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U.S. STOCKS SLIP AS INVESTORS PARSE EARNINGS REPORTS

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US FINANCIAL MARKET

U.S. STOCKS SLIP AS INVESTORS PARSE EARNINGS REPORTS

  • U.S. stocks wavered a day after the S&P 500 set a new record as investors sifted through a heavy batch of earnings reports and awaited key economic data later this week.
  • The broad stock-market index set a fresh record Monday, its first since July.
  • General Motors, which said the worker strike this year cost it $3 billion and cut its 2019 profit forecast, climbed 5.1% after third-quarter earnings beat Street estimates.
  • Shares of Pfizer rose 3.3% after the drugmaker raised its financial targets for 2019.
  • Rival Merck gained 2.6% after it, too, boosted its full-year outlook.
  • Tuesday’s gains were kept in check, however, by a 2% slide in shares of Google-parent Alphabet, which fell after the company posted earnings that missed analyst expectations.
  • Data from FactSet shows 78% of the S&P 500 companies that have reported thus far beat analyst expectations.

Google’s search for sales in cloud, hardware clip Alphabet profit

  • Google parent Alphabet reported quarterly results that show costs continue to rise faster than revenue as the web search leader seeks to broaden its business, dampening Wall Street’s enthusiasm despite Google’s continued dominance in advertising sales.
  • Alphabet reported revenue of $40.5 billion, up 20%. Analysts estimated 19.52% growth and $40.325 billion in revenue.
  • Total quarterly expenses grew 25% compared to a year ago – a similar rate to recent periods – to $31.3 billion.
  • The operating margin was 23%, down from 24% in the second quarter.
  • Net income for the third quarter rose to $7.1 billion, compared with analysts’ estimates of $8.811 billion.
  • Alphabet’s equity investments hit the conglomerate’s bottom line in a big way this past quarter, as Alphabet reported paper losses of $1.53 billion from such investments, compared with gains of $1.38 billion a year earlier.

GM Factory Strikes to Hit Bottom Line by Nearly $3 Billion

  • General Motors lowered its full-year profit outlook, saying the 40-day strike at its U.S. factories wiped out nearly all its free cash flow for the year and will cost the Detroit auto maker close to $3 billion in lost earnings.
  • Revenue fell slightly to $35.47 billion from $35.79 billion, above analysts’ estimates of $33.82 billion.
  • The automaker reported a 6% increase in third-quarter U.S. sales, led by its full-size pickup trucks, SUVs and crossovers.
  • The automaker posted third-quarter net income of $2.3 billion, down from $2.5 billion a year earlier.
  • The company said it now expected full-year adjusted automotive free cash flow in a range from zero to $1 billion, down from its previous forecast of $4.5 billion to $6 billion.
  • GM also cut its projected 2019 capital expenditures to around $7.5 billion from its previous outlook of $8 billion to $9 billion.
  • GM now expects full-year adjusted earnings per share between $4.50 to $4.80, down from its previous range of $6.50 to $7.

Strong consumer spending drives Mastercard profit beat

  • Mastercard on Tuesday beat Wall Street estimates for quarterly profit as customers shrugged off fears of an economic slowdown and spent more with their credit and debit cards, boosting fees for the world’s second-largest payment processor.
  • Net revenue was $4.47 billion, up 15% and beating estimates from analysts.
  • The company’s gross dollar volume, the dollar value of transactions processed, rose 12.4% to $1.65 trillion in the third quarter.
  • Around 28.2 billion transactions were processed, up about 22% from a year earlier led by a near 12% rise in the United States and a 31.4% jump in Europe.
  • The company’s net income rose to $2.11 billion in the third quarter, from $1.9 billion a year earlier.

Beyond Meat Books First Profit as Competition Mounts

  • Beyond Meat reported its first ever net profit and raised its full-year sales forecast, but shares tumbled 6.5% in extended trading as the vegan burger maker said it would need to offer more store discounts or promotions as competition heats up.
  • Net revenue rose 250% in the third quarter to $91.96 million, above Wall Street’s estimate of $82.2 million.
  • Beyond Meat reported a quarterly net income of $4.1 million, compared with a loss $9.3 million a year earlier.
  • Beyond Meat raised its full-year net revenue forecast for the second time to $265 million to $275 million.
  • It had previously forecast net revenue to exceed $240 million. Third-quarter discounts rose about 254%.

Pfizer raises 2019 forecast on surging cancer drug sales

  • Pfizer posted third-quarter profit well above analysts’ estimates on higher sales of cancer drug Ibrance and arthritis medicine Xeljanz, encouraging the largest U.S. drugmaker to lift its earnings forecast for the year.
  • Total revenue fell about 5% to $12.68 billion, beating estimates of $12.26 billion, as sales of pain treatment Lyrica, which recently lost patent protection in the United States, more than halved to $527 million.
  • Sales in its biopharmaceutical segment rose by about 7% to $10.11 billion, led by higher sales of its Ibrance, Xeljanz, Eliquis, Vyndaqel and Inlyta brands as well as an increase in sales in its international markets, Pfizer said.
  • The company posted a third-quarter profit of $7.68 billion, compared with $4.11 billion a year ago.
  • The drugmaker said it expects full-year revenue of between $51.2 billion and $52.2 billion, compared with its previous outlook of between $50.5 billion and $52.5 billion.
  • Pfizer raised its 2019 adjusted earnings per share forecast to between $2.94 and $3.00, from a prior estimate of $2.76 to $2.86. Analysts on average were expecting $2.82 per share.

Merck beats estimates as Keytruda sales top $3 billion for first time

  • Merck blew past Wall Street expectations for third-quarter profit on Tuesday, as sales of its blockbuster immunotherapy Keytruda crossed the $3-billion mark for the first time in a quarter and beat lofty estimates.
  • Total sales rose 14.9% to $12.40 billion, surging past estimates of $11.64 billion.
  • Sales of Keytruda rose 62.5% to $3.07 billion in the third quarter, sweeping past estimates of $2.88 billion.
  • Net income fell to $1.90 billion in the third quarter from $1.95 billion a year earlier.
  • Merck raised its 2019 adjusted earnings forecast to between $5.12 and $5.17 per share from a prior range of $4.84 to $4.94. Analysts were expecting $4.92 per share.

Grubhub’s Profit Falls as Delivery Competition Accelerates

  • Shares of GrubHub plunged nearly 32% in extended trading on Monday, after the online food delivery company warned of slowing growth as customers opted to choose from a growing pool of rival providers to get better deals.
  • Revenue rose 30% to $322.1 million, but missed estimate of $330.5 million.
  • For the quarter, net income fell to $1 million, from $22.7 million a year earlier.
  • The company reduced expectations for earnings before interest, taxes and other expenses for its fourth quarter to a range of $15 million to $25 million.
  • Grubhub now anticipates revenue of between $315 million to $335 million for the period. Analysts had projected $387 million.
  • “Right now, we are in a weird bubble that is about to burst,” Grubhub’s Chief Executive Matt Maloney said in an interview.
  • Raising funds in the private markets has become more difficult as investors grow skeptical about startups in the wake of WeWork’s troubles, he said, and that will cool the growth of food-delivery businesses in the future.

Kellogg’s Snacks Help Results, but Cereal Remains a Challenge

  • Kellogg was helped in the third quarter by its snacks business, but the maker of Rice Krispies again struggled to lift sales of its portfolio of cereals.
  • Kellogg reported sales of $3.37 billion for the quarter, slightly more than expectations but down from $3.47 billion a year earlier.
  • On an organic basis, excluding currency fluctuations, mergers and asset sales, sales rose 2.4% in the quarter, Kellogg said.

T-Mobile beats quarterly phone subscriber estimates

  • T-Mobile on Monday beat analysts’ third-quarter estimates for net new phone subscribers who pay a monthly bill, boosted by competitive wireless plans aimed at fending off its bigger rivals.
  • Revenue rose 2% to $11.06 billion, missing estimates of $11.33 billion.
  • The carrier added 754,000 phone subscribers who pay a monthly bill on a net basis, compared with 774,000 additions a year earlier and expectations of 742,600 new postpaid phone subscribers.
  • T-Mobile’s third-quarter net income rose to $870 million, from $795 million a year earlier.
  • The company said it now targeting adjusted core earnings for 2019 of $13.1 to $13.3 billion, up at the midpoint from prior guidance of $12.9 to $13.3 billion.

Shopify posts bigger quarterly loss on higher spending

  • Canada’s Shopify posted a bigger quarterly net loss on Tuesday as it spent more to add sellers to its e-commerce platform and expand fulfillment centers across the United States, sending shares down 8.6% before the bell.
  • The Ottawa-based company reported a total revenue of $390.6 million, up 45% year-over-year.
  • Total operating expenses in the third quarter rose to $252.4 million from $181.1 million a year earlier.
  • The company’s net loss tripled to $72.8 million, or 64 cents per share, in the quarter ended Sept. 30, from a year earlier.
  • The company expects revenue between $472 million and $482 million in the fourth quarter, above expectations of $470.6 million.

ConocoPhillips profit beats estimates on higher production

  • U.S. oil and gas company ConocoPhillips’ quarterly profit shot ahead of analysts’ estimates on Tuesday, as higher shale production offset the impact from lower crude prices and higher exploration costs.
  • Total production, excluding Libya, rose 98,000 barrels of oil equivalent per day (boe/d) to 1.322 million boe/d, with output from U.S. basins including Eagle Ford, Bakken and the Permian rising 21% in the quarter.
  • ConocoPhillips said the total realized price per barrel of oil equivalent fell 18% to $47.07 in the quarter.
  • Net earnings rose to $3.1 billion in the third quarter, from $1.9 billion a year earlier thanks to a $2.68 billion sale of its U.K. assets.
  • The company expects fourth quarter production to be in the range of 1.265 to 1.305 million boe/d, excluding Libya, and includes the impacts from the divestiture.

U.S. Silica posts bigger-than-expected loss on weak demand, lower prices

  • Frac sand miner U.S. Silica Holdings reported a bigger-than-expected loss for the third quarter on Tuesday, battered by weaker prices and softer demand from shale oil drillers.
  • Revenue fell 14.5% to $361.8 million, missing estimates of $395.5 million.
  • The company sold 3.9 million tons from its oil & gas segment in the third quarter, down 1% from the prior quarter.
  • U.S. Silica reported a net loss of $23 million for the quarter, compared with a profit of $6.3 million a year earlier.
  • For the fourth quarter, it expects the slowdown in well completions in North America to hit volumes by 10% sequentially.

Astec Industries Third Quarter EPS Misses Lowest Estimate

  • Astec Industries missed estimates for revenue and profit and reported a declining backlog, sending shares down 4% in early trading.
  • Astec had revenue of $255.8 million in the third quarter, down -0.3% from a year ago and missing estimates of $263 million.
  • The company ended the quarter with a backlog of $243.9 million, down 21% from a year ago.
  • Net income declined 57% to $3.0 million from $7.0 million in the same period a year ago.

Emcor Group Beats Q3 Earnings and Revenue Estimates

  • Emcor beat estimates for earnings and revenue but missed earnings per share guidance for the full year.
  • Revenue of $2.3 billion was up 12% from a year ago and beat estimates of $2.2 billion.
  • Profit of $81.8 million was up 2% from a year ago, beating estimates on a per share basis.
  • Emcor raised full year profit guidance to a range of $5.65 -$5.75 per share, up from a range of $5.50-$5.75, while Street expectations were for $5.71.

Martin Marietta Boosts FY Revenue View, 2.5% Above Est.

  • Martin Marietta Materials posted stronger than expected profit and revenue for the quarter, while upgrading its full-year revenue forecast, though shares were flat in early trading.
  • Revenue of $1.4 billion in the quarter was up 24.5% year over year, beating estimates of $1.34 billion.
  • Profit of $249 million was up 38% year over year, beating estimates on a per share basis.
  • The company sees FY revenue $4.66 billion to $4.77 billion, up from a range of $4.54 billion to $4.73 billion, estimate $4.60 billion.
  • Sees FY aggregate net sales $2.98 billion to $3.02 billion, up from a range of $2.8 billion to $2.91 billion.

Congress Opens Boeing 737 MAX Hearing Looking to Toughen Oversight

  • U.S. lawmakers kicked off two consecutive days of hearings Tuesday on what went wrong with Boeing’s 737 MAX jet, with many already looking to tighten federal oversight of how jetliners are certified.
  • Boeing CEO Dennis Muilenburg for the first time is facing congressional interrogation about a faulty flight-control system that led to dual crashes of the MAX, the company’s best-selling plane, taking a total 346 lives.
  • Much of the discussion is likely to touch on ways to ensure the safety of updates to other aircraft models.

Ford Recalls About 320,000 Vehicles in North America

  • Ford Motor said Tuesday it is recalling about 320,000 vehicles in North America for various safety reasons.
  • The recalls are related to three specific issues, with the largest related to driveshaft flexible coupling problems affecting certain 2015 to 2017 Ford Transit vehicles.
  • That recall affects 293,558 vehicles in the U.S., 22,960 in Canada and 2,744 in Mexico.
  • The company said in a regulatory filing on Tuesday that the recalls could result in more than $250 million in costs, without giving an exact amount.

Lockheed Martin’s F-35 fighter program gets $34 billion Pentagon contract, its biggest yet

  • The Pentagon on Tuesday announced a $34 billion F-35 contract with Lockheed Martin, the largest contract yet for the defense firm’s costly fighter program.
  • The deal is for the delivery of 478 of the aircraft.
  • “This agreement achieves an average 12.7% cost reduction across all three variants and gets us below $80 million for a USAF F-35A by Lot 13 – one lot earlier than planned,” Air Force Lt. Gen. Eric Fick, F-35 program executive officer, said Tuesday.
  • The deal for lot 12 was for 149 jets, 160 for lot 13 and 169 for lot 14, for a total of 478 fighters for the U.S. military and allied partners.

