Mint Market Watch - 21 Oct 22
Blackstone AUM surges 30% approaching $1T. Indian FIs gain on strong tail winds. Japan core inflation at 3%. Luxury product makers remain resilient.
Blackstone AUM surges 30% approaching $1T. Indian FIs gain on strong tail winds. Japan core inflation at 3%. Luxury product makers remain resilient.
Volvo & Ericsson miss earnings estimates as cost increases outstrip margins. L’Oreal books solid sales growth as demand remains strong. Hermes reported sales of €3.14B (2.84B E), up 24% YoY.
Blackstone AUM surges 30% approaching $1T. Woodside Energy raises forecasts. AT&T tops earnings with sharp subscriber gains sending stock 9.5% up.
Japan core inflation reaches 3%. German PPI increases 2.3% MoM in September. US existing home sales drop 1.5%.
Bajaj Finance Q2 net up 88% YoY at $330M. Axis Bank profits up 70% YoY in the Sep quarter. Operating profit in Q2 up by 30% on the year to INR 7,716 crores.
German PPI rises 2.3% in September
German PPI surged by 2.3% MoM in September (1.3% E) this marks a 45.8% YoY increase in prices at factory gates. Energy prices, which are 132% higher YoY, were the biggest contributor by far with companies passing on higher energy costs to consumers.
Excluding energy prices, the annual rate of inflation has now been in decline for four months, and totaled only 14% in September.
Still, items that require energy as a key input are increasing in price. Nitrate fertilizer prices have tripled over the last year, while food items such as butter and coffee rose by 72% and 32%, respectively.
One of the few items in Destatis' basket to show falling prices was scrap metal, down 9% due to the inability of steel mills to pay for the electricity needed to process it. German industry has scaled back production to only those items that are profitable with current energy prices. (Yahoo)
EU leader’s undecided on gas price caps yet
EU leaders ended their negotiations over a gas price cap with no resolution early on Friday, stating that they would continue studying a price cap further.
EU leaders eventually backed proposals made by the European Commission this week to launch an alternative price benchmark for liquefied natural gas and voluntary joint gas buying, although laws to make this happen will need to be negotiated over the coming weeks.
The 27 countries have already agreed to fill gas storages and claw back revenues from energy firms to spend on helping consumers with crippling bills.
Germany, the biggest EU economy, leads a small camp that has so far resisted calls from 15 countries to cap gas prices, saying it would risk suppliers freezing Europe out, and reduce incentives for energy saving. (Reuters)
US Jobless claims fall to 214k
US initial jobless claims fell to 214k last week (230k E) down from 226k in the prior week.
The claims report showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 21,000 to 1.385 million in the week ending Oct. 8. (Reuters)
US existing home sales fall 1.5% as the housing market faces stress
US existing home sales fell by 1.5% MoM in September to 4.71M (4.7M E) down from 4.78M in August. Home resales, which account for the bulk of U.S. home sales, decreased 23.8% on a year-on-year basis.
Though house price growth has slowed as demand weakened, tight supply is keeping prices elevated. The median existing house price increased 8.4% from a year earlier to $384,800 in September. There were 1.25 million previously owned homes on the market, down 0.8% from a year ago.
NAR Chief Economist Lawrence Yun said the September sales numbers don't reflect the latest surge in mortgage rates, which have climbed roughly a percentage point in a month. As a result, he expects the sales rate to decline further in the months ahead, perhaps to as low as 4.5 million annually, which would be roughly 4% to 5% lower than the current sales pace. (Reuters)
Japan core inflation reaches 3%
Japan’s national core CPI rises 3% YoY in September from 2.8% previously. This takes core consumer inflation to an 8-year high, testing the BoJ’s resolve to keep interest rates low.
BoJ’s target for core inflation is 2%, inflation has now been higher than this for 6 months. The so-called 'core-core' index, which strips away both fresh food and energy costs, rose 1.8% in September from a year earlier, accelerating from a 1.6% gain in August
The current price rises are driven mostly by rising import costs due to a rapidly weakening Yen rather than strong demand. The yen's decline has been particularly painful for Japan due to its heavy reliance on imports for fuel and most raw material, forcing companies to hike prices for a wide range of goods including fried chicken, chocolates to bread.
