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Tag: Financial Performance

  • Nokia posts forecast-beating net profit

    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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  • IBM stock rallies on third-quarter results, upbeat forecast

    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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  • Elon Musk teases massive Tesla stock buyback as CFO trims forecast for annual deliveries and stock falls

    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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  • Wall Street wavers up and down as more earnings roll in

    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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  • Netflix Adds a Better-Than-Expected 2.4 Million Subscribers

    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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  • United Airlines says travel demand is stronger than recession pressures; shares rally

    United Airlines says travel demand is stronger than recession pressures; shares rally

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    United Airlines Holdings Inc. stock rallied after hours Tuesday after the airline said it expected the travel rebound to weather a shakier economy in the months ahead and reported third-quarter results that beat expectations.

    “Looking forward through the end of the year, the airline expects the strong COVID recovery trends to continue to overcome the recessionary pressures in the macroeconomic environment,” company executives said in a statement.

    That backdrop — along with tighter flight networks and changes in how people work — helped justify the airline’s more upbeat forecast for the fourth quarter. United Airlines
    UAL,
    +3.19%
    said it expected adjusted fourth-quarter operating margin of around 10%, the first time the figure would end above pre-pandemic 2019 levels.

    United also forecast adjusted fourth-quarter earnings per share of between $2.00 and $2.25, well above FactSet forecasts for 98 cents per share. The carrier also said it expected a 24% to 25% gain in total fourth-quarter unit revenue — a much-watched industry metric that measures sales as spread out across an airline’s flight capacity — when compared to the same period in 2019.

    Adjusted fourth-quarter unit costs were seen up between 11% and 12%, and roughly 15% for the full year, when compared to the respective periods in 2019.

    For the third quarter, United reported net income of $942 million, or $2.86 per share, compared with $473 million, or $1.44 per share, in the prior-year quarter.

    On an adjusted basis, the company earned $2.81 per share, compared with a $1.02 per-share loss in the quarter a year ago and $4.07 in 2019. Revenue was $12.877 billion, compared with $7.75 billion a year ago and $11.38 billion in 2019.

    Analysts polled by FactSet expected adjusted earnings of $2.28 per share, on revenue of $12.743 billion.

    Shares jumped 7% after the market’s close. American Airlines Group Inc.
    AAL,
    +3.79%    ,
    which reports earnings on Thursday, rose 3.6% after hours.

    United, in its earnings release, also called out three demand trends that it said were “more than fully offsetting any economic headwinds.” It said that “Air travel is still in the COVID recovery phase, hybrid work gives customers the freedom and flexibility to travel for leisure more often, and external supply challenges will limit industry supply for years to come.”

    The carrier said it expected total flight capacity, a measure of available seats on flights, to be down between 9% and 10% for the fourth quarter and down around 13% for the full year, when compared to 2019 levels.

    United reported as analysts look for cracks in the travel industry’s rebound and holiday demand, after eager travelers this summer ran into flight delays and cancellations, insufficient staffing and severe weather. Airfares and fuel costs are more expensive — a function of strong demand and thinner supplies. Aircraft supply is tight, some executives have said. Airlines have also tried to bulk up flight crews, particularly pilots, after encouraging buyouts in 2020, as the pandemic left the industry without passengers and burning through cash.

    Delta Air Lines Inc.
    DAL,
    +3.34%
    last week said it expected fourth-quarter sales to grow from pre-pandemic levels, as demand for travel, after two years of pandemic-related restraint, holds up against rising prices.

    “The travel recovery continues as consumer spend shifts to experiences and demand improves in corporate and international,” Delta CEO Ed Bastian said in its earnings release.

    Raymond James analyst Savanthi Syth, in a research note last week, said she expected United to see similar momentum, helped by corporate travel and international demand.

    She said American and JetBlue Airways Corp.
    JBLU,
    +1.90%
    should benefit to a lesser degree, “due to large corp and transatlantic exposure at the former and large coastal-city exposure at the latter.” JetBlue reports earnings on Oct. 25.

    Delta’s international-unit revenue growth outpaced that in its domestic business for the first time since the pandemic started. Leisure travel to Europe helped propel results, as did strong demand for Delta’s premium-class seats. Bastian said he expected Delta’s flight network to be fully restored by summer next year.

    “Demand has not come close to being quenched by a hectic summer travel season,” he said on Delta’s earnings call. “At the same time, industry supply is constrained by aircraft availability, regional pilot shortages and hiring and training needs.” 

    Delta rose 3% after the bell on Tuesday.

    United Airlines stock is down 15% so far this year. By comparison, the S&P 500 Index
    SPX,
    +1.14%
    is down 22% over that time.

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  • Netflix snaps streak of subscriber declines and beats on earnings, stock jumps 15%

    Netflix snaps streak of subscriber declines and beats on earnings, stock jumps 15%

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    Netflix Inc. added more than 2 million subscribers in the third quarter after stumbling into 2022 with two consecutive quarterly declines, a rebound that sent shares more than 15% higher in after-hours trading Tuesday.

    Netflix 
    NFLX,
    -1.73%
    reported a net gain of 2.41 million subscribers in the third quarter, while analysts on average were forecasting 1.1 million net additions, according to FactSet. That follows a decline of roughly 200,000 subscribers in the first quarter and nearly a million in the second quarter, which has led the company to plan massive changes, including a cheaper, ad-supported streaming tier set to arrive in the fourth quarter.

    In a letter to shareholders, Netflix executives said they expect 4.5 million new subscribers to join in the fourth quarter, with revenue forecast to grow to $7.78 billion from $7.71 billion a year ago. Analysts on average were estimating revenue of $7.97 billion and a net subscriber gain of 4 million for the fourth quarter, according to FactSet.

    “After a challenging first half, we believe we’re on a path to reaccelerate growth,” executives wrote in the letter.

    The news sent Netflix shares up about 15% in after-hours trading following the release of the results, after closing with a 1.7% drop at $240.86. The stretch of subscriber declines has filleted Netflix shares, which have swooned 60% so far this year while the broader S&P 500 index
    SPX,
    +1.14%
    has declined 22.8%.

