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Earnings season: Tesla drives through Q3 with another earnings beat
Despite supply shortages, Tesla comes out on top with another record-breaking earnings quarter.
Tesla’s headline stats
It’s another expectation-beating quarter for Elon Musk’s Tesla.
The electric carmaker was buoyed by record deliveries in Q3. This translated into higher net income and better margins. Tesla appears to have found chipsets no one else can locate, giving it the edge over its rivals as the world experiences a global computer chip shortage.
The key takeaways from Tesla’s Q3 2021 earnings are:
- Earnings per share – $1.86 vs. $1.59 estimated
- Revenue – $13.76 billion vs $13.63 billion estimated
In income terms, Tesla reported net income of $1.62bn. This is the second consecutive quarter the auto manufacturer has reached a $1bn income quarter. It only goes to show just how far Tesla has come. Last year, third quarter net income totalled $330m.
It was reported at the start of October that Tesla vehicle deliveries had outstripped Wall Street estimations. According to Tesla, it delivered 20% more vehicles against Q2 for a total of 241,300. Its Model Y and Model 3, more “affordable” cars, were the most popular models. Ultimately, Q3 vehicle deliveries were up 73% year-on-year.
Analysts had forecast that Q3 deliveries would stack up at 229,242 vehicles.
Gross margins improved from 26.6% overall and 30.6% for Tesla’s main automotive business – another record-breaking metric for Elon Musk’s brand.
Tesla also generated $806 million in revenue from its energy business, which combines solar and energy storage products, and $894 million in services and other revenue. Other revenue comprises maintenance, insurance and merchandise.
Tesla insiders show pre-earnings sell off
In a move that may signal something greater (but also maybe not), Tesla insiders began selling shares prior to the company’s third quarter earnings release.
As you can see from the below, Tesla company insiders have been releasing stocks. Over 450m Tesla stocks have been sold over the past 3 months, worth $7.1m. Compare that with buys of just 764,446.
Could this be part of a broader trend? Is Musk planning to sell some of his own Tesla holdings? It’s hard to say at this stage, but it’s worth keeping an eye on.
Tesla stock fell 1.5% in after-market trading. As of Thursday morning, the stock was still relatively flat, trading at $866.56. On the whole, Tesla shares are up around 23% across 2021.
According to the Markets.com analyst recommendations tool, Tesla holds a neutral rating.
Contrasting with that is news sentiment which places Tesla in a firmly bullish position.
Where next for Tesla?
Tesla is in the process of expanding its production capabilities with new factories under construction around the world.
„There’s quite an execution journey ahead of us,“ Chief Financial Officer Zachary Kirkhorn said in the brand’s quarterly earnings call.
The centrepiece of its expansion plans is its Berlin “Gigafactory”. The $7 billion project could see cars start rolling off the production line in the next month, but there are still global parts shortages and high commodities prices to contend with.
This didn’t seem to really hold Tesla back in the third quarter. The EV builder seemingly has the ability to pull parts, chipsets, and micro components out of thin air.
„Q4 production will depend heavily on availability of parts, but we are driving for continued growth,“ Kirkhorn said.
Also expect to see acceleration of the so called “Full Self-Driving Systems” Tesla is developing. As we reported yesterday, this new tech has its fair share of detractors, not least the National Highway Traffic Safety Administration. The self-driving technology is already under investigation by the NHTSA, and some Tesla fanboys/girls see this as an attack on the brand.
Others just don’t want to see a repeat of several fatal incidents caused by Tesla vehicles on autopilot. It’s imperative Tesla gets this right, otherwise there good be a major clampdown on its autopilot ambitions. But if people are getting hurt, or being killed, by wayward Tesla cars, it’s only right to take a cautious approach.
Let’s mention batteries. Tesla says it is about to make a switch to its standard-range models who currently use a lithium-ion battery with a nickel cathode. Tesla says it will start using a lithium iron phosphate (LFP) mix. Basically, iron is more abundant than nickel. It should make it easier for Tesla to source supplies.
The end goal, says Tesla VP of Powetrain and Energy Engineering Drew Baglino, is to localise battery and car production.
Some supply and critical safety challenges to overcome then for the world’s most valuable car maker.
S Q3 earnings season is in full swing. Stay tuned for more updates. In the meantime, check out our earnings calendar to see which megacaps are reporting and when.
Stocks look heavy, Barclays down despite beat, Unilever rallies on prices
Caution is the order of the day…European stock markets fell moderately in early trade as the risk-on rally that powered Wall Street to fresh all-time highs ran out of steam overnight. Major bourses –0.5%, with the FTSE 100 under 7,200 again and the DAX under 15,500. The yen rose and Japanese equities fell, leading a broad decline in Asian equities overnight as Evergrande shares resumed trading and promptly plunged 13%. US futures are lower after the Dow Jones industrial average recorded a fresh all-time high and the S&P 500 notched is sixth daily gain on the bounce as investors looked through inflation and central bank fears to better earnings.
The Dow rose to a record intra-day high of 35,669.69, but finished the day 0.1% off its record close, gaining 0.4% for the session. As noted here recently, it might just be that the market has passed peak in/stagflation worries, even if the situation is going to be evident in the real economy for many months to come. Earnings are generally beating expectations – 84% so far according to FactSet. As commented on last night, growth is stalled – the Atlanta Fed’s Q3 GDP estimate is down to just 0.5% from +6% in the summer; inflation is running at +5% at least – German producer price inflation is running above 14%; and the yield curve is inverting, but ‘stonks’ just keep on rising. Rates flattish close to multi-month highs today – as noted yesterday there has been some mild steepening in yields, 2s/10s at 1.25%, 5s30s at 0.96.
Travel stocks are doing a little better in early trade with IAG, EasyJet +1% after posting sizeable losses yesterday as the UK signalled it could reintroduce some restrictions, whilst rising case numbers will make the country less accessible to many foreigners.
Oil is a little lower this morning after moving to fresh multi-year highs overnight – WTI just a shade under $84, Brent hitting $86 a barrel. US inventories were bullish with big draws for distillates and gasoline. Global inventories still falling, India is again calling on OPEC to pump more. Reports indicate Exxon is debating abandoning some of its biggest oil and gas projects.
