US FINANCIAL MARKET

Stocks Fall as Disappointing Meta Profit Weighs on Tech – Wall Street Journal, 2/3/2022

• Major U.S. stock indexes tumbled on Thursday, dragged down by technology and social-media companies, as investors hammered shares of Facebook owner Meta Platforms after a disappointing earnings report.
• The tech-focused Nasdaq Composite Index slid 1.6% in morning trading.
• The broader S&P 500 fell 1.1%, while the Dow Jones Industrial Average declined 0.7%.
• Meta’s stock price plunged 23% after the social-media giant startled investors with a sharper-than-expected decline in profit and a gloomy outlook. Other social-media companies sold off in its wake.
• Snap and Pinterest, which are due to report earnings later Thursday, slid 18% and 4.8%, respectively. Twitter fell 3.8%.
• Several other tech stocks also slumped. Spotify Technology fell 16% after the company declined to issue annual guidance, spooking investors.
• Amazon.com —which is also scheduled to report earnings later Thursday—dropped 6%.
• Earlier, PayPal slumped 25% on Wednesday after the payments company lowered its profit outlook.
• One bright spot on Thursday was T-Mobile US, whose shares jumped 9.4% after the telecommunications company topped analysts’ profit forecasts.
• On the economic front, initial claims for jobless benefits fell to 238,000 in the week through Jan. 29. Claims hit a record low in early December as businesses held on to more workers amid a persistent labor shortage.
• The Bank of England pressed ahead with raising borrowing costs Thursday, nudging up its policy rate to 0.5% from 0.25%.
• The pound strengthened 0.2% to $1.3604. Yields on 10-year U.K. government bonds rose following the bank’s decision, as did yields on equivalent U.S. debt. The yield on benchmark Treasury notes climbed to 1.834% from 1.765% Wednesday.
• The European Central Bank (ECB) held its key interest rates steady and said it would keep them there until inflation was durably at its target.
• Overseas stock markets were broadly lower. The Stoxx Europe 600 slid 1.5%, led by losses for industrial goods and tech shares. In Asia, Japan’s Nikkei 225 fell 1.1%. Chinese markets were closed for a public holiday.

Meta Faces Historic Stock Rout After Facebook Growth Stalled – Bloomberg, 2/3/2022

• Meta Platforms’ stock collapsed as much as 26% on Thursday morning, its biggest drop ever, after Facebook’s user base faltered last quarter, the first stagnation in the company’s history. It was just one bad metric of several in a dire earnings report that caused many investors to wonder if the stock’s best days are behind it.
• Revenue was $33.67 billion, compared with the $33.43 billion average estimate.
• Facebook reported 2.91 billion monthly users in the fourth quarter, flat compared with the prior period.
• The main app’s daily active users in North America — the company’s most lucrative market — declined slightly from 196 million to 195 million users.
• Meta’s Reality Labs division, which includes the company’s investments in the metaverse and virtual reality, reported an operating loss of $3.3 billion for the fourth quarter, as the company disclosed its contribution for the first time.
• Net income in the fourth quarter was $10.3 billion, or $3.67 a share, Meta said, falling short of the $3.84 per share analysts projected.
• Aside from user growth woes and intensifying competition, Meta is also contending with a crackdown on targeted advertising by Apple, which it said may trim $10 billion in revenue this year, and cutbacks by advertisers that are paring budgets because of rising costs and supply chain disruptions.
• Meta said revenue in the current period will be $27 billion to $29 billion, compared with the $30.3 billion analysts estimated on average. Changes to Apple’s mobile software that require user permission to gather data for ad tracking are significantly crimping revenue by limited targeted advertising, Meta said.

