Walmart topped third-quarter estimates and raised fiscal-year guidance. But investors were expecting more from the world’s largest retailer, sending the stock lower in premarket trading.
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Tag: Sales Figures
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Walmart’s stock tumbles after soft guidance offsets earnings beat
An earlier version of this article incorrectly said that Walmart’s stock has fallen this year. It has gained 20%. The article has been corrected.
Walmart Inc.’s stock tumbled 7.3% early Thursday, after the company offered guidance for 2023 that was below consensus, offsetting a profit and sales beat for the third quarter.
The Bentonville, Ark.-based retail giant
WMT,
+1.27%
posted net income of $453 million, or 17 cents a share, for the third quarter, after a loss of $1.8 billion, or 66 cents a share, in the year-earlier period.Adjusted per-share earnings came to $1.53, ahead of the $1.52 FactSet consensus.
Revenue rose 5.2% to $160.8 billion from $152.8 billion, also ahead of the $159.7 billion FactSet consensus.
See also: Target CEO says consumers are still spending, but sees pressure on discretionary items
Walmart’s U.S. same-store sales rose 4.9%, while e-commerce sales rose 24%. Average transactions were up 3.4%, while the average ticket was up 1.5%.
Chief Executive Doug McMillion said the company saw revenue grow across segments and that it was getting an early start to the holiday season.
At the company’s international segment, growth in sales was led by Walmex and China. E-commerce sales fell 3%, while advertising grew 4%.
At Sam’s Club U.S., sales rose 2.8% to $22.0 billion from $21.4 billion a year ago, led by food and consumables, and healthcare. Same-store sales rose 3.8%, transactions were up 4% and average ticket was down 0.2%.
The company said it was raising its full-year guidance and now expects adjusted EPS of $6.40 to $6.48, but that was below the FactSet consensus of $6.50. It expects sales to grow 5% to 5.5%, while FactSet is expecting growth of 5%.
The stock has gained about 20% in the year to date, while the S&P 500
SPX,
+0.16%
has gained 17%. -
Fisker’s stock tanks 10% after EV maker widens loss, revenue falls short
Fisker Inc. shares plunged around 10% in the after-hours session Monday after the electric-vehicle maker widened its quarterly loss and reported sales that missed the mark, underscoring the difficulties of turning a profit in the EV world.
Fisker
FSR,
+7.03%
lost $91 million, or 27 cents a share, in the third quarter, compared with a loss of $149.3 million, or 49 cents a share, in the year-ago period.Revenue rose to $71.8 million, from $14,000 a year ago and $825,000 in the second quarter.
Analysts polled by FactSet expected Fisker to report a loss of 23 cents a share on sales of $143.1 million.
Fisker kept its guidance for 2023 operating expenses and capital expenditures unchanged, between $565 million and $640 million, but removed language about gross margins.
See also: Tesla’s Cybertruck contract restricts reselling vehicle within the first year
In August, the company said it expected gross margins between 8% and 12% for the year, “provided input costs do not change dramatically.”
The EV maker said the third quarter was its first quarter “with meaningful automotive sales revenue.”
Fisker is often dubbed the “Apple of autos,” and is focused on design and consumer interfaces while contracting out the manufacturing of cars.
The company said it produced 4,725 vehicles and sold 1,097 in the quarter. Deliveries “have accelerated as Fisker begins optimizing last-mile logistics and expanding its delivery infrastructure to achieve further scale effects in Q4 and beyond,” the company said in a statement.
“Over 3,000 vehicles delivered globally to date and hundreds more en route to consumers,” the company said.
On Monday, Fisker said it lowered its Fisker Ocean prices in the U.S. for the first time since it introduced the trim pricing in 2020 and 2021. Fisker also adjusted pricing in Europe and Canada, narrowing the gap between two trims.
Don’t miss: Plug Power’s stock extends losses as investors seek ‘clarity’ about going-concern warning
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Dow Jones slips after strong run as inflation data looms
U.S. edged lower early Monday ahead of important inflation data in coming days, while gauging the possibility of a shutdown of the federal government at the end of the week.
What’s happening
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The Dow Jones Industrial Average
DJIA
was down 42 points, or 0.1%, at 34,242. -
The S&P 500
SPX
fell 19 points, or 0.4%, to 4,396. -
The Nasdaq Composite
COMP
shed 93 points, or 0.7%, to 13,705.
The Dow, S&P 500 and Nasdaq Composite rose Friday to score back-to-back weekly gains.
What’s driving markets
The S&P 500 has jumped 7.2% over the past two weeks, helped by benchmark borrowing costs
BX:TMUBMUSD10Y
falling swiftly from 16-year highs on hopes that recent softer jobs data means inflation can ease further and the Federal Reserve has thus finished its campaign of interest rate rises.However, after that strong rally a more cautious tone prevails at the start of the new week as the market awaits a U.S. consumer-price index report for October, due Tuesday, that thus has the heft to underpin the latest bull run or bring it to a halt.
Read: Stock-market rally faces make-or-break moment. How to play U.S. October inflation data.
Core CPI growth — which strips out volatile items such as food and energy — is expected to remain steady at 0.3% month-on-month. The producer prices report for October will be published on Wednesday.
