US FINANCIAL MARKET

U.S. Stocks Move Higher After Wild Ride – Wall Street Journal, 1/27/2022

• U.S. stocks traded higher as economic growth data came in stronger than expected, and investors parsed more earnings from major companies.
• The economy grew at an annualized rate of 6.9% last quarter, the biggest one-year jump since 1984. Economists had forecasted 5.5% growth, propelled by consumer spending, business investment and efforts to rebuild inventories.
• Earnings season is ongoing and is seen as the next big test of whether the stock market’s sky-high valuations can be justified.
• McDonald’s shares were little changed after the company missed analysts’ profit estimates, despite a sales boost.
• Blackstone rose 8% after it reported that net income nearly doubled.
• Mastercard declined 0.5% after it said operating expenses had jumped.
• On Wednesday, the Fed signaled it would begin raising interest rates in mid-March, its latest step toward removing stimulus to bring down inflation. Fed Chairman Jerome Powell said the central bank could continue to lift rates faster than it did during the past decade.
• The yield on the benchmark 10-year Treasury note edged down to 1.836% Thursday from 1.845%.
• Shorter-dated government bonds continued to sell off, with the two-year Treasury yield rising to 1.179%, notching a new pandemic high.
• The greenback strengthened, with the WSJ Dollar Index rising to the highest level since July 2020.
• Precious metals fell, with gold recently down 1.3%.
• Apple, Visa and food and beverage giant Mondelez are due to report Thursday after markets close.
• Weekly jobless claims were 260,000, a decline from the previous week. Analysts were expecting a drop amid a tight labor market. Orders for durable goods in December slipped 0.9%.
• Oil prices edged up. Brent, the global benchmark for crude, climbed 1.1% to trade at $89.72 and hit a fresh seven-year high. Declining inventories have been pushing up prices, according to Nordic bank SEB.

Tesla beats on earnings and revenue, says supply chain issues were ‘main limiting factor’ – CNBC, 1/26/2022

• Tesla reported fourth-quarter results that came in stronger than expected on Wednesday. Shares fell as much as 5% in extended trading on Wednesday after the automaker warned supply chain issues could persist throughout 2022, but later rebounded into slightly positive territory.
• Revenue rose 65% year over year in the quarter, while automotive revenue totaled $15.97 billion, up 71%, according to a statement.
• Energy generation and storage revenue was $688 million, which was down 8% and below the StreetAccount consensus of $815.1 million. It was the lowest revenue for that division since the first quarter of 2021.
• Net income, at $2.32 billion, was up some 760%, and Tesla said it had a 27.4% gross margin, compared with 26.6% in the previous quarter.
• “Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022,” the company said in a shareholder deck.
• CEO Elon Musk said on the company’s earnings call that he expects Tesla to remain “chip-limited” in 2022, and that the company would introduce no new vehicle models this year as a result.

Intel Earnings Dropped, Revenue Edged Higher – Wall Street Journal, 1/26/2022

• Intel’s earnings fell last quarter as the company ramped up spending on new facilities and products, part of Chief Executive Officer Pat Gelsinger’s efforts to revive the semiconductor giant’s fortunes.
• The chip company posted $20.5 billion in fourth-quarter sales, up 3% from the year-earlier period.
• The company generated net income of $4.6 billion, down 21% year-over-year.
• Wall Street expected sales of $19.2 billion and net income of $3.2 billion.
• Intel said it expects sales of roughly $18.3 billion for the current quarter.
• Analysts surveyed by FactSet expect around $18.1 billion.
• Mr. Gelsinger said Wednesday that the chip shortage is starting to let up in some areas but still has the potential to last into 2024.
• He declined to provide a timeline for its self-driving car unit’s initial public offering, which is slated to happen later this year.
• The unit, called Mobileye, brought in record revenue for the full year.

