : U.S.: NYSE
$ 148.22
-0.66 -0.44%
Volume: 1.47M
Nov. 11, 2019 6:30p
P/E Ratio
25.04
Dividend Yield
1.98%
Market Cap
$128.50 billion
Rev. per Employee
$277,021
loading...
/zigman2/quotes/202894679/composite
US : U.S.: NYSE
$ 119.33
-0.37 -0.31%
Volume: 3.85M
Nov. 11, 2019 6:30p
P/E Ratio
79.55
Dividend Yield
2.50%
Market Cap
$298.51 billion
Rev. per Employee
$727,304
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