[ad_1]
Shares of regional banks posted big gains on Tuesday as they regained their footing after huge losses in the previous session, but volatility continued in the sector following the demise of Silicon Valley Bank, Signature Bank and Silvergate Capital in the past week.
While the rise in some cases is eye-popping, most stocks have yet to recover fully from losses in the past few days. Most stocks are trading well below their levels from a week ago, even with Tuesday’s gains.
Among…
[ad_2]
[ad_1]
Trading in shares of First Republic Bank and Western Alliance Bancorp ended sharply lower in a tough day of trading for regional banks as fears over bank solvency persisted following the failures of Silicon Valley Bank, Signature Bank and Silvergate Capital.
Stocks were periodically halted or paused for trading amid the bank stock bloodbath, which saw many suffering percentage declines well into the double digits. Typically, bank stocks are stable compared with sectors such as technology, with daily moves above 5% being relatively…
[ad_2]
[ad_1]
Silicon Valley Bank has failed following a run on deposits, after its parent company’s share price crashed a record 60% on Thursday.
Trading of SVB Financial Group’s
SIVB,
stock was halted early Friday, after the shares plunged again in premarket trading. Treasury Secretary Janet Yellen said SVB was one of a few banks she was “monitoring very carefully.” Reaction poured in from several analysts who discussed the bank’s liquidity risk.
California regulators closed Silicon Valley Bank and handed the wreckage over to the Federal Deposit Insurance Administration later on Friday.
Below is the same list of 10 banks we highlighted on Thursday that showed similar red flags to those shown by SVB Financial through the fourth quarter. This time, we will show how much they reported in unrealized losses on securities — an item that played an important role in SVB’s crisis.
Below that is a screen of U.S. banks with at least $10 billion in total assets, showing those that appeared to have the greatest exposure to unrealized securities losses, as a percentage of total capital, as of Dec. 31.
Some media reports have referred to SVB of Santa Clara, Calif., as a small bank, but it had $212 billion in total assets as of Dec. 31, making it the 17th largest bank in the Russell 3000 Index
RUA,
as of Dec. 31. That makes it the largest U.S. bank failure since Washington Mutual in 2008.
One unique aspect of SVB was its decades-long focus on the venture capital industry. The bank’s loan growth had been slowing as interest rates rose. Meanwhile, when announcing its $21 billion dollars in securities sales on Thursday, SVB said it had taken the action not only to lower its interest-rate risk, but because “client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted.”
SVB estimated it would book a $1.8 billion loss on the securities sale and said it would raise $2.25 billion in capital through two offerings of new shares and a convertible bond offering. That offering wasn’t completed.
So this appears to be an example of what can go wrong with a bank focused on a particular industry. The combination of a balance sheet heavy with securities and relatively light on loans, in a rising-rate environment in which bond prices have declined and in which depositors specific to that industry are themselves suffering from a decline in cash, led to a liquidity problem.
Banks leverage their capital by gathering deposits or borrowing money either to lend the money out or purchase securities. They earn the spread between their average yield on loans and investments and their average cost for funds.
The securities investments are held in two buckets:
In its regulatory Consolidated Financial Statements for Holding Companies—FR Y-9C, filed with the Federal Reserve, SVB Financial, reported a negative $1.911 billion in accumulated other comprehensive income as of Dec. 31. That is line 26.b on Schedule HC of the report, for those keeping score at home. You can look up regulatory reports for any U.S. bank holding company, savings and loan holding company or subsidiary institution at the Federal Financial Institution Examination Council’s National Information Center. Be sure to get the name of the company or institution right — or you may be looking at the wrong entity.
Here’s how accumulated other comprehensive income (AOCI) is defined in the report: “Includes, but is not limited to, net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and accumulated defined benefit pension and other postretirement plan adjustments.”
In other words, it was mostly unrealized losses on SVB’s available-for-sale securities. The bank booked an estimated $1.8 billion loss when selling “substantially all” of these securities on March 8.
On the regulatory call reports, AOCI is added to regulatory capital. Since SVB’s AOCI was negative (because of its unrealized losses on AFS securities) as of Dec. 31, it lowered the company’s total equity capital. So a fair way to gauge the negative AOCI to the bank’s total equity capital would be to divide the negative AOCI by total equity capital less AOCI — effectively adding the unrealized losses back to total equity capital for the calculation.