    The streaming-video giant’s downturn after a pandemic-boosted surge has only intensified pressure from rival streaming services at Walt Disney Co. 
    DIS,
    +1.18%    ,
     Apple Inc. 
    AAPL,
    +0.94%    ,
    Amazon.com Inc. 
    AMZN,
    +2.26%    ,
    Warner Bros. Discovery Inc. 
    WBD,
    +4.55%    ,
    Comcast Corp. 
    CMCSA,
    -0.23%
    and Paramount Global 
    PARA,
    +1.56%    .

    That didn’t stop Netflix executives from taking a pot shot at streaming rivals over profitability. “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,” Netflix executives said in the shareholder letter.

    A dramatic shift in the video-streaming climate, one in which Disney surpassed Netflix as market leader in July, has prompted a radical makeover at Netflix. Last week, the company announced its long-awaited advertising-supported tier, which debuts Nov. 3 in the U.S. for $6.99 a month. Another 11 countries, including Canada and Mexico, will get the service by Nov. 10. The company has also vowed a crackdown on shared accounts, and is pushing forward on gaming.

    The advertising-supported tier directly acknowledges competition and the necessity of Netflix “adapting to the streaming landscape’s new normal,” Insider Intelligence analyst Ross Benes said in a note late Tuesday.

    For more: Netflix lost its streaming crown to Disney. Here’s how execs expect to win it back.

    Netflix announced third-quarter earnings of $1.4 billion, or $3.10 a share, down from $3.16 a share a year ago. Netflix revenue improved to $7.93 billion in the quarter from $7.48 billion in the same period a year ago, but missed diminished expectations. Analysts polled by FactSet expected earnings of $2.14 a share on sales of $7.84 billion, estimates that had dipped in recent days.

    Tuesday’s results follow some serious self-reflection among Netflix executives on how to stanch a decline in visits among subscribers that has led to cancellations. Co-CEO Reed Hastings has consulted with staff to find ways to make subscribers visit the platform more frequently, according to reports by The Wall Street Journal and Bloomberg News.

    One such strategy is cracking down on multiple users sharing the same account. In the shareholder letter, Netflix said it has “landed on a thoughtful approach to monetize account sharing and we’ll begin rolling this out more broadly starting in early 2023.”

    “After listening to consumer feedback, we are going to offer the ability for borrowers to transfer their Netflix profile into their own account, and for sharers to manage their devices more easily and to create sub-accounts (‘extra member’), if they want to pay for family or friends,” the letter said. “In countries with our lower-priced ad-supported plan, we expect the profile transfer option for borrowers to be especially popular.”

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  • J&J sales grow, but strong dollar tugs at expectations

    J&J sales grow, but strong dollar tugs at expectations

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    Johnson & Johnson topped third-quarter expectations thanks to growth in pharmaceutical sales, but the health care giant continued to tread cautiously with its outlook due to the strong dollar.

    J&J on Tuesday stuck to the midpoint of its 2022 forecast after lowering expectations the previous two quarters due to the impact of currency exchanges. The company now expects adjusted earnings to range between $10.02 and $10.07 per share.

    That’s a narrower forecast than the $10-to-$10.10 range the company predicted in July.

    For the full year, analysts expect, on average, earnings of $10.07 per share, according to FactSet.

    J&J brings in nearly half of its sales from outside the United States. A strong U.S. dollar, which is now worth more than a euro for the first time in 20 years, can affect sales for companies that do a lot of international business.

    They have to convert those sales into dollars when they report earnings. The stronger dollar decreases the value of those sales. It also gives foreign products a price edge in the United States.

    In the third quarter, J&J’s profit climbed 22% to $4.46 billion. Revenue rose 2% to $23.79 billion, and adjusted earnings totaled $2.55 per share.

    Analysts were expecting earnings of $2.48 per share on $23.36 billion in revenue, according to FactSet.

    Revenue from the company’s biggest segment, pharmaceutical, climbed 2.6% — or 9% without the impact of foreign exchange — to $13.2 billion. That business was charged by sales of the blood cancer treatment Darzalex, which soared nearly 30% to $2.06 billion.

    The company recorded no U.S. sales in the quarter from its one-shot COVID-19 vaccine, which brought in $489 million in revenue from international markets.

    J&J’s vaccine was one of three initially authorized by U.S. regulators more than a year ago to protect against COVID-19. But the government has since strictly limited who can receive the shot due to a small risk of rare but serious blood clots.

    The company also has had to trash millions of doses of the shots due to manufacturing trouble at a Baltimore factory operated by a contractor.

    Shares of New Brunswick, New Jersey company rose 2% before the opening bell.

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  • Microsoft Lays Off Employees After Slowdown in Earnings Growth

    Microsoft Lays Off Employees After Slowdown in Earnings Growth

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    The software giant said earlier this year that it planned to reduce staff by less than 1%

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  • ‘Material risk’ looms over stocks as investors face bear market’s ‘second act,’ warns Morgan Stanley

    ‘Material risk’ looms over stocks as investors face bear market’s ‘second act,’ warns Morgan Stanley

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    Stock-market investors have been adjusting to the jump in interest rates amid high inflation, but they have yet to cope with profit headwinds faced by the S&P 500, according to Morgan Stanley Wealth Management.

    “While a rate peak may solidify estimates for the equity risk premium and valuation multiples, equity investors still face the bear market’s second act — the earnings outlook,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in a note Monday. 

    “They have been slow to recognize that pricing power and operating margins, which hit all-time highs in the past two years, are unsustainable,” she said. “Even without a recession, the mean reversion of profits in 2023 translates to a 10%-to-15% decline from current estimates.”


    MORGAN STANLEY WEALTH MANAGEMENT NOTE DATED OCT. 17 2022

    Unprecedented monetary and fiscal stimulus during the throes of the pandemic had led to the largest U.S. companies booking record operating margins that were 150 to 200 basis points above norms seen in the past decade, according to Shalett. 

