The Numbers Say “Go,” the Market Says “Whoa”

By Mitchell Clark, B.Comm. — Ahead of the Street column

Just when things were going so well, another shock hit the system. Hopefully this will be fixed soon. I’ve been saying it over and over again and there’s no doubt in my mind. Sovereign debt represents the single greatest threat to the stability of capital markets. We’re seeing this play out right now.

In another sign that things are getting better in the technology sector, IBM (NYSE/IBM) just increased its dividend and its share buyback program.

The company increased its quarterly dividend to $0.65 per share which will bring the stock’s current yield to about 2%. In March, the company announced a $2 billion share buyback and now IBM plans to add another $8 billion to the program. Clearly, this company has extra cash to return to stockholders. This is another positive sign for technology and the economy as a whole.


There’s been some other important earnings news this season and it’s a good sign for the future. Dow Chemical (NYSE/DOW) just reported its first quarter numbers and the company’s sales beat consensus growing a substantial 48% to $13.4 billion. Earnings came in at $466 million, or $0.41 per share, beating consensus estimates by $0.11. Not only did the company say that demand is improving across most of its product lines, the company has also been able to raise its prices. This is a really good sign for a business that operates at the very heart of the industrial sector.

Another company that generated a good performance in the first quarter was DuPont (NYSE/DD). This stock’s been on a tear lately and is up almost ten points since February. All the while, the company’s paying a healthy 4% dividend to stockholders.

DuPont said that its first quarter earnings more than doubled to approximately $1.13 billion, or $1.24 per share. Sales increased 23% to $8.48 billion, up solidly from sales of $6.87 billion generated in the same quarter in 2009. Company managed cited that its overall sales volume grew 19% during the quarter and its Asia-Pacific business saw its sales volume grow by 65%. The company is experiencing higher local selling prices and is benefitting from currency exchange rates. DuPont’s latest numbers blew away consensus estimates and the company increased its full year earnings guidance.

It’s pretty evident by the numbers being presented by such powerhouse companies that business is getting better—much better. What’s also evident is that companies are raising their prices without affecting demand. This is a very positive development for corporations and stockholders.

Big companies are very good at reacting during tough economic times. They hunker down, cut costs and they usually have the cash to wait out the cycle. Companies like Dow Chemical and DuPont are highly cyclical in nature and they represent good benchmarks for the economy.

If we could just get this sovereign debt issue under control then stocks could move a lot higher based on the fundamentals.