Getting back to our list of 10 banks that raised similar red margin flags to those of SVB, here’s the same group, in the same order, showing negative AOCI as a percentage of total equity capital as of Dec. 31. We have added SVB to the bottom of the list. The data was provided by FactSet:
| Bank | Ticker | City | AOCI ($mil) | Total equity capital ($mil) | AOCI/ TEC – AOCI | Total assets ($mil) |
| Customers Bancorp Inc. |
CUBI, |
West Reading, Pa. | -$163 | $1,403 | -10.4% | $20,896 |
| First Republic Bank |
FRC, |
San Francisco | -$331 | $17,446 | -1.9% | $213,358 |
| Sandy Spring Bancorp Inc. |
SASR, |
Olney, Md. | -$132 | $1,484 | -8.2% | $13,833 |
| New York Community Bancorp Inc. |
NYCB, |
Hicksville, N.Y. | -$620 | $8,824 | -6.6% | $90,616 |
| First Foundation Inc. |
FFWM, |
Dallas | -$12 | $1,134 | -1.0% | $13,014 |
| Ally Financial Inc. |
ALLY, |
Detroit | -$4,059 | $12,859 | -24.0% | $191,826 |
| Dime Community Bancshares Inc. |
DCOM, |
Hauppauge, N.Y. | -$94 | $1,170 | -7.5% | $13,228 |
| Pacific Premier Bancorp Inc. |
PPBI, |
Irvine, Calif. | -$265 | $2,798 | -8.7% | $21,729 |
| Prosperity Bancshare Inc. |
PB, |
Houston | -$3 | $6,699 | -0.1% | $37,751 |
| Columbia Financial, Inc. |
CLBK, |
Fair Lawn, N.J. | -$179 | $1,054 | -14.5% | $10,408 |
| SVB Financial Group |
SIVB, |
Santa Clara, Calif. | -$1,911 | $16,295 | -10.5% | $211,793 |
| Source: FactSet | ||||||
Click on the tickers for more about each bank.
Read Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Ally Financial Inc.
ALLY,
— the third largest bank on the list by Dec. 31 total assets — stands out as having the largest percentage of negative accumulated comprehensive income relative to total equity capital as of Dec. 31.
To be sure, these numbers don’t mean that a bank is in trouble, or that it will be forced to sell securities for big losses. But SVB had both a troubling pattern for its interest margins and what appeared to be a relatively high percentage of securities losses relative to capital as of Dec. 31.
There are 108 banks in the Russell 3000 Index
RUA,
that had total assets of at least $10.0 billion as of Dec. 31. FactSet provided AOCI and total equity capital data for 105 of them. Here are the 20 which had the highest ratios of negative AOCI to total equity capital less AOCI (as explained above) as of Dec. 31:
| Bank | Ticker | City | AOCI ($mil) | Total equity capital ($mil) | AOCI/ (TEC – AOCI) | Total assets ($mil) |
| Comerica Inc. |
CMA, |
Dallas | -$3,742 | $5,181 | -41.9% | $85,406 |
| Zions Bancorporation N.A. |
ZION, |
Salt Lake City | -$3,112 | $4,893 | -38.9% | $89,545 |
| Popular Inc. |
BPOP, |
San Juan, Puerto Rico | -$2,525 | $4,093 | -38.2% | $67,638 |
| KeyCorp |
KEY, |
Cleveland | -$6,295 | $13,454 | -31.9% | $189,813 |
| Community Bank System Inc. |
CBU, |
DeWitt, N.Y. | -$686 | $1,555 | -30.6% | $15,911 |
| Commerce Bancshares Inc. |
CBSH, |
Kansas City, Mo. | -$1,087 | $2,482 | -30.5% | $31,876 |
| Cullen/Frost Bankers Inc. |
CFR, |
San Antonio | -$1,348 | $3,137 | -30.1% | $52,892 |
| First Financial Bankshares Inc. |
FFIN, |
Abilene, Texas | -$535 | $1,266 | -29.7% | $12,974 |
| Eastern Bankshares Inc. |
EBC, |
Boston | -$923 | $2,472 | -27.2% | $22,686 |
| Heartland Financial USA Inc. |
HTLF, |
Denver | -$620 | $1,735 | -26.3% | $20,244 |
| First Bancorp |
FBNC, |
Southern Pines, N.C. | -$342 | $1,032 | -24.9% | $10,644 |
| Silvergate Capital Corp. Class A |
SI, |
La Jolla, Calif. | -$199 | $603 | -24.8% | $11,356 |
| Bank of Hawaii Corp |
BOH, |
Honolulu | -$435 | $1,317 | -24.8% | $23,607 |
| Synovus Financial Corp. |
SNV, |
Columbus, Ga. | -$1,442 | $4,476 | -24.4% | $59,911 |
| Ally Financial Inc |
ALLY, |
