Market Update
Shell Plc 2022 Earnings Soared but Eased In Q4 On Windfall Tax
Scott Peters
02 Feb, 2023
New York City
Shell Plc fell 1% to 2,341.0 pence after the oil giant reported record annual profit and launched a $4 billion stock repurchase program.
Revenue in the fourth quarter increased to $101 billion from $85 billion a year ago after energy prices spiraled higher.
Net income in the quarter eased to $10.4 billion from $11.5 billion and diluted earnings per share eased to $1.46 from $1.48.
In 2022, revenue surged to $381 billion from $261.5 billion and net income soared to $42.3 billion from $21.5 billion and diluted earnings per share to $5.71 from $2.57 a year ago.
Full year 2022 income attributable to shareholders also included net gains of $3.4 billion due to the fair value accounting of commodity derivatives.
Windfall taxes imposed by the European Union and the UK also negatively impacted earnings.
The net income also included $2.3 billion charges related to the "EU solidarity contribution" and the UK "Energy Profits Levy," and net impairment reversals of $0.7 billion.
The oil company said it has completed its $4 billion stock repurchase program announced in the previous quarter and the company expects to complete a new $4 billion plan before the release of current quarter's results.
Shell also increased its dividend by 15% to 28.57 a share.
Meta Powered Tech Rally Broadens On Wall Street
Barry Adams
02 Feb, 2023
New York City
Rally mood persisted on Wall Street and Meta Platforms earnings and stock buyback plan pushed benchmark above 1% for the second day in a row.
Investors focused on corporate earnings after another batch of 130 companies released results and the familiar theme played out.
Weakening construction activities in December, looking recession worries, sharp fall in advertising and strong dollar impacted companies across all sectors.
Investors focused on not-so-weak economic growth in the U.S. and Europe and surmised that despite the elevated energy prices and four-decade high inflation, consumer spending is still resilient.
Tech stocks took the lead on the leaderboard across the Atlantic and powered market rallies in the U.S., Germany, France and the UK.
U.S. Indexes In Review
The S&P 500 index increased 1.4% to 4,179.16 and the Nasdaq Composite index soared 3.1% to 12,186.98.
Crude oil traded up 24 cents to $76.65 a barrel and natural gas futures increased 7 cents to $2.64 a thermal unit.
Treasury Yields Fall to 4-month Lows
U.S. Treasury yield traded lower after Fed Chairman Jerome Powell directed his comments to labor market conditions and acknowledged cooling inflation.
Optimist investors prolonged the hopes of either Fed pausing or lowering its aggressive rate hike stance and demanded lower yields on the U.S. government bond obligations.
The yield on 2-year Treasury notes decreased to 4.09%, 10-year Treasury notes to 3.37% and 30-year Treasury bonds to 3.53%
U.S. Movers
Meta Platforms, Inc soared 18.8% to $181.86 after the social media sites operator reported higher-than-expected quarterly results.
Advertising impressions delivered across all sites increased 23% and the average price per ad decreased 22% from the previous year.
For the full-year 2022, ad impressions increased 18% and the average price per advertising impression fell 16% from the previous year.
Meta Platforms said revenue in the December quarter declined 4% to $32.2 billion and net income fell 55% to $4.6 billion from $10.3 billion and diluted EPS dropped to $1.76 from $3.67 a year ago.
The company estimated first quarter 2023 revenue in the range of $26 billion and $28.5 billion and revised lower its full-year 2023 expenses estimate to between $89 billion and $95 billion from $94 billion to $100 billion.
The company announced a $40 billion stock repurchase plan after completing a $28 billion stock buyback plan in 2022.
Estee Lauder Companies Inc declined 1% to $276.96 after the cosmetic company said travel restrictions in Asia and mainland China impacted its business.
Estee Lauder said the fourth quarter revenue declined 17% to $4.6 billion and net income fell 64% to $397 million and diluted EPS declined to $1.09 from $2.97 a year ago.