Tesla earnings beat expectations, but the stock fell. Insiders have been selling the stock ahead of the earnings release, which maybe tells you something. EPS rose to $1.86 vs $1.59 expected on a record revenue quarter. gross margins improved – 30.5% for its automotive business and 26.6% overall. Vice president of vehicle engineering Lars Moravy struck a more conciliatory tone about the NHSTA than his boss: “We always cooperate fully with NHTSA.”
Unilever products are just about everywhere in just everyone’s homes. So, when they raise prices it usually affects a lot of people. Unilever raised prices by an average 4.1% in the third quarter across all its brands, helping it to achieve underlying sales growth of 2.5% despite sales volume declining 1.5%. Turnover rose 4%. The company said it is taking action to “offset rising commodity and other input costs”. Share rose over 2%, delivering a boost to the FTSE 100.
Barclays said profits doubled in the third quarter as a strong performance at its investment bank and further reduction in Covid-era impairments boosted earnings. Attributable profit rose to £1.45bn, up from $611m for the same quarter last year. Return on tangible equity returned to a more normal 11.9% from the 18.1% in the previous quarter. Provisions for loan losses fell to £120m as the economic recovery continues to ease pressure on banks.
CEO Jes Staley touted “the benefits of our diversified business model” as Barclays posted its highest Q3 YTD pre-tax profit on record in 2021. Pre-tax profits at the investment bank rose a mighty 51% to £1.5bn, well ahead of expectations. Staley also pointed to consumer recovery and better rate environment. But does Barclays get enough credit for the investment bank earnings? Despite driving the performance in a fashion similar to some of the big Wall Street beasts it seeks to emulate, shares continue to trade at a hefty discount. Barclays trades at a price to book of about 0.5, whilst US peers are above 1, with BoA at about 1.5 and JPM closer to 2. But if investment banking revenues were not that sustainable and ‘can’t be counted on for future quarters’, why do it? Certainly they are more volatile quarter to quarter – revenues from equity trading, M&A and advisory fees cannot be counted on in the coming quarters to the same extent that mortgage fees and credit card fees might be. But discounting these entirely seems like a mistake by investors. Barclays rightly touts its more diversified revenue stream. When consumer and business growth markets are strained – like during the pandemic – volatility in financial markets creates a good environment for trading revenues to prosper. Barclays is reaping the benefits.
After a softer day on Wednesday, the dollar is a tad firmer this morning as risk is on the back foot. Yen also stronger. GBPUSD tests 1.38 support – daily candles suggest near-term top put in at 1.3830 area and maybe calling for pullback towards lower end of the rising channel. Hourly chart points to declining momentum. Test at 1.3740 for bulls.
Earnings season: Netflix plays the Squid Game, wins subs beat
Netflix leverages a content backlog into millions of new subscribers according to its Q3 2021 earnings report.
Netflix’s headline stats
It’s been a good quarter for Netflix. New subscribers keep flooding in, seemingly attracted by new event TV shows, such as the global smash Squid Game. What’s more, Netflix’s EPS beat estimates too.
The key takeaways from Netflix’s third quarter earnings report are:
- Revenues – $7.48 billion vs $7.48 billion forecast
- Earnings per share (EPS) – $3.19 vs $2.56 estimated
- New global paid subscription additions – 4.4 million vs 3.84 million forecast
The important thing to note here is the growth of new paid subscribers. These are Netflix’s bread and butter. Users may have been attracted to the streaming platform thanks to a large chunk of new shows and movies finally hitting Netflix. The pandemic appears to have created a significant backlog of content which is now making its way onto release schedules.
South Korean dystopian horror series Squid Game is the standout here. The show has been getting rave reviews and may become a significant draw going forward. According to Netflix, 142 million households watched Squid Game in its first four weeks.
“Like some of our other big hits, Squid Game has also pierced the cultural zeitgeist, spawning a Saturday Night Live skit and memes/clips on TikTok with more than 42 billion views,” the company said. Demand for consumer products related to the show is high, it added.
Netflix’s official guidance for subscriber numbers in Q4 is eight million – nearly double that of Q3. Is that overly optimistic? Maybe, but we are approaching winter in the Northern Hemisphere. Shorter days and colder temps may lead to an uptick in subscribers as people stay inside during winter conditions.
There is yet more content to come.
“We’re in uncharted territory,” Netflix co-CEO Reed Hastings said. “We have so much content coming in Q4 like we’ve never had, so we’ll have to feel our way through, and it rolls into a great next year also.”
Netflix share performance
As we can see, Netflix’s earnings per share levels beat expectations in Q3, coming in at $3.19 against $2.56 forecast by Wall Street.
Shares did drop 1% after the bell yesterday, however. It’s interesting. Achieving sustainable subscription growth is one of the cornerstones of Netflix’s business. You would have thought, after posting subscription and EPS beats, the firm’s shares would have grown.
As of Wednesday morning, Netflix shares are back in the green, trading for around $640.88 at the time of writing.
Where next for Netflix?
Netflix’s next frontier is gaming.
The streamer said it has begun testing video game streaming, possibly in a similar way to Microsoft’s cloud-based Game Pass service, in certain countries.
It’s still very early days for this, but Netflix subscribers may soon be able to play some form of video games via their TVs. It’s unlikely Netflix will be launching a console to compete with Sony, Nintendo, or Microsoft.
Personally, I can’t see them making great strides in this sphere. Gaming is already a highly competitive environment as it is, and Microsoft’s Game Pass has been a bit of a major market disruptor.
It would take a lot for Netflix to really make an impact on the gaming world, at least in the form of triple A titles, in my view. Mobile and app-based games are probably the way to go.
But with 200 million subscribers – double Xbox Live’s 100 million – and a competitive price point, some casual gamers might find a home with Netflix.
US Q3 earnings season is in full swing. Stay tuned for more updates. In the meantime, check out our earnings calendar to see which megacaps are reporting and when.
