Morgan Stanley posts better-than-expected quarterly profit

Morgan Stanley reported a better-than-expected quarterly profit yesterday, driven by higher revenues in equities and fixed income trading as well as investment banking.

Banks are benefiting from increased market volatility due in part to escalating trade tensions causing investors to buy and sell assets to protect their portfolios and take advantage of opportunities.

Morgan Stanley highlighted its equity financing business and a stronger performance in commodities and credit products. Large strategic deals and cross-border activity helped drive M&A in the quarter, chief financial officer Jonathan Pruzan said on a call to discuss results.

But the bank is watching for signs the trade and geopolitical concerns could dampen future underwriting revenue. Morgan Stanley’s net revenue rose 12% to $10.6bn, with institutional securities accounting for 54% of the gains. Institutional securities comprises the bank’s investment banking and trading units. Chief executive James Gorman called the quarter’s performance straightforward and focused some of his prepared comments on the Federal Reserve’s methodology for its stress tests, noting that the US regulator’s extreme scenarios this year exceeded even what the bank experienced during the 2007-2009 financial crisis.

Morgan Stanley said net income rose 39% to $2.4bn, or $1.30 per share, from $1.8bn, or 87 cents per share, in the year-ago period. Adjusted for special items, its profit was $1.25 per share, topping the $1.11 per share analysts expected, on average, according to Thomson Reuters I/B/E/S. Net revenue from the bank’s sales and trading business rose 18% to $3.8bn, with fixed income and equity trading businesses recording gains of 12% and 15%.

Reliance Communications

Debt-laden Indian telecoms company Reliance Communications (RCom) said its losses narrowed in the first quarter and it is confident of closing its debt resolution process by the end of September.

It reported a loss of Rs3.42bn ($34mn) for April to June yesterday, saying lower expenses in terms of access charges and licensing fees had helped reduce losses.

It was the company’s seventh straight quarter in the red but narrowed from a loss of Rs198bn in the previous quarter and a Rs12.21bn loss in the same quarter a year ago.

Like other Indian telecoms firms, RCom has been hit by a fierce price war and is the most leveraged of all listed telecoms carriers in India. RCom, controlled by businessman Anil Ambani, is due to sell Rs181bn of assets to Reliance Jio Infocomm and Canada’s Brookfield, which will trim its huge debt pile.

Revenue from operations fell about 26% to Rs10.06bn in the first quarter, it said.

RCom owed banks $7bn as of March 2017 when it last made public its debt level, and more to vendors. RCom is confident of closing the ongoing debt resolution in the second quarter of FY 2018-19 as planned, the company said in its results statement.

Abbott Laboratories

Abbott Laboratories raised its full-year earnings forecast and reported a quarterly profit that beat analysts’ estimates, powered by higher sales across its businesses.

The diversified healthcare company yesterday reported an 11.3% rise in second-quarter medical device sales to $2.89bn, topping analysts’ average estimate of $2.66bn.

The unit — the largest contributor to total sales with a 37% share — benefited from increased adoption of the company’s sensorbased glucose monitoring system, FreeStyle Libre, which reduces the need for routine finger pricks for diabetics.

The company’s shares rose 2.6% in pre-market trading.

The Chicago-based company now expects adjusted earnings per share from continuing operations to be $2.85 to $2.91, compared with a prior range of $2.80 to $2.90.

Net earnings more than doubled to $733mn in the three months ended June 30. Excluding items, the company earned 73 cents per share, ahead of analysts’ average estimate of 71 cents, according to Thomson Reuters I/B/E/S.

Textron

Textron Inc reported a higher-than-expected quarterly profit yesterday as American corporations spent more on jets, leading the company to raise its earnings and cash flow forecasts for the year. A stronger US economy, the Trump administration’s tax cuts and higher oil prices are supporting a recovery in business jet demand.

Textron also saw strong demand for its Bell helicopters used by oil companies to ferry workers to and from offshore rigs.

“We are encouraged by revenue growth resulting from improving commercial demand across many of our end markets,” Textron chief executive officer Scott Donnelly said in a statement. Textron’s shares rose 3.3% in premarket trading.

The Providence, Rhode Island-based company said it now expects 2018 earnings per share of $3.15 to $3.35, compared with its previous forecast of $2.95 to $3.15. The company raised its forecast for cash flow from continuing operations by $50mn to a range of $750mn to $850mn. The company’s income from continuing operations jumped 46.4% to $224mn, or 87 cents per share. Total revenue rose 3.4% to $3.73bn.

Electrolux

Home appliance maker Electrolux cut its full-year forecast for sales growth in North America, its biggest market, after higher US steel tariffs forced it to increase prices for its products.

The Swedish company said yesterday it expected demand in North America to grow by zero to 2% in 2018, lagging its previous forecast of 2-3% growth, while it also lowered its outlook for the smaller Latin American and Australian markets.

