Daily stocks in the news

AT&T (T) is facing a series of setbacks that have caused its shares to plummet to their lowest levels since the 1990s. A recent Wall Street Journal (WSJ) article shed light on the health risks posed by toxic lead cables that AT&T and Verizon have failed to remove from underground. Following the article's publication, the stock experienced a sell-off, and prominent analysts downgraded their ratings on AT&T, expressing concern over potential class action lawsuits and government penalties. The WSJ article cited a senior AT&T manager, John Malone, who revealed that employees working with the lead-sheathed cables had shown elevated levels of metal in their blood, indicating lead exposure. The dangers of lead exposure include kidney problems, heart disease, and reproductive issues. Moreover, the soil surrounding these cables was found to retain a significant amount of the released lead, posing environmental hazards. The extent of the problem remains uncertain, but the WSJ believes there are over 2,000 lead-covered cables throughout the country, some of which belong to AT&T. AT&T, however, has defended its actions, stating they have followed relevant laws and regulations in managing these outdated cables. This situation has added to AT&T's existing financial struggles. While the company broke a string of revenue declines in Q1, its growth remained modest at just 1.4%. Additionally, a significant obstacle for the company has been its staggering debt of $137.5 billion, making investors question the sustainability of its hefty dividend yield.

On the other hand, Tesla (TSLA) has received a boost in its stock value after announcing the production of its first Cybertruck at its Austin, Texas facility. The Cybertruck, originally slated for production in 2021, has faced delays, but the company expects to begin deliveries in Q3. Market participants are optimistic about its potential as a growth catalyst, with strong demand anticipated. However, Tesla's automotive gross margin may be affected by low production rates and price-cutting strategies. The company's margins have already been under pressure, and the introduction of the Cybertruck may exacerbate this situation. Nevertheless, investors are looking ahead to FY24 when Cybertruck production is expected to be in full swing, and analysts foresee a significant boost in earnings growth. There are still uncertainties surrounding the Cybertruck, such as its pricing, which remains undisclosed. With competition heating up in the electric vehicle market, Tesla may face challenges in meeting delivery expectations for the Cybertruck, especially if it comes at a higher price. Overall, Tesla's milestone in Cybertruck production marks a positive development for the company, signaling potential growth opportunities.

Previous update:

Citigroup (C) reported disappointing second-quarter results, falling behind its peers in the banking industry. While JPMorgan Chase (JPM) and Wells Fargo (WFC) saw significant year-over-year earnings per share (EPS) growth of 58% and 69%, respectively, Citigroup's earnings declined by 39%. The Institutional Clients Group (ICG), which includes the trading and investment banking businesses, experienced a 9% decline in revenue compared to the previous year. The Markets and Banking businesses within ICG faced weaknesses, with fixed income and equity trading revenues decreasing. Citigroup attributed this decline to uncertainty surrounding the debt ceiling, causing clients to remain cautious. On the consumer side, Citigroup performed better, supported by higher interest rates and strong loan growth in U.S. Personal banking. However, the company's investment banking and trading businesses weighed it down, leading to underperformance compared to JPMorgan Chase and Wells Fargo. The bank expressed concerns about the challenging IPO market. Looking ahead, Morgan Stanley (MS) and Goldman Sachs (GS) are scheduled to report earnings soon, and their results may be affected by similar industry trends.

JPMorgan Chase (JPM) reported significant earnings per share (EPS) upside, surpassing expectations and easing investor concerns. The bank has consistently exceeded EPS estimates by $0.40 or more for the past three quarters. JPMorgan Chase also provided positive insights on the macroeconomic outlook for the second half of 2023. The Consumer & Community Banking (CCB) segment saw a 37% year-over-year increase in revenue, driven by strong performance in new checking accounts and card loans. Banking & Wealth Management was the standout segment, with revenue surging by 68% due to higher deposit margins. The Corporate & Investment Bank (CIB) segment experienced modest 4% revenue growth, with markets revenue declining but commercial banking and asset & wealth management showing strength. JPMorgan Chase expressed optimism about the resilience of the U.S. economy, noting healthy consumer balance sheets and strong job growth. However, the bank also highlighted concerns about core inflation, fiscal deficits, and geopolitical tensions. Overall, JPMorgan Chase's robust second-quarter results, coupled with positive comments on the consumer and the economy, were well received by investors and bode well for other banks reporting earnings in the coming days.

