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https://www.barrons.com/articles/li-auto-earnings-stock-price-7ca16378
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Palantir Technologies Inc. matched expectations with its latest quarterly results Monday while announcing a new $1 billion buyback authorization.
The software company posted its third quarter in a row of GAAP profitability, recording second-quarter net income of $28 million, or 1 cent a share, whereas Palantir
PLTR,
racked up a net loss of $179.3 million, or 9 cents a share, in the year-earlier period. Analysts tracked by FactSet were modeling GAAP earnings per share of 1 cent.
Palantir logged adjusted earnings per share of 5 cents, in line with the FactSet consensus.
Revenue rose to $533 million from $473 million and also met the FactSet consensus. The company notched $232 million in commercial revenue, up 10% from a year before, along with $302 million of government revenue, up 15%.
After initially falling following the report, Palantir shares rose 2.6% in after-hours trading.
“We continue to see unprecedented demand,” Chief Revenue Officer Ryan Taylor told MarketWatch. That includes both “top-of-funnel” conversations with new customers and others expanding their use of Palantir software, as momentum builds for the company’s artificial-intelligence offerings.
Taylor added that Palantir’s U.S. government work has “never been stronger.”
See also: Palantir is ‘the Messi of AI,’ says analyst who thinks its stock can jump 45%
Palantir also announced that its board of directors has approved a stock-buyback program of up to $1 billion. The move comes as the company posted $285 million in adjusted free cash flow during the first half of the year and finished the second quarter with $3.1 billion in cash and equivalents on its balance sheet.
“Our cash flow, balance sheet and the authorization of a billion-dollar buyback show what we believe in for the future of this company,” Chief Financial Officer David Glazer told MarketWatch. The belief is that “AI is a massive opportunity.”
Added Chief Executive Alex Karp in a shareholder letter: “The scale of the opportunity that lies ahead has increased significantly in recent months. And we intend to capture it.”
He noted that the company is in talks with more than 300 additional enterprises about using Palantir’s AI platform, “all of which are searching for an effective and secure means of adapting the latest large language models for use on their internal systems and proprietary data.”
For the third quarter, Palantir expects $553 million to $557 million in revenue, along with GAAP profitability. Analysts tracked by FactSet were modeling $553 million,
Palantir also expects to report GAAP net income for its fourth quarter. It further models upwards of $2.212 billion in full-year revenue, while analysts were looking for $2.210 billion.
Shares of Palantir are up 180% so far this year.
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Canadian cannabis producer Tilray Brands Inc.
TLRY,
on Monday said it had agreed to buy eight beer and drink brands from Anheuser-Busch InBev
BUD,
— including Shock Top, Redhook Brewery and Widmer Brothers Brewing. The other five brands are Breckenridge Brewery, Blue Point Brewing Co., 10 Barrel Brewing Co., Square Mile Cider Co. and HiBall Energy. The deal, which includes related staff and breweries, is expected is expected to close this year. Tilray said it expects to pay in cash to complete the deal. The purchase price wasn’t disclosed in a release. The deal follows other efforts by Tilray to expand into alcohol, amid heavy competition in Canada’s legal cannabis industry and stalled federal reform in the U.S. Shares rose 2.7% after hours on Monday.
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Paramount Global shares were popping in Monday’s after-hours action after the media giant topped expectations with its latest quarterly financials.
The company posted a second-quarter net loss of $299 million, or 48 cents a share, whereas it posted net income of $419 million, or 62 cents a share, in the year-earlier period.
Paramount
PARA,
posted 10 cents in adjusted diluted earnings from continuing operations, compared with 64 cents a year before. Analysts tracked by FactSet were modeling breakeven performance on adjusted earnings.
“In [the second quarter], we maintained our focus on scaling our streaming platforms, maximizing our traditional business, and building a sustainable business model that will return the company to significant earnings growth in 2024,” Chief Executive Bob Bakish said in a shareholder presentation.
Don’t miss: Roku faces risk from Hollywood strikes — but Roku City might be able to help
Shares of the media giant were rallying 5% in Monday’s extended session.
Revenue slipped to $7.62 billion from $7.80 billion, while analysts were expecting $7.44 billion. Revenue for the Paramount+ streaming service was up 47%, while total direct-to-consumer advertising revenue grew by 21%.
“And despite the environment, TV Media continued to contribute significant earnings,” Bakish said. “As we look forward, we will continue to be guided by our content-first approach and seek to maximize its value across platforms and revenue streams, while also operating with the utmost efficiency through this year of peak streaming investment.”
Read: Streaming nirvana is about to become more expensive — and offer less content
The direct-to-consumer business lost $424 million in the second quarter on the basis of adjusted operating income before depreciation and amortization.
Separately, Paramount announced on Monday that KKR will purchase its Simon & Schuster publishing business for $1.62 billion in an all-cash deal.
