What You Need To Know For October 24th

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Welcome Back!

U.S. Markets had a modest selloff yesterday as treasury rates continued rising. Over the past month, the 10-year has rallied from ~3.6% to 4.24%, an abrupt shift from the decline in rates that started this Spring. Rates have been on the move back higher as 1) fewer rate cuts seem likely 2) inflation seems stickier 3) recession fears cool and 4) worries over how the U.S. spending deficit will drive how high the terminal rate should be. As things stand, we’re not sure how much higher rates can go - but we do think they’ll be stickier than a lot of folks think.

Let’s get into it!

Earnings Corner 📜 

Trending Up 📈 

• Tesla (TSLA) reported earnings that beat estimates, with revenue of $25.18B up 8% y/y (vs. $25.37B expected) and EPS of $0.72 (vs. $0.58 expected). Automotive revenues were up 2% as TSLA saw a 6% increase in deliveries, following 2 consecutive quarters of y/y decline. Profit margins were boosted by $739MM in automotive regulatory credit sales to other car manufacturers. The stock was up 12.1% after Wednesday’s close

• Starbucks (SBUX) just threw out the kitchen sink - tossing out its 2025 guidance to give new CEO Brian Niccol a fresh plate. They don’t report until 10/30/24. Starbucks will reveal more on 10/30/24, but earlier this week they released its fourth-quarter earnings early, with comp sales down 7%, with U.S. stores down 6% and a steep 14% decline in China comps. Niccol emphasized that they need to get back to being the coffee shop that the community loves, as well making sure baristas are better supported (likely with more staffing), throwing a wrench in the old CEO’s plans that were highly focused on efficient, mobile ordering. The stock rallied 6% from Tuesday’s lows

• AT&T (T) reported earnings that beat estimates, with revenue of $29.8B down 0.6% y/y (vs. $30.45B expected) and EPS of $0.60 (vs. $0.57 expected). The wireless provider added 403,000 new subscribers (vs. 393,430 expected), profiting from the adoption of premium, unlimited plans. These higher-tiered offerings have allowed AT&T to compete with the bundled wireless and streaming (Netflix & MAX) packages sold by competitors. The stock was up 4.6% after Wednesday’s close

• Phillip Morris International (PMI) reported earnings that beat estimates, with revenue of $9.91B up 8.4% y/y (vs. $9.69B expected) and EPS of $1.91 (vs. $1.82 expected). Zyn sales were up 43.6% to 164.6MM cans, as mgmt. explained that shortages of the nicotine pouch are easing with the rollout of new U.S. manufacturing capacity. Smokeless products now make up 38% of PMI’s revenue. The stock recorded its biggest gain since 2008 and was up 10.1% at Wednesday’s close

• GE Vernova (GEV) reported earnings that missed estimates, but mgmt. reaffirmed guidance, and the stock was up 1.3% at Wednesday’s close.

• Peloton (PTON) shares were up 11% on Wednesday after hedge fund manager David Einhorn called the company significantly undervalued

• Raytheon Technologies (RTX) reported earnings that beat estimates, coming 8 days after the defense giant agreed to a $950MM settlement for alleged bribery of Qatari officials and defrauding the DoD. The stock was up 1% at Wednesday’s close

• Texas Instruments (TI) reported earnings that beat estimates, as chip sales for industrial applications stabilized from last quarter and drove the stock up 4% at Wednesday’s close

• T-Mobile (TMUS) reported earnings that beat estimates, driven by the best Q3 wireless customer growth in a decade and the lowest Q3 subscriber churn in the company’s history. The stock was up 2.8% after Wednesday’s close

Trending Down 📉 

• Verizon (VZ) reported earnings that beat estimates, with revenue of $33.3B nearly flat y/y (vs. $33.43B expected) and EPS of $1.19 (vs. $1.18 expected). As the wireless market becomes saturated and consumers wait longer to upgrade their phones (now an average of 40 months), VZ has doubled down on high-speed internet. However, mgmt. announced that associated capex will be higher than expected at $17.5B-$18.5B (vs. $17.57B expected). The stock was down 2.2% at Wednesday’s close

• Boeing (BA) reported earnings that missed estimates, with Revenue of $17.84B down 1.4% y/y (vs. $17.94B expected) and EPS of -$10.44 (vs. -$8.82 expected). In his first earnings call, new CEO Kelly Ortberg emphasized cost cutting and suggested BA may begin to generate positive cash flows in the second half of 2025 (vs. prior plans to stabilize by the end of 2024).  The stock was down 1.76% at Wednesday’s close. Even worse, the Boeing machinists rejected a new labor agreement that would’ve given them a 35% pay raise over 4 years, extending a strike that’s lasted 5 weeks now

• Lockheed Martin (LMT) reported earnings that beat estimates, with revenue of $17.1B up 1.34% y/y (vs. $17.37B expected) and EPS of $6.84 (vs. $6.44 expected). Aeronautics unit sales (which make up 38% of overall revenue) were dragged down 3% due to contractual and funding delays for the F-35 fighter. The stock was down 7.3% at Wednesday’s close

• Boston Scientific (BSX) reported earnings that beat estimates, but the stock stumbled as mgmt. announced it was temporarily pausing trials on its Farapulse PFA product. The stock was down 0.64% at Wednesday’s close

• Coca-Cola (KO) reported earnings that beat estimates, with higher prices offsetting weak consumer demand, and the stock down 2% at Wednesday’s close

• Danaher Corporation (DHR) reported earnings that beat estimates, but the stock was down 5.9% at Wednesday’s close

• GE Aerospace (GE) reported earnings that beat estimates, but weak sales in the commercial engines and defense and propulsion segments drove the stock down 6.5% at Wednesday’s close

• General Dynamics (GD) reported earnings that missed estimates, with strong performance from its defense segment, but poor business jet deliveries hurting the top and bottom line. The stock was down 0.5% at Wednesday’s close

• IBM (IBM) reported earnings that beat estimates, but disappointing consulting and infrastructure revenue drove the stock down 3% after Wednesday’s close

• ServiceNow (NOW) reported earnings that beat estimates, with revenue growth of over 22% y/y, but mgmt.’s growth outlook disappointed investors, with the stock down 2.5% after Wednesday’s close

• Sherwin Williams (SHW) reported earnings that missed estimates, with mgmt. citing a weak demand environment, driving the stock down 5% at Wednesday’s close

• Thermo Fisher Scientific (TMO) reported earnings that beat estimates but missed on revenue, with the stock down 1.67% at Wednesday’s close