UnitedHealth (UNH) faced concerns about its medical care ratio surpassing the high end of its FY23 guidance range, leading to a sell-off in its stock. However, the company's second-quarter earnings report presented a solid beat-and-raise performance. UNH's costs were better than anticipated, and revenue grew nearly 16% year-over-year, marking its strongest growth in over five years. The medical care ratio increased to 83.2% in the second quarter, in line with expectations. The increase was primarily driven by the deferred care being addressed, particularly in the Medicare Advantage business, and increased claims expenses related to mental and emotional health issues following the pandemic. UNH highlighted that the unwinding of pent-up demand for care is primarily occurring on the outpatient side, which carries lower costs. The company's top-line growth was well-balanced across its segments, with Optum, its data/analytics, pharmacy care services, and healthcare delivery business, seeing a 25% revenue increase. UNH delivered solid second-quarter results and adjusted its full-year EPS guidance range slightly upward. The report eased concerns about escalating medical care costs impacting UNH's margins and earnings.

Previous update:

Disney (DIS) has extended Bob Iger's tenure as CEO for two more years until December 2026. Iger's return to the CEO role last year was met with anticipation that he would address the challenges faced by Disney, particularly the losses in the streaming business, including Disney+. However, the difficulties have proven to be more significant than anticipated, leading to mixed financial performance and a 2% stock decline. Iger has improved profitability for the direct-to-consumer segment, but the linear networks segment continues to be problematic. As part of the company's transformation towards a streaming model, Disney is considering selling some of its TV assets that may no longer align with its core business. The cord-cutting trend and reduced advertising spending have further impacted the linear networks segment's revenue and operating income. On the other hand, the direct-to-consumer segment, including Disney+ and Hulu, is benefiting from the growing demand for streaming services. Disney is also in talks to acquire the remaining stake in Hulu from Comcast. The purchase price is expected to be significantly higher than the initial $9 billion, possibly reaching $35-$40 billion. Despite the challenges, Disney remains committed to its streaming transformation, with Bob Iger leading the charge over the next two years.

Conagra (CAG), the consumer-packaged goods company, experienced an initial increase in its stock following better-than-expected earnings in Q4. However, the stock has since cooled off, reflecting the struggles faced by the company this year, with a YTD decline of nearly 15%. Conagra managed to achieve a slight beat on its bottom line in Q4, but revenue growth decelerated. The company is facing challenges in volume recovery, as consumers are buying fewer items due to higher prices. Factors such as increased travel and declining contribution from Ardent Mills are affecting food-at-home consumption. Conagra's adjusted EPS forecast for FY24 fell short of analyst estimates, and its organic sales growth projection was relatively low. Despite the headwinds, Conagra's gross margins improved in Q4, driven by its brand investments and market share gains. FY24 may be a challenging year for Conagra if the current trends, including reduced basket sizes, continue.

Cintas (CTAS), the uniform supplier and facility services provider, reported solid results for its fiscal year-end. The company achieved a double-digit EPS beat in Q4, with revenue exceeding expectations. However, its FY24 guidance was considered somewhat muted. Cintas has a history of consistently beating earnings expectations and benefiting from cross-selling opportunities. Its gross margins improved, and it expects non-fuel costs to decrease in the next quarter. Despite the lower-than-expected guidance, investors remain positive about Cintas due to its consistent performance and ability to capitalize on outsourcing trends.

Delta Air Lines (DAL) delivered an exceptional Q2 earnings report, surpassing expectations and experiencing record operating revenue and income. The strong demand for air travel, driven by an affluent customer base and increased consumer spending on services, has outperformed macroeconomic headwinds. Delta saw growth in international passenger revenue, domestic corporate travel, and other segments. After facing rising costs, especially for labor and fuel, Delta has reached an inflection point with non-fuel costs expected to decrease in Q3. The company raised its EPS guidance for FY23, projecting strong earnings growth. Delta's performance sets a positive tone for other airlines, such as United Airlines, American Airlines, and Southwest Airlines, which are scheduled to report earnings soon.

PepsiCo's (PEP) Q2 report provided a bounce for the stock after concerns about weakening volumes and competition from private labels. The company demonstrated consistency and resilience, beating earnings estimates and achieving sales growth. Despite high prices, PepsiCo's brands maintained their strength, resulting in minimal trade down by consumers. Price hikes were accepted without significant pushback, leading to increased revenue. Supply chain disruptions have eased, leading to improved operating margins. PepsiCo raised its FY23 guidance, indicating confidence in its brands' ability to withstand economic conditions. The positive results from PepsiCo's report bode well for its competitor Coca-Cola, which is set to report earnings later this month.