The September CPI data showed that while goods prices rose 5.6% year-on-year, services prices were just up 0.2% in a sign of how Japan's inflation is still driven mostly by cost-push factors. (Reuters)
Philadelphia Fed Manufacturing Index remains weak in October
The Philadelphia Fed’s Manufacturing index inched up to -8.7 in October (-0.5 E) from -9.9 in September. The headline index is based on a single stand-alone question about business conditions unlike the national ISM manufacturing sector index which is a composite based on components. A similar survey from New York – the Empire State Index – fell 7.6 points to negative 9.1 in October.
New orders ticked up 2 points to negative 15.9. The shipments index was essentially unchanged at 8.6. The measure on six-month business outlook fell sharply to negative 14.9 from negative 3.9.
The manufacturing sector in the US is struggling with lower orders that could decline further with many companies currently holding excess inventory. (Marketwatch)
Investor AB reports negative shareholder return of 3%
Investor AB reported net profit attributable to shareholders in Q3 was SEK 8.37B down from SEK 26.97B last year (-70%). Net asset value per share rose to 181 Swedish kronor ($16.13) at the end of September from SEK 177 at the end of June. On an adjusted basis, net asset value rose to SEK 204 per share from SEK 199.
Investor AB reported negative total shareholder return of 3% compared with negative return of 4% last year. Investor AB CEO stated that going forward there was a clear risk of the macro environment becoming more challenging. (Marketwatch)
Volvo misses earnings as margins slip
Volvo reported revenue of SEK 114.92 ($10.17B) up 35% YoY. Net profit for Q3 was SEK 8.63B ($769.3M) up 22% YoY. The group's operating margin fell to 10.3% from 11.0%, while those it its trucks unit fell to 10.0% from 10.9%. Truck deliveries rose 21% in the quarter, while order intake rose 27%. Currency effects had a positive impact of SEK 2.42 billion.
Volvo is struggling with an unpredictable global supply chain and higher input costs, particularly those for electricity. They expect disruptions, stoppages, and extra cost to continue.
Volvo backed its 2022 truck market forecasts for Europe, North America and China, but raised its Indian market forecast to 330,000 and cut its Brazilian outlook to 95,000. (Marketwatch, Reuters)
Ericsson misses earnings as costs outstrip margins
Ericsson reported revenue of SEK 68.04B ($6.02B) up 21% YoY and higher than the analyst estimate of SEK 66.39B. Net profit attributable to shareholders was 5.21 billion Swedish kronor ($464.4 million) down 9% YoY and lower than the analyst estimate of SEK 5.7B.
Overall sales of network equipment grew by 19% on the year, with growth driven primarily by North America. Gross margin fell to 41.4% from 44.0% while the EBIT margin slipped to 10.5% from 15.7% as revenue from intellectual property dropped 40% on the year.
Margins were weighed by lower licensing revenue with several expired patents awaiting renewal. Increased component costs and investments in supply-chain resilience also negatively affected the margin
Southeast Asia, Oceania, India and the Middle East and Africa also reported double-digit growth. The global radio access network equipment market is set for growth of 5% in 2022. (Marketwatch)
Danaher profits rise with growth across all segments
Danaher reported adjusted EPS of 2.56 (2.26 E) on revenue of $7.66B ($7.14B E), up 6% YoY. The company posted a profit of $1.6 billion, or $2.10 a share, compared with $1.12 billion, or $1.54 a share, a year earlier.
The gross margin compressed slightly from 60.3% to 59.8%, and the operating margin improved from 18.1% a year ago to 26.3%.
Danaher’s growth was broad-based across all three segments. For FY22, the company is increasing its expectation for non-GAAP core revenue growth to the high-single-digit percent range, which includes non-GAAP base business core revenue growth in the high-single-digit percent range. (Yahoo, Marketwatch)
Bajaj Finance reports record profits
Bajaj Finance reported Q2 net profit of Rs. 2,781 Cr. ($330M), up 88% YoY. This was the highest ever quarterly profit reported by Bajaj Finance and higher than analyst estimates of Rs. 2,638 Cr.
Its AUM grew 31% to Rs. 2.18 lakh cr. ($26B). Net Interest Income surged 31% to Rs. 7001 Cr. New loans booked during the September quarter grew by 7% to 6.76 million against 6.33 million in the corresponding quarter of last year. Bajaj Finance's loan losses and provisions for Q2 stood at Rs 734 crore against Rs 1,300 crore.