Detroit | -$4,059 | $12,859 | -24.0% | $191,826 |
| WSFS Financial Corp. |
WSFS, |
Wilmington, Del. | -$676 | $2,202 | -23.5% | $19,915 |
| Fifth Third Bancorp |
FITB, |
Cincinnati | -$5,110 | $17,327 | -22.8% | $207,452 |
| First Hawaiian Inc. |
FHB, |
Honolulu | -$639 | $2,269 | -22.0% | $24,666 |
| UMB Financial Corp. |
UMBF, |
Kansas City, Mo. | -$703 | $2,667 | -20.9% | $38,854 |
| Signature Bank |
SBNY, |
New York | -$1,997 | $8,013 | -20.0% | $110,635 |
Again, this is not to suggest that any particular bank on this list based on Dec. 31 data is facing the type of perfect storm that has hurt SVB Financial. A bank sitting on large paper losses on its AFS securities may not need to sell them. In fact Comerica Inc.
CMA,
which tops the list, also improved its interest margin the most over the past four quarters, as shown here.
But it is interesting to note that Silvergate Capital Corp.
SI,
which focused on serving clients in the virtual currency industry, made the list. It is shuttering its bank subsidiary voluntarily.
Another bank on the list facing concern among depositors is Signature Bank
SBNY,
of New York, which has a diverse business model, but has also faced a backlash related to the services it provides to the virtual currency industry. The bank’s shares fell 12% on Thursday and were down another 24% in afternoon trading on Friday.
Signature Bank said in a statement that it was in a “strong, well-diversified financial position.”
[ad_2]
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-6acba64b
Stock futures traded mostly flat Monday as Wall Street kicked off a week that includes testimony before Congress from Federal Reserve Chairman Jerome Powell and the U.S. jobs report for February.
These stocks were poised to make moves Monday:
[ad_2]
[ad_1]
Silicon Valley could use a reboot. The biggest players aren’t growing, and more than a few are seeing sharp revenue declines. Regulators seem opposed to every proposed merger, while legislators push for new rules to crack down on the internet giants. The Justice Department just can’t stop filing antitrust suits against Google. The initial public offering market is closed. Venture-capital investments are plunging, along with valuations of prepublic companies. Maybe they should try turning the whole thing on and off.
The only strategy that seems to be working is to lay people off. Tech CEOs suddenly are channeling Marie Kondo, tidying up and keeping only the people and projects that “spark joy,” or at least support decent operating margins. Layoffs.fyi reports that tech companies have laid off more than 122,000 people already this year.
[ad_2]
[ad_1]
Intel
is cutting its dividend. In a treacherous environment for the economy and profits, more companies could do the same.
On Wednesday, Intel (ticker: INTC) cut its dividend by 66% to an annual 50 cents a share, helping push the stock down about 16% in the past month. Intel has lost market share for chips to
Advanced Micro Devices
(AMD) and has struggled to meet Wall Street’s earnings targets. Weighing on earnings is weak PC demand, with year-over-year declines in sales. A dividend cut this large may partly reflect the economic environment, but also the company’s own problems.
[ad_2]
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-5b0c54ae
[ad_2]
[ad_1]
PepsiCo
beat earnings and revenue estimates in the fourth quarter, driven by higher prices. It increased its annual dividend, sending the stock higher in premarket trading Thursday.
The beverages and snacks giant (ticker:PEP) reported adjusted earnings per share (EPS) of $1.67 on sales of $28 billion. Analysts were expecting EPS of $1.65 on sales of $26.8 billion.