    See: Stock market’s wild gyrations put earnings in focus as inflation crushes Fed ‘pivot’ hopes

    She said that company profits may now be imperiled by slowing growth, with “demand skewing toward services” after pulling forward toward goods earlier in the pandemic, and a likely reversal in “extremely strong” pricing power as the Fed fights surging inflation with interest-rate hikes.

    “Such risks are not discounted in 2023 consensus yet, constituting a material risk to stocks for the remainder of the year,” Shalett said.

    While many sectors have discounted the potential drop in 2023 profits from current estimates that could stir headwinds even with no recession, “the megacap secular growth stocks that dominate market-cap indexes have not,” she warned. “And those indexes are where risk gets repriced in the bear market’s final stages.”

    Morgan Stanley’s chief U.S. equity strategist Mike Wilson estimates as much as 11% downside from consensus estimates, with his base-case, earnings-per-share forecast for the S&P 500 for 2023 being $212, according to Shalett’s note. 

    U.S. stocks were bouncing Monday, with major stock benchmarks trading sharply higher in the afternoon, after sinking Friday amid inflation concerns as earnings season got under way. The S&P 500
    SPX,
    +2.65%
    was up 2.7% in afternoon trading, while the Dow Jones Industrial Average
    DJIA,
    +1.86%
    gained 1.9% and the technology-heavy Nasdaq Composite surged 3.5%, FactSet data show, last check. 

    In the bond market, Treasury rates were trading slightly lower Monday afternoon, after the 2-year yield hit a 15-year high and the 10-year yield notched a 14-year high on Friday, according to Dow Jones Market Data. Two-year yields ended last week at 4.507%, the highest level since August 8, 2007 based on 3 p.m. Eastern time levels, while the 10-year rate climbed to 4.005% for its highest rate since Oct. 15, 2008.

    The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.992%
    was down about 1 basis point Monday afternoon at around 4%, while two-year yields
    TMUBMUSD02Y,
    4.439%
    fell about five basis points to around 4.45%, FactSet data show, at last check.

    Meanwhile, as investors capitulated to higher inflation, “peak policy rates moved up aggressively in the fed funds futures market, with the terminal rate now at nearly 5%, an aggressive stance that smacks of ‘peak hawkishness,’” according to the Morgan Stanley note.

    “Critically, although the market is still pricing 1.5 cuts in 2023, the January 2024 fed-funds rate is estimated at 4.5%, a comfortable 100 basis points above our forecast” for core inflation measured by the consumer-price index, Shalett wrote.

    “Consider locking in solid short-term yields in bonds and shoring up positions in high growth, dividend-paying stocks,” she said. “Short-duration Treasuries look attractive, especially because the yield is more than 2.5 times that of the dividend yield on the S&P 500.”

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  • These 11 stocks can lead your portfolio’s rebound after the S&P 500 ‘earnings recession’ and a market bottom next year

    These 11 stocks can lead your portfolio’s rebound after the S&P 500 ‘earnings recession’ and a market bottom next year

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    This may surprise you: Wall Street analysts expect earnings for the S&P 500 to increase 8% during 2023, despite all the buzz about a possible recession as the Federal Reserve tightens monetary policy to quell inflation.

    Ken Laudan, a portfolio manager at Kornitzer Capital Management in Mission, Kan., isn’t buying it. He expects an “earnings recession” for the S&P 500
    SPX,
    +2.78%
    — that is, a decline in profits of around 10%. But he also expects that decline to set up a bottom for the stock market.

    Laudan’s predictions for the S&P 500 ‘earnings recession’ and bottom

    Laudan, who manages the $83 million Buffalo Large Cap Fund
    BUFEX,
    -2.86%
    and co-manages the $905 million Buffalo Discovery Fund
    BUFTX,
    -2.82%    ,
    said during an interview: “It is not unusual to see a 20% hit [to earnings] in a modest recession. Margins have peaked.”

    The consensus among analysts polled by FactSet is for weighted aggregate earnings for the S&P 500 to total $238.23 a share in 2023, which would be an 8% increase from the current 2022 EPS estimate of $220.63.

    Laudan said his base case for 2023 is for earnings of about $195 to $200 a share and for that decline in earnings (about 9% to 12% from the current consensus estimate for 2022) to be “coupled with an economic recession of some sort.”

    He expects the Wall Street estimates to come down, and said that “once Street estimates get to $205 or $210, I think stocks will take off.”

    He went further, saying “things get really interesting at 3200 or 3300 on the S&P.” The S&P 500 closed at 3583.07 on Oct. 14, a decline of 24.8% for 2022, excluding dividends.

    Laudan said the Buffalo Large Cap Fund was about 7% in cash, as he was keeping some powder dry for stock purchases at lower prices, adding that he has been “fairly defensive” since October 2021 and was continuing to focus on “steady dividend-paying companies with strong balance sheets.”

    Leaders for the stock market’s recovery

    After the market hits bottom, Laudan expects a recovery for stocks to begin next year, as “valuations will discount and respond more quickly than the earnings will.”

    He expects “long-duration technology growth stocks” to lead the rally, because “they got hit first.” When asked if Nvidia Corp.
    NVDA,
    +6.14%
    and Advanced Micro Devices Inc.
    AMD,
    +3.69%
    were good examples, in light of the broad decline for semiconductor stocks and because both are held by the Buffalo Large Cap Fund, Laudan said: “They led us down and they will bounce first.”

    Laudan said his “largest tech holding” is ASML Holding N.V.
    ASML,
    +3.79%    ,
    which provides equipment and systems used to fabricate computer chips.

    Among the largest tech-oriented companies, the Buffalo Large Cap fund also holds shares of Apple Inc.
    AAPL,
    +3.09%    ,
    Microsoft Corp.
    MSFT,
    +3.88%    ,
    Amazon.com Inc.
    AMZN,
    +6.63%
    and Alphabet Inc.
    GOOG,
    +3.91%

    GOOGL,
    +3.73%    .