“The proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders, while also delevering our balance sheet,” Bakish said in a release.
Disney earnings preview: How much magic is left in the kingdom?
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Lucid Group Inc. shares rallied in the extended session Monday after the luxury EV maker kept unchanged its 2023 production outlook despite weaker quarterly sales.
“We’re on track toward achieving our 2023 production target of more than 10,000 vehicles, but we recognize we still have work to do to grow our customer base,” Chief Executive Peter Rawlinson said in a statement.
Shares rose about 3% in after-hours trading.
Lucid
LCID,
lost $764 million, or 40 cents a share, in the second quarter, compared with a loss of $220 million, or 33 cents a share, in the year-ago period.
Revenue rose to $150.9 million, from $97 million a year ago.
Analysts polled by FactSet expected Lucid to post an adjusted loss of 34 cents a share on sales of $181.6 million.
Lucid in July reported production and delivery numbers that disappointed Wall Street, and all eyes were on the yearly guidance.
Lucid, whose largest shareholder is Saudi Arabia’s sovereign wealth fund, said it ended the quarter with about $6.25 billion in total liquidity, “which is expected to fund the company into 2025.”
Lucid raised $3 billion in capital in the quarter, including $1.8 billion from the Saudi fund, the company said.
Read also: Tesla’s stock drops as CFO steps down
Lucid earlier Monday slashed prices on its EVs by up to 11.5%
The price-cut news came “as a surprise to us,” because Lucid didn’t seem to have much room to drop prices amid negative gross margins, Cantor Fitzgerald analyst Andres Sheppard said.
Lucid shares have dropped about 6% this year, compared with gains of around 18% for the S&P 500 index
SPX.
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Palantir Technologies Inc. matched expectations with its latest quarterly results Monday while announcing a new $1 billion buyback authorization.
The software company posted its third quarter in a row of GAAP profitability, recording second-quarter net income of $28 million, or 1 cent a share, whereas Palantir
PLTR,
racked up a net loss of $179.3 million, or 9 cents a share, in the year-earlier period. Analysts tracked by FactSet were modeling GAAP earnings per share of 1 cent.
Palantir logged adjusted earnings per share of 5 cents, in line with the FactSet consensus.
Revenue rose to $533 million from $473 million and also met the FactSet consensus. The company notched $232 million in commercial revenue, up 10% from a year before, along with $302 million of government revenue, up 15%.
After initially falling following the report, Palantir shares rose 2.6% in after-hours trading.
“We continue to see unprecedented demand,” Chief Revenue Officer Ryan Taylor told MarketWatch. That includes both “top-of-funnel” conversations with new customers and others expanding their use of Palantir software, as momentum builds for the company’s artificial-intelligence offerings.
Taylor added that Palantir’s U.S. government work has “never been stronger.”
See also: Palantir is ‘the Messi of AI,’ says analyst who thinks its stock can jump 45%
Palantir also announced that its board of directors has approved a stock-buyback program of up to $1 billion. The move comes as the company posted $285 million in adjusted free cash flow during the first half of the year and finished the second quarter with $3.1 billion in cash and equivalents on its balance sheet.
“Our cash flow, balance sheet and the authorization of a billion-dollar buyback show what we believe in for the future of this company,” Chief Financial Officer David Glazer told MarketWatch. The belief is that “AI is a massive opportunity.”
Added Chief Executive Alex Karp in a shareholder letter: “The scale of the opportunity that lies ahead has increased significantly in recent months. And we intend to capture it.”
He noted that the company is in talks with more than 300 additional enterprises about using Palantir’s AI platform, “all of which are searching for an effective and secure means of adapting the latest large language models for use on their internal systems and proprietary data.”
For the third quarter, Palantir expects $553 million to $557 million in revenue, along with GAAP profitability. Analysts tracked by FactSet were modeling $553 million,
Palantir also expects to report GAAP net income for its fourth quarter. It further models upwards of $2.212 billion in full-year revenue, while analysts were looking for $2.210 billion.
Shares of Palantir are up 180% so far this year.
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/yellow-stock-bankruptcy-9bd197f5
Yellow
one of the country’s largest and oldest trucking companies, has filed for bankruptcy amid mounting debt and a labor dispute with the Teamsters union.
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Online retail giant Amazon.com Inc.’s
AMZN,
second-quarter results and third-quarter forecast sales last week were a bet that more consumers would start buying more things, but Wall Street’s expectations for the third quarter overall have only grown dimmer.
With most of the 500 companies that make up the S&P 500 Index
SPX
already through the second-quarter earnings reporting season, slightly more than normal have reported per-share profit that beat Wall Street’s estimates, according to FactSet.
For the third quarter though, analysts now expect a mere 0.2% increase in per-share profit growth overall, according to a FactSet report on Friday, or slightly lower than the 0.4% growth that was expected for the third quarter on June 30,
And with some two months still left in the third quarter, and with that forecast likely to come down as the period progresses, Wall Street’s profit expectations are getting ever closer to turning negative.
