US FINANCIAL MARKET

U.S. Stocks Waver Ahead of Major Earnings – Wall Street Journal, 4/20/2022

• U.S. stocks were mixed as investors assessed the impact of higher inflation on corporate earnings and ahead of more results from major companies.
• The S&P 500 rose 0.2% in early afternoon Wednesday, a day after the broad-market index closed up 1.6%.
• The tech-focused Nasdaq Composite Index fell about 1%. The Dow Jones Industrial Average advanced 0.8%, or 290 points.
• Netflix’s report after hours on Tuesday disappointed, while Procter & Gamble reported the biggest jump in sales in two decades, leading investors to closely scrutinize performance in an environment with rising prices.
• Procter & Gamble rose 2.6% after it raised its full-year guidance and said demand for its pricier items held up.
• IBM climbed 7.7% after it reported stronger-than-expected revenue growth driven by its cloud business.
• Netflix shares plunged 37%, on course for its worst day in nearly a decade, after it said its subscriber base shrank by 200,000 in the last quarter and predicted the loss of another 2 million subscribers this quarter.
• Other streaming companies fell: Paramount dropped 6.9%, Warner Bros. lost 4.6%, Walt Disney slid 4.5% and Spotify fell 8.1%. The S&P 500’s communications services sector, of which Netflix is a component, was down 3.6%.
• In economic news, U.S. home prices reached a record $375,300 in March as mortgage-interest rates shot up and a shortage of homes for sale continued to thwart buyers.
• Overseas, the pan-continental Stoxx Europe 600 rose 0.8%.
• In Asia, major benchmarks were mixed. The Shanghai Composite Index declined 1.4% and Hong Kong’s Hang Seng Index slid 0.4%. Japan’s Nikkei 225 rose 0.9%.

Netflix shares crater 25% after company reports it lost subscribers for the first time in more than 10 years – CNBC, 4/20/2022

• Netflix on Tuesday reported a loss of 200,000 subscribers during the first quarter — its first decline in paid users in more than a decade — and warned of deepening trouble ahead.
• The company’s revenue increased nearly 10% to $7.87 billion, but fell short of analysts’ expectations of $7.93 billion.
• Netflix previously told shareholders it expected to add 2.5 million net subscribers during the first quarter. Analysts had predicted that number would be closer to 2.7 million. During the same period a year ago, Netflix added 3.98 million paid users.
• The company said that the suspension of its service in Russia and the winding-down of all Russian paid memberships resulted in a loss of 700,000 subscribers. Excluding that impact, the company said it would have seen 500,000 net additions during the most recent quarter.
• Net income during the quarter ended March 31 fell 6.4% to $1.6 billion, down from $1.7 billion the year prior.
• The company’s free cash flow amounted to $802 million during the quarter, up from $692 million a year earlier.
• Netflix is forecasting a global paid subscriber loss of 2 million for the second quarter. The last time Netflix lost subscribers was October 2011.
• The company estimates that in addition to its 222 million paying households, access is being shared with more than 100 million additional households through account sharing. It warned a global crackdown could be coming.
• Netflix said it is exploring offering a lower priced ad-supported version of the platform to boost its subscriber base.
• Netflix estimated that besides its almost 222 million paying households, the service is being shared with an additional 100 million homes including 30 million in the U.S. and Canada.

Anthem raises earnings forecast after lower medical costs drive profit beat – Reuters, 4/20/2022

• Health insurer Anthem raised its forecast for full-year adjusted earnings on Wednesday, as lower-than-expected medical costs due to the waning impact of the pandemic helped it beat Wall Street estimates for quarterly profit.
• In the first quarter, Anthem’s benefit expense ratio – an insurer’s spending on claims against the premiums it earns – was 86.1%, compared with expectations of 87.8%, according to five analysts polled by Refinitiv.
• Net income attributable to shareholders rose to $1.81 billion, or $7.39 per share, in the first quarter ended March 31 from $1.67 billion, or $6.71 per share, a year earlier.
• The company now expects adjusted net income of over $28.40 per share, compared with its prior forecast of more than $28.25 per share.

IBM Revenue Up 8% on Continued Momentum in Hybrid Cloud Business – Wall Street Journal, 4/20/2022

• International Business Machines reported a stronger-than-expected 8% revenue increase in the first quarter on continued momentum in its hybrid cloud platform, a key focus of the tech company’s transformation.
• Revenue rose to $14.2 billion, from $13.19 billion a year earlier, beating analysts’ expected $13.78 billion, according to FactSet.
• The results were boosted by a 14% revenue increase from the hybrid cloud, which straddles public clouds, private clouds and as-a-service properties.
• Software revenue rose 12% in the latest period, which included revenue from its commercial relationship with Kyndryl.
• Consulting revenue rose 13%, while infrastructure revenue was again the laggard, with a 2% revenue decline in the March quarter.
• For the period ended March 31, IBM posted a profit of $733 million, or 81 cents a share, compared with $955 million, or $1.06 a share, a year earlier.
• Excluding impacts from items like acquisitions and the Kyndryl spinoff, operating profit was $1.40 a share in the latest period.
• Analysts recently polled by FactSet expected $1.39 a share.

