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Tag: financial results

  • Chevron earnings soar to a record | CNN Business

    Chevron earnings soar to a record | CNN Business

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    New York
    CNN
     — 

    Chevron reported a record full-year profit of $36.5 billion, buoyed by high oil prices.

    Adjusted earnings for the year more than doubled from the $15.6 billion Chevron earned in 2021 and up 36% from its previous record profit set in 2011.

    The oil company’s fourth-quarter earnings came in at $7.9 billion, up 61% from a year earlier but less than the record quarterly income of $11.4 billion it reported for the second quarter.

    The fourth quarter earnings per share of $4.09 fell short of the forecast of $4.38 a share from analysts surveyed by Refinitiv. But revenue in the quarter of $56.5 billion topped forecasts by nearly $2 billion and was up 17% from a year earlier.

    Full-year revenue of $246.3 billion was up 52% from 2021.

    Shares of Chevron

    (CVX)     were down slightly more than 1% in premarket trading.

    Ahead of Friday’s report Chevron, the nation’s second largest oil company, behind only ExxonMobil, had announced it was hiking its dividend by 6% along with a massive $75 billion share repurchase plan. The decision brought criticism from those who said oil companies should be investing their money in producing more oil and gasoline to increase supply and drive down prices for inflation-weary drivers.

    “For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it,” said Abdullah Hasan, assistant press secretary at the White House, in a tweet Wednesday evening after the share repurchase was announced.

    Chevron said Friday its investments in operations increased by more than 75% from 2021, and annual US production increased to the equivalent of 1.2 million barrels of oil a day.

    The amount it spent on capital spending and exploration in 2022 was $12.3 billion, up 43% compared with $8.6 billion spent in 2021, but only slightly more than the $11 billion it spent on dividends or the $11.3 billion on share repurchases during the year.

    The record profit came primarily from the soaring oil prices during the year, not its increased production.

    Chevron and other major oil companies all benefited from the spike in oil and gasoline prices during 2022, in the wake of Russia’s invasion of Ukraine. While Russia, one of the world’s leading oil exporters, sent relatively little oil to the United States, sanctions placed on Russia following the invasion roiled global commodity prices which set the price of oil.

    Futures for a barrel of Brent crude oil, the global benchmark, hit a record of $123.58 close in early June, up more than 50% from six months earlier ahead of the war, and the average price of a gallon of regular gas in the United States broke the $5 mark a week later to reach a record $5.03.

    But oil and gas prices have fallen substantially since then. Brent closed Thursday at $87.47, slightly below the year-earlier level, while the average price of a gallon of regular gas stands at $3.51 a gallon, only slightly higher from the $3.35 average of a year ago.

    But prices have started to rise once again, partly because Covid lockdown rules in China have been lifted. Traders believe that’s a bullish sign for global demand for oil and gasoline. Refinery problems caused by winter weather are also pushing prices higher.

    The average US price of a gallon of regular gasoline is up nearly 12 cents in just the last week and up 41 cents, or 13%, in the last month. Brent oil is up 12% in the last three weeks.

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  • Southwest posts quarterly loss and warns more losses are ahead after service meltdown | CNN Business

    Southwest posts quarterly loss and warns more losses are ahead after service meltdown | CNN Business

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    New York
    CNN
     — 

    Southwest Airlines reported a loss for the fourth quarter because of the company’s service meltdown over the holiday travel season, and it warned the costs from those problems will result in another loss in the first quarter.

    The airline was forced to cancel more than 16,700 flights between December 21 and 29, roughly half its schedule during that period. Thursday, Southwest said the meltdown cost the airline about $800 million, resulting in an adjusted net loss in the quarter of $226 million. Still, it managed to report an adjusted annual profit of $723 million, a turnaround from $1.3 billion it lost in 2021.

    It said it expects another loss in the first quarter due to the continued impact and costs associated with meltdown. The first quarter is typically the slowest and least profitable period for US air travel. However, Southwest said it is encouraged by strong bookings for March.

    Southwest

    (LUV)    ’s quarterly loss of 38 cents a share was far worse than Wall Street analysts’ forecast. Shares of Southwest

    (LUV)     lost 3% because of that miss and especially its sour outlook.

    The airline said it expected a first quarter loss because of an increase in passengers canceling reservations and a lower level of bookings for January and February, which the airline said “are assumed to be associated with the operational disruptions in December.” Those lost bookings in the current quarter are expected to cost it between $300 million to $350 million.

    To repair customer relations, Southwest has given affected passengers 25,000 bonus points in frequent flier accounts, as well as travel vouchers. And in addition to refunding fares for canceled flights, it is reimbursing those passengers who bought tickets on other airlines or incurred other unexpected travel costs.

    Even with the meltdown, which cost Southwest $410 million in lost revenue when it had to refund tickets to passengers on canceled flights, it still reported record fourth quarter sales of $6.2 billion, up 7% from the same quarter of 2019, just before the pandemic.

    Southwest brought in that record revenue even though the number of seats it was able to fly in the quarter was down 6% from the same period of 2019, before the pandemic, when adjusted for miles flown. But the strong demand meant that Southwest passengers paid 10.6% more for every mile they flew than they were paying in late 2019.

    A massive winter storm started the service problems, but Southwest had a much tougher time recovering from the weather than other airlines because of an antiquated crew scheduling system that was quickly overwhelmed, leaving the airline unable to get the staffing it needed to locations to fly flights. Nearly half of its schedule was canceled during the December 20 to 29 period. Some days, as much as 75% of its scheduled flights were grounded.

    The airline said that it is “conducting a third-party review of the December events and … reexamining the priority of technology and other investments planned in 2023.”

    Southwest has traditionally been the most profitable US airline by a large margin. Many of its rivals were in and out of bankruptcy in recent decades due to losses brought on by recessions and events like the 9/11 attack, but Southwest had put together a string of 47 consecutive profitable years before the pandemic. In 2020, Southwest and all other airlines to reported a loss.

    All other airlines lost money again in 2021, excluding special items such as financial support from the federal government, and most airlines reported another quarterly loss in the first three months of 2022 as the surge in Covid cases caused by the Omicron variant limited demand for travel.

    But demand to fly had been very strong starting with the Spring Break travel season, and air fares soared as passengers paid top dollar to take long-delayed trips. Southwest and most other US airlines reported profits in the second and third quarters, and most have either reported profitable fourth quarters or are forecast to do so – as Southwest had been before the meltdown.

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  • Microsoft quarterly profit falls 12% but cloud computing business shows strength | CNN Business

    Microsoft quarterly profit falls 12% but cloud computing business shows strength | CNN Business

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    CNN
     — 

    Microsoft on Tuesday posted weaker-than-expected revenue and a double-digit percentage drop in profit for the final three months of last year amid broader economic uncertainty and reduced demand for personal computers and software.

    The tech giant reported revenue of $52.7 billion for the quarter, a modest 2% increase from the year prior but slightly less than analysts had expected. It reported net income of $16.4 billion, a 12% decline from the year prior.

    The earnings results come at a turbulent moment for Microsoft, and the tech industry as a whole. Microsoft said last week that it plans to lay off 10,000 employees as part of broader cost-cutting measures. In his explanation of the cuts, CEO Satya Nadella pointed to changing demand for digital services years into the pandemic as well as looming recession fears.

    Demand for personal computers, and the Microsoft operating systems that power them, has pulled back after experiencing a boom early in the pandemic. Consulting firm Gartner said earlier this month that worldwide PC shipments fell more than 28% in the fourth quarter of 2022 compared to the same period the prior year. This marked the largest quarterly shipment decline since Gartner began tracking the PC market in the mid-90s.

    On Tuesday, Microsoft reported revenue declines from its Windows OEM operations and from its Xbox content and services lines. Microsoft also said it would incur $800 million in severance expenses from the layoffs announced this month, as well as charges from “changes to our hardware portfolio, and costs related to lease consolidation activities.”

    But the earnings report had some bright spots. Revenue from its cloud computing division, a key area of focus for Microsoft in recent years, increased 22% from the prior year. An analyst at Evercore described the results as “a sigh of relief.”

