Mint Market Watch - 27 Oct 22
AU Inflation at 32-year high; Big EU banks face windfall tax; Meta shares plunge 22% in aftermarket trading;
AU inflation rises to 32 year high. US goods trade deficit widens with weakening exports. US goods trade deficit rose 5.7% to $92.2B in Sep.
Big European banks face windfall taxes as they reap record earnings on rising rates
Boeing reports $3.3B loss due to problems in defense unit. Hilton Hotels raise profit forecast after strong earnings. India's IIFL Finance profit surges 36%
Meta misses earnings with two sequential negative growth and shares plunge 22% in aftermarket trading.
Teladoc stock surges 13% after loss narrows & ServiceNow reports strong revenue growth. Harley Davidson reports strong revenue growth as global motorcycle shipments recover
Other Key Headlines:
1. Big European banks face windfall taxes as they reap record earnings on rising rates
2. Australia inflation rises to 32 year high
3. Singapore’s manufacturing output rises 0.9% YoY in September
4. US goods trade deficit widens with weakening exports. US goods trade deficit rose 5.7% to $92.2B in September.
5. US new home sales fall 10.9% while prices remain high.
6. Bank of Canada announces smaller than expected 50bps rate hike
7. Boeing reports $3.3B loss due to problems in defense unit
8. Bristol Myers sales fall on competition for cancer drug and forex pressure
9. Kraft Heinz beats earnings as prices soar
10. Hilton Hotels raise profit forecast after strong earnings
11. Thermo Fischer Scientific beats earnings as revenue rises 14%
12. Meta misses earnings estimates as they spend big on metaverse. Meta shares fell 22% in aftermarket trading.
13. Ford reports net loss in Q3 due to supply chain problems and Argo AI investment
14. Teladoc stock surges 13% after loss narrows in Q3
15. ServiceNow reports strong revenue growth
16. Harley Davidson reports strong revenue growth as global motorcycle shipments recover
17. Dabur reports earnings in line with estimates, announces dividend of Rs. 2.5
18. IIFL Finance profit surges 36%
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Big European banks face windfall taxes as they reap record earnings on rising rates
Europe’s largest banks generated huge profits on the back of rising interest rates in the third quarter, raising the prospect of windfall taxes.
Deutsche Bank reported one of its strongest quarter & best FY since GFC in 2008. Barclays, Santander, UniCredit, SCB, HSBC and UBS beat analysts’ estimates.
Higher interest rates were the main reason. BoE rates have risen to 2.25%, from 0.1% last year, while ECB is anticipated to raise rates from 0.75% to 2.5% next year. (FT)
Australia inflation rises to 32 year high
Australia’s CPI increased by 1.8% in the September Quarter (1.6% E). Annual inflation rose to 7.3% up from 6.1% last quarter. This is the highest since 1990 and almost three times the pace of wage growth.
Core inflation increased 1.8% in the quarter and 6.1% annually (5.6% E). The CPI report showed food prices were already climbing at an annual pace of 9.0%, with the third quarter alone seeing a surge of 3.2%.
The ABS noted that annual inflation for essential goods and services leaped to 8.4% in the September quarter, highlighting the extent of cost-of-living pressures.
The increase in inflation last quarter is also unwelcome for the RBA which had thought that core inflation would peak at 6% in the December quarter. The RBA had eased their rate hiking at their last meeting where they announced a 25bps hike after four consecutive 50bps hikes. This surprise reading suggests that the RBA will hike rates more aggressively.
Both ANZ and Commonwealth Bank of Australia added another 25 basis points to their forecasts for the cash rates to peak at 3.85% and 3.1% respectively. National Australia Bank also revised up its terminal rate expectation to 3.6%, compared with 3.1% before. The cash rate is currently at 2.6%. (Reuters)
Singapore’s manufacturing output rises 0.9% YoY in September
Singapore’s manufacturing output rose 0.9% YoY in September (1.2% E). Excluding biomedical manufacturing, the output rose by 2%.
A key industry for Singapore’s growth, the electronics sector, saw output drop by 7% in September, after it shrank 7.8% in August and 5.2% in July. Semiconductor output fell 8.4% after falling in July and August. Singapore supplies 11% of the world’s semiconductors and 20% of the chipmaking equipment.
