US FINANCIAL MARKET
Stocks Slide, Bond Yields Rise After Inflation Data – Wall Street Journal, 2/10/2022
- Stocks slipped and bond yields rose after data showed another acceleration in inflation, taking it to a new-four-decade high.
- The S&P 500 fell 0.4% after bouncing back from earlier losses of more than 1%. The Dow Jones Industrial Average and Nasdaq Composite fell 0.2% and 0.3%, respectively, as both also recovered from their session lows.
- The moves followed new pricing data, showing inflation accelerated to a 7.5% annual rate in January, topping economists’ forecasts and December’s 7% pace.
- Bond yields, meanwhile, rose to 1.995% from 1.928% Wednesday after briefly hitting 2% for the first time since 2019.
- The yield on two-year notes, which are particularly sensitive to interest rates, rose to 1.477% from 1.346%.
- PepsiCo fell 2% after raising its dividend and setting a $10 billion stock buyback program.
- Walt Disney jumped 5% after it reported 11.8 million new subscribers for its Disney+ streaming service in the fourth quarter.
- Uber Technologies, meanwhile, gained 3.5% after the ride-hailing firm said quarterly revenue climbed 83%.
- Twilio added 11% after the software company said revenue and profits topped analysts’ forecasts.
- Mattel also topped forecasts, sending shares of the toy maker 10% higher.
- Overseas stock markets were mixed. The Stoxx Europe 600 was flat as gains for real-estate stocks offset losses for shares of media and financial-service companies.
- In Asia, Japan’s Nikkei 225 added 0.4% and the Shanghai Composite ticked up 0.2%.
- In Hong Kong, China Evergrande shares rose 5.4% after reports that the embattled property company plans to restore construction and sales activity, while refraining from a fire sale of its assets.
Disney+ Subscriptions Near 130 Million, Beating Expectations in Earnings Report – Wall Street Journal, 2/9/2022
- Walt Disney reported better-than-expected subscription numbers for its Disney+ streaming service in the recently completed quarter, reversing a slowdown in sign-ups.
- The world’s largest entertainment company posted $21.82 billion in revenue for the quarter, compared with $16.25 billion a year earlier. Analysts were expecting the company to report revenue of $20.27 billion.
- Disney+ reported 129.8 million subscribers at the end of the holiday quarter, up from 118.1 million subscribers in the prior quarter. Analysts polled by FactSet expected 124.7 million subscribers.
- Sales at its theme parks and consumer products division, which includes Walt Disney World and Disneyland resorts, were $7.23 billion, buoyed by increasing strength in outdoor travel. Analysts expected $6.36 billion.
- The company said its domestic parks and resorts reported record revenue and operating income.
Uber Fourth-Quarter Revenue Jumps as Customers Go Out, Keep Ordering In – Wall Street Journal, 2/9/2022
- Uber Technologies’ revenue climbed 83% in the last quarter of 2021, helped by a recovery in its rides business and continued demand for food delivery despite restaurant reopenings.
- The company posted revenue of $5.78 billion for the three months ended Dec. 31, beating the average estimate of $5.35 billion from analysts polled by FactSet.
- Its rides bookings rose by 67% year-over-year while its food-delivery bookings jumped 34% over the same period.
- Uber ended the quarter with 118 million active customers, a record for the company.
- Uber’s adjusted EBITDA of $86 million beat analysts’ average estimate of $67 million.
- Uber Eats, its delivery unit, posted its first profit by this measure in the quarter.
- The company’s full-year revenue in 2021 rose 57%.
- Uber trimmed its net loss to $496 million from a loss of $6.77 billion in 2020, helped by cost cuts and shedding money-losing businesses during the pandemic.
- Uber said it expects its gross bookings—the total value of bookings made on its platform—to reach as much as $26 billion in the first quarter of 2022. That compares with $19.5 billion in the year-earlier quarter.
- It said it expects adjusted earnings before tax, interest and other expenses between $100 million to $130 million for the same period, compared with analysts’ average estimate of $151 million.