T-Mobile Soars After Carrier’s Upbeat 2022 Customer Outlook – Bloomberg, 2/3/2022

• T-Mobile soared as much as 9.5% in extended trading after the company, the No. 2 U.S. wireless carrier, projected 2022 subscriber growth that exceeded most analysts’ expectations.
• Revenue edged up to $20.8 billion, missing estimates.
• T-Mobile also reported fourth-quarter profit that beat analysts’ estimates.
• Earnings came to 34 cents a share, the Bellevue, Washington-based wireless provider said, exceeding estimates of 12 cents.
• As part of its fourth-quarter report, T-Mobile said Wednesday it expects to add 5 million to 5.5 million new subscribers this year.
• Analysts had forecast 5 million, according to the average of analysts surveyed by Bloomberg.
• The integration of Sprint, acquired in 2020, has led to overhead cost savings that the company estimates will range as high as $2.35 billion this year, according to the earnings report.

Qualcomm Posts Strong Earnings, as Demand for Chips Stays High – Wall Street Journal, 2/3/2022

• Qualcomm posted strong quarterly earnings and gave an upbeat sales outlook, underscoring that demand for chips for everything from smartphones to cars remains elevated.
• The company on Wednesday said it generated $10.7 billion in sales and $3.4 billion in net income in the most-recent quarter, surpassing Wall Street expectations.
• Handsets, though, remain core to Qualcomm’s results. Sales in that segment advanced 42% in the most recent quarter from the year-ago period amid strong demand for 5G devices.
• Qualcomm, which projects revenue of up to $11 billion for the current quarter, joins other chip companies to report strong results over the past 10 days, as semiconductor demand outpaces supply.

Spotify, Facing Pushback Against Joe Rogan, Reports Jump in Users – Wall Street Journal, 2/3/2022

• Spotify Technology added more users and saw a surge in advertising revenue in its recently completed quarter as its podcast strategy takes hold despite backlash to its star host.
• Neil Young last week removed his music from Spotify in protest to what he says is vaccine misinformation spread by podcaster Joe Rogan on the streaming service.
• On Spotify’s earnings call Wednesday, Chief Executive Daniel Ek called it a very complicated issue and said Mr. Rogan, like other creators on the company’s platform, has to abide by its content policies.
• In all for the quarter ended Dec. 31, Spotify’s revenue rose 24% to €2.69 billion, above the company’s expectations.
• For the fourth quarter, Spotify reported 406 million monthly active users, up 18% from a year earlier and at the high end of the company’s guidance.
• Paying subscribers, its most lucrative type of customer, rose 16% to 180 million, also at the top of the company’s expectations.
• Average revenue per user for the subscription business in the recently completed quarter climbed 3% to €4.40.
• Revenue from subscriptions climbed 22% to €2.295 billion, equivalent to roughly $2.6 billion.
• Advertising revenue shot up 40% to €394 million.
• Spotify said it has 3.6 million podcasts available on its service, up from 3.2 million in the previous quarter.
• Spotify reported a narrower loss of €39 million from a loss of €125 million a year earlier.
• For the current first quarter, the company said it expects monthly active users of 418 million, premium subscribers of 183 million and revenue of €2.6 billion.
• Analysts, on average, were expecting 418.2 million monthly active users, 184 million premium subscribers and €2.6 billion in revenue, according to FactSet.
• Spotify shares—down 44% over the past year to $191.92—fell another 11% in after-hours trading as the company said it wouldn’t provide annual guidance.

Hershey’s Quarterly Profit Rose, Helped by Price Increases – Wall Street Journal, 2/3/2022

• Candy company Hershey said its sales and profit rose in the holiday quarter, as higher prices helped offset a jump in costs.
• The company posted sales of $2.33 billion for the quarter, up from $2.19 billion a year ago.
• Analysts surveyed by FactSet were looking for sales of $2.27 billion.
• For the fourth quarter, Hershey posted net income attributable to the company of $335.6 million, compared with $291.4 million a year earlier. Earnings were $1.62 a share, up from $1.39 a year earlier.
• In the year ahead, the company said it plans to invest between $550 million and $600 million, including in expanding the agility and capacity of the company’s supply chain.
• The company also forecast full-year 2022 sales growth of between 8% and 10%.
• The company expected full-year adjusted earnings to come in between 9% and 11% higher.

