Daily Comment


July 23, 2014

The market held on to early gains with the Dow Jones Industrial Average finishing the day up 61.81 points (0.36 percent), the S&P 500 Index advancing 9.90 points (0.50 percent), and the Nasdaq Composite tacking on 31.31 points (0.71 percent).  Grasping for any positive news from trouble spots, investors may have been heartened by the decision of separatist forces in eastern Ukraine to hand over black boxes from MH17 to Malaysian authorities and by Secretary of State John Kerry efforts on brokering a cease fire in Gaza. A little confusion was added to the mix when a federal appeals court panel covering Washington D.C. ruled 2-1 that subsidies received to help pay for health care via the federal exchanges in states that have not created their own exchanges were illegal...Soon thereafter, the federal appeals court based in Richmond, Virginia ruled 3-0 that the subsidies are legal. In economic news, consumer prices were reported up 0.3 percent in June, matching expectations and down from a 0.4 percent increase in May. Notably, gasoline costs rose 3.3 percent after increasing 0.7 percent in May. Excluding food and energy, core CPI increased 0.1 percent in June after increasing 0.3 percent in May; the consensus expectation had been for an increase of 0.2 percent.  Existing home sales increased to a 5.04 million annual rate in June from an upwardly revised 4.91 million (from 4.89 million) in May, beating the average forecast of 5.00 million. This was the first time sales exceeded a 5.00 million annual rate since October 2013. Still, sales are down 2.3 percent year-over-year.

In the News

Chipotle Mexican Grill (CMG-659.77) reported second-quarter EPS of $3.50, up from $2.82 in the year-earlier period and well above the consensus estimate of $3.09. Revenue increased almost 29 percent to $1.05 billion. Chipotle is known for serving antibiotic-free meats and organic produce. It has a loyal following among sought-after teen and young adult diners and is an investor favorite for its ability to crank sales out of its existing restaurants.  To that end, the Company said that its service is the fastest it has ever been, due to added staff, increased training and software that analyzes performance. Sales at Chipotle restaurants open at least 13 months increased 17.3 percent for the quarter, substantially better than the average analyst estimate for a gain of 10.5 percent. Based on last quarter's gains, Chipotle raised its forecast for same-restaurant sales growth, calling for an increase in the mid-teen percentages, versus its prior target for a high-single-digit percentage increase. The stock rallied 11.8 percent yesterday.


Harley-Davidson (HOG-63.46) reported second-quarter EPS $1.62, up from $1.21 in the year-earlier period, beating the average analyst estimate of $1.46. However, the Company cut its full-year shipment forecast, saying second-quarter sales had suffered from prolonged poor weather across parts of the United States and soft demand for its low-priced Sportster motorcycles. Harley said it now expected to ship between 270,000 and 275,000 bikes to its worldwide network of independent dealers in 2014, down from a previous forecast of 279,000 to 284,000. The low end of the new range translates into year-over-year worldwide shipment growth of just 3.5 percent. The Company attributed the weakness in Sportster sales to the anticipated introduction of the Street platform, its first all-new bike in more than a decade and its first Harley-badged foray into the lightweight market since the 1970s. But those new bikes, which were supposed to begin appearing in dealer showrooms in May, did not begin to arrive until late June. The company said its worldwide network of independent dealers had sold 90,218 new motorcycles in the second quarter, virtually unchanged from a year earlier. In the United States, dealers sold 58,225 motorcycles in the quarter, down a hair from 58,241 a year earlier. Harley's stock was down 5.4 percent yesterday.




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