Procter & Gamble Posts Biggest Sales Gain in Decades—and a Word of Caution – Wall Street Journal, 4/20/2022

• The maker of Tide detergent and Gillette razors on Wednesday posted its biggest quarterly sales gain in at least two decades as consumers, so far undeterred by inflation and the threat of a recession, paid more for household mainstays and gravitated toward higher-end options.
• P&G reported earnings per share of $1.33, up 6% from the same period a year earlier, while revenue climbed 7% to $19.4 billion.
• The Cincinnati consumer-products company said organic sales rose 10% for the quarter ended March 31, the biggest jump since P&G started tracking the metric 20 years ago.
• In the latest quarter, the company’s healthcare segment, which houses brands such as Crest toothpaste and Vicks cold medicine, saw organic sales rise 16% as the company raised prices, consumers switched to premium products and a more severe cough, cold and flu season drove up demand for over-the-counter medications.
• The two divisions that make home-care and laundry products and baby and feminine-care products each notched 10% gains.
• Pricing overall rose 5%, while sales volumes increased 3%. The only drag was foreign exchange, which lowered revenue by 3%.
• P&G on Wednesday raised its organic-sales growth forecast to a range of 6% to 7%, up from its earlier forecast of 4%-to-5% growth for the fiscal year ending June 30.
• It predicted core earnings per share will rise about 3%, the low end of its forecast of 3%-to-6% growth.

Baker Hughes earnings miss profit outlook, sending shares down – Reuters, 4/20/2022

• U.S. oilfield services and equipment firm Baker Hughes on Wednesday disclosed first-quarter earnings that missed analysts’ forecasts, sending its shares down about 10%, on mixed results across its equipment and services units.
• Orders in its Turbomachinery and Process Solutions business doubled from a year ago to $3 billion, but margins were pressured by supply chain issues and geopolitical events, Chief Executive Officer Lorenzo Simonelli said.
• Pre-tax margins in its oilfield services and oilfield equipment units declined sequentially, and margins in its equipment segment also fell year over year. Simonelli told investors he was “disappointed” with the overall level of profitability in that unit.
• Baker’s chemical production unit was among the hardest hit by supply chain issues, resulting in a roughly 170-basis-point drag on oilfield services margins, the company said on a conference call.
• Adjusted net income rose to $145 million, or 15 cents per share, in the three months ended March 31, up from $91 million, or 12 cents per share, a year ago. Wall Street analysts had anticipated earnings of 20 cents per share, according to Refinitiv IBES.
• It anticipates weaker revenues in its Russia-related businesses this year, particularly in its oilfield services unit, the company said. Russia accounted for about 4% of its total company revenues in the first quarter.

Abbott cuts sales growth forecast on baby formula recall – Reuters, 4/20/2022

• Abbott Laboratories on Wednesday lowered its full-year sales growth forecast, citing the voluntary recall of some infant formula products, including Similac, even as COVID-19 testing demand helped the company beat quarterly estimates.
• The company reported $3.3 billion in COVID-19 test sales in the quarter, adding that it now expects to record nearly $4.5 billion in 2022, most of which it expects to log in the first half.
• Its previous estimate was $2.5 billion.
• Abbott recalled certain powdered formulas made at its Michigan facility during the quarter after they were linked to infant illnesses. As a result, sales at its nutrition unit declined 7% in the quarter.
• Abbott said it still expects 2022 adjusted profit per share to be at least $4.70. Analysts on average expected profit of $4.83.

Nasdaq profit tops estimates on robust demand for software products – Reuters, 4/20/2022

• Nasdaq topped Wall Street estimates for first-quarter profit on Wednesday, driven by robust demand for its investment- and market technology-related products that offset a lull in initial public offerings.
• Net revenue was up 5% at $892 million.
• Revenues from the New York-based company’s market services segment eased 6% to $315 million from a record quarter last year, while the company’s solutions segment, which also includes anti-financial crime and environmental, social, and governance advisory products, rose 15% to $576 million.
• Nasdaq hosted 70 IPOs in the quarter, including the biggest market debut this year of private equity firm TPG, but that was down from 275 stock market flotations a year earlier.
• Excluding one-time items, Nasdaq earned $1.97 per share, above analysts’ average estimate of $1.95 per share, according to IBES data from Refinitiv.

Oil Edges Higher as U.S. Crude Stockpiles Fall Most Since 2021 – Bloomberg, 4/20/2022

• Oil resumed climbing after a sharp drop in U.S. crude inventories compounded supply concerns amid an accelerating decline in Russian production.
• West Texas Intermediate jumped back to $103 a barrel on Wednesday after briefly pairing gains earlier in the session.
• U.S. crude stockpiles fell 8.02 million barrels, the biggest draw since January 2021, according to an Energy Information Administration report.
• Earlier it was reported that Russia’s crude and condensate production from April 1 to 19 fell 8.2% from the March average.
• In China’s leading commercial hub of Shanghai, carmakers to supermarkets are now starting to resume their operations as the city seeks to recover from the economic toll of an unprecedented lockdown.

Grubhub Owner Just Eat Considers Sale After Orders Fall – Wall Street Journal, 4/20/2022

• Online food ordering company Just Eat Takeaway.com is considering selling its U.S. unit Grubhub after reporting a decline in orders following a boom in sales during Covid-19 lockdowns.
• The company said it was exploring the introduction of a strategic partner or the partial or full sale of the U.S.-based food delivery service. Just Eat completed its acquisition of Grubhub last year, a deal valued at $7.3 billion.
• Just Eat saw a 5% decline in orders in North America, currently its largest market, and a 1% decline in orders across the globe in the first quarter of 2022, according to a trading update.
• The company said it had about 90 million orders in North America and 264 million orders overall in this year’s first quarter.
• Grubhub is Just Eat’s only subsidiary based in the U.S., according to its website.