    Shares of Microsoft rose 4% in after-hours trading Tuesday on the news.

    “The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” CEO Satya Nadella said in a statement accompanying the results. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

    Earlier this week, Microsoft confirmed it is making a “multibillion dollar” investment into OpenAI, the company behind the viral AI-powered chatbot tool ChatGPT. The deepening partnership between the two companies – Microsoft was an early investor in OpenAI – could help catapult Microsoft as an AI leader and pave the way for the company to incorporate elements of ChatGPT into some of its hallmark applications, such as Outlook and Word.

    In his memo to staffers announcing the job cuts, Nadella said the company will continue to invest in “strategic areas for our future” and pointed to advances in AI as “the next major wave” of computing.

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  • Forget inflation, it’s all about earnings | CNN Business

    Forget inflation, it’s all about earnings | CNN Business

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    New York
    CNN
     — 

    To everything there is a season and now is the time for earnings.

    Over the past few weeks investors have been squarely focused on inflation and Fed policy, but now market reactions are getting bigger for earnings (especially the misses) and smaller for economic data.

    What’s happening: “We expect earnings to take the center stage going forward,” wrote Bank of America strategists Savita Subramanian and Ohsung Kwon in a note on Friday. They noted that over the last three quarters, S&P 500 reactions to earnings beats and misses have soared higher and have now surpassed the one-day market reaction to both CPI inflation and Fed policy meeting decisions.

    Companies that missed on both sales and earnings-per-share during the last quarter underperformed the S&P 500 by nearly six percentage points on average the next day, the largest reaction to earnings misses on record.

    Shares of Disney sank 13.16% last November — their lowest level in more than two years — when they missed earnings estimates. Meta shares plummeted 24% after showing a drop in third-quarter revenue in October, the company’s second consecutive quarterly revenue decline. And shares of Palantir closed down more than 11% in November after it missed estimates only slightly.

    “We see this as a narrative shift in the market from the Fed and inflation to earnings: reactions to earnings have been increasing, while reactions to inflation data and FOMC meetings have been getting smaller,” wrote Subramanian and Kwon.

    So we can expect some serious volatility over the next few weeks as companies report their fourth quarter corporate earnings.

    Bank of America’s predictive analytics team analyzed earnings transcripts to calculate sentiment scores and found that corporate sentiment remained flat in the third quarter, well off its highs, which points to a potential earnings decline ahead.

    Similarly, companies’ references to of better business conditions (specific usage of the words “better” or “stronger” vs. “worse” or “weaker”) remained well below the historical average, and mentions of optimism dropped to the lowest level since the first quarter of 2020.

    So far, swings have been to the downside. S&P 500 fourth-quarter earnings-per-share estimates have dropped by about 7% since October. Early earnings reports from some of the largest financial institutions point to a bleak quarter.

    Bad news ahead: The estimated earnings decline for the S&P 500 in the fourth quarter of 2022 is -3.9%, according to a FactSet analysis. If that is indeed the actual drop, it will mark the first earnings decline reported by the index since the third quarter of 2020.

    Over the past few weeks, reported FactSet, earnings expectations for the first and second quarters of 2023 switched from year-over-year growth to year-over-year declines.

    The latest: JPMorgan beat estimates for fourth-quarter revenue but also increased the amount of money for expected defaults on loans. The bank added a $2.3 billion provision for credit losses in the quarter, a 49% increase from the third quarter.

    The move was driven by a “modest deterioration in the Firm’s macroeconomic outlook, now reflecting a mild recession in the central case,” said the report. On a subsequent call, JPMorgan CFO Jeremy Barnum told reporters that the bank expects a recession to hit by the fourth-quarter of 2023.

    Bank of America

    (BAC)     also beat earnings expectations but CEO Brian Moynihan said Friday that the bank is preparing for rising unemployment and a recession in 2023. “Our baseline scenario contemplates a mild recession,” he said. The bank added a $1.1 billion provision for credit losses, a sharp change from last year when that number was negative.

    What’s next: Hold on to your hats. During the upcoming week, 26 S&P 500 companies are scheduled to report results for the fourth quarter.

    Apple CEO Tim Cook has responded to angry shareholders by recommending that the company cut his pay this year, reports my colleague Anna Cooban.

    Cook was granted $99.4 million in total compensation last year. The vast majority of his 2022 compensation — about 75% — was tied up in company shares, with half of that dependent on share price performance.

    But shareholders voted against Cook’s pay package after Apple’s stock fell nearly 27% last year. The vote is nonbinding, but the board’s compensation committee said Cook himself requested the reduction.

    “The compensation committee balanced shareholder feedback, Apple’s exceptional performance, and a recommendation from Mr. Cook to adjust his compensation in light of the feedback received,” the company said in its annual proxy statement released Thursday.

    But don’t cry for Tim Cook just yet. This year, the executive’s share award target is $40 million. About $30 million, or three-quarters, of that is linked to share price performance. The tech boss, who has headed up Apple

    (AAPL)     since 2011, is estimated to have a personal wealth of $1.7 billion, according to Forbes.

    The bottom line: Apple’s share price, like other tech companies, plunged last year as coronavirus lockdowns shuttered some of its factories in China. Supply chain bottlenecks and fears that a global economic slowdown would crimp demand also dragged down its stock.

    Angry investors believe that the person at the helm of the company should also see a drop in pay.

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  • Bank earnings fail to impress investors as recession worries rise | CNN Business

    Bank earnings fail to impress investors as recession worries rise | CNN Business

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    New York
    CNN
     — 

    JPMorgan Chase, Bank of America, Citigroup and asset management giant BlackRock posted results that topped Wall Street’s forecasts Friday, but investors were nonetheless a little disappointed at first.

    Trading was choppy, with most bank stocks falling at the open before rebounding. Shares of JPMorgan Chase

    (JPM)     were up about 2.5% in late afternoon trading while BofA

    (BAC)     was up 2%. Wells Fargo

    (WFC)    , which reported earnings that missed Wall Street’s targets, reversed earlier losses and was up 3%. Citi

    (C)     was up 2% while BlackRock

    (BLK)     was flat.

    “The earnings were solid, but the market is concerned with recession fears,” said John Curran, managing director and head of North American bank coverage at MUFG.

    Investors might have been concerned by the downbeat tone of the big banks. Executives are clearly still worried about inflation and the threat of a recession this year following several big interest rate hikes by the Federal Reserve.

    JPMorgan Chase CEO Jamie Dimon said in the bank’s earnings statement that although the economy is still strong and that consumers and businesses are spending and healthy, “we still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher.”

    The bank added in the earnings release that it now expects a “mild recession” as a base economic case. CFO Jeremy Barnum added during a conference call with reporters that in addition to the slowdown that has already started in its home lending unit, it is starting to see “headwinds” in auto lending.

    Meanwhile, BofA CEO Brian Moynihan noted that this is “an increasingly slowing economic environment” and Wells Fargo CEO Charlie Scharf said “we are carefully watching the impact of higher rates on our customers.” Wells Fargo recently announced plans to pull back on its massive mortgage business.

    Banks are clearly worried about a looming recession, and Wall Street has taken notice.

    Moody’s Investors Service analyst Peter Nerby noted in a report that “credit provisions are rising” at JPMorgan Chase and that Citi “built capital and reserves in anticipation of a slowdown in core markets.”

    The Fed’s rate hikes aren’t helping either.

    “Higher than expected interest rates pose a significant risk to the outlook for credit quality, loan growth and net interest margins,” said David Wagner, a portfolio manager at Aptus Capital Advisors, in an email.

    Concerns about the economy were one reason why stocks plunged in 2022, suffering their worst year since 2008. As a result of the Wall Street slump, there was a major slowdown in merger activity and initial public offerings.

    That hurt the investment banking businesses for the top banks. JPMorgan Chase and Citi each said that advisory fees plummeted nearly 60% in the quarter.

    Goldman Sachs

    (GS)     and Morgan Stanley

    (MS)     will give more color about the health of Wall Street next Tuesday when they both report their fourth quarter results.

