Wall Street consolidates slightly before market this Friday, following a new series of results including some disappointments in the ‘bullet points’, in particular on the Intel file. Operators had already sanctioned Tesla’s too short results yesterday. The S&P 500 and the Dow Jones returned 0.1%, while the Nasdaq lost 0.3%. Note that the ‘core PCE’ inflation figures revealed today are quite reassuring…
Markets are still anticipating future rate cuts, banking on controlled inflation and a soft landing for the economy. On the Nymex, a barrel of WTI crude lost 1% to $76.6. An ounce of gold gains 0.3% to $2,024. The dollar index lost 0.3% against a basket of currencies.
The monetary meeting on January 30 and 31 is also approaching. A new monetary status quo is expected – at 97% according to FedWatch -, but the Fed could then begin to reduce its rates in March or May according to the same barometer (46% probability in March).
On the economic front, American GDP surprised yesterday with its solidity in the fourth quarter. It appears to be growing at a rate of 3.3%, compared to a consensus of 1.7% measured by FactSet and an expansion of 4.9% a quarter before. This is the advanced estimate of quarterly GDP, the first of three assessments. Personal consumption expenditure rose at a rate of 2.8%, once again an increase higher than the consensus. The price index linked to GDP also shows a much smaller increase than expected (+1.5% versus +2.3% consensus).
The personal income of American households for the month of December 2023, announced this Friday, increased by 0.3% compared to the previous month, in line with the market consensus. Personal household spending increased by 0.7% compared to the previous month, compared to +0.5% market consensus. The adjusted ‘core PCE’ price index, closely followed by the Fed, was up 0.2% month-on-month and 2.9% year-on-year as expected.
Operators will still be monitoring December’s housing sales promises at 4 p.m. (consensus +2% compared to the previous month).
Visa, Intel, T-Mobile US, Kla Corporation, Capital One, Weyerhaeuser, Western Digital and Levi Strauss announced their quarterly results yesterday evening, after market trading. American Express and Colgate-Palmolive release this Friday.
Values
Intel drops 10% before market on Wall Street. The American microprocessor giant published fiscal fourth quarter earnings per share of 54 cents and sales of $15.4 billion, compared to a Bloomberg consensus of 44 cents and $15.2 billion. The group, however, provides forecasts considered disappointing, anticipating revenues ranging from 12.2 to 13.2 billion dollars only for the first quarter of the financial year started, compared to a consensus of 14.2 billion. Adjusted earnings per share are expected at 13 cents, versus… 34 cents consensus. The gross margin is anticipated at 44.5%, compared to 45.5% consensus.
Pat Gelsinger, general manager of the group, however, foresees a gradual improvement in 2024, quarter after quarter. “We know we have a lot of work ahead of us as we strive to regain and strengthen our leadership position in each category in which we participate,” the executive said.
KLA Corporation dropped 4% before market on Wall Street, while the group posted a turnover for the second fiscal quarter higher than expectations, but forecasts for its third quarter that were too short. The chip production tools designer now sees third-quarter revenue of $2.175-$2.425 billion, while consensus was at $2.46 billion. Third-quarter adjusted EPS is expected to be around $5.26, plus or minus 60 cents, versus a consensus of $5.85. For the just-ended second quarter, revenues totaled $2.49 billion, versus $2.46 billion consensus, while adjusted EPS was $6.16 versus $5.9 consensus.
Visa announced last night, for its just ended fiscal first quarter, adjusted earnings per share of $2.41 compared to a FactSet consensus of $2.34. Revenues were $8.63 billion versus the consensus of $8.55 billion. Payment volume in constant dollars grew 8% year-over-year. For its second fiscal quarter, the group expects mid- to high-single-digit revenue growth, which is quite close to market expectations (+8.6%). Earnings per share should increase at a double-digit rate, which is again consistent with the consensus.
T-Mobile US, the American telecom operator, missed the profit consensus for the closed quarter, but its performance in terms of subscriptions exceeded expectations. The second largest American mobile operator posted earnings per share of $1.67 in the fourth quarter, far from the consensus which was around $1.9. Nevertheless, T-Mobile gained 934,000 wireless subscribers in the quarter, while analysts were looking for a level of 890,000. The group expects adjusted EBITDA ranging from $31.3 to $31.9 billion for 2024.
Western Digital, the hard drive giant, widened its losses in the second fiscal quarter of 2024. On an adjusted basis, the quarterly loss per share stood at 69 cents. The quarterly adjusted loss stood at $210 million, compared to $135 million a year before. Revenues represented a little more than 3 billion dollars in this quarter ended at the end of December, against 3.4 billion consensus. Revenues still increased sequentially by 10% compared to the previous quarter. The group now expects adjusted earnings per share for the third fiscal quarter to be between a loss of 10 cents and a profit of 20 cents. Revenues over the period are anticipated between 3.2 and 3.4 billion.
Levi Strauss is expected to reduce its global corporate workforce by up to 15% in the first half, as part of a two-year restructuring. The jeans manufacturer would thus cut 10 to 15% of its workforce, after having provided cautious forecasts for the 2024 financial year against a backdrop of fragile wholesale sales. For its fourth fiscal quarter, the group posted revenues up 3%, reflecting the American performance, as well as direct-to-consumer sales up 11%. Adjusted earnings per share rose 29% to 44 cents. Inventory levels fell by 17% on a comparable basis. For fiscal 2024, the group anticipates revenue growth of 1 to 3%, while adjusted EPS is anticipated between $1.15 and $1.25.
Capital One Financial, the Virginia bank, also a credit card issuer, in which Warren Buffett’s Berkshire Hathaway recently initiated a position, posted fourth-quarter profits down 43% year-on-year, with provisions for credit losses and charges related to the FDIC contribution. Provisions for credit losses over the period swelled to $2.86 billion. The charge linked to the bailout of the deposit insurance fund of the FDIC, bank deposit guarantee agency, reached 289 million dollars. Net profit thus fell to $706 million and $1.67 per share over the quarter, compared to $1.23 billion for the corresponding period last year.
Colgate-Palmolive, the American hygiene products giant, revealed sales for its fourth fiscal quarter up 7% in consolidated and organic data, at $4.95 billion, for adjusted earnings per share of 87 cents. up 13%. The consensus was for 85 cents in adjusted earnings per share on $4.9 billion in revenue. Over the financial year, sales increased by 8.5% to $19.46 billion, while adjusted earnings per share increased by 9% to $3.23. For the 2024 financial year which has just begun, the group anticipates consolidated sales growing by 1 to 4%. Organic growth is expected within the long-term target range of 3 to 5%. Annual adjusted earnings per share are finally expected to increase in the mid to high single digits.
American Express revealed slightly short adjusted earnings per share for its fourth fiscal quarter at $2.62, compared to $2.07 a year earlier. Revenue rose 11% to $15.8 billion. The consensus was for $2.64 adjusted EPS on $16 billion in revenue. Provisions for credit losses jumped 40% to $1.44 billion, higher than expected. The guidance appears solid enough to offset this slight disappointment in profits for the closed quarter. The group now anticipates 2024 earnings per share ranging from $12.65 to $13.15, compared to a consensus of $12.4. Revenues are expected to increase by 9 to 11%.