ServiceNow stock soars after earnings beat – MarketWatch, 1/26/2022

• ServiceNow’s stock jumped more than 9% in extended trading Wednesday after the software company reported quarterly results that beat expectations, results that the chief executive said “show that ServiceNow’s business model is set to flourish in any economic environment.”
• ServiceNow, reported fourth-quarter earnings of $26 million, or 13 cents a share, on revenue of $1.61 billion, up from $1.25 billion a year ago. After adjusting for stock-based compensation and other effects, the company reported earnings of $1.46 a share, up from $1.17 a share a year ago.
• Analysts surveyed by FactSet had expected earnings of $1.43 a share on revenue of $1.6 billion on average.
• ServiceNow tends to focus on subscription revenue more than overall revenue, stripping out professional services and other forms of sales.
• In their forecast, executives called for first-quarter subscription revenue of $1.61 to $1.615 billion and full-year subscription sales of $7.02 billion to $7.04 billion; analysts on average were expecting $1.62 billion and $7.02 billion, according to FactSet.

Northrop sales disappoint as supply chain snarls restrict deliveries – Reuters, 1/27/2022

• Northrop Grumman missed fourth-quarter revenue estimates on Thursday as labor shortages and supply chain snarls hampered its ability to deliver components for defense products, including Lockheed Martin’s F-35 jets.
• The defense contractor’s sales fell 15% in the final three months of 2021 to $8.64 billion, falling short of the average analyst estimate of $8.99 billion, according to Refinitiv data.
• The drop was driven by a 25% decline in revenue from its aeronautics unit that makes the center fuselage for fighter jets and also reflected how the pandemic has hobbled manufacturers by disrupting supply chains.
• But its space systems business was a bright spot, with revenue rising 4% in the fourth quarter as countries ramped up investment in space exploration and satellite-based sensors.
• Quarterly net earnings rose to $2.71 billion, or $17.14 per share, from $330 million, or $1.97 per share, a year ago, aided by a one-time gain on the sale of its IT services business.
• Northrop’s shares fell 1.7% before the bell as its 2022 forecast suggested the supply chain pressure was likely to continue. The company expects sales of between $36.2 billion and $36.6 billion this year, below estimates of $37.03 billion.

Mastercard profit surges as travel spending back to pre-pandemic levels – Reuters, 1/27/2022

• Mastercard beat quarterly profit expectations on Thursday as domestic spending through its cards rose and cross-border volumes grew following an uptick in international travel.
• Mastercard’s net revenue rose 27% to $5.2 billion, above estimates of $5.16 billion.
• Gross dollar volumes, which represents the dollar value of the transactions processed, jumped 23% to $2.1 trillion from a year earlier. Cross border volumes, a key metric that track card spending beyond the country of issue, rose 53%.
• Operating expenses, however, rose 16% from a year earlier to $2.4 billion, dragging shares down 1.35% to $340.
• The company’s profit rose to $2.4 billion, or $2.41 per share, in the quarter ended Dec. 31, from $1.8 billion, or $1.78 per share a year earlier.

United Rentals Earnings and Revenues Top Estimates – NASDAQ, 1/26/2022

• United Rentals came out with quarterly earnings of $7.39 per share, beating the Zacks Consensus Estimate of $6.91 per share.
• This compares to earnings of $5.04 per share a year ago. These figures are adjusted for non-recurring items.
• United Rentals, which belongs to the Zacks Building Products – Miscellaneous industry, posted revenues of $2.78 billion for the quarter ended December 2021, surpassing the Zacks Consensus Estimate by 0.57%.
• This compares to year-ago revenues of $2.28 billion.

Lam Research notes fresh supply-chain issues, hurting stock and casting pall over chip-equipment sector – MarketWatch, 1/26/2022

• Lam Research shares sank 6% in late trading Wednesday after the chip-equipment supplier reported worse-than-expected fiscal second-quarter revenue and third-quarter guidance, which the chief executive attributed to “supply-chain conditions.”
• Revenue rose to $4.23 billion from $3.46 billion in the year-ago quarter, but came in lower than analysts’ consensus estimate amid a global semiconductor shortage.
• Lam Research, reported second-quarter net income of $1.2 billion, or $8.44 a share, compared with $869.2 million, or $5.96 a share, in the year-ago period. Adjusted earnings, which exclude amortization and other items, were $8.53 a share, compared with $6.03 a share in the year-ago period.
• Analysts surveyed by FactSet had forecast adjusted earnings of $8.52 a share on revenue of $4.41 billion, based on Lam’s forecast of $7.95 to $8.95 a share on revenue of $4.15 billion to $4.65 billion.
• “While supply-chain conditions worsened in late December and are causing near-term impacts to our results, we expect wafer fabrication equipment investments to again increase in calendar-year 2022, leading to another strong growth year for Lam,” Chief Executive Tim Archer said in a statement.