    Goldman Sachs, which has aggressively built up a consumer banking unit over the past few years, has struggled to make money in that division. Goldman Sachs disclosed in a regulatory filing Friday that it has lost more than $3 billion in its consumer business since 2020.

    There were some signs of optimism though. BlackRock, which owns the massive iShares family of exchange-traded funds, reported a rebound in assets under management from the third quarter to the fourth quarter as stocks soared in October and November.

    “The current environment offers incredible opportunities for long-term investors,” said BlackRock CEO Larry Fink in the earnings release.

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  • Samsung estimates quarterly profit sank to 8-year low on demand slump | CNN Business

    Samsung estimates quarterly profit sank to 8-year low on demand slump | CNN Business

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    Seoul
    Reuters
     — 

    Samsung Electronics flagged on Friday its quarterly profit tumbled to an eight-year low as a weakening global economy hammered memory chip prices and curbed demand for electronic devices.

    Profits at the world’s largest memory chip, smartphone and TV maker are expected to shrink again in the current quarter, analysts said, after Samsung announced its October-December operating profit likely fell 69% to 4.3 trillion won ($3.37 billion) from 13.87 trillion won a year earlier.

    It was Samsung

    (SSNLF)    ’s smallest quarterly profit since the third quarter of 2014 and fell short of a 5.9 trillion won Refinitiv SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.

    “All of Samsung’s businesses had a hard time, but chips and mobile especially,” said Lee Min-hee, analyst at BNK Investment & Securities.

    Quarterly revenue likely fell 9% from the same period a year earlier to 70 trillion won, Samsung said in a short preliminary earnings release. Asia’s fourth-biggest listed company by market value is due to release detailed earnings later this month.

    Rising global interest rates and cost of living have dampened demand for smartphones and other devices that Samsung makes and also for the semiconductors it supplies to rivals including Apple

    (AAPL)    .

    “For the memory business, the decline in fourth-quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances,” Samsung said in the statement.

    Its mobile business’ profit declined in the fourth quarter as smartphone sales and revenue decreased due to weak demand resulting from prolonged macroeconomic issues, Samsung added.

    “Memory chip prices fell in the mid-20% during the quarter, and high-end phones such as foldable didn’t sell as well,” said BNK Investment’s Lee.

    Three analysts said they expected Samsung’s profits to dive again in the current quarter, with a likely operating loss for the chips business as a glut drives a further drop in memory chip prices.

    Samsung shares rose 0.3% in Friday morning trade, underperforming a 0.6% rise in the wider market. Shares of rival memory chip maker SK Hynix rose 1%.

    “The reason shares are rising despite the poor earnings result is… investors are hoping Samsung will need to reduce production, like Micron or SK Hynix said they would, which would help the memory industry overall,” said Eo Kyu-jin, an analyst at DB Financial Investment.

    Samsung had said in October that it did not expect much change to its 2023 investments. Analysts said that Samsung has a history of not announcing production cuts in memory chips, but could organically adjust investment by delaying bringing in equipment or through other ways.

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  • LinkedIn is having a moment thanks to a wave of layoffs | CNN Business

    LinkedIn is having a moment thanks to a wave of layoffs | CNN Business

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    New York
    CNN
     — 

    In a normal year at this time, a typical LinkedIn feed might be full of posts about year-end reflections on leadership and professional goals and suggested lifehacks for the year ahead — possibly with a few posts from CMOs offering tips on brand strategy, for good measure.

    Those posts are still there. But mixed in are many others about job hunts, offers of support for laid off friends and colleagues, and advice for coping with career hurdles in an uncertain economic environment.

    Some LinkedIn users affected by recent layoffs have formed groups on the site aimed at providing assistance, coordinating around signing exit paperwork and aiding with connections for new jobs. One LinkedIn group of employees affected by the November layoffs at Facebook-parent Meta, for example, now has more than 200 members. Even bosses who are doing the laying off have turned to LinkedIn to explain themselves and seek support or advice, as one marketing CEO did in a post alongside a tearful selfie last year (to mixed results).

    If the first year of the pandemic was marked by widespread layoffs in lower paying retail and services jobs, the past few months have been defined by something different: the prospect of a white-collar recession. Even as the overall job market remains strong, there has been a wave of recent layoffs in the tech and media industries — which just so happen to make up a core part of LinkedIn’s user base. Suddenly, the normally staid professional network has become both a vital lifeline for recently laid off workers and a surprisingly lively social platform.

    The LinkedIn mobile app was downloaded an estimated 58.4 million times worldwide in 2022 across the Google Play and Apple app stores, up 10% from the prior year, according to research firm Sensor Tower.

    The number of posts on LinkedIn mentioning “open to work” were up 22% during November compared to the same period in the prior year, according to data provided by the company. LinkedIn says it also saw a steady increase in the rate of users adding connections last year compared to the year prior, a sign that users were more active on the platform.

    The uptick in use appears to have been good for LinkedIn’s business. The platform posted 17% year-over-year revenue growth in the three months ended in September, according to parent company Microsoft’s most recent earnings report. Microsoft CEO Satya Nadella told analysts in the October earnings call that LinkedIn was seeing “record engagement” among its 875 million members, with growth accelerating especially in international markets.

    Some of LinkedIn’s momentum may predate the wave of layoffs. “There’s been an uptick in [LinkedIn use] since the pandemic,” said Jennifer Grygiel, an associate professor and social media expert at Syracuse University. “You had to do social distancing and we were quarantining and people were working remotely so there was a shift in real-life networking possibilities.”

    LinkedIn rose to the occasion — and now it may be rising to another one.

    Even apart from the layoffs, the social media landscape has been through a volatile year. Facebook and Instagram have been criticized by users for racing to turn their services into TikTok. TikTok has been criticized over concerns that user data could end up in the hands of the Chinese government. And after Elon Musk’s takeover of Twitter late last year, the platform has been criticized for morphing into a possible haven for its most incendiary users.

    But LinkedIn remains, as ever, LinkedIn — and at this moment, with fears of a looming recession and career concerns top of mind, LinkedIn may be just what the digital world needs.

    Grygiel said many people working in media or academia are likely now looking for somewhere to build and engage in professional communities other than Twitter. And while upstart Twitter alternatives like Mastodon have experienced a surge in growth, they still don’t have the same sort of network effect that comes with a legacy platform’s broad user base.

    LinkedIn in recent years has leaned into courting influencers who regularly post content to the site, potentially giving users more reasons to visit. And the platform has been growing its “learning” section, which provides video courses taught by various industry experts and which the company says experienced a 17% increase in hours spent as of November compared to the year prior. But lately it appears users have more than enough reason to use LinkedIn amid a wave of thousands of layoffs.

    Perhaps the clearest and most public examples of LinkedIn’s new centrality came from rival social networks like Twitter.

    In the wake of Twitter’s November mass layoffs — in which half the company was terminated, followed by additional firings and exits — many former and remaining employees took to LinkedIn, rather than the platform they had built, to seek support, community and new opportunities.

    One group of Twitter employees created a spreadsheet of laid-off workers from the company alongside recruiters hiring for other firms, and used LinkedIn to help facilitate sign-ups. Another pair of former Twitter employees set up a system to connect job hunters with recruitment professionals open to volunteering to provide free resume review and interview prep services, which they promoted through LinkedIn.

    “We completely understand how the job-hunting process can be scary and overwhelming … While we can’t guarantee where your next opportunity will be or when it will come, we can offer guidance, so you will be ready for that opportunity when it arrives,” Darnell Gilet, a former Twitter senior technical recruiter who helped coordinate the effort, said in a LinkedIn post.

    Gilet, who was affected by the mass layoffs at Twitter in November following Elon Musk’s takeover, told CNN last month that around 28 different recruiters and talent acquisition professionals had agreed to participate in the system, and that he himself had spoken to nearly two dozen job seekers since shortly after he was laid off to offer advice and support. He said LinkedIn seemed like the obvious place to promote the service.