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US ECONOMY & POLITICS

U.S. pending home sales increase more than expected

  • Contracts to buy previously owned homes increased more than expected in September, suggesting that the housing market was getting a lift from lower mortgage rates though tight supply remains a constraint.
  • The National Association of Realtors said on Tuesday its Pending Home Sales Index, based on contracts signed last month, advanced 1.5% to a reading of 108.7.
  • Economists polled by Reuters had forecast pending home sales rising 0.9% in September.
  • Pending home sales surged 3.9% in September from a year ago.

Home Price Growth Ticks Up, Raising Hopes for Rebound

  • Home prices grew more quickly in August, a sign that lower mortgage rates are providing a bit of a lift to the housing market.
  • Average national home prices grew 3.2% in the year ending in August, according to the S&P CoreLogic Case-Shiller National Home Price Index, up slightly from 3.1% the prior month.
  • More than half of the 20 metropolitan areas in the Case-Shiller index reported slower home-price growth in August than in July.

U.S. consumer confidence slips in October

  • U.S. consumer confidence unexpectedly fell in October amid household concerns about the short-term outlook for business conditions and job prospects.
  • The Conference Board said its consumer confidence index slipped to a reading of 125.9 this month from an upwardly revised 126.3 in September. The index was previously reported at 125.1 in September.
  • Economists had forecast it rising to 128.0 in October.
  • The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, increased to 172.3 this month from 170.6 in September.

Trump, Xi meeting date is still fluid: White House official

  • U.S. President Donald Trump and Chinese President Xi Jinping are expected to finalize a trade agreement on the sidelines of next month’s Asia-Pacific Economic Cooperation summit in Chile, but the date is still fluid, a White House official said.
  • The South China Morning Post, citing a person briefed on the arrangements, said the leaders of the world’s two largest economies were tentatively slated to sign the interim trade deal on Nov. 17 “if everything goes smoothly”.
  • Trump on Monday said he expected to sign a significant part of a trade deal with China at the summit, but did not elaborate on the timing.

FCC Targets China’s Huawei and ZTE

  • The Federal Communications Commission is moving to place another restraint on the U.S. business of Huawei Technologies Co. and ZTE by banning U.S. companies receiving federal subsidies from purchasing the Chinese firms’ equipment.
  • FCC Chairman Ajit Pai set the proposal for vote at the agency’s meeting on Nov. 19.
  • It would designate Huawei and ZTE as national security threats and tell U.S. firms not to buy their equipment using money from an $8.5 billion federal fund designed to expand telecommunications service in rural areas.
  • That ban could take effect within 30 days, though it could take as long as 120 days if Huawei or ZTE contests it, an FCC official said.

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EUROPE & WORLD

BP Swings to Loss on Weaker Oil Prices, Repair Costs

  • BP PLC said it swung to a loss in third-quarter earnings resulting from a divestment-related charge and lower earnings in its exploration and production business.
  • Oil and gas production, excluding BP’s share from its 19.75% stake in Russia’s Rosneft, was down 2.5% from a year earlier at 2.568 million barrels of oil equivalent per day as a result of maintenance at several high-margin fields and a two-week disruption to production in the U.S. Gulf of Mexico from Hurricane Barry.
  • Third-quarter underlying replacement cost profit, the company’s definition of net income, fell 40% from the year earlier period to $2.3 billion. That exceeded a forecast of $1.73 billion and compared to $2.81 billion in the second quarter of 2019.
  • Cash flow from operations was unchanged in the quarter from a year earlier at $6.1 billion despite a 17% drop in oil prices.
  • The company said it expects to complete its $10 billion divestment program ahead of schedule—by the end of this year instead of 2020.

U.K. Opposition Labour Party to Back Boris Johnson’s Call for Election

  • A British general election aimed at breaking the Brexit deadlock looks set for December after the main opposition Labour Party decided Tuesday to back a national ballot.
  • Labour leader Jeremy Corbyn, who on Monday rejected Prime Minister Boris Johnson’s call for an election, switched positions and said his party’s lawmakers would vote in favor of an election in a new vote in the House of Commons later Tuesday.
  • The decision to move for an election marks a final roll of the dice by parties across the country’s political spectrum to try to either cancel or deliver Brexit after years of wrangling in Britain’s Parliament.
  • The country’s once sturdy two-party system is fraying under the pressure of the divorce from the European Union, making an election a gamble for both the ruling Conservative Party and Labour.

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TODAY in HISTORY

  • The New York Stock Exchange crashed on Black Tuesday, precipitating the Great Depression. (1929)

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