    Laudan also said he had been “overweight’ in UnitedHealth Group Inc.
    UNH,
    +1.77%    ,
    Danaher Corp.
    DHR,
    +2.64%
    and Linde PLC
    LIN,
    +2.25%
    recently and had taken advantage of the decline in Adobe Inc.’s
    ADBE,
    +2.32%
    price following the announcement of its $20 billion acquisition of Figma, by scooping up more shares.

    Summarizing the declines

    To illustrate what a brutal year it has been for semiconductor stocks, the iShares Semiconductor ETF
    SOXX,
    +2.12%    ,
    which tracks the PHLX Semiconductor Index
    SOX,
    +2.29%
    of 30 U.S.-listed chip makers and related equipment manufacturers, has dropped 44% this year. Then again, SOXX had risen 38% over the past three years and 81% for five years, underlining the importance of long-term thinking for stock investors, even during this terrible bear market for this particular tech space.

    Here’s a summary of changes in stock prices (again, excluding dividends) and forward price-to-forward-earnings valuations during 2022 through Oct. 14 for every stock mentioned in this article. The stocks are sorted alphabetically:

    Company

    		 Ticker

    		 2022 price change

    		 Forward P/E

    		 Forward P/E as of Dec. 31, 2021
    Apple Inc.

    		 AAPL,
    +3.09%         		-22%

    		 22.2

    		 30.2
    Adobe Inc.

    		 ADBE,
    +2.32%         		-49%

    		 19.4

    		 40.5
    Amazon.com Inc.

    		 AMZN,
    +6.63%         		-36%

    		 62.1

    		 64.9
    Advanced Micro Devices Inc.

    		 AMD,
    +3.69%         		-61%

    		 14.7

    		 43.1
    ASML Holding N.V. ADR

    		 ASML,
    +3.79%         		-52%

    		 22.7

    		 41.2
    Danaher Corp.

    		 DHR,
    +2.64%         		-23%

    		 24.3

    		 32.1
    Alphabet Inc. Class C

    		 GOOG,
    +3.91%         		-33%

    		 17.5

    		 25.3
    Linde PLC

    		 LIN,
    +2.25%         		-21%

    		 22.2

    		 29.6
    Microsoft Corp.

    		 MSFT,
    +3.88%         		-32%

    		 22.5

    		 34.0
    Nvidia Corp.

    		 NVDA,
    +6.14%         		-62%

    		 28.9

    		 58.0
    UnitedHealth Group Inc.

    		 UNH,
    +1.77%         		2%

    		 21.5

    		 23.2
    Source: FactSet

    You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.

    The forward P/E ratio for the S&P 500 declined to 16.9 as of the close on Oct. 14 from 24.5 at the end of 2021, while the forward P/E for SOXX declined to 13.2 from 27.1.

    Don’t miss: This is how high interest rates might rise, and what could scare the Federal Reserve into a policy pivot

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  • A Tesla stock plunge could destroy ‘zombie stocks’ such as GameStop and Peloton, warns equity research firm New Constructs

    A Tesla stock plunge could destroy ‘zombie stocks’ such as GameStop and Peloton, warns equity research firm New Constructs

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    Tesla shares could decline dramatically — and that could mean disaster for a number of stocks that have already seen deep share-price cuts, according to equity research firm New Constructs.

    The research firm, which uses machine learning and natural language processing to parse corporate filings and model economic earnings, called the stocks in danger “zombie stocks,” and defined them as companies with poor business models that are burning cash at an alarming rate and are at risk of seeing their stock decline to $0 per share.

    The research firm estimates there could be some 300 zombie companies across the marketplace.

    “The Federal Reserve’s aggressive rate hikes so far in 2022 have ended the era of free money and exposed a worrisome dynamic throughout capital markets: zombie stocks,” wrote New Constructs CEO David Trainer, in a note.

    See Now: Tesla earnings are coming, but do record deliveries mask a demand problem?

    New Constructs does not define Tesla Inc.
    TSLA,
    +7.01%
    as a “zombie stock,” citing CEO Elon Musk’s ability to raise capital, but does see the electric car manufacturer as a bellwether for the sector. “It shares many of the common characteristics of a zombie stock, such as an outrageous valuation and high cash burn,” wrote Trainer. “We believe Tesla’s unrelenting share price rise over the past three years – where investors completely ignored company fundamentals – inspired the birth of many of today’s zombie stocks.” 

    Tesla reports its third-quarter results after the closing bell on Oct. 19.

    The company’s stock was trading around $220 on Monday, an increase of over 1,000% compared to three years ago. But Trainer feels that Tesla is at risk of falling more than 80% to $25 a share.

    Tesla’s Optimus bot: ‘High school science project’ or robotics game changer?

    Tesla’s stock has fallen 37.6% in 2022, outpacing the S&P 500 Index’s
    SPX,
    +2.65%
    decline of 22.7%.

    “Its valuation remains nosebleed high because the cash flow expectations baked into the stock price are unreasonably optimistic,” Trainer wrote. “Our message to investors is to take profits in Tesla and avoid zombie stocks at all costs.”

    New Constructs recently added cloud-based communication company RingCentral Inc.
    RNG,
    +6.49%
    to its list of “zombie” stocks. Other companies on the list are Freshpet Inc.
    FRPT,
    -2.03%    ,
     Peloton Interactive Inc.
    PTON,
    +7.04%    ,
     Carvana Co.
    CVNA,
    +6.30%    ,
     Snap Inc.
    SNAP,
    +6.01%    ,
     Beyond Meat Inc.
    BYND,
    +0.64%    ,
     Rivian Automotive Inc.
    RIVN,
    +6.93%    ,
     DoorDash Inc.
    DASH,
    +6.15%    ,
     Shake Shack Inc.
    SHAK,
    +4.01%    ,
     Chewy Inc.
    CHWY,
    +10.76%    ,
     Uber Technologies Inc.
    UBER,
    +4.98%    ,
     Robinhood Markets Inc.
    HOOD,
    +3.24%    ,
     Tilray Brands Inc.
    TLRY,
    +7.32%    ,
     Affirm Holdings Inc.
    AFRM,
    +6.72%    ,
     SunRun Inc.
    RUN,
    +1.70%    ,
     Blue Apron Holdings Inc.
    APRN,
    +3.26%    ,
     and meme stocks AMC Entertainment Holdings Inc. 
    AMC,
    +6.00%
    and GameStop Corp.
    GME,
    +5.40%    .