See: This week’s October inflation data looms large on Washington’s economic radar
October retail sales data is also on the docket this week, offering further clues to the health of the consumer on Wednesday.
“Most eyes will be focused on the latest inflation numbers, but retail sales and retail earnings will also help set the tone,” Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley, said in emailed comments.
He warned that the market “may be a little more jittery than usual,” following a downgrade of the U.S. credit outlook by Moody’s Investors Service and the possibility of a shutdown of the federal government at the end of the week.
Also see: House Republicans look to pass two-step package to avoid partial government shutdown
Worries over a dysfunctional government contributed to Moody’s Investors Service late Friday cutting its outlook on the U.S. sovereign credit rating to negative from stable.
“This week, we will plunge back into the U.S. political saga, as the government short-term funding deadline is due 17th of November and not much progress has been made to seal a fresh deal,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Depending on the new funding resolution – or the lack thereof – we could see the U.S. 10-year yield return above 4.80%,” Ozkardeskaya added.
Investors will also be keeping an eye out for a slew of earnings reports from retailers, including Home Depot Inc.
HD,
-1.24%
on Tuesday, Target Corp.
TGT,
-0.50%
on Wednesday and Walmart Inc.
WMT,
+0.15%
on Thursday. Their comments on the health of the consumer may also play into thinking on the Fed.Indeed, the earnings season in general should have provided fundamental support to investor sentiment, according to analysts. “For Q3 2023, with 92% of S&P 500 companies reporting actual results, 81%…have reported a positive earnings per share surprise and 61%…have reported a positive revenue surprise,” said John Butters, senior earnings analyst at FactSet.
The U.S. federal budget update for October will be published at 2 p.m. Eastern. Fed Governor Lisa Cook was due to deliver opening remarks at a Fed conference Monday morning.
Companies in focus
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Shares of Dow component Boeing Co.
BA,
+4.35%
rose 4% after a flurry of news. Bloomberg reported Monday that the Chinese government is close to lifting a freeze on commercial sales of the U.S. company’s 737 Max aircraft. Elsewhere, long-haul carrier Emirates announced at the Dubai Airshow that it would buy $52 billion of the Boeing’s planes, and SunExpress, a joint venture between Turkish Airlines and Lufthansa
LHA,
+1.08%
said it would purchase 90 737 MAX jets.
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The Dow Jones Industrial Average
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Adidas 3Q Net Pft EUR259M
By Andrea Figueras
Adidas on Wednesday posted a decline in net profit and sales for the third quarter while it continued to reduce high inventory levels.
The German athletic apparel and footwear company confirmed its third-quarter preliminary figures and said that net profit fell 25% on year to 259 million euros ($277.1 million).
As reported last month, revenue declined 6.4% to EUR6 billion, although currency-neutral revenue increased 1%, it said.
Operating profit fell to EUR409 million from EUR564 million and the operating margin was 6.8%, down from 8.8% in 2022.
Results for the third quarter were better than expected, but the current performance isn’t good enough, the company said.
Inventory levels decreased more than expected and were down 23% on year, it said. During the first nine months, inventories fell by more than EUR1.1 billion.
Adidas backed its recently updated guidance for 2023, which was raised thanks to Yeezy inventory reductions and a better-than-expected underlying business, it said.
It continues to expect currency-neutral revenues to decline at a low single-digit rate and underlying operating profit–excluding any one-offs related to Yeezy and the underway strategic review–at around EUR100 million.
Adidas also sees an operating loss of around EUR100 million this year.
Write to Andrea Figueras at andrea.figueras@wsj.com
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Sluggish EV and auto sales could continue next year, based on what these chip makers just said
A couple of lesser-known chip companies and a battery maker have confirmed growing fears among investors about the slowdown in electric-vehicle and overall auto sales, which appears likely to continue into next year.
Monday was loaded with bad news from companies that make industrial chips for the auto industry, as earnings reports from On Semiconductor Corp.
ON,
-21.77%
in the morning and Lattice Semiconductor Inc.
LSCC,
-4.05%
in the afternoon disappointed Wall Street with their forecasts.If inflation and high interest rates continue into next year, which is feasible, the slump in auto sales is expected to continue.
“We think it will carry through into the first part of next year, with most cycles running six to nine months,” said David Williams, an analyst with Benchmark who had predicted that the outlook for On Semi would have to be tempered. “However, the reduced consumer buying power and overall macro backdrop will likely keep buyers on the sidelines for the next couple of quarters.”
On Semi said that because of the shortfall in an order from one unnamed automotive customer in Europe, it now expects to ship $200 million less this year of its silicon carbide chips, which are used in EVs. The company did not give further details on its customer, but pointed out that at $800 million, its 2023 revenue will still be four times higher than 2022.
Last year, On Semi touted a new plant in Hudson, N.H., to make chips out of silicon carbide, an energy-efficient semiconductor material made of silicon and carbon, and predicted those chips would exceed $1 billion in sales in 2023.
“EVs are going to grow,” On Semi Chief Executive Hassane El-Khoury said Monday. “They’re going to grow for us in the fourth quarter as well. It’s just not going to grow in the fourth quarter at the rate that we expected… I think EVs are a long-term growth opportunity — even with the backdrop of a lot of the headlines that we’re seeing, customer designs have not slowed down.”