Tesla stuff, Squid Games
Tesla stuff: Haters hate, regulators regulate: don’t confuse the two. Duke University engineering and computer science professor Missy Cummings is set to become a new senior adviser for safety at the National Highway Traffic Safety Administration. Many Tesla fanboys and girls are crying foul. Cummings, a former pilot and robotics expert, is seen as ‘anti-Tesla’. Now that’s kind of interesting in the first place: you’re either definitely for Tesla or definitely a hater. No room for a middle ground. That’s kind of odd for a carmaker. Most people are not anti or pro Ford, or GM. They maybe like/dislike their cars, think they’re doing a good/bad job with the tech and think management are capable/useless. No one would say they’re anti-Ford. They might have an objective, rational view on the cars and/or the stock, but not a creed. But rational objectivity and Tesla seldom go hand in hand. And I’m not sure if you could say she’s anti-Tesla per se, just sceptical about the level of technology that is being touted around by some companies. But, particularly Tesla.
For instance, last year she tweeted: “LMAO…there is NO WAY Tesla will have a viable robo-taxi service this year. My lab has been running controlled experiments on Tesla Autopilot & I can say with certainty that they are not even close to being ready. My student on this project should get hazardous duty pay.” In one 2018 tweet she said “The only killer robot out there is @elonmusk’s Tesla.” There are lots of examples on the feed.
It’s fair to say Cummings is a vocal critic of the ability of self-driving systems to cope with bad weather, and authored plenty of research that calls into question some of the main claims that companies like Tesla make when they market their ‘full self-driving‘ systems. There are numerous papers, some choice tweets and essentially you can say she doesn’t buy the tech being anything like close enough to be objectively safe for the roads.
After news of her appointment broke Elon Musk tweeted today: “Objectively, her track record is extremely biased against Tesla.”
Tesla’s self-driving technology is already being investigated by the NHTSA. The company must provide the regulator with extensive data about its Autopilot system by Friday. Tesla has been getting away with marketing ‘Full Self Driving’ technology for a while; Cummings could mark time for a much tougher stance. Steven Cliff, deputy administrator since February, has also been nominated by the White House to lead the NHSTA. He’s currently in charge of the Tesla investigation. Another Tesla ‘hater’, according to many. Regulators are maybe finally going to regulate.
Meanwhile, in other Tesla ‘stuff’. Get a load of Elon Musk, who told a customer apparently not impressed with the look of the side mirrors on the cyber truck, that it’s OK to remove them. “They’re required by law, but designed to be easy to remove by owners,” he tweeted. I am ‘absolutely sure’ that is not irresponsible or unsafe…
Tesla earnings are due out today: the company hit record deliveries in Q3 as it found chips no one else seems to be able to find. EPS is seen around $1.50, on revenues of $13.6bn. Looking for updates on the Berlin Gigafactory, competition in China, internal chip production, Cyber truck and Semi releases, and, of course, the beta FSD progress. Let’s hope for some analyst questions around the NHSTA today.
Squid Games: Netflix posted solid subscriber growth in the third quarter of 4.4m, well ahead of the 3.84m expected. A deluge of hit new content that had been delayed by the pandemic is helping to drive interest such that the company anticipates 8.5m net adds next quarter. Earnings per share were a handsome beat at $3.19 vs $2.56 expected. In Q3, revenue grew 16% year over year to $7.5 billion, while operating income rose 33% vs. the prior year quarter to $1.8 billion. Content and subscribers are in good shape, but free cash flow remains elusive as it reported a second consecutive quarter of negative free cash. Still when you have low-cost, high margin content in multiple languages, you think Netflix will be able to drive non-US subscriber growth substantially in the coming years. Shares fell slightly in after-hours trade.
Markets: Stocks are flat again this morning in early trade in Europe, with the FTSE 100 hovering around the 7,200, looking like it has decent support. The S&P 500 rallied three-quarters of one percent yesterday to close within 0.4% of its record high. Megacap tech had a decent day despite rising bond yields. If it’s stagflation then growth is still a premium.
US 10-year rates rose to a 5-month at 1.67% as the Fed’s Waller said tapering should start in November and that if inflation keeps rising „a more aggressive policy response“ might be required in 2022. Bitcoin at or around all-time highs post the ProShare ETF launch.
Inflation: UK inflation has fallen! But before we rejoice too much, it’s probably a one-off. CPI fell to 3.1% in September from 3.1% in August. The end of the Eat Out to Help Out scheme at the end of August last year, which led to restaurants raising prices in September, is a big factor. The surge in energy prices and ongoing supply chain problems are still expected to drive inflation to 4% this year. Moreover, the RPI rose 4.9%.
As we said in yesterday’s note on ‘Will the Bank of England actually raise rates in November?’, the reading of the inflation print is important: the consensus remains firmly on the MPC voting to raise rates in two weeks’ time. But, as stressed in the same commentary, it’s not a slam dunk given the make-up of the MPC right now.
Meanwhile, German produce price inflation surged – rising 2.3% month-on-month vs the +1% expected. That took the annual rate to 14.2%. Supply chain and capacity problems abound. Underlines that rising cost pressures are not going away.
Sterling just eased back on the inflation miss. GBPUSD retreated to test the support offered at 1.3770, the OCt 15th swing high, where sits the 50hr SMA. Recent price action indicates this is the chief support before resumption of the uptrend, though we are less convinced that GBP can rally with rate expectations now they are baked in. However, I do see further dollar weakness likely to support further gains for cable following the topping pattern on the last 3 weekly candles.
Wochenausblick: Ist die heiße britische Inflation permanent?
Was Big Data angeht gibt es diese Woche einiges zu sehen. Zunächst haben wir die VPI-Zahlen für Großbritannien. Bleibt die Inflation länger bestehen als gedacht? Flash-PMIs für Großbritannien und die EU kommen ebenfalls jetzt zu einer Zeit, in der es so aussieht, als ob die Wirtschaftstätigkeit sich verlangsamen würde. Außerdem ist es US-Earnings-Season mit Berichten der führenden Tech-Unternehmen.
VPI für Großbritannien: Falken und heiße Daten
Auf der Daten-Seite ist eine der großen Veröffentlichungen dieser Woche der Verbraucherpreisindex für Großbritannien.
Die Zahlen vom September zeigten, dass die Inflation in Großbritannien das Ziel der Bank of England von 2% für August übertroffen hat. Verbraucherpreise steigen in den letzten 12 Monaten um 3,2%, dem höchsten monatlichen Anstieg seit Beginn der Aufzeichnungen im Jahr 2017.