Twitter Profit Drops; Company Says Apple Impact Largely Avoided – Wall Street Journal, 2/9/2022
- Twitter on Thursday posted lower-than-expected profit as expenses climbed but said it largely dodged the impact of privacy changes that are hurting Facebook parent Meta Platforms.
- Twitter’s revenue rose to $1.57 billion in the fourth quarter, up 22% from $1.29 billion a year earlier.
- That was largely in line with the analysts’ estimate of $1.58 billion, according to FactSet.
- The social-media company said its daily user base rose 2.84% from its previous quarter to 217 million.
- Analysts polled by FactSet had expected the user count to rise to 218 million.
- Twitter posted net income of $182 million, down from $222 million a year earlier.
- Analysts were expecting $290 million, according to FactSet.
- Some 85% of Twitter’s ad revenue comes from brand ads, which are less affected by Apple’s changes than direct-response ads, Twitter Chief Financial Officer Ned Segal said in an interview.
Coke and PepsiCo Earnings Show Big Sales Gains on Big Price Increases – Wall Street Journal, 2/9/2022
- Coca-Cola and PepsiCo reported higher quarterly sales as the global soda giants pushed through price increases but also felt the squeeze of higher costs for commodities and transportation.
- Coke’s organic revenue increased 9% in the quarter ended Dec. 31, driven by a 10% increase in prices. Organic revenue at PepsiCo, which also sells Doritos, Lays potato chips and other packaged foods, rose 11.9% with a 7% increase in prices.
- Both companies said inflationary pressures hurt their profits as costs rose for trucking, agricultural commodities and packaging.
- Coke’s operating income fell 28% in the quarter; PepsiCo’s operating profit fell 9%. Still, the results were better than Wall Street forecasts.
- For 2022, Coke said it expects organic revenue growth of 7% to 8%. It forecast adjusted earnings per share growth of 5% to 6% from 2021, excluding currency swings.
- Chief Executive Ramon Laguarta said that in recent months, PepsiCo has seen some improvements in its supply chain throughout North America. The company forecast 6% organic revenue for 2022 growth and an 8% increase in core earnings per share, excluding currency swings.
Kellogg annual profit view crunches estimates on price hikes – Reuters, 2/10/2022
- Cereal maker Kellogg forecast full-year profit growth above market expectations on Thursday, riding on higher product prices that helped overcome labor strike disruptions and soaring input costs in the fourth quarter.
- Net sales fell to $3.42 billion in the quarter but beat the consensus estimate of $3.39 billion.
- Adjusted gross margin for the fourth quarter fell to 30.2% from 34.2% a year earlier, while net income attributable to Kellogg more than doubled to $433 million, or $1.26 per share.
- Increasing costs for freight and ingredients such as wheat, corn and edible oils due to global supply chain snarls have significantly hurt packaged food companies, leaving them with little choice but to hike prices.
- Kellogg, however, expects adjusted full-year profit per share to grow by 1% to 2% on a currency-neutral basis thanks to increased prices for its breakfast cereals and snacks such as Pop-Tarts and Pringles.
- Analysts on average expected a 0.1% rise, according to Refintiv IBES data.
Datadog Stock Is Racing Higher. The Company’s Earnings and Revenue Crushed Estimates. – Barron’s, 2/10/2022
- Datadog stock surged Thursday after the security-software provider beat fourth-quarter earnings estimates and provided an upbeat outlook.
- The company earned 20 cents a share in the fourth quarter from revenue of $326.2 million.
- Analysts surveyed by FactSet expected Datadog to report 11 cents a share, with revenue of $291.5 million.
- Revenue in the quarter grew was 84% higher than the year-earlier quarter.
- Datadog had 2,010 customers at the end of December, up roughly 63% from 1,228 reported in the year-ago quarter.
- For the first quarter, Datadog expects revenue between $334 million and $339 million, beating analysts’ estimates of $306.4 million.