Even as company executives spun the positives, investors were rattled and On’s shares tumbled nearly 22%. Lattice Semiconductor also disappointed Wall Street with its outlook for the fourth quarter. Lattice sells chips that are used in advanced driver-assistance systems in cars, and shares tumbled 13% in extended trading after its fourth-quarter outlook came in lower than expected, due to fewer customers in Asia.
“In the last kind of four to six weeks of Q3, we started to see demand soften from our industrial and automotive customers,” Lattice CEO Jim Anderson told analysts. “I would say that it was really localized to the Asia geography, and we expect that softness we started to see at the end of Q3 extend into the current quarter.”
In addition, Tesla Inc.’s battery partner, Panasonic Holdings
6752,
-8.35%
of Japan, said it was slashing its production by 60% due to slower sales of some models to Tesla. That fueled a 4.8% drop in Tesla stock
TSLA,
-4.79% ,
to its lowest close since late May. Investors have been nervous about the EV market, especially after Ford
F,
-1.91%
executives said last week that consumers were unwilling right now to pay a premium for EVs.Semiconductor companies are often harbingers of future end-product demand in a wide variety of industries. Now that automakers use so many semiconductors, they can also be a big indicator of auto demand, especially in the hot arena of EVs. And those indicators don’t look good in the short term.
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Amazon Stock Jumps on Earnings Beat. Cloud Results Were Good Enough.
[ad_2]Amazon shares rose in late trading Thursday after the company posted better-than-expected financial results for the September quarter.
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Hasbro’s stock is having its worst month since the 1980s as toys sales tumble
Shares of Hasbro Inc. got rocked Thursday, making investors suffer through the worst month in four decades, as a weakening toy market led the company to report disappointing third-quarter results.
Heading into 2023, the toy market was expected to be down in the low-single-digit percentage range for the year, but the market’s performance has been “more challenging that planned,” Chief Executive Chris Cocks said on the post-earnings conference call with analysts.
“We saw the category soften during [the third quarter] to negative 10%,” Cocks said, according to an AlphaSense transcript.
The stock
HAS,
-11.42%
fell 11.5% toward a seven-month low in afternoon trading and was headed for the biggest one-day selloff since it sank 18.7% on March 16, 2020.It has fallen in 14 of the 19 trading days in October, to plunge 26.7% in the month to date. That puts it on track for the worst monthly performance since the record 43.1% selloff in October 1987, the month when “Black Monday” occurred.
Overall, third-quarter revenue fell 10.3% to $1.5 billion, to miss the FactSet consensus of $1.62 billion. The company’s consumer-products business, which includes toys, dropped 17.6% to $956.9 million, missing expectations of $1.1 billion.
Sales for Habro’s entertainment segment fell 41.9% to $122.9 million, below Wall Street projections of $127.8 million, but the company was able to blame that weakness on the effects of the writers and actors strikes on film and TV revenue.
It wasn’t all bad for Hasbro, however. Wizards of the Coast and digital-gaming revenue soared 39.6% to $423.6 million, well above expectations of $390.3 million, amid a more than doubling in digital- and licensed-gaming revenue behind “Baldur’s Gate III” from Larian Studios.
For 2023, the company now expects revenue to be down 13% to 15% from 2022, which is much worse than previous guidance for a decline of 3% to 6%. The current FactSet revenue consensus of $5.5 billion implies a 6.1% decline.
Hasbro also reported a net loss of $171.1 million, or $1.23 a share, after recording net income of $129.2 million, or 93 cents a share, in the same period a year ago. Excluding nonrecurring items, such as losses on assets held for sale, adjusted earnings per share rose to $1.64 from $1.42 but missed the FactSet consensus of $1.72.
CFRA analyst Zachary Warring cut his price target on Hasbro’s stock to $68 from $85 but reiterated his strong buy rating, as the new target implied 40% upside from current levels.
“Even though we were caught offside on this quarter’s results, we believe this is a multi-year opportunity to buy shares and expect digital gaming to continue momentum while consumer products has little downside,” Warring wrote in a note to clients.
Meanwhile, shares of Hasbro rival Mattel Inc.
MAT,
-7.63%
also dropped, down 7.1% toward a four-month low, even though the company’s third-quarter profit and sales beat expectations. That’s because strong sales of Barbie, Disney Princess and Disney Frozen dolls offset weakness in toys.Mattel said it expects toy-industry sales to decline in the mid-single-digit percentage range for the year.
Mattel’s stock was down 15.2% in October, while the S&P 500
SPX
slipped 3.2%. -
U.S. pending home sales stay near record low despite modest pickup in September
The numbers: U.S. pending home sales rebounded in September but remain near a record low as high mortgage rates and low inventory continue to hurt the real-estate sector.
Pending home sales rose 1.1% in September from the previous month, according to the monthly index released Thursday by the National Association of Realtors.
But pending home sales were still depressed on an annual basis due to the dearth of home listings. The September figure was the second-lowest reading since the NAR began tracking the data in 2001.
Transactions were down 11% from last year.
Nonetheless, the sales pace exceeded expectations on Wall Street. Economists were expecting pending home sales to fall 1.5% in September.
