Earnings Season Playlist
…..A deluge of earnings reports. The end of Google Fiber? New home sales up, inventories tight. Trade deficit declines. NATO flexes muscle. Microsoft wants to be cool. Watson aims at ubiquity. Friends don’t tag friends on Facebook.
Financial Review by Sinclair Noe for 10-26-2016
DOW + 30 = 18,199
SPX – 3 = 2139
NAS – 33 = 5250
10 Y + .03 = 1.79%
OIL – .76 = 49.20
GOLD – 6.40 = 1267.70
After the closing bell yesterday, Apple reported its first decline in annual revenues in over a decade, profit just barely beat expectations. Apple forecast higher sales in the holiday quarter but that doesn’t seem to be enough to motivate investors. Meanwhile, iPhone sales continued their decline, falling 5% from the previous year, although that’s an improvement from the 15% drop seen in fiscal Q3. Apple’s cash pile also continued to swell to a record of over $237 billion – if that was its own public company it would be the world’s fourteenth largest. Apple is still making money, about $9 billion in profits in the last quarter, but the bigger question is “what’s next?” The answer comes tomorrow, as Apple introduces the next generation of its MacBook laptop. And maybe something to do with Apple TV – possibly a playlist for TV. We’ll see. Apple sank 2.3 percent in today’s trading.
Boeing shares were trading at their highest level this year, after the world’s largest plane maker reported a jump in quarterly profit despite slower sales. The stock gave the biggest boost to the S&P and the Dow.
Coca-Cola reported better-than-expected quarterly revenue, helped by higher prices for sodas and strong demand for water and sports drinks in North America. Coke reported profit of just over $1 billion on revenue of $1.6 billion.
Tesla shares were up about 5% in after-hours trade, after the electric car maker reported results that were better than expected. Third-quarter was $2.3 billion in revenue, well above targets of about $1.9 billion. Tesla posted a profit of $111 million, or $0.71 on an adjusted per share basis, beating estimates that called for a loss. Tesla maintained its guidance for 24,500 vehicle deliveries in the third quarter, and its second-half estimate of 50,000 deliveries, at the low end of its full-year guidance of 80-90,000.
Chipotle is optimistic on next year. The burrito chain announced diluted earnings of $0.27 a share, missing Wall Street’s estimate of $1.56 by a wide margin. Same-restaurant sales dropped 21%. The company expects a rebound next year.
Pokémon Go didn’t help Nintendo much. Despite the success of the popular iPhone game, and a big one-time gain from selling its controlling interest in the Seattle Mariners baseball team, the Japanese games company’s figures were dented by the strength of the Japanese currency. The video-game maker posted an operating loss for the quarter and cut its operating profit outlook for the fiscal year.
Airbus missed forecasts on supply chain issues, but the aircraft maker maintained its full year guidance.
Brazil provided some bright side for Santander as a pick-up in performance lifted earnings above expectations.
Provisions ate into the quarterly profit at Lloyds, as the bank set aside another £1-billion-pounds to pay compensation for mis-sold payment protection insurance.
Bayer raised guidance for the full year on strong pharma results in its first quarterly scorecard since securing the Monsanto merger.
Southwest Airlines slid after saying a revenue measure may worsen this quarter.
Biogen rallied after its quarterly profit topped estimates.
Mondelez International rose after boosting its earnings forecast.
Northrop Grumman climbed to a record after raising its earnings outlook.
Comcast posted higher third-quarter revenue and profit, benefiting from its NBCUniversal unit’s broadcast of the Rio Olympics.
Google Fiber is halting its rollout in 10 cities and laying off staff, dealing a major setback to the Internet giant’s ambitions of blanketing the nation in super-speedy Internet. The change-up comes months after the company acquired Webpass, largely seen as an admission that fixed wireless might be a preferable route to laying fiber.
AT&T’s new streaming service is coming. DirecTV Now will offer more than 100 channels for just $35 a month. The service debuts in November.
New-home sales picked up in September, to an annual rate of 593,000. That was 3.1% higher than August’s figures. Sales in September were 29.8% higher compared to a year ago. The median price of new homes sold in September was $313,500, 6.7% higher than in August, and 1.9% higher than a year ago. In part, that reflects dwindling supply. There were 4.8 months’ worth of homes available for sale at the current pace in September, fewer than in August. Despite robust demand, builders haven’t ramped up construction of new homes since the recession. Many continue to report difficulties in finding affordable labor and lots.