Das Office for National Statistics (ONS) sagte, dass der Anstieg „vermutlich vorübergehend ist“ und vermutlich das Regierungsprogramm „Eat out to Help out“ zu dem Anstieg beigetragen hat.
„Im August 2020 wurden viele Preise in Restaurants und Cafés aufgrund des „Eat Out to Help Out“-Programms der Regierung, bei dem Kunden zwischen Montag und Mittwoch Speisen und Getränke zum halben Preis zum Verzehr im Lokal (bis zu einem Wert von 10 £) angeboten wurden“, sagte das ONS in seiner Erklärung.
„Weil EOHO eine kurzfristige Maßnahme war, ist der Anstieg der 12-monatigen Inflationsrate im August 2021 vermutlich vorübergehend.“
Die offizielle Position war, dass höhere Preise nur vorübergehend bestehen bleiben würden, aber Stimmen aus der Bank of England warnen, dass sie länger bleiben könnten, als zunächst gedacht.
Der neue Chef-Ökonom der BoE Huw Pill sagte, dass er glaube, die heiße Inflation würde bleiben.
„Meiner Ansicht nach verschiebt sich dieses Risikogleichgewicht derzeit in Richtung großer Sorgen um die Inflationsaussichten, da sich die aktuelle Inflationsstärke als nachhaltiger erweisen könnte als ursprünglich erwartet“, sagte Pill im September.
Pill stimmt damit bei den immer lauter werdenden Falken in Rat der Bank of England mit ein. Eine Anzahl der MPC-Mitglieder rufen nach einer Zinserhöhung im früh im nächsten Jahr. Ein weiterer hoher VPI-Wert im September könnte daher dazu führen, dass die Stimme der Falken noch lauter wird.
Läuten die PMIs die wirtschaftliche Verlangsamung ein?
Es ist außerdem Zeit für Flash-PMIs.
Diese Woche werden Daten für Großbritannien und die EU veröffentlicht, nachdem der Bericht des letzten Monat darauf hindeutete, dass sich das Wachstum der beiden großen Volkswirtschaften verlangsamt.
Lassen Sie uns mit Großbritannien beginnen. Der IHS Markit Flash Composite für September zeigte, dass die Leistung auf den niedrigsten Stand seit Februar gefallen war. Großbritannien verzeichnet 54,1 Punkte, ein Abstieg von 54,8 im August.
Die Erholung scheint mit dem Beginn der Wintermonate stehenzubleiben. Geringere Wirtschaftstätigkeit zusammen mit höherer Inflation führen nicht gerade zum besten Ergebnis für die Zukunft der britischen Wirtschaft.
Der PMI für den Dienstleistungssektor fiel von 55,0 im August auf 54,6 im September, den niedrigsten Stand seit Februar, als Großbritannien noch im Lockdown war. Für das produzierende Gewerbe viel er von 60,3 auf 56,4, was wieder der niedrigste Stand seit Februar ist.
Auf der anderen Seite des Ärmelkanals ist es das gleiche. Das europäische Wachstum wurde durch Lieferengpässe gehemmt, was die Input-Kosten in der gesamten EU im letzten Monat auf ein 20-Jahres-Hoch trieb. Werden die PMI-Zahlen diesen Monat das Gleiche zeigen?
Was die Punkte angeht, zeigten die IHS-Verbundszahlen, dass das wirtschaftliche Wachstum im September auf ein Fünf-Monats-Tief gefallen ist. Die EU erreichte in dem Monat 56,1Punkte gegen 59,0 im August.
Das liegt weit unter den Marktprognosen. Eine Reuters-Umfrage deutete darauf hin, dass Ökonomen und Analysten glaubten, dass sich der Output verlangsamen würde, aber mit langsameren 58,5.
Die größten Faktoren scheinen hier Lieferengpässe zusammen mit einer allgemeinen Verlangsamung des BIP-Wachstum zu sein. Die EU-Wirtschaft nährt sich ihrer Vorpandemie-Größe, eine Verlangsamung war also immer in den Karten, aber nicht so drastisch.
Ich würde erwarten, dass die neuesten Zahlen am Freitag niedrigere PMI-Zahlen für die EU zeigen werden.
Immer neue Geschäftsberichte von der Wall Street – jetzt kommen die Tech-Aktien
Nächste Woche stecken wir mitten in der Q3-Earnings-Season. Die Großbanken waren letzte Woche dran, unter anderem Goldman Sachs, Citigroup und JPMorgan. Jetzt sind einige der Tech-Riesen dran, ihre jüngsten Geschäftsberichte zu teilen.
Netflix und Tesla sind die zwei, auf die man diese Woche besonders achten sollte. Beide legten starke Zahlen für Q1 und Q2 vor, haben aber angemerkt, dass die Leistung im dritten Quartal 2021 schlechter sein könnte.
Für weitere Informationen dazu, welche Unternehmen ihre Geschäftsberichte veröffentlichen, schauen Sie in unseren US-Earnings-Season-Kalender.
|Mon 18-Oct||3:00am||CNY||GDP q/y|
|3:00am||CNY||Retail Sales y/y|
|2:15pm||USD||Industrial Production m/m|
|3:30pm||CAD||BOC Business Outlook Survey|
|Tue 19-Oct||1:30am||AUD||Monetary Policy Meeting Minutes|
|Wed 20-Oct||7:00am||GBP||CPI y/y|
|1:30pm||CAD||Common CPI y/y|
|1:30pm||CAD||Median CPI y/y|
|1:30pm||CAD||Trimmed CPI y/y|
|3:30pm||USD||Crude Oil Inventories|
|Thu 21-Oct||1:30pm||USD||Philly Fed Manufacturing Index|
|Fri 22-Oct||7:00am||GBP||Retail Sales m/m|
|8:15am||EUR||French Flash Manufacturing PMI|
|8:15am||EUR||French Flash Services PMI|
|8:30am||EUR||German Flash Manufacturing PMI|
|8:30am||EUR||German Flash Services PMI|
|9:00am||EUR||Flash Manufacturing PMI|
|9:00am||EUR||Flash Services PMI|
|9:30am||GBP||Flash Manufacturing PMI|
|9:30am||GBP||Flash Services PMI|
|1:30pm||CAD||Core Retail Sales m/m|
|1:30pm||CAD||Retail Sales m/m|
|2:45pm||USD||Flash Manufacturing PMI|
|2:45pm||USD||Flash Services PMI|
|Tentative||USD||Treasury Currency Report|
|Tue 19 Oct||Wed 20 Oct||Thu 21 Oct||Fri 22 Oct|
|Philip Morris International (PM)||Verizon Communications Inc (VZ)||AT&T (T)||American Express (AXP)|
|Johnson & Johnson (JNJ)||International Business Machines (IBM)||Intel Corp (INTC)||Schlumberger Ltd (SLB)|
|Procter & Gamble (PG)||Tesla Inc (TSLA)||Snap Inc A (SNAP)|
|Netflix Inc (NFLX)|
US pre-mkts: Bank earnings strong, Cat upgrade
Very strong bank earnings coming through this morning – JPM led the way yesterday and the latest numbers from peers also look strong. Real good signs of improving loan growth in particular is a positive for BAC.
US pre-market key pointers
Bank of America (BAC)
Strong performance from Bank of America.
- Net income of $7.7bn, EPS of $0.85 vs $0.71 expected
- Revenues up 12% year-on-year – JPM was just up 2.2%
- Net interest income up 10% to $11.1bn – most rate-sensitive of the big banks
- Record M&A activity – Noninterest income up 14% to $11.7bn, driven by record asset management fees, strong investment banking revenue and higher sales and trading revenues
- Expenses down on the quarter, flat on the year
- $624m clawback from bad loan provisions – bottom line flattered less than the JPM numbers.
- Stock up pre-mkt to tune of 2.5%, having fallen 0.92% yesterday in sympathy with JPM, which is trading mildly higher in pre-mkt.
Wells Fargo (WFC)
Wells Fargo results showed:
- Net income of $5.1bn, EPS $1.17 vs $0.98 expected
- Net interest income was down 5%, due to lower loan balances that reflect soft demand, also higher prepayments, lower yields
- Results include $1.7bn decrease in credit loss provisions – equivalent to $0.30 per share.
- Pre-mkt trades +1%, having slipped 1.3% yesterday.
Meanwhile, ahead of the cash open on Wall Street, US futures indicate all the major averages will open higher. SPX seen opening up 30+pts at just under 4,400, Dow Jones +200pts at 34,610, NDX at 14,900. Risk looking solid.
- Walgreens Boots Alliance reported earnings $1.17, vs $1.02 expected, revenues $1bn ahead of expectations, cost-cutting programme a year ahead of schedule. US comparable sales up 8.1% from a year before.
- UnitedHealth shares +2% pre-mkt after reporting earnings beat and raised guidance.
- Caterpillar +1% pre-mkt, bouncing of its weakest level since Jan, as Cowen advises clients to buy ahead of the first ‘megacycle’ in 14 years, initiates with ‘Outperform’ rating and PT of $241.
- Tesla shares are up pre-mkt to their best level in 7 months.
- Boeing down 1% pre-mkt after report says co. dealing with new Dreamliner defect, production problems
- FTSE 100 at HOD just a whisker under 7,200
- Dollar continues to struggle. GBPUSD making a fresh 3-week high at 1.37334.
- Gold also trades at HOD at $1,800, sitting on its 100-day SMA.
- Treasury yields lower, 10s at 1.532%
Earnings season: five stocks on Goldman’s radar
Earnings season is underway. Now’s the time to take a look at some stocks that could provide investors with more than the Wall Street consensus would tell you.
US earnings season Q3 2021
Goldman reviews earnings season stocks
Sometimes investors like to break away from the pack. To dare is to do.
It’s all about spotting opportunities from stocks that may be overlooked by Wall Street.
As reported by CNBC, Goldman Sachs has been scanning Wall Street for stocks it believes hold promise for investors looking for something different this earnings season.
Earnings season began in earnest this week with major US banks leading the charge as always. You can use our earnings season calendar to see which megacaps are reporting this quarter and when.
In a note to investors published on Wednesday, Goldman said it expects stocks to rise 6% this quarter. Its spotlighted stocks, however, could offer upsides of 14%.
The investment bank deployed a fairly complex methodology when analysing Q3 2021 earnings season stocks. 1,000 companies in Goldman Sachs’ coverage universe were scanned at the 25 best opportunities were selected when considering EPS of $5 per share over the next four quarters.
After this, the results were filtered through analysts which were above or below Thomson Reuters’ consensus for the upcoming quarter, and the year ahead, “on a key financial metric.”
“Single stock put-call skew is at its highest level in over a year,” Goldman said, encouraging investors to make out-of-money calls on its out-of-consensus stock picks. “Given investors are well hedged, even modest earnings beats are likely to drive a relief rally in specific stocks (on earnings day) and the broad index (over the next three months).”
The out-of-consensus stocks to pick
Please note these are only Goldman Sachs’ recommendations – not hard and fast must-buys. Only invest if you are comfortable with the risk of potential capital loss.
The top five stocks Goldman has selected to watch this earnings season are:
- Signature Bank
- Bank of America Corp
Let’s start with Uber. The ride-hailing service burst onto the scene several years ago as a taxi industry disruptor. Goldman’s Eric Sheridan thinks the app can deliver a 37% upside over the coming year. Sheridan’s earnings estimates put Uber 20% higher than Wall Street consensus right now too.
The idea is that if Uber can close the supply/demand gap, then this should lead to normalised ride pricing, higher demand in general, and thus pre-pandemic profits.
Outdoor retailers Yeti could offer even better upsides than Uber. Goldman considers Yeti a “growth compounder with best in class authentic brand positioning.” It could deliver upsides of 44% if Goldman is on the money. In terms of EPS, Yeti’s could be 8% higher than analysts think in the third quarter and 3% higher in the next.
Investment banks are usually amongst the first to start reporting on Wall Street come earnings season. It’s certainly true this year. Of these, Goldman flags Bank of America as the one to keep an eye on. Goldman’s analysis puts BoA’s upside at 7% – some 10% higher than consensus.