The company guided full-year fiscal 2023 sales to decline between 5% and 7% and GAAP diluted earnings per share between $4.25 and $4.44.
Humana Inc fell 3.9% to $492.50 after the health insurance company reported higher quarterly loss.
European Markets Jump Between 1% and 2%
European markets soared after the European Central Bank and the Bank of England lifted key lending rates as advertised and investors welcomed dovish comments from Fed Chairman.
The European Central Bank revised its benchmark rate higher by 50 basis points to 3.0%, the level last seen in 2008 and confirmed its plan to increase by the same at the next policy meeting in March.
The Bank of England decided to increase its benchmark rate in a 7-to-2 vote by 50 basis points to 4.0%, the highest level since 2008 as policymakers battle to control forty-year high inflation.
The DAX index soared 2.2% to 15,509.19, the CAC-40 index increased 1.2% to 7,166.27 and the FTSE 100 index added 0.8% to 7,820.16.
The euro advanced to $1.09, the British pound inched higher to $1.22 and the Swiss franc edged up to 91.25 U.S. cents.
Brent crude oil decreased 24 cents to $82.60 a barrel and Dutch TTF spot price fell 6.3% to 55.61 per MWh.
Asian Markets Edged Higher
Asian markets advanced after rate anxieties eased and investors shifted focus to local economic data and corporate earnings.
Stocks in Tokyo advanced despite the worries of stronger yen weighed on market sentiment.
The Nikkei 225 index increased 0.2% to 27,402.05 and the yen strengthened to 127.05 against the U.S. dollar.
Benchmark indexes in China held steady ahead of a slew of corporate earnings next week.
The Shanghai Composite index increased 0.75 points to 3,285.67 and the Hang Seng Index fell 0.5% or 113.82 points to 21,958.36.
At least 89 e-commerce startups in China closed down in 2022, according to a report published by Linkshop.com.
Weak consumer spending, rising online fraud and poor customer service were the leading three reasons for corporate failures.
Last week, the Ministry of Commerce in China said e-commerce grew by 4% to 13.79 trillion yuan or $2.04 trillion.
Adani Group stocks accelerated decline for the second week in a row on the worries of regulatory hurdles and closer scrutiny to slow down company's efforts in raising capital.
The Sensex index increased 0.4% or 224.16 points to 59,932.24 and the Nifty index edged down 0.03% or 5.90 points to 17,610.40.
The Indian rupee edged lower to 82.15 against the U.S. dollar.
Asian Markets Turn Positive After Rates Worries Eased
Arjun Pandit
02 Feb, 2023
Mumbai
Asian markets advanced after rate anxieties eased and investors shifted focus to local economic data and corporate earnings.
Stocks in Tokyo advanced despite the worries of stronger yen weighed on market sentiment.
The Nikkei 225 index increased 0.2% to 27,402.05 and the yen strengthened to 127.05 against the U.S. dollar.
Benchmark indexes in China held steady ahead of a slew of corporate earnings next week.
The Shanghai Composite index increased 0.75 points to 3,285.67 and the Hang Seng Index fell 0.5% or 113.82 points to 21,958.36.
At least 89 e-commerce startups in China closed down in 2022, according to a report published by Linkshop.com.
Weak consumer spending, rising online fraud and poor customer service were the leading three reasons for corporate failures.
Last week, the Ministry of Commerce in China said e-commerce grew by 4% to 13.79 trillion yuan or $2.04 trillion.
Adani Group stocks accelerated decline for the second week in a row on the worries of regulatory hurdles and closer scrutiny to slow down company's efforts in raising capital.
The Sensex index increased 0.4% or 224.16 points to 59,932.24 and the Nifty index edged down 0.03% or 5.90 points to 17,610.40.
The Indian rupee edged lower to 82.15 against the U.S. dollar.
Movers: 1800 Flowers, Advanced Drainage, Becton Dickinson, Estee Lauder, Humana, Meta, Scotts Miracle, Vista Outdoor
Scott Peters
02 Feb, 2023
New York City
1-800-Flowers.com Inc jumped 15% after the online gifts company reported better-than-expected quarterly results.
