Mint Market Watch - 26 Oct 22
China's GDP 3.9%; above expectations but below target; Housing prices in decline; Google misses expectations & shares plunge 6.5%; MSFT earnings growth slowest in 5 years.
China's GDP 3.9%; above expectations but below target; Housing prices in decline; Google misses expectations & shares plunge 6.5%; MSFT earnings growth slowest in 5 years.
Google's topline & net misses expectations with margins in decline too; Shares fall 6.5% post-results. Net income fell to $13.9B ($1.06 per share) from $18.9B ($1.40 per share LY).
China’s GDP growth 3.9% beats expectations but fell short of target. House prices fell by the highest MoM rate since 2014, reflecting a property crisis. Retail sales growth of just 2.5%, missed forecasts. President Xi's tightening of political power spurs wealthy to exit China.
Microsoft earnings slowest in five years. Cloud sales growth stalls. Company delivered revenue of $50.1B ($49.6B E) & an EPS of $2.35 ($2.29 E).
Visa beats earnings and boosts dividend by 20% with payments volume up 10%. Visa’s revenue rose to $7.79 B from $6.56 B LY ($7.55B E).
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China’s GDP growth beats expectations but fell short of full year target
China's economic performance exceeded forecasts with GDP numbers. Delayed by almost a week, the announcement of 3.9% GDP growth was better than the 3.3% forecast by analysts but short of China’s full-year target of 5.5%.
Other data, painted a more nuanced picture. House prices in the secondary market fell by the highest month-on-month rate since 2014, reflecting a property crisis. Growth in retail sales, just 2.5%, missed forecasts as strict Covid lockdowns continued to hold back consumption.SG Inflation (FT)
Singapore annual inflation rate at 7.5% remains unchanged from a previous month which stands at a 14-year high
Singapore's annual inflation rate was at 7.5% in September, unchanged from August's figure of more than 14-year high, in line with market estimates.
Food prices rose by 6.9%, the most since October 2008, after gaining 6.4% in August. Additional upward pressures from cost of housing (6.0% vs 6.0% in July), due to accommodation; transport (19.0% vs 20.2%), linked to private transport; clothing (6.0% vs 8.7%); healthcare (2.8% vs 2.7%), led by outpatient services; recreation & culture (6.1% vs 5.9%), led by holiday expenses; and education (2.1% vs 2.2%).
On a monthly basis, consumer prices went up 0.4%, the least since a fall in April, slowing from a 0.9% rise in August. The government expects 2022 inflation to be between 4.5-5.5%, while core inflation to average between 2.5-3.5%. (Statistics Singapore)
President Xi's tightening of political power spurs wealthy to exit China
As per a Financial Times report, Wealthy Chinese are carrying out "escape plans" on fears of high taxes and detention.
David Lesperance, a Europe-based lawyer who has worked with rich families in Hong Kong and China, says Xi ruling beyond two terms is a tipping point for China’s business elite, who thrived for decades as the economy boomed.
He added that Hong Kong, long a favoured destination for Chinese elite families, had become less attractive as Beijing increased control over the territory.
The number of family offices in Singapore jumped fivefold between 2017 and 2019, and almost doubled from 400 at the end of 2020 to 700 a year later, according to Citi Private Bank.
“The family motto has been: ‘Keep a fast junk in the harbour with gold bars and a second set of papers’. The modern equivalent would be a private jet, a couple of passports and foreign bank accounts,” Lesperance said. (FT)
Microsoft quarterly earnings shows slowest growth in five years
Microsoft earnings beat analysts' expectations on the top and bottom line, despite cloud sales growth falling to 20% YoY.
The Company delivered revenue of $50.1 B ($49.6 B E) and an EPS of $2.35 ($2.29 E). Shares of Microsoft were down 2.8% following the announcement.
“In a world facing increasing headwinds, digital technology is the ultimate tailwind,” CEO Satya Nadella said in a statement. “In this environment, we’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way."
Microsoft is also dealing with a dramatic fall off in the PC market, which has seen sales collapse following the huge growth it experienced during the pandemic.
According to Gartner, worldwide PC shipments declined 19.5% from 84.1 million units in Q3 2021 to 68 million in Q3 2022, falling back to pre-pandemic levels.
Microsoft isn’t the only company feeling the impact of the decline in PC sales. Shares of Intel (INTC), AMD (AMD), and Nvidia (NVDA), which produce chips used in PCs, plummeted this year. Intel has collapsed 46% year-to-date, while AMD and Nvidia are off 57% and 54%, respectively. (Yahoo! Finance)
Google's Topline and Net Income misses expectations and Operating margins decline too; Shares gets hammered post-results
Alphabet - Google’s parent company - called out slowing spending by advertisers on YouTube, said financial services spending was cooling on Google, and plans to cut hiring by more than half.
