Mint Market Watch - 19 Oct 22
J&J beats earnings with growth across all segments. Netflix tops subscriber forecast reversing decline over last two quarters.
Goldman Sachs unveils reorganization plan as revenues and profits fall. Announces plans to pivot away from Marcus digital banking.
J&J beats profits and revenue expectations. Net income increases 20% to $4.46B. Sales rise across all segments.
Netflix tops subscriber forecast (2.4M vs 1.1M E) after 2 consecutive quarterly declines. Shares jump 13% after-market.
Silvergate shares plummet 23% after earnings miss. US industrial output gains 0.4% in September. Canada housing starts surge 11%.
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Roche sales decline due to lowered demand for COVID products
Roche reported sales of 14.74B Swiss Francs (~$14.8B) for Q3 (CHF 15.5B expected) down 6% YoY. Roche reported sales of CHF 47.04B YTD, up slightly YoY. Sales growth was offset by a decline due to competition from cancer-treatment biosimilars.
The third quarter of 2022 was particularly challenging due to base effects, as the demand for COVID-19 medicines and tests was exceptionally high in the same quarter of 2021
Sales of Covid-19 medicines Actemra/RoActemra and Ronapreve declined by about CHF1 billion in the period. Ocrevus gained 16% in sales to 1.52 billion francs during the quarter, while Hemlibra jumped 23% to 952 million francs. Demand in China was recovering as people started seeing their doctors again after harsh lockdown measures but was not yet back to pre-pandemic levels.
Roche backed its outlook for 2022, saying that it expects stable sales or sales growth in the low-single-digit range at constant exchange rates. Core earnings per share are expected to grow in the low- to mid-single-digit range at constant exchange rates, and dividend is expected to be raised, the company said. (Reuters, Marketwatch)
J&J beats profits and revenue expectations
J&J reported adjusted EPS of 2.55 (2.52 E) on revenue of $23.79B ($23.46B E), up 1.9% YoY. Net income rose to $4.46B up 20% YoY. Cost of sales rose 7.7%, as gross margin contracted to 67.2% from 68.9%.
Among business segments, sales for Pharmaceutical rose 2.6% to $13.21 billion ($12.89 billion expected), Consumer Health fell 0.4% to $3.80 billion ($3.72 billion expected). MedTech rose 2.1% to $6.78 billion ($6.71 billion expected).
Sales of cancer drug Darzalex jumped nearly 30% to $2.05 billion in the quarter. The medical devices unit reported a 2.1% rise in sales to $6.78 billion on demand for contact lenses and wound-closure products.
For 2022, the company narrowed its adjusted EPS guidance range to $10.02 to $10.07 from $10.00 to $10.10 and lowered its reported sales guidance to $93.0-$93.5 billion from $93.3-$94.3 billion.
The company expects some inflationary pressures to ease next year, but warned higher costs of inventory manufactured in 2022 could weigh on 2023 profit. A stronger dollar will reduce 2023 adjusted earnings by between 40 cents and 45 cents, the company said.
J&J CFO stated that they were looking at “right sizing” J&J which could lead to job cuts. This comes as J&J spins off its consumer unit to Kenvue late next year. (Reuters, Marketwatch)
Netflix beats subscriber forecast after 2 consecutive quarterly declines. Shares jump 13% higher after-market
Netflix reported adjusted EPS of 3.1 (2.18 E) on revenue of $7.93B ($7.85B), up 6% YoY. Net income was $1.4B or $3.10 per share down from $3.16 per share last year. Netflix reported a net gain of 2.41 million subscribers in Q3 (1.1 million expected), this reverses the decline of 1M last quarter and 200k in Q1.
Netflix stock dropped nearly 60% this year after reporting two consecutive quarterly declines. This led to massive changes including the launch of a new cheaper ad-supported service which is due to launch in November. Additionally, Netflix will begin to crack down on password sharing next year, opting to allow people who have been borrowing accounts to create their own.
In a letter to shareholders, Netflix executives said they expect 4.5 million new subscribers to join in the fourth quarter, with revenue forecast to grow to $7.78 billion from $7.71 billion a year ago. Analysts on average were estimating revenue of $7.97 billion and a net subscriber gain of 4 million for the fourth quarter. Netflix expects to spend $17B on content this year.
Starting next quarter, Netflix will no longer provide guidance for its paid memberships but will continue to report those numbers during its quarterly earnings release.
Netflix stock jumped 13% after market on the news. (Marketwatch, CNBC)
Goldman Sachs unveils reorganization plan as revenue and profit fall
Goldman Sachs reported adjusted EPS of 8.25 (7.8 E) on revenue of $11.98B ($11.37B E), down 9% YoY. Net income fell 44% to $2.96B.
Goldman reported management and other fees of $2.24B up 15% YoY and a new record. Investment banking revenue fell 57% YoY and 26% QoQ to $1.58B. Global markets revenue increased 11% to $6.2B reflecting higher revenue in fixed income and commodities while equities trading revenue dropped 14% to $2.68B.
After product delays, executive turnover, branding confusion, regulatory missteps and deepening financial losses, Solomon on Tuesday said the firm was pivoting away from its previous strategy of building a full-scale digital bank, Marcus. Goldman will instead focus on the Marcus customers it already has, while aiming to market fintech products through the bank’s workplace and wealth management channels.
The company reported firm-wide headcount of 49,100, up from 43,000 in the year-ago quarter and 47,000 in the second quarter.
In the most major reorganization since Solomon took over as CEO in 2019, Goldman Sachs said it will operate the bank under three business units: Asset & Wealth Management, Global Banking & Markets and Platform Solutions. (Marketwatch, CNBC)
Intuitive shares jump on increasing revenue
Intuitive Surgical reported adjusted EPS of 1.19 (1.12 E) on revenue of $1.56B ($1.51B E), up 11% YoY.