- For the full fiscal year 2022, the company expects revenue between $1.51 billion and $1.53 billion, above analysts’ consensus call of $1.40 billion.
Twilio spikes after major revenue beat and bold quarterly guidance – CNBC, 2/10/2022
- Shares of cloud communications software builder Twilio jumped as much as 29% after the company issued fourth-quarter results and quarterly revenue guidance that sped past expectations.
- Revenue increased 54% year over year to $842.7 million, compared with 65% growth in the third quarter, according to a statement.
- The company posted a loss of 20 cents per share, vs. loss of 22 cents per share as expected by analysts, according to Refinitiv.
- With respect to guidance, Twilio called for a first-quarter adjusted net loss of 26 cents to 22 cents per share on $855 million to $865 million in revenue, which implies almost 46% growth.
- Analysts polled by Refinitiv had been looking for an adjusted loss of 5 cents per share on $802.9 million in revenue for the first quarter.
IronNet Announces Agreement with a Gulf Cooperation Council Country – Business Wire, 2/10/2022
- IronNet announced the execution of a multi-year contract with a Gulf Cooperation Council (GCC) country —which is remaining anonymous to help protect its operational security—to enable it to better defend its most important governmental, financial, and infrastructure enterprises, country-wide, against cyber attacks.
- The GCC country will use IronNet’s leading AI-based Network Detection and Response (NDR) solution, as well as the IronNet Collective Defense platform, to facilitate real-time, collaborative cyber defense spanning key ministries and enterprises, as well as between public and private organizations in an effort to more quickly detect vulnerabilities across critical industry and government sectors.
- The Amazon Web Services (AWS) backbone of the IronNet Collective Defense platform will enable the country to deploy the solution quickly across hundreds of enterprises and maintain a dynamic cyber radar view of threats on enterprise networks comprehensively and at network speed. Today’s agreement represents IronNet’s largest AWS cybersecurity deployment in this region to date.
Kate Spade owner Tapestry lifts annual forecast as luxury demand booms – Reuters, 2/10/2022
- Tapestry raised its full-year revenue and profit forecast on Thursday as consumers splurge on luxury handbags and apparel in the United States and Europe, boosting the Kate Spade owner’s shares 3% in premarket trade.
- Total revenue rose 27% to $2.14 billion in the second quarter ended Jan. 1, surpassing analysts’ average estimate of $2 billion, according to IBES data from Refinitiv.
- On an adjusted basis, it earned $1.33 per share, above estimates of $1.18.
- The company forecast fiscal 2022 revenue of about $6.75 billion, compared with a prior estimate of nearly $6.6 billion. It expects annual profit of $3.60 to $3.65 per share, up from $3.45 to $3.50 earlier.
- Tapestry, which also owns Coach and Stuart Weitzman, raised its share buyback target for the year to $1.25 billion from $1 billion.
Canada Blockade Escalates, Shutting Auto Plants and Two-Way Traffic Around U.S. Border – Bloomberg, 2/10/2022
- At least six auto plants near the U.S.-Canada border have temporarily halted work as the impact from a protest blocking truck traffic into Detroit begins rippling through both nations’ economies.
- Toyota Motor said it will idle three plants in Ontario due to parts shortages caused by the bridge blockade. General Motors canceled the evening shift Wednesday and Thursday’s day shift at an SUV factory in Lansing, Michigan.
- Ford Motor shut down an engine plant and cut the schedule at an assembly plant, both in Ontario, while Stellantis NV canceled shifts Wednesday night at multiple facilities in the U.S. and Canada.
- The blockade started Monday as an offshoot of the trucker convoy in Ottawa that started in protest to a vaccine mandate for drivers who travel across the U.S. border. Since then, it has grown along with a movement that opposes Canada’s Covid-related restrictions and dislikes Canadian Prime Minister Justin Trudeau.
- Traffic was not flowing in either direction as of Thursday morning, due to a protest on the Canadian side that is now blocking both Canada-bound traffic exiting the bridge and U.S.-bound traffic entering it, said Dan Stamper, president of the Detroit International Bridge Co., which owns the Ambassador Bridge.
