Dow Jumps Despite Tepid Jobs Report; Outerwall Gains, but Linkedin Fades

Dow Jumps Despite Tepid Jobs Report; Outerwall Gains, but Linkedin Fades

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks jumped again today despite a tepid jobs report, as all three major indexes tacked on at least 1% for the second day in a row. The Dow Jones Industrial Average added 166 points, or 1.1%, for the day. The Department of Labor reported just 113,000 jobs were added in January, short of estimates of 175,000, but private-sector performance was better, seeing an addition of 142,000 jobs. Meanwhile, the unemployment rate ticked down from 6.7% to 6.6%. Many recent economic reports have been unfavorable due to bad weather, and investors seem to have attributed the lackluster jobs report to that factor. There were also positive signs in the report as the percentage of working-age Americans with jobs hit its highest mark since October 2012, at 58.8%, and the number of long-term unemployed fell by 232,000, to 3.6 million. This is a positive sign, as those Americans have been hit hardest by the slow economic recovery. That figure has dropped by 1.1 million during the last year as the economy moves back to full employment.

On the earnings board today, Outerwall jumped 12% after announcing earnings and a share buyback plan. The parent of Coinstar and Redbox said it would repurchase $350 million worth of shares through a modified Dutch auction, giving shareholders the opportunity to sell their stock at a price between $66.82 and $76.32. The offer could lead to the company buying back as much as 20.8% of its stock, which would inflate per-share earnings by more than 25%. Considering shares are now at a 52-week high, the timing of the proposal may be odd, but the market almost always cheers buybacks, especially ones of this size. As for earnings, adjusted profits rose to $1.68 from $1.01 on a 5% increase in revenue, to $593.7 million, showing that the Redbox video-rental model continues to be successful despite the proliferation of video streaming.

Elsewhere, Linkedin shares finished down 6% after reporting disappointing guidance in its quarterly report. The hot social media stock actually beat on both top and bottom lines, as its adjusted per-share profit of $0.39 was $0.01 ahead of estimates; but the professional social network saw top-line growth slowing in the current year. After a 47% increase in sales in the most recent quarter, Linkedin sees growth coming in at about 33% this year. For nearly any other company, that number would be eyepopping, but Linkedin carries a sky-high valuation, as shares have jumped more than 300% since its IPO. Still, the company has the type of business model that can easily convert sales into profits, making it different from many of its Web 2.0 peers.

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