Big Tech earnings fail to impress

Wall Street's main indices closed slightly lower on Tuesday, erasing early gains as investors focused on earnings reports from Alphabet and Tesla. Tesla's revenue rose unexpectedly due to higher vehicle deliveries, while Alphabet exceeded revenue estimates with strong digital ad sales. Despite gains in major tech shares like Apple and Microsoft, the market was dampened by disappointing results from UPS, GM, and other companies, leading to overall declines. Meantime, European equities edged up 0.4%, with tech shares rising and mining equities falling. Porsche’s shares dropped 5% due to a lowered 2024 outlook.

Summary for 24.07.2024

Most Asian shares fell this morning, led by declines in the technology sector following disappointing earnings from US heavyweights Tesla and Alphabet. China's markets hit a two-week low amid poor economic data and political uncertainties, while broader Asian equities moved flat-to-low, influenced by mixed regional economic indicators.

European and US equity markets are expected to open lower, with technology shares leading the decline following disappointing earnings from Alphabet and Tesla.

Oil prices rose in Asian trade on Wednesday, recovering slightly from recent losses due to tight near-term market expectations from a US inventory draw. Brent and WTI futures saw modest gains. Despite this, concerns over a 2025 surplus and economic issues in China, weighed on the outlook.

Vice President Kamala Harris leads Donald Trump 44% to 42% in a Reuters/Ipsos poll after President Joe Biden endorsed her and withdrew from the race. Harris consolidated Democratic support, raised $81 million in 24 hours, and campaigned in Wisconsin, while she considers potential running mates.

Alphabet's Q2 earnings beat analyst expectations with EPS of $1.89 and revenue of $84.74 billion, driven by strong performance in Search and Cloud services. Google Cloud's revenue surpassed $10 billion for the first time. Despite this, a slight miss in YouTube ad revenue and higher capital expenditures led to a 2.2% drop in shares after hours.

Tesla reported its lowest profit margin in over five years for Q2, missing Wall Street targets with a net income of $1.48 billion and a 7.8% drop in shares. Challenges include declining sales, increased AI spending, and delays in new models like the Robotaxi and Cybertruck. Amidst this, Elon Musk polled his 190.5 million X followers about investing $5 billion in his AI startup xAI, with 70.5% in favour.

Visa's third-quarter revenue fell short of Wall Street expectations, declining 3.2% in extended trading. The company reported $8.90 billion in revenue, missing forecasts due to limited consumer spending amid high borrowing costs. Payment volume growth slowed in Asia-Pacific and overall growth is expected to be in the "low double-digit" percentages for Q4.

LVMH reported a decrease in first-half profit and revenue, with net profit at €7.27 billion from €8.48 billion and revenue dropping to €41.68 billion from €42.24 billion. Q2 sales grew 1% to €20.98 billion, missing expectations due to weaker Chinese demand, although Western markets improved. Sales in Asia (excluding Japan) declined 14%, while Japan saw growth. Operating profit fell to €10.65 billion, with margins at 25.6%. An interim dividend of €5.50 per share will be paid on 4 December.

Spotify shares surged 12% in regular trading on Tuesday after Q2 2024 earnings exceeded expectations. EPS was €1.33 vs. €1.05 estimate, and gross margin hit 29.2%, surpassing forecasts. Revenue was €3.81 billion, slightly below estimates. Despite missing user growth targets, strong gross margin and profit outlooks buoyed investor confidence.

Sherwin-Williams raised its 2024 earnings forecast after a strong Q2 performance, reporting a profit of $3.70 per share, beating estimates of $3.48. Revenue rose slightly to $6.27 billion but fell short of the $6.33 billion forecast. The company cited higher prices and increased sales but noted ongoing weakness in its Consumer Brands Group, with sales down 10.7%.

General Motors reported Q2 profit and revenue that exceeded Wall Street expectations and raised its annual profit forecast, driven by strong demand for gas-powered trucks. However, shares fell 6.4% due to concerns over its Cruise self-driving strategy, ongoing losses in China, and delays in EV production. Despite these issues, GM's shares have risen 38% this year.

Comcast's Q2 revenue fell 2.7% to $29.69 billion, missing estimates, due to fewer movie releases and lower theme park attendance. Studio revenue dropped 27%, and free cash flow was $1.34 billion, below forecasts. Despite losing 120,000 broadband customers, Comcast's Peacock streaming service saw revenue of $1 billion and 33 million subscribers. Shares declined by 2.6% in regular trading.

Coca-Cola raised its 2024 sales and profit forecasts, driven by strong international demand and increased marketing efforts, including sponsorships of major events like the Paris Olympics. Q2 revenue rose 2.9% to $12.31 billion, exceeding estimates, and adjusted profit was 84 cents per share. The reaction on the market was muted.

Texas Instruments exceeded second-quarter profit estimates, driven by stabilising demand for analog chips and lower manufacturing costs. Shares rose 3% after-hours, following a 3.7% drop in regular trading. TI’s earnings of $1.22 per share beat estimates, and its third-quarter revenue forecast matched expectations. Capital expenditures were lower than anticipated, addressing activist investor concerns.

GE Aerospace raised its 2024 profit outlook but reduced revenue and LEAP engine production forecasts due to ongoing supply chain issues. Despite a 29% drop in LEAP engine deliveries and lower revenue guidance, shares rose 5.7% as the company reported strong growth in commercial engine services.

UPS shares dropped over 12% after reporting a 29.5% decline in Q2 earnings, with adjusted EPS at $1.79 and revenue falling 1.1% to $21.8 billion, missing estimates. Despite a return to US volume growth, weak domestic and international segments and ongoing challenges led to a gloomy market reaction.

Enphase Energy's Q2 2024 results showed revenue of $303.5 million and an adjusted EPS of $0.43, missing analyst estimates. Despite this, the shares rose 5.1% in after-hours trading due to strong investor confidence. The company projected Q3 revenue between $370 million and $410 million, with expected gross margins between 47.0% and 50.0%.

UniCredit reported a 5% rise in Q2 net profit to €2.7 billion, exceeding expectations, with revenues down just 0.7% to €6.3 billion. The bank raised its annual revenue forecast to over €23 billion while maintaining its €8.5 billion profit target. UniCredit also announced a €370 million investment to acquire Belgium’s digital bank Aion and cloud banking provider Vodeno, enhancing its tech capabilities.

BNP Paribas beat Q2 earnings expectations with net profit rising to €3.395 billion and revenue growing 3.9% to €12.27 billion. The bank's corporate and institutional banking saw a 12% revenue increase. BNP Paribas reaffirmed its 2024 targets, expecting higher revenue and net income than last year.

Banco Santander raised its annual revenue growth forecast to high-single digits after posting a 20% rise in Q2 net profit to €3.21 billion, exceeding expectations. Revenue grew to €15.67 billion, driven by €11.47 billion in net interest income. The bank’s core equity Tier 1 ratio improved to 12.5%.

Deutsche Bank reported a €143 million loss for Q2, its first loss in four years, due to a €1.3 billion provision for an ongoing investor lawsuit involving its Postbank division. This loss ends a 15-quarter profit streak and is slightly better than the expected €280 million loss.

Baird analysts upgraded Qualcomm to a "Bullish Fresh Pick" with a $250 target price, citing increased procurement estimates for the iPhone 16 and strong AI-driven demand. They expect double-digit ASP growth for Qualcomm's components and higher performance benefits from AI, boosting Qualcomm’s RF share and Snapdragon X Elite processor.

ECB officials are reconsidering their initial request for banks to set aside up to €13 billion in provisions for bad leveraged loans, potentially reducing it to around €7 billion. This revision comes after significant backlash from lenders and internal debates among officials, who argued for a lower provision amount following a detailed review of the business.

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