Contamination at Maker of Flash-Memory Chips Poses Risk to Global Supply Chain – Wall Street Journal, 2/10/2022
- Two factories making flash-memory chips have been hit by production stoppages since late January over a contamination issue, a problem likely to affect the already troubled semiconductor supply chain.
- The factories are operated by Japan’s Kioxia Holdings in a partnership with San Jose, Calif.-based Western Digital. The NAND flash-memory chips they make go into many products including smartphones, computers and servers.
- The two companies said Thursday Japan time that some materials used in making the chips suffered from unidentified contamination at factories in the Japanese cities of Yokkaichi and Kitakami.
- The problem affects an advanced kind of chip known as three-dimensional flash memory, Kioxia said. It said it hoped to bring operations back to normal as soon as possible but didn’t give a specific target.
- Western Digital said the problem was likely to cause a shortage of at least 6.5 exabytes in flash storage, equivalent to about 100 million of the 64 gigabyte flash memory cards often used for digital-camera storage.
- Taiwan-based research firm TrendForce said the shortfall represented 13% of the companies’ expected output in the first quarter of this year.
- Western Digital and Kioxia combined held a 32.5% share of the market for NAND flash memory chips in the third quarter of last year, according to TrendForce.
Microsoft Promises Openness on New App Store as It Seeks Approval for Activision Deal – Wall Street Journal, 2/10/2022
- Microsoft executives promised that the marketplace they are envisioning for videogames would operate by a set of open-market principles, part of a pitch to regulators around the world to approve its acquisition of gaming giant Activision Blizzard.
- The principles are a response to concerns raised by app developers and lawmakers, who say app stores run by Apple and others take an unfairly large cut of digital revenues and stifle competition. Microsoft said it wouldn’t require developers to use a proprietary payment system, among other steps.
- The principles would also help Microsoft offer its new gaming store on devices where it can’t today, executives told reporters Wednesday. Apple’s iPhone, for example, doesn’t allow competing app stores, a step the company says helps it to protect users’ security and privacy.
US ECONOMY & POLITICS
U.S. Inflation Charges Higher With Larger-Than-Forecast Gain – Bloomberg, 2/10/2022
- U.S. consumer prices surged in January by more than expected, sending the annual inflation rate to a fresh four-decade high and adding more urgency to the Federal Reserve’s plans to start raising interest rates.
- The consumer price index climbed 7.5% from a year earlier following a 7% annual gain in December, according to Labor Department data released Thursday.
- The widely followed inflation gauge rose 0.6% in January from a month earlier, reflecting broad increases that included higher food, electricity and housing costs.
- Excluding the volatile food and energy components, so-called core prices increased 6% from a year ago, also the most since 1982, and 0.6% from a month earlier.
- The median forecasts in a Bloomberg survey of economists called for a 7.3% year-over-year increase in the CPI and 0.4% gain from a month earlier. Economists have underestimated the monthly change in the CPI in eight of the last 10 months.
- Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — climbed 0.3% from the prior month.
- The increase reflected the biggest jump in rent of primary residence since May 2001. Owners’ equivalent rent also rose.
- Lodging away from home fell 3.9%, the weakest print since April 2020 and likely reflecting reduced travel amid the surge in Covid-19 infections.
- Food prices rose 0.9% in January, the most in three months, and energy costs also advanced 0.9% on gains in fuel oil and electricity. Residential electricity costs increased last month by the most in 16 years.
- From a year ago, food inflation is up 7%, the most since 1981.
- Inflation-adjusted average hourly earnings fell 1.7% in January from a year earlier, marking the 10th straight decline, separate data showed Thursday.
Half-Point Fed Hike in March Is a Coin Flip After Hot Inflation – Bloomberg, 2/10/2022
- Traders ramped up wagers that the Federal Reserve will raise interest rates more aggressively after inflation once again exceeded expectations, with futures pricing in a 50% chance the central bank will boost rates by a half-percentage-point next month for the first time since 2000.