[ad_2]
[ad_1]
Royal Caribbean Group
did better than anticipated in the fourth quarter, turning in a narrower-than-expected loss and saying bookings were nearing record highs at higher prices.
The stock surged more than 6% in early trading Tuesday. It is now up close to 50% so far in 2023.
[ad_2]
[ad_1]
Tyson Foods Inc. stock slid 5.5% in premarket trade Monday, after the meat processor and parent to brands including Jimmy Dean and Hillshire Farm missed consensus estimates for its fiscal first quarter by a wide margin.
“We faced some challenges in the first quarter,” Chief Executive Donnie King said in a statement. “Market dynamics and some operational inefficiencies impacted our profitability. We expect to improve our performance through the back half of fiscal 2023 and into the future, as we strive to execute with excellence and work to become best in class in our industry.”
Springdale, Arkansas-based Tyson posted net income of $316 million, or 88 cents a share, for the quarter to Dec. 31, down from $1.121 billion, or $3.07 a share, in the year-earlier period. Adjusted per-share earnings came to 85 cents, well below the $1.31 FactSet consensus.
Sales rose to $13.260 billion from $12.933 billion, also below the $13.515 billion FactSet consensus.
The company, the biggest U.S. meat supplier measured by sales, said beef prices fell by an average of 8.5% in the quarter, while chicken prices rose 7.1% and pork prices were up 1.4%. The company’s prepared foods division’s sales rose 7.6% and international and other food sales were up 4.9%.
Beef sales rose 2.9% to $4.723 billion, while pork sales fell 7.4% to $1.529 billion. Sales of chicken rose 2.5% to $4.263 billion, while prepared foods sales rose 1.2% to $2.538 billion. International and other food sales were up 6.4% to $612 million.
The U.S. Department of Agriculture is expecting domestic protein production — beef, pork, chicken and turkey — to be flat in fiscal 2023 versus year-earlier levels, said Tyson.
Tyson said it is expecting fiscal 2023 sales of $55 billion to $57 billion, while FactSet expects $55.2 billion. Tyson expects capex of about $2.5 billion and net interest costs of about $330 million.
The stock has fallen 27% in the last 12 months, while the S&P 500
SPX,
has fallen 8%.
[ad_2]
[ad_1]
Wall Street’s expectations for 2023 have been diving as forecasts for the new year come in light, and the news could get worse once they factor in disappointing results from Big Tech. But at least Bob Iger is coming back for a sequel.
Google, Facebook, Amazon and Apple all disappointed with holiday earnings this week. Their forecasts ranged from nonexistent to piecemeal to meh, and the fallout will only add to the biggest dive in Wall Street’s expectations through the beginning of a year since 2016.
Analysts’ average forecast for 2023 earnings from the S&P 500 index
SPX,
dropped by 2.5% in January, according to FactSet Senior Earnings Analyst John Butters, the worst in seven years. Those projections began heading lower last year, and the decline is only steepening — analysts are now projecting 3% earnings growth in 2023, and that is contingent on a big holiday rebound from the results being released this quarter.
The news was even worse for the first quarter, for which projections declined 3.3% in January as companies whiffed on their forecasts at a rapid pace: 86% of the 43 companies that have guided for first-quarter earnings have missed projections, Butters reported. Earnings are now expected to decline 4.2%, which would be the first year-over-year earnings decline since the third quarter of 2020, when the COVID-19 pandemic write-offs started to come in.
Big Tech only added to the downward trajectory in recent days. Amazon.com Inc.
AMZN,
missed on its holiday earnings as well as its forecast for the first quarter, and that company could determine if S&P 500 profits rise in 2023 all on its own. Amazon’s worst holiday earnings since 2014 could also contribute to the consumer discretionary sector’s first earnings decline since the beginning of the pandemic, with holiday sector earnings now expected to drop more than 5%.
Google parent Alphabet Inc.
GOOGL,
GOOG,
and Facebook parent Meta Platforms Inc.
META,
also missed their respective earnings targets amid problems with the digital-advertising industry, leading to the communications-services sector having the worst earnings season in the S&P 500. Profit has declined 25.2% in that sector so far, the worst among the 11 S&P 500 sectors, but would be down just 6.5% without the effects of Meta and Alphabet, Butters reported.
Apple Inc.
