Ama­zon is not the only big win­ner this earn­ings cy­cle

The Star Malaysia - StarBiz - - Digital Trend -

CHICAGO: For all the hand-wring­ing about how Ama­zon.com Inc’s growth as­pi­ra­tions may hurt other com­pa­nies, there’s plenty of ev­i­dence in third-quar­ter earn­ings re­sults that the on­line re­tailer isn’t alone in ben­e­fit­ing from ro­bust eco­nomic growth.

Ama­zon blew through fore­casts on Thurs­day, trig­ger­ing a stock surge that made founder Jeff Be­zos the world’s rich­est per­son. But the week held other win­ners too: Re­sults from Mi­crosoft Corp, Gen­eral Mo­tors Co and United Par­cel Ser­vice Inc all helped el­e­vate US bench­mark stock in­dexes to records. De­spite some high-pro­file blowups, re­ports by Euro­pean com­pa­nies from Volk­swa­gen AG to At­las Copco AB to lux­ury-goods gi­ant Ker­ing SA pleased in­vestors, as did China’s Kwe­i­chow Moutai Co, the most valu­able dis­tiller.

The US just logged the best backto-back quar­ters of GDP growth since 2014, con­firm­ing that Hur­ri­canes Har­vey and Irma caused less dam­age to the world’s largest econ­omy than once thought. Earn­ings re­flected global op­ti­mism, even with lin­ger­ing con­cerns about Brexit and a Cata­lan Re­pub­lic se­ces­sion in Europe. Here’s what we’ve learned so far:

> Cor­po­rate prof­its rising in ma­jor re­gions

With more than half of the Stan­dard & Poor’s 500 stock in­dex com­pa­nies re­port­ing, earn­ings have risen 8.4% and sales are up 6.3%. In Europe, profit growth for com­pa­nies in the Stoxx 600 In­dex is com­ing in at a sur­pris­ingly strong 8%, JPMor­gan Chase & Co. strate­gists said last Fri­day. Among the roughly one-quar­ter of the com­pa­nies in the MSCI AC Asia Pa­cific in­dex that have re­ported, growth was even more brisk at 15%.

“The global eco­nomic ac­cel­er­a­tion, which kind of be­gan in late 2016, is re­ally flow­ing through,” said Pa­trick Pal­frey, an eq­uity strat- egist with Credit Suisse.

> Ama­zon leads surge among tech com­pa­nies

Ama­zon is show­ing in­vestors it can run the newly ac­quired Whole Foods gro­cery chain, churn out gad­gets, sell more prod­ucts on­line and still man­age ex­penses. The com­pany tram­pled fore­casts and its shares surged 13% last Fri­day to close at a record US$1,100.95.

Cloud com­put­ing is hot, for both Ama­zon and Mi­crosoft. Sales at Mi­crosoft rose 12% amid buoy­ant de­mand for Azure cloud ser­vices, used to store and run cus­tomers’ ap­pli­ca­tions in Mi­crosoft’s data cen­tres.

Growth in on­line ser­vices, while great for tech firms, helps cre­ate both win­ners and losers else­where. Toy­maker Mat­tel Inc’s sales fell 13% due in great part to the bank­ruptcy of re­tailer Toys “R” Us Inc – done in by com­pe­ti­tion from Ama­zon. UPS, how­ever, is poised to ben­e­fit as con­sumers shop on­line, say­ing last Thurs­day it ex­pected to ship a record 750 mil­lion pack­ages over the hol­i­days in a test of the in­vest­ments it’s made to ex­pand ca­pac­ity.

> The hur­ri­canes landed only a glanc­ing blow

The hur­ri­canes that raked the US in Au­gust and Septem­ber left plenty of lo­cally heavy dev­as­ta­tion but so far have made mainly just rip­ples in earn­ings re­ports for com­pa­nies other than prop­erty in­sur­ers like the Trav­el­ers Cos.

Drug­maker Am­gen Inc raised its profit fore­cast for 2017 even with a pre-tax ex­pense of as much as 18 US cents a share stem­ming dam­age to a Puerto Ri­can fac­tory. In Europe, shares of French eye­glass-lens maker Es­silor In­ter­na­tional SA and Ray-Ban owner Lux­ot­tica Group SpA jumped, even af­ter the com­pa­nies said the hur­ri­canes held back their sales amid shop clo­sures. Gen­eral Mo­tors and Ford Mo­tor Co both beat profit es­ti­mates, aided in part by a surge in de­mand in Septem­ber as cus­tomers re­placed storm-dam­aged ve­hi­cles.

