Facebook and UPS Lead Stocks Lower
Stocks are generally lower today after social-media giant Facebook and shipping company UPS reported disappointing earnings for the final three months of last year. With roughly an hour left in the trading session, the Dow Jones Industrial Average is off by 11 points, or 0.08%. The S&P 500 sits less than a point above where it started the day.
Facebook heads lower
While shares of Facebook started the day out considerably lower, they've almost managed to claw their way back to breakeven. Yesterday, the Menlo Park, Calif.-based company reported its earnings for the fourth quarter of 2012.
Despite a 40% increase in revenue, the company's net income plunged 79% as operating expenses surged by 82%. Excluding certain items, Facebook earned $0.17 per share compared to the consensus estimate of $0.15 per share.
CEO Mark Zuckerberg was nevertheless undeterred in his plan to invest in growth. Among other things, he pointed to the company's gains in the mobile space, saying: "Today there's no argument. Facebook is a mobile company." He then went on to note:
Mobile is the perfect device for Facebook for three reasons: It allows us to reach more people, we have more engagement from the people who we reach, and I think we'll also be able to make more money for each minute people spend with us on their mobile devices. But mobile isn't just driving greater engagement on Facebook; mobile enables many new experiences and is growing overall sharing across all apps. This creates a very dynamic ecosystem and one where there's a lot of room for us to create even more sharing through Facebook.
Despite the fact that shares in the company are down, many analysts seem to agree with Zuckerberg. As one analyst told Bloomberg News: "As long as eyeballs tune in and revenue keeps growing, the Street will believe that at some point the company can flip the switch on profitability."
UPS follows Facebook's lead
Shares of economic bellwether UPS are also trading lower today following the company's fourth-quarter earnings release. For the three months ended Dec. 31, the shipping and logistics giant reported a loss of $1.75 billion, or $1.83 per share, on revenue of $14.57 billion.
Notably, the loss was caused by a $3 billion charge related to the company's obligations under its pension fund. Excluding that charge, UPS earned $1.32 per share. The consensus forecast called for EPS of $1.38.
Despite the disappointment, CEO D. Scott Davis expressed a glimmer of hope on the conference call, saying, "In the fourth quarter, global trade returned to more normal trends, and expectations are for that to continue."
Suffice it to say that Davis' observation and optimistic expectations fly in the face of an otherwise downbeat week in terms of economic news. On Tuesday, the Conference Board released the results of its Consumer Confidence Index, which showed that sentiment is at its lowest level since 2011. Yesterday, the Department of Commerce reported that the domestic economy contracted in the fourth quarter, rather than expanding as many economists had predicted. And earlier today, the Department of Labor announced that initial jobless claims rose by 38,000 last week to the highest level since Nov. 10 of last year.
Consequently, UPS' earnings release may indeed by a blessing in disguise.
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John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Facebook and United Parcel Service. The Motley Fool owns shares of Facebook. 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.
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