AAPL,
also didn’t do projections any favors, reporting its biggest sales decrease since 2016 and an earnings miss Thursday afternoon. In a piecemeal forecast, executives projected a similar sales decline in the calendar first quarter, though unofficially.
After the busiest week in earnings season wrapped up, don’t expect much of a breather — 95 S&P 500 companies are expected to report in the week ahead, the third consecutive week with at least 90 companies reporting. There will be plenty of intrigue among companies not in the S&P 500 too, including Robinhood Markets Inc.
HOOD,
and Affirm Holdings Inc.
AFRM,
reporting together on Wednesday afternoon.
Only one Dow Jones Industrial Average
DJIA,
stock will report, but that is the Wednesday call you will want to tune in for: Bob Iger’s return to the Walt Disney Co.
DIS,
earnings show.
[ad_2]
[ad_1]
Eric Thayer/Bloomberg
A portfolio of stocks picked by Barron’s has enjoyed a rally in the past week, as the market anticipates the end of the Federal Reserve’s interest rate hikes. A buoyant performance from the auto industry also juiced the portfolio.
The entire stock market has enjoyed a gain in the past week. The S&P 500 is up about 3% in that span, including a pop in the last couple of days. Wednesday, the Fed announced a small interest rate hike, but markets interpreted Chairman Jerome Powell’s comments to mean that the end of rate increases is coming soon.
The rally has helped the average stock in the Barron’s portfolio post a 3.8% gain in the past week. The measure differs from a value-weighted index like the S&P 500, where stocks with bigger market capitalizations have bigger effects on the index.
Almost three quarters of 86 stocks in the Barron’s portfolio are up in the past week, with some of the winners posting mammoth gains. Top performers include
Generac
(GNRC),
PoolCorp
(POOL) and
Olaplex
(OLPX), which gained 15%, 14% and 19%, respectively in the past week.
Some stocks posted even larger gains.
Tesla
(TSLA) gained 22% since last Thursday’s close. In its fourth quarter of 2022 reported on Jan. 25, sales of $24.3 billion beat expectations for $24 billion, while earnings per share of $1.19 came in above estimates of $1.12. Wall Street is confident that, even with the company lowering prices as consumers feel the pain of higher rates, Tesla can keep boosting sales and profit growth. Analysts expect vehicle deliveries to grow 40% from a year earlier to almost 1.85 million in 2023, better than the 31% growth seen in the reported quarter.
“The key debates from here will be on whether vehicle deliveries can reaccelerate (we expect that they will especially starting in 2Q23),” writes
Goldman Sachs
analyst Mark Delaney.
Barron’s recommended Tesla stock on Jan. 6, arguing that the the worst of the company’s challenges—including delivery growth—are behind it. The stock is up 67% since then.
Lithia Motors
(LAD), a $7 billion by market capitalization auto dealer, has seen its stock rise 23% in the past week. It reports fourth-quarter earnings Feb 15, but the stock has risen as the picture for auto sales has improved. Tesla’s quarterly performance helped, but so did General Motors‘ (GM). The automating giant reported better-than-expected sales and EPS and said on its earnings call that 2023 will be a “strong year,” one in which analysts expect sales growth.
Barron’s recommended Lithia Motors in April 2022, arguing that the stock was cheap and that production constraints that held sales back would soon be a thing of the past. Since then, the stock is up about 4%.
Lucid Group
(LCID), a $20 billion electric vehicle and battery maker, is up 39% since last Thursday. Earnings are Feb. 22, but strong auto trends already have helped. Lucid, too, is expected to lower prices and aggressively grow deliveries. The stock got a pop late in January on speculation that Saudi Arabia’s Public Investment Fund could buy the rest of the company. The fund recently invested $1.5 billion and holds just over 60% of the company.
Unfortunately, Barron’s recommended shorting the stock in November, and it is up 17% since then.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
[ad_2]
[ad_1]
Intel Corp. continues to cut costs for everything except payments to investors.
Intel
INTC,
which is already in the process of cutting what is believed to be thousands of jobs amid steep declines in profit and revenue, is reducing Chief Executive Pat Gelsinger’s base salary by 25% and trimming other salaries at a descending rate based on seniority, down to 5% cuts for midlevel positions, a person familiar with the matter told MarketWatch. While nonexempt workers and junior positions face no pay cuts, Intel is trimming its 401(k) contributions to 2.5% from 5% and will suspend merit raises and quarterly performance bonuses, the person said. Annual performance bonuses and stock grants will remain.
In an emailed statement, an Intel spokesperson confirmed “several adjustments to our 2023 employee compensation and rewards programs.”
“As we continue to navigate macroeconomic headwinds and work to reduce costs across the company, we’ve made several adjustments to our 2023 employee compensation and rewards programs,” the statement said. “These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy. We are grateful to our employees for their commitment to Intel and patience during this time as we know these changes are not easy.”
Opinion: Intel just had its worst year since the dot-com bust, and it won’t get better anytime soon
The move is similar to a 50% cut in stock compensation that Apple Inc.
AAPL,
CEO Tim Cook requested and received, though Apple is one of the few large Silicon Valley tech companies that has not announced layoffs yet. Intel is targeting $3 billion in cost cuts in 2023 that include hundreds of layoffs that have already been disclosed in California, with many more expected.
Intel has not touched its dividend, though, even as its free cash flow fell into the red during 2022 and is expected to be negative again this year. The chip maker paid out roughly $1.5 billion in dividends in the fourth quarter, completing $6 billion in annual payments, and maintained the same level of payments for the first quarter despite analysts questioning whether the company can afford it.
For more: Intel stock’s dividend sticks out among chip makers
“The board [and] management, we take a very disciplined approach to the capital allocation strategy and we’re going to remain committed to being very prudent around how we allocate capital for the owners, and we are committed to maintaining a competitive dividend,” Chief Financial Officer David Zinsner said when asked directly about the dividend during Intel’s earnings call last week.
Intel shares have declined 42.1% in the past 12 months, as the S&P 500
SPX,
has dropped 10.3% and the Dow Jones Industrial Average
DJIA,
— which counts Intel as one of its 30 components — has fallen 3.7%.
[ad_2]
[ad_1]
Marlboro maker
Altria
Group beat earnings and revenue estimates in the fourth quarter and announced a new $1 billion share buyback plan.
The cigarettes company reported adjusted earnings per share (EPS) of $1.18 on revenue of $6.1 billion in the final three months of the year. Analysts expected EPS of $1.17 on sales of $5.15 billion in the quarter, according to FactSet data.
[ad_2]
[ad_1]
Advanced Micro Devices Inc. shares rose in the extended session Tuesday after the chip maker’s data-center sales gained and executives forecast sales of more than $5 billion to start 2023, even as cloud-customer demand begins the year light.
AMD shares AMD rose 3% after hours, following a 3.7% gain in the regular session to close at $75.15.
AMD…
[ad_2]
[ad_1]
PayPal Holdings Inc. plans to lay off about 7% of its staff as it continues with broader efforts to reduce costs.
Chief Executive Dan Schulman announced the layoffs, which will affect about 2,000 PayPal PYPL employees, in an email to the staff Tuesday afternoon.
“While we have made substantial progress in right-sizing our cost structure,…
[ad_2]
[ad_1]
The initial version of this story had incorrect price changes for 2023. It is now updated with information as of the market close on Jan. 31.
Investors staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.
This…
[ad_2]
[ad_1]
A federal appeals court rejected Johnson & Johnson ‘s plan to use a legal strategy to push about 38,000 talc lawsuits into bankruptcy court, hampering the controversial tactic the company and a handful of other profitable businesses have used to move mass personal-injury cases to chapter 11.
The Third U.S. Circuit Court of Appeals on Monday dismissed the chapter 11 case of J&J subsidiary LTL Management LLC, which the consumer-health-goods giant created in 2021 to move to bankruptcy court the mass lawsuits alleging its talc-based baby powder products caused cancer.
[ad_2]
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-tesla-alibaba-gm-lucid-51674835133
[ad_2]
[ad_1]
In the biggest week of the holiday-earnings season, Big Tech results will receive the spotlight amid thousands of layoffs that could only be the beginning.
After tech stocks were decimated in 2022, investors will be looking for signs of a turnaround in holiday reports and potential forecasts for the year ahead from three of 2022’s top five market-value losers: Amazon.com Inc.
AMZN,
Apple Inc.
AAPL,
and Meta Platforms Inc.
META,
The other two stocks on that list — Microsoft Corp.
MSFT,
and Tesla Inc.
TSLA,
— reported last week, and Microsoft’s results in the wake of a mass-layoffs announcement did not bode well for its Big Tech brethren.
See also: Microsoft could be the cloud sector’s ‘canary in the coal mine’
Those companies — along with Google parent Alphabet Inc.
GOOGL,
GOOG,
— will deliver results after finding themselves in unfamiliar territory: A backdrop of layoffs amid slowing demand for core products like digital ads, electronics and e-commerce, after a two-year pandemic surge and a two-decade-plus honeymoon with investors. Some analysts say the bottom hasn’t arrived, for either their finances or their workforces.
The one Big Tech company that hasn’t taken a sword to its payroll is Apple, which also increased its staff the least among the group during the COVID-19 pandemic. Apple shed $846 billion from its market cap last year, and now reports after its core product was part of the smartphone industry’s worst year since 2013 and worst holiday-season decline on record. The iPhone maker could also face questions from Wall Street about changing up its product sourcing, which has relied heavily on China, a nation whose COVID-19 restrictions have constrained production of some phones.
While the tech-industry layoffs have yet to hit Apple, some analysts say the company is unlikely to be spared, despite Chief Executive Tim Cook requesting and receiving a healthy cut to his compensation.
“Similar to other big technology companies, we expect Apple to adjust its head count to reflect an increasingly challenging global macroeconomic environment,” D.A. Davidson analyst Tom Forte said in a research note Tuesday.
Rivals that have already cut could face more if profit continues to fall along with revenue growth. Alphabet, for instance, is cutting 12,000 employees, but an activist investor has already said that is not enough considering how much the company grew during the pandemic, and the difficulties it now faces in the online-ad sector.
Opinion: Microsoft’s big move in AI does not mean it will challenge Google in search
Analysts have said Meta’s “darkest days” are still ahead, as it navigates a round of more than 11,000 layoffs, competition from TikTok and its early stumbles in the metaverse. While cutting, Chief Executive Mark Zuckerberg has promised to keep spending on metaverse development, even as the efforts slash the Facebook parent company’s previously healthy bottom line.
“In 2023, we expect Meta to remain engulfed in arduous battles inside the Octagon,” Monness Crespi Hardt analyst Brian White said in a research note on Thursday. “In the long run, we believe Meta will benefit from the secular digital ad trend and innovate in the metaverse; however, regulatory scrutiny persists, internal headwinds remain, and we believe the darkest days of this downturn are ahead of us.”
Full Facebook earnings preview: Meta’s ‘darkest days’ are ahead, but some analysts say ad sales are still on track
Online retailer Amazon
AMZN,
was the first Big Tech company to publicly declare cost-cutting was in order a year ago, and still coughed up $834 billion in market value in 2022. It kicked off 2023 with plans to lay off more than 18,000 workers as struggles continued throughout last year, when inflation siphoned away more consumer dollars toward essentials.
Amazon’s own AWS cloud-infrastructure unit has helped to drive sales in years past, as businesses built out their tech infrastructures. But remarks and the outlook from Microsoft executives — the third-biggest market-cap loser of 2022, and a big barometer for tech spending overall — weren’t exactly encouraging for cloud growth: Executives there last week warned of “moderating consumption growth” for its own cloud business.
For more: One company could determine whether U.S. corporate profits rise to a record in 2023
“Sentiment was already bearish on AWS, with investors looking for slowing revenue over the next three quarters, largely confirmed after Microsoft earnings and conversations with industry checks,” Oppenheimer analyst Jason Helfstein said in a note on Wednesday. “Positively, we believe e-commerce revenue has stabilized, and margins should improve from organic scale and announced head-count reductions.”
Layoffs are also starting to spread beyond Big Tech companies that grew fast during the pandemic in response to massive demand spikes. International Business Machines Corp.
IBM,
confirmed plans for 3,900 layoffs as it reported earnings, despite already reducing its workforce by at least 20% during the pandemic.
One sector to watch is semiconductors, where a chip shortage has turned into a glut: Chip-equipment maker Lam Research Corp.
LRCX,
announced layoffs in the past week as Silicon Valley semiconductor giant Intel Corp.
INTC,
displayed “astonishingly bad” results while laying off workers. When Intel rival Advanced Micro Devices Inc.
AMD,
reports this week, it could determine whether there is any silver lining in the semiconductor storm.
Earnings preview: AMD faces even more scrutiny after ‘astonishingly bad’ Intel outlook
Wedbush analyst Daniel Ives said in a Sunday note that a common theme of this week’s Big Tech earnings will be that “tech layoffs will accelerate with more pain ahead to curb expenses,” though he added that “Apple will likely cut some costs around the edges, but we do not expect mass layoffs from Cupertino this week.”
Big Tech earnings were a salve to other problems in the market for the past decade-plus, but with layoffs already under way and doubts about the path forward, don’t expect salvation from their results this week.
For the week ahead, 107 S&P 500
SPX,
companies, including six members of the Dow Jones Industrial Average
DJIA,
will report results, according to FactSet. While more Dow components reported last week, this will be the busiest week for S&P 500 holiday earnings of the season, FactSet senior earnings analyst John Butters confirmed to MarketWatch.
Appliance-maker Whirlpool Corp.
WHR,
reports on Monday, after it forecast fourth-quarter sales that were below expectations, following what it called a “one-off supply-chain disruption” and the pandemic home-renovation boom.
On Tuesday, package-deliverer United Parcel Service Inc.
UPS,
reports, amid questions about holiday-season demand. So does streaming service Spotify Technology,
SPOT,
following its own layoffs and suggestions of possible price hikes, as well as McDonald’s Corp.
MCD,
amid concerns that rising prices are keeping people from dining out. Exxon Mobil Corp.
XOM,
Caterpillar Inc.
CAT,
Snap Inc.
SNAP,
and Pfizer Inc.
PFE,
also report Tuesday.
Earnings outlook: McDonald’s earnings haven’t been hit by higher prices
On Wednesday, T-Mobile US Inc.
TMUS,
reports, in the wake of a data breach and wobbling cellphone demand. Coffee chain Starbucks Corp.
SBUX,
reports on Thursday, with analysts likely to be zeroed in on U.S. demand and China’s reopening, after executives said they were confident that higher prices, along with enthusiasm from younger customers and for customizable drinks, could help them navigate any potholes in the economy.
For the Big Tech companies, Thursday is also the big day: Apple, Amazon and Alphabet will report that afternoon, after Meta reports the prior day.
WWE upheaval: World Wrestling Entertainment Inc.
WWE,
reports earnings on Thursday, as Vince McMahon — who returned to the professional-wrestling organization this month following allegations of sexual misconduct — seeks a buyer or some other so-called “strategic alternative” for the company.
Analysts have speculated how the company’s wrestling events and backlog of media content might be repurposed, with some entertaining the possibility of interest from Amazon or Netflix Inc.
NFLX,
But WWE has struggled to develop story lines that stick with viewers, and has thinned its ranks of wrestlers.
The Wall Street Journal this month reported that McMahon would pay a multimillion-dollar settlement to a former referee who accused him of raping her. Among the changes since McMahon returned was the departure of his daughter, who had been promoted to co-CEO after he stepped down from the role last year.
There isn’t much clarity on whether Vince McMahon will be on Thursday’s earnings call, which was moved from the morning to the afternoon due to a scheduling conflict. But it should offer drama no matter who attends.
GM and Ford auto sales: Auto makers General Motors Co.
GM,
and Ford Motor Co.
F,
will issue results on Tuesday and Thursday respectively, amid signs of waning demand and rising interest rates that have made car loans more expensive. Despite falling new-vehicle sales in the third quarter, GM managed to keep its own sales higher, the AP noted.
Mary Barry, GM’s chief executive, called out the popularity of vehicles like the Escalade, the Chevrolet Bolt EV and some pickups and SUVs during the auto maker’s third-quarter earnings call in October. During that quarter, GM said it completed and shipped nearly 75% of the unfinished vehicles held in its inventory in June. She said supply-chains were opening up again, but added that “short-term disruptions will continue to happen.”
The auto makers report as they try to put a chip shortage and other production constraints behind them. But some forecasts call for 2022 auto sales, or sales volumes, to be the weakest in roughly a decade. Electric vehicle maker Tesla’s recent price cuts could also cut into GM’s and Ford’s own EV sales.
[ad_2]