Bank of America’s potential has been pegged to “significant remixing of cash into securities” by Goldman.
Smaller banks are represented by Signature Bank. Ryan Nash, a Goldman stock analyst, forecasts earnings-per-shares to come it at 7% higher than Wall Street forecasts this quarter and 5% for the next four. Signature is on course for a revenue-beating Q3, driven by an acceleration in loan growth.
Rounding off Goldman’s section of potentially consensus-beating stocks is Lowe’s. The DIY probably benefitted more than most from the pandemic last year, but this quarter it could offer investors an upside of 12%.
Goldman’s Kate McShane said Lowe’s position is stronger now than in the last 6-12 months, thanks to bringing forward its seasonal inventory purchases.
Stocks rally, inflation sticks, earnings on tap
Stock markets rose in early trade as investors parsed the latest signs of inflation and the central bank reaction function, whilst earnings season has got underway across the pond with some decent numbers from JPMorgan. Wall Street rose mildly, snapping a three-day losing streak. VIXX is off sharply, which maybe reflects increasing comfort that the market has stabilised, if not able to make new highs just yet.
Earnings season gives investors a chance to ignore some of the noise and market narratives and get into actual numbers. Only this time we expect the corporate reporting season to underline the inflation narrative – the question is whether it’s just inflation or stagflation. Probably we get a bit of both – watch for sandbagging. JPMorgan numbers were positive, but as ever the stock fell despite beating on the top and bottom line. Profits were boosted by better-than-expected loan losses. Trading revenues were robust, asset and wealth management strong, loan growth improving and likely to pick up in 2022. Delta Air Lines also posted numbers that topped expectations including a first quarterly profit ex-state aid since the pandemic. But higher fuel costs and other expenses will hit the fourth-quarter profit – shares fell over 5%. Today sees Citigroup, Bank of America, Morgan Stanley and Wells Fargo report.
Chinese producer price inflation rose 10.7% in September, the highest level since 1996. The China PPI number is an important leading indicator for global consumer inflation. On that front, US consumer price inflation accelerated in September to 5.4%, with prices up 0.4% month-on-month. Core rose 0.2% from August, leaving prices ex-volatile items like energy and food at 4%. US PPI inflation today is seen at +0.6%, +0.5% for the core reading.
Minutes from the Fed’s last meeting indicated the US central bank is likely to commence tapering asset purchases next month. “Participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate,” the minutes said.
Post the CPI and FOMC minutes we see Treasury yields lower, the dollar lower, gold firmer. Lower bond yields lifted megacap growth, or at least provided some marginal buying excuse to do so. Inflation is still hot but not getting much hotter. Narrative has clearly exited team transitory to support team sticky. The question now is whether we are at peak in/stagflation fears and this allows the market to move on to start pricing for 12-18 months hence, by which time you’d feel a lot of the post-pandemic bottlenecks and pressures will have eased. The problem for this – still team transitory if you like – is that anything that raises the costs of getting goods from source to consumer is inflationary and the pandemic has certainly been that. But so too is the shift in globalisation trends, eg Brexit.
Sterling is firmer as the dollar weakened in the wake of the CPI report. GBPUSD has broken free of the trend resistance and with bullish MACD crossover in play. Bulls would like to see the previous two highs on the MACD cleared (red line) to confirm reversal of the downtrend since May.
Chart: Dollar index easing back to the middle of the channel, but faces pressure from bearish MACD crossover.
Yesterday I noted that gold was likely to face some volatility and break free from its recent consolidation. CPI numbers were indeed the catalyst and we saw gold prices hit the highest in a month, approaching $1,800 before pausing. Near-term, consolidation again with the 1hr chart showing a clear flag pattern with the lower end capped by the 23.6% line.
Oil has firmed, with WTI recovering the $81 handle, though price action remains sluggish and sideways for the time being. OPEC yesterday cut its global oil demand growth forecast for 2021 but maintained its 2022 view and cautioned that soaring natural gas prices could boost demand for oil products.
OPEC cuts its demand growth forecast for 2021 to 5.82 million barrels per day, down from 5.96 million bpd. As we noted some months ago, it was always likely that OPEC would need to trim its 2021 forecast since it had always backdated so much of that extra demand to come in H2. The original 6m bpd forecast implied 1m bpd in H1, 5m bpd in H2, which always seemed optimistic. Critically, though, it was not wildly optimistic – demand has come back strongly after shrugging off the summer Delta blues. The cartel maintained its 4.2m bpd growth forecast for next year. EIA inventories today – a day late due to the Columbus Day holiday – forecast 1.1m build.
Nat gas – holding the trend support and 20-day SMA, bearish MACD crossover still in force.
Hays shares +4% as fees rose 41% from a year ago. Strong leveraged play on record numbers of job vacancies and staff shortages. Shares have been flat the last 6 months, though +17% YTD, +45% the last 12 months leaves not a lot of room left on the table.
Dunelm still performing strongly against tough comparisons. Total sales in the first quarter increased by 8.3% against a very strong comparative period in FY21, when sales grew by 36.7%. Gross margins were down 10bps and expected to be 50-75bps lower than last year for the full year. Management warned on supply chain problems and inflation but stressed that good stock levels should provide them some cover. Some way to go to for the shares to recover recent highs but encouraging signs.
Markets primed for US inflation, FOMC minutes, JPM kick off earnings season proper
European stocks were off half a percent this morning in early trade after another fragile day on Wall Street saw selling into the close and another weaker finish. All eyes today on the US CPI inflation number, minutes from the FOMC’s last meeting and the start of earnings season with numbers due out from JPMorgan. Asian equities mixed after Chinese trade data was better than expected.
Markets in Europe turned more positive after the first half-hour but it’s clear sentiment is anaemic The FTSE 100 is chopping around its well-worn range, the DAX is holding on to its 200-day moving average just about. Possible bullish crossover on the MACD needs confirming – big finish required.
JOLTS: We saw a marked jump in the „quits rate“ with 4.3m workers leaving their jobs, with the quits rate increasing to a series high of 2.9%. Tighter labour market, workers gaining bargaining power = higher wages, more persistent inflation pressures.