Pending home sales reflect transactions where the contract has been signed for the sale of an existing home, but the sale has not yet closed. Economists view it as an indicator of the direction of existing-home sales in subsequent months.
The NAR also released an updated forecast for existing-home sales on Thursday. The group expects sales to fall 17.5% in 2023 to a pace of 4.15 million, which will be the slowest pace since 2008. Yet due to low inventory, the median home price will increase by 0.1% in 2023, the NAR said, to $386,700.
The group expects home sales to rebound in 2024, rising 13.5% to a rate of 4.71 million. Home prices are expected to rise 0.7% next year, to $389,500.
The NAR also expects the 30-year mortgage rate to fall to 6.9% in 2023 and 6.3% in 2024. The 30-year was averaging 7.98% as of Wednesday, according to Mortgage News Daily.
Big picture: The U.S. housing market is dealing with problems on both the demand and supply sides, but the NAR seems confident that the sector will recover in the new year.
At present, not only are rates high enough to discourage home buyers, the lack of inventory is also making homes more expensive, which further spooks buyers. The NAR expects the pace of existing-home sales to fall to the slowest in 15 years, when the U.S. was in the midst of a recession caused by the subprime-lending crisis.
What the realtors said: “Because of home builders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” NAR Chief Economist Lawrence Yun said. “This underscores the importance of increased inventory in helping to get the overall housing market moving.”
Market reaction: Stocks
DJIASPX
were mixed in early trading on Thursday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose above 4.9%. -
Danone 3Q Sales EUR6.91B
By Giulia Petroni
Danone raised its full-year sales growth guidance after recording a sequential improvement in volume/mix in sales in the third quarter.
The French producer of yoghurts, bottled water and infant-nutrition products said Thursday that it now expects like-for-like sales growth between 6% and 7% in 2023 from previous expectations of between 4% and 6%.
It also said it expects to return to a positive volume/mix territory before the end of the year, and confirmed it sees a moderate improvement in the recurring operating margin.
In the third quarter, Danone posted sales of 6.91 billion euros ($7.30 billion), down from EUR7.33 billion in the year earlier, partly due to the depreciation of the majority of currencies against the euro. On a like-for-like basis, sales grew 6.2%, with volume/mix at minus 0.3% from minus 2.3% in the second quarter.
Analysts had forecast sales of EUR6.90 billion and like-for-like growth of 4.7%, according to a company-compiled consensus.
“This quarter is the seventh consecutive quarter of delivery,” said Chief Executive Antoine de Saint-Affrique. “We continue to view our future with confidence, despite a challenging environment.”
Write to Giulia Petroni at giulia.petroni@wsj.com
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Meta’s Earnings Story Will Be a Good Ol’ Rebound in Ads
Oct 25, 2023, 1:00 am EDT
In recent quarters, Meta Platforms CEO Mark Zuckerberg has been talking more about artificial intelligence and cost cutting, while focusing less and less on the company’s multibillion-dollar investment in the metaverse. Expect more of the same when the parent of Facebook, Instagram, WhatsApp, and Threads reports results after the close Wednesday.
Continue reading this article with a Barron’s subscription.
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Microsoft, Google post strong quarterly sales growth as Big Tech continues its comeback | CNN Business
New York
CNN
—
Big tech companies are continuing a turnaround from last year, as Alphabet, Microsoft and Snap kicked off earnings season with strong sales results for the quarter ended in September.
Google parent company Alphabet on Tuesday reported quarterly sales of $76.69 billion, up 11% from the same period in the prior year. The company also posted profits of $19.69 billion for the quarter.
Meanwhile, Microsoft posted 13% year-on-year sales growth to $56.5 billion, also beating expectations. Microsoft’s quarterly profits hit $22.3 billion, up 27% from the year-ago period.
Snapchat parent Snap on Tuesday reported a return to sales growth in the September quarter, after two consecutive quarters of declining sales. The company reported revenue of nearly $1.2 billion, an increase of 5% from the same period in the prior year and ahead of analysts’ projections. The company reported a net loss of $368 million.
The strong results come after Microsoft, Alphabet, Snap and other tech companies carried out mass layoffs and other cost cutting moves over the past year following a difficult 2022 when advertisers and other clients cut back on their spending due to concerns over the macroeconomic environment.
Despite beating Wall Street’s sales expectations, shares of both Alphabet (GOOGL) and Snap (SNAP) each dipped around 5% in after-hours trading following the reports, although Snap’s quickly regained some ground. Microsoft (MSFT) shares gained around 4% in after-hours trading.
“Q3 tech season has been quite strong thus far,” Tejas Dessai, research analyst at investment fund GlobalX said in a statement. “These numbers clearly defy concerns of near term economic weakness looming.”
Google’s advertising business generated quarterly revenue of $59.6 billion, up from $54.5 billion in the prior year. YouTube ads, meanwhile, garnered some $7.9 billion in revenue, up roughly 12% year-over-year.
YouTube Shorts, the company’s TikTok competitor, hit a milestone 70 billion daily views last quarter, Alphabet CEO Sundar Pichai said on a call with analysts Tuesday afternoon.
Google’s cloud business, however, reported revenue of $8.41 billion — missing analysts’ estimates.