- The specter of increasing price pressures drove money markets to price in a full percentage point of rate increases through July, the equivalent of a traditional quarter-point move at each of its next four meetings, and to briefly price in six such moves in 2022.
- Treasuries fell sharply, driving the policy sensitive two-year note’s yield up as much as 13 basis points to about 1.5%, the highest since January 2020, and the 10-year yield touched nearly 2%, a level not seen since 2019.
- The gap between five- and 30-year yields narrowed below 40 basis points, approaching its flattest level since late 2018, when the Fed had tightened overnight rates to 2.5%.
U.S. Mortgage Rates Surge to the Highest Level in More than Two Years – Bloomberg, 2/10/2022
- Mortgage rates in the U.S. jumped to the highest level since January 2020, before the pandemic rocked financial markets.
- The average for a 30-year loan was 3.69%, up from 3.55% last week, Freddie Mac said in a statement Thursday.
- That was the highest since Jan. 2, 2020, when rates averaged 3.72%.
- At the current average for a 30-year low, the monthly payment on a $300,000 mortgage would be $1,379.
- That’s up from $1,209 a little more than a year ago, when rates hit a record low of 2.65%.
U.S. Housing Affordability Worsens – Wall Street Journal, 2/10/2022
- U.S. housing affordability worsened in the fourth quarter as home prices rose alongside mortgage-interest rates.
- The median sales price for single-family existing homes was higher in the quarter compared with a year ago for 181 of the 183 metro areas tracked by the National Association of Realtors, the association said Thursday.
- In the fourth quarter, the typical monthly mortgage payment for a single-family home rose to $1,240, from $1,039 a year earlier, NAR said.
- Median prices rose by more than 10% from a year earlier in 67% of the 183 metro areas, a slowdown from the third quarter when 78% of metro areas reported double-digit-percentage growth.
- Nationwide, the median single-family existing-home sales price rose 14.6% in the fourth quarter from a year ago to $361,700, NAR said. That is a slight decline from the record median sales price of $363,100 reached in the prior quarter.
- The only metro areas to post a decline in the fourth quarter from a year earlier were Davenport, Iowa, where median prices fell 1.1%, and Peoria, Ill., down 0.1%, NAR said.
Rent Inflation Shows That Landlords Have the Upper Hand Again – Bloomberg, 2/10/2022
- If you’re a renter and you moved last year, you’re probably already paying more for shelter. If you didn’t, you may soon find yourself in a similar position, when your lease comes up for renewal.
- Rent of shelter is the biggest expense for the typical U.S. household and consequently the biggest component of the government’s official indexes of consumer prices, making up about 32% of them by weight.
- Inflation in that category topped 4% in 2021, after averaging 3.3% annually in the five years before the pandemic.
- Many forecasters expect it to remain high through much of this year, even as other overheated categories, such as autos and other durable goods, start moderating.
- Several private-sector gauges of rent inflation showing double-digit growth nationally in 2021 focus on prices of new leases, whereas the Labor Department measure also accounts for the much larger category of existing leases being renewed.
- The trend may add to the impetus at the Federal Reserve for higher interest rates, though here the inflation cure could backfire.
- The reason: Rising mortgage costs could prevent some renters from becoming homeowners, putting additional pressure on the market.
U.S. Foreclosures Surge in January After End of Pandemic Freeze – Bloomberg, 2/10/2022
- Foreclosures on homes in the U.S. surged in January after a pandemic moratorium ended, though they remained well below pre-Covid levels, according to new data from RealtyTrac.
- Foreclosure filings such as default notices, scheduled auctions or bank repossessions jumped 29% from a month earlier and more than doubled compared with January 2021, the report said.
- Lenders repossessed 4,784 properties in the month and started the process on another 11,854 homes.
- Measured against the total number of homes, the state with the highest foreclosure rate is New Jersey, where one in every 2,336 housing units has a filing. Nationwide, the ratio is one in 5,922. Among large cities, the worst foreclosure rates in January were in Detroit, Cleveland and Chicago.