Casual denim trend, higher prices fuel Levi’s upbeat forecast – Reuters, 1/26/2022

• Levi Strauss forecast annual sales and profit above analysts’ estimates after topping quarterly results on Wednesday, bolstered by higher prices and strong demand for its jeans and jackets, sending its shares up 8% after the bell.
• Net revenue rose 22% to $1.69 billion in the fourth quarter, edging past analysts’ estimate of $1.68 billion.
• Compared to pre-pandemic levels, Asia net revenue was flat in the three months ended Nov. 28, recovering from a 23% slump reported in the third quarter.
• Excluding items, Levi earned 41 cents per share, a cent above expectations.
• San Francisco-based Levi expects adjusted full-year profit per share between $1.50 and $1.56, compared with estimates of $1.52.
• The Signature and Levi’s 501 jeans maker said it expects revenue between $6.4 billion and $6.5 billion in fiscal year 2022, compared with analysts’ estimates of $6.37 billion, according to Refinitiv IBES data.
• Levi plans to raise prices further in 2022 and beyond, Chief Executive Officer Chip Bergh said on a call with analysts, adding that demand outstripped supply in the quarter due to supply chain snarls.

McDonald’s Says its Costs to Rise Further in 2022 – Wall Street Journal, 1/27/2022

• McDonald’s said it expects the rate of cost increases for food, paper and other materials in the U.S. to roughly double this year compared with 2021’s pace, as the burger giant wrestles with rising inflation.
• Sales of $6 billion for the quarter were 12% greater than in the same period before the pandemic.
• McDonald’s said Thursday that price increases and promotions are helping to boost its U.S. sales. The Chicago-based company reported a 7.5% increase in U.S. same-store sales for its fourth quarter ended Dec. 31, with the chain attributing the growth to menu price increases and marketing of items such as fried chicken sandwiches and the McRib special.
• Global same-store sales grew 12.3% compared with the previous year’s period, the company said, as European markets including France, the U.K. and Germany experienced fewer pandemic-related disruptions.
• McDonald’s reported quarterly per-share earnings of $2.23, after adjusting for one-time items, below analysts’ expectations of $2.34 a share. Net income climbed to $1.6 billion, up 19% from the amount in last year’s period.
• McDonald’s said it expects to open more than 1,800 restaurants this year. It plans to spend $2.2 billion to $2.4 billion on capital expenditures in 2022, with a portion reserved to upgrading U.S. restaurants.
• The company said that it and franchisees raised wages last year by more than 10%, helping to attract and retain workers. McDonald’s U.S. menu prices increased by roughly 6% last year on an annual basis, the company said, because of rising labor, food, packaging and other costs.

Southwest Turns Quarterly Profit, Says Worst of Omicron Is Over – Wall Street Journal, 1/27/2022

• Southwest Airlines said it swung to its first quarterly profit during the pandemic without the help of government aid, but faces pressure from rising costs and disruption from the Omicron variant.
• The Dallas-based airline on Thursday posted a fourth-quarter profit of $68 million, up from a loss of $908 million a year earlier, fueled by strong demand for travel over the holidays.
• While it previously planned for flying capacity this year to be higher than in 2019, when the pandemic began to decimate travel, Southwest’s 2022 capacity is now expected to be down 4% from that year.
• The result will be higher expenses per seat mile the airline offers, a measure of unit costs.
• Southwest said it now expects such operating expenses, excluding fuel, to be 20% to 24% higher than in 2019, up from the company’s previous guidance of a 10% to 14% increase.
• The airline is also aiming to hire at least 8,000 workers this year.
• To help attract and retain employees, it is raising starting pay to $17 an hour, after boosting its minimum hourly wage to $15 last year.
• The new variant has slowed both leisure and business travel, and Southwest expects that to reduce operating revenue by $330 million in January and February.

