Meta guidance miss rattles tech peers

US equities dipped on Wednesday as investors balanced strong corporate earnings with speculation over future interest rate hikes. The S&P 500 remained flat, the Nasdaq edged up 0.1%, while the Dow Jones dipped 0.1%. Rising Treasury yields and increased debt supply pressured riskier equities. Tesla surged 12%, countering weak results, while Boeing shares fell 2.9%. Meanwhile, the Eurozone’s Stoxx 50 index dropped 0.4% to 4,990, dragged down by luxury conglomerate Kering’s nearly 7% plunge due to weak spending in key Asian markets affecting its flagship brand, Gucci, though tech shares like Infineon rose over 5%. 

Summary for 25.04.2024 

• Most Asian equities declined on Thursday, with technology shares mirroring losses in their Wall Street counterparts after Meta Platforms provided disappointing guidance. Japan’s Nikkei 225 and TOPIX fell on tech losses ahead of the Bank of Japan meeting. South Korea’s KOSPI declined despite strong earnings and GDP data due to tech shares weakness. Other Asian markets showed mixed performance. Australian markets were closed for a holiday. 
• European markets are expected to open cautiously on Thursday, with a focus on earnings reports from major banks like Deutsche Bank, BNP Paribas SA, and Barclays Plc. US equity index futures also dropped, particularly the tech-heavy Nasdaq, as Meta and peers tumbled, with attention now turning to upcoming earnings and US GDP data. 
• Oil prices edged lower as concerns over a potential US economic slowdown outweighed worries about Middle East tensions. Brent crude fell to $86.95 a barrel, and West Texas Intermediate to $82.74. Tensions between Iran and Israel escalated, but concerns about delayed US interest rate cuts dampened demand. Unexpectedly low US crude inventories provided a brief lift, but the effect was short-lived. 
• In March 2024, new orders for US durable goods surged by 2.6% from the previous month, exceeding expectations of a 2.5% increase. This was primarily driven by strong demand for transport equipment, including vehicles and aircraft. Orders rose across various categories, while non-defence capital goods excluding aircraft increased by 0.2%, indicating steady business spending plans. 
• In April 2024, Germany’s Ifo Business Climate indicator rose to 89.4, exceeding expectations and marking the third consecutive monthly increase. This surge, the highest since May 2023, was driven by anticipation of ECB interest rate cuts and easing inflationary pressures. Companies showed less pessimism about future months and current business situations across various industries. 
• BHP Group has proposed acquiring Anglo American, potentially reshaping the global mining industry. Anglo’s board is reviewing the offer, but its future remains uncertain. Anglo has faced challenges including price drops and operational issues. If successful, this would mark a significant return to large-scale acquisitions for BHP under CEO Mike Henry. 
• BNP Paribas reported a slight decline in first-quarter profit and revenue but surpassed analyst expectations due to lower expenses and strong performance in corporate banking. Despite flat or falling revenues in most sectors, the bank remains optimistic, aiming for full-year earnings exceeding €11.2 billion and revenue growth exceeding 2%. 
• Deutsche Bank reported a net profit of €1.275 billion for Q1, a 10% increase from last year, beating analysts’ forecasts of €1.23 billion. Revenue rose 1% to €7.8 billion, driven by growth in commissions and fee income, along with strong performance in fixed income and currencies. The bank also noted a CET1 ratio of 13.4%. 
• Sanofi reported a 14.7% decline in Q1 operating income, attributed to adverse currency effects and increased competition for its multiple sclerosis drug Aubagio. However, rising sales of anti-inflammatory drug Dupixent partially offset the decline. The company’s adjusted operating income of €2.84 billion was slightly higher than analysts’ expectations. Sanofi reaffirmed its forecast of a “low single-digit” percentage decline in adjusted earnings per share for 2024. 
• STMicroelectronics this morning revised its full-year sales guidance due to decreased demand from car manufacturers and a drop in orders from laptop and phone companies. The company now expects revenue between $14 billion and $15 billion for 2024, down from the previous range of $15.9 billion to $16.9 billion. Analysts had anticipated revenue of $16.1 billion for the year. 
• Nestle reported lower-than-expected organic sales growth in the first quarter, rising only 1.4%, below analysts’ estimates of 2.9%. The company attributed this to price hikes and decreased product sales. However, CEO Mark Schneider remains optimistic, expecting a rebound in sales volumes in the second quarter and reliable performance for the rest of the year. 
• Shares of Meta Platforms plunged 15.3% in aftermarket trading due to a disappointing Q2 outlook, despite strong Q1 earnings. The forecasted revenue of $36.5 billion to $39 billion, lower than estimates, led to a sector-wide sell-off. Increased costs, especially in AI investment, drove the weaker outlook. However, Goldman Sachs maintains a buy rating on Meta, emphasizing long-term AI potential. 
• Boeing reported its first quarterly revenue drop in seven quarters due to production slowdowns caused by a mid-air incident. CEO Dave Calhoun hinted at a Spirit AeroSystems acquisition in Q2, despite uncertainties over price and talks with Airbus. Boeing’s CFO expects a “sizeable” cash burn in Q2 but improved free cash usage. Moody’s downgraded Boeing’s credit rating over challenges. 
• ServiceNow reported strong Q1 results, with adjusted EPS at $3.41, surpassing expectations, and adjusted revenue of $2.60 billion, exceeding forecasts. While subscription revenue met estimates, second-quarter projections fell slightly short, leading to a 5% drop in share value. Despite this, ServiceNow raised its full-year subscription revenue guidance, demonstrating overall positive results. 
• Chipotle Mexican Grill raised its full-year sales forecast due to strong demand despite higher menu prices. Shares rose 3% in extended trading, hitting $3,015 after a share split. CEO Brian Niccol highlighted increased foot traffic across all income levels. Comparable sales grew 7% in Q1, with a 10% year-over-year increase in visits. 
• Lam Research reported Q1 revenue of $3.79 billion, exceeding estimates, with adjusted EPS at $7.79, higher than expected. Despite challenges, the company’s revenue remained steady, reflecting strong profitability. Q2 guidance forecasted revenues between $3.5 billion and $4.1 billion, signalling a cautiously optimistic outlook. CEO Tim Archer highlighted solid performance and the company’s readiness for future semiconductor challenges. Lam Research’s financial stability improved with cash and investments reaching $5.7 billion. 
• Thermo Fisher beat profit estimates and raised its annual forecast, anticipating improved demand for its products used in drug development. The company expects adjusted profit of $21.14 to $22.02 per share for the year, up from the previous forecast. Revenue in its laboratory products segment exceeded expectations, driven by new product launches. 
• IBM reported mixed Q1 2024 results, with EPS of $1.68, beating estimates, but revenue slightly below expectations at $14.46 billion. Shares fell over 5% in after-hours trading. IBM also announced the acquisition of HashiCorp for $6.4 billion, aiming to enhance its hybrid cloud capabilities. 