- An estimated 7.1 million borrowers — 14% of all mortgage holders — entered into forbearance during the pandemic, though more than two-thirds of them had exited by March 2021, according to Harvard University’s latest annual report on the national housing market.
Manhattan Apartment Rents Creep Closer to the Highest on Record – Bloomberg, 2/10/2022
- Manhattan apartment rents skyrocketed in January, coming close to an all-time high for the month.
- The median rent jumped 23% from a year earlier to $3,467, according to a report Thursday by appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. That’s just shy of the record for January of $3,472, reached in 2020 before the pandemic exodus sent rates sliding.
- Now, New Yorkers are flooding back to the city and grabbing whatever deals are left before costs rise even further. January’s median rent was just 2.1% below the record for any month in more than a decade of data-keeping by the firms: $3,540, in April 2020.
- In January, the supply of available apartments tumbled 83% from a year earlier to 4,316.
- Landlord concessions, essential to luring tenants during the height of the pandemic, were offered in just 25% of new leases last month — a near-normal rate for the market.
- The median rent at doorman buildings is up 6.9% from January 2020, but costs at non-doorman properties, which tend to be cheaper, are still 5% below where they were two years earlier.
EUROPE & WORLD
Massive Russian Military Drills on Ukraine Border Ratchet Up Threat – Wall Street Journal, 2/10/2022
- Russia kicked off large-scale military exercises in Belarus on its western borders with Poland and Lithuania and along its southern flank near Ukraine, an escalation of the standoff between Moscow and Western powers and a possible precursor to a Russian invasion of a smaller neighbor.
- Western officials believe the Russian exercises in Belarus could open a possible new vector to launch an attack on Ukraine, adding to the 100,000 troops Moscow has already deployed to the Russian-Ukrainian border.
- The Kremlin says the military activity is in response to a threat from the West to its own security.
- Russia and Belarus, which conduct joint military drills routinely, have said the exercises, called United Resolve, are meant to test the readiness of their forces in neutralizing military threats and securing borders.
- The two countries haven’t disclosed the number of troops involved in drills, which started Thursday. Russia’s Defense Ministry has said they don’t exceed limits set by a 2011 agreement with Europe, according to which exercises involving more than 9,000 troops require notification.
Evergrande CEO Sold Bonds Before Profit Warning – Wall Street Journal, 2/10/2022
- China Evergrande Group’s chief executive sold his holdings of company dollar bonds with a face value of $128 million last summer, stock exchange-filings showed, with the sales coming a few weeks before the property developer issued a profit warning.
- Evergrande CEO Xia Haijun, and Hui Ka Yan, the group’s founder and chairman, have in recent years bought sizable quantities of new bonds from the company, according to company statements and to earlier filings disclosing changes to their holdings. Some of the bond-buying was presented as a public show of support when the Chinese real-estate giant was conducting multibillion-dollar debt issues.
- Mr. Xia sold all of his holdings in three dollar notes issued by either Evergrande or its Scenery Journey Ltd. unit in a series of transactions between July 27 and Aug. 17 of last year, according to the exchange filings on Wednesday.
- The notes were sold at between about 36 cents and 52 cents on the dollar, the filings showed. Evergrande’s bonds have since fallen further in price. One of the bonds that Mr. Xia had invested in, which is due in 2022, was recently quoted at 10 cents on the dollar, Refinitiv data shows.
AstraZeneca sees higher 2022 sales even as COVID boost wanes – Reuters, 2/10/2022
- AstraZeneca raised its annual dividend for the first time in a decade on Thursday and forecast higher sales for 2022 as new drugs against cancer, kidney disease and rare conditions make up for a decline in COVID-19 products.
- Total revenue jumped 63% to $12.01 billion for the three months to Dec. 31 on a constant-currency basis, while core EPS came in at $1.67 cents, topping estimates of an EPS of $1.50 on sales of $10.79 billion.
