With the US earnings season drawing to a close, it seems a good time to examine the aggregate picture. In a note published on Monday, equity and quant strategists at Bank of America Merrill Lynch have done just that, for S&P 500 companies. Report card in the form of a pie chart (thank goodness this wasn’t how class results were presented at school): Read more
The updated Google Q3 is out, and we go from…
PENDING LARRY QUOTE
Accidental earnings release? In any case, highly unusual intraday results from Google had sent shares down 7.45 per cent at pixel time. (And the numbers were rubbish – $9.03 per share versus $10.65 expected) Read more
Back in February, Generation Investment Management LLP, a firm co-founded by Al Gore and David Blood in 2004, issued a report entitled “Sustainable Capitalism”. It came with various actionable suggestions for how such a form of capitalism could be achieved, inclusive of this idea (emphasis ours):
3. END THE DEFAULT PRACTICE OF ISSUING QUARTERLY EARNINGS GUIDANCE Read more
IBM shares fell 4 per cent in extended markets following third-quarter results which showed flat performance in major markets, the FT says. While the company posted 4 per cent growth in the US, growth was essentially flat in Europe. Total revenues, which grew 8 per cent to $26.16bn, came in slightly below forecasts, according to Reuters. New service contracts, a barometer of future activity, increased in line with expectations to reach $12.3bn but remain below the second quarter’s $14.3bn, the WSJ reports.
It’s a good job no one is sad enough to make drinking games* out of US bank financial results (it’s way too early in the morning, anyway)…
Because if you’d taken a swig every time JPMorgan Chase mentioned “DVA” (or “CVA”) within Thursday’s Q3 earnings release — you’d be absolutely smashed right now: Read more
In what promises to be an ugly earnings season, J.P. Morgan will be the first of the major banks to announce third quarter earnings on Thursday at 7am ET. Analysts expect earnings to come in at 97 cents per share (adjusted), reports the WSJ. At the conference call later in the day, analysts will be listening closely to any further colour on the bank’s European exposures and amounts set aside in anticipation of litigation related to soured mortgages. Not one to shy away from commenting on regulation, CEO Jamie Dimon’s discourse is likely find its way into tomorrow’s headlines.
Alcoa’s revenues have dropped 3 per cent from the previous quarter, with weakening aluminium demand suggesting the economic slowdown has reached the biggest US aluminium producer, reports Reuters. Revenues increased 21 per cent to $6.4bn from a year earlier. But Alcoa’s quarterly income from continuing operations fell harder than analyst expectations in the third quarter, to 15 cents per share, down from 28 cents and below a forecast of 22 cents, WSJ Marketbeat says. European aluminium users had “dramatically” cut orders, the company said, according to Bloomberg.
Earnings reports from Intel and IBM have revealed an unexpected rebound in business spending, indicating optimism about economic recovery, the FT reports. Intel reported revenues of $12.8bn, up 25 per cent on a year ago, while IBM’s revenues were up 8 per cent to $24.6bn, its highest in a decade. Businesses have pumped up their spending on servers and data hardware necessary for cloud and mobile computing, the WSJ says. Even Intel’s personal computing revenues posted a strong performance, defying analyst forecasts of competition from tablet computers. The upbeat earnings sent Asia stocks and commodities higher on Wednesday, Reuters reports.
Morgan Stanley may have suffered a $91m loss on Wednesday, on slowing momentum in its trading business, but a significant chunk of its underperformance was also down to the firm’s so-called debt valuation adjustments (DVAs) — rather than trading itself.
In this case DVAs reflected tightening spreads in the company’s own debt (and others), and via that, a mark-to-market loss in the credit default swaps purchased to protect against defaults in that debt. Read more
Number four in the big US bank earnings line-up is Goldman Sachs.
The company reported 2010 third-quarter earnings per common share of $2.98 on Tuesday, beating market expectations of $2.32 a share. Read more
Behold the second in your line-up of Q3 2010 US bank results.
Hot on the heels of JPMorgan on Friday comes Citi on Monday — and it’s a slight earnings beat, with net income of $2.2bn profit or $0.07 per diluted share, compared with consensus expectations of about $0.06 a share. Excluding an $800m pre-tax loss on The Student Loan Company, the numbers look a little better — $2.6bn or $0.08 per diluted share. Watch that net interest margin though, and those falling credit loss provisions – which seem to be the biggest driver of the profit. Read more
Jamie Dimon can act as nonchalant as he wants about the foreclosure mess/scandal/crisis/catastrophe-in-the-making, but clearly the market stopped buying it on Thursday. But if what you really want is to hear management squirming over all this, you’ll soon get your chance.
Compliments of the gang at RBS (click to enlarge): Read more
Fears that Google would allow its costs to spiral upwards as it prepared for a new wave of expansion proved unfounded in the company’s lastest quarter, as a jump in revenues and tighter controls led to earnings that comfortably beat analysts’ forecasts, the FT reports. The company’s shares jumped 8 per cent in after-market trading. The internet search company reported a 25 per cent jump in net revenues, to $5.48bn, as advertising continued to bounce back strongly from the downturn. Wall Street had been expecting a rise of only 20 per cent in net revenues, which are calculated after deducting the $1.81bn in traffic acquisition costs Google paid to other internet companies that generated some of its search traffic. Operating expenses, meanwhile, rose 34 per cent as the company continued to boost its spending on sales and marketing and on research and development. Headcount also continued to rise swiftly, rising by around 1,500, to 23,331, in the period.