Jesse Cohen, a senior analyst at Investing.com, attributed Alphabet’s after-hours stock fall to the “relatively weak performance in its Google cloud platform, which is at risk of falling further behind [Microsoft’s] Azure and [Amazon’s] AWS.” Still, despite taking a hit in 2022 amid a broader tech sector downturn, shares for Alphabet have climbed roughly 56% since the start of 2023, beating the tech-heavy Nasdaq index.
Google’s report comes as the tech giant is in the antitrust hot seat. US prosecutors officially opened a landmark antitrust trial against Google last month with sweeping allegations that the company engaged in anticompetitive behavior to maintain its dominance over search. (As the legal showdown rages on, Google has continued to deny allegations that it operated illegally.)
Google also confirmed last month plans to lay off hundreds of staffers in its recruiting division, as it continues cost cutting efforts in some areas. These more targeted layoffs came after Alphabet in January cut around 12,000 jobs — about 6% of its workforce.
Still, Google has signaled that it remains committed to investing heavily in generative artificial intelligence technology. Last month, Google rolled out a major expansion of its Bard AI chatbot tool.
“As we expand access to our new AI services, we continue to make meaningful investments in support of our AI efforts,” Pichai said on the call. “We remain committed to durably re-engineering our cost base in order to help create capacity for these investments, in support of long-term sustainable financial value.”
Microsoft’s recent investments in AI technology helped boost its sales in the September quarter, especially in its key cloud division. Sales from Microsoft’s “intelligent cloud” business — its biggest revenue driver — grew 19% from the year-ago quarter to $24.3 billion.
Revenue from the company’s “productivity and business processes” business, which includes LinkedIn and Office commercial and consumer products, also grew 13% year-over-year to $18.6 billion.
“Microsoft is firing on all cylinders and AI is clearly driving growth,” Cohen said in a research note following the company’s report. “The results indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth.”
But economic jitters among consumers appear to still have some impact on the company’s bottom line. Devices revenue, which includes sales of laptops, tablets and Xbox consoles, decreased 22% year-over-year, despite a 3% sales increase in the overall “more personal computing” segment. Ongoing concerns about a potential economic slowdown could continue to weigh on the company as it heads into the crucial holiday device sales season.
The report is Microsoft’s first since the company closed its $69 billion acquisition of “Call of Duty” maker Activision Blizzard earlier this month. While the deal didn’t factor into this quarter’s results, it’s expected to supercharge the company’s gaming business.
“Microsoft now controls 30 game studios and some of the most well-known games across the industry,” Edward Jones analyst Logan Purk said in a research note earlier this month. “With a massive cloud network and now a compelling library of games, Microsoft has a leg up on peers” in gaming, he said.
Following the Activision takeover, “we’re looking forward to one of our strongest first-party holiday [game] lineups ever, including new titles like Call of Duty Modern Warfare 3,” CEO Satya Nadella said on an analyst call Tuesday. The company said it expects roughly $400 million of operating expenses in the fourth quarter to come as a result of the acquisition.
Snap said its sales growth was driven in part by its ongoing efforts to revamp its advertising technology, following changes to Apple’s app tracking policies that took a hit to the business models of Snapchat, Facebook and other platforms.
“We are focused on improving our advertising platform to drive higher return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and drive customer success,” CEO Evan Spiegel said in a statement.
Snap also reported that it now has 406 million daily active users, up 12% compared to the year-ago quarter. And time spent watching Spotlight — Snapchat’s TikTok clone — grew 200% year-over-year, according to the company.
The company also recently announced that it had reached more than 5 million subscribers to its Snapchat+ subscription program, a key effort to diversify its revenue.
Snap said Tuesday that its chief operating officer, Jerry Hunter, plans to retire. Hunter, who spent seven years at the company, will step down from his role as of the end of the month, but will remain at the company until July 1, 2024, to support the transition.
The company noted that some advertisers temporarily paused their spending following the outbreak of the Israel-Hamas war. Because of the “unpredictable nature” of the war, Snap declined to provide formal guidance for the fourth quarter, but said its internal forecast assumes year-over-year quarterly revenue growth between 2% and 6%.
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Novartis Raises 2023 View
By Adria Calatayud
Novartis raised its full-year earnings guidance for the third time this year after it reported higher net profit and sales for the third quarter, boosted by strong sales of key drugs.
The Swiss pharmaceutical giant said Tuesday that it now expects core operating profit to grow this year by a percentage in the mid to high teens range. It had previously anticipated a growth rate from low double percentage digits to mid teens excluding Sandoz, the generics unit that was spun off earlier this month.
Novartis reiterated its expectation for net sales growth of a high single digit in 2023.
For the third quarter, the company made a net profit of $1.76 billion compared with $1.57 billion for the same period last year.
Net sales for the quarter grew to $11.78 billion from $10.49 billion.
“Our growth drivers, including Kesimpta, Entresto, Kisqali and Pluvicto, continue to perform well in the market,” Chief Executive Vas Narasimhan said.
Excluding exceptional items, core operating income from continuing operations was up 21% at $4.41 billion.
Write to Adria Calatayud at adria.calatayud@dowjones.com
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U.S. home sales fell in September to the lowest level since the Great Recession
The numbers: Home sales in September fell to the lowest level since 2010, as high mortgage rates continue to hammer the housing market.