Comcast’s Broadband Growth Slows While Pandemic-Hit NBCUniversal Rebounds – Wall Street Journal, 1/27/2022

• Comcast said it added fewer broadband customers than in recent quarters, a slowdown that comes after a period of record growth during the height of the coronavirus lockdowns.
• Revenue rose 9.5% to $30.34 billion as Comcast’s media and theme park businesses continued to rebound.
• Comcast added 212,000 broadband subscribers in the fourth quarter, down 61% from the same quarter last year.
• Its cellphone business, Xfinity Mobile, added 312,000 customers, while Comcast’s pay-TV business continued to shrink, losing 373,000 subscribers.
• Even with the slowdown in broadband subscriber growth, the Comcast Cable segment, comprising the broadband, cable-TV, landline and mobile units, made up the bulk of revenue with $16.41 billion, up 4.5% from the same period last year.
• The company’s NBCUniversal unit, which is made up of its television, film and theme park businesses, saw revenue rise 25.6% to about $9.34 billion.
• Revenue for NBCUniversal’s media segment, which includes its broadcast and cable-TV channels, increased 8.4% to $5.83 billion, while movie studios—another business beleaguered in the early days of the pandemic—jumped 36% to $2.42 billion.
• The Philadelphia-based company, owner of Xfinity-branded broadband and cable services, the NBCUniversal media empire and the U.K.’s Sky TV business, reported a 9.6% decline in fourth-quarter net profit to $3.06 billion, or 66 cents a share, from $3.38 billion, or 73 cents a share, a year earlier.
• NBCUniversal said Peacock reached 24.5 million U.S. monthly active accounts by the end of 2021. This is the most recent update to Peacock’s metrics since July, when the company said it had more than 20 million monthly active accounts.

Dow expects strong first-quarter sales on higher prices – Reuters, 1/27/2022

• Dow on Thursday forecast better-than-expected sales for the current quarter after fourth-quarter results beat estimates, helped by higher prices for its products as supplies remained tight amid strong demand.
• Sales rose 34.2% to $14.37 billion and came in slightly above estimates of $14.31 billion.
• However, this marked the first sequential decline in Dow’s revenue in six quarters.
• Prices climbed 39% in the fourth quarter from a year earlier, while volumes fell 4%.
• Net operating income more than doubled to $1.6 billion, or $2.15 per share, in the three months ended Dec. 31.
• Analysts were expecting a profit of $2.04 per share.
• Dow forecast first-quarter sales between $14 billion and $14.5 billion, above analysts’ estimates of $12.84 billion, according to Refinitiv IBES data.

Textron sees higher corporate jet production, reports 4th quarter sales drop – Reuters, 1/27/2022

• Textron expects to continue ramping up business jet production in 2022 as wealthy travelers fly private, but broader industry supply chain hiccups, labor shortages and a recent surge in COVID-19 cases remain challenges.
• It reported revenue of $3.32 billion in the three months ended Dec. 31, below analysts’ estimate of $3.44 billion.
• The U.S.-based company, whose product lineup also includes helicopters, reported a fourth-quarter revenue miss, with its aviation division delivering 46 jets in the quarter, down from 61 a year earlier.
• It delivered 167 jets in 2021, up from 132 in 2020, and reported an aviation backlog of $4.1 billion at year end.
• The company expects revenue of about $13.3 billion for 2022, compared to analysts’ estimates of $13.56 billion, according to Refinitiv IBES data, with earnings per share between $3.80 and $4.00.

