Stocks turned in mixed results on Wednesday, as the Dow Jones Industrial Average (DJINDICES: ^DJI) rose slightly while the S&P 500 (SNPINDEX: ^GSPC) ticked lower.
Image source: Getty Images.
Today’s stock market
| Index | Percentage Change | Point Change |
|---|---|---|
| Dow | 0.17% | 30.06 |
| S&P 500 | (0.17%) | (3.73) |
Data source: Yahoo! Finance.
The SPDR Select Financial Sector Fund (NYSEMKT: XLF) saw heavy trading ahead of the Federal Reserve’s monetary policy meeting next week. Economists don’t expect an interest rate hike to happen at that meeting, but hints about a possible December increase could boost prospects for banks. Meanwhile, the United States Oil Fund (NYSEMKT: USO) fell 1.3% as oil prices fell back below $50 per barrel.
Individual stocks on the move included Apple (NASDAQ: AAPL) and iRobot (NASDAQ: IRBT), which swung in opposite directions following their latest earnings announcements.
Apple’s profit letdown
Apple was the Dow’s biggest decliner, falling 2.3% after revealing a 9% revenue decline and a 19% drop in earnings for its fiscal fourth quarter. As expected, the consumer tech titan’s results were pressured by a double-digit drop in iPhone sales. That segment makes up over 60% of the business, and fell 13% as unit sales worsened to 45.5 million from 48 million in the prior-year period. On the positive side, average selling prices, which have trended lower after the release of the iPhone SE model, ticked up sequentially and may be headed back toward $700 per unit.
Image source: Apple.
Of course, the iPhone 7 and 7 Plus weren’t available for most of the quarter and sales of those popular products are still constrained by supply. Management sounded confident that the refreshed lineup is being well received. “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus, and Apple Watch Series 2,” CEO Tim Cook said in a press release.
Apple’s guidance for the current quarter calls for a return to revenue growth after three consecutive quarters of declines. Yet its profitability forecast, of roughly 38% gross margin, was lower than expected. Judging by the 20% stock price rise in the three months leading up to this report, Wall Street was simply hoping for a more aggressive earnings outlook from Cook and his executive team.
iRobot’s holiday season forecast
iRobot shares spiked 12% to reach a new all-time high following quarterly results that position the robotic tech specialist for a banner holiday season ahead. Third-quarter sales jumped 17% and net income soared 52% higher as both the top and bottom lines beat management’s July guidance. “Our third-quarter performance was outstanding,” CEO Colin Angle said in a press release, partly thanks to what executives described as successful marketing programs for its consumer products like the Roomba line of home-cleaning robots.
Image source: iRobot.
It wasn’t all good news for investors, though. Gross profit margin fell by a full percentage point as the average selling price of robot units declined to $229 from $252.
Overall, though, iRobot is preparing for a solid finish to its fiscal year. Orders already received from retailers, plus the anticipated orders for the fourth quarter, suggest substantial sales gains ahead.
As a result, management raised full-year guidance for the second straight quarter, bumping the revenue forecast up to $653 million from $642 million. The profit outlook also edged up to $40 million from $38 million as the company believes it has hit the right balance of product innovations and pricing to drive a 25% sales boost in the key U.S. market this year.
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Demitrios Kalogeropoulos owns shares of Apple. The Motley Fool owns shares of and recommends Apple and iRobot. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. 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.