The company's customer franchise increased 19% to 62.91 million. Consolidated deposits registered a growth of 37% in the quarter to Rs 39,422 crore. (Economic Times)
Union Pacific beats earnings on higher fuel surcharge revenue, volumes, and prices
Union Pacific reported adjusted EPS of 3.19 (3.08 E) on revenue of $6.57B ($6.44B E), up 18% YoY. It posted a profit of $1.9 billion, or $3.05 a share, compared with $1.67 billion, or $2.57 a share, in the same quarter a year ago.
The rising profit and revenue was a result of the company making more on fuel surcharge revenue, higher volumes, and higher prices. (Marketwatch)
AT&T beats earnings on sharp subscriber gains
AT&T reported adjusted EPS of 0.68 (0.61 E) on revenue of $30B ($29.87B E), down 4% YoY. AT&T attributed the drop in headline revenue during the latest quarter to the divestment of its U.S. video business last July as well as lower business wireline revenue. Those trends were partially offset by higher mobility revenue.
The company posted third-quarter income from continuing operations of $6.3 billion, or 79 cents a share, compared with $5.0 billion, or 63 cents a share, in the year-prior quarter.
AT&T generated $3.8 billion in free-cash flow from continuing operations during the September quarter and look likely to meet their $14B target for the entire year.
The company saw 708,000 postpaid phone net additions during the period (631k E), building on the 1.5 million such net additions it saw during the first half of the year. They added 964,000 wireless postpaid subscribers (913k E). AT&T also added 338,000 net fiber subscribers in the third quarter.
AT&T raised its full-year EPS forecast to at least $2.50 from the prior range of $2.42 to $2.46. The new forecast is somewhere in line with the consensus of $2.51.
AT&T expects growth in mobility service revenues at the “upper end” of the 4.5% to 5% range for the full year. It gave a target of 4.5% to 5% growth in its second-quarter report. They believe that demand for phone and broadband was likely to continue even in a highly inflationary macro environment.
AT&T stock surged 9.5% on the positive earnings result. (Marketwatch, Investing)
Woodside Energy raises output forecast, make higher profits on high energy prices
Woodside said it produced 51.2 mmboe during the quarter, the first full quarter of production since its merger with BHP's petroleum arm, compared with 22.2 mmboe a year earlier. The company was able to charge an average price of about $102 per barrel of oil equivalent (boe) in the September quarter.
This, along with the newly acquired BHP assets from their merger with BHP’s petroleum division, helped boost quarterly revenue to $5.86 billion, from $1.53 billion a year ago marking a 283% YoY increase.
Woodside now expects to produce between 153 million barrels of oil equivalent per day (mmboe) and 157 mmboe over the entirety of 2022, up from its July forecast of 145 to 153 mmboe.
Woodside also said its Sangomar oil and gas project in Senegal was 70% complete at the end of September, with first production targeted for the latter half of 2023. Its "crown jewel" — the $5.7 billion Scarborough gas project— which holds about 11 trillion cubic feet of gas and the Pluto Train 2, was 21% complete, Woodside said, with the first LNG cargo targeted for 2026.
Woodside shares jumped 7% on the raised outlook. (Reuters)
Asian Paints profit surges 31% but misses estimates
Asian Paints reported consolidated net profit for the September quarter at Rs 782.71 crore, 31% higher YoY but lower than the analyst estimate of Rs. 1076 Cr. Consolidated revenue for the period rose 19% YoY to Rs 8,457.6 crore, but missed the analyst estimate of Rs. 8765 Crore. The board has approved an interim dividend of Rs 4.40 per share.
A fall in the other income and higher costs weighed on the bottom line of the paints maker. Raw material cost in the quarter rose nearly 8% on year to Rs 4,925 crore, while other income slumped 31% to Rs 95.5 crore. (Economic Times)
Axis bank profit surges 70% on 31% higher NII
Axis Bank reported 70% year-on-year (YoY) growth in net profit to Rs 5,330 crore in the September quarter. Operating profit in Q2 grew by over 30% on year to Rs 7,716 crore.