Wall Street analysts overall still expect a bigger rebound for the fourth quarter, the FactSet report said. And they expect 2023 overall to eke out a per-share profit gain of 0.8%.
Worries of a U.S. recession emerging at some point during the back half of this year have started to fade at least a little after many economists fixated on the possibility earlier this year when the Federal Reserve was raising interest rates to combat a jump in inflation in 2022 . Some analysts now say savings fatigue could prompt more shoppers to splurge this year, after relentlessly tightening their budgets due to rising prices.
Federal Reserve Chair Jerome Powell last month said policymakers at the central bank had also shucked off their worries of a downturn.
See: Fed no longer foresees a U.S. recession — and other things we learned from Powell’s press conference
“The staff now has a noticeable slowdown in growth starting later this year in the forecast. But given the resilience of the economy recently, they are no longer forecasting a recession,” he said last month.
Not everyone is convinced that a downturn has vanished from the horizon though. Sheraz Mian, director of research at Zacks, told MarketWatch last month that more bearish analysts had kept pushing out their recession forecasts, after being defied by the actual, and more positive, economic data. Some economists continue to push out those forecasts.
“We still expect a recession, but now we are looking for it to begin in Q1 2024 rather than Q3 2023,” Thomas Simons, U.S. economist at Jefferies, said in a research note on Friday.
He said that interest rate hikes from the Federal Reserve were only just starting to affect customer behavior. Households were trying to rebuild their savings, after spending through whatever they had built up during the pandemic. Student-loan payments were returning, he said, and corporate margins were thinning.
“Corporate profit margins are narrowing, and businesses will look to cut costs through layoffs,” he said.
Among S&P 500 index companies, 34 report results during the week ahead, including one from the Dow Jones Industrial Average, according to FactSet.
Results from Walt Disney Co.
DIS,
will likely gobble up more media attention, but earnings from Paramount Global Inc
PARA,
— which oversees CBS, Showtime, Comedy Central and other channels — will offer more detail about how studios are positioning themselves with Hollywood actors on strike. Lions Gate Entertainment Corp.
LGF.A,
also reports.
Results from Tyson Foods Inc.
TSN,
will give investors and customers a brief look at the state of the grocery aisle where higher food prices over the past year have strained spending on other things. Beyond Meat Inc.
BYND,
which also reports during the week, will be hoping new product launches of plant-based meat-like alternatives can overtake analyst skepticism, amid competition with fake meat and real meat alike.
Elsewhere, ride-hailing platform Lyft Inc.
LYFT,
online dating service Bumble Inc.
BMBL,
and video-game maker Take-Two Interactive Software Inc.
TTWO,
also report during the week. And Canadian pot producer Canopy Growth Corp.
CGC,
will get another chance to pick up the pieces, after over-expanding and now trying to hold onto its cash.
Disney drama: One way or another, people on both coasts are mad at Disney
DIS,
Chief Executive Bob Iger right now, as his company prepares to report quarterly results on Wednesday. Shares of Disney are down slightly this year. The company is currently fighting with Florida Gov. Ron DeSantis, who is trying to stamp out Disney World’s self-governing privileges after the company criticized the state’s restrictions on classroom discussion of gender identity. When Iger accused striking actors and writers in Hollywood of not being “realistic,” the actors and writers shot back, noting his hefty executive compensation plan.
While the friction in Florida hasn’t hurt Disney’s parks attendance, the Hollywood shutdown has threatened Disney’s massive film and TV show operations, as Disney+ subscribers fall and investors more aggressively seek profits from studios’ streaming operations. Elsewhere, Rich Greenfield, an analyst at LightShed Partners, said “Pixar and Disney Animation have not had a breakout hit that impacted children’s play patterns and both Marvel and Lucasfilm feel increasingly tired from overuse.”
The sense is growing that more time is needed for Iger to fix Disney’s problems. On Wednesday, analysts may get a deeper sense of how much more, with the chance of more drama between Disney and its home state and the writers and actors the company depends on.
UPS and the Teamsters deal: United Parcel Service Inc. reports quarterly results on Tuesday, as rank-and-file Teamsters vote on a tentative labor agreement struck with the package deliverer in an effort to avert a strike. The deal, if approved, would raise worker pay and give the economy and businesses a breather, after threats of strikes or work stoppages at the nation’s ports and railways were averted over the past year.
Local Teamsters unions have voted overwhelmingly to at least endorse the agreement, between UPS
UPS,
and the Teamsters union, which represents 340,000 UPS workers, but not everyone was happy with the deal. Some part-timers felt the Teamsters could have used their leverage to wrest more from UPS, following a profit windfall at the company. And investors have held out for more detail from UPS executives themselves on what the deal might mean for the bottom line and for shipping prices.
