Wall Street ended sharply higher on Friday, in the wake of the latest figures from Apple and a very mixed report on American employment for the month of April which revives expectations of a rate cut across the Atlantic. This “softening” of the labor market, long awaited by the Fed, finally seems to be materializing… For now, it is a sixth consecutive status quo that the Fed has observed this week by maintaining the fed funds rate between 5.25% and 5.50%, at a 23-year high. On arrival, the S&P 500 gained 1.26% to 5,127 pts, the Dow Jones gained 1.18% to 38,675 pts and the Nasdaq climbed 1.99% to 16,156 pts!
On the Nymex, a barrel of WTI crude lost another 1% to $78. The dollar index lost 0.2% against a basket of currencies and bitcoin rose to $62,933.
The creation of non-agricultural jobs in the United States for the month of April 2024 therefore stood at only 175,000, compared to a market consensus of 235,000 measured by FactSet, a Bloomberg consensus of 243,000 and a level of 315,000 one month previously. The previous reading for March was 303,000. The unemployment rate stood at 3.9%, compared to the consensus 3.8% and 3.8% a month earlier. The average hourly wage increased by 0.2% compared to the previous month, against +0.3% of consensus and +0.3% a month earlier – or +3.9% over one year against +4% of consensus. Job creation in the manufacturing sector was 8,000, compared to the FactSet consensus of 10,000. Job creation in the private sector stood at 167,000 against a consensus of 180,000. The labor force participation rate in April was in line with expectations at 62.7%.
The ISM American services index for the month of April was significantly weaker than expected, at 49.4, compared to a market consensus of 52 and a reading of 51.4 in March. The new orders index declined to 52.2 from 54.4 in March.
The Fed’s Michelle Bowman, Austan Goolsbee and John Williams spoke today: Governor Bowman said inflation is expected to “continue to decline, even if rates are kept at current levels.” This remains her base case, but the official still sees “upside risks to inflation”, which could affect this outlook. The current monetary policy posture appears restrictive according to Bowman, who does not, however, completely rule out the idea of an additional rate hike in the event of deterioration on the inflation front or a halt to progress.
According to the CME Group’s FedWatch tool, the probability of a new monetary status quo at the next meeting on June 11-12 is now 86%. The probability of a first monetary easing on July 31 becomes more significant, with more than 37% chance that rates will go down a notch by then… Finally, the dominant probability for September 18 (48%) is that of a rate range of 5-5.25%, which would therefore represent a drop of a quarter of a point.
Values
Apple gains 5.9%. The Californian group from Cupertino reassured the markets by revealing slightly better than expected accounts and giving hope for a return to growth in the quarter started, but also and above all by announcing a disproportionate share buyback program of $110 billion. – compared to 90 billion over the last three years! Tim Cook, CEO of the group, also indicated last night that Apple was enthusiastic about the opportunities in generative AI, with the group now investing significantly in this essential area…
These fine speeches, accompanied by a very aggressive capital allocation in favor of shareholders in the short term, have masked the current weakness of activity, marked nonetheless by a drop of around 10% in iPhone sales in year-on-year. The drop in Apple’s activity for the closed quarter was less pronounced than feared. Additionally, Cook reported that iPhone revenue in mainland China grew “on a reported basis” and before adjustments for Covid-19-related supply chain disruptions in 2022. The group said indicated that it had generated $16.4 billion in revenue in mainland China over the past quarter versus $15.9 billion consensus, but down from last year. Cook, however, explained that the weakness in revenues in China compared to last year came from other parts of the business, while the iPhone would therefore be growing. “Some products did not perform as well,” said the CEO.
Apple revealed for its second quarter of fiscal 2024, period ended March 30, 2024, total revenue of $90.8 billion, down 4% year over year, and a quarterly earnings per share of $1.53. These two measures come out slightly above the market consensus, which was housed at $1.50 in earnings per share for $90.3 billion in revenue. Quarterly net profit, of around $24 billion, was down 2% year-on-year.
Coinbase, the cryptocurrency exchange platform, announced its second consecutive profitable quarter, but the stock lost 2.4%, after a jump of 370% over one year. For its first quarter, the group generated a net profit of $1.17 billion. The group benefited over the period from the resumption of trading in digital currencies with the launch of new Bitcoin ETFs which revived the attraction for “cryptos”. Coinbase’s trading revenue reached $1.07 billion in the quarter ended, nearly three times last year’s level. Revenues from subscriptions and services increased by 41% to 511 million. Brian Armstrong’s group thus posted total revenues of around 1.6 billion dollars, an increase of 72%, compared to a consensus of 1.34 billion. Adjusted Ebitda reached $1 billion, more than that generated in the entire 2023 financial year.