But… 38% of households across the US report facing serious financial problems in the past few months, a poll from NPR found. Which begs the question – why and how people are not getting back into work and quitting. One will be down to massive asset inflation due to central bank and fiscal policy that has enabled large numbers of particularly older workers to step back sooner than they would have down otherwise. Couple of years left to retire – house now worth an extra 20% and paid off, 401k looking fatter than ever, etc, etc. Number two is something more sinister and damaging – people just do nothing, if they can. Working day in, day out is like hitting your head against a brick wall – you get a headache, you die sooner, and you don’t go back to it once you’ve stopped doing it. Animal spirits – people’s fight to get up and do things they’d prefer not to do – have been squashed by lockdowns.
More signs of inflation: NY Fed said short and medium-term inflation expectations rose to their highest levels since survey began in 2013.
UoM preliminary report on Friday – will give us the latest inflation expectation figures. This is where expectations stand now. Today’s CPI print is expected to show prices rose 0.4% on the month to maintain the annual rate at 5.4%.
The Fed’s Clarida said the bar for tapering was more than met on inflation and all but met on employment. FOMC minutes will tell us more about how much inflation is a worry – we know the taper is coming, the question is how quickly the Fed moves to tame inflation by raising rates.
Watch for a move in gold – it’s been a fairly tight consolidation phase even as rates and the USD have been on the move – the inflation print and FOMC minutes could spur a bigger move. Indicators still favour bulls.
US earnings preview: banks kick off the season
Wall Street rolls into earnings season in a bit of funk. The S&P 500 is about 4% off its recent all-time high, whilst the Nasdaq 100 has declined about 6%, as the megacap growth stocks were hit by rising bond yields. S&P 500 companies are expected to deliver earnings growth of 30%, on revenue growth of 14%.
JPMorgan Chase gets earnings season underway with its Q3 numbers scheduled for Oct 13th before the market open. Then on Thursday we hear from Bank of America, Citigroup, Morgan Stanley and Wells Fargo, before Goldman Sachs rounds out the week on Friday. JPMorgan is expected to deliver earnings per share of $3, on revenues of $29.8bn. Note JPM tends to trade lower on the day of earnings even when it beats expectations for revenues and earnings.
Outlook: Nike and FedEx are among a number of companies that have already issued pretty downcast outlook. Supply chain problems are the biggest worry with a majority of companies releasing updates mentioning this. Growth in the US is decelerating – the Atlanta Fed GDPNow model estimates Q3 real GDP growth of just 1.3%. Higher energy costs, rising producer and consumer inflation, supply bottlenecks, labour shortages and rising wages all conspiring to pull the brake on the recovery somewhat. Still, economic growth has not yet given way to contraction and after a global pandemic it will take time to recovery fully.
Trading: Normalisation of financial markets in the wake of the pandemic – ie substantially less volatility than in 2020 – is likely to weigh somewhat on trading revenues, albeit there was some heightened volatility in equity markets towards the end of September as the stock market retreated. Dealmaking remains positive as the recovery from the pandemic and large amounts of excess cash drove business activity.
Costs: The biggest concern right now for stocks is rising costs. Supply-side worries, specifically rising input and labour costs, pose the single largest headline risk for earnings surprises to fall on the downside. The big banks have already raised their forecasts for expenses this year on a number of occasions. It’s not just some of the well-publicized salary hikes for junior bankers that are a concern – tech costs are also soaring.
Interest rates: Low rates remain a headwind but the recent spike in rates on inflation/tapering/tightening expectations may create conditions for a more positive outlook. The 10s2s spread has pushed out to its widest since June. Rising yields in the quarter may have supported some modest sequential net interest income improvement from Q2.
Chart: After flattening from March through to July, the yield curve is steepening once more.
Loan demand: Post-pandemic, banks have been struggling to find people to lend to. Commercial/industria loans remain subdued versus a year ago, but there are signs that consumer loan growth is picking up. Fed data shows consumer loan growth has picked up as the economy recovers. However, UBS showed banks were lowering lending requirements in a bid to improve activity, which could impact on the quality, though this is likely a marginal concern given the broad macro tailwinds for growth. Mortgage activity is expected to be substantially down on last year after the 2020 surge in demand for new mortgages and refinancing.
Chart: Consumer loan growth improving
Other stocks we are watching
The Hut Group (THG) – tanked 30% yesterday as its capital markets day seems to have been a total bust. Efforts to outline why the stock deserves a high tech multiple and what it’s doing with Ingenuity and provide more clarity over the business seemingly failed in spectacular fashion. The City has totally lost confidence in this company and its founder. No signs of relief for the company as investors give it the cold shoulder. Shares are off another 5% this morning.
Diversified Energy – the latest to get caught in the ESG net – shares plunged 19%, as much as 25% at one point after a Bloomberg report said oil wells were leaking methane. Rebuttal from company seemed to fall on deaf ears. Shares recovering modestly, +3% today.
Analysts are lifting their Netflix price targets, partly on the popular „Squid Game.“ Netflix will report its third-quarter earnings next week.
Wochenausblick: Bereiten Sie sich auf die Flut der Q3-Geschäftsberichte vor
Wall Street wird diese Woche vor lauter Quartalsberichten brummen, da es diese Woche mit der Q3-Earnings-Season ernst wird. Auf der Zahlenseite erwarten uns die US-VPI-Zahlen, sowie ein Blick hinter die Kulissen der Fed mit den jüngsten FOMC-Sitzungsprotokollen.
Wichtige Inflations-Metrik mit US-VPI-Bericht
Zuerst steht die Veröffentlichung des Verpraucherpreisindex-Bericht am Mittwoch an, der die Inflation in den USA bemisst.
Nach der Veröffentlichung der August-Zahlen im September halten sich Jerome Powell und seine Kollegen an das bekannte Drehbuch: dass all diese hohe Inflation nur vorübergehend ist. Werden die Zahlen am Mittwoch das untermauern?
Im Vergleich zeigte der letzte, im September veröffentlichte VPI-Bericht eine kleine Abkühlung im August. Die zugrundeliegenden Preise stiegen am langsamsten seit 6 Monaten. Insgesamt stieg der VPI 0,3% nachdem er im Juli bereits 0,5% zugelegt hatte. In den 12 Monaten bis August stieg der VPI 5,3%, nachdem er im Jahresvergleich für Juli um 5,4% in die Höhe geschossen war.
