Big Names Struggle But New Leaders Keep Popping Up: Earnings This Week

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Big Names Struggle But New Leaders Keep Popping Up: Earnings This Week

Prominent stocks have struggled after announcing results, but some new leaders may be stepping up.

Tesla (TSLA) and Boeing (BA) got slammed after missing estimates. Facebook (FB) surpassed consensus, only to drift aimlessly. Meanwhile, less-followed companies like Snap (SNAP), United Parcel Service (UPS), Anheuser-Busch (BUD) and Hasbro (HAS) found new buyers.

Let’s have the bad news first. TSLA had plenty, coming up short on both profit and revenue. The future looks even bleaker as management trimmed margin guidance and a key executive left. Analysts are now increasingly worried about the electric car maker’s balance sheet. That’s seldom good news for equity investors.

BA was another mess, suffering its sharpest drop since news of its 737 MAX problems emerged four months ago. The aircraft giant posted its biggest loss ever as it struggles to fix software problems on its top-selling plane.

Tesla (TSLA) chart with 50-day moving average.
Tesla (TSLA) chart with 50-day moving average.

FB actually managed to surpass consensus. That mattered for about the first 10 minutes of trading yesterday, until the sellers came out of the woodwork to erase its weekly gain. The social-media giant’s last quarter might have been solid, but its future is clouded with higher regulatory costs and risks of possible anti-trust action by the U.S. government.

Snap Gets More ‘Likes’

FB’s much smaller rival, SNAP, got a lot more “likes.” The photo-based social media giant surprised across the board, beating on usage, profit and revenue. Margins improved dramatically. It was the third straight bullish quarter for SNAP, which is up more than 200 percent so far this year.

UPS was another stunner as retailers embraced its Next Day Air service to fulfill online orders. That pushed profit and revenue ahead of estimates, resulting in the stock’s biggest one-day gain since 2008. Is this once-boring shipping giant suddenly in the midst of a major business transformation?

Want another blast from the past? Check out Hasbro (HAS). The toymaker is riding a wave of demand for “Avenger: Endgame” toys, along with its own products like Monopoly. Perhaps even more important, the industry has finally worked its way through inventory issues after the Toys “R” Us bankruptcy.

Chip Stocks Still Flying

The rebound in semiconductors has been one of the biggest stories this year. That trend continued with big names like Intel (INTC) and Texas Instruments (TXN) beating estimates. Teradyne (TER), whose equipment is used by chip makers, also surprised to the upside and issued strong guidance.

Alphabet (GOOGL), the parent of Google, rebounded from a disastrous report last quarter. Profit and revenue both exceeded estimates, while traffic-acquisition costs were lower than feared. Its non-search cloud business and YouTube showed rapid growth as well. Is this staggering giant finally getting back on its feet?

Texas Instruments (TXN) chart, with 50-day moving average.
Texas Instruments (TXN) chart, with 50-day moving average.

Amazon.com (AMZN) was just the opposite. The e-commerce giant missed on profit as competition from Microsoft (MSFT) in the cloud seemed to increase. Delivery costs also spiraled. Is Jeff Bezos once again sacrificing margins on the altar of top-line growth?

Speaking MSFT, the software giant reported a strong quarter last Friday. However it ran like a horse into the release so has barely moved since.

Industrials Mostly Positive

Aside from BA, most industrial stocks performed well. United Technologies (UTX) continued its string of better-than-expected results. The parent of Pratt & Whitney seems to have benefited from the 737 MAX grounding as operators scrambled to put other planes in the sky.

Defense stock Raytheon (RTN) also closed at its highest level since October yesterday after beating on the top and bottom lines. Stanley Black & Decker (SWK) and WW Grainger (GWW) rallied on mixed results — a possible example of cash-flush investors wanting to buy something cyclical. Their choice of obscure industrial stocks may reflect confidence in the economy.

Caterpillar (CAT) is anything but obscure. Everyone knows it’s struggling with weak Chinese demand and cost pressures. So, they sold it.

Starbucks, AT&T Rally

Starbucks (SBUX) rallied after customers swallowed price increases and came back for more — literally. The coffee giant’s same-store sales rose more than expected. This seems to follow the pattern of positive consumer spending cited on Market Insights. It especially applies to services and experiences over simple things.

Ditto for Chipotle Mexican Grill (CMG), which beat on comps as customers spent more per ticket and digital orders doubled. Coca-Cola (KO) also managed to grow volumes by shifting to smaller cases and introducing new beverages.

AT&T (T) is another old-fashioned company that successfully tinkered with its business. The telecom giant boosted managed to boost margins and added more wireless customers than expected. The result? T had its biggest rally in a year.

Anheuser-Busch (BUD) chart with 50- and 200-day moving averages.
Anheuser-Busch (BUD) chart with 50- and 200-day moving averages.

Then you had BUD. Everyone thought it would go flat as millennials shun beer, but then the brewing giant shocked the skeptics with its best volume growth in five years.

Rounding Out the List

Align Medical (ALGN) was the S&P 500’s worst performer in the last week of earnings. The backward-looking numbers were good enough, but forward guidance was much worse than expected as its Chinese outlook darkened. More than one-quarter of the dental-supplier’s value disappeared.

PayPal (PYPL) issued weak guidance as management works to implement contracts with partners. Investors, not terribly patient after a 45 percent year-to-date run, hit the sell button.

Heart-valve maker Edwards Lifesciences (EW), on the other hand, broke out to new highs after once again beating estimates.

In conclusion, we’re wrapping up one of the second-busiest week in earnings season. (Next week has even more results.) The takeaways are:

  • Semiconductors keep impressing: INTC, TXN
  • Consumer-facing companies show no sign of a slowdown: SBUX, KO, CMG, BUD
  • New or forgotten names got some love: SNAP, HAS, T
  • Big tech was mixed: GOOGL good, AMZN bad, FB so-so

Be sure to check back in a week for our next recap.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.