OCBC Bank chief economist Selena Ling noted that big chipmakers like Texas Instruments and SK Hynix were the latest to sound a warning on the semiconductor market, with demand weakening for both personal devices and industrial equipment.
Chemicals output also declined in September, falling 7.1%. While, the petroleum segment grew 12.1% due to higher demand for jet fuel as global air travel restrictions ease. General manufacturing output grew 23.3% YoY, with all segments recording an increase in output.
Manufacturing output expanded 3.9% for the first nine months of 2022, but is likely to come in below the 3% handle for the full year amid the growing economic headwinds. (Straits Times)
US goods trade deficit widens with weakening exports
US goods trade deficit rose 5.7% to $92.2B in September.
Exports of goods fell 1.5% to $177.6 billion last month. The decline was led by a 14.0% tumble in food exports. Shipments of industrial supplies, which include crude oil, fell 3.1%. Exports of consumer goods also declined.
But there were increases in exports of capital goods, motor vehicles and other goods. The decline in exports was likely due to a strong Dollar that is making American goods less competitive. The Dollar has gained 11% against the US’s main trade partners.
Goods imports rose 0.8% to $269.8 B. They were lifted by a 4.4% jump in imports of capital goods, which bodes well for business spending on equipment. There were also increases in imports of motor vehicles and consumer goods.
Wholesale inventories increased 0.8% last month after advancing 1.4% in August. Retail inventories gained 0.4% after rising 1.4% in August.
Motor vehicle inventories increased 1.9% after surging 3.5% in August. Excluding motor vehicles, retail inventories dipped 0.1% after rising 0.7% in August. (Reuters)
US new home sales fall 10.9% while prices remain high
US new home sales decreased 10.9% MoM to a seasonally adjusted rate of 603k in September (585k E) down from 677k in August.
Sales tumbled 20.2% in the densely populated South and fell 0.7% in the West. But they rose 4.3% in the Midwest and surged 56.0% in the Northeast. Sales are 17.6% lower YoY, they peaked at 993k in January.
The median new house price in September was $470,600, a 13.9% increase from a year ago. There were 462,000 new homes on the market at the end of last month, up from 457,000 units in August. Houses under construction made up 65.2% of the inventory, with homes yet to be built accounting for 22.7%.
The 30-year fixed mortgage rate averaged 6.94% in the latest week, the highest in 20 years, up from 6.92% in the prior week. (Reuters)
API reports crude build up and gasoline draw
API reported a build of 4.52M barrels last week after a draw of 1.27M barrels last week.
The build in crude oil inventories includes the Department of Energy’s release of 3.4 million barrels from the Strategic Petroleum Reserves in the week ending October 21, leaving the SPR with 401.7 million barrels.
The API reported a draw in gasoline inventories this week of 2.278 million barrels. (Oil Prices)
Bank of Canada announces smaller than expected rate hike
Bank of Canada announced a 50bps rate hike smaller than the 75bps hike that was expected by money markets.
The policy rate was increased from 3.25% to 3.75%. (Reuters)
Boeing reports $3.3B loss due to problems in defense unit
Boeing reported adjusted EPS of -6.18 (0.18 E) on revenue of $15.96B ($18.19B E) up 4% YoY. Boeing reported a quarterly loss of $3.3B, $2.8B of which was from its defense unit on programs including the KC-46 tanker and Air Force One. The company previously disclosed losses of more than $1 billion associated with modifying two 747 jumbo jets to serve as Air Force One.
Boeing’s commercial unit’s revenue rose 40% from a year ago to $6.26 billion. It delivered 112 planes in the third quarter, up from 85 a year earlier. Deliveries of its 787 Dreamliner resumed in August after a pause for much of the previous two years to address a series of manufacturing flaws.
Boeing shares fell nearly 9% to close at $133.79 on Wednesday after executives outlined a host of challenges through 2023, including labor and training hurdles and continued constraints on the company’s supply chain. (CNBC)
Bristol Myers sales fall on competition for cancer drug and forex pressure
Bristol Myers Squibb reported adjusted EPS of 1.99 (1.82 E) on revenue of $11.22B ($11.15B E), down 3.5% YoY. Profit in the quarter fell to $4.26B from $4.3B a year ago.
