Why Adobe Systems and La-Z-Boy Will Be Big Movers Tomorrow
Stocks edged higher today as stronger-than-expected inflation numbers lifted financial and cyclical stocks. The Dow Jones Industrial Average finished the day up 27 points, or 0.2%, while the S&P 500 gained by 0.2% and the Nasdaq increased 0.4%.
The Consumer Price Index, the mostly widely watched inflation indicator, rose 0.4% in May, the most in more than a year, and higher than expectations of 0.2%. The gain follows an increase of 0.3% in April. Rising inflation is a sign of increasing demand and, generally, of a strengthening economy. The increase in prices, however, could provoke action by the Fed in the form of higher interest rates. Year-over-year inflation was up 2.1%, above the Fed's target of 2%. Still, the rising prices also indicate that consumers are able to spend more as the labor market improves.
The Fed began its two-day Open Market Committee Meeting, during which the central bank is widely expected to continue to taper its bond-buying program by $10 billion. Elsewhere in the day's economic news, housing starts and building permits for May both came in lower than expected at a seasonally adjusted annual rate of 1.001 million and 991,000, respectively. Still, it was just the fourth month in the past year that housing starts have been 1 million or more, though the news indicates that the housing recover may be hitting a plateau.
After hours today, shares of Adobe Systems were flying higher, up 9.4%, after delivering a strong earnings report. The software maker said its subscription-based business grew, with Creative Cloud subscriptions jumping about 20% sequentially, as adjusted earnings per share improved to $0.37, better than estimates at $0.30. Revenue in the quarter improved 6%, to $1.07 billion, topping expectations of $1.03 billion. Management credited the growth to its financial leverage, strong performance in its subscription services, and noted a promising "upcoming product pipeline."
Looking ahead, the company expects earnings of $0.22-$0.28 and revenue of $975 million to $1.03 billion against analyst estimates of $0.27 and $1.02 billion, respectively. The tech company has, at times, struggled with the shift to mobile, but the growth of its subscription services seem to indicate it has a reliable future revenue stream.
Moving in the other direction after hours was La-Z-Boy , which fell 11% after delivering a disappointing earnings report of its own. The furniture maker actually beat earnings estimates by $0.01, with a per-share profit of $0.33, but sales were badly off the mark, growing just 2.1% to $353 million against the consensus at $367.9 million. Management blamed the weather for the poor revenue growth. Same-store sales also declined for the first time in 14 quarters, falling 0.9%, lapping an increase of 11.2% from the year before. Comps did improve as the weather got better. Considering that the weather appeared to play a large role in the slow-sales growth, I'd ignore today's drop.
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The article Why Adobe Systems and La-Z-Boy Will Be Big Movers Tomorrow originally appeared on Fool.com.Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems. 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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