• O’Reilly Automotive missed Q1 profit estimates due to increased costs, primarily from store expansion and adapting to EV trends. Tough weather conditions also impacted sales. The company plans $900 million to $1.0 billion in capital expenditure for 2024 and aims to open 190 to 200 stores. Comparable sales rose 3.4%, while adjusted profit per share was $9.20, slightly below analysts’ $9.26 estimate. O’Reilly’s 2024 adjusted EPS forecast is between $41.35-$41.85, lower than analysts’ $42.42 estimate. 
• Goldman Sachs and Bank of America shareholders rejected proposals to split the CEO and chairman roles, against advice from proxy advisers. While the votes indicate shareholder satisfaction with current leadership, there was increased support compared to previous years, suggesting potential for change in the future. 
• HSBC views Microsoft‘s current valuation as attractive, driven by its focus on monetising AI initiatives, notably seen in the $1.1 billion partnership with Coca-Cola. They maintain a Buy rating with a target price of $516, citing strong revenue growth, margins, and leadership in AI and cloud computing. 
• Analysts at Bernstein believe Tesla‘s Full-Self Driving (FSD) deployment is five to ten years away, contrary to Elon Musk’s optimism. They cite regulatory barriers and competition from tech companies, auto OEMs, and startups. Tesla’s lack of an L3 autonomy solution and trailing self-driving metrics raise doubts about its success in FSD. 
• UBS analysts assert that the ongoing earnings season is crucial for market sentiment, with about 180 S&P 500 companies disclosing results. Despite some misses, forward-looking growth plans are being well received. UBS remains optimistic, projecting 7%-9% EPS growth for the S&P 500, and foresees small-cap shares rebounding with lower interest rates.