1-800-Flowers.com said revenue in the December quarter fell 4.8% to $897.9 million and net income declined to $82.5 million from $88.5 million and diluted EPS fell to $1.27 from $1.34 a year ago.
The company said its quarterly results benefitted from the strength in its gourmet foods and gift baskets business with improving gross margins, as well as an enterprise-wide reduction in operating expenses.
Advanced Drainage Systems Inc plunged 12% to $91.54 after the maker of PVC pipes reported a decline in sales and earnings and lowered its fiscal year outlook.
Advanced Drainage said revenue in the December quarter decreased 8.4% to $655.2 million and net income fell 12% to $83.2 million and diluted EPS declined to 99 cents from 86 cents a year ago.
The company said price increase to cover higher material costs improved its operating margin but the weakness in residential construction in December negatively impacted its filtration and overall business.
Net sales are now expected to be in the range of $2.975 billion to $3.050 billion, lower than the previous estimated range between $3.1 billion and $3.2 billion.
Adjusted EBITDA is now expected to be in the range of $850 to $890 million, lower than the previous estimate of $900 million to $940 million.
Becton, Dickinson & Company declined 1.7% after the medical products maker reported a decline in sales and earnings.
Becton Dickinson said revenue in the December quarter fell 2.8% to $4.6 billion and net income fell 26% to $486 million from $655 million and diluted EPS fell to $1.70 from $1.90 a year ago.
U.S. sales rose 1% to $27 billion but the stronger dollar impacted international sales and declined 7.9% to $1.85 billion.
Estee Lauder Companies Inc declined 1% to $276.96 after the cosmetic company said travel restrictions in Asia and mainland China impacted its business.
Estee Lauder said the fourth quarter revenue declined 17% to $4.6 billion and net income fell 64% to $397 million and diluted EPS declined to $1.09 from $2.97 a year ago.
The company guided full-year fiscal 2023 sales to decline between 5% and 7% and GAAP diluted earnings per share between $4.25 and $4.44.
Humana Inc fell 3.9% to $492.50 after the health insurance company reported higher quarterly loss.
Humana said the fourth quarter revenue increased 6.6% to $22.4 billion and net loss rose to $18 million from $13 million and diluted loss per share increased to 12 cents from 11 cents a year ago.
The company reaffirmed 2023 individual Medicare Advantage membership growth of at least 13.7% or 625,000 and GAAP diluted earnings per share of $27.57.
The company said it repurchased $4.3 billion of its stock at an average price of $464.71 a share and about $1.0 billion is still available for stock buy back as of end of January 2023.
Meta Platforms, Inc soared 18.8% to $181.86 after the social media sites operator reported higher-than-expected quarterly results.
Advertising impressions delivered across all sites increased 23% and the average price per ad decreased 22% from the previous year.
For the full-year 2022, ad impressions increased 18% and the average price per advertising impression fell 16% from the previous year.
Meta Platforms said revenue in the December quarter declined 4% to $32.2 billion and net income fell 55% to $4.6 billion from $10.3 billion and diluted EPS dropped to $1.76 from $3.67 a year ago.
The company estimated first quarter 2023 revenue in the range of $26 billion and $28.5 billion and revised lower its full-year 2023 expenses estimate to between $89 billion and $95 billion from $94 billion to $100 billion.
The company announced a $40 billion stock repurchase plan after completing a $28 billion stock buy back plan in 2022.
The Scotts Miracle-Gro Company increased 1.5% to $81.76 after the company reported wider loss but lower than expected by investors.
Scotts Miracle-Gro said revenue in the December quarter fell 7% to $527 million and net loss rose 30% to $64.7 million from $50 million and diluted loss per share rose to $1.17 from 90 cents a year ago.
Vista Outdoor Inc declined 6.2% to $28.01 after the company appointed a board member as its chief executive officer.
Vista Outdoor said revenue in the December quarter declined 5% to $754 million and net income fell to $65.2 million from $118.1 million and diluted EPS dropped to $1.13 from $2.0 a year ago.