Sales of Revlimid, which began facing generic competition in the United States earlier this year, fell 28% to $2.4 billion in the quarter, above analyst estimates of around $2.2 billion. The company still expects full year sales of the drug in the range of $9 to $9.5 billion.
Sales of blood thinner Eliquis, which Bristol shares with Pfizer, rose 10% to $2.65 billion and its cancer immunotherapy Opdivo rose 7 percent to $2.05 billion. Sales from its recently launched drugs rose to $553 million from $344 million last year.
Profits were also hit by the effects of the weak Euro and Pound. (Yahoo)
Kraft Heinz beats earnings as prices soar
Kraft Heinz reported adjusted EPS of 0.63 (0.57 E) on revenue of $6.5B ($6.27B E), up 3% YoY. Kraft said average selling prices rose 15.4 percentage points in the third quarter, but sales volumes slipped 3.8 percentage points.
Packaged food makers are also getting a helping hand from inflation-weary consumers sticking to the pandemic-fueled preference for cooking at home, though analysts have cautioned that the firms may be nearing their ceiling on price hikes. (Reuters)
Hilton Hotels raise profit forecast after strong earnings
Hilton Hotels reported adjusted EPS of 1.31 (1.24 E) on revenue of $2.37B ($2.4B E), up 35% YoY. Hilton had a net income of $324M up from $241M last year. Systemwide revenue per available room increased by 29.9% in the quarter on currency neutral basis. Hilton added 12,900 rooms in the quarter.
The recovery in profit comes as people are eager to travel after the pandemic.
Hilton said it now expects net income between $1.22 billion and $1.24 billion this year, compared with its previous forecast of $1.15 billion and $1.22 billion. It expects 2022 adjusted earnings per share for 2022 between $4.46 and $4.54 compared with $4.21 and $4.46 forecast earlier, as it benefits from strong pricing power amid resilient travel demand. (Reuters)
Thermo Fischer Scientific beats earnings as revenue rises 14%
Thermo Fischer Scientific reported adjusted EPS of 5.08 (4.81 E) on revenue of $10.68B ($9.98B E), up 14% YoY. Organic revenues in the reported quarter declined 1% year over year, while currency translation lowered revenues by 5%. Products added with acquisitions drove revenues higher by 20%.
Revenues at the Life Sciences Solutions segment (27.7% of total revenues) declined 20.4% year over year to $2.96 billion, while Analytical Instruments Segment sales (15.2%) improved 9.8% to $1.62 billion.
Revenues at the Laboratory Products and Biopharma Services segment (52.3%) rose 60.2% to $5.59 billion. The Specialty Diagnostics segment (10%) however recorded a 21.8% year-over-year fall in revenues to $1.07 billion.
The gross margin of 41.5% in the third quarter contracted 990 bps YoY due to a 37.8% rise in the cost of revenues. In the quarter, selling, general and administrative expenses increased 0.9% to $1.74 billion. Research and development expenses remained flat at $351 million.
They returned $118M to shareholders through dividends this quarter, an increase of 15% as announced in February. (NASDAQ)
Meta misses earnings estimates as they spend big on metaverse
Meta reported adjusted EPS of 1.64 (1.93 E) on revenue of $27.71B ($27.57B E), down 4% YoY. This is their second straight quarter of declining revenue. Profit plummeted 52% to $4.4B. Operating margin sank to 20% from 36% last year.
Revenue in the Reality Labs unit, which houses the company’s virtual reality headsets and its futuristic metaverse business, fell by almost half from a year earlier to $285 million. Its loss widened to $3.67 billion from $2.63 billion in the same quarter last year. Reality Labs has lost $9.4 billion so far this year.
Meta is contending with a broad slowdown in online ad spending, challenges from Apple’s iOS privacy update and increased competition from TikTok.
The company said revenue for the fourth quarter will be $30 billion to $32.5 billion. Analysts were expecting sales of $32.2 billion.
Meta shares fell 22% in aftermarket trading. (CNBC)
Ford reports net loss in Q3 due to supply chain problems and Argo AI investment
Ford reported adjusted EPS of 0.3 (0.32 E) on revenue of $39.4B ($37.75B E), down 2% YoY. Adjusted earnings of $1.8B fell 40% YoY. Ford recorded a net loss of $827M in the quarter.