Analysts will be dissecting the impact of the agreement as shipping demand lags, trucking company Yellow Corp.
YELL,
reportedly shuts down and FedEx Corp.
FDX,
tries to slash costs.
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Warren Buffett’s Berkshire Hathaway swung to a profit in the second quarter owed to its investment portfolio and insurance holdings, according to a release out Saturday.
The holding company with businesses that range from insurer Geico and railroad BNSF Railway to Dairy Queen restaurants and its own energy division posted net income of $35.9 billion, or $24,775 a class A share equivalent. That compared with a loss of $43.8 billion, or $29,754 a class A share equivalent, a year earlier.
Berkshire’s
BRK.A,
BRK.B,
after-tax operating earnings, a figure Warren Buffett wants shareholders to and which excludes some investment results, rose 6% to just over $10 billion from $9.3 billion a year earlier. Regulations do require Berkshire to include unrealized gains and losses from its investment portfolio when it reports its net income.
Berkshire’s stock repurchases totaled $1.4 billion in the second quarter, compared with $4.4 billion in the first quarter and $1 billion for the year-earlier period. The Q2 repurchases were below an estimate of $2.2 billion from UBS analyst Brian Meredith.
Reduced buybacks did come alongside appreciation in Berkshire stock, which was up 10% in the second quarter.
Berkshire ended the second quarter with $147.4 billion in cash and cash equivalents, compared with $105.4 billion in the same period a year ago.
Berkshire’s Class A shares have been hovering near all-time highs, up 21% over the past year and bringing the company’s market value to roughly $780 billion.
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The Food and Drug Administration late Friday approved the first-ever pill that can be taken at home for postpartum depression.
The medication, called zuranolone, and jointly developed by pharmaceutical companies Biogen Inc.
BIIB,
and Sage Therapeutics
SAGE,
is taken daily for two weeks, the FDA said in its release.
In a pair of clinical trials involving women who experienced severe depression after having a baby, the drug improved symptoms including anxiety, trouble sleeping, loss of pleasure, low energy, guilt or social withdrawal as soon as three days after the first pill.
“Postpartum depression is a serious and potentially life-threatening condition in which women experience sadness, guilt, worthlessness — even, in severe cases, thoughts of harming themselves or their child,” said Tiffany Farchione, M.D., director of the Division of Psychiatry in the FDA’s Center for Drug Evaluation and Research.
”And, because postpartum depression can disrupt the maternal-infant bond, it can also have consequences for the child’s physical and emotional development,” she said.
Women who are breastfeeding or had mild or moderate depression weren’t included in the trials.
Until now, the only available option for this condition has been an intravenous injection that the FDA approved in 2019. It requires patients to stay in a hospital for two-and-a-half days.
Postpartum depression affects one in eight new mothers in the U.S., according to the Centers for Disease Control and Prevention. Researchers suggest the actual rate may be higher and that half of such cases go undiagnosed.
Research finds that postpartum depression is more intense and lasts longer than the typical worries, sadness or tiredness that many women experience after giving birth. The condition can make it harder for mothers to bond with their babies and may increase the likelihood of developmental delays in infants.
Drug overdoses and suicides are leading causes of maternal death in the U.S., contributing to nearly one in four pregnancy-related deaths, according to the CDC.
Zuranolone stimulates a brain receptor called GABA that slows down the brain and helps control anxiety and stress. The drug, through trials, is thought to calm women suffering from postpartum depression enough to allow them to rest, which also improves symptoms.
Shares of Biogen are up 23% over the past year, and Sage has lost 14%, while the S&P 500
SPX
is up 8% over the same time.
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Icahn Enterprises Inc.’s bonds saw better buying on Friday, after Carl Icahn’s investing arm announced it was halving its quarterly distribution, a move that disappointed unit holders but is positive for its bonds.
Bondholders are typically focused on making sure a company can make its interest payments and repay the principal when a bond matures.
The company said it would now make a distribution of $1, down from $2 previously. The news came as the company posted a surprise loss for the second quarter and a $1 billion decline in revenue.
Icahn placed the blame for the fund’s poor performance on Hindenburg Research, the short seller that published a report about IEP on May 2, accusing it of overstating asset values. Hindenburg also revealed that Icahn himself had borrowed from the company, among other issues.
For more, see: Icahn Enterprises’ stock slides 30% after company halves quarterly distribution to $1 per unit
The stock promptly tumbled and was last down 24%, putting it on track for its biggest one-day selloff since it went public 36 years ago. The next biggest drop was 20.0% on May 2, when the Hindenburg Research report was released.
As the chart below from data-as-a-service provider BondCliQ Media Services shows buyers emerging after 8:00 a.m. Eastern, immediately after the news was announced. By midmorning, some sellers had emerged.
The following table shows there was net buying over the last 10 days, focused on the 6.35% notes that mature in 2026.