Gary McArthur, a member of the company's board of directors, was appointed as interim Chief Executive Officer replacing Chris Metz and the company said because of its board's "loss of confidence in his leadership for reasons not involving financial reporting or internal controls."
The company is still on track to separate its outdoor and sporting products segments.
U.S. Stocks Rally After Rate Hike On Soft Landing Hopes
Barry Adams
01 Feb, 2023
New York City
Stocks reversed morning losses and soared in the afternoon trading after the Federal Reserve slowed rate hike but signaled more increases to follow.
The Federal Reserve increased its key lending rate at a slower pace but held out for more hikes to combat elevated inflation.
In an unanimous decision, the Federal Open Market Committee raised federal funds target rate range by 25 basis points to 4.50% to 4.75%. the statement from the Federal Reserve showed.
Policymakers have been struggling in deciding the future rate path as the economy cools but labor market conditions remain tight and higher rates have a lagging effect on the economy.
With inflation falling but far from the Fed's desired level and the economy still growing, indicating that the rates are still not restrictive enough to bring down the inflation, making the Fed's balancing act between inflation and employment levels challenging.
Chairman Powell in a press conference after the rate decision stressed that the Federal Reserve is closely watching labor markets data.
With today's rate hike the Federal Reserve has raised rates eight times in the last ten months but inflation has stayed well above the Fed's target rate of 2%.
Some investors have been hoping for the Federal Reserve to pause on the hopes of cooling inflation.
“Given our outlook, I don’t see us cutting rates this year, if our outlook comes true, in a press conference after the decision, Chairman Jerome Powell clarified.
Across the Atlantic, the European Central Bank and the Bank of England are also scheduled to release rate decisions on Thursday.
U.S. Private Sector Job Growth Slowed In January
Private sector job growth slowed more than expected in January, according to a monthly report released by the payment processor ADP Wednesday.
Private sector net job additions declined to 106,000 in January from the upwardly revised 253,000 in December.
The employment in the service sector rose 109,000 after employment in leisure and hospitality expanded.
"In January, we saw the impact of weather-related disruptions on employment during our reference week. Hiring was stronger during other weeks of the month, in line with the strength we saw late last year," said ADP chief economist Nela Richardson.
Jobs in large businesses increased 128,000 and employment at mid sized businesses advanced 64,000 jobs, while employment at small businesses declined 75,000, the ADP report showed.
The U.S. Labor Department is scheduled to release its monthly non-farm payroll report on Friday and economists are anticipating job growth to slow to 175,000 from 223,000 in December.
Jobless rate in January is expected to advance to 3.6% from 2.5%.
U.S. Indexes Surge After Rate Decision
Benchmark indexes soared after the Federal Reserve raised rates as expected and signaled more rate hikes to follow at next meetings.
The S&P 500 index closed higher 1.2% to 4,119.21 and the Nasdaq Composite index advanced 2.0% to 11,816.32
Crude oil decreased $2.04 to $76.83 a barrel and natural gas futures fell 19 cents to $2.48 a thermal unit.
The yield on 2-year Treasury notes declined to 4.10%, 10-year Treasury notes inched lower to 3.41% and 30-year Treasury notes decreased to 3.57%.
European Markets Anticipate Aggressive Rates Hikes
European markets struggled to advance ahead of crucial rate decisions and investors reacted to local corporate earnings reports in cautious trading.
Euro Area Inflation Eased In January
The Euro Area inflation in January declined to an eight-month low to 8.5% from 9.2% in December.
Core inflation remained stable at 5.2%, Eurostat said in a preliminary statement on Wednesday.
Looking at the inflation components, inflation slowed across all factors but remained elevated.
Annual inflation rate for energy declined to 17.2% from 25.5% in December, followed by food, alcohol & tobacco eased to 14.1% from 13.8%, non-energy industrial goods to 6.9% from 6.4% and services to 4.2% from 4.4%.