- The COVID-19 vaccine, with sales of $3.9 billion, was AstraZeneca’s second best-selling product last year, behind only lung cancer drug Tagrisso, which racked up over $5 billion in revenues.
- The company beat fourth-quarter earnings forecasts and said it would raise its annualized dividend by $0.10 to $2.90 per share.
- While sales of COVID-19 products are expected to decline by a low-to-mid 20s percentage this year, the London-listed company forecast overall revenues to rise by a high teens percentage, with core earnings up by a mid-to-high 20s percentage.
- Analysts currently expect 2022 earnings per share (EPS) of $6.68 and sales of $42.73 billion, according to Refinitiv IBES data.
ArcelorMittal raises dividend, announces new $1 billion capital return – Reuters, 2/10/2022
- ArcelorMittal, the world’s second largest steelmaker, said on Thursday it would increase its dividend and announced a new $1 billion capital return for the first half of the year after reporting better-than-expected fourth-quarter earnings.
- Fourth-quarter core profit (EBITDA), the figure most watched by the market, was $5.05 billion, almost five times the year-ago figure. That was slightly higher than the average forecast of $4.95 billion in a company poll.
- The uplift brings the capital returns announced by the company since September 2020 to $7.2 billion. It will seek further authorization to repurchase shares at its annual general meeting. It raised its dividend from $0.30 per share to $0.38, a 27% increase.
- Meanwhile, the company’s net debt increased to $4.03 billion from $3.87 billion, 15.3% above ING analysts’ expectations. Shares were down 2.93% to 28.52 euros as of 0941 GMT.
- ArcelorMittal said it expects steel consumption, excluding China, to grow between 2.5% and 3% and sees its own steel shipments rising by 3% in 2022.
- It sees a positive medium to long-term outlook for steel with inventories now replenished and demand recovery continuing, particularly if the automotive supply chain constraints ease.
Higher steel prices boost Thyssenkrupp amid supply chain strains – Reuters, 2/10/2022
- Thyssenkrupp said on Thursday that operating profit rose nearly fivefold in its first quarter, as its two biggest divisions – steel and materials trading – benefited from significantly higher steel prices.
- Thyssenkrupp’s adjusted earnings before interest and tax (EBIT) came in at 378 million euros ($432 million) in the October-December period, the first three months of the group’s fiscal year, up from 78 million a year earlier.
- Free cash flow before M&A, however, was a negative 858 million euros due to a rise in working capital related to “ongoing bottlenecks in the supply chain with the resulting delays in customer call-offs,” the company said.
- Adjusted EBIT at the group’s steel division, which could be spun off at some point but not this year, increased sixfold to 124 million euros, as higher selling prices offset a strong rise in raw materials and energy costs.
- Meantime, Thyssenkrupp’s automotive technology unit struggled with an ongoing shortage of semiconductors, causing operating profit to fall by two thirds in the period.
- The group, which makes everything from car parts to submarines, continues to expect full-year adjusted EBIT of 1.5-1.8 billion euros and free cash flow before M&A to break even.
India’s Mahindra and Mahindra reports surge in quarterly profit – Reuters, 2/10/2022
- Indian automaker Mahindra and Mahindra reported a 57% jump in third-quarter profit on Thursday, boosted by higher revenues that offset an increase in costs due to supply chain disruptions and semiconductor shortages.
- The company, chaired by Indian billionaire Anand Mahindra, said it also saw a sharp rise in exports of automobiles and tractors in the October-December quarter.
- Mahindra’s revenue from the auto sector grew 15% during the reported quarter and it said the auto business was continuing to see a strong booking pipeline with more than 155,000 pending orders for its vehicles.
- Consolidated net profit from continuing operations rose to 19.87 billion rupees ($265.11 million) for the quarter ended Dec. 31, from 12.68 billion rupees a year ago.
Siemens reports big surge in orders as profit beats forecast – CNBC, 2/10/2022
- Siemens reported better-than-expected industrial profit on Thursday as the German technology group said it was seeing “extraordinary” order intake from its customers.