    “Chaos creates opportunity for somebody, right?” Gilet said. “People are getting laid off and you have this recession that’s looming, the ideal place … that would have the greatest growth opportunity from that would be a platform that’s focused on careers like LinkedIn. So it makes perfect sense.”

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  • Macy’s says its holiday sales will be lower, citing inflation pressures | CNN Business

    Macy’s says its holiday sales will be lower, citing inflation pressures | CNN Business

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    New York
    CNN
     — 

    Turns out inflation may have put a damper on the holidays.

    Macy’s chair and CEO Jeff Gennette said lulls during the non-peak holiday weeks “were deeper than anticipated” and that consumers will continue to feel pressured into 2023, in a Q4 update Friday.

    Macy’s said Friday its net sales from the holiday quarter will likely be at the low-end to mid-point of its previously issued range of $8.16 billion to $8.4 billion. The retailer said its adjusted diluted earnings per share are expected to be between $1.47 to $1.67.

    In last year’s fourth quarter results, Macy’s earned $8.67 billion, above analysts’ forecasts, and had an adjusted earnings per share of $2.45.

    Total end-of-quarter inventories are on track to fall slightly below last year and down mid-teens relative to 2019.

    Gennette said its Black Friday and Cyber Monday sales met expectations and the week leading up to and following Christmas beat them.

    “Overall, our occasion apparel and gift-giving business were strengths, and inventory composition and price points aligned with customers’ needs,” Gennette said, noting that its high-end Bloomingdale’s stores and cosmetics line Bluemercury continued to outperform forecasts.

    Macy’s warning may provide an early clue to investors wondering if high inflation has hampered shopping demand during the holidays.

    Americans spent more this season to keep up with high prices. US retail sales increased 7.6% during the period between November 1 to December 24 compared to the same time last year, according to the Mastercard Spending Pulse. US retail sales were lower than expected in November, falling 0.6% during the month, which was the weakest performance in nearly a year.

    Gennette warned that consumer sentiment is unlikely to change with the new year.

    “Based on current macro-economic indicators and our proprietary credit card data, we believe the consumer will continue to be pressured in 2023, particularly in the first half, and have planned inventory mix and depth of initial buys accordingly,” the Macy’s CEO said.

    The company expects to report full results for the fourth quarter and fiscal year 2022 in early March 2023.

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  • Housing slump likely to continue but some see hopeful signs ahead | CNN Business

    Housing slump likely to continue but some see hopeful signs ahead | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    Mortgage rates have ticked down recently, but are still up dramatically from a year ago thanks to the surge in long-term bond yields as the Federal Reserve hiked interest rates.

    While that’s already had a negative impact on the housing market, we’ll get more details this week about how much worse the damage has become.

    A long list of housing data is on tap. On Tuesday the US Census Bureau will report housing starts and building permits figures for November, followed by Friday’s release of new home sales data for the same month. In between that will be the November existing home sales numbers from the National Association of Realtors on Wednesday, as well as weekly data on mortgage rates and applications on Thursday.

    For the past few months, existing and new home sales have been steadily declining because of the spike in rates and the fact that home prices remain stubbornly high for first-time buyers. Housing starts and building permits have been choppier on a month-to-month basis, but those figures are both down from a year ago.

    Still, there are some promising signs that the worst could soon be over. Shares of Lennar

    (LEN)    , one of the largest homebuilders in the US, rallied after reporting earnings last week. Revenue topped forecasts and the company’s guidance for the number of homes it expected to deliver next year was a little higher than analysts’ estimates as well.

    Lennar investors “may be looking ahead to 2023, perhaps crossing the valley from recession to potential recovery,” according to CFRA Research analyst Kenneth Leon.

    Others in the industry are cautiously optimistic as well.

    According to data from Amherst Group, an investment firm that buys single-family homes to rent out, it’s important to put the recent slide in prices in context.

    Amherst said home prices are still up about 40% from pre-pandemic levels. So even a further drop of about 15% would merely bring them to mid-2021 levels. In other words, this isn’t like the mid-2000s real estate bubble bursting.

    It’s also worth noting that the job market is still strong and wages are growing. What’s more, many consumers still have decent levels of excess savings thanks to pandemic era government stimulus.

    That all amounts to a few good reasons why the housing market could avoid a severe and prolonged slump.

    “The U.S. housing market is still supported by a tight labor market, the lock-in effect of low fixed mortgage rates for existing homeowners, tight mortgage underwriting, low leverage in the mortgage sector, and low housing supply,” said Brandywine fixed-income analyst Tracy Chen in a report this month.

    “We believe we can avoid a severe housing downturn like the one in the Global Financial Crisis,” Chen added.

    Others point out that even though housing sales may remain weak due to high home prices and still elevated mortgage rates, the good news is that most existing homeowners are still paying their monthly mortgage on time.

    Again, that’s a stark contrast from 2008 when many people with subprime loans or borrowers with poor credit histories were unable to keep up with their mortgage payments.

    “Housing is not bringing down the economy. Yes, the housing market has been impacted. But mortgage delinquencies are still low,” said Gene Goldman, chief investment officer at Cetera Investment Management.

    There aren’t a ton of companies reporting their latest earnings this week. But the few that are could give more clues about the financial health of consumers and the state of corporate spending.

    Cereal giant General Mills

    (GIS)     will release earnings on Tuesday. Analysts are expecting a slight increase in both sales and profit. Consumers may be growing increasingly wary about inflation and the broader economy, but they’re still eating their Wheaties. Shares of General Mills

    (GIS)     have soared nearly 30% this year.

    Analysts are less optimistic about the outlooks for sneaker king and Dow component Nike

    (NKE)    , used car retailer CarMax

    (KMX)     and memory chip maker Micron

    (MU)    , whose semiconductors are used in devices ranging from cell phones and computers to cars.

    Earnings are expected to decline for these three companies. They won’t be the only leaders of Corporate America to report weak results.

    According to data from FactSet, fourth-quarter earnings for S&P 500 companies are expected to decline 2.8% from a year ago. Analysts have been busy cutting their forecasts too. John Butters, senior earnings analyst at FactSet, noted in a report that fourth-quarter profits were expected to rise 3.7% as recently as September 30.

    Investors are also going to be paying very close attention to what companies say in their earnings reports about their outlooks for 2023. Analysts currently are anticipating earnings growth of 5.3% for 2023. That could be too optimistic… especially if companies start cutting their own forecasts due to worries about the broader economy.

    “Odds of a recession are pretty high,” said Vincent Reinhart, chief economist and macro strategist at Dreyfus & Mellon. “That will have a knock-on effect for corporate earnings. Higher rates and weaker earnings suggest more pain for stocks.”

    Monday: Germany Ifo business climate index

    Tuesday: US housing starts and building permits; China sets loan prime rate; Bank of Japan interest rate decision; earnings from General Mills, Nike, FedEx

    (FDX)     and Blackberry

    (BB)

    Wednesday: US existing home sales; Germany consumer confidence; earnings from Rite Aid

    (RAD)    , Carnival

    (CCL)    , Cintas

    (CTAS)    , Toro

    (TTC)     and Micron

    Thursday: US weekly jobless claims; US Q3 GDP (third estimate); earnings from CarMax

    (KMX)     and Paychex

    Friday: US personal income and spending; US PCE inflation; US new home sales; US durable goods orders; US U. of Michigan consumer sentiment; Japan inflation; UK markets close early

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  • The Grinch comes for retailers | CNN Business

    The Grinch comes for retailers | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Weaker-than-expected retail sales in November pummeled market sentiment on Thursday and raised the odds that the Federal Reserve’s inflation-fighting interest rate hikes would push the economy into recession.

    What’s happening: US retail sales, which measure the total amount of money that stores make from selling goods to customers, fell 0.6% in November, the weakest performance in nearly a year. The drop concerned economists who had expected monthly sales to shrink by just 0.1%. It’s also a sharp reversal from October’s sales increase of 1.3%.

    That’s a bad sign for the economy. Just last month Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer is nearly single-handedly staving off recession. Consumer spending is a major driver of the economy, and the last two months of the year can account for about 20% of total retail sales — even more for some retailers, according to National Retail Federation data.