Carlyle’s Fourth-Quarter Earnings Jump – Wall Street Journal, 2/3/2022

• Carlyle Group reported a big jump in fourth-quarter earnings, driven by strong investment performance in some of its businesses and an upswing in fee-related revenue.
• Fee-related earnings climbed 20% to $174.5 million as fee-earning assets under management increased by 14% to $193 billion. Overall assets under management rose to $301 billion, up 22% year over year.
• The Washington, D.C.-based firm reported net income of $647.6 million, or $1.77 a share, in the period. That compares with net income of $518.8 million, or $1.44 a share, a year earlier.
• Carlyle’s fourth-quarter distributable earnings, or the portion of profit that could be returned to shareholders, came in at a record $902.8 million, or $2.01 a share. That compares with $236.9 million, or 64 cents a share, a year earlier.
• The firm said its board approved an increase in the annual dividend to $1.30 per share, up from $1.

Honeywell’s revenue misses estimates on supply woes, lower mask demand – Reuters, 2/3/2022

• Honeywell International reported lower-than-expected quarterly sales on Thursday, hit by supply chain challenges at its aerospace segment and a fall in demand for masks.
• Total sales for the fourth quarter slid 2% to $8.66 billion, compared with analysts’ expectations of $8.73 billion, according to Refinitiv data.
• The company, whose shares fell 2.7% before the bell, reported a decline in sales in three out of its four segments, with its Safety and Productivity Solutions unit — that makes masks — seeing a 10% slide in the fourth quarter.
• Price increases to combat inflation helped Honeywell post a rise in profit.
• Its net income rose 5% to $1.43 billion, or $2.05 per share, in the quarter ended Dec. 31, from $1.36 billion or $1.91 per share a year earlier.
• The company forecast 2022 sales of $35.4 billion to $36.4 billion, lower than analyst estimate of $36.76 billion.

Merck sees 2022 sales up nearly 20%, mostly on new COVID pill – Reuters, 2/3/2022

• Merck said on Wednesday it expects its 2022 sales to increase as much as 18 percent over last year, mostly on sales of its new COVID-19 pill, molnupiravir.
• Merck reported fourth-quarter sales of $13.52 billion, up from $10.95 billion a year ago, driven by molnupiravir sales and growth of blockbuster cancer drug Keytruda and human papillomavirus (HPV) vaccine Gardasil. Analysts had expected sales of around $13.2 billion in the quarter.
• The drugmaker said sales of the COVID-19 drug were $952 million in the fourth quarter, and it expects another $5 billion to $6 billion in molnupiravir sales in 2022.
• Merck expects 2022 revenue to be between $56.1 billion and $57.6 billion, up from $48.7 billion last year.

Biogen 2022 forecast below Street view on Alzheimer’s drug uncertainty – Reuters, 2/3/2022

• Biogen on Thursday forecast 2022 profit well below Wall Street estimates as sales of its new Alzheimer’s disease drug stall amid questions over its efficacy and a looming U.S. government coverage decision that could severely limit its future use and force further cost cutting.
• Aduhelm brought in $1 million in sales in the fourth quarter, compared to already diminished estimates of $2.8 million.
• In the fourth quarter, Biogen earned $3.39 per share, edging past analysts’ estimates by a cent.
• Biogen on Thursday forecast full-year adjusted profit of $14.25 to $16.00 per share, well short of analysts’ estimates of $18.82 per share, according to Refinitiv IBES.
• The U.S. Centers for Medicaid and Medicare Services (CMS) in January proposed to restrict coverage for Alzheimer’s drugs, including Biogen’s Aduhelm, only to patients taking part in approved clinical trials. A final decision is expected in April.
• The company warned that it could be forced to cut more costs, beyond the current program to save $500 million annually, if the final coverage decision is not broader than the proposal.

