Stock Market Today: Is this 9% Gainer a Recession-Proof Winner?

The stock market today opened lower as investors enter the third-quarter earnings season feeling very pessimistic. Alcoa's report yesterday and Chevron's announcement today only intensified this sentiment, but there is one stock that is proving to be a winner.

• Alcoa Inc. (NYSE: AA) reports a loss to start earnings season- Alcoa reported a net loss of $143 million, or 13 cents a share for the third quarter, a reversal of last year's third-quarter profits of $172 million, or 15 cents a share. Sales fell as well, dropping 9.2% to $5.83 billion from $6.42 billion. Alcoa, the largest U.S. aluminum producer, was hurt by declining demand and aluminum prices that are 20% lower than a year ago. The company now expects aluminum demand will rise 6% this year, lower than the 7% forecast made in July. The silver lining for Alcoa is that the numbers weren't as bad as expected. Excluding environmental and legal charges the company posted a profit of 3 cents per share, ahead of Wall Street's estimate to break even. Even though sales fell they too beat projections. "The global economy is clearly slowing," Lloyd O'Carroll, a Richmond, Virginia-based analyst for Davenport & Co., told Bloomberg News yesterday. "That's what the IMF said today and so I think what Alcoa is doing is consistent with that." AA stock was down almost 4% as of noon.
• Chevron Corp (NYSE: CVX) announces 3Q results will stumble- Chevron said on Tuesday that it expects third-quarter earnings to be "substantially lower" than its second-quarter results. The San Ramon, CA-based company cited lower production and a lower price of oil for the decline in profits. For the months of July and August the average price of a barrel of oil in the U.S. was $95.44 compared to $103.91 in the April-June quarter. Last quarter the company earned $7.2 billion, or $3.66 per share and analysts expect net income of $6.2 billion, or $3.08 per share for the third quarter. Chevron, the second-largest U.S. energy company by market value, will release full third-quarter results on Nov. 2. CVX stock is down 3.5% as of noon.

Finally, this stock is looking like it can withstand weakening growth in 2013.

• Yum! Brands Inc. (NSYE: YUM) rallies after earnings beat- Yum! Brands, owner of Taco Bell, Pizza Hut, and KFC chains reported strong third-quarter results fueled by better than expected sales in China. The company posted a 23% increase in profits to $471 million, or $1 a share, from $383 million, or 80 cents a year earlier. Excluding some items net income was 99 cents a share, two cents ahead of expectations. Yum's forecast to achieve 15% profit growth in China during 2013 is what's really pleasing investors today. China accounts for about 40% of Yum's profits and the company announced third-quarter operating profit in China increased 22%. Yum also raised its full-year EPS to $3.24 from $3.22. "I think this puts some fears at ease, at least for now," Investment Technology Group Inc. research analyst Steve West told Reuters. "Even through the deep, dark days of the recession and the global slowdown, Yum tended to beat expectations in China," he said. YUM stock is up almost 9% in early trading.

The Dow Jones was down 54 points, or 0.40%, and the S&P 500 was down 2.57 points, or 0.18% in early trading.

Related Articles and News:

• Money Morning:
  U.S. Stocks 2012: Will Third-Quarter Earnings Kill Rally?
• Money Morning:
  Silver Prices Give Shiny Future to this Mining Stock
• Bloomberg News:
  Alcoa Cuts Global Aluminum Forecast on China Slowdown
• Reuters:
  Yum raises forecast as China sales hold up

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