Apple Rains on Dow Parade


It was another strong day for the Dow Jones Industrial Average as the blue chips, boosted by IBM's 4.4% gain, jumped 67 points, or 0.5%. Though losers slightly outnumbered gainers on the Dow, its price-weighted index means Big Blue accounts for a sixth of the total weight, making it the major driver of today's gains. IBM beat earnings estimates by $0.14 in its report yesterday, and its revenue dropped by less than expected.

After hours today, Apple and Netflix were making headlines, as the two entertainment specialists were headed in different directions after reporting their quarters.

Despite small gains during the trading session, Apple dropped 9.8% after hours as revenue and guidance missed estimates. iPhone and iPad sales reached new records, but the expectations riding on Apple have become enormous, given its place as the most valuable publicly traded company in the world. The company brought in more than $13 billion in profit, about even with the total a year ago, while revenue of $54.5 billion was slightly under analyst targets. Perhaps more importantly, management guided revenue for the current quarter at $41 billion to $43 billion, under expectations of $45 billion. The momentum has shifted for the juggernaut of the last decade, and Apple will be considered guilty until proven innocent. Recent reports of order cuts have only added to investor concerns.

Netflix, meanwhile, jumped a whopping 35% after hours as the video streamer reported a $0.13-per-share profit instead of the $0.13 loss the market was expecting. Netflix added 2 million streaming subscribers in the U.S. during the quarter, apparently helped by the proliferation of tablets during the holiday season. The red-envelope mailer also added nearly 2 million international subscribers and saw revenue grow 8%, while profits were down substantially from a year ago as the company spends heavily to market itself abroad.

Two Dow stocks also reported earnings today. McDonald's topped estimates on the top and bottom lines as its Dollar Menu and early McRib rollout helped boost quarterly profits. However, same-store sales grew by only 0.1% in the period, and the fast-food chain warned that comparable sales are expected to drop in January. Shares finished up 0.6%.

United Technologies gained 0.7% as the conglomerate reported growth in sales, but a decline in profits. The maker of Otis elevators and other industrial products said its acquisition of Goodrich and similar moves had made 2012 a "transformational year." The company has begun to focus more on aerospace and implemented a number of restructuring measures in 2012, which management believes will lead to increasing profits in 2013.

After today's big miss by Apple, investors are surely wondering if fight-or-flight is the right answer. To help put your worries at ease, I encourage you to take a look at our premium research report all about the iPhone-maker. This analysis digs deep into Apple's segments and gives you a preview of new products like Apple TV that could send earnings headed north once again. Get your copy of this exclusive report now. All you have to do is click right here.

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Fool contributor Jeremy Bowman owns shares of Apple. The Motley Fool recommends Apple, McDonald's, and Netflix and owns shares of Apple, McDonald's, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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