In a letter to unit holders accompanying the results, Icahn acknowledged missteps in the past several years as the company has shifted away from its core activist strategy and shorted far more than was necessary.
“While we made money on the long side through our activism efforts, our returns have been overwhelmed by our overly bearish view of the market and related oversized short (hedge) positions,” Icahn wrote. “Over the past six months, we have significantly reduced our hedges. Going forward, we intend to stick to our knitting and focus on our activist strategy while remaining appropriately hedged.”
For more, see: Carl Icahn admits he was wrong to take a huge short position on the market that lost $9 billion
Activism is the best investment paradigm because “there is no accountability in Corporate America,” he wrote.
With many exceptions, “most CEOs are incapable of creating great businesses (or even improving them) and the desire to empire build is rampant. “
Many are not the best person for the job or even the most talented individual in the organization, he continued. Far too often, they have climbed through the ranks by being agreeable and presenting no threat to their superiors.
“Those CEOs are generally too busy playing at the proverbial country club to realize what improvements can be made or what hidden jewels can be unlocked,” he said.
CEOs are hard to unseat, as they can pack a board with loyal cronies and use company funds to defend against an activist campaign by hiring expensive legal and financial experts, further depleting the coffers.
Icahn has himself waged endless activist campaigns against companies and their management teams, and most recently succeeded in his effort to shake up management at gene sequencing test maker Illumina Inc.
ILMN,
as the Associated Press reported.
Past activist campaigns by Icahn’s company have generated billions of dollars for shareholders and helped boards and CEOs capture untapped value, Icahn has argued, citing Reynolds, Netflix
NFLX,
Forest Labs, Apple
AAPL,
CVR Energy
CVI,
Herbalife
HLF,
eBay
EBAY,
Tropicana, Cheniere
LNG,
and Occidental
OXY,
as examples.
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“ ‘The numbers justified it, regrettably.’”
Blackstone chief executive officer Steve Schwarzman said Fitch Ratings’ recent downgrade to long-term U.S. debt was justified, and it is a “shot across the bow” after repeated debt-ceiling standoffs over the borrowing limit make the U.S. government less trustworthy than before.
“We’ve had an explosion of debt since the global financial crisis and we don’t appear to have a lot of discipline going forward,” Schwarzman said in a CNBC interview on Friday. “We’re running huge deficits now.”
Fitch Ratings late Tuesday lowered its rating on the U.S.’ long-term foreign currency issuer default rating to AA+ from AAA, saying that it reflects “expected fiscal deterioration,” a “high and growing” government debt burden and an “erosion of governance” in face of multiple debt-limit standoffs.
See: What Fitch’s U.S. credit downgrade means for investors
Fitch’s ratings downgrade was the first for the U.S. sovereign debt since Standard & Poor Global Ratings took the same step in 2011, cutting the nation’s credit rating to AA+ from AAA also after a debt-ceiling standoff in Congress. Moody’s Investors Service has kept its U.S. credit rating at Aaa, its highest, and remains the last of the three major credit credit-rating firms to maintain a top rating for the country.
Treasury Secretary Janet Yellen on Wednesday slammed the move by Fitch Ratings, calling it “arbitrary and based on outdated data” as it came two months after a debt-ceiling agreement that averted a U.S. default. She said the decision “does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s pre-eminent safe and liquid asset, and that the American economy is fundamentally strong.”
See: Warren Buffett dismisses Fitch downgrade: ‘There are some things people shouldn’t worry about’
Schwarzman said regardless of the rating, the U.S. dollar is the world’s reserve currency. “We do defend a large part of the world including people who have triple As, and when there’s a crisis in the world, they buy our securities,” he said on Friday.
“Now that doesn’t last forever if you don’t keep some discipline. And so in a way, it’s a bit of a shot across the bow,” Schwarzman said.
U.S. stocks were holding gains Friday following the July jobs report, with the Dow Jones Industrial Average
DJIA
up 170 points, or 0.5%, while the S&P 500
SPX
also advanced 0.5%.
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Fisker earnings, reported Friday morning, topped analyst expectations, but that was the extent of the good news.
An error has occurred, please try again later.
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The second-quarter earnings season so far is showing that one trend that featured in the first quarter has not gone away.
“Greedflation,” or the practice of companies raising prices to protect their profit margins, is alive and well, based on the number of companies that have so far acknowledged raising prices yet again, even as inflation readings have come down and as some acknowledge that their input costs are falling.
At the same time, companies continue to emphasize on earnings calls that their customers are showing signs they are weary of higher prices and are shopping more frequently at more stores, while spending less per trip.
See: Consumers are shopping in more stores than ever before to save money
“Across industries, we’ve seen the same story over and over the last two years,” said Liz Zelnick, director of economic security and corporate power at Accountable.US, a liberal-leaning consumer-advocacy group.
