DAILY MARKET REPORTS
- The S&P 500 and the Nasdaq were on track to post their first two-day gain this month on Wednesday, as Facebook led a slew of encouraging earnings reports that boosted sentiment at the end of a tumultuous October for global markets.
- Shares of Facebook jumped 6.2% after the social media giant eased investor concerns by forecasting that margins would stop shrinking after 2019 as costs from scandals ease up.
- That brought some relief to the so-called FANG group of high-growth internet stocks.
- Amazon rose 4.1%, Netflix climbed 6.8% and Alphabet gained 3.9%.
- Strong earnings reports from companies including General Motors, Yum Brands and Estee Lauder, all of which have a fair share of exposure to China, also boosted sentiment.
- General Motors jumped 6.9% after the carmaker’s robust quarterly results and forecast.
- Yum Brands was up 2.7% and Yum China rose 14.1% as strong KFC sales drove results.
- Estee Lauder gained 7.2% after the cosmetics maker said strong demand in Asia boosted quarterly results and full-year profit outlook.
- The ADP national employment report showed private payrolls increased by 227,000 this month, the highest rise since February.
- But data also showed U.S. labor costs accelerated in the third quarter as wages for both private and government workers surged amid tightening labor market conditions..
US FINANCIAL MARKET
Facebook’s rise in profit outweighs slow user, sales growth
- Facebook beat profit estimates but missed targets for growing monthly users and reported its slowest revenue growth in about six years in a quarter some investors feared would be hit harder by defections from the social media site.
- Overall third-quarter revenue was $13.73 billion, up 33% from last year and below the $13.78 billion average estimate.
- Facebook lost 1 million monthly users in Europe for the second straight quarter, but gained 1 million monthly users in the United States after holding steady last quarter.
- Monthly and daily users of the main Facebook app compared with a year ago were up 10% to 2.27 billion and up 9% to 1.49 billion, respectively. Estimates were for 2.292 billion and 1.508 billion.
- The company said 2.6 billion users interact with at least one of its apps each month, up from 2.5 billion when it released the figure for the first-time last quarter to emphasize that its potential audience for advertisers is unrivaled in size.
- Quarterly profit of $5.14 billion was up 9% from the same period last year and above the average per-share estimate.
EBay forecasts fourth-quarter profit above estimates, shares rise
- EBay said on Tuesday it expects fourth-quarter profit above analysts’ estimates, at a time when bigger rival Amazon.com missed revenue expectations and forecast sales below estimates for the holiday quarter.
- Net revenue rose 6% to $2.65 billion, in line with analyst expectations.
- The company’s profit rose to $721 million in the third quarter, from $520 million a year earlier.
- EBay forecast fourth-quarter adjusted profit of 67 cents to 69 cents per share and revenue of $2.85 billion to $2.89 billion. Analysts on average were expecting a profit of 67 cents per share and revenue of $2.90 billion.
GM sees strong full year, profit races past expectations
- General Motors posted far higher-than-expected quarterly profit and said its full-year earnings would come in at the high end of its forecast due to strong demand in North America, driven by its new pick-up trucks.
- Revenue in the quarter rose 6.4% to $35.8 billion, above the $34.85 billion analysts had expected.
- The Detroit automaker was able to push through higher pricing, mostly in North America, allowing it to benefit by $1 billion in the quarter and offsetting higher commodity costs.
- GM reported third-quarter net income of $2.53 billion, compared with a loss last year of $2.98 billion.
- Last year’s quarter included a charge related to Europe.
- The No. 1 U.S. automaker said it still sees a full-year profit in the range of $5.80 to $6.20 a share, but said it now expected to finish at the high end of the range with potential to finish even higher. It cited a favorable tax rate and its strong performance.
Taco Bell, KFC power Yum Brands quarterly results
- Yum Brands beat Wall Street estimates for third-quarter revenue and profit on Wednesday, as strong sales at KFC and Taco Bell more than made up for further weakness at Pizza Hut, sending its shares up more than 4%.
- Total revenue fell 3% to $1.39 billion, but also beat analysts’ average estimate.