Whirlpool Says Omicron Will Keep Appliances in Short Supply – Wall Street Journal, 1/27/2022

• Washing machines, refrigerators and other appliances are likely to remain hard to get this year as Covid-19 infections continue to fuel supply chain problems, Whirlpool’s chief executive said Wednesday.
• Revenue for the quarter ended Dec. 31 was 0.3% higher compared with a year earlier and up 8% from the same period in 2019. Many people have been upgrading kitchens and homes during the pandemic.
• Whirlpool said revenue in North America rose 2.6% in the fourth quarter to $3.12 billion.
• Whirlpool is paying more for input costs, such as raw materials, labor and transportation, Whirlpool CEO Marc Bitzer said.
• Its cost of goods sold rose 7%.
• Those higher costs weighed on its profit. Net income in the quarter fell 40% to $298 million. Earnings per share declined to $4.90 a share from $7.80 in the same quarter a year ago. The company reported adjusted earnings per share of $6.14, down from $6.67.
• Still, the appliance maker said it anticipates demand for its appliances to stay strong this year. It expects revenue to rise up to 6% this year, on top of 13% growth in 2021.
• Whirlpool said it had higher input costs of about $500 million in the quarter, and it has been trying to offset rising costs with price increases. The company now expects cost increases to peak in the next several months, instead of last quarter as it previously projected.

Blackstone Earnings Nearly Double as Firm Enjoys Record Cash Haul – Wall Street Journal, 1/27/2022

• Blackstone’s net income nearly doubled in the fourth quarter thanks to strong investment performance in some of its biggest businesses, as the largest private-equity firm by assets raked in more cash than in any other period in its history.
• Fee-related earnings of $1.83 billion were more than double the fourth quarter of 2020.
• Blackstone’s distributable earnings, or the portion of cash that could be returned to investors, climbed to $2.27 billion, or $1.71 a share, from $1.46 billion, or $1.13, a year earlier.
• The New York firm said earnings rose to $1.40 billion, or $1.92 a share, from $748.9 million, or $1.07 a share, a year earlier.
• Blackstone reported $154.8 billion of inflows during the quarter—a haul bigger than the entire asset base of rival TPG Inc., which went public earlier this month.
• The flood of new capital pushed Blackstone’s assets under management to $880.9 billion at the end of the fourth quarter, up from $730.7 billion in the third quarter and $618.6 billion in the fourth quarter of 2020.
• The firm, which in 2018 set a goal of reaching $1 trillion in assets by 2026, appears on track to achieve that target much earlier than previously planned.

AMD’s Planned Purchase of Xilinx Clears Last Big Regulatory Hurdle – Wall Street Journal, 1/27/2022

• Chinese authorities approved U.S. chip maker Advanced Micro Devices’ planned $35 billion purchase of Xilinx, clearing the last major regulatory hurdle for one of the biggest deals in recent years in the semiconductor industry.
• China’s State Administration for Market Regulation said in a statement released online Thursday that it has conditionally approved the deal, which AMD and Xilinx had reached in October 2020.
• The two companies had already received approvals from competition authorities in major markets except China, an AMD executive told analysts in December.
• AMD and Xilinx, in regulatory filings Thursday, acknowledged China’s approval and said they expected the deal to close this quarter. The companies said they are waiting for the U.S. government to clear the transaction.
• AMD’s addition of San Jose, Calif.-based Xilinx, which specializes in a type of chip called field-programmable gate arrays, would put AMD, based in Santa Clara, Calif., on a more even keel with rival Intel, which also has a FPGA business acquired from Altera in 2015.

Apple to Rival Square by Turning iPhones Into Payment Terminals – Bloomberg, 1/27/2022

• Apple is planning a new service that will let small businesses accept payments directly on their iPhones without any extra hardware, according to people with knowledge of the matter.
• The company has been working on the new feature since around 2020, when it paid about $100 million for a Canadian startup called Mobeewave that developed technology for smartphones to accept payments with the tap of a credit card. The system will likely use the iPhone’s near field communications, or NFC, chip that is currently used for Apple Pay.
• If Apple lets any app use the new technology, then Square can continue accepting payments via Apple devices without needing to worry about providing its own hardware. If Apple requires merchants to use Apple Pay or its own payment processing system, that could compete directly with Square.