Intel reassured markets at the start of the earnings season with third-quarter results ahead of its reduced expectations and a forecast of “healthy worldwide demand” for products for the rest of the year, reports the FT. Amid fears of a double-dip recession, the world’s biggest chipmaker had warned at the end of August of weaker demand than expected for computers in mature markets, reducing its sales forecast from about $11.6bn to $11bn. The “back-to-school” season was disappointing for PC makers in the US. Price-cutting is reported to have led to a recovery in September, meaning the “last four weeks of the quarter were better than we first thought”, according to Paul Otellini, chief executive. This had made Intel more optimistic about the fourth quarter. Intel shares closed at $19.77 in extended trading in New York.
JP Morgan kicked off the third-quarter bank earnings season on Wednesday with a better-than-expected set of results.
Earnings per share came in at $1.01 versus a market consensus of $0.90, largely down to lower loan losses in its retail and credit card units. Read more
Lloyds Banking Group on Wednesday posted a £1.6bn underlying first-half profit after a marked easing of the loan losses that had ravaged its financial performance in 2009, reports the FT. However, it said that net lending to businesses – a politically sensitive subject – was broadly flat because corporate customers were being cautious about investing or expanding their inventories. Loan impairment charges, however, were “significantly lower than originally envisaged” at £6.554bn on a combined businesses basis, half the £13.399bn reported a year earlier. Lloyds’s writedowns soared to £24 bn following its purchase of HBOS in January last year, notes Bloomberg.
HSBC has reported that interim profit more than doubled year on year to $11.1bn, helped by a decline in impairment charges of $6.4bn from $7.5bn, the lowest level since the start of the financial crisis, the FT reports. Earnings per share rose 81 per cent to 38 cents, helping it declare a dividend of $0.16 cents a share. Tier 1 capital ratio, a measure of balance sheet strength, rose to 11.5 per cent, ahead of targets. For more see FT Alphaville.
France’s biggest listed bank BNP Paribas reported consensus-beating profits on Monday thanks to lower loan provisions and strong retail banking, which offset volatile financial market conditions, reports Reuters. The second-quarter performance revealed an improving but still challenging macroeconomic environment in BNP’s key euro zone markets, pointing the way to more growth in retail, Chief Executive Baudouin Prot said in the bank’s statement. Net profit rose 31 per cent in the quarter to €2.11bn.
And the beat goes on in US earnings season. Bank of America announced Q2 earnings of $3.1bn on Friday, translating to an EPS of 27 cents a share versus estimates of 23 cents.
More flashes, via Reuters: Read more
Unexpected growth in capital spending costs led Google’s second-quarter earnings to disappoint on Thursday, the FT reports, raising doubts about its strategy of pursuing long-term investment opportunities. Proforma earnings per share came in ten cents short of estimates at $6.45. Shares in Google fell by up to 4.2 per cent in after-market trading. Google has responded by touting growth in its Android open-source mobile software, and is planning further bond issues to finance investment, ZDNet reports.
JPMorgan Chase on Thursday confirmed investors’ fears that Wall Street’s year-long rebound from the financial crisis had come to a halt in the second quarter, offsetting steady improvement in the financial health of US consumers and businesses, the FT reports. Seeking Alpha says that though the bank’s Q2 earnings — net income of $4.8bn, or $1.09 a share, up 76 per cent from $2.7bn or 28 cents a share — smashed estimates, JPM’s business still has “major” weak spots.
JP Morgan reported second-quarter EPS around 40¢ above market expectations on Thursday at $1.09 — although ex-exceptional brought this down to $87.
Flashes, via Reuters: Read more
There is a cautious tone to markets as traders absorb the sharp risk asset rally of recent days and contemplate the prospects for the US second-quarter earnings season, the FT’s global markets overview says. Treasury yields are lower and Wall Street equity futures are down 0.6 per cent, after stock markets posted their best gains in a year last week. Alcoa will report earnings after Monday’s close, while Google, Intel and JP Morgan are among firms disclosing this week.
Bank of America has released its Q1 2010 results, hot on the heels of JP Morgan earlier this week. But, is the news as positive as Jamie Dimon’s?
On first sight, it has at the very least beaten expectations. Read more
Analysts and industry watchers increasingly believe that ‘normalised’ earnings will return to Wall Street within two years, the American Banker reports. JP Morgan’s recent earnings report showed marked improvements in its loan impairment rates, strengthening the case that other big banks have turned the corner.
…with a big earnings beat from JP Morgan.
Via Reuters: Read more
A mildly disappointing start to the US first-quarter earnings season and a more cautious assessment of the bail-out for Greece provided the excuse for investors to pare back risky bets on Tuesday, according to the FT’s rolling global market overview. The FTSE All-World equity index dropped 0.3 per cent from cyclical highs, commodities saw selling and the euro stabilised as some traders argued that details of the €30bn ($41bn, £26.6bn) aid package for Athens were – yet again – vague, and did not solve the fundamental budget problems facing heavily indebted nations.