Apple Gets Nailed on Earnings, but Caterpillar Jumps

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 finished down for the third day in a row today, though today's drop was minor compared with Friday's bloodbath on emerging-market worries. The Dow Jones Industrial Average was the best-performing out of the three major indexes, finishing down 41 points, or 0.3%, while the S&P 500 fell 0.5%, and the Nasdaq closed down just over 1%. In the day's only official economic report, December new-home sales missed expectations, coming at just 414,000 against estimates of 457,000. It was the second straight decline for the category, though some blamed that on unusually cold weather, Lean inventory and rising home prices also seem to indicate that the housing market is still strong.

After hours, Apple shares tumbled, falling 8% as the iPhone maker disappointed the market in its quarterly report. Though the company saw record sales of iPhones and iPads, it wasn't enough to please the Street as iPhone sales were short of expectations, and its forecast for the current quarter was badly off the mark. Apple says it expects sales of just $43 billion, well below the analyst consensus at $46 billion. Profits were essentially flat, though per-share earnings improved about 5% to $14.50, ahead of estimates at $14.09 a share. Revenue, meanwhile, increased just 6% to $57.6 billion, edging out estimates at $57.5 billion. CEO Tim Cook alluded to plans the company has for new products, but he didn't go into specifics. With its once-unstoppable sales growth now nearly flat, the report makes clear that Apple desperately needs a breakout product to justify sending the stock back up to the $700 level it once occupied.

Elsewhere, Caterpillar shares were climbing higher, finishing up 6% after a better-than-expected earnings report, a rare feat considering the heavy-equipment maker's recent troubles. Earnings for the fourth quarter came in at $1.54, solidly beating estimates of $1.28, while sales fell 10.4% to $14.4 billion, topping the analyst consensus at $13.6 billion. The report signals that the manufacturer is still facing problems with a slowdown in mining and lower demand, but the problems aren't as bad as feared and a turnaround could be closer than thought. Cost-cutting also helped boost profits, and investors were happy with the board's approval of a new $10 billion share-repurchase plan. Still, Caterpillar's not out of the woods yet, as the company sees mining equipment sales falling to 10% in 2014, though construction-equipment sales should improve 5%.

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Fool contributor Jeremy Bowman owns shares of Apple and Caterpillar. The Motley Fool recommends and owns shares of Apple. 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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