Earnings focus nets mixed results Communications equipment spurs rally

oil, retail shares decline

September 26, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks were mixed yesterday as a communications equipment rally sparked by better-than-expected earnings from 3Com Corp. was offset by declines in oil and retail shares.

The Dow Jones industrial average seesawed, up 21 at one point in the day and down 18 later, to close at 5,877.36, up 3.33. International Business Machines Corp. rose most, climbing $2.375, to $126.50.

The Federal Reserve's decision Tuesday to leave benchmark lending rates unchanged and keep mum on economic conditions left investors to concentrate on the strengths and weaknesses of individual companies.

"People are taking some comfort that the Fed doesn't seem to think of inflation as a problem, which turns the focus to earnings," said Ric Dillon, a fund manager at Dillon Capital Management with $100 million in assets.

The attention paid to earnings growth benefited 3Com and Cisco Systems Inc., both makers of computer network equipment. 3Com jumped $8, to a record $64.625, after it said earnings for the fiscal first quarter surged 62 percent from the same quarter last year, to 52 cents a share. The results beat Wall Street's average estimate of 50 cents, and prompted some to raise their forecasts for coming quarters.

Cisco tacked on $2.6875 to a record $63.1875 and Andrew Corp., another equipment maker for linking computers and communication devices, rose $2, to $53.75.

The broader Standard & Poor's 500 was mixed, closing up 0.22 at 685.83 as retailers Dayton-Hudson Corp. and May Department Stores Inc. fell for a second day amid signs of slow sales. 3Com and Cisco helped limit losses in the index. The two networkers boosted the Nasdaq composite index, up 9.39, to 1,224.66.

Advancing shares led declining shares on the New York Stock Exchange, 1,312 to 1,078. About 476.9 million shares changed hands, above the average of 402 million shares so far this year.

Investors punished companies who said earnings wouldn't be up to snuff.

Shares of Apple South Inc. plunged $7.875, or 38 percent, to $13 after the largest franchisee of Applebee's Neighborhood Grill and Bar restaurants said earnings for the year wouldn't meet analysts' expectations because of sluggish sales, management defections and high employee turnover.

Apple South said earnings would slip below 95 cents a share, and approach last year's full-year results of 73 cents a share, before acquisition charges.

Shares of Applebee's International Inc., which operates 32 Applebee's, fell amid concern that fewer customers are patronizing its restaurants. It dropped nearly $4, to $27.065.

Checkpoint Systems Inc. slumped $6.875, to $27.625, after the maker of electronic security products said third-quarter earnings wouldn't meet analysts' expectations. The company said it expects to earn 5 cents to 6 cents a share less than Wall Street's average forecast of 20 cents.

The Russell 2000 index of smaller shares rose 1.06, to 343.72. The Wilshire 5000 index -- a gauge of stocks listed on the NYSE, Nasdaq Stock Market and American Stock Exchange -- rose 11.37 to 6,734.86.

Economically sensitive shares, which might have been expected to get a benefit from faster growth amid the Fed's benign neglect, fell instead. Gains were limited as some investors grew concerned that the Fed's reluctance stemmed from expectations the economy would slow in the coming months.

Energy shares declined. Exxon Corp. dropped $1.125, to $85.125, Texaco Inc. dropped $1.25, to $93.875, and Mobil Corp. skidded $2, to $116.625.

Among department stores, Dayton-Hudson slipped $1.125, to $33.50, May Department Stores sank $1.50, to $46.50, and Federated Department Stores Inc. slipped 62.5 cents, to $33.875. Investors expect consumers to cut back on high-end clothing and bedding when tighter economic times hit.

Pub Date: 9/26/96

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