    See Now: RingCentral added to ‘zombie’ stocks list by equity research firm New Constructs

    “Investors are now fed up with these kinds of companies, especially amid this year’s stock market volatility,” wrote New Constructs’ Trainer. “If investors start to give up on Tesla and take profits on the stock, which is up over 1,000% over the past three years, that spells terrible news for all of the other zombie stocks that don’t have the cash-raising luxury that Tesla has.”  

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  • Bank of America Reports Earnings Monday. What Wall Street Is Watching.

    Bank of America Reports Earnings Monday. What Wall Street Is Watching.

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    Bank of America Reports Earnings Monday. What Wall Street Is Watching.

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  • Today in History: October 15, Senate confirms Thomas

    Today in History: October 15, Senate confirms Thomas

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    Today in History

    Today is Saturday, Oct. 15, the 288th day of 2022. There are 77 days left in the year.

    Today’s Highlight in History:

    On Oct. 15, 1966, President Lyndon B. Johnson signed a bill creating the U.S. Department of Transportation.

    On this date:

    In 1815, Napoleon Bonaparte, the deposed Emperor of the French, arrived on the British-ruled South Atlantic island of St. Helena, where he spent the last 5 1/2 years of his life in exile.

    In 1945, the former premier of Vichy France, Pierre Laval, was executed for treason.

    In 1946, Nazi war criminal Hermann Goering (GEH’-reeng) fatally poisoned himself hours before he was to have been executed.

    In 1954, Hurricane Hazel made landfall on the Carolina coast as a Category 4 storm; Hazel was blamed for some 1,000 deaths in the Caribbean, 95 in the U.S. and 81 in Canada.

    In 1966, the revolutionary Black Panther Party was founded by Huey Newton and Bobby Seale in Oakland, California.

    In 1976, in the first debate of its kind between vice-presidential nominees, Democrat Walter F. Mondale and Republican Bob Dole faced off in Houston.

    In 1989, South African officials released eight prominent political prisoners, including Walter Sisulu (sih-SOO’-loo).

    In 1991, despite sexual harassment allegations by Anita Hill, the Senate narrowly confirmed the nomination of Clarence Thomas to the U.S. Supreme Court, 52-48.

    In 1997, British Royal Air Force pilot Andy Green twice drove a jet-powered car in the Nevada desert faster than the speed of sound, officially shattering the world’s land-speed record.

    In 2001, Bethlehem Steel Corp. filed for Chapter 11 bankruptcy.

    In 2003, eleven people were killed when a Staten Island ferry slammed into a maintenance pier. (The ferry’s pilot, who’d blacked out at the controls, later pleaded guilty to eleven counts of manslaughter.)

    In 2015, President Barack Obama abandoned his pledge to end America’s longest war, announcing plans to keep at least 5,500 U.S. troops in Afghanistan at the end of his term in 2017 and hand the conflict off to his successor.

    Ten years ago: Former pro wrestler Hulk Hogan sued the news and gossip website Gawker for posting a sex tape of him online. (Hogan won a $140 million verdict against Gawker, which ended up settling for $31 million in a legal fight that led to the media company’s bankruptcy.)

    Five years ago: Actress and activist Alyssa Milano tweeted that women who had been sexually harassed or assaulted should write “Me too” as a status; within hours, tens of thousands had taken up the #MeToo hashtag (using a phrase that had been introduced 10 years earlier by social activist Tarana Burke.) Former San Francisco 49ers quarterback Colin Kaepernick filed a grievance against the NFL, alleging that he was still unsigned because of collusion by owners resulting from his protests during the national anthem.

    One year ago: British Conservative lawmaker David Amess was stabbed to death as he met with constituents at a church hall; the assailant, an Islamic State supporter who said he targeted Amess because of his past support for airstrikes on Syria, was convicted and sentenced to life in prison. A suicide bombing targeting a Shiite mosque in southern Afghanistan killed at least 47 people and wounded scores of others; the Islamic State group claimed responsibility. The lawyers for accused Florida school shooter Nikolas Cruz said he would plead guilty to the 2018 massacre at a Parkland high school that killed 14 students and three staff members.

    Today’s Birthdays: Singer Barry McGuire is 87. Actor Linda Lavin is 85. Rock musician Don Stevenson (Moby Grape) is 80. Baseball Hall of Famer Jim Palmer is 77. Singer-musician Richard Carpenter is 76. Actor Victor Banerjee is 76. Former tennis player Roscoe Tanner is 71. Singer Tito Jackson is 69. Actor-comedian Larry Miller is 69. Actor Jere Burns is 68. Movie director Mira Nair is 65. Britain’s Duchess of York, Sarah Ferguson, is 63. Chef Emeril Lagasse (EM’-ur-ul leh-GAH’-see) is 63. Rock musician Mark Reznicek (REHZ’-nih-chehk) is 60. Singer Eric Benet (beh-NAY’) is 56. Actor Vanessa Marcil is 54. Singer-actor-TV host Paige Davis is 53. Country singer Kimberly Schlapman (Little Big Town) is 53. Actor Dominic West is 53. R&B singer Ginuwine (JIHN’-yoo-wyn) is 52. Christian singer-actor Jaci (JAK’-ee) Velasquez is 43. Actor Brandon Jay McLaren is 42. R&B singer Keyshia Cole is 41. Actor Vincent Martella is 30. Actor Bailee Madison is 23.