- Revenue during the quarter, the first of Siemens’s 2022 financial year, rose 17% to 16.50 billion euros, beating forecasts for 15.95 billion euros. Net profit for the company rose 20% to 1.8 billion euros.
- Orders surged 52% to 24.21 billion euros ($27.66 billion), well ahead of expectations, the maker of trains and factory software said, as businesses stocked up on equipment and demand increased after the pandemic slowdown.
- Siemens’s jump in orders was led by the company’s factory automation business, where orders increased by 73% with growth in all businesses and regions as customers stocked up on drives and controllers.
- Industrial profit rose 12% to 2.46 billion euros during the three months to the end of December, beating analyst forecasts for 2.27 billion euros.
Ben & Jerry’s Owner Unilever Says Soaring Costs Will Eat Into Profit – Wall Street Journal, 2/10/2022
- Unilever PLC reported higher quarterly sales growth but warned its profit margin would fall sharply this year as the owner of Dove soap and Ben & Jerry’s ice cream grapples with the impact of surging costs around the world.
- Overall, for the fourth quarter, Unilever reported underlying sales growth of 4.9% driven entirely by higher prices, with volumes flat. The company didn’t disclose profit figures for the quarter.
- In the fourth quarter, the company raised prices by 8.9% in Latin America and by 2.9% in the U.S. However, in Europe prices rose by just 0.2% as the company resorted instead to offering fewer discounts and deals, said Chief Financial Officer Graeme Pitkethly.
- The company is grappling with a 100% rise in soybean oil, a 130% rise in palm oil and much higher shipping and transport costs among others, he added.
- Unilever said it expects underlying sales growth this year to be between 4.5% and 6.5%. But it expects its underlying operating margin for 2022 to drop between 16% and 17%, the company said, as its raw material, packaging and distribution costs remain high.
- On Thursday, Unilever said canvassing shareholders in recent weeks had shown they have “no appetite” for the company to pursue major acquisitions for the foreseeable future.
- Instead, Unilever said it would buy back €3 billion, or about $3.43 billion, of shares over the next two years and restrict itself to doing smaller deals.
Canada Goose Plunges After Sales View Cut on Weakness Abroad – Bloomberg, 2/10/2022
- Shares of Canada Goose Holdings had their biggest drop in more than two years after the maker of designer parkas cut its annual forecast due to lower sales in Asia and Europe.
- The company said it now sees fiscal 2022 revenue in the range of C$1.09 billion to C$1.11 billion ($860 million to $876 million), down from a prior forecast of C$1.13 billion to C$1.18 billion.
- Canada Goose also cited Covid-19 variant outbreaks and virus-related restrictions in the current quarter as an additional drag on its outlook.
- Canada Goose fell as much as 21% in New York trading, its biggest drop since May 2019.
- The stock had slid 18% in the past year through Wednesday’s close.
Credit Suisse Reports $2.2 Billion Loss From Charges, Lower Revenue – Wall Street Journal, 2/10/2022
- Credit Suisse Group capped a turbulent year with a net loss of more than $2 billion in the fourth quarter and said 2022 would be a year of transition for repairing its balance sheet and reputation.
- The bank’s moves to make its business safer and a broader slowdown in borrowing and investing activity among clients pushed net revenue down 12% for the quarter year on year. It said January had been weaker than a year earlier.
- Credit Suisse said net revenue fell in its investment bank, by around 31%, from pulling back on risk and exiting prime services, the unit that lent to Archegos. It said its bonus pool is 32% lower than in 2020 to reflect the difficult year.
- The investment bank had a $2.1 billion pretax loss in the fourth quarter. It took a 1.6 billion Swiss franc goodwill impairment charge for another write-down of Donaldson, Lufkin & Jenrette, the U.S. brokerage it bought two decades ago for $11.5 billion.
- It took a 3.8 billion Swiss franc charge in 2016. Credit Suisse had flagged the new charge in November.
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