Previous update:

Beyond Meat's (BYND) expansion of its Beyond Steak product to multiple retailers has contributed to its continued success. The plant-based meat supplier has announced that Whole Foods Market, Wegmans, Meijer, and other retailers will now carry the product, in addition to existing availability at Kroger, Walmart, Target, and other major retailers. Beyond Meat has been making headlines recently with new product announcements, including its partnership with Costco and the introduction of a new version of Beyond Sausage. While today's news may not have a significant impact on the stock price, it could still trigger meaningful fluctuations given the high short interest. Beyond Meat has been experiencing a strong recovery, with its stock soaring over 55% since the disappointing Q1 results in May. Although it still trades below its 52-week high, the company has been steadily working towards achieving its long-term goals, such as restoring growth at strategic partners.

Domino's Pizza (DPZ) has seen a significant increase in its stock price following the announcement of a partnership with Uber. The deal allows US customers to order Domino's food through the Uber Eats and Postmates apps, while the delivery will still be handled by Domino's drivers. The partnership aims to reach a new segment of customers and generate incremental delivery orders. The initial rollout will take place in four pilot markets, with nationwide ordering expected to be available by the end of 2023. This surprising move by Domino's, which had previously resisted using third-party delivery aggregators, is seen as an attempt to boost its delivery business and tap into Uber's large customer base. Investors have responded positively to this shift in strategy.

NVIDIA (NVDA) is considering becoming an anchor investor in Arm's upcoming IPO, signaling its continued interest in the semiconductor company despite abandoning its acquisition plans. NVIDIA aims to turbocharge its AI capabilities by investing in Arm's IPO, which would allow it to maintain a distance that satisfies regulators' concerns. Arm, a dominant force in the semiconductor industry, designs chips that power devices and products from major companies like Apple, Samsung, and Qualcomm. While the valuation for Arm's IPO is still under discussion, NVIDIA's previous bid for the company provides some indication of a likely valuation range. A successful IPO for Arm, backed by NVIDIA and possibly Intel, could have significant implications for the IPO market, potentially igniting further activity.

Alphabet's (GOOGL) stock has experienced a solid increase today, driven in part by a favorable CPI report. However, an interesting development emerged last night as Google decided to cancel its plans for an AI-powered mobile chatbot application targeting Generation Z users. This decision highlights the challenges that tech firms face in monetizing large-language models (LLMs) like ChatGPT. Google's focus remains on maintaining its competitive edge over rivals like Microsoft, which has implemented a chatbot into Bing. While Google continues to dominate the search engine market, the rise of LLMs poses a potential threat to its search dominance. Other companies, such as Wix.com and Adobe, have incorporated AI features into their applications to adapt to the changing landscape. Google, with its strong market position and Chrome browser, has the potential to monetize its AI offering, Bard, by attracting users to its search platform and selling the API to enterprises for integration into Chrome. Despite potential challenges, Google's market positioning suggests it will ultimately overcome open-source threats and successfully monetize AI.

Previous update:

Roku (ROKU) is experiencing a surge in its stock price after announcing a partnership with e-commerce company Shopify (SHOP). This partnership has the potential to boost Roku's platform revenue, which has been declining. The stock has seen a positive momentum with a 20% increase this week, reaching its highest levels since August 2022. Roku's recent rebound can be attributed to its better-than-expected financial results and the belief that demand for CTV ads has reached its lowest point. Additionally, Roku has launched its own TVs, reducing its reliance on third-party OEMs, and has expanded its partnerships to drive more revenue to its platform. The partnership with Shopify will allow Roku viewers to make purchases from Shopify merchants directly through Roku Action Ads, potentially providing a significant boost to Roku's ad revenue. However, it may take some time for the full impact of this partnership to materialize, as only a few Shopify partners have signed on so far. Nonetheless, investors are optimistic about Roku's top-line growth and margin improvement.