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  • Retail sales flat in September as inflation takes a bite

    Retail sales flat in September as inflation takes a bite

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    NEW YORK — The pace of sales at U.S. retailers was unchanged in September from August as rising prices for rent and food chipped away at money available for other things.

    Retail sales were flat last month, down from a revised. 0.4% growth in August, the Commerce Department reported Friday. Retail sales fell 0.4% in July.

    Excluding sales of automobiles and at gas stations, retail sales rose 0.3%. Excluding gas sales, spending was up 0.1%

    While the report showed the resilience of the American consumer, the figures are not adjusted for inflation unlike many other government reports. In fact, sales at grocery stores rose 0.4%, helped by rising prices in food.

    Evidence that the Fed’s fight to cool the economy may be taking hold can also be seen, particularly with big-ticket items. Sales at auto dealers fell 0.4% last month, and shoppers continued to pull back on appliances, electronics and furniture, all categories that did well during the early part of the pandemic. Business at consumer electronics and appliance stores fell 0.8%.

    Sales at clothing stores rose 0.5%, while business at department stores rose 1.3% That indicates a solid back-to-school season but adjusted for inflation, spending was modest, analysts said. Business at restaurants rose 0.5%, while online sales ticked up at the same pace.

    Neil Saunders, managing director of GlobalData Retail said the report was “representative of an economy that is tightening and of a shopper that is becoming more discerning and cautious about what they buy.”

    Consumer spending accounts for nearly 70% of U.S. economic activity and Americans have remained mostly resilient even with inflation near four-decade highs. Yet surging prices for everything from mortgages to rent have upped the anxiety level. Overall spending has slowed and shifted increasingly toward necessities like food, while spending on electronics, furniture, new clothes and other non-necessities has faded.

    “Even if people are employed and on paper look reasonably comfortable they are not feeling comfortable, and they are very concerned about what’s to come next,” said Joel Rampoldt, a managing director in the retail practice at AlixPartners.

    Inflation in the United States accelerated in September, with the cost of housing and other necessities putting more pressure on households, eliminating pay gains and almost guaranteeing that the Federal Reserve will keep raising interest rates aggressively.

    Consumer prices, excluding volatile food and energy costs, jumped 6.6% in September from a year ago — the fastest such pace in four decades. And on a month-to-month basis, core prices surged 0.6% for a second straight time, defying expectations for a slowdown and signaling that the Fed’s multiple rate hikes have yet to ease inflation pressures. Core prices typically provide a better picture of underlying price trends.

    Overall prices rose 8.2% in September compared with a year earlier, down slightly from August, the government said Thursday in its monthly inflation report.

    It is a crucial period for retailers as they prepare for the holiday shopping season, which accounts on average for 20% of the industry’s annual sales. Inflation is already changing shopper habits, causing them to trade down to cheaper stores like Walmart and dollar stores and within aisles, switching to cheaper brands.

    Walmart and Target are among others that are pushing deals earlier while others are offering new financing for customers.

    Conn’s HomePlus, a Texas furniture and mattress chain that caters to households at the lower end of the economic scale, launched a new layaway program that caters to the 20% to 25% of the chain’s applicants not eligible to qualify for other financing.

    “(Shoppers’) ability to spend on discretionary is more limited than it was before, ” said CEO Chandra Holt. Sales on things like deluxe coffee makers other consumer electronics have faded, she said. .

    A slew of holiday forecasts from various research and consulting firms point to a sales slowdown from last year, but adjusted for inflation, retailers could actually see a decline. AlixPartners predicts holiday sales to be up anywhere from 4% to 7% from last year, which was up 16%, according to its calculations. The National Retail Federation, the nation’s largest retail trade group, hasn’t released its holiday forecast.

    Janet Barnes, a 42-year-old College Park, Maryland resident, says she’s trading down and going to cheaper stores for groceries as prices spike. Instead of Wegmans or Whole Foods, she now heads to the discount chain Lidl and said she saves about 40% in groceries. Thrift stores have replaced Nordstrom, she said.

    “We are creatures of habit, said Barnes. “But it is not a bad deal to see what else is going on — and test something else.”

    —————-

    Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio

    AP Economics Writer Chris Rugaber in Washington contributed to this report.

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  • JPMorgan profit falls but beats estimates while Wells Fargo misses

    JPMorgan profit falls but beats estimates while Wells Fargo misses

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    JPMorgan Chase & Co. shares rose Friday after the megabank beat analyst targets for third-quarter profit and revenue and said it would top forecasts for its net interest in come in the coming quarter.

    In a busy day for bank earnings, Wells Fargo & Co.
    WFC,
    +4.62%
    fell short of earnings target but its stock rose in premarket trades as it beat revenue estimates.

    Morgan Stanley
    MS,
    +3.55%
    shares fell after it missed Wall Street’s targets for earnings and revenue.

    Citigroup Inc.
    C,
    +5.17%
    shares rose after beating its profit mark, although revenue fell 1% after breaking out the impact of divestitures.

    Overall, banks benefited from higher interest rates and strong trading volumes, but investment banking deal activity fell sharply. Banks also channeled more capital into reserves and away from their collective bottom lines to prepare for a potential economic downturn.

    As the largest bank in the U.S. and a bellwether for the sector, JPMorgan Chase
    JPM,
    +5.56%
    turned in a “solid performance” in the latest quarter, in the words of Chief Executive Jamie Dimon.

    The bank said it expects to meet its capital requirements under the international Basel III banking guidelines and resume stock buybacks early in 2023.

    “In the U.S., consumers continue to spend with solid balance sheets, job openings are plentiful and businesses remain healthy,” Dimon said. “However, there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.”

    Dimon said the bank remains “prepared for bad outcomes” so it can continue to operate even in the most challenging times.

    Dimon’s prepared statement comes a day after the oft-quoted CEO said the U.S. consumer sector remains strong currently, but inflation will start weighing on people by 2023.