Aside from low inventory, rising rates are eroding buyers’ purchasing power, and drying up demand. Sales of previously owned homes fell by 2% to an annual rate of 3.96 million in September, the National Association of Realtors said Thursday.
That’s the number of homes that would be sold over an entire year if sales took place at the same rate every month as they did in September. The numbers are seasonally adjusted.
The drop in sales was slightly better than what Wall Street was expecting. They forecasted existing-home sales to total 3.9 million in September.
Compared to September 2022, home sales are down by 15.4%.
Key details: The median price for an existing home in September rose for the third month in a row to $394,300. Prices are up 2.8% from a year ago. That was the highest price for the month of September since NAR began tracking the data.
Home prices peaked in June 2022, when the median price of a resale home hit $413,800.
Around 26% of properties are being sold above list price, the NAR noted.
The total number of homes for sale in September fell by 8.1% from last year, to 1.13 million units. Housing inventory for the month of September was the lowest since 1999, when the NAR began tracking the data.
Homes listed for sale remained on the market for 21 days on average, up from the previous month. Last September, homes were only on the market for 19 days.
Sales of existing homes rose only in the Northeast in September, as compared with the previous month, by 4.2%. The median price of a home in the region was $439,900.
All-cash buyers made up 29% of sales, highest since January 2023. The share of individual investors or second-home buyers was 18%. About 27% of homes were sold to first-time home buyers.
Big picture: The U.S. housing market is in the midst of a serious slowdown that is primarily driven by high mortgage rates. High rates spook home buyers, drying up demand, and high rates also deter homeowners from selling since they may have to purchase another home. For a homeowner with a 3% mortgage rate for the next few decades, there’s little incentive to move.
And the residential sector is likely to see sales fall further in October’s data, as the 30-year mortgage inches even higher. Demand for mortgages has collapsed, and some outlets like Mortgage News Daily are quoting a rate of 8% for the 30-year.
Existing-home sales in 2023 could fall to the slowest pace since the housing bubble burst in 2008, real-estate brokerage Redfin said on Thursday, at a 4.1 million pace.
What the realtors said: “Mortgage rates and limited inventory has been the story throughout this year — no different this month, other than the fact that interest rates are moving higher,” said Lawrence Yun, chief economist at the National Association of Realtors.
“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains,” he added. “We don’t want the Fed to overdo it and cause great harm to real estate.”
Yun also questioned whether there will be a “fundamental change” or a temporary one to the “American way of life” due to the slowdown in sales.
Market reaction: Stocks were down in early trading on Thursday. The yield on the 10-year note
BX:TMUBMUSD10Y
rose above 4.9%. -
Nestle 9-Mos Sales CHF68.83B
By Giulia Petroni
Nestle reported a 7.8% organic sales growth in the first nine months of the year driven by price increases amid high inflation levels, and backed its full-year outlook.
The Swiss food and beverage giant said sales stood at 68.83 billion Swiss francs ($76.57 billion) in the period from CHF69.13 billion a year earlier, driven by pricing at 8.4%. Real internal growth was minus 0.6%, but the company said the recovery of volume and mix is underway.
A company-compiled consensus estimate had forecast organic sales growth of 8.1%.
Write to Giulia Petroni at giulia.petroni@wsj.com
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ASML Holding Sees Flat 2024 Revenue on Demand Uncertainty
ASML Holding said it expects revenue next year to be similar to 2023 given uncertainty around demand recovery in the semiconductor industry but posted better-than-expected net income for the third quarter.
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AI stole the show this year, but earnings will drag Wall Street back to reality
Nearly a year ago, OpenAI released ChatGPT 3 into the world, and investors got visions of dollar signs in their heads as they imagined the ways that artificial intelligence could make big money for businesses.
Wall Street’s now coming to terms with the fact that those sorts of paydays are going to take time. As investors have already seen from the past two quarters of earnings, AI has only really delivered financial benefits for a select few hardware companies so far — while spurring new costs for many others.
“The AI boom has already bifurcated into the contenders and pretenders,” said Daniel Newman, chief executive and principal analyst of Futurum Research. And while Advanced Micro Devices Inc., Intel Corp. and Arm Holdings PLC
ARM,
+0.38%
have stirred up interest, Nvidia Corp.
NVDA,
-4.68%
has established itself as far and away the greatest “contender,” with AI driving strong demand for its chips tuned for AI training.Nvidia last quarter reported record earnings, including a 141% jump in revenue for its graphics chips used in AI infrastructure building up data centers. Nvidia, which reports near the end of earnings season on Nov. 21, posted record revenue of $13.5 billion last quarter and is expected to easily top that with $16 billion in the most recent quarter, a surge of 170% versus a year ago. Those estimates include $12.3 billion of revenue coming from data-center sales.
Other chip companies could post gains from AI as well, but to far lesser extents. Candidates include Broadcom Corp.
AVGO,
-2.01%
and system maker Super Micro Computer Inc.
SMCI,
+2.35% ,
as well as Marvell Technology Inc.