Einige Fed-Mitglieder sind aber nicht besorgt.
„Ich kann mir gut vorstellen, dass dies vorübergehend erhöhte Preise sind, die auch wieder sinken werden, wenn Lieferengpässe behoben sind“, sagte der Präsident der Chicagoer Fed, Charles Evans, gegenüber CNBC. „Ich glaube es könnte länger dauern als wir erwarten, definitiv, da habe ich keine Zweifel. Aber ich glaube, dass die weitere Anstieg dieser Preise unwahrscheinlich ist.“
Treibstoffpreise steigen aber. Öl und Gas schossen letzte Woche in die Höhe. Höhere Ölpreise deuten im Allgemeinen auf höhere Input- und Transportkosten in mehreren Sektoren hin, die dann auf den Verbraucher abgewälzt werden können, was zu allgemein höheren Preisen führt. Vor dem Hintergrund könnten sich die höheren Energiepreise und ihre Auswirkungen deutlicher im VPI-Bericht des nächsten Monats hervortreten anstatt dem vom Mittwoch.
Sitzungsprotokolle des FOMC-Treffens könnten Einblicke ins Denken der Fed geben
Mittwoche sehen wir auch die Veröffentlichung des FOMC-Sitzungsprotokolle für das Treffen im September.
Wir wissen mittlerweile alle was kommt: Zinsen bleiben niedrig; Zurücknahme kommt bald.
Wir wissen aber auch, dass die Falken unter den Fed-Mitgliedern mit früher als erwarteten Zinserhöhungen rechnen. Es gibt das Gefühl, dass ein Anstieg der Zinsen im nächsten Jahr kommen könnte.
Der Vorsitzende Powell stimmte bei denen mit ein, die vor dem Nicht-Anheben der Schuldenbremse warnten. Finanzministerin Janet Yellen warnte Ende September, dass der US-Regierung das Geld ausgehen könnte, wenn nichts unternommen wird.
Die Nichtbedienung der US-Schulden würde Powell zufolge der US-Wirtschaft „deutliche Schäden“ zufügen. Präsident Biden hat angedeutet, dass ein Anstieg der Staatsschulden möglich ist, sodass die Krise vielleicht noch abgewendet werden kann.
Was die Steuerung der Wirtschaft angeht ist aber wahrscheinlich die Rücknahme die große Maßnahme. Man glaubt, dass die Fed ihre Unterstützung schrittweise zurücknehmen wird, bis sie bis Ende 2022 komplett zurückgenommen ist.
Es ist ein starkes Zeichen, dass die USA schnell zur wirtschaftlichen Normalität zurückkehren wollen. Aber die Bedrohung durch neue COVID-19-Varianten steht immer noch im Raum. Man kann nur hoffen, dass 2022 keine neue Delta-Variante zu einer Welle neuer Lockdowns führt oder die Fed steht im Regen.
Die Earning Season ist wieder hier
Gehen wir zur Wall Street. Wir stehen kurz vor Veröffentlichung der Gewinne des dritten Quartals von den ganz Großen, da diese Woche wieder die Earnings Season beginnt.
Wie immer beginnen wir mit den großen Investitionsbanken, die im Q2 wunderschöne Wachstumszahlen verzeichnet haben. Wird der Trend anhalten? JPMorgan, Wells Fargo, Citigroup, Goldman Sachs und andere bringen den Ball dieses Quartal ins Rollen. Der erste Geschäftsbericht kommt am Mittwoch von JP.
Obwohl es so aussieht als ob sich das Wachstum vom sehr guten zweiten Quartal 2021 verlangsamt, könnte uns immer noch ein sehr leistungsstarkes Quartal erwarten. Die US-Finanzdatengruppe FactSet prognostiziert für S&P500-Unternehmen ein Gewinnwachstum von 27,6% im dritten Quartal – die dritthöchste Jahresgewinnwachstumsrate des Index seit 2010.
Im Q3 gibt es auch noch Lieferengpässe. Es gab sie in der ersten Jahreshälfte, aber mit dem Anstieg der Preise von Rohmaterialien und Energie könnten wir eine Verlangsamung der Ergebnisse sehen.
Apple und Konsorten haben zwar gewarnt, dass sich das Absatzwachstum gegen Ende des Jahres verlangsamen könnte, aber lassen Sie uns mal abwarten, was passiert.
Unser Kalender für die US-Earnings-Season hält Sie auf dem Laufenden, welche Mega Caps wann melden, damit Sie Ihre Trades basierend auf den Gewinnberichten dieses Quartals planen können. Unten finden Sie eine Übersicht über die Unternehmen, die diese Woche ihre Geschäftsberichte veröffentlichen.
|Tue Oct-12||10:00am||EUR||ZEW Economic Sentiment|
|10:00am||EUR||German ZEW Economic Sentiment|
|3:00pm||USD||JOLTS Job Openings|
|6:01pm||USD||10-y Bond Auction|
|Wed Oct-13||1:30pm||USD||CPI m/m|
|1:30pm||USD||Core CPI m/m|
|6:01pm||USD||30-y Bond Auction|
|7:00pm||USD||FOMC Meeting Minutes|
|Thu Oct-14||1:30am||AUD||Employment Change|
|1:30pm||USD||Core PPI m/m|
|4:00pm||USD||Crude Oil Inventories|
|Fri Oct-15||1:30pm||USD||Core Retail Sales m/m|
|1:30pm||USD||Retail Sales m/m|
|1:30pm||USD||Empire State Manufacturing Index|
|3:00pm||USD||Prelim UoM Consumer Sentiment|
|Tentative||USD||Treasury Currency Report|
Key earnings data
|Wed 13 Oct||Thu 14 Oct||Fri 15 Oct|
|JPMorgan Chase & Co (JPM) PMO||Bank of America Corp (BAC) PMO||Goldman Sachs Group Inc (GS) PMO|
|Wells Fargo & Co (WFC) E||Citigroup Inc (C) PMO||Goldman Sachs Group Inc (GS) PMO|
|Morgan Stanley (MS) PMO|