Shares in Alphabet fell 6.5% in trading after the bell.
Alphabet's weak results raises concerns for other companies in the sector, especially advertising-dependent Meta Platforms (META.O). The Facebook parent, which reports results on Wednesday, saw shares drop 4.5% on Tuesday.
Companies that slowed ad spending included those in financial services such as insurance, mortgages and cryptocurrencies, Alphabet said. Travel and retail advertisers helped Google Search ad revenue.
Google's advertising revenue was $54.48 billion in the third quarter, compared with $53.13 billion last year but came in below analysts' expectations.
The company said total revenue was $69.09 billion in the quarter ended Sept. 30, compared with $65.12 billion a year earlier. Analysts on average expected revenue to be $70.58 billion, according to Refinitiv data.
"Google’s earnings miss this quarter proves it’s not immune to the challenges facing the digital advertising industry at large," said Jesse Cohen, senior analyst at Investing.com.
The speed of the slowdown also shocked investors who are "highly sensitive to the changing tide," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
Ad sales on streaming video site YouTube also declined to $7.07 billion, from $7.2 billion in the prior-year quarter.
Alphabet's net income fell to $13.91 billion, or $1.06 per share, from $18.94 billion, or $1.40 per share, a year earlier. Net income missed analyst expectations of $1.25 per share. The company's operating margin declined to 25% in the third quarter, from 32% in the prior year.
The tech giant said in July it would slow the pace of hiring for the rest of the year, saying it was "not immune to economic headwinds." Porat said the company hired 12,700 people in the third quarter and expects to hire less than half that number in the final quarter.
Revenue from Google Cloud rose to $6.9 billion during the quarter, from $5 billion a year earlier.
During a conference call with analysts, Alphabet Chief Executive Sundar Pichai said the company would continue to evaluate its projects and make "course corrections" as needed. "Times like this are clarifying," he said. (Reuters)
Visa beats earnings and boosts dividend by 20%
Visa Inc. topped earnings expectations for its latest quarter as the payments giant continued to call out strong consumer spending trends. Payments volume at Visa grew 10% in the fiscal fourth quarter, while processed transactions increased 12%. Visa’s revenue rose to $7.79 billion from $6.56 billion and came in ahead of the FactSet consensus, which was for $7.55 billion.
This most recent earnings report was highly anticipated because Visa has a September-ending fiscal year and typically offers an annual forecast on its fiscal fourth-quarter earnings call.
Indeed, the company did so, with Prabhu telling investors on the call that Visa currently expects reported nominal dollar net revenue growth in the high single-digit range, though he acknowledged that the economic situation is fluid.
Prabhu added that “for internal planning purposes,” Visa is “assuming no recession.” But the company remains “vigilant” and will have “contingency plans in place should we have an economic or geopolitical shock that impacts our business.”
For the latest quarter, the company reported net income of $3.94 billion, or $1.86 a share, compared with $3.58 billion, or $1.65 a share, in the year-earlier period. After adjustments, Visa earned $1.93 a share, up 19% from a year prior, while analysts tracked by FactSet were looking for $1.87 a share.
The company noted in its release that during October, its board of directors approved a new $12 billion stock-buyback program as well as an increase to the dividend. The quarterly cash dividend will be 45 cents a share, up from 38 cents prior, payable on Dec. 1 to shareholders of record as of Nov. 11. (MarketWatch)
UPS posts mixed quarterly results
UPS reported revenue that fell below analyst expectations and earnings per share that beat them. The company reaffirmed its full year guidance of $102 billion in revenue and adjusted operating margin of 13.7%.
The company said softening demand globally hurt volumes, which was partially offset by higher pricing driven by inflation. Similar to rival FedEx, UPS plans to increase shipping rates by 6.9% effective Dec. 27 due to inflation and service costs.
For 2022, UPS stood by its outlook for revenue of $102 billion and adjusted operating margin of 13.7%, despite what CEO Carol Tomé called a “very dynamic” macroeconomic environment.
UPS posted an EPS of $2.99 ($2.84 E) on Revenues if $24.16B ($24.30B E). Shares of the company closed down less than 1% Tuesday.
For the holidays, UPS expects volumes to be lower than last year, which the company attributed to changes in its contracts with larger clients. (CNBC)
Coca-Cola tops earnings expectations while raising full year outlook
Coca-Cola raised its full-year outlook hinging on its two-pronged strategy of hiking prices and offering more affordable options will keep driving sales growth.
The Company delivered EPS of 69c (64c E) on Revenues of $11.05B ($10.52B E). Organic revenue climbed 16%, fueled by higher prices across Coke’s portfolio.
Coke’s organic revenue grew 16% in the third quarter, and its unit case volume rose 4%.