The preliminary report used the estimate for the German inflation data after the Federal Statistics Office faced technical glitches and could not deliver the information before the release of this report.
European Indexes Trade In Tight Range
The DAX index increased 0.5% to 15,195.85, the CAC-40 index gained 0.2% to 15,195.85 and the FTSE 100 index edged up 0.01% to 7,772.77.
Euro Advanced ahead of Expected ECB Rate Hike
The euro inched higher to $1.089, the British pound advanced to $1.232 and the Swiss franc traded up to 91.68 U.S. cents.
Crude Oil Held Steady
Brent crude oil price decreased to 74 cents to $84.67 a barrel and the Dutch TTF natural gas futures rose 3.4% to €59.31 per MWh.
Europe Movers
Novartis AG declined 2.6% to 80.83 Swiss franc after the Swiss pharmaceutical company reported a sharp decline in fourth quarter profit.
Net sales in the December quarter fell 4% to $12.7 billion from $13.2 billion and net income plunged 91% to $1.5 billion from $16.3 billion a year ago.
Excluding the impact of Roche income, net income rose 2% and earnings per share rose 7% in constant currencies.
Novartis agreed to sell 53.3 million (approximately 33%) Roche bearer shares in a bilateral transaction to Roche for a total consideration of $20.7 billion in November 2021.
Vodafone Group fell 2.1% to 91.18 pence after the British telecom said growth slowed in its latest quarter.
Revenue in the fiscal third quarter ending in December declined 04% to €11.63 billion from €11.68 billion largely on the account of weakness in its German business.
The telecom operator reiterated its fiscal year 2023 guidance for adjusted EBITDA and leased assets between €15.0 and 15.2 billion and adjusted free cash flow of €5.1 billion.
Hannover Re decreased 5% to €176.85 after the German reinsurance company said it has increased its 2023 major net loss to €1.725 billion to account for higher net loss expectations from natural disasters.
Halma Plc increased 1.4% to 2,178.64 pence after the fire detection safety company agreed to acquire Bradford, UK based Thermocable (Flexible Elements) Ltd for £22 million.
Thermocable in the year ending in March 2022 generated sales of £6 million with return on sales above the "Halma's target range of 18% to 22%."
Asian Markets
Asian markets paused ahead of rate decisions in the U.S. and Europe and a private survey showed manufacturing in China shrank at a slower pace in January but stayed strong in India.
The Nikkei 225 index increased 0.07% to 27,346.88 and the yen edged lower to 129.57 against the U.S. dollar.
The Shanghai Composite Index increased 0.9% to 3,284.92 and the Hang Seng index advanced 1.1% to 22,072.18.
India's Budget to Expand Rail and Highway Networks
Stocks in Mumbai traded mixed after the central government released the Union Budget with a focus on improving transportation investment and accelerating manufacturing industry growth.
Central government estimated spending in fiscal year 2024 ending in March to increase 7.5% to ₹45 lakh crore, including ₹5.94 lakh crore for defense and increase railways spending by 48% to ₹2.4 lakh crore.
The Finance Ministry is expecting the fiscal year 2024 nominal growth to slow down to 11% from the estimated 15.4% in the fiscal year 2023.
The Sensex in Mumbai traded higher 0.3% or 158.18 points to 59,708.08 but the Nifty index declined 0.3% or 45.85 points to 17,616.30.
The Indian rupee edged slightly lower to 81.74 against the U.S. dollar.
After the market closed, Adani Enterprises announced its plan to cancel its $2.5 billion stock offering in a filing with the stock exchange.
In a stunning setback, billionaire Gautam Adani decided to pull the plug after the stock resumed its decline for the second day following the critical report from Hindenburg Research.
"However, today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct.
The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO," the company said in a filing with the Bombay Stock Exchange.
The offering cancellation is not expected to have any material near-term impact on the company's operations but the rise of the company in recent years was seen by many as the emergence of India's economy on the global stage.
"Our balance sheet is very healthy with strong cash flows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans," Chairman Gautam Adani added in the statement.