> China’s growth lifts earn­ings around the world As goes China, so goes much of the in­dus­trial world. Cater­pil­lar Inc last Tues­day surged the most in six months. One rea­son: An im­proved out­look for con­struc­tion in China is pro­pel­ling the machin­ery maker to­ward its first an­nual sales gain since 2012. China even pro­vided a bright spot in Gen­eral Elec­tric Co’s dis­mal Oct 20 re­port: Or­ganic orders for health-care equip­ment rose 20% in China, com­pared with 4% in the US and 8% in Europe.

Do­mes­tic de­mand helped buoy earn­ings at some of China’s big­gest com­pa­nies at the same time Pres­i­dent Xi Jin­ping is firm­ing up his sta­tus as the na­tion’s strong­est leader in decades. Kwe­i­chow Moutai, the world’s most valu­able dis­tiller, more than dou­bled its profit on pop­u­lar­ity of its pre­mium liquors. Even in the sat­u­rated mo­bile-phone mar­ket, China Mo­bile Ltd re­ported higher rev­enue and im­prove­ment in profit mar­gins.

> En­ergy com­pa­nies post un­even re­sults Earn­ings in the oil­fields have been a tale of two sec­tors. Pro­duc­ers are ex­pe­ri­enc­ing a re­bound af­ter a three-year mar­ket rout, beat­ing es­ti­mates on higher crude prices and a crash diet of cost cuts. Ser­vice com­pa­nies and equip­ment mak­ers have been less suc­cess­ful, strug­gling to over­come pur­chas­ing cut­backs by drillers who turned fru­gal dur­ing the slump.

With crude now sit­ting com­fort­ably above US$53 a bar­rel, some 15% above a year ago, Cono­coPhillips, Sta­toil ASA and Sun­cor kicked off earn­ings sea­son for the world’s big­gest oil com­pa­nies with prof­its that eas­ily beat es­ti­mates. Exxon Mo­bil Corp, the world’s big­gest ex­plorer, To­tal SA and Chevron Corp. also posted strong prof­its last Fri­day, though Exxon and Chevron shares fell af­ter the com­pa­nies re­ported dis­ap­point­ing pro­duc­tion.

Some CEOs land in the hot seat Just be­cause cor­po­rate earn­ings are do­ing well glob­ally doesn’t mean ev­ery­one is hav­ing an easy time. Deutsche Bo­erse AG chief ex­ec­u­tive of­fi­cer Carsten Kengeter re­signed last Fri­day amid grow­ing share­holder pres­sure af­ter he be­came em­broiled in an in­sider-trad­ing probe, and the com­pany said it isn’t likely to meet its ful­lyear earn­ings tar­gets.

United Con­ti­nen­tal Hold­ings Inc shares are still down 11% since CEO Os­car Munoz and his team failed to sat­isfy in­vestors about the 2018 out­look on their Oct 18 earn­ings call.

In Ja­pan, scan­dals linked to Kobe Steel Ltd’s fake data and Nis­san Mo­tor Co’s ve­hi­cle-in­spec­tion prac­tices have cast a pall over the coun­try’s man­u­fac­tur­ing sec­tor. Kobe Steel CEO Hiroya Kawasaki and Hiroto Saikawa, his coun­ter­part at Nis­san, both had to apol­o­gise in pub­lic as in­ves­ti­ga­tions con­tinue. Kobe Steel with­drew its profit fore­cast and elim­i­nated its in­terim div­i­dend yes­ter­day.

In Euro­pean bank­ing, CEOs John Cryan of Deutsche Bank AG and Jes Sta­ley of Bar­clays Plc are un­der pres­sure af­ter pre­sid­ing over their sec­tor’s big­gest earn­ings dis­ap­point­ments. In both cases, the cul­prit was sus­tained, worse-thanfeared weak­ness at their in­vest­ment banks. Rev­enue from trad­ing bonds and stocks plunged 30% at Deutsche Bank and 31% at Bar­clays.

Bond trad­ing also proved a weak spot for No­mura Hold­ings Inc., which re­ported yes­ter­day that its net in­come dropped 15% in the three months to Septem­ber, the first de­cline in five quar­ters. At HSBC Hold­ings Plc the mood was more buoy­ant, with the Lon­don-based bank an­nounc­ing its third con­sec­u­tive in­crease in quar­terly rev­enue, helped by higher rev­enue from Asia. — Bloomberg

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