Block (-1.1%), Jack Dorsey’s payment services group announced adjusted earnings per share of 85 cents for its first fiscal quarter, compared to a consensus of 71 cents. Revenue slightly beat expectations at $5.96 billion in the period, growing more than 19% year-over-year. The group is also taking the liberty of raising its annual forecasts for gross margin and adjusted Ebitda. In addition, Block intends to reinvest approximately 10% of the gross margin earned on Bitcoin products in Bitcoin purchases. The group believes that Bitcoin is “an instrument of economic empowerment, providing individuals with a means to participate in a global monetary system and control their own financial future.”
Booking Holdings (+3%) published revenues of 4.4 billion for its first quarter of 2024, an increase of 17% year-on-year, exceeding expectations, for a net profit of 776 million, almost tripled compared to the last year. Earnings per share more than tripled to $22.37, well above market expectations. Adjusted Ebitda rose 53% to $898 million – versus a consensus of $719 million. Gross travel bookings rose 10% to $43.5 billion, compared to a consensus of $42.2 billion. The group also declared a cash dividend of $8.75. The group, which notably owns Priceline and Kayak, nevertheless indicated that reservations could slow down in the quarter started with tensions in the Middle East. Room nights booked for the quarter ended March 31 rose 8.5% to 297 million, but that pace could slow to 4-6% in the current quarter.
Expedia (-15.2%) posted gross bookings of $30.2 billion in the first quarter (+3%), missing the industry consensus which stood at $30.5 billion… For the quarter ended, revenues increased 8% to $2.9 billion, while B2B revenues alone grew 25% to $833 million. The net loss was $135 million, while adjusted net income was $29 million. Adjusted Ebitda reached $255 million, up 38% year-on-year with margin expansion of 191 basis points compared to 2023. Free cash flow fell 8% to $2.7 billion dollars. The group also highlights the accelerated pace of share buybacks at $786 million at this stage of the year.
Amgen (+11.8%). The group, which has just published solid quarterly results, also said it was “very encouraged by its study on obesity”. For its first quarter, the group posted revenues up 22% to $7.4 billion, product sales up 22% and volume growth of 25%. Adjusted earnings per share were almost stable at $3.96, with operating and interest expenses increased due to the acquisition of the Horizon firm. Adjusted operating profit still increased to $3.1 billion, representing a margin of 43.2%. Also and importantly, Amgen said yesterday it was “very encouraged” after completing an interim analysis of its mid-term study of the experimental weight loss drug MariTide. The laboratory expects to have data from the MariTide phase 2 trial at the end of this year. Amgen plans a comprehensive Phase 3 program covering multiple indications, including diabetes.
Monster Beverage (+3%). The group improved its accounts in the first fiscal quarter, benefiting from resilient demand. Revenues thus totaled $1.90 billion (+12%), in line with the consensus, while the gross margin improved to 54.1% compared to 52.8% a year earlier. Excluding adverse currency effects, revenues would have increased by 15.6%. Net profit increased 11.2% to $442 million. Operating profit was $542 million, compared to $485 million in the first quarter of 2023. The group will also launch a share buyback offer for $3 billion of ordinary securities, in the form of a Dutch auction. and subject to market conditions.
Ingersoll Rand (-6.6%), the American supplier of industrial products announced revenues of $1.67 billion for its first quarter, an increase of 3% in published data, but a decline of 1% organically. Quarterly orders declined 4% on a reported basis and 7% organically, to $1.71 billion. Net profit, group share, represented $202 million, or 50 cents per share, while adjusted profit was $320 million, or 78 cents per share. The consensus was for 69 cents in adjusted EPS on $1.7 billion in revenue. Quarterly adjusted Ebitda increased 15% to $459 million, for a margin of 27.5%, an increase of 290 basis points. 2024 adjusted EPS is now expected between $3.20 and $3.30, up 8 to 11%. The forecasts for adjusted EPS and adjusted EBITDA are therefore revised upwards.
The Hershey Co (+1%), the American food group, specialist in confectionery, announced revenues of $3.25 billion for its first fiscal quarter of 2024, an increase of 8.9% year-on-year, as well as a organic growth of 8.6%. Net profit represented $797.5 million or $3.89 per share on a diluted basis, an increase of 36%. Adjusted earnings per share rose 4% to $3.07. The market consensus was $2.76 in adjusted earnings per share for $3.11 billion in revenue. The group reiterates its estimates for 2024 sales growth and earnings per share. Thus, revenues are expected to increase by 2-3%, while adjusted earnings per share and consolidated EPS are expected to be stable.
XPO Logistics (+3.3%). For its first fiscal quarter, the group revealed revenues of $2.02 billion, an increase of 5.8% and slightly higher than market expectations. Net profit represented 67 million dollars from continuing operations, compared to 17 million a year before. Diluted earnings per share were 56 cents, three times higher than last year. Adjusted Ebitda increased 37% to $288 million. Operating profit more than doubled to $138 million.