    Market mania: The weak report means that spending faltered just as the holiday season started, a critical time for retailers to ramp up profits and get rid of excess inventory. Investors weren’t too happy about that.

    Shares of Costco

    (COST)     closed Thursday 4.1% lower, Target

    (CBDY)     fell by 3.2%, Macy’s

    (M)     dropped 3.5% and Abercrombie & Fitch

    (ANF)     was down 6.2%.

    The entire sector took a blow — the VanEck Retail ETF, with Amazon

    (AMZN)    , Home Depot

    (HD)     and Walmart

    (WMT)    as its top three holdings, fell by 2.2%. The SPDR S&P Retail ETF, which follows all S&P retail stocks, was down 2.9%.

    Weak sales are likely to continue, say analysts, and if they do, then retailers’ bottom lines and fourth-quarter earnings will suffer.

    “The headwinds of the past year are catching up to consumers and forcing them to be more conservative in their holiday shopping this winter,” warned Morgan Stanley economist Ellen Zentner in a note.

    The Fed factor: November’s report could indicate that consumers are feeling the double-punch of sky-high inflation and painful interest rate hikes from the central bank. This retail sales data adds to recessionary concerns, as it suggests that consumers may be becoming more cautious with their spending.

    “Households are increasingly relying on their savings to sustain their spending, and many families are resorting to credit to offset the burden of high prices. These trends are unsustainable, and the current credit splurge is a true risk, especially for families at the lower end of the income spectrum,” said Gregory Daco and Lydia Boussour, economists at EY Parthenon.

    While American bank accounts are still fairly robust, they’re beginning to dwindle. In the third quarter of 2022, credit card balances jumped 15% year over year. That’s the largest annual jump since the New York Fed began keeping track of the data in 2004.

    “Against this backdrop, we expect consumers will rein in their spending further in coming months,” said Daco and Boussour. “Real consumer spending should see modest growth in the final quarter of the year, but we expect it will barely grow in 2023.”

    Bottom line: If Bank of America’s Moynihan was right, the US economy is in trouble.

    US mortgage rates came in lower once again this week, marking the fifth consecutive drop in a row.

    The 30-year fixed-rate mortgage averaged 6.31% in the week ending December 15, down from 6.33% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.12%, reports my colleague Anna Bahney.

    That’s a sharp reversal from the upward trend in rates we’ve seen for most of 2022. Those increases were spurred by the Federal Reserve’s unprecedented campaign of harsh interest rate hikes to tame soaring inflation. But mortgage rates have tumbled in the last several weeks, following data that showed inflation may have finally reached its peak.

    The Fed announced on Wednesday that it will continue to raise interest rates — albeit by a smaller amount than it has been.

    “Mortgage rates continued their downward trajectory this week, as softer inflation data and a modest shift in the Federal Reserve’s monetary policy reverberated through the economy,” said Sam Khater, Freddie Mac’s chief economist.

    “The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” he added. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”

    American regulators have been granted unprecedented access to the full audits of Chinese companies like Alibaba

    (BABA)     and JD.com

    (JD)     after threatening to kick the tech giants off US stock exchanges if they did not receive the data.

    The announcement marks a major breakthrough in a yearslong standoff over how Chinese companies listed on Wall Street should be regulated. It will come as a huge relief for these firms and investors who have invested billions of dollars in them, reports my colleague Laura He.

    “For the first time in history, we are able to perform full and thorough inspections and investigations to root out potential problems and hold firms accountable to fix them,” Erica Williams, chair of the Public Company Accounting Oversight Board, said in a statement Thursday, adding that such access was “historic and unprecedented.”

    More than 100 Chinese companies had been identified by the US securities regulator as facing delisting in 2024 if they did not hand over the audits of their financial statements.

    On Friday, China’s securities regulator said it’s looking forward to working with US officials to continue promoting future audit supervision of companies listed in the United States.

    There are more than 260 Chinese companies listed on US stock exchanges, with a combined market capitalization of more than $770 billion, according to recent calculations posted by the US-China Economic and Security Review Commission.

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  • The Fed will raise rates again. But it’s playing with fire | CNN Business

    The Fed will raise rates again. But it’s playing with fire | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    The Federal Reserve is all but guaranteed to announce Wednesday that it will once again raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.

    Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

    The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). That followed two smaller rate hikes earlier this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.

    The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.

    But it may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. That was a bit higher than the expected rate of 7.2% but a marked slowdown from the 8% increase through October.

    The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.

    As long as inflation remains a problem, the Fed is going to have to tread cautiously.

    “Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.

    Jones still thinks the Fed will raise rates by only half a point this week and may look to hike them just a quarter point in early 2023. But she conceded that the Fed is now sort of “making it up as they go along.”

    The other problem: The Fed’s rate hikes this year have had limited impact on the economy so far. Yes, mortgage rates have spiked and that has severely hurt demand for housing, but the job market remains strong. Wages are growing, and consumers are still spending. That can’t last indefinitely.

    “The cumulative impact of higher rates are just beginning. Hence, the Fed has to step down its pace a bit,” Jones said.

    So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices Wednesday.

    In September, the Fed’s consensus forecasts called for GDP growth of 1.2% in 2023, an unemployment rate of 4.4% and an increase in personal consumption expenditures, the Fed’s preferred measure or inflation, of 2.8%. It seems likely that the Fed will cut its GDP target and raise its expectations for the jobless rate and consumer prices.

    The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest, so it may be too late for the central bank to prevent a recession.

    “A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”

    The US economy isn’t in a recession yet. But are American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.

    Economists are actually forecasting a small dip of 0.1% in retail sales from October. But it’s important to put that number in context. Retail sales surged 1.3% from September and 8.3% over the past 12 months.

    So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

    One market strategist also pointed out that as long as price increases continue to slow, consumers will feel more confident as well.

    “Everybody has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

    What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

    (HESAF)     and cosmetics giant L’Oreal

    (LRLCF)    .

    Monday: UK monthly GDP; earnings from Oracle

    (ORCL)

    Tuesday: US Consumer Price Index; Germany economic sentiment

    Wednesday: Fed meeting; EU industrial production; UK inflation; earnings from Lennar

    (LEN)     and Trip.com

    (TCOM)

    Thursday: US retail sales; US weekly jobless claims; ECB and Bank of England rate decisions; earnings from Jabil

    (JBL)

    Friday: Eurozone PMI; UK retail sales; earnings from Accenture

    (ACN)    , Darden Restaurants

    (DRI)     and Winnebago

    (WGO)

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  • Salesforce Co-CEO Bret Taylor steps down, leaving Marc Benioff alone at the top | CNN Business

    Salesforce Co-CEO Bret Taylor steps down, leaving Marc Benioff alone at the top | CNN Business

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    New York
    CNN Business
     — 

    Enterprise tech giant Salesforce said Wednesday that its co-CEO and Vice Chair Bret Taylor will step down from his roles. Salesforce co-founder Marc Benioff, who had been co-CEO alongside Taylor, will continue running the company and serving as board chair, the company said in a news release.

    Taylor had worked at Salesforce

    (CRM)     for six years, most recently as president and COO before being elevated to co-CEO last November. He will officially exit his position on January 31, 2023. Benioff, in a statement, called Taylor’s decision to step down “bittersweet.”

    “After a lot of reflection, I’ve decided to return to my entrepreneurial roots,” Taylor said in a statement. “Salesforce has never been more relevant to customers, and with its best-in-class management team and the company executing on all cylinders, now is the right time for me to step away.”

    Prior to Salesforce, Taylor founded and led collaboration platform Quip, which Salesforce acquired for $750 million in 2016. Taylor also worked as chief technology officer at Facebook during the company’s IPO.

    Taylor’s move comes at a rocky time for Salesforce, whose shares have fallen around 40% since the start of this year amid the economic downturn. The announcement coincided with Salesforce’s third quarter earnings report, in which the company said it expected fourth quarter revenue at the low-end of analysts’ expectations.

    Salesforce’s stock fell more than 6% in after-hours trading following the earnings and leadership change announcements.