Eli Lilly results beat on diabetes drug, COVID antibody therapies – Reuters, 2/3/2022

• Eli Lilly reported quarterly results on Thursday that beat analysts’ estimates due to strong demand for its top-selling diabetes drug Trulicity as well as higher sales of its COVID-19 antibody therapies.
• The company’s revenue from COVID-19 antibody therapies rose 22% to $1.06 billion, compared with estimates of $648 million, according to Refinitiv IBES data.
• Trulicity sales jumped 25% to $1.88 billion, helping the company post quarterly revenue of $8 billion, beating estimates of $7.73 billion.
• The surge in COVID-19 cases also led to a 59% jump in sales of its rheumatoid arthritis drug Olumiant, which is also used to treat patients hospitalized due to the coronavirus, Lilly said.
• On an adjusted basis, Lilly reported a quarterly profit of $2.49 per share, compared with estimates of $2.46 per share.
• The company also reaffirmed its full-year adjusted earnings outlook between $8.50 and $8.65 per share.

Estee Lauder boosts annual projections on recovering cosmetics demand – Reuters, 2/3/2022

• Estee Lauder bumped up its annual revenue and profit projections on Thursday as consumers returning to in-person events splurged on its foundations and MAC lipsticks.
• Sales of the cosmetics maker rose in every region in the last three months of 2021, powering second-quarter earnings above Wall Street expectations.
• The La Mer beauty products maker expects reported net sales to rise between 13% and 16% for the full year, compared with its previous forecast of a 12% to 15% increase.
• It sees adjusted annual profit of between $7.43 and $7.58 per share, up from $7.23 to $7.38 per share previously.
• It forecast current-quarter adjusted profit between $1.55 and $1.65 per share, below expectations of $1.92, according to Refinitiv IBES data.

Ralph Lauren rides luxury boom as high-end apparel sales soar – Reuters, 2/3/2022

• Ralph Lauren raised its annual revenue forecast on Thursday and became the latest luxury goods retailer to top market estimates for holiday-quarter revenue as demand for high-end apparel soars.
• Ralph Lauren’s net revenue rose 27% to $1.82 billion in the third quarter ended Dec. 25.
• Analysts on average had expected revenue of $1.64 billion, according to Refinitiv IBES data.
• Revenue rose 30% in North America and 47% in Europe.
• Excluding certain items, Ralph Lauren reported a profit of $2.94 per share, beating estimates of $2.17.
• Ralph Lauren said it expects current-quarter revenue to rise by about 17% to 18% on constant currency basis, helped by higher prices, which the company said will also offset higher freight and raw material costs.
• The company said it expects constant currency revenue for fiscal year 2022 to rise 39% to 41%, compared with a 34% to 36% increase it forecast earlier.

Capri plans price increases at Michael Kors, Versace as luxury fashion booms – Reuters, 2/3/2022

• Michael Kors owner Capri on Wednesday reported a 24% jump in holiday-quarter sales and raised its full-year outlook, saying it would further increase prices across its brands to take advantage of soaring demand for high fashion.
• The company’s total revenue rose to $1.61 billion in the third quarter ended Dec. 25, ticking back up above pre-pandemic levels.
• The company forecasts fiscal 2022 revenue of $5.56 billion, compared with its prior estimate of $5.4 billion, while it expects annual profit per share to be $6, up from $5.30 per share.
• Capri also projected fiscal 2023 revenue of about $6.1 billion, above analysts estimates of $5.97 billion.

U.S. Moving—Some Say Too Slowly—to Address TikTok Security Risk – Wall Street Journal, 2/3/2022

• The Biden administration is moving to revise federal rules to address potential security risks from TikTok and other foreign-owned apps, eight months after opting not to pursue a forced shutdown of the Chinese-owned video-sharing platform.
• The Commerce Department recently concluded a public-comment period on the proposed rule change, which would expand federal oversight to explicitly include apps that could be used by “foreign adversaries to steal or otherwise obtain data,” according to a filing in the Federal Register.
• Under the rule, the commerce secretary could effectively bar foreign apps deemed unacceptable security risks. That could force social-media platforms such as TikTok and other software applications connected to the internet to submit to third-party auditing, source-code examination and monitoring of the logs that show user data, according to the proposed rule.
• The U.S. military has already banned its members from using the app on government-issued devices. Some lawmakers including Sen. Marco Rubio (R., Fla.) say the White House is moving too slowly to come up with a comprehensive plan.