“CEOs claim outside forces made them gouge consumers, then turn around and give themselves raises and boast of record profits and billions in new investor handouts,” she said, referring to the billions of stock buybacks and dividend payouts the same companies have made.
See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike
Also read: U.S. wholesale inflation slows to a crawl, PPI shows
Procter & Gamble Co.
PG,
for example, said it raised prices by up to 9% in its latest quarter, after raising them up to 10% the previous quarter and up to 10% in the same quarter in 2022.
On a call with analysts, Chief Executive Jon Moeller signaled more price increases to come, which he attributed to the company’s innovation pipeline, which is creating must-have products.
“If you look back historically, pricing has been a positive contributor to our top-line growth for something like 48 out of the 51 last quarters and again as we strengthen our innovation program even further, that will provide opportunities to continue to benefit from modest pricing,” said Moeller, according to a FactSet transcript.
See also: Colgate to keep raising prices as inflation slows to boost margins and profit
The company blew past earnings estimates with adjusted per-share earnings of $1.37, ahead of the $1.32 FactSet consensus, and sales of $20.6 billion, versus the $20 billion FactSet consensus.
Gross margin increased 380 basis points from a year ago, driven by 340 basis points of pricing benefit and 290 basis points of productivity savings.
Coca-Cola Co.
KO,
also swept past estimates and raised guidance after the drinks and snacks giant increased prices by 10%. The company’s adjusted operating margin rose to 31.6% from 30.6% a year ago.
Conagra Brands Inc.
CAG,
raised prices by up to 17%, which Chief Executive Sean Connolly described as “inflation-justified.” The parent of brands such as Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim also reported that its customers are buying less food to stretch their budgets.
For more, see: Consumers are now ‘hunkering down’ rather than ‘trading down’ on groceries, Conagra says
Oreo cookie maker Mondelez International Inc.
MDLZ,
raised prices in North America by 10.4 percentage points in the second quarter and raised prices for all developed markets by 12.4 percentage points. That’s after raising North America prices by 15 percentage points and prices in developed markets by 13.4 percentage points in the first quarter.
The company’s second-quarter gross margins expanded by 3.1 percentage points to 39.4%. Revenues rose 17%, while volumes were flat.
At Campbell Soup Co.
CPB,
sales for its fiscal third quarter were up 5%, led by “favorable net price realization,” as the company disclosed as the very first bullet point in its release. Campbell raised prices of meals and beverages by 9% and if snacks by 15%, after raising them by 15% and 13%, respectively, in the second quarter.
However, volumes were down in the third quarter as shoppers proved sensitive to higher prices.
Kraft Heinz Co.
KHC,
on Tuesday said it too has lost business because it raised prices more than its competitors, but it’s not planning to cut prices to try to get those customers back anytime soon.
“[W]hile we did lose share in the quarter, as price gaps have stayed wider for longer than we would have liked, we are managing the business for the long term and still generated mid-single-digit top-line growth within the range of what we expected,” Chief Executive Miguel Patricio said.
The company, parent to brands including Kraft Mac and Cheese, Heinz Ketchup, Jell-O and Lunchables, indicated on the post-earnings conference call with analysts that rather than increasing discounting, or just cutting prices, it will remain focused on protecting margins, which has been allowing it to accelerate investment in the business, particularly in marketing, research and development and technology.
Besides, as Chief Financial Officer Andre Maciel said, the gaps between Kraft’s prices and those of competitors are not getting worse. “If anything, they are slightly getting better,” Maciel said, according to an AlphaSense transcript.
Considering the market-share losses and with inflation coming down, “do you think you took too much price, given you said you took price ahead of competitors, and they have not followed?” UBS analyst Cody Ross asked on the conference call.
CEO Miguel Patricio’s answer was simple: “No.”
“I mean, we had very high inflation. And we are leaders in the vast majority of categories where we play. And it’s our role as leader to try to compensate … this inflation with price increases,” Patricio said. “So I would do everything again. I mean we can always go back on price if we think we have to or when we have to. But we had to lead price increases.”
All of that leaves families to foot the bill for higher food prices, said Accountable.US’s Zelnick.
The Consumer Staples Select Sector SPDR exchange-traded fund
XLP
has gained 1.2% in the year to date, while the SPDR S&P Retail ETF
XRT
has gained 10.3%. The S&P 500
XRT
has gained 17%.
Tomi Kilgore contributed.
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The July jobs report on Friday showed the U.S. economy gained 187,000 jobs last month, with the unemployment rate dipping to 3.5% from 3.6%.
Economists polled by The Wall Street Journal had expected an addition of 200,000 jobs and unemployment staying at 3.6%.
See: U.S. adds 187,000 jobs in July
Below are some initial reactions from economists and other analysts, including their views on what the jobs report means for the Federal Reserve as the central bank considers how to proceed with interest-rate hikes. U.S. stocks
ES00,
SPX
looked set to trade up modestly following the data on nonfarm payrolls.