    Taylor also had a busy year outside Salesforce. As the former chair of Twitter’s board of directors, he was in charge of leading the company through Elon Musk’s tumultuous takeover deal and litigation. Musk officially closed his $44-billion deal to buy the company last month and quickly dissolved the board of directors.

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  • Good luck finding an iPhone 14 Pro before Christmas | CNN Business

    Good luck finding an iPhone 14 Pro before Christmas | CNN Business

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    CNN Business
     — 

    If you haven’t ordered one of the higher-end iPhone 14 models by now, it may be harder than usual to get one before the holidays.

    The wait time for the 14 Pro and 14 Pro Max in the United States is now 34 days, up from seven days last week and 19 days as of three weeks ago, according to a new report from UBS, which tracked iPhone availability in 30 countries.

    In a series of checks conducted on Apple.com by CNN for several cities, including New York, Los Angeles, Washington DC, Chicago and Miami, most iPhone 14 Pro and iPhone 14 Pro Max models in varying storage and color options had delivery dates of December 28 or later. The iPhone 14 Pro and 14 Pro Max were also unavailable for pickup in most locations.

    The wait times, which a UBS analyst called “extreme,” come as Apple

    (AAPL)     confronts supply chain constraints and increased Covid-19 restrictions at its main assembly facility in Zhengzhou, China, which the company previously said is operating at a significantly reduced capacity.

    Earlier this month, Apple released a statement that noted it is experiencing “strong demand” for iPhone 14 Pro and iPhone 14 Pro Max models but it expects lower shipments than anticipated. “Customers will experience longer wait times to receive their new products,” the company said.

    Apple told CNN on Thursday that Apple Stores get regular shipments and customers can continue to check for in-store pickup options at their local retail location. The company also sometimes ships products ahead of the stated delivery date, and it’s possible some retailers and wireless carriers have more in stock than Apple.

    While it’s unclear whether the higher-end iPhone 14 models will be available in time, the iPhone 14 and iPhone 14 Max showed availability in many locations for same-day pickup in CNN’s test on Thursday. UBS said it initially expected consumers to purchase a lower-priced iPhone 14 instead of an iPhone 14 Pro model, but the wait times did not increase for the less expensive devices last week.

    Apart from being a potential headache for consumers, the uncertainty around iPhone availability could add to Apple’s challenges for the all-important holiday quarter. Apple CFO Luca Maestri previously said the company expects year-over-year revenue growth to decelerate in the December quarter compared to the prior quarter, citing the strength of the US dollar and ongoing macroeconomic weakness.

    Apple released its new smartphone lineup in September, including the larger 6.7-inch iPhone 14 Plus model and an updated iPhone 14 Pro that rethinks the much-maligned notch. In typical Apple fashion, the devices also offer better battery life and camera features than the year prior.

    The iPhone 14 and 14 Plus start at $799 and $899, respectively, while the iPhone 14 Pro starts at $999 and the Pro Max starts at $1099.

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  • Amazon stock falls 14% on light holiday quarter sales forecast | CNN Business

    Amazon stock falls 14% on light holiday quarter sales forecast | CNN Business

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    CNN Business
     — 

    Amazon

    (AMZN)     stock fell some 14% in after-hours trading Thursday after the company forecast its holiday quarter sales would be lighter than analysts had expected.

    The e-commerce giant said it expects revenue for the final three months of the year to be between $140 billion to $148 billion, significantly below the $155 billion analysts surveyed by Refinitiv had expected. The weaker forecast comes as rising inflation and looming recession fears weigh on consumer purchasing decisions.

    Amazon reported revenue of $127.1 billion for its third-quarter, a 15% increase from the prior year but just missing Wall Street estimates.

    “There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon CEO Andy Jassy said in a statement accompanying the earnings release.

    The company reported its Amazon Web Services segment sales increased 27% year-over-year to $20.5 billion – representing a slower pace of growth for a closely-watched business unit than Wall Street had expected.

    But Amazon’s cloud computing division continues to be a strong profit driver for the company. Amazon posted a $2.9 billion profit for the three-month period, much improved from the prior quarter when it posted $2 billion net loss largely due to its investment in electric vehicle maker Rivian.

    The latest results comes at a precarious time for the e-commerce giant. Amazon initially saw its business boom during the pandemic, as more consumers relied on online shopping. This year, however, the company is confronting a shift back to in-person shopping as well as a souring economic outlook has hampered consumers’ demand.

    Jesse Cohen, a senior analyst at Investing.com, said Amazon’s earnings report “proves it’s not immune to the challenges facing the tech industry at large as it struggles in the face of worsening macroeconomic headwinds, such as soaring inflation and worries about a possible recession.”

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  • Microsoft earnings hit by personal computing slowdown | CNN Business

    Microsoft earnings hit by personal computing slowdown | CNN Business

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    CNN Business
     — 

    Microsoft posted a double-digit profit decline in the three-month period ending in September as the company confronted a slowdown in the personal computing industry and a broader economic downturn.

    The tech giant on Tuesday reported net income of $17.6 billion for the quarter, a decrease of 14% from the year prior. Microsoft

    (MSFT)    ’s revenue, meanwhile, grew a modest 11% to $50.1 billion. Both results were better than analysts had expected.

    Microsoft’s Azure cloud services unit saw revenue increase by 35% from the prior year, but the growth was slower than some analysts had hoped for a division that has been one of the company’s biggest bright spots in recent years.

    Other parts of Microsoft’s business declined. Microsoft said revenue from its Windows OEM operations fell 15% from the year prior, which comes as demand for personal computers has fallen sharply on the heels of a pandemic-fueled boom. Consulting firm Gartner reported earlier this month that worldwide PC shipments declined 19.5% in the third quarter of 2022, compared to the same period last year. This marks the steepest market decline since Gartner began tracking the PC market in the mid-1990s.

    Microsoft also said revenue from Xbox content and services declined by 3%. The company reportedly recently laid off employees in its Xbox division, among other parts of the company, as it — like many other tech companies right now — looks to cut costs.

    Shares of Microsoft fell 2% in after-hours trading Tuesday following the earnings report.

    Microsoft’s stock has fallen more than 25% since the beginning of the year, amid a broader market downturn as rising inflation, geopolitical uncertainty from the war in Ukraine and more macroeconomic headwinds continue to wreak havoc on the tech industry.

    “In this environment, we’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way,” Satya Nadella, CEO of Microsoft, said in a statement Tuesday announcing the quarterly earnings.

    Haris Anwar, senior analyst at Investing.com, called Microsoft’s earnings report a “mixed bag” in a commentary after the results were released on Tuesday.

    “It shows that Microsoft is weathering the economic storm better than other technology players and its diversified business model is playing a big role in doing so,” Anwar said. But he added that the slowing cloud computing growth was cause for concern.

    “If this growth deceleration continues, it could harm an investment case in the company’s stock which is considered a safe-haven amid the market turmoil, with these concerns reflected in the company’s shares being down in extended trading,” Anwar said.

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  • Ford takes $2.7 billion hit as it drops efforts to develop full self-driving cars | CNN Business

    Ford takes $2.7 billion hit as it drops efforts to develop full self-driving cars | CNN Business

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    New York
    CNN Business
     — 

    Ford is essentially pulling the plug on an effort to develop its first full self-driving car, and it’s going to cost the automaker $2.7 billion to walk away.

    The company announced Wednesday it would no longer provide financial support for Argo AI, a self-driving car technology company it invested $1 billion in back in 2017.

    Instead of having Argo develop self-driving car technology for cars without steering wheels, brakes or accelerator pedals — what is known in the industry as Level 4 or L4 technology — Ford will instead pursue in-house development of a lower level of automated driving technology.

    The level it will now pursue on its own, known as Level 3 or L3, allows a driver to not pay attention to the road in certain conditions, such as on the highway, but it would expect a driver to be aware enough to quickly take control of the car if needed.

    The decision will mean that Argo AI will shutdown. And the drop in value of Ford’s investment in Argo caused it to take a $2.7 billion charge in the just-completed third quarter. That resulted in an $827 million loss in the period.