MRVL,
-0.91% ,
which last quarter told analysts that it expects to end the year at a revenue run rate of about $800 million this year from cloud/data-center chips related to AI.“This is well above what we had outlined last quarter. Put this in perspective: This would put us at the run rate we had previously communicated for all of next year,” Marvel Chief Executive Matthew Murphy told analysts.
Super Micro is also riding the AI wave with its customized data-center servers that are designed to consume less power. But revenue in the September quarter is forecast to rise just 15% from a year ago and drop on a sequential basis, as supply constraints from Nvidia likely hampered Super Micro’s ability to meet all its demand.
Much as Advanced Micro Devices Inc.
AMD,
-1.24%
and Intel Corp.
INTC,
-1.37%
want to be in the AI conversations with the graphics chips they hope will be used for AI data-center applications, they won’t see much of an impact yet from AI revenue. Plus, those companies are experiencing a slowdown in PC sales that may overshadow any small benefit from AI chips.The AI boom in chips is clearly not providing enough of a boost to lift finances for the overall semiconductor sector, which is forecast to see earnings fall 3.3% in the third quarter and post a revenue decline of 0.6%, according to FactSet. The industry is being dragged down in part by Micron Technology Inc.
MU,
-0.12% ,
which reported a 40% drop in revenue and a whopping fiscal fourth-quarter loss in late September for the quarter ended Aug. 31, which is included in FactSet’s third-quarter data. Even so, the company called a bottom to the memory-chip downturn.Read also: Micron’s AI focused chip won’t help financial results anytime soon.
“Most of the consumer-based tech is still struggling, [including] PCs, laptops and to a certain extent smartphones,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. Wall Street has tempered expectations related to the impact of Apple Inc.’s
AAPL,
-0.88%
iPhone 15 launch on the quarter, as estimates call for an overall 1% drop in September-quarter revenue. Last quarter, Apple executives forecast that both Mac and iPad sales would be down by double-digits and that revenue performance would be similar to its June quarter, when revenue fell 1.3%In addition, when asked about AI, Apple CEO Tim Cook said the company views AI and machine learning “as core fundamental technologies that are integral to virtually every product that we build.” Those comments, though, can also apply to the bulk of tech companies, where AI is built into software as another layer to improve a product. Internet companies such as Meta Platforms Inc.
META,
+0.89%
and Alphabet Inc.
GOOG,
+0.36% GOOGL,
+0.45%
incorporate AI into their software and algorithms but don’t treat it as a specific, revenue-generating product.Other software companies are building AI into their products as separate features or add-ons, but they are still in the early stages of seeing whether or not customers will pay more for them. Take Microsoft Corp.,
MSFT,
-0.17%
which has showed off Copilot, an extra AI feature for customers of Microsoft 365.“[Microsoft] can distinguish itself by providing more details around its AI revenue
ramp since we don’t expect much information from Google, who really doesn’t seem
to have the monetization plan for Bard and AI-assisted search (SGE) ready to
articulate yet,” Melius Research analyst Ben Reitzes said in a note to clients this week. He also noted that the cost of offering AI products to consumers is steep, and requires lots of investment.“There are sophisticated issues to contend with for Microsoft, including balancing the potential for higher revenue from Copilots with the high costs per query and much-needed investment,” Reitzes said. “The balance of AI adoption vs. cost was implied when Microsoft guided to flat operating margins year over year for fiscal 2024.”
Earlier this year, the Information reported that OpenAI, the creator of ChatGPT and recipient of a hefty investment from Microsoft, has costs of up to $700,000 a day, because the massive amounts of computing power needed to run queries. In February, OpenAI launched ChatGPT Plus, for $20 a month, a service that will give subscribers access to its AI during peak times and faster response times.
Another example is Adobe Inc.
ADBE,
+1.70% ,
which has a few AI offerings, including a subscription service called Generative Credits, tokens that let customers turn text-based prompts into images. Another is Firefly, a generative AI service for images, and an AI option in Photoshop, currently called Photoshop Beta AI, to help users fill in images and other collaborative tools. Adobe did not provide any forecasts on potential revenue generation during its analyst day earlier this month.Toni Sacconaghi, a Bernstein Research analyst, said AI could drive a massive increase in enterprise productivity, and companies could dramatically increase IT spending on servers in order to invest in productivity-enhancing AI. “However, we note that enterprise adoption appears to be in early stages,” he said in a recent note to clients, adding that it was feasible that spending on AI infrastructure could take money away from other IT projects in process. “We do worry that projected AI infrastructure build out may be occurring too quickly, necessitating a digestion period, which could result in a commensurate stock pullback in AI-related names.”
Overall, the information-technology sector itself is expected to see anemic revenue growth this quarter. The consensus on FactSet forecasts a meager 1.35% revenue uptick in the third quarter, with earnings growth of 4.65%. FactSet’s estimates for IT companies exclude internet companies like Meta and Alphabet, which are under the category of communications/interactive media services. That sector is expected to see sales growth of 12%, and earnings growth of 51%, thanks to a 116% boost in Meta’s net income, after it hit a low point in the year-ago quarter.
Amazon.com Inc.
