Earnings roundup: Auto, Covenant, Facebook, Visa

TRADE WAR, HIGHER PRICES TO CUT AUTOMAKER PROFITS

All of Detroit’s Big 3 automakers issued downward revisions Wednesday in their financial forecasts for the year. The moves, made as the companies announced second-quarter earnings, sent their shares down sharply.

General Motors said a decline in its quarterly income largely reflected rising commodity and materials prices. Ford and Fiat Chrysler singled out difficulties in their operations in China, and both said they were undertaking aggressive efforts to regain momentum.

The reference to commodities prices signaled that the Trump administration’s tariffs and trade policies were already hurting auto company profits and might yet worsen the situation, said Efraim Levy, a stock analyst at CFRA Research.

“It’s been a bad day for auto stocks,” he said. “Commodities and tariffs and their interrelationship are weighing. It’s the big picture that’s hitting the outlook.”

President Donald Trump has imposed tariffs on imported steel and aluminum, moves that raise costs for automakers, who are major purchasers of those metals.

GM and Fiat Chrysler both reported their earnings before the market opened. GM shares ended the day off 4.6 percent, and Fiat Chrysler was down 11.8 percent.

Ford’s announcement came after the close of trading, and its shares were off about 4 percent in extended trading.

GM said its pretax profit fell 13.3 percent to $3.2 billion, with its North American operations feeling a significant hit. The automaker said it was also affected by economic turmoil in South America and unfavorable exchange rates related to the Brazilian and Argentine currencies.

COVENANT TRANSPORT PROFITS JUMP IN QUARTER

Covenant Transportation Group Inc. boosted its second-quarter profits nearly sevenfold from a year ago and beat analysts’ forecasts for the spring period as freight volumes, rates and utilization all improved for the Chattanoogabased trucking firm.

Covenant said it earned $10 million, or 54 cents per share, on revenues of $196.3 million. In the same period a year earlier, Covenant earned $1.5 million, or 8 cents per share, on revenues of $145.6 million. The results were 2 cents per share better than the average estimate among analysts who follow Covenant.

Covenant Transport CEO David Parker said he expects the improvement in trucking volumes and utilization to continue in the second half of 2018 and the company’s $83 million purchase of the Greeneville, Tennessee-based Landair Transport Inc. — the biggest acquisition in Covenant’s 32-year history — should add to earnings in the balance of the year.

“From an earnings perspective, we expect our consolidated operating ratio for the third quarter to be similar to our consolidated operating ratio for the second quarter, but with the addition of revenue from Landair’s operations,” Parker said. “For the fourth quarter, we expect to remain a major participant in the holiday peak shipping season and anticipate our consolidated operating ratio and consolidated earnings per diluted share to improve compared with the fourth quarter of 2017.”

FACEBOOK’S GROWTH SLOWS AFTER SCANDALS

Facebook may not be bulletproof after all.

For months, the social network has weathered a series of scandals — including Russian misuse of the platform to interfere in the 2016 U.S. presidential campaign and the harvesting of user data through the political consulting firm Cambridge Analytica — with hardly any effect to its business. Facebook continued to post healthy double-digit increases in revenue and profit.

But on Wednesday, it showed some of the first signs of wear and tear from the months of scrutiny.

The Silicon Valley company reported a 42 percent increase in revenue and a 31 percent jump in profits for its second quarter. But the quarterly revenue of $13.2 billion missed Wall Street estimates of $13.4 billion. In addition, Facebook said its daily active users rose 1.4 percent to 1.47 billion, compared with 3.4 percent growth in the previous quarter.

The results sent Facebook’s stock down more than 7.5 percent in after-hours trading.

“It should not be surprising that there was some impact from Cambridge Analytica,” said Brian Wieser, an analyst at Pivotal Research. “To explain that there is a couple million people who chose not to continue using Facebook is unsurprising.”

VISA PROFIT JUMPS BY SPENDING BOOST

Payment processing giant Visa said Wednesday its fiscal third-quarter profits rose an adjusted 36 percent from a year ago, helped by an 11 percent increase in the amount people spent on its namesake network worldwide.

Visa reported a profit of $2.33 billion, up from $2.06 billion in the same period a year earlier. Excluding a $600 million one-time charge related to a lawsuit Visa is defending, the company’s net income was $2.79 billion, or $1.20 a share. That beats the $1.09 per-share estimate analysts had been expecting according to FactSet.

Consumers spent $2.101 trillion on Visa’s network worldwide last quarter, up 11.1 percent from a year earlier. Visa earns a small fee for every dollar spent using credit or debit cards on its Visa network.

“Our third quarter results reflect continued strength across all of our key business drivers and healthy economic fundamentals across the world,” said Visa Chief Executive Officer Alfred Kelly.

Total revenues were $5.24 billion up from $4.57 billion a year earlier.

STRONG AIR TRAVEL GIVES BOEING A BOOST

The strong air-travel business continues to give a lift to Boeing, as the aircraft maker reported Wednesday that second-quarter profit rose 26 percent to $2.2 billion.

Boeing Co. raised its forecast for full-year revenue but left its profit outlook unchanged, reflecting continuing hitches in its program to build a new refueling tanker for the U.S. Air Force.

The shares fell $7.58, or 2.1 percent, to $350.69 in midday trading, helping put the Dow Jones industrial average in the red.

Chicago-based Boeing delivered 194 airline jets in the quarter, 11 more than a year earlier, and booked 239 new orders including 91 higher-priced widebody aircraft.

CEO Dennis Muilenburg said the market is putting pressure on Boeing to further increase production of some planes. Boeing executives said the company can meet promised aircraft deliveries despite problems in getting key components including fuselages and engines from suppliers.