- Taco Bell’s same-restaurant sales were up 5% in the third quarter versus an expected a 3% rise; same store sales at the KFC division also rose 3%, beating expectations of a 2.13% growth; while Pizza Hut sales fell 1%.
- Yum’s net income rose 8.6% to $454 million in the quarter.
Estee Lauder sales beat as China demand booms, shares up 7%
- Estée Lauder joined rival L’Oreal in dismissing fears of a slowdown in China as its quarterly results beat estimates on booming demand for cosmetics and high-end skincare products in the Asian country.
- Net sales rose nearly 8% to $3.52 billion in the first quarter. Analysts on average had expected $3.47 billion in sales.
- Overall, sales in the Asia-Pacific region grew 24%.
- Net income increased 17% to $500 million, compared to $427 million in the year ago period.
- The company raised its fiscal 2019 adjusted earnings per share outlook to $4.73-$4.82, above its prior forecast of $4.62-$4.71. Analysts had estimated $4.75 per share.
Spirit AeroSystems profit beats estimates
- Aircraft parts maker Spirit AeroSystems reported a better-than-expected quarterly profit on Wednesday, and the company said its delivery schedule was back on track to meet booming demand from biggest customers Boeing and Airbus.
- Total revenue rose about 4% to $1.81 billion, but was below the estimate of $1.83 billion.
- Spirit’s net income rose to $169 million in the third quarter, from $147 million a year earlier.
T-Mobile tops expectations for new phone subscriptions
- T-Mobile beat Wall Street’s quarterly estimates for net new phone subscribers who pay a monthly bill, driven by competitive wireless plans and trade-in offers for iPhones aimed at fending off its bigger rivals.
- Revenue rose to $10.84 billion from $10.02 billion, and was higher than analysts’ estimates of $10.72 billion.
- The company said it added a net 774,000 phone subscribers during the third quarter, up from 595,000 new subscribers it added last year. Analysts on average had expected the company to add 628,000 subscribers.
- T-Mobile’s net income rose to $795 million in the quarter, from $550 million a year earlier.
Sprint beats revenue and profit forecasts, shares rise
- Wireless carrier Sprint beat estimates for quarterly revenue, profit and overall postpaid net subscriber additions, driving shares in the No. 4 U.S. mobile player 7% higher.
- Total operating revenue rose to $8.43 billion from $7.93 billion a year earlier, ahead of the consensus $7.97 billion.
- Sprint said it added a net 109,000 subscribers who pay a monthly bill during the second quarter, down from 168,000 new subscribers at the same time last year. But ahead of expectations for the company to lose a net 10,000 subscribers.
- Sprint reported net income of $196 million in the quarter, compared with a net loss of $48 million a year earlier.
Amgen posts higher quarterly EPS, Repatha sales fall short
- Amgen said stock buybacks lifted its third-quarter earnings per share, but operating income fell as expenses rose and sales of some key products declined.
- Total revenue for the quarter rose 2% from a year earlier to $5.9 billion, about $100 million above expectations.
- Net income was essentially flat at $2.4 billion in the quarter, but were ahead of estimates on a per share basis.
- Citing solid fourth-quarter expectations, the company raised its full-year earnings forecast to between $14.00 and $14.25 per share from a previous outlook of $13.30 to $14.00. That puts the midpoint above Wall Street estimates of $14.01.
Anthem profit beats as insurer reins in costs
- Anthem reported quarterly profit that beat Wall Street estimates on Wednesday, helped by lower costs at its commercial insurance business and the company raised its full-year adjusted earnings forecast.
- Total revenue rose 3.7% to $23.25 billion, beating the analyst average estimate of $22.94 billion.
- The insurer’s benefit expense ratio – an insurer’s spending on claims against the premiums it earns – narrowly missed the consensus estimate of 84.7% but improved to 84.8% in the quarter from 87% in the year-ago period.
- Net income rose 28.5% to $960 million in the third quarter, from $747 million in the year earlier.
Kellogg cuts full-year profit outlook, shares tumble
- Kellogg cut its full-year profit outlook on Wednesday, citing increased spending on advertising and higher distribution costs, and shares of the Corn Flakes maker slid 5.6%.