AMZN,
-0.81% ,
in the category of consumer discretionary/broadline retail, is forecast to see earnings growth of 109%, and revenue growth of 11%. Amazon’s cloud services business, AWS, is expected to also see a potential uplift from customers spending money on AI projects, according to a TD Cowen & Co. survey, in which 41% of respondents said they were “highly considering” allocating a budget for generative AI.“This trend could bode well for Amazon’s AWS,” TD Cowen analyst John Blackledge said in a recent report, adding that he expects AWS revenue growth to reaccelerate in the second half of this year and in 2024, boosted by the move of additional workloads to the cloud, possibly including generative AI.
As companies build up their infrastructure, or their spending on cloud computing to add or improve AI capabilities, they are seeing higher costs, which is affecting margins — especially if revenue has slowed down, as it has in some sectors. Across both the broader S&P 500
SPX,
and the IT sector, earnings are lower than a year ago.As Newman of Futurum pointed out, “AI stole the budget this year.” And that is a mixed bag for tech.
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Retail sales rise on strong car sales and Internet buying. Economy not slowing much.
Developing story. Check back for updates.
The numbers: Sales at U.S. retailers jumped a bigger-than-expected 0.7% in September in a sign households have enough buying power to keep the economy expanding.
The increase was spurred by strong demand at auto dealers and Internet stores. Higher gas prices also played a role, however.
Economists polled by The Wall Street Journal had forecast a 0.2% increase in sales.
Retail sales represent about one-third of all consumer spending and usually offer clues on the strength of the economy.
Yet September also falls between the busy back-to-school and holiday-shopping seasons and tends to reveal less about how consumers are doing.
Key details: Auto dealers posted a 1% gain in sales and helped to inflate the headline number. Auto sales account for about 20% of all retail sales.
Receipts at gas stations also rose nearly 1%, but that largely reflected higher gas prices. That’s not a good thing for households.
Retail sales advanced a still-robust 0.6% when car dealers and gas stations are set aside, which gives a better idea of consumer demand.
Sales at internet retailers stayed on a hot streak. They rose 1.1%.
Sales climbed 0.9%% at bars and restaurants. Restaurant sales tend to rise when the economy is healthy and Americans feel secure in their jobs. Sales decline during times of economic stress.
Over the past year, restaurant sales have surged 9.2% — more than twice as fast as inflation.
On the negative side of the ledger, sales fell at big-box electronics stores, clothing stores and home centers such as Home Depot
HD,
+1.85%
and Lowe’s
LOW,
+1.28% .Sales in August were also revised up to show a 0.8% increase instead of 0.6%.
Big picture: The retail sales report is the latest to suggest the economy is still expanding at solid pace and perhaps not decelerating as much as the Federal Reserve would like to help slow the rate of inflation.
Consumer spending has stayed fairly healthy because of rising wages and the lowest unemployment rate in decades. What’s more, incomes are finally increasing faster than inflation for the first time in a few years.
Yet higher interest rates are pinching households and businesses and are bound to slow the economy in the months ahead. If so, retail spending is also likely to soften.
Looking ahead: “Consumer spending shows little sign of flagging, especially when purchases increased on everything from durable goods, such as autos, to the least durable goods, food and drink at bars and restaurants,” said Robert Frick, corporate economist at Navy Federal Credit Union.
“As long as the jobs market remains healthy, consumers should have the cash and confidence to maintain spending.”
Market reaction: Before the markets opened, the Dow Jones Industrial Average
DJIA
and S&P 500
SPX
were set to open lower in Tuesday trades. -
Lonza Warns on 2024 Profitability Hit From Lost Moderna Revenue
Updated Oct. 17, 2023 2:47 am ET
Lonza Group warned that its profitability will take a hit next year from losing revenue from an agreement with Moderna and the risk of a smaller business with Kodiak Sciences.
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UK Retail Sales Slow in September as Consumers Avoid Big Ticket Purchases, BRC Says
By Michael Susin
Retail sales growth in the U.K. slowed in September despite a fall in inflation as the high cost of living continues to put households’ budget under pressure, according to the latest sales-monitor report from the British Retail Consortium published on Tuesday.
Total retail sales for the five weeks to Sept. 30 increased by 2.7% compared with the prior month, when it saw growth of 4.1%, and was at the same level as the three-month average growth, the report said. In September last year, retail sales were up 2.2%.
Food sales rose 7.4% over the three months to September, while non-food sales further decreased 1.2%.
“Big ticket items such as furniture and electricals performed poorly as consumers limited spending in the face of higher housing, rental and fuel costs. The Indian summer also meant sales of autumnal clothing, knitwear and coats, have yet to materialize,” BRC Chief Executive Helen Dickinson said in a note.
Looking ahead, retailers are getting ready for the ‘Golden Quarter’ amid fierce competition that is likely to bring earlier and abundant promotions ahead of Christmas, KPMG U.K. Head of retail Paul Martin said.
“Consumers will continue to seek out good deals, with price driving purchasing decisions. This is likely to be one of the most important golden quarters that we have seen in years, as for some in the sector, it could very much determine their future,” he adds.
Dickinson highlighted that retailers’ efforts might be challenged by the 400 million pounds ($489.6 million) increase in business rates expected next year, and urged Chancellor Jeremy Hunt to scrap the rates rise in the upcoming budget statement.
Write to Michael Susin at michael.susin@wsj.com
