The Monday upswing for U.S. equities was highlighted by a 2.2% surge for financial stocks. That resulted in a 1.1% bump for the S&P 500 and the Dow Jones Industrial Average, as well as a 1.2% improvement for the Nasdaq Composite.
The market will try to extend those gains on the strength of strong earnings reports from Alcoa Corp (NYSE:AA) and Caterpillar Inc. (NYSE:CAT). However, their results will be blunted by a steep decline in Express Scripts Holding Company (NASDAQ:ESRX) this morning.
Here’s what you should know heading into Tuesday’s trade:
Caterpillar Inc. (CAT)
CAT shares are getting a big lift on Tuesday morning after the company clobbered expectations for its fiscal first quarter.
Earnings of $1.28 were more than double the consensus estimate of 62 cents, while revenues of $9.82 billion were more than enough to get over a bar of $9.27 billion. Importantly, the top-line increase of nearly 4% was the first positive year-over-year sales figure for the company in 10 quarters.
Said Caterpillar CEO Jim Umpleby: “We’re also benefiting from our significant cost reduction and restructuring actions, which have improved cash flow and further strengthened an already healthy balance sheet.”
As a result, the company upgraded its full-year revenue outlook to a range of $38 billion to $41 billion.
Caterpillar was one of many infrastructure plays that ran up in the wake of Donald Trump’s presidential election victory, climbing about 20% between November and its February peak. However, derailed confidence about the timing of a big infrastructure spend, as well as a federal raid of several of Caterpillar’s offices, have largely stunted the progress of CAT stock since then.
However, a 4%-plus bump in Tuesday’s premarket trade would send shares to 2017 highs above the $100 mark.
Alcoa Corp (AA)
Alcoa is no longer the “unofficial” start of earnings season, but it should enjoy some time in the spotlight amid an earnings beat and a pop in AA shares.
The aluminum and metals producer posted earnings of $225 million ($1.21 per share), flipping from a $201 million loss (-$1.15) in the year-ago period. Nearly half of the profit raked in by Alcoa came as the result of special items ($108 million) from the sale of the Yadkin Hydroelectric Project.
Still, even backing out one-time items, AA posted profits of 63 cents per share, well more than the 48-cent bar Wall Street set.
While revenues of $2.7 billion were under expectations of $2.96 billion, the figure was 5% better than last year’s Q1.
The company also reiterated its own projections of full-year adjusted EBITDA between $2.1 billion and $2.3 billion.
“Alcoa is off to a strong start with our first full quarter as an independent company,” CEO Roy Harvey said, referring to the split with Arconic Inc (NYSE:ARNC).
While AA shares were up 19% year-to-date heading into Monday night’s report, that also included a 20% slide from February’s peaks through April’s lows. However, shares are recovering, including a 4% bump today, following a 5% jump Monday ahead of the report.
Express Scripts Holding Company (ESRX)
Lastly, Express Scripts is off by double digits this morning in the wake of earnings, but not because of earnings.
Earnings came in at 90 cents per share, but $1.33 per share on an adjusted basis. The figure topped analysts’ projections of $1.32 per share for the period for its Q1. Revenue tallied up to $24.65 billion, below the $24.79 billion from a year ago and shy of Wall Street’s consensus estimate of $24.99 billion in sales.
For its second quarter, Express Scripts expects earnings in a range of $1.70 to $1.74 per share.
However, the disheartening news of the day is that
Express Scripts also announced some disheartening news for shareholders as Anthem Inc (NYSE:ANTM) — owner of numerous Blue Cross Blue Shield companies, and ESRX’s biggest customer at about 18% of revenues — will not be renewing its contract with the pharmacy benefit manager.
ESRX says “Anthem is not interested in continuing discussions regarding pricing concessions for 2017-2019 or in receiving the Company’s proposed pricing for the period beyond 2019.” That’s largely because Anthem has accused Express Scripts of cheating it out of billions of dollars.
ESRX shares are off more than 10% in Tuesday’s premarket action.