    Also Read: JPMorgan CEO Dimon says inflation hasn’t dampened consumer spending yet but give it time

    JPMorgan Chase’s stock rose 2.4% ahead of Friday’s open after it said its third-quarter net income fell 16.7% to $9.74 billion, or $3.12 a share, from $11.69 billion, or $3.74 a share, in the year-ago quarter.

    Third-quarter revenue at the megabank rose to $32.72 billion from $29.65 billion in the year-ago quarter.

    Wall Street analysts expected JPMorgan Chase to earn $2.90 a share on revenue of $32.12 billion, according to estimated compiled by FactSet. T

    The bank said a net credit reserve build of $808 million ate into its net income for the latest quarter, compared with a net reserve release of $2.1 billion in the prior year.

    Net interest income climbed 34% to $17.6 billion and net interest income excluding its Markets unit rose 51% to $16.9 billion on higher interest rates.

    JPMorgan Chase’s total assets under management fell 13% to $2.6 trillion in the face of losses in the equities market and difficult conditions in the bond market.

    Looking ahead, JPMorgan Chase said it expects fourth-quarter net interest income of about $19 billion, ahead of the $18.2 billion analyst estimate.

    Octavio Marenzi, CEO of management consultant company Opimas said the bank’s results were “surprisingly solid” and if you strip away its payments for loan reserves, its profit is basically unchanged.

    “Individual lines of business, such as investment banking and mortgages did predictably badly, but this was more than compensated for by strength in other areas of lending and in trading,” Marenzi said.

    Shares of JPMorgan Chase have lost 30.9% in 2022 compared with a 17.3% drop by the Dow Jones Industrial Average
    DJIA,
    +2.83%
    and a 23.0% loss by the S&P 500
    SPX,
    +2.60%    .

    Wells Fargo misses profit target but share rise

    Wells Fargo & Co. shares advanced 2% in Friday’s premarket after the bank posted net income of $3.528 billion, or 85 cents a share, for the quarter to end September, down from $5.122 billion, or $1.17 a share, in the year-earlier quarter.

    The megabank fell short of the earnings-per-share target of $1.09 a share.

    Wells Fargo’s revenue rose to $19.505 billion from $18.834 billion a year ago, ahead of the $18.775 billion FactSet consensus.

    Chief Executive Charlie Scharf said performance was “significantly impacted” by $2 billion, or 45 cents a share, in operating losses “related to litigation, customer remediation, and regulatory matters primarily related to a variety of historical matters.”

    However, the bank is seeing historically low delinquencies and high payment rates, and the “timing of deterioration in those measures due to high inflation remains unclear. “

    The bank set aside $784 million in provisions for loan losses, after reducing them by $1.395 billion a year ago.

    Net interest income rose 36%, while noninterest income fell 25%, as mortgage banking income declined.

    Citi analyst Keith Horowitz said Wells Fargo turned in a “good” quarter overall, although larger-than-expected one-time charges and a reserve build reduced profits. But Wells Fargo also raised its outlook for net interest income “and we still see upside to 2023 consensus,” Horowitz said.

    Shares of Wells Fargo have declined 12% in the year to date.

    Morgan Stanley shares fall on results

    Morgan Stanley fell 2.6% in premarket trades after the investment bank missed Wall Street’s targets for earnings and revenue amid a drop in deal activity.

    Morgan Stanley said its third-quarter net income fell to $2.49 billion, or $1.47 per share, from net income of $3.7 billion, or $1.98 per share in the year-ago quarter.

    Third-quarter revenue dropped to $12.99 billion from $14.75 billion.

    Wall Street analysts were looking for earnings of $1.52 a share and revenue of $13.29 billion, according to FactSet data.

    “Firm performance was resilient and balanced in an uncertain and difficult environment, delivering a 15% return on tangible common equity,” said CEO James Gorman. “Wealth Management added an additional $65 billion in net new assets and produced a pre-tax margin of 28%, excluding integration-related expenses, demonstrating scale and stability despite declining asset values.”

    Morgan Stanley shares have lost 19.2% in 2022.

    Citi beats targets but shares lose ground

    Citigroup shares fell 1.3% in premarket trades Friday after the bank posted stronger-than-expected profit, but revenue fell 1% after breaking out divestiture-related impacts, as growth in net interest income was more than offset by lower non-interest revenue.

    Citi said its third-quarter net income dropped to $3.5 billion, or $1.63 per share, from $4.6 billion, or $2.15 a share, in the year-ago quarter.

    Excluding divestiture-related impacts, earnings were $1.50 a share.

    Total revenue increased to $18.5 billion from $17.4 billion.

    Analysts were looking for earnings of $1.42 a share and revenue of $18.26 billion for Citigroup, according to a FactSet survey.

    Citi said it continues to shrink its operations in Russia, and expects to end nearly all of the institutional banking services offered in the country next quarter. “To be clear, our intention is to wind down our presence in this country,” Chief Executive Jane Fraser said.

    Shares of Citigroup have dropped 28.9% in 2022.

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  • Royal Mail may lay off up to 6,000 after loss in first half

    Royal Mail may lay off up to 6,000 after loss in first half

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    International Distribution Services PLC said Friday that its U.K. division Royal Mail swung to an adjusted operating loss for the first half of fiscal 2023, mostly due to the effect of three days of industrial action.

    The company
    IDS,
    -13.14%
    said that Royal Mail’s adjusted operating loss for the six month period ended in September was 219 million pounds ($248.1 million) compared with an adjusted operating profit of GBP235 million for the first half of fiscal 2022. This included a GBP70 million of direct negative impacts stemming from three days of industrial action, it said.

    Royal Mail might require between 5,000 to 6,000 redundancies by the end of August, 2023, IDS said.

    The company said that it expects Royal Mail to post full-year adjusted operating loss–a metric which strips out exceptional and other one-off items–to be around GBP350 million. The company said this estimate includes the direct and immediate effect of eight days of industrial action which have taken place or been notified to Royal Mail, but excluding any charges for voluntary redundancy costs.