CEO Jonas Samuelson said Electrolux had raised prices in North America by 2% after US tariffs inflated prices of locally sourced steel and that it would lift prices further to offset any additional inflation due to the trade conflict.

Adjusted operating earnings came in at 1.65bn Swedish crowns for the second quarter, slightly ahead of a 1.61bn crown forecast in a Reuters poll of analysts but down from a profit of 1.92bn crowns a year ago.

ASML Holding

ASML Holding NV, a supplier of equipment to the world’s biggest computer chipmakers, reported forecast-beating second-quarter results, boosted by a rise in orders for its newest machines and demand from logic and memory chip makers.

ASML, whose earnings are widely viewed as an indicator of the semiconductor industry’s health, said it expected an even stronger performance for the rest of this year and into the next. Its products play a decisive role in shrinking the size of chips so as to cram ever more circuits onto them.

The bullish outlook may assuage concerns that demand for memory chips is waning, or that US tariffs on China are undermining customers’ confidence.

The Dutch company, which supplies the world’s top chipmakers, including Intel, Samsung, and TSMC, reported net income of €584mn ($680mn), up from €466mn a year earlier, as sales surged 30% to €2.74bn.

AkzoNobel

Leading global paintmaker AkzoNobel yesterday posted a sharp drop in second quarter profits, mainly blaming the fall on currency fluctuations.

The news of a 10% cut in net income, down to €271mn ($315mn) in the second quarter of 2018 from €301mn in the same period last year, comes after a turbulent time for the Dutch giant.

In March the company announced it was selling its chemicals arm to US-based investors Carlyle Group and Singapore’s GIC for €10.1bn, seeking to restore investor confidence in the Dutch giant. “Second quarter revenues were however also down 3.0%, from €2.5bn in 2017 to 2.4bn euros in the three months of April, May and June. The manufacturer of such household paint brands as Dulux and Trimetal, AkzoNobel last year decided to divest its chemicals arm as it fended off an increasingly hostile takeover bid by US-based rival PPG. After making three offers, PPG eventually dropped its efforts in mid-2017, which would have valued the Dutch company at €26.9bn.

Swedbank

Swedbank reported a bigger-than-expected rise in quarterly earnings yesterday on stronger trading income and a surprise reversal in loan loss impairments in its Baltic and corporate businesses. The Swedish banking group’s net earnings rose to 6.01bn crowns ($678.9mn) from 4.75bn a year earlier and topped a mean forecast of 5.35bn in a poll of analysts.

Gains on financial items, which includes trading income, were 31% higher than analysts had forecast while credit impairments were net positive against an expected negative 292mn crowns. Previously announced one-off items, including a capital gain from the sale of a stake in credit information provider UC, also helped. A slump in Sweden’s housing market after two decades of rising prices has weighed on the shares of top lenders Swedbank, Nordea, Handelsbanken and SEB since the middle of last year. While housing prices appear to have stabilised in recent months, the emergence of smaller players has raised questions about whether traditional banks can maintain margins on mortgage lending.

America Movil

Telecommunications giant America Movil, Mexican billionaire Carlos Slim’s flagship company, said its profit fell sharply in the second quarter as the peso was pummelled by uncertainty. The firm reported a net profit of 818mn pesos ($43mn) from April to June, down 94.3% from the same period last year.

The firm said it faced hefty financing costs of 32.2bn pesos, “mostly derived from foreign exchange losses arising mostly from the depreciation of the Mexican peso versus the dollar.” The peso lost 9% against the dollar during the quarter, weighed down by uncertainty over the future of the North American Free Trade Agreement (Nafta) with the United States and Canada and the outcome of Mexico’s July 1 elections, which ended in a landslide victory for leftist candidate Andres Manuel Lopez Obrador. America Movil’s revenue for the period nevertheless increased 3.2% year-on-year, to 257.3bn pesos, it said.

Ericsson

Mobile telecom equipment maker Ericsson unexpectedly swung to a modest operating profit in the second quarter, boosted by growing sales in North America and said it was increasingly confident of meeting its longer-term targets.

The Swedish mobile telecom gear maker has met an industrywide downturn and mounting losses by sweeping cost cuts, clearing out most of its top management and setting a strategy to focus on profitability over growth.

Bolstering investor optimism are expectations that Ericsson is on the cusp of a new cycle of network upgrades as demand for nextgeneration 5G gear kicks in later this year or early in 2019, starting in the United States. Its shares have gained more than 36% in the year to date, buoyed by progress toward meeting its 2020 financial targets and hopes for a 5G-led industry growth cycle. Marking its second consecutive quarter of substantial progress toward hitting its 2020 financial goals, the Swedish firm reported an operating profit of 0.2bn crowns ($23mn), excluding restructuring charges of 2.0bn crowns. The operating profit compared to a 0.5bn loss in the year earlier quarter.

Analysts, on average, had forecast an 0.1bn loss for the second quarter in a Reuters poll.