- Total revenue increased 7% to $3.5 billion from $3.3 billion a year ago, but sales declined 1.3% at Kellogg’s U.S. morning foods unit, and fell 3.5% to $737 million at Kellogg’s U.S. snacks business, its biggest unit.
- Net income rose to $380 million, from $288 million a year earlier.
- The company now expects full-year adjusted earnings per share to rise about 7% to 8%, a downward revision from the prior outlook of a 11% to 13% rise, and below an expected 11.9% rise in full-year adjusted profit.
Clorox down on lowering FY2019 EPS outlook
- Clorox reports sales rose 4% in Q1, includes 2 points of negative impact from unfavorable foreign currency headwinds and 3 points of benefit from the Nutranext acquisition net of the Aplicare divestiture.
- Gross margin rate fell 150 bps to 43.4%, driven primarily by higher manufacturing and logistics costs as well as unfavorable commodity costs.
- Segment revenue: Cleaning: $571M (+2%), Household: $442M (flat), Lifestyle: $309M (+26%), International: $241M (-5%).
- FY2019 Guidance: Sales: +2% to +4%; Gross margin rate: flat; Diluted EPS: $6.20 to $6.40; Tax rate: 23% to 23%.
Carlyle reports 25 cents for third-quarter earnings per unit, misses forecast
- Alternative asset manager Carlyle Group on Wednesday missed estimates for earnings per unit for the third quarter, as the value of its private equity investments rose less than that one of its key rivals.
- Carlyle, said quarterly economic net income per unit came in at 25 cents. That missed analysts’ expectations for 51 cents, and compared with 56 cents a year earlier.
- After-tax distributable earnings (DE) – the actual cash available for paying dividends – fell year on year to $194.7 million from $254.5 million.
- Despite the earnings miss, Carlyle’s assets under management grew to $212.3 billion, with $6 billion raised in the quarter and $26 billion raised so far in 2018.
US ECONOMY & POLITIC
‘Robust’ jobs market sees another 227,000 hires in October
- Companies continued to hire at a brisk pace in October, with private payrolls rising by a better-than-expected 227,000, according to a report Wednesday from ADP and Moody’s Analytics.
- Economists had expected growth of 189,000 after September’s 218,000, which was revised lower from an initial count of 230,000.
- In terms of company size, big businesses that employ 500 or more workers led the way with 102,000.
- Small businesses lagged with just 29,000 new hires, another sign of a tightening job market where qualified workers are getting harder to find.
Wages and salaries jump by 3.1%, highest level in a decade
- U.S. employment costs rose by more than forecast in the third quarter as increases in private wages and salaries accelerated, indicating workers are gaining leverage in a tightening labor market.
- The employment cost index, a broad gauge monitored by the Federal Reserve, increased 0.8% in the July-September period from the prior quarter, according to a Labor Department report Wednesday.
- That compared with the median estimate of economists for a 0.7% increase.
- The gauge was up 2.8% from a year earlier, matching the prior quarter as the fastest gain since 2008.
- Wednesday’s report showed private-sector wages and salaries rose 3.1% in the third quarter from a year earlier, the best pace since 2008.
Fed sets new rules to ease regulations on smaller banks
- Smaller banks would face “significantly” reduced regulations while larger institutions would see largely the same scrutiny under rules the Federal Reserve proposed Wednesday.
- Under the plan, banks could be divided into four categories, each with different risk profiles.
- The lowest rung would entail banks with between $100 billion and $250 billion in assets.
- They “would be subject to significantly reduced requirements” including exclusion from stress tests the Fed conducts.
- The next level would be those with $250 billion or more in assets or with $100 billion in assets that “exceed certain risk thresholds.” They would be subject “enhanced standards,” which would be tailored to meet the banks’ risk profiles.
- A third category would focus on those with “global scale,” or assets at $700 billion or more or with $75 billion cross-jurisdictional activity. They would have “more stringent prudential standards.”
- The final category, considered global systemically important banks, or GSIBs, would have the same highly stringent standards adopted after the crisis.