Provisions in the quarter dropped to Rs 550 crore from Rs 1,735 crore a year ago. The asset quality improved further during the quarter. The gross non-performing asset ratio fell to 2.5% as on September 30, from 2.76% a quarter ago and 3.53% a year ago. However, the capital adequacy ratio for the private sector lender dipped to 16.52%.
Net interest income grew by 31% on year to Rs 10,360 crore. Retail loans grew 22% on year. The net interest margin expanded 57 basis points on year and 36 bps sequentially to 3.96%. The fee income registered a growth of 20%. Non-interest income, comprising fee, trading profit and miscellaneous income, rose 31% sequentially to Rs 3,941 crore in Q2. (Economic Times)
L’Oreal reports solid sales growth as demand for beauty products remains strong
L’Oreal posted sales of 27.94B Euros, up 20% YoY. The jump is sales was seen across regions. In the United States, sales grew 9.3%, sales grew 10.5% in Europe. L’Oreal reached record market share in China but sales grew just 0.3% due to COVID disruptions.
L’Oreal CEO stated that consumer demand for beauty products has not slowed despite high inflation. Consumer goods and luxury companies have posted strong trading updates as shoppers shrug off higher prices and continue to spend. (Reuters, SeekingAlpha)
Phillip Morris beats earnings
Phillip Morris reported adjusted EPS of 1.53 (1.37 E) on revenue of $8.03B ($7.43B E), down 1.1% YoY.
Adjusted operating margin for the quarter compressed from 43.9% to 41.5%, with $3.3 billion in adjusted operating income. Revenue from smoke-free products on a pro forma basis increased by 14.2% on an organic basis. (Benzinga)
Hermes reports strong sales growth, plans big price rises
Hermes reported total sales of 3.14B Euros (2.84B E), 24% higher YoY at constant currency.
In France and the rest of Europe, performance was bolstered by a dynamic summer tourist season. Sales in the Americas continued to grow strongly.
In Asia, excluding Japan, revenues grew by 34% over the period, with China in particular rebounding strongly after a new round of COVID-19 curbs.
They flagged plans to hike prices by 5% to 10% in 2023 on rising costs and currency fluctuations. They increased prices by around 4% this year and by 1.5-2% on average in previous years. This is far lower than competitors who hike prices in the double digits.
Hermes said it would accelerate a hiring drive in the second half, after adding 800 people in the first six months and increasing salaries for all European employees in July. (Marketwatch, Reuters)
Blackstone AUM surges 30% to near $1T but net income falls sharply
Blackstone reported adjusted EPS of 1.06 (0.98 E) on revenue of $2.59B ($2.37B E), down 15% YoY. third-quarter net income fell sharply to $2.3M, or zero cents a share, from $1.4B, or $1.94 a share in the year-ago quarter. Fee-related earnings rose to 98 cents a share from 65 cents a share in the year-ago quarter. Distributable earnings fell to $1.06 a share from $1.28 a share. It declared a dividend of 90 cents per share.
Blackstone said its net profit from asset divestments across its portfolio, including real estate, private equity, and hedge funds, fell 61% to $402.6 million, down from $1.03 billion a year ago, amid the turmoil. The companies in its corporate private-equity portfolio notched overall revenue growth of 17% year-over-year in the quarter. The firm’s private-credit portfolio, which is nearly all floating-rate debt, was a bright spot, appreciating 3% in the quarter as interest rates rose. Blackstone’s hedge-fund business continued its recent streak of strong performance with the value of its investments rising 1.2%.
Total AUM increased 30% YoY to $951B nearing the $1T mark. The firm booked $45 billion of inflows in the third quarter. Perpetual-capital assets under management climbed by 83% YoY to $359.6 billion. Blackstone also said it invested $31.3 billion on new acquisitions during the quarter. (WSJ, Marketwatch, Reuters)
Marsh McLennan misses revenue estimate
Marsh McLennan reported adjusted EPS of 1.18 (1.14 E) on revenue of $4.77B ($4.88B E), up 4.1% YoY. Net income for the third quarter rose to $546 million, or $1.08 a share, from $537 million, or $1.05 a share, a year earlier.
Risk and insurance revenue increased 6% to $2.8 billion, while revenue coming from its consulting services rose 1% to $2 billion, the company said. Total expenses increased 3.5% year over year to $4 billion in the third quarter due to higher compensation and benefits, and other operating expenses. (Nasdaq, Marketwatch)
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