An early look at trade patterns in September points to a sharper than expected drop in the U.S. trade deficit – showing a deficit of $56.1 billion in September compared to $59.1 billion in August. A smaller deficit boosts the official growth rate of the economy, or gross domestic product. The size of the decline in September could even be enough to generate 3% GDP. While exports of American-made goods rose 0.9% in September, imports fell 1.1% and retail and wholesale U.S. inventories rose in the month.
Britain will send fighter jets to Romania next year and the United States promised troops, tanks and artillery to Poland in NATO’s biggest military build-up on Russia’s borders since the Cold War. Germany, Canada and other NATO allies also pledged forces at a defense ministers meeting in Brussels on the same day two Russian warships armed with cruise missiles entered the Baltic Sea between Sweden and Denmark. Those warships have now made their way to the Mediterranean, headed for Syria, but Spain denied refueling at one of its ports in North Africa. Others NATO allies joined the four battle groups led by the United States, Germany, Britain and Canada to go to Poland, Lithuania, Estonia and Latvia. Canada said it was sending 450 troops to Latvia, joined by 140 military personnel from Italy. Germany said it was sending between 400 and 600 troops to Lithuania, with additional forces from the Netherlands, Norway, Belgium, Croatia and Luxembourg.
Every year for the past 24 years, the United Nations General Assembly has held a vote to end the US embargo of Cuba. The resolution is adopted each year despite the US vote. Such resolutions are non-binding, but can carry political weight. Today, the 25th vote was called and the US abstained.
Mercedes-Benz is launching a pickup truck in late 2017, dubbed the new “X-Class,” entering one of the most lucrative segments in the car industry.
General Motors and IBM are combining AI system Watson with OnStar in an effort to market new services to drivers. Watson, a collection of artificial-intelligence software delivered as cloud-computing services, is a high-profile part of what IBM calls its “strategic imperatives” to help spur growth. IBM says Watson artificial-intelligence technology is on track to be used in some form by a billion people by the end of next year. IBM also announced an arrangement with the business messaging service Slack, which helps workers to collaborate in private groups. Slack will use Watson Conversation to enhance the accuracy and efficiency of Slackbot, a customer-service bot that helps Slack users troubleshoot problems. IBM announced a relationship last week with Quest Diagnostics, in which Watson will help analyze the results of genetic sequencing of tumor samples of cancer patients.
Is it possible that Microsoft might have some cool software? I suppose anything is possible. Today, Microsoft executives introduced 3D as a core feature of Window’s 10 Creator’s suite; it was a splashy rollout, the way tech companies do. Along with Microsoft Paint 3D, the company showed off a way to easily scan a real-world object with a phone so that it could become a 3D file you can manipulate with software. It linked 3D objects to its flagship piece of futurism, the Microsoft HoloLens, which makes sharing and interacting with 3D objects a lot more compelling than viewing them on a two-dimensional screen. This vision for a new world, where ordinary users create and share 3D objects as casually as they share images on Instagram and Snapchat, won’t become a reality right away. Microsoft’s HoloLens hardware is still only available as a very expensive developer kit. Most people own smartphones, but most don’t own VR headsets. Microsoft can’t sell most people the hardware to realize its vision of the future today; they’re still working on it. But they planted some seeds to capture that market with its new software, even if it is basically a beta version.
LG Chem, the world’s largest automotive battery maker, will enter the U.S. market for home energy storage through a partnership with rooftop solar company Sunrun. The move will put LG in direct competition with electric car maker Tesla Motors Inc, which unveiled its own home battery packs, called Powerwalls, last year. Sunrun has been using Tesla batteries in its home storage systems in Hawaii since earlier this year, and this deal will add LG to its list of suppliers.
Every time you tag a friend in a Facebook photo, Facebook stores their image in its database. You might consider that an invasion of your privacy. Facebook says it is not. Tomorrow, a San Francisco court will assess whether Facebook is breaking the law by using its facial-recognition tool, to identify faces in photographs uploaded by users. Plaintiffs in the class action case are concerned on a number of fronts: Facebook could be selling identifying information to retailers or other third parties. More importantly, they worry that biometric data is just as susceptible to theft, hacking, and the long and invasive arm of law enforcement as other types of data. And yes, there is a law that requires companies to get consent from users before storing biometric information.