Democrats up in hard-fought Florida; Republicans close gap in Arizona
- Democrats have pulled ahead in Florida’s marquee races for the U.S. Senate and governor, a new Reuters opinion poll showed on Wednesday, as President Donald Trump was set to return to the battleground state in a closing bid to bail out Republicans.
- Democratic U.S. Senator Bill Nelson is leading Rick Scott, Florida’s Republican governor, by 5%age points among likely voters, according to the Reuters/Ipsos/UVA Center for Politics poll.
- Democrat Andrew Gillum is holding onto momentum in his bid to become Florida’s first black governor.
- He drew the support of 50% of likely voters, compared with the 44% supporting former U.S. Representative Ron DeSantis.
- The Republican slate looks stronger in Arizona, where two U.S. congresswomen are battling for the Senate seat being vacated by Jeff Flake, a Republican who has been a prominent Trump critic.
- Republican Martha McSally leads Democrat Kyrsten Sinema by 2%age points, according to the new Reuters poll. Sinema led a Reuters poll last month. However, an NBC News/Marist poll released this week showed Sinema with a 6-point lead..
EUROPE & WORLD
Samsung slashes capex, calls end to chip boom after record third quarter
- Samsung Electronics slashed 2018 capex by more than a quarter on Wednesday and warned of lower profit until early next year, calling an end to a two-year boom in memory chips that fueled record third-quarter profit.
- The company said third-quarter revenue rose 5.5% to 65.5 trillion won, slightly ahead of its guidance.
- Samsung reported a record 17.6 trillion won operating profit in the July-September quarter, in line with the company’s estimate.
- Its semiconductor business booked a 37% rise in operating profit to 13.7 trillion won, while the mobile business posted a 33% fall to 2.2 trillion won.
- Samsung, one of the industry’s biggest buyers of chip-manufacturing tools, said its capital spending this year would drop by 27% to 31.8 trillion won ($28 billion) from a record 43.4 trillion won last year.
GSK beats third-quarter forecasts on strong Shingrix sales, nudges up guidance
- Strong demand for a new shingles vaccine Shingrix helped pharmaceutical firm GlaxoSmithKline to post a better-than-expected 14% rise in third-quarter earnings and to nudge its outlook higher.
- The British company reported sales of 8.09 billion pounds ($10.33 billion), beating consensus forecast of 8.02 billion pounds.
- Net income slightly declined to 1.7 billion pounds from 1.71 billion pounds a year earlier, but beat consensus on a constant currency basis.
- It narrowed its forecast for full-year adjusted EPS growth to 8-10%, from a former 7-10%, whether or not a generic competitor to Advair is launched in the United States.
China’s Baidu tops revenue estimates, helped by AI
- Baidu reported higher-than-expected third quarter revenue as China’s biggest search engine operator places more emphasis on artificial intelligence (AI) and autonomous driving.
- Revenue rose to 28.2 billion yuan ($4.11 billion) from 23.49 billion yuan in the same quarter a year ago, beating the average estimate of 27.53 billion yuan.
- Net income rose 56% from a year earlier to 12.4 billion yuan, the company said.
- Baidu forecast fourth-quarter revenue of 25.48 billion to 26.72 billion yuan, lower than Wall Street’s target of 27.69 billion yuan.
IQiyi falls 10% after profits, guidance disappoint
- Net loss per ADS was 4.34 yuan, well short of expectations for a loss of 2.81 yuan/ADS.
- Revenues meanwhile grew 48% to 6.9B yuan (about $1B).
- Operating loss was 2.6B yuan ($377.3M).
- Subscribers were at 80.7M as of Sept. 30 (up 89% from a year-ago 42.7M), and 98% of those were paying members.
- For Q4, it’s guiding to net revenues of 6.48B-6.75B yuan ($943.5M-$982.8M), with the midpoint below consensus; that would be a 43-49% gain in renminbi terms Y/Y.
TODAY in HISTORY
- A heavy snowfall trapped the Donner Party in the Sierra Nevada mountains. (1846)
- Indian prime minister Indira Gandhi was assassinated. (1984)
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