    Even excluding the special charges for Argo and other items, Ford reported adjusted earnings per share of 30 cents, a slide from the 51 cents it earned on that basis a year ago, but a slight improvement over the 27 cents forecast by analysts surveyed by Refinitiv.

    Ford reported automotive revenue of $37.2 billion, a jump of $4 billion from a year ago and $1 billion more than the analysts’ forecasts. The revenue was helped by a $3.4 billion from higher pricing on vehicles.

    Ford did have some problems in the quarter beyond the charge it took for closing down Argo. It said supply shortages left it with about 40,000 vehicles in its inventory at the end of the quarter that were built but awaiting needed parts before they can be shipped to dealers.

    It also was hit with $1 billion in higher-than-expected supplier payments, and a $1.5 billion increase in commodity costs.

    And it had a smaller profit and profit margin in its core North American market due to those higher commodity costs, and a loss in China, due to costs associated with the development of electric vehicles.

    While higher pricing on vehicles helped its European unit post a narrow profit in the quarter compared to a narrow loss a year ago, CEO Jim Farley did concede, “Our performance in China and Europe is not nearly as healthy as we’d like it to be.”

    But, in good news, Ford raised its goal for full-year cash that will be generated by the business to be between $9.5 billion and $10 billion — up from $5.5 billion to $6.5 billion — on strength in the company’s automotive operations.

    Shares of Ford

    (F)     were down 1% in after-hours trading following the earnings news.

    But in the end, the big news of the earnings report was a major change in direction on self-driving vehicles.

    The company insists it still expects to offer full self-driving vehicles in the future, just not soon enough to make the investment such technology will require today. It said it decided it is better to invest in driver assistance technology that is closer to being implemented on vehicles today, and that customers want from their new cars, rather than a fleet of robo-taxis with no drivers at all aboard.

    “We’re optimistic about a future for L4 ADAS [advanced driver assistance systems], but profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” said Farley.

    Farley said he expects to be able to find jobs for many of the Argo employees at Ford, having them switch gears to develop L3 driver assistance features.

    “That’s really the decision, in many ways, that is driving what we’re doing here at Argo… we are deeply passionate about the L3 mission,” said Doug Field, Ford’s chief advanced product development and technology officer.

    He said there is only so much talent available to develop the different driver assistance and self-driving features.

    “So this is the way we want to use that talent,” he said.

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  • Meta’s stock falls 17% as its quarterly profit is cut in half | CNN Business

    Meta’s stock falls 17% as its quarterly profit is cut in half | CNN Business

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    New York
    CNN Business
     — 

    Meta on Wednesday posted the second quarterly revenue decline in its history since going public and warned that it is making “significant changes” aimed at cutting costs ahead of 2023, as it confronts an economic downturn that is hitting its core online advertising business.

    For the three months ended in September, Meta

    (FB)     posted revenue of $27.7 billion, down 4% year-over-year and slightly above Wall Street analysts’ expectations. The Facebook parent company posted its first-ever quarterly revenue decline during the June quarter.

    The company reported net income of nearly $4.4 billion — less than half the amount it made during the same period in the prior year and below analysts’ projections.

    “We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company,” Mark Zuckerberg, Meta’s founder and CEO, said in a statement.

    Meta’s stock fell almost 17% in after-hours trading Wednesday following the results.

    Demand for online advertising has declined in recent months amid rising inflation and fears of a looming recession. Tech companies like Google and Snap have also seen hits to their ad revenues. Meta CFO David Wehner said on a call with analysts following the report that the average price per ad across Meta’s platforms fell 18% during the quarter.

    At the same time, Meta’s user growth is slowing amid heightened competition from rivals like TikTok. Meta reported having 2.96 billion monthly active users on its core Facebook app at the end of the quarter, up 2% year-over-year. That’s down from the 6% growth rate it posted in the year-ago quarter. Daily active users on Meta’s family of apps grew 4% to 2.93 billion, down from the 11% increase it posted the year prior.

    Zuckerberg noted on the call that Instagram now has more than 2 billion monthly active users and WhatsApp has more than 2 billion daily active users.

    These challenges to its core business come as Meta is funneling billions of dollars into an ambitious new bet to build a future version of the internet called the metaverse that likely remains years away.

    Wehner said operating losses from the company’s metaverse ambitions, which are categorized under its Reality Labs unit, are expected to “grow significantly year-over-year” in 2023. Reality Labs lost nearly $3.7 billion in the September quarter, and has cost the company a total of $9.4 billion so far this year. Revenue from the Reality Labs unit also fell by nearly 50% year-over-year in the September quarter.

    Altimeter Capital, a Meta sharehoder, last week wrote an open letter calling on the company to reduce its headcount expenses by at least 20% and its annual capital expenditure by at least $5 billion, and to limit its investment in the metaverse to no more than $5 billion per year.

    In Wednesday’s report, Wehner said the company is “making significant changes across the board to operate more efficiently.” Executives said the company expects headcount at the end of 2023 will be roughly in line with or slightly smaller than the 87,314 it reported as of the end of September (an increase of 28% from the year prior).

    “We are holding some teams at in terms of headcount, shrinking others and investing headcount growth only in our highest priorities,” Wehner said. He also hinted that the company could shrink its physical office footprint.

    Zuckerberg said on the call that the three key areas of investment for the company in the coming year are its AI discovery engine that’s powering Reels and other recommendations, ads and business messaging, and its future vision for the metaverse. Meta earlier this month unveiled its newest virtual-reality headset, the Meta Quest Pro, and touted its potential for business customers.

    In the final three months of the year, Meta expects quarterly revenue between $30 billion and $32.5 billion. On the high end, the projection would mark a 3.5% year-over-year decline from the same period in the prior year.

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  • Elon Musk must close Twitter deal by end of this week or face trial | CNN Business

    Elon Musk must close Twitter deal by end of this week or face trial | CNN Business

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    New York
    CNN Business
     — 

    The clock is ticking for Elon Musk to complete his deal to buy Twitter.

    The billionaire Tesla CEO has until 5 p.m. ET on Friday to close his $44 billion acquisition of Twitter or face a trial that was previously delayed to allow both parties to close the deal.

    The high-stakes countdown comes after a months-long battle over an acquisition that would put the world’s richest man in charge of one of the world’s most influential social media platforms, with vast potential impacts on the company’s employees, users and for online discourse generally.

    Musk in April agreed to buy Twitter

    (TWTR)     for $54.20 per outstanding share and then, weeks later, sought to terminate the deal. He initially cited concerns over the prevalence of bots on the platform and later added claims from a company whistleblower. Twitter

    (TWTR)     sued him to follow through with the acquisition.

    The two sides had been in the midst of a contentious litigation process preparing for trial to begin on Oct. 17 when Musk told Twitter he wanted to move forward with closing the deal at the originally agreed upon price. The judge overseeing the case, Delaware Chancery Court Chancellor Kathaleen St. Jude McCormick, gave the two sides until Oct. 28 to close the deal or face a November trial.

    In the weeks since the litigation was paused, Twitter has appeared to continue to take steps toward closing the deal. Bloomberg last week reported that the company had frozen employees’ stock accounts in anticipation of the deal’s closing, and that lawyers for both Musk and Twitter were preparing paperwork to close the deal. Musk, meanwhile, told Tesla shareholders that he was “excited” about Twitter even as he admitted to “obviously overpaying” for it.

    But there have been questions about whether the financing Musk had originally lined up to help fund the deal would come through as expected after he spent months disparaging the company and the overall market, including for social media stocks, has declined. Musk has turned to a mix of debt and equity financing for the deal, in addition to putting up his own money, much of it likely from sales of his Tesla shares.

    Some experts have suggested that Musk may need to sell billions of dollars worth of additional Tesla

    (TSLA)     shares to fund the deal, a move that became easier for the CEO after the company reported quarterly earnings last week – not to mention more costly following a recent decline in the car maker’s share price.

    With days to go before the deadline, there have also been some last-minute jitters among Twitter investors and employees.

    Twitter shares briefly dipped Friday morning following a Bloomberg report that Biden administration officials were in early discussions about possibly subjecting some of Musk’s ventures to national security reviews, including the planned Twitter takeover.