Travel + Leisure Co (TNL) is experiencing positive trends and offers an attractive dividend yield and reasonable valuation. TNL, a recent spin-off from Wyndham, focuses on vacation ownership (timeshares). While alternative accommodations like Airbnb have gained popularity, vacation ownership remains a significant industry, with TNL having over 800,000 owners and generating $3.15 billion in revenue last year. TNL is well-positioned to weather the current economic climate, as consumers prioritize experiences over material goods. Companies that provide enjoyable experiences have demonstrated resilience, benefiting TNL. TNL's April trends resembled the strong demand seen at the end of 2022, and other companies like Dave & Buster's and Delta Air Lines have also experienced positive results due to the focus on experiences. TNL has been targeting a younger demographic and has relatively low exposure to younger generations, which could be a net positive as younger consumers face financial pressures. TNL's impressive margins and its focus on higher credit score consumers have contributed to its success. With macro uncertainty, organizations providing value and memorable experiences are expected to continue operating well, providing a tailwind for TNL.

WD-40 (WDFC) has returned to double-digit sales growth in Q3 after experiencing disruptions from price hikes. The company reported a significant EPS beat and approved a new $50 million share repurchase plan, leading to a spike in its stock price. Total revenues increased by 14.6% year-over-year, with Asia-Pacific showing exceptional growth due to improved market conditions. The Americas remained resilient, and the company's core offerings saw double-digit growth. Although EMEA lagged, it experienced a rebound in sales. WDFC's volumes have likely bottomed out after the initial backlash to price hikes, and the company is optimistic about the growth potential of its multi-use products. With a solid earnings outlook and a focus on constant currency growth, WDFC is well-positioned for future success.

PriceSmart (PSMT), a warehouse club operator, initially saw a decline in its stock price after issuing mixed Q3 results. However, the shares quickly rebounded and reached new 52-week highs. While revenue fell short of expectations, adjusted EPS exceeded expectations for the fourth consecutive quarter. PSMT is seeing strength in the food category but is experiencing weaker demand for discretionary products due to inflationary pressures. The company has been managing expenses and investing in efficiencies to drive profitability. The announcement of a new $75 million share repurchase program has also generated positive sentiment. PSMT's membership growth and renewal rates remain strong, indicating consumer interest in saving money through bulk purchases. With plans for real estate expansion and a focus on improved operations, PSMT is well-positioned to benefit from the warehouse club category's strength across Central America.

Previous update:

MercadoLibre (MELI), the leading e-commerce site in Latin America, experienced a decline in its stock price as it was downgraded by BofA Securities from a "Buy" to a "Neutral" rating. The downgrade caused the stock to gap down, and the shares are currently trading below their 200-day moving average. Despite this, the stock may find support if it closes above this indicator. The downgrade is notable because MercadoLibre has seen few analyst changes in the past year, and the two ratings it received in 2023 were both downgrades, suggesting potential challenges ahead. However, it is believed that the sell-off may be an overreaction, particularly for long-term investors. MercadoLibre operates in 18 countries, covering a vast area larger than the United States. Its three largest markets are Brazil, Mexico, and Argentina, which collectively contribute over 95% of its total revenue. While many of the countries it serves are facing economic difficulties, particularly inflation, Argentina is currently experiencing severe inflationary pressures. The company managed to achieve significant Gross Merchandise Volume (GMV) growth in the first quarter of the year, excluding currency fluctuations. Argentina's exceptional GMV growth was largely driven by inflation, but MercadoLibre also saw a reversal of the previous year's trend in terms of items sold, with a 3% expansion in the quarter. Other regions, such as Chile, also showed positive trends in GMV growth. One of the factors contributing to MercadoLibre's resilience is its focus on consumable goods, including groceries, and its efforts to enhance first-party sales. Additionally, the company's financial services business, Mercado Pago, experienced strong user growth in the first quarter, as it expanded into offering loans and payment processing. This expansion has helped create a strong economic moat for the company, as navigating regulatory hurdles across multiple countries is challenging for potential competitors. However, there are risks associated with MercadoLibre's business. Amazon is a competitor in the Latin American market, and its proven dominance in the United States poses a potential threat to MercadoLibre's position in several markets. Furthermore, being an emerging market, Latin America is susceptible to geopolitical and macroeconomic concerns. Additionally, cross-border selling and maintenance can be expensive and lead to significant volatility in financial performance. Despite the risks, MercadoLibre has a strong track record in many Latin American markets, providing it with an advantage over external competitors like Amazon. The company has also weathered various geopolitical and macroeconomic challenges in the past, demonstrating its ability to overcome obstacles. Moreover, MercadoLibre has been working on improving its distribution network and scaling up its operