Tag: Earnings

Swiss bank UBS posts 24% profit slide but beats analyst expectations
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UBS reports its latest earnings

FABRICE COFFRINI | AFP | Getty Images

UBS on Tuesday reported a net income of $1.7 billion for the third quarter of this year, slightly above analyst expectations, with the Swiss bank citing a challenging environment.

Analysts had expected a net profit of $1.64 billion, according to Refinitiv data. UBS reported a net income of $2.3 billion a year ago.

The Swiss lender had missed expectations in the last quarter when it posted a net profit of $2.108 billion. The bank said at the time the second quarter had been “one of the most challenging periods for investors in the last 10 years” due to high inflation, the war in Ukraine and strict Covid-19 policies in Asia.

UBS said Tuesday these factors continued to be in investors’ minds in the third quarter.

“The macroeconomic and geopolitical environment has become increasingly complex. Clients remain concerned about persistently high inflation, elevated energy prices, the war in Ukraine and residual effects of the pandemic,” Ralph Hamers, CEO of UBS, said in a statement.

Other highlights for the quarter include:

Revenues hit $8.3 billion, down from $9.1 billion a year ago.

Operating expenses dropped to $5.9 billion, from $6.2 billion a year ago.

CET 1 capital ratio, a measure of bank solvency, reached 14.4% versus 14.9% a year ago.

Its investment banking division saw revenues down by 19% with the lower performance in equity derivatives, cash equities, and financing revenue being offset by revenues in foreign exchange. The Global Wealth Management division also reported lower revenues, down by 4% year-on-year.

However, Personal and Corporate Banking revenues rose over the same period on more beneficial rates from the Swiss National Bank.

Shares of UBS are down about 8% so far this year.
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October 24, 2022
Should Investors Raise a Glass to Boston Beer Company?

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One of the strongest movers on a bullish day for the market is the Boston Beer Company (NYSE:SAM). The company, which is synonymous with its signature Sam Adams beers and Truly Hard Seltzers reported earnings per share (EPS) of $2.21 on revenue of $596.45 million. The top line number exceeded analysts’ estimates for $566.42 million. But the bottom line was lower than the $3.48 that was expected.

MarketBeat.com – MarketBeat

Nevertheless, the EPS was a significant improvement from the prior year when earnings were negative. However, investors may be concerned that the earnings number Is not an improvement over 2019. The $2.21 EPS was 38% lower than 2019. This is even though revenue is up 57% over the same timeframe.

Seltzer Sales Remain a Problem

Part of the problem is that Boston Beer is trying to find the right product mix. The company overestimated demand for its Truly Hard Seltzer brand. Sales soared during the pandemic, but demand plummeted when consumers went back to bars and restaurants in 2021.

This created a situation that is reminiscent of an actual Boston Tea Party. The company had to dispose of millions of cases of unsold inventory. That’s a key reason the company was unprofitable in 2021.

The company is, however, seeing strength in its Twisted Tea and Hard Mountain Dew brands that are part of its “Beyond Beer” portfolio. And beer sales themselves remain strong. That was a dynamic that is playing out across the sector this quarter. And to get to the answer for that we can look at the continued strength in travel and entertainment.

How Long are the Travel Coattails?

When a stock makes such a large move after earnings, it suggests that the results caught people by surprise. But maybe investors shouldn’t have been so surprised. The beer and spirits industry is an adjacent industry to travel and entertainment experiences. The two go together in many cases like peanut butter and jelly.

And if, as expected, more people travel for the holidays in 2022 than in either of the past two years, that would likely mean the possibility of another strong quarter for Boston Beer. The question for investors is just how long those coattails are. Because without them, persistent inflation would suggest that many consumers will look to trade down to less expensive brands or forego discretionary alcohol purchases altogether.

The Company Lowered its Guidance Again

It’s this dynamic that may be causing Boston Beer to once again lower its earnings guidance. The company is now saying full year adjusted earnings will be between $7 and $10. This is a cut on the high end from the range of $6 and $11 it forecast in April. And it’s a significant drop from the initial forecast for $11 and $16.

SAM stock is now trading above 2019 levels. And the strong top line numbers may make it worthy of those numbers. I appreciate the company’s candor about supply chain and possible lowered demand. And while I believe that sales tell the ultimate tale, the stock looks more susceptible to heading lower than moving higher.

Analysts tracked by MarketBeat give SAM stock a Hold rating with the potential downside risk of 10% for the stock. That may change as analysts weigh in after this earnings report. But there’s nothing that suggests to me that the rating will fundamentally change. This is a case where I like the product more than the stock.

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Chris Markoch

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October 21, 2022
Tesla Stock Could Rebound in 3 Months. Here’s What it Would Take.

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Elon Musk says that

Tesla

could someday be worth more than

Apple

and Saudi Aramco, combined. First, it needs to get through the next few months.

Before Tesla (ticker: TSLA) reported third-quarter earnings this past week, investors had been hoping they would allay concerns that had been growing since the company released second-quarter numbers three months earlier. They did no such thing. While earnings topped expectations, third-quarter deliveries, sales, and profit margins all fell short of Street projections. Tesla shares slumped 6.7% following the release, putting them down 22% since the end of September, their second-worst start to a quarter since the first few weeks of 2016.

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October 21, 2022
Boston Beer, Schlumberger rise; Snap, Twitter fall

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Stocks that traded heavily or had substantial price changes Friday: Boston Beer, Schlumberger rise; Snap, Twitter fall

NEW YORK — Stocks that traded heavily or had substantial price changes Friday:

Snap Inc., down $3.03 to $7.76.

The owner of Snapchat gave a lackluster forecast for the fourth quarter.

Twitter Inc., down $2.55 to $49.89.

Elon Musk could cut almost 75% of the social media company’s workforce, according to a report.

CSX Corp., up 46 cents to $27.54.

The railroad’s third-quarter earnings and revenue beat analysts’ forecasts.

SVB Financial Group, down $72.43 to $230.03.

The financial services firm gave investors a disappointing financial forecast.

Boston Beer Co., up $66.12 to $402.28.

The brewer of Samuel Adams beer beat Wall Street’s third-quarter revenue forecasts.

Schlumberger NV, up $4.72 to $50.41.

The world’s largest oilfield services company beat analysts’ third-quarter financial forecasts.

American Express Co., down $2.38 to $140.04.

The credit card giant said it is setting aside hundreds of millions of dollars to cover potential losses as the economy continues to deteriorate.

Robert Half International Inc., down $6.83 to $73.01.

The staffing firm’s third-quarter earnings and revenue fell short of analysts’ forecasts.

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October 21, 2022
Social media stocks slip amid Musk, Snap news

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Shares of social media companies are tumbling before the market open on Friday after a slew of news in the sector that concerned investors, including a report that Elon Musk may cut almost 75% of Twitter‘s workforce and Snap’s muted fourth-quarter outlook.

Musk has told prospective investors in his Twitter purchase that he plans to cut nearly 75% of Twitter’s employee base of 7,500 workers, leaving the company with a skeleton crew, according to a Thursday report by The Washington Post.

Wedbush’s Dan Ives said in a client note that Twitter Inc. is due for some job cuts, but that the reported figure may not be the best approach.

“Musk cannot cut his way to growth with Twitter and a number in the 75% zip code would be way too aggressive in our opinion out of the gates,” he wrote.

A Delaware judge has given Musk and Twitter until Oct. 28 to work out details of the proposed $44 billion deal. Otherwise, there will be a trial in November.

Shares of Twitter dropped more than 4% in premarket trading.

Elsewhere in the sector, Snap Inc.’ stock slid more than 28% after the company behind Snapchat gave a lackluster forecast for the fourth quarter and its third-quarter revenue missed Wall Street’s view.

Snap reported third-quarter revenue of $1.13 billion, below the $1.15 billion that analysts polled by Zacks Investment Research expected.

While the Santa Monica, California-based company said in a letter to investors that it wasn’t giving a formal fourth-quarter outlook, it did say that it’s highly likely that year-over-year revenue growth will slow during the period. Snap said its internal forecasts are for year-over-year revenue growth to be about flat.

A JPMorgan analyst note said that Snap is experiencing weaker demand due to macro pressures, platform policy changes and competition.

“We appreciate management’s efforts to control what they can—cutting costs & doubling down on more resilient performance-based ads—but trends remain choppy, and the macro backdrop is likely even tougher into 2023,” the note said.

Adding to the mix are concerns about the way social media platforms are being used as the mid-term elections near. While platforms like Twitter, TikTok, Facebook and YouTube say they’ve expanded their work to detect and stop harmful claims that could suppress the vote or even lead to violent confrontations, a review of some of the sites shows they’re still playing catchup with 2020, when then-President Donald Trump’s lies about the election he lost to Joe Biden helped fuel an insurrection at the U.S. Capitol.

Shares of Meta Platforms Inc., parent company of Facebook, declined 4.4% before the opening bell.

The flurry of news weighed on others in the sector as well, including Google parent Alphabet Inc., off 2%, and Pinterest Inc., down 8%.

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October 21, 2022
Instacart reportedly puts off its long-anticipated IPO

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Grocery-delivery company Instacart Inc. is delaying its long-awaited initial public offering because of poor market conditions, according to news reports Thursday.

The New York Times first reported Thursday that the San Francisco-based company has halted its IPO plans, and is awaiting more favorable conditions. Later Thursday night, the Wall Street Journal confirmed the report, citing a memo from Instagram CEO Fidji Simo saying an IPO will be “highly unlikely” this year.

The IPO market has been severely curtailed this year following a record-setting 2021, as the stock market has slid amid high inflation and recession fears. As of September, the number of U.S. IPOs was down 79% year over year, with total proceeds down 95%, according to Renaissance data.

According to the Times, Instacart had intended to start the IPO process this week by releasing some financial information, but decided not to, for now, due to market volatility.

The Journal reported that the IPO had received positive feedback from potential investors, but executives came away with the message that the market will not support a tech IPO at this time.

“Our business has never been stronger,” Instacart said in a statement Thursday. “In Q3, our revenue grew more than 40% year-over-year, and our net income and adjusted EBITDA more than doubled from Q2. We remain focused on building for the long term, and we are excited about the opportunity ahead.”

Instacart confidentially filed for its IPO in May. The company has been one of the more anticipated potential IPOs for years. In July, Instacart cut its estimated valuation for the second time in four months, to $15 billion, nearly 40% less than its previous valuation of $24 billion.

Last month, the Wall Street Journal reported Instacart didn’t plan on raising much capital in its IPO, instead having most of its listing come from the sale of employees’ shares — a move that could greatly benefit current employees.

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October 20, 2022
Snap investors, do you still trust Evan Spiegel?

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When Snap Inc. went public in 2017, this column boiled down the entire investment opportunity to one, simple question: Do you trust Evan Spiegel?

As Snap
SNAP,
-0.64%
stock heads toward its lowest prices since March 2020, and potentially even lower, that question is even more important, and answering “yes” should be even harder.

Three months ago, amid the beginning of a huge slowdown in the ad business, Snap initiated a unique dividend meant to ensure that the founders maintained control of the company, even if they sold their stock — protecting themselves. Then in August, news came that Snap was laying off one in five employees. As Snap again reported disappointing results Thursday and saw the stock plunge again, the company decided now was the time to initiate a stock buyback plan, promising to spend up to $500 million to offset the dilution from employee stock plans — in the past nine months, Snap has spent $937 million on stock-based compensation.

On the face of it, this seems like an investor-friendly approach — Barron’s pointed out earlier this year that investors were suffering while employees were faring better with the hefty stock-comp plans. But it’s also worth pointing out who the biggest investors in Snap are: Spiegel and his co-founder Bobby Murphy.

As the company’s largest individual shareholders, Spiegel and Murphy are among the key beneficiaries of Snap’s plans to buy back stock, which usually leads to a boost in the stock price. Those two still control over 99% of the voting power of the company’s capital stock, and as the parent of Snapchat reminded investors in its annual report, “Mr. Spiegel alone can exercise voting control over a majority of our outstanding capital stock.”

Shares of Snap tumbled an additional 25% to just under $8 in after-hours trading, putting them near the lowest prices since March 2020. On Thursday, the company ended regular trading hours with a market capitalization of around $17.91 billion, but that was headed toward $13 billion with the after-hours collapse.

Besides protecting themselves and their investment, Snap’s executives have shown little ability to head off big issues, nor offer any worthwhile solutions to the current ad downturn. In the third quarter, its revenue grew a paltry 6%, down from the most recent second-quarter revenue growth of 13%. Snap appears to be in a steady revenue slowdown, from its peak growth of 116% in the June 2021 quarter.

Snap has blamed both privacy changes that Apple Inc.
AAPL,
-0.33%
made to the iPhone that affected ad tracking, and more recently, the macroeconomic advertising climate, while avoiding one of the biggest factors — the rise of TikTok. Top executives didn’t seem to see any of those challenges coming early enough, and did not do enough about them once they did.

“The company was slow to react — or acknowledge — the significant headwinds faced by privacy initiatives, compounded by competition, and more recently macro headwinds,” Colin Sebastian, an analyst at Baird Equity Research, wrote in a note.

The competition factor, mostly from China’s TikTok, was addressed briefly on the company’s call with analysts, but was not really acknowledged by Snap leaders.

“We believe that the differentiated nature of our service is what’s contributing to the daily active-user growth, which grew 19% year-over-year to 363 million daily active users,” Spiegel said. “In terms of the content specifically, I think there’s a lot of headroom, of course, to continue to grow content engagement.”

In the company’s shareholder letter, Spiegel acknowledged that the results were “far from our aspirations,” and that Snap would use this time of reduced demand “to pull forward and accelerate changes to our advertising platform and auction dynamics that we believe will deliver better results for our advertising partner.”

Spiegel is known for going by his own instincts and not listening to other executives, employees or even market forces, as was noted in a Wall Street Journal report that detailed his push for an unsuccessful product redesign in 2018. While the company appeared to have snapped back from that debacle last year, it is now facing a fiercer rival for young people on social media in the form of TikTok.

Investors who still have patience to wait and see if this stock ever recovers will also have to stick around with Spiegel — and as our IPO column noted — Snap is unapologetically founder-controlled. No change at the top can ever come unless it is initiated by Spiegel himself. Investors have to make a leap of faith that Spiegel can turn things around, but they need to remember that Spiegel usually thinks about himself first.

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October 20, 2022
American Airlines posts $483 million profit for late summer

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DALLAS — The three biggest U.S. airlines enjoyed a boffo summer, reaping a combined profit of more than $2 billion as Americans jammed on to planes despite fares that were sharply higher than a year ago.

What pandemic?

American Airlines said Thursday that it earned $483 million on record-breaking revenue that more than offset higher fuel costs in the third quarter. American predicted that profit will continue to exceed Wall Street expectations during the holiday-packed remainder of 2022.

The results from American, however, weren’t quite as grand as figures from its more prosperous rivals. United Airlines reported a $942 million profit on Tuesday, and Delta Air Lines posted third-quarter earnings of $695 million last week.

Clearly, many people are eager to travel after most were grounded during the early part of the pandemic. Executives at all three big U.S. airlines said they see no indication that consumer concerns about inflation and the economy are hurting ticket sales.

“American’s third-quarter results, including our record revenue performance, are significant considering the macroeconomic uncertainty facing so many people,” CEO Robert Isom said on a call with analysts and reporters. “Demand remains strong.”

American, which is based in Fort Worth, Texas, predicted that fourth-quarter profit will be between 50 cents and 70 cents per share, which would beat Wall Street’s forecast of 19 cents per share.

U.S. air travel has roared back from pandemic lows in early 2020. Last Sunday, the Transportation Security Administration screened nearly 2.5 million travelers on a single day, the busiest day at the nation’s airports since February 2020.

Travel is booming despite a 43% leap in airfares in the past year, according to government figures.

One reason fares are high is that the number of flights has not returned to pre-pandemic levels, leaving consumers vying for fewer seats. American, for example, did nearly 10% less flying in the third quarter than in the same period of 2019.

American said it plans to run at 95% to 100% of 2019 levels next year. That is in line with Delta, which expects to restore its full schedule by next summer. United recently announced it will expand European flying next summer.

Isom said American could add more flights next year but will take a cautious approach. American, Delta and others canceled flights earlier this year when they didn’t have enough staff, particularly pilots.

“We are going to make sure that we don’t outpace what we have, either in terms of aircraft deliveries if that’s the constraint, or if it’s pilots at a regional level or our ability to train pilots” at American, he said.

For the third quarter, American said its adjusted profit, which excludes certain items, was 69 cents per share, compared with a forecast of 54 cents per share by analysts surveyed by FactSet.

Revenue rose to $13.46 billion, slightly higher than the $13.36 billion predicted by analysts. American, which has a major hub operation in Miami and operates many flights to the Caribbean, said it lost about $40 million in revenue because of hurricanes Fiona and Ian in September.

Also Thursday, the parent of Alaska Airlines reported a $40 million third-quarter profit on record revenue of $2.8 billion. The Seattle-based airline said, however, that non-fuel costs in the fourth quarter will be higher than expected because of three new contracts with union labor groups including pilots.

Shares of American Airlines Group Inc. closed down 4% and Alaska Air Group Inc. dropped 5%, while shares of Delta, United and Southwest dipped by smaller percentages.

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October 20, 2022
Snap stock plummets more than 25% as online advertising continues to struggle

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A bruising year for Snap Inc.’s shares worsened Thursday, as the stock plummeted more than 20% in after-hours trading as executives launched the company’s first major share-repurchase program amid revenue issues in a poor environment for online advertising.

Snap
SNAP,
-0.64%
executives revealed that revenue increased less than 6% year-over-year in the quarter — its slowest quarterly grow ever recorded — and said that the holiday season is shaping up similarly, with sales increasing 9% so far in the quarter. The social-media company, which laid off roughly 20% of its staff this summer in response to the issues, also declined to provide a full forecast for the important fourth quarter.

“Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” executives said in a letter to shareholders, outlining the results. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”

“Forward-looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” executives explained about the lack of guidance in a letter to investors.

The board did approve a $500 million share repurchase, a first for the young company. In a news release, executives said that the move was meant “to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture.”

Snap’s results — the first among the major tech companies who rely heavily on digital advertising — likely portend even more turbulent times ahead for Alphabet Inc.’s
GOOGL,
+0.34%

GOOG,
+0.24%
Google, Facebook parent company Meta Platforms Inc.
META,
-1.28%,
Twitter Inc.
TWTR,
+1.18%,
Pinterest Inc.
PINS,
-0.30%
and others in the grip of inflation, a war in Ukraine, foreign-exchange worries and a widening recession.

Snap’s desultory news sent shares tumbling in extended trading for Pinterest (-8%), Trade Desk Inc.
TTD,
+2.26%
(-5), Meta (-4%) and Google (-3%).

Deteriorating macroeconomic conditions have left advertisers with little choice but to delay or cancel buys. At the same time, intensifying competition from the likes of TikTok and others has deepened headwinds.

“As a smaller player, Snap is more susceptible but no platform is immune,” Insider Intelligence analyst Jasmine Enberg told MarketWatch. “I expect more of the same results next week” when Google and Meta report, she added.

Snap reported a third-quarter net loss of $359.5 million, or 22 cents a share, compared with a loss of 5 cents a share a year ago. Analysts on average were expecting a loss of 24 cents a share.

Snap’s sales increased less than 6% to $1.13 billion, barely falling short of Street estimates of $1.14 billion. Daily active users rose 19% to 363 million. FactSet analysts had modeled 358.2 million.

Snap shares initially fell more than 20% in after-hours trading. They closed the regular trading session down 0.6% to $10.79. Shares of Snap have nosedived 77% this year, while the S&P 500 index
SPX,
-0.80%
is down 23%.

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October 20, 2022
AT&T stock surges toward best day since 2020 as earnings mark a ‘step forward’

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Shares of AT&T Inc. were up more than 9% in morning trading Thursday after the telecommunications company topped profit expectations and posted another quarter of sizable subscriber gains.

The company saw 708,000 postpaid phone net additions during the period, building on the 1.5 billion such net additions it saw during the first half of the year. Postpaid phone churn in the latest quarter was 0.84%.

The subscriber traction reflected “more of the same,” AT&T’s
T,
+9.01%
investor relations head Amir Rozwadowski told MarketWatch. While he said that some wireless competitors have been adjusting their promotions every few weeks, he added that AT&T has stayed more consistent with its strategy, something he saw as beneficial for consumers, who understand what the company is offering, and store associates, who don’t have to make major adjustments to their messaging.

AT&T also added 338,000 net fiber subscribers in the third quarter.

Shares were up 9.5% in Wednesday morning trading and on track to log their best single-day performance since March 13, 2020, when they rose 10.0%. The stock is also on track to log its best post-earnings gain since at least 1997, according to Dow Jones Market Data.

Revenue came in at $30.0 billion, down from $31.3 billion a year before, though up from $29.1 billion in revenue for standalone AT&T when adjusting for business divestments. The FactSet consensus was $29.8 billion in revenue.

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.

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.

“Our results demonstrate that the strategy we put forward more than two years ago is the right strategy for not only the future of our business, but for the future of the communications industry,” Chief Executive John Stankey said on the company’s earnings call.

The current inflationary backdrop impacts both consumers and AT&T, and the company recently raised prices on some legacy plans recently as it dealt with its own inflationary costs. Despite financial pressures on consumers, Rozwadowski said that AT&T has seen consumers trade up to higher-tier plans more generally because they see more value in those plans.

While he said that AT&T was “certainly seeing signs of inflation across our business,” he also emphasized that consumers seem to have a strong appreciation for connectivity services as they evaluate their expenses. “You need phone and broadband probably more now than in the last recession,” Rozwadowski said.

AT&T executives highlighted last quarter that some consumers were taking a bit longer to pay their bills, though they ultimately were still paying them. The company is “not seeing any material change relative to what we saw last quarter,” Rozwadowski said, as customer payment cycles are holding steady at pre-pandemic levels.

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.

After adjustments for actuarial gains on benefit plans and some other factors, AT&T notched 68 cents a share in earnings from continuing operations, up from 66 cents a share a year earlier, and also above the 62 cents a share in earnings from continuing operations for standalone AT&T during that year-ago period. The standalone number accounts for the fact that the company divested its U.S. video business last summer.

Analysts tracked by FactSet were modeling 61 cents a share in adjusted earnings for AT&T’s third quarter.

Citi Research analyst Michael Rollins called AT&T’s latest earnings a “step forward,” highlighting that they “reflect a better balance of profitability relative to its revenue growth.”

“Results show that AT&T remains highly-competitive in wireless, while showing forward progress on improving fiber net adds with its expanding footprint,” he continued in a note to clients.

AT&T generated $3.8 billion in free-cash flow from continuing operations during the September quarter, and Chief Financial Officer Pascal Desroches shared on the earnings call that AT&T felt “good about our line of sight to achieving our free-cash flow target in the $14 billion range for the year.”

Rozwadowski said that the company was focused on putting cash back into the network.

“The business is generating a healthy amount of cash,” he said, and by investing that money in network improvements, AT&T hopes to achieve a “flywheel effect” since an enhanced network can help the company retain customers and convince them to pay up for more expensive plans.

Desroches added on the earnings call that AT&T was “very comfortable with our cash levels after paying our dividend commitment” and said that “this should only increase in future years as we expect cash conversion to improve from here.”

The company models adjusted earnings per share from continuing operations of “$2.50 or higher” for the full year, while analysts tracked by FactSet were looking for $2.53.

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October 20, 2022
AT&T stock gains after earnings beat, driven by continued subscriber rush

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Shares of AT&T Inc. were up 2% in premarket trading Thursday after the telecommunications company topped profit expectations for its latest quarter.

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.

After adjustments for actuarial gains on benefit plans and some other factors, AT&T
T,
-0.38%
notched 68 cents a share in earnings from continuing operations, up from 66 cents a share a year earlier, and alone above the 62 cents a share in earnings from continuing operations for standalone AT&T during that year-ago period. The standalone number accounts for the fact that the company divested its U.S. video business last summer.

Analysts tracked by FactSet were modeling 61 cents a share in adjusted earnings for AT&T’s third quarter.

Revenue came in at $30.0 billion, down from $31.3 billion a year before, though up from $29.1 billion in revenue for standalone AT&T. The FactSet consensus was for $29.8 billion in revenue.

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 saw 708,000 postpaid phone net additions during the period, while postpaid phone churn was 0.84%.

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. The company also models adjusted earnings per share from continuing operations of “$2.50 or higher” for the full year, while analysts tracked by FactSet were looking for $2.53.

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October 20, 2022
Global stocks lower amid British political turmoil

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BANGKOK — Global stock markets declined Thursday as the British prime minister faced demands to quit and Japan reported its 14th straight monthly trade deficit.

London and Frankfurt opened lower and Shanghai, Tokyo and Hong Kong declined. Oil rose more than $1 per barrel.

British Prime Minister Liz Truss faced demands to resign following chaotic scenes in Parliament during a vote on a fracking ban. Truss has been defiant despite financial market turmoil caused by multiple policy U-turns.

Truss “precipitated this political crisis by triggering the market crisis,” said Michael Every of Rabobank in a report. Britain is “deep in an emerging-market rut.”

In early trading, the FTSE 100 in London was off 0.2% at 6,914.12 and the DAX in Frankfurt fell 0.7% to 12,655.08. The CAC 40 in Paris was little-changed at 6,041.18.

On Wall Street, the future for the benchmark S&P 500 index was off 0.3%. That for the Dow Jones Industrial Average was up less than 0.1%.

On Wednesday, the S&P fell 0.7%, breaking two days of gains. The Dow slipped 0.3% and the Nasdaq composite sank 0.9%.

In Asia, the Nikkei 225 in Tokyo tumbled 0.9% to 27,006.96 after September imports ballooned 46% over a year earlier due to a surging oil prices and a weak yen. The Japanese currency is trading at a 32-year low against the dollar.

The yen weakened to 149.82 to the dollar from Wednesday’s 149.81 yen.

The dollar has gained against other currencies following repeated interest rate hikes by the Federal Reserve, which increases the return on assets valued in dollars. Investors also see the U.S. currency as a stable haven amid global uncertainty.

“Rising U.S. yields and the strong U.S. dollar are the sledgehammers pounding global equities lower,” said Stephen Innes of SPI Asset Management in a report.

The Shanghai Composite Index lost 0.3% to 3,035.05 and the Hang Seng in Hong Kong fell 1.4% to 16,280.22.

The Kospi in Seoul retreated 0.9% to 2,218.09 and Sydney’s S&P-ASX 200 sank 1% to 6,730.70.

On Wednesday, Wall Street pulled back as investors reviewed earnings and Treasury yields climbed to multiyear highs.

Netflix soared 13% and United Airlines rose 5% after releasing quarterly results. Abbott Laboratories, M&T Bank and others sank.

The yield on the 10-year Treasury, which influences mortgage rates, climbed to 4.13%, its highest level since June 2008. It was at 4.02% late Tuesday.

The yield on the two-year Treasury, which responds to expectations of future Fed action, rose to 4.54% from 4.43%.

The Fed and central banks in Europe and Asia have been raising interest rates to cool inflation that is at multi-decade highs. Investors worry they might tip the global economy into recession.

Inflation in Britain hit a 40-year high of 10.1% over a year earlier in September.

In energy markets, benchmark U.S. crude rose $1.56 to $86.08 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, advanced $1.34 to $93.75 per barrel in London.

The euro gained to 97.83 cents from Wednesday’s 97.68 cents.

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October 20, 2022
Nokia posts forecast-beating net profit

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Nokia Corp. on Thursday posted a forecast-beating third-quarter net profit as demand for mobile networks and network infrastructure remained strong and supply-chain constraints eased.

Nokia
NOK,
-1.94%

NOKIA,
-6.26%
said it still expects to deliver net sales growth in mobile networks on a constant-currency basis in 2022 after strong sales growth in North America during the quarter, while sales in Europe, Latin America and Greater China also grew.

Comparable net profit for the quarter rose to 550 million euros ($537.6 million) from EUR454 million a year earlier as sales rose 16% to EUR6.24 billion, it said.

Analysts polled by FactSet had expected comparable net profit of EUR510 million on sales of EUR6.05 billion.

On a reported basis, Nokia posted a net profit of EUR427 million from EUR342 million a year earlier.

Nokia lifted full-year sales guidance to between EUR23.9 billion and EUR25.1 billion from EUR23.5 billion and EUR24.7 billion, adjusted for currency. It still sees the full-year comparable operating margin at 11%-13.5%.

“While risks around timing of outstanding deals in Nokia Technologies remain, assuming these close we continue tracking towards the high-end of our net sales guidance for 2022 and towards the mid-point of our operating margin guidance,” Chief Executive Pekka Lundmark said.

Write to Dominic Chopping at dominic.chopping@wsj.com

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October 20, 2022
Nokia posts forecast-beating net profit

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Nokia Corp. on Thursday posted a forecast-beating third-quarter net profit as demand for mobile networks and network infrastructure remained strong and supply-chain constraints eased.

Nokia
NOK,
-1.94%

NOKIA,
-5.29%
said it still expects to deliver net sales growth in mobile networks on a constant-currency basis in 2022 after strong sales growth in North America during the quarter, while sales in Europe, Latin America and Greater China also grew.

Comparable net profit for the quarter rose to 550 million euros ($537.6 million) from EUR454 million a year earlier as sales rose 16% to EUR6.24 billion, it said.

Analysts polled by FactSet had expected comparable net profit of EUR510 million on sales of EUR6.05 billion.

On a reported basis, Nokia posted a net profit of EUR427 million from EUR342 million a year earlier.

Nokia lifted full-year sales guidance to between EUR23.9 billion and EUR25.1 billion from EUR23.5 billion and EUR24.7 billion, adjusted for currency. It still sees the full-year comparable operating margin at 11%-13.5%.

“While risks around timing of outstanding deals in Nokia Technologies remain, assuming these close we continue tracking towards the high-end of our net sales guidance for 2022 and towards the mid-point of our operating margin guidance,” Chief Executive Pekka Lundmark said.

Write to Dominic Chopping at dominic.chopping@wsj.com

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October 20, 2022
IBM stock rallies on third-quarter results, upbeat forecast

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Shares of International Business Machines Corp. rallied in extended trading Wednesday, after the tech software, consulting and infrastructure giant reported third-quarter results that beat expectations and offered up a more upbeat full-year sales forecast.

IBM
IBM,
-0.35%
reported earnings as Wall Street tries to gauge the impact of a tough foreign-exchange environment, and the state of business spending on tech services amid worries over a downturn. But the company saw gains in hybrid cloud services, products like open-source software platform Red Hat, its consulting services and its zSystems servers and software.

“Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio,” Chief Executive Arvind Krishna said in a statement. He added that he now expects full-year sales growth “above our mid-single-digit model.”

That’s a bit more optimistic than the forecast he gave over the summer, when IBM reported second-quarter results. Krishna, at that time, said he continued “to expect full-year revenue growth at the high end of our mid-single-digit model.”

Wall Street expects IBM’s full-year sales to come in at $59.667 billion, according to FactSet. Analysts expect 2022 earnings per share of $9.28. IBM also said it continued to expect around $10 billion in consolidated free cash flow for the year.

For the third quarter, the company reported a net loss of $3.2 billion, or $3.54 per share, compared with a $1.1 billion profit, or $1.25 per share, in the year-earlier period. On an adjusted basis, IBM earned $1.81 per share.

Sales came in at $14.1 billion, compared with $13.3 billion a year ago.

Analysts polled by FactSet expected adjusted earnings per share of $1.79, on revenue of $13.517 billion.

Revenue in the company’s software segment grew 7.5%. Consulting revenue rose 5.4%, while the company’s infrastructure segment jumped 14.8%.

Shares gained 4.8% after hours on Wednesday.

Prior to the results, analysts had zeroed in on the impact of the strong dollar and what Morgan Stanley, in a recent note, described as “continued wage pressure in consulting.” IBM has also been trying to lean more into cloud and AI technology, unloading some businesses in an effort to narrow its focus.

Last year, in a move toward that goal, IBM spun off its infrastructure services business into Kyndryl Holdings
KD,
-2.85%.
But afterward, some analysts raised questions about IBM’s ability to grow sales and compete in the cloud-services industry. Francisco Partners, an investment firm, this year also acquired health-care data and analytics assets that were part of IBM’s Watson Health segment.

In January, IBM declined to provide an earnings-per-share forecast. The company also changed how it organizes its business segments at the beginning of this year.

But during the spring, Krishna said he saw “demand staying strong” even if economic growth flattens or enters into a brief recession, with the decision to halt business in Russia, following its invasion of Ukraine, the only drag on results.

IBM stock is down 8% year to date. By comparison, the S&P 500 Index
SPX,
-0.67%
is down 22%.

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October 19, 2022
Elon Musk teases massive Tesla stock buyback as CFO trims forecast for annual deliveries and stock falls

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Tesla Inc. Chief Executive Elon Musk suggested the electric-vehicle maker could repurchase up to $10 billion worth of its stock Wednesday, as shares declined following a third-quarter revenue miss and his CFO brought down delivery expectations for the full year.

Some Tesla
TSLA,
+0.84%
investors have been agitating for a stock buyback after multiple stock splits and the company losing more than a third of its market capitalization in 2022, and Musk said in an earnings conference call that Tesla’s board has discussed a buyback in the range of $5 billion to $10 billion.

“We debated the buyback idea extensively at board level. The board generally thinks that it makes sense to do a buyback, we want to work through the right process to do a buyback, but it is something possible for us to do a buyback on the order of $5 [billion] to $10 billion even in a downside scenario next year, given next year is very difficult,” he said, adding that it “is obviously pending board review and approval.”

“So it’s likely that we will do some meaningful buyback,” he concluded.

The statement did not immediately move Tesla’s stock, as it was followed closely by a forecast revision from Chief Financial Officer Zachary Kirkhorn, who said, “We do expect to be just under 50% growth [for deliveries] due to an increase in the cars in transit at the end of the year.”

Tesla delivered a record number of cars in the third quarter, but still missed analysts’ expectations and made it more difficult to hit executives’ target for the year of an increase of more than 50% in vehicle deliveries. Kirkhorn said that the company will increase production of cars by 50%, “although we are tracking supply-chain risks which are beyond our control.”

Shares declined more than 6% following the car company’s earnings report. Tesla reported third-quarter earnings of $3.29 billion, or 95 cents a share, on sales of $21.45 billion, up from $13.76 billion a year ago. After adjusting for stock-based compensation, the electric-vehicle manufacturer reported earnings of $1.05 a share, up from 62 cents a share a year ago.

Analysts on average were expecting adjusted earnings of $1 a share on sales of $21.98 billion, according to FactSet. Tesla shares declined about 5% in after-hours trading immediately following the release of the results, after closing with a 0.8% increase to $222.04 in the regular trading session.

Tesla shares have fallen more than 37% so far this year, a harder descent than the 22% decline of the S&P 500 index
SPX,
-0.67%,
after years of outsize gains. Pundits have put forth a variety of reasons for the downturn, including increasing competition in the EV market, negative press around Tesla’s full-self-driving claims and actual performance, and Musk’s attention being diverted to his attempt to acquire Twitter Inc.
TWTR,
+0.10%.

Don’t miss: Market share for electric vehicles expected to roughly double

None of that cowed Musk, however. He predicted that Tesla would be worth as much as the two most valuable companies in the world, Apple Inc.
AAPL,
+0.08%
and Saudi Arabian Oil Co.
2222,
+0.42%,
combined. Both companies have market capitalizations topping $2 trillion.

“Now I am of the opinion that we can far exceed Apple’s current market,” Musk said on the call, after referencing a previous prediction that Tesla would reach Apple’s then-record market cap. “In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined. That doesn’t mean it will happen or that it will be easy, in fact it will be very difficult, require a lot of work, very creative new products, expansion and always good luck. But for the first time I’m seeing, I see a way for Tesla to be, let’s say roughly twice the value of Saudi Aramco.”

In a preview of the report Tuesday, Wedbush Securities analyst Daniel Ives said that “the Street is starting to worry that the bloom is coming off the rose in the Tesla story with delivery shortfalls front and center.”

“Between logistical issues in China, supply-chain problems, FSD black-eye moments, the Musk Twitter fiasco and EV competition increasing across the board, there is growing pressure on Musk & Co. to prove themselves,” Ives wrote.

Tesla’s automotive gross margin, which declined in the second quarter despite price increases that Musk called “embarrassing,” were the same sequentially at 27.9%. Operating margin increased both sequentially and year-over-year, however, to 17.2% from 14.6% both in the third quarter a year ago and the previous quarter.

Earnings preview: Do record Tesla deliveries mask a demand problem?

In their communications with investors on Wednesday, Tesla executives disclosed that they will change the process for one of their most challenging tasks of late — transporting cars — in hopes of bringing costs down.

“We are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure. As a result, we began transitioning to a smoother delivery pace, leading to more vehicles in transit at the end of the quarter,” the company’s shareholder deck reads. “We expect that smoothing our outbound logistics throughout the quarter will improve cost per vehicle.”

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October 19, 2022
Wall Street wavers up and down as more earnings roll in

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NEW YORK — Stocks wavered between gains and losses in early trading on Wall Street, leaving indexes mixed as another batch of companies reported their latest quarterly results.

Several companies including Netflix and United Airlines rose sharply while others, including Abbott Laboratories and M&T Bank, sank.

The S&P 500 shook off an early slump and was little changed as of 10:23 a.m. Eastern. The Dow Jones Industrial Average rose 56 points, or 0.2%, to 30,582 and the Nasdaq fell 0.1%. Smaller companies fell more than the rest of the market.

Stocks are coming off of two days of gains, but trading remains unsteady overall. Treasury yields rose back near multi-year highs. Crude oil prices rose slightly.

Homebuilders and other companies tied to the industry fell following a disappointing report on the housing industry. Construction on new homes declined more than expected in September. Homebuilder Lennar fell 4.4% and home-improvement retailer Lowe’s shed 5.1%.

The yield on the 10-year Treasury, which influences mortgage rates, rose to 4.08% from 4.02% late Tuesday. The yield on the two-year Treasury, which tends to track expectations for future Federal Reserve action, also rose to 4.52% from 4.43%.

U.S. crude oil prices rose 1.2% and energy stocks made gains. Exxon Mobil rose 2.2%. The White House plans to announce another release of oil from the U.S. strategic reserve.

Investors have been focusing on the latest round of corporate earnings this week. The latest results are being closely watched for clues about how companies are dealing with the hottest inflation in four decades and how they intend to operate through the rest of the year and into 2023.

Netflix soared 14.7% after the company said it picked up 2.4 million subscribers during the July-September period, a comeback from a loss of 1.2 million customers during the first half of the year.

United Airlines rose 7.2% after reporting strong third-quarter financial results. American Airlines will report its results on Thursday.

Household goods giant Procter & Gamble rose 2.2% after also reporting strong financial results. It joined a growing list of companies, including Hasbro and Johnson & Johnson, warning investors about a strong U.S. dollar cutting into revenue. A strong dollar decreases the value of overseas sales after converting the currency. The U.S. currency is now worth more than a euro for the first time in 20 years.

The U.S. dollar has gained strength versus currencies worldwide as inflation and recession concerns prompt investors to look for relatively stable investments. Central governments and banks worldwide are dealing with stubbornly hot inflation. British food prices rose at the fastest pace since 1980 last month, driving inflation back to a 40-year high.

The U.S. faces its own potential recession as high prices on everything from food to clothing barely budge and the Fed raises interest rates to temper inflation.

The Fed’s rate increases are meant to make borrowing more difficult and slow economic growth in an effort to tame inflation. The strategy risks stalling the already slowing U.S. economy and bringing on a recession.

——

Joe McDonald and Matt Ott contributed to this report.

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October 19, 2022
Netflix Just Released Its Earnings Report. Investors Are Shocked.

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Remember the big news that Netflix was shedding subscribers faster than Vecna was gobbling up victims?

That was so last quarter.

Last this afternoon, the streaming giant reported its third-quarter earnings, and the results are above their bold forecast.

In a classic case of under-promising and over-delivering, Netflix added 2.41 million subscribers from July to September 2022., which doubles the 1 million new subscribers the company had predicted.

Netflix also pulled in $7.93 billion in revenue versus the $7.85 billion expected.

In a letter to its shareholders, the company said:

After a challenging first half, we believe we’re on a path to reaccelerate growth. The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us.

And a challenging first half it was. Netflix lost 200,000 subscribers in the first quarter and close to a million in the second. Its stock plummeted to close to 70% of its value. As a result, the streamer laid off 450 people from its staff of nearly 11,000 employees.

But strange things occurred over the past month that helped Netflix grow to 223 million subscribers worldwide. The company attributed its rebound to the success of shows such as “Monster: The Jeffrey Dahmer Story,” “Stranger Things: Season 4,” “Extraordinary Attorney Woo,” and “Purple Hearts.”

Netflix also noted the advantage they have over competitors who are newer to the streaming game, writing:

“Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard – we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit.”

Hopefully, some of those jobs lost will be able to come back.

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Jonathan Small

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October 18, 2022
Netflix Has ‘Monster’ Q3 With 2.4 Million New Subscribers, Forecast Beat, And Profits
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(Image courtesy of NETFLIX)

After half a year in misery that forced dramatic changes across the company and the entire streaming industry, Netflix bounced back in its third quarter earnings in a big way, topping forecasts, adding 2.4 million subscribers and even making money.

The company released results and an investor letter after markets closed Tuesday that also marked a return to the company’s traditional swagger, as it tweaked competitors for losing money, bragged about a string of big hits led by Dahmer – Monster: The Jeffrey Dahmer Story, and said viewer engagement far outstrips other major streaming services, “with room for growth.”

“After a challenging first half, we believe we’re on a path to reaccelerate growth,” the investor newsletter says. “The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us.”

Shares, which had drooped 1.67% during the day, shot up more than 13% in initial after-hours trading, briefly topping $274 a share. That’s still far below the stock’s stratospheric heights of last November, when prices topped $685 a share.

Prices plummeted after a disastrous April earnings call, when the company reported its first drop in subscribers in a decade, followed a quarter later by an even bigger drop of about 1 million subscribers.

The relatively small initial drop, however, sent investors to the exit door, forcing the company to begin cutting spending, laying off hundreds of employees and contract workers, killing some projects, and most notably announcing a new ad-supported tier, which launches in 16 days.

Netflix’s drop also forced a reckoning on the rest of the industry as investors began looking at metrics beyond subscriber adds, and started pushing companies to say when they’d begin making money on streaming. For most, the answer is 2024 or after.

Netflix appeared to answer all those questions for itself on Tuesday:
- It’s beating forecasts, at least its own, as it slightly exceeded expected revenue, operating income and membership;
- It’s growing again, adding 2.4 million subscribers, to 223.09 million worldwide, a rise of 4.5% year over year;
- It’s making hits. Beyond Monster and some other Dahmer-related programming, the company debuted several other big hits, including Season 4 of Stranger Things (the season’s second half debuted at the very start of the quarter), Korean-made Extraordinary Attorney Woo, $200 million spy thriller The Gray Man, and romantic drama Purple Hearts;
- People are sticking around to watch a lot. Engagement – one of those newly valued Wall Street metrics – far exceeded competitors in the United States and United Kingdom, with 8.2 % of video viewing in the UK and 7.6% of U.S.;
- It’s making money, and everyone else isn’t: “Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard – we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit.”
The company reported $7.93 billion in revenue, up 5.9% year over year, but down slightly from Q2, which hit $7.97 billion. The company credited the higher revenue to more subscribers, up 5%

Net income hit $1.398 billion, and diluted earnings per share remained high at $3.10. Free cash flow topped $472 million, dramatically up from Q2’s $13 million, and the negative FCF of the second half of 2021.

The company forecasted a much tighter set of results for 2022’s last quarter, however, with another decline in revenue, to $7.78 billion, a big drop in net income to $163 million, and diluted earnings per share to 36 cents. That’s despite a projected big bump in subscribers again, up 4.5 million to 227.59 million worldwide.

LightShed Partners’ Rich Greenfield wondered in a note published before the earnings came out if Netflix’s “approach to advertising (is) primitive on purpose,” designed to milk the $65 billion or so spent annually in legacy broadcast and cable, rather than take on the data-informed precision of YouTube and Facebook. Those legacy ad revenues are seeing a significant outflow to connected TV and streaming as advertisers follow the shift in viewing habits.

Also unclear, Greenfield wrote, is how Microsoft’s reported $5 billion in revenue guarantees over the next five years will impact Netflix’s Average Revenue Per User, another newly prized metric. Microsoft is Netflix’s technology partner on the ad tier.

Netflix has long wrung more revenue from its subscribers than most competitors, especially Disney, whose roughly equal global subscriber totals have been plumped by tens of millions of Indian subscribers paying far less per month for Disney+/Hotstar subscriptions.
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David Bloom, Senior Contributor

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October 18, 2022
Netflix Adds a Better-Than-Expected 2.4 Million Subscribers

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Netflix

shares were trading sharply higher after the streaming giant posted better-than-expected subscriber growth for the third quarter.

The company added 2.41 million net new subscribers in the quarter, beating its own forecast of 1 million additions. Netflix (ticker: NFLX) said it expects to add another 4.5 million subscribers in the December quarter.

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October 18, 2022