Inflation will likely hurt the firm with rising expenses in 2023. Foreign currency is also projected to weigh on Coke’s earnings and revenue next year. Shares of the company closed up 2.3%.
For 2022, Coke now expects adjusted EPS growth of 6% to 7%, up from its prior range of 5% to 6%. The company also raised its outlook for organic revenue growth to 14% to 15% from a range of 12% to 13%.
In the fourth quarter, Coke is forecasting that foreign currency will weigh on its adjusted net sales by 8% and adjusted earnings per share by 9%, including the impact of hedged positions. (CNBC)
GM's strong Q3 results ease investor fears of slowdown
Solid Q3 from GM eased investor fears and stepped up confidence while tamping down growing fears of a global recession.
GM reported net income of $3.3 billion, compared with $2.4 billion a year earlier. Revenue jumped to $41.9 billion, from $26.8 billion a year ago.
GM shares were up nearly 2% in early trading on Tuesday as the company's strong North American truck sales and prices drove a higher quarterly profit that beat analysts' estimates.
While investors have been concerned that a U.S. economic slowdown could hurt demand for new vehicles, Chief Financial Officer Paul Jacobson said on Tuesday: "We haven’t seen any direct impact on our products. Pricing remains strong. Demand remains strong."
GM reaffirmed its guidance for full-year net income of $9.6 billion to $11.2 billion, and full-year diluted earnings per share of $5.76 to $6.76.
Diluted earnings per share in the third quarter of $2.25 topped estimates for $1.88. EBIT-adjusted net margin in North America climbed nearly a point, to 11.2%. (Reuters)
Halliburton beats both topline and earnings estimates
Haliburton - the oilfield services company reported non-GAAP Q3 net income of $0.60 per share, more than doubling its $0.28 per share adjusted profit during the year-ago quarter and beating the Capital IQ consensus by $0.04 per share.
Total revenue rose to $5.36 billion from $3.86 billion during the year-ago period, narrowly exceeding the $5.34 billion analyst mean. (MT Newswires)
Texas Instruments Beats Expectations But Issues Weak Guidance
Chipmaker Texas Instruments (TXN) beat analyst estimates for the third quarter but guided below views for the current period.
The Dallas-based company earned $2.47 EPS ($2.39 E) on sales of $5.24B ($5.14B E) in the September quarter. YoY, TI earnings rose 19% while sales increased 13%.
For the current quarter, Texas Instruments forecast earnings of $1.97 a share on sales of $4.6 billion. That's based on the midpoint of its guidance.
"During the quarter we experienced expected weakness in personal electronics and expanding weakness across industrial," Chief Executive Rich Templeton said in a news release.
In after-hours trading on the stock market today, TXN stock sank 5.3% to 153.50. During the regular session Tuesday, TXN stock climbed 0.3% to close at 162.16. (IBD)
Spotify Boosts Subscribers and Revenue, Says 2023 Price Increases Likely
For Q3, Spotify reported 456 million MAUs, up 20% YoY. Paying subscribers, Spotify’s most lucrative type of customer, climbed 13% to 195 million, also exceeding the company’s expectations, thanks to promotions and household plans.
Chief Executive Daniel Ek said in an interview Tuesday that subscribers can expect price hikes for the service sometime in 2023. The premium service in the U.S. has cost $9.99 since Spotify was launched in the U.S. in 2011. Apple Inc. on Monday increased the subscription price in the U.S. for its music service by $1 a month, the first of any major company to break from the long-held $9.99 a month for individual users. The company cited an increase in licensing costs. Spotify shares fell nearly 6% in aftermarket trading Tuesday.
During the quarter, Spotify introduced its expansion into audiobooks, the latest move in the company’s evolution from a pure-play music service to a more diversified audio business. Users can now purchase and listen to a catalog of more than 300,000 titles from independent authors and major publishers on a pay-per-download basis.
Free cash flow, a measure of the cash a company generates from operations and viewed by many investors as a proxy for performance, was €35 million, the equivalent of $34.9 million, down from €99 million a year earlier and €37 million in the previous quarter.
Spotify posted a loss of €194 million, or 99 euro cents a share, compared with a loss of €80 million a year earlier. For years, executives have said the company will give priority to investment over profits as the company works to attract users around the world and expand into new forms of audio.
Spotify said it now has 4.7 million podcasts available on its service, up from 4.4 million in the previous quarter, and that the number of users who listened to shows in the period increased in the “substantial double-digits” from a year ago.
In all for the third quarter, revenue increased 22% to €3.04 billion, coming in above the company’s guidance. For Q4, Spotify expects MAU of 479 million and premium subscribers of 202 million. It forecast revenue of €3.2 billion. (WSJ)
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