    “This may increase to around a GBP450 million loss if customers move volume away for longer periods following the initial disruption,” it said.

    The company said that the loss for the full year would materially increase and it might require “further operational restructuring and headcount reduction” if the Communication Workers Union proceeds with the 16 days of industrial action announced.

    Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com

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  • Amazon’s holiday sales event sees lower sales, group says

    Amazon’s holiday sales event sees lower sales, group says

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    NEW YORK — Amazon said Thursday its Prime members ordered more than 100 million items during a sales event this week that analysts are expecting to be a bellwether for the holiday shopping season.

    As expected, the Seattle-based e-commerce company did not share sales figures. Still, some third-party estimates offer clues on how consumers spent during the two-day discount event that ran on Tuesday and Wednesday.

    According to the data group Numerator, which tracked roughly 44,670 orders during the sale, the average order size clocked in at $46.68, $13 less than what it was during Amazon’s Prime Day sales event in July. Inflation also had an impact – 26% of shoppers passed on a deal because it wasn’t a necessity, Numerator said.

    Major retailers have been offering more holiday discounts this year and doing it much earlier than usual, aiming to offload excess goods and offer cash-strapped Americans better deals amid high inflation.

    Amazon’s discount event this week was the first time the company offered major sales to its Prime members twice in one year. Walmart has also been offering sales this week and has expanded its window for gift returns to between Oct. 1 and Jan. 31, compared with last year’s return window of Nov. 1 to Jan. 24. Meanwhile, Target began offering holiday deals last week during a two-day discount event. The company declined to share its revenue from those sales.

    According to Salesforce, which analyzes online shopping data, the average online discount rate on Tuesday and Wednesday was roughly 21%, the deepest discount rate since the beginning of the pandemic outside of Cyber Week, the time between Thanksgiving and Cyber Monday.

    But despite the deep discounts, consumers are still generally paying more than they did in the past two years due to high inflation. The average online selling price on Tuesday and Wednesday, for example, was up 8% compared to last year, and 17% compared to 2020, Salesforce said.

    Online spending in November and December is expected to hit $209.7 billion, a 2.5% jump from 2021, according to Adobe Analytics. That’s sluggish growth compared to last year’s gain of 8.6%.

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  • Taiwan chipmaker TSMC says quarterly profit $8.8 billion

    Taiwan chipmaker TSMC says quarterly profit $8.8 billion

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    TAIPEI, Taiwan — Taiwan Semiconductor Manufacturing Co., the biggest contract manufacturer of processor chips for smartphones and other products, said Thursday that its quarterly profit rose 79.7% over a year earlier to $8.8 billion amid surging demand.

    Quarterly revenue rose 47.9% over a year ago to $19.2 billion, the company reported.

    TSMC, headquartered in Hsinchu, Taiwan, makes processor chips for brands including Apple Inc. and Qualcomm Inc. Many of their products are assembled by factories in China, which has exposed TSMC to the possible impact of U.S.-Chinese tension over technology and security.

    TSMC’s U.S.-traded shares fell 14% in value after Washington on Friday tightened restrictions on Chinese access to advanced computer chips. Those controls are based on limiting the ability of TSMC and other suppliers to use U.S. chip or manufacturing technology for Chinese customers.

    The American Embassy in Beijing didn’t immediately respond to a question about whether TSMC had received an exemption that might allow normal supplies to Chinese factories to continue.

    TSMC’s chip supplies to China already were restricted under a 2020 order by then-President Donald Trump that prohibits vendors from using U.S. technology to manufacture for Huawei Technologies Ltd., a maker of network switching gear and smartphones. Washington says Huawei is a security risk and might facilitate Chinese spying, which the company denies.

    Chipmakers are benefiting for demand for next-generation telecoms, high-performance computing and chips for use in products from cars to medical devices.

    TSMC announced plans last year to invest $100 billion over the next three years in manufacturing and research and development.

    Most semiconductors used in smartphones, medical equipment, computers and other products are made in Taiwan, South Korea and China.

    That has prompted concern among American officials about reliance on supplies that might be disrupted by conflict between China and Taiwan. They are lobbying TSMC and other chipmakers to set up factories in the United States.

    TSMC announced plans last year to build its first chip factory in Japan. The company and Sony Corp. later said they would jointly invest $7 billion in the facility.

    TSMC operates a semiconductor wafer fabrication facility in Camas, Washington, and design centers in San Jose, California, and Austin, Texas.

    The company has announced plans for a second U.S. production site in Arizona.

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  • Philips warns of 5% fall in like-for-like sales due to supply-chain woes

    Philips warns of 5% fall in like-for-like sales due to supply-chain woes

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    Royal Philips NV said Wednesday that its performance for the third quarter was hurt by stronger-than-anticipated supply-chain challenges, and adopted a more pessimistic view on its sales through the end of the year.

    The Dutch health-technology company
    PHIA,
    -8.01%

    PHG,
    -0.80%
    said that it expects to record a 1.3 billion euro ($1.26 billion) impairment charge in the period. The company said that this is an impairment of goodwill of Philips Respironics, its sleep and respiratory care business, and that it is due to revisions to the business’s financial forecast.

    This compares with adjusted Ebita of EUR512 million, or 12.3% of sales, a year earlier.

    Analysts had seen the metric at EUR336 million, according to a consensus estimate provided by the company.

    Philips expects to book a EUR1.3 billion impairment charge on its sleep and respiratory care business after revising its financial forecast for the unit, it said.

    Group comparable sales for the quarter fell around 5%.

    For the last quarter of the year, Philips now expects a mid-single-digit decline in comparable sales, it said.

    In late July, Philips had guided for 6%-9% growth in comparable sales over the second half of the year.

    “Philips still expects a better second half of the year, compared to the first half of 2022. However, the company sees prolonged supply chain disruptions and a worsening macro-environment,” it said.

    The company said it expects adjusted Ebita margin to be in the range of a high single to double digit for the last quarter of the year.

    Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com and Cristina Roca at cristina.roca@wsj.com

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