    However, asked by CNN, the administration pushed back on the report, which cited people familiar with the matter. “We do not know of any such conversations,” National Security Council Spokesperson Adrienne Watson said in a statement. Mergers and acquisitions experts have said that while such a review could complicate matters, it likely wouldn’t allow Musk to get out of the acquisition deal.

    Separately, Twitter was forced to address concerns among its employees about the fate of their jobs after The Washington Post reported on Thursday that Musk told prospective investors in the deal that he planned to get rid of nearly 75% of the company’s staff. (Representatives for Musk did not respond to a request for comment on the report, which cited internal documents and unnamed people familiar with the matter.)

    Following the report, Twitter General Counsel Sean Edgett sent a memo to staff saying the company does “not have any confirmation of the buyer’s plans following close and recommend not following rumors or leaked documents but rather wait for facts from us and the buyer directly,” according to a report from Bloomberg. A Twitter spokesperson confirmed to CNN the authenticity of the memo.

    Musk previously discussed dramatically reducing Twitter’s workforce in personal text messages with friends about the deal, which were revealed in court filings, and didn’t dismiss the potential for layoffs in a call with Twitter employees in June.

    Despite his reported plans to gut the staff, and his own remarks that he is overpaying for the company, Musk has tried to sound optimistic about Twitter’s potential.

    “The long-term potential for Twitter, in my view, is an order of magnitude greater than its current value,” he said on the Tesla conference call last week. He has floated several possible product updates and suggested Twitter will become part of an “everything” app called x, possibly in the style of popular Chinese app WeChat.

    But the most immediate change for users, if the deal goes through, could be limiting Twitter’s content moderation and restoring accounts that were previously banned from the platform, most notably that of former President Donald Trump.

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  • Snap stock falls nearly 25% after revenue hit by shrinking advertiser budgets | CNN Business

    Snap stock falls nearly 25% after revenue hit by shrinking advertiser budgets | CNN Business

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    CNN
     — 

    Snap’s bad year continues.

    Snap on Thursday reported revenue of $1.13 billion for the three months ending in September, a slight 6% increase from the year prior and less than Wall Street had expected, as the company confronts tightening advertiser budgets in an uncertain economy.

    In a letter to investors, Snapchat’s parent company said its revenue growth was slowed by several factors, including growing competition and jitters from the advertisers who make up its core business.

    “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,” the company said in the letter.

    Shares of Snap fell nearly 25% in after hours trading following the earnings report.

    Snap’s report kicks off what is expected to be a sobering tech earnings period, as layoff announcements, hiring freezes and other cost-cutting measures have become increasingly common in the industry amid fears of a looming recession.

    Snap helped set off a wave of anxiety among tech investors when it warned in May that the economy had worsened faster than it expected, cutting into its revenue and profit forecast for the quarter. In late August, Snap announced plans to lay off some 20% of its more than 6,400 global employees, or more than 1,200 staffers.

    Like other tech companies, Snap has had to confront headwinds from rising inflation, a stronger dollar and broader economic jitters that are leading some advertisers and consumers to rethink their spending in the United States and abroad.

    Snap has also faced increasing competition from fast-growing competitors like TikTok, and is still navigating its digital ads business in the wake of privacy changes implemented by Apple that have made it more difficult for marketers to target users with ads.

    There were some glimmers of hope in Snap’s report, including that the number of daily active users grew 19% year-over-year to reach 363 million in the third quarter. Its net loss was also smaller than Wall Street had expected, but the company nonetheless lost $360 million in the quarter, compared to a loss of $72 million in the year prior. Much of that loss ($155 million) came from restructuring charges related to layoffs.

    Snap declined to provide financial guidance for the final three months of the year. In its letter to investors, the company said: “We expect that the operating environment will continue to be challenging in the months ahead and believe the actions we are taking provide a clear path forward for Snap.”

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  • Tech earnings are coming and they probably won’t be pretty | CNN Business

    Tech earnings are coming and they probably won’t be pretty | CNN Business

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    New York
    CNN Business
     — 

    After months of layoffs, hiring freezes and other cost-cutting measures, big tech companies are set to provide the most detailed look yet at just how bad things have gotten for their businesses amid fears of a looming recession.

    Snapchat’s parent company, which tanked much of the tech sector in May with a warning about a worsening economy, is set to report third-quarter earnings on Thursday. Apple

    (AAPL)    , Amazon

    (AMZN)    , Facebook

    (FB)    -parent Meta, Microsoft

    (MSFT)    , Twitter

    (TWTR)     and Google-parent Alphabet

    (GOOGL)     will each report earnings results the following week.

    “People probably should be bracing themselves for these results,” said Scott Kessler, technology global sector lead at research firm Third Bridge Group.

    For years, the giants of Silicon Valley seemed almost immune to swings in the global economy. Even amid a pandemic, a trade war and other geopolitical uncertainty, the biggest names in tech only seemed to grow bigger and richer. But like other sectors in recent months, they have faced a variety of new challenges.

    Rampant inflation is eating away at consumers’ paychecks and reducing their ability to spend freely on tech products and services. Increased costs and recession fears have cut down on demand for online advertising and enterprise tech services. And other macroeconomic issues such as continued supply chain snarls and higher interest rates are stunting growth, analysts say.

    To make matters worse, tech companies must also confront the growing strength of the US dollar, which is currently trading at its highest level in two decades. That can mean sales made overseas are not worth as much, according to Angelo Zino, senior industry analyst at CFRA Research. A stronger US dollar may also make hardware products from companies like Apple less affordable for foreign consumers, which, as Zino points out, is problematic given “most of these companies are generating more than half their revenue outside the United States.”

    In a striking shift, most of the big tech companies are now expected to report slowing profit and revenue growth, or even year-over-year declines, for the three months ending in September, according to analyst estimates.

    Amazon

    (AMZN)    , which is projected to be in the best shape, is expected to post essentially flat sales from the year prior. Meta’s revenue is projected to fall 5% year-over-year, marking the company’s second consecutive quarterly revenue decline. Net income at Meta, Amazon

    (AMZN)    , Google and Snap is also expected to be down from the year prior.

    These dour projections come after many tech businesses were already showing signs of weakness in the prior quarter. Meta in July posted its first year-over-year quarterly revenue decline since going public in 2012 in large part due to decreased demand in the online advertising market that fuels its core business. Twitter

    (TWTR)    , Snap, Google, Apple and Microsoft all also reported that shrinking ad budgets had taken some toll on their June quarter earnings.

    “We compare investor negative sentiment on tech today to what we have seen only 2 other times in our decades of covering tech stocks: 2008 and 2001,” Wedbush analyst Dan Ives said in a note to investors this week, referring to two prior recessionary periods.

    Many of the issues currently weighing on tech companies are unlikely to let up anytime soon, which is why industry watchers will be paying close attention to the guidance these companies offer for the rest of 2022.

    “More than anything, people really want a good understanding about what to expect” from the final three months of this year, which has “historically been the most important quarter for these companies,” Kessler said. Investors will likely want to know, for example, whether the online ad market has begun to stabilize ahead of the crucial holiday season.

    Negative results or future outlook could lead to increased pressure on tech firms to focus on their core businesses and cut back on big bets that aren’t expected to quickly product returns. Some of that is already underway.

    In recent weeks, Google announced it would shut down its gaming service Stadia, Amazon said it would stop testing a home delivery robot and Meta shut down its newsletter product, Bulletin.

    Meta may be in a uniquely difficult position. Last October, Facebook rebranded as Meta and ramped up investments to build a future version of the internet called the metaverse, which isn’t expected to be fully realized for years, if ever. But the Wall Street Journal reported last month the company was quietly reducing staff — and some analysts expect more cuts to come.

    “I do think you’ll see them announce cost cuts. I think they’ll reduce the workforce,” Zino said. “Meta is really boxed in a corner here. Their core business is in an environment where they’re not going to see much growth at all … and they don’t have any major revenue center outside of advertising.”

    What a difference a year makes.

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