• “The Fed will take comfort from moderating job growth, but will continue to fret about the tight labor market. So far, the July employment and CPI reports are a wash for the Fed’s September 20 decision (we expect no change in rates), placing extra pressure on the August releases to add some clarity.” — Sal Guatieri, senior economist at BMO Capital Markets, in a tweet
• “This month’s slow job growth is a sign the economy is continuing to cool; while a negative in some senses, this is a positive indicator for the Fed and may soon end its interest rate hikes. … Moving forward, we anticipate the unemployment rate will remain low. We also expect unemployment will rise to its natural long-run rate of 4.5% over the next two years.” — Steve Rick, chief economist at TruStage, previously known as CUNA Mutual Group, in a note
• “Since bad news is good news these days, Jay Powell will be smiling this morning, if not entirely happy. The below consensus reading in hiring in the July payrolls is the type of labor market softening the Fed is looking for. … But there were some more mixed elements in the report as well. The unemployment rate ticked down a notch to 3.5% and average nominal wages grew 0.4% for the second consecutive month. The Fed will continue to be looking for a broader set of data and will be focused on a further deceleration in prices before throwing in the towel for September.” — Ali Jaffery, economist at CIBC, in a note
• “The wage data is stronger than the payroll data, suggesting that demand for labor is still robust, and that the slowing pace of hiring is more due to a lack of supply of labor. [Average hourly earnings] rose 0.4% in July, same as May and June. AHE Y/Y was steady at +4.4%. This, combined with the firmer household survey data, should keep the Fed on their toes for another rate hike as soon as next month, but the [consumer price index] data next week will have a big influence in that decision as well.” — Thomas Simons, U.S. economist at Jefferies, in a note
• “If you were to write the script of what a soft landing looks like, this is it. Payrolls grew a strong +187k, signaling a slower yet still strong — and more sustainable —pace.” — Justin Wolfers, University of Michigan economics professor, in a tweet
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The numbers: The U.S. added a more modest 187,000 new jobs in July, perhaps a sign the economy is cooling enough to drive inflation lower and even stave off further increases in interest rates.
Employment growth has fallen below 200,000 two months in a row for the first time since the onset of the pandemic in 2020.
The unemployment rate, meanwhile, dipped to 3.5% from 3.6%, the government said Friday.
After the report, stocks rose and bond yields fell.
Senior officials at the Federal Reserve will decide whether to raise interest rates again in September after reviewing a handful of reports on jobs, wages and inflation.
Scott Olson/Getty Images
Higher rates work to slow inflation by depressing the economy, but they also raise the risk of recession. The Fed is aiming to extinguish high inflation without triggering a downturn — what economists call a “soft landing.”
The good news? Inflation has slowed a bit faster than expected recently. Yet while the labor market appears to be cooling, a shortage of workers is keeping upward pressure on wages.
Wages rose 0.4% in July. The increase over the past 12 months was unchanged at 4.4%.
Fed officials want to see annual wage growth return to pre-pandemic levels of 3% or less.
The pace of hiring is also faster than the Fed would like. The economy probably only needs to add 100,000 jobs a month to absorb all the people entering the labor force in search of work, Fed officials said.
Key details: The increase in hiring in July was concentrated in just a handful of areas, mostly health care and social assistance.
Some 87,000 jobs — or 47% of July’s total — were created by medical providers and social programs.
Hiring also rose slightly in leisure and hospitality, finance, wholesale and government.
While the economy is still creating lots of new jobs, fewer industries are hiring. The percentage of firms adding jobs vs. the share reducing them fell close to a record low last month. That’s a sign the labor market is cooling off.
Hiring in June and May was also weaker than previously reported.
Job gains in June were reduced to 185,000 from 209,000, marking the smallest increase since the end of 2020.
The increase in employment in May was cut to 281,000 from 306,000.
Another sign of a softening labor market: The number of hours people work fell a tick to 34.3 and matched a post-pandemic low. Businesses tend to cut hours before resorting to layoffs when the economy slows.
The share of people working or looking for work, meanwhile, was unchanged at a post-pandemic high of 62.6%.
High labor-force participation can also help to reduce inflation. When more people are looking for work, companies don’t have to raise wages as much to obtain labor.
Big picture: Can the Fed really pull off a soft landing — something it’s only done once or twice since World War Two? Senior officials are increasingly convinced it’s doable.
The Fed economic staff recently dropped its forecast of a recession and a majority of Wall Street economists now say a downturn is unlikely in the next year.
The economy still isn’t out of danger, though. The Fed has raised interest rates to the highest level in a few decades and some key parts of the economy are suffering.
If progress on reducing inflation wanes and rates go even higher, the economy would be more vulnerable to a recession.
Looking ahead: “Today’s July jobs report is consistent with a soft landing in the U.S. economy,” said chief economist Gus Faucher of PNC Financial Services. “Job growth is gradually slowing to a more sustainable pace.”
“The July employment report should not change the Fed’s hawkish lean,” said Nationwide Chief Economist Kathy Bostjancic. “But officials will want to see the August employment report and the next two inflation monthly readings before deciding whether they can remain on hold or if further rate hikes are required to cool labor demand and inflationary pressures.”
Market reaction: The Dow Jones Industrial Average
DJIA
and S&P 500
SPX
were set to open higher in Friday trades. The yield on the 10-year Treasury BX:TMUBMUSD10Y fell to 4.1%.
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Icahn Enterprises L.P.’s stock tumbled 30% on Friday, after the company said it’s cutting its quarterly distribution to $1 from $2 previously.
The company
IEP,
made the announcement as it reported a surprise quarterly loss with Chairman Carl Icahn, the billionaire activist investor, blaming the news squarely on one thing.
“I believe the second quarter partially reflected the impact of short selling on companies we control or invest in, which I attribute to the misleading and self-serving Hindenburg report concerning our company, “Icahn said in a statement.
“It also reflected the size of the hedge book relative to our activist strategy.”
Icahn was referring to a report by short seller Hindenburg Research published on May 2 that accused IEP, Icahn’s publicly traded investing arm, of overstating asset values. Hindenburg also revealed that Icahn himself had borrowed from the company, among other issues.
That had been disclosed in a footnote to financials that Wall Street had overlooked.
Read: What we know about Carl Icahn’s margin loan
The report shaved billions off IEP’s market cap and was firmly rebutted by Icahn, who recently said he has finalized amended loan agreements with banks that untie his personal loans from the trading price of his company’s shares.
Icahn said IEP has paid out distributions for 73 continuous quarters and does not intend for a “misleading” report to interfere with that practice.
“The payment of future distributions will be determined by the board of directors quarterly, based upon current economic conditions and business performance and other factors that it deems relevant at the time that declaration of a distribution is considered,” said Icahn.
On a call with analysts, IEP’s Chief Executive David Willetts highlighted the long-term “lumpiness” of the business, given its many moving parts.
“We have large wins at times and we have volatility, we’re not a company that necessarily has predictable cash flow, there are no guarantees,” he told analysts.
But IEP is not changing its strategy on distributions, he added.
The stock was headed for the biggest one-day selloff since it went public 36 years ago. The next biggest drop was 20.0% on May 2, when the Hindenburg Research report was released.
The company, which is 84% owned by Icahn and his son, Brett, offers exposure to Icahn’s personal portfolio of public and private companies, including petroleum refineries, car-parts makers, food-packaging companies and real estate. Its unit holders are mostly retail investors.
The fund has performed poorly in the past decade. For many years Icahn has publicly expressed suspicion of the bull market that raged around him. He shorted the stock market in a big way as a hedge against his long activist positions. Going into 2021, for example, Icahn’s investment fund had a short exposure of 142%, SEC filings show.
For more, see: Carl Icahn admits he was wrong to take a huge short position on the market that lost $9 billion
Hindenburg, the short selling firm founded by Nate Anderson, took a victory lap on Elon Musk’s X platform, the renamed Twitter, noting that it had predicted that IEP’s poor investment performance would eventually force it to cut the distribution.
Icahn has himself waged endless activist campaigns against companies and their management teams, and most recently succeeded in his effort to shake up management at gene sequencing test maker Illumina Inc.
ILMN,
In June, that company accepted the resignation of its Chief Executive and director, Francis DeSouza, ending a monthslong heated battle over its $7.1 billion acquisition of cancer test maker Grail that has faced regulatory hurdles, as the Associated Press reported.
Icahn had urged shareholders to vote out its chairman, John Thompson, and DeSouza. Company shareholders voted out Thompson in late May.
Past activist campaigns by Icahn’s company have generated billions of dollars for shareholders and helped boards and CEOs capture untapped value, Icahn has argued, citing Reynolds, Netflix
NFLX,
Forest Labs, Apple
AAPL,
CVR Energy
CVI,
Herbalife
HLF,
eBay
EBAY,
Tropicana, Cheniere
LNG,
and Occidental
OXY,
as examples.
IEP said it had a loss of $269 million, or 72 cents per depositary unit, for the second quarter, wider than the loss of $128 million, or 41 cents per depositary unit, posted in the year-earlier period.
Revenue fell to $2.684 billion from $3.796 billion.
The FactSet consensus was for income of 25 cents per depositary unit and revenue of $2.657 billion.
Meanwhile, investors are waiting to see the outcome of a federal probe of IEP’s corporate governance and other issues, which was disclosed along with first-quarter earnings.
IEP’s stock is down 35% in the year to date, while the S&P 500
SPX
has gained 18%.
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