Ford attributed the lower-than-expected results to parts shortages affecting 40,000 to 50,000 vehicles as well as an extra $1 billion in unexpected supplier costs during the quarter.
Ford recorded a $2.7 billion non-cash, pretax charge on its investment in Argo AI, which the company initially invested in starting in 2017. It later split its ownership of Argo AI with German automaker Volkswagen in 2019. Ford CFO John Lawler said the company is winding down the operations to focus on advanced driver-assist systems such as its BlueCruise hands-free highway driving system.
Ford updated its guidance to forecast full-year adjusted earnings before interest and taxes of about $11.5 billion. The automaker raised its full-year adjusted free cash flow forecast to between $9.5 billion and $10 billion – up from $5.5 billion to $6.5 billion – on strength in the company’s automotive operations. (CNBC)
Teladoc stock surges 13% after loss narrows in Q3
Teladoc reported adjusted EPS of -0.45 (-0.57 E) on revenue of $611M ($608M E), up 17% YoY. The company posted a net loss of $73.5 million, or 45 cents a share, compared with a loss of $84.3 million, or 53 cents a share, in the year-earlier period.
For the fourth quarter, Teladoc executives anticipate $625 million to $640 million in revenue, along with $88 million to $98 million in adjusted Ebitda.
Teladoc shares rallied 13% in after hours trading. (Marketwatch)
ServiceNow reports strong revenue growth
ServiceNow reported adjusted EPS of 1.96 (1.85 E) on revenue of $1.93B ($1.85B E), up 21% YoY. ServiceNow reported subscription revenues of $1.74B representing 22% YoY increase or 28.5% when adjusted for constant currency. The number of customers paying over $10 million in annual contract value in Q3 2022 grew 60% year-over-year.
Current remaining performance obligations were $5.87, representing 18% year-over-year growth (up 25% adjusted for constant currency). For the full 2022-year, the company expects subscription revenues to be in the range of $6.865 - $6.870 billion.
ServiceNow shares soared 13% in after market trading. (Investing)
Harley Davidson reports strong revenue growth as global motorcycle shipments recover
Harley Davidson reported adjusted EPS of 1.78 (1.41 E) on revenue of $1.65B ($1.37B E), up 21% YoY. Revenue from the Motorcycles and Related Products segment (HDMC) grew 24% to $1.44 billion, beating the consensus of $1.37 billion.
The increase in HDMC revenue was driven by a strong recovery in global motorcycle shipments after disruptions during Q2. Gross profit margin in HDMC increased 7.4% to 34.1%.
Revenue from Motorcycles climbed 28%, Parts & Accessories dropped 2%, Apparel climbed 41%, and Licensing rose 26%.
Harley-Davidson reaffirmed its guidance and expects FY22 HDMC revenue growth of 5% - 10%, HDMC operating income margin of 11% - 12%, HDFS operating income to decline by 20% - 25%. It lowered the capital investments outlook to $170 million - $190 million from 190 million - $220 million.
Harley Davidson shares rose 13% in after market trading. (Yahoo)
Dabur reports earnings in line with estimates, announces dividend of Rs. 2.5
Dabur reported consolidated revenue of Rs 2,986 Cr ($362M), up from Rs 2,818 Cr. last year. Dabur's EBITDA came in at Rs 600 crore as against Rs 620 crore in the same quarter last year.
Also, its margin saw a decline to 20.1% from 22% YoY.
Dabur announced a dividend of Rs. 2.5 to be issued on November 4th. (Economic Times)
IIFL Finance profit surges 36%
IIFL Finance reported a consolidated net profit of Rs 397 Cr, up 36% YoY. Profit Before Tax rose 42.5% to Rs. 529 Cr.
IIFL Finance had loan assets under management (AUM) of Rs 55,302 crore ($6.71B) as of Q2FY23, with the home loans segment constituting 36%, gold loans 32%, business loans 14% and microfinance loans 12% of the total AUM.
The total capital adequacy ratio of IIFL Finance stood at 22% as of Q2FY23, against the minimum regulatory requirement of 15%.
IIFL Shares rose 6%. (Economic Times)
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