Net income fell 14% to $324M ($403M E). Intuitive reported total operating expenses of $653.2 million, an increase of more than 23% from the $528.8 million reported in the third quarter of last year.
Intuitive shares jumped 10% after-market.(Marketwatch)
Truist Financial’s profit falls amid market downturn
Truist Financial reported adjusted EPS of 1.24 (1.2 E) on revenue of $5.89B ($5.94B E), up 5% YoY. Truist posted a profit available to common shareholders of $1.54B down from $1.62B last year.
Noninterest income fell 11% from a year earlier to $2.1 billion, primarily due to lower residential mortgage, investment banking and other income, partially offset by growth in insurance revenues.
Truist CEO said the challenged market environment was weighing on Truist’s capital-markets revenue.
The company said it set aside $234 million for credit losses, compared with a benefit of $324 million in the year-ago period. (Marketwatch)
Interactive Brokers beat earnings on higher net interest income and futures trading commissions
Interactive Brokers reported adjusted EPS of 1.08 (0.96 E) on revenue of $847M ($797M E), up 30% YoY. Higher customer futures trading activity boosted commissions 3%, to $320 million.
Net interest income rose 73%, to $473 million, thanks to rising interest rates and customer credit balances. Customer accounts increased 31%, to 2.01 million. (Investing)
State Street reports revenue slipping on decline in fee-based income
State Street reported adjusted EPS of 1.82 (1.78 E) on revenue of $2.96B ($2.97B E), down 1% YoY. Net income fell to $690M or $1.8 per share down from $714M and $1.96 per share.
Fee revenue declined 8% because of market conditions and currency headwinds. Servicing and management fees decreased 12% and 10%, respectively.
Net interest income increased to $660 million from $487 million thanks to rising global interest rates across the yield curve. (Marketwatch)
Silvergate shares plummet 23% after earnings miss
Silvergate reported adjusted EPS of 1.28 (1.41 E) on revenue of $89.34M ($100.5M E), up from $51.7M last year.
Silvergate Exchange Network, the firm’s key growth driver, reported a drop in usage in the quarter. The payments platform for crypto firms and investors handled $112.6 billion of US dollar transfers, down 41% from the prior quarter and 30% from a year ago.
Silvergate’s digital asset customers grew to 1,677 at Sept. 30, up from 1,585 at the end of last quarter. But average digital asset customer deposits fell to $12 billion, down from $13.8 billion from the prior quarter.
Silvergate also said deployment of its stablecoin -- built with technology the bank acquired from the failed Meta Platforms Inc.-backed Diem project -- would be delayed to an unknown future date. A rollout had been expected by the end of this year.
The current consensus EPS estimate according to Zack’s is $1.83 on $125.82 million in revenues for the coming quarter and $4.94 on $373.67 million in revenues for the current fiscal year.
Silvergate stock dropped 23% following the release, it stands 63% lower YTD. (Bloomberg, Yahoo)
US industrial output gains in September
Industrial production in the US increased 0.4% in September (0.1% E). Output in August was revised to a slight decline of 0.1% from the initial estimate of a 0.2% fall. Capacity utilization rose to 80.3% in September from 80.1% in the prior month. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities.
Manufacturing output rose 0.6% in September after a 0.4% gain in the prior month. The index for mining, which includes oil and gas drilling, rose 0.6% after being flat in August. Motor vehicles and parts output rose 1% after a 1.5% decline in the prior month. Excluding autos, total industrial output increased 0.3%. Utilities output fell 0.3% in September after a sharp 3.3% drop in the prior month.
Still, manufacturing activity shows signs of slowing. Manufacturing grew 4.7% annualized in Q1, 5.2% in Q2 and now 2.9% in Q3. This is due to a fall in orders due to weaker global trade. (Marketwatch)
Canada housing starts surge 11%
Canadian housing starts increased 11% in September to 299,598 (263k E) up from 270k in August. The SAAR of total urban starts increased 12 per cent to 276,142 units in September.
Multi-unit urban starts increased 16 per cent to 216,549 units, while single-detached urban starts were flat at 59,593 units. Rural starts were estimated at a seasonally adjusted annual rate of 23,447 units.
September’s increase was mainly driven by higher urban multi-unit starts. (Nasdaq, Business Examiner)
German economic sentiment improves slightly in October
ZEW stated that its economic sentiment index increased to -59.2 in October (-65.7 E) from -61.9 in September. In contrast, their current conditions index fell by 11.7 points in October to a reading of -72.2 (-68 E) from -60.5 in September.
Price brakes announced for gas and electricity are helping to stabilise sentiment, said Dekabank analyst Andreas Scheuerle, but the fact that they have yet to take effect explains the deterioration in how the economic situation is assessed.
"Despite the gas price brake, the energy crisis is not off the table and the global situation is serious," said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe private bank, who added: "The economy is on a recession course."
Economic sentiment in the entire EU also improved slightly from -60.7 in September to -59.7 in October (-61.2 E) (Reuters)
Brazil 2022 inflation projection falls to 5.62%
Brazilian economic authorities have cut down projections regarding 2022's annual inflation from 5.71% to 5.62%, it was reported Monday. It was the 16th consecutive reduction of the National Wide Consumer Price Index (IPCA) estimate.
For 2023, the inflation projection was 4.97%. For 2024 and 2025, the forecasts are for inflation of 3.43% and 3%, respectively.
September showed deflation of 0.29%, the third month in a row in which the index fell. With this result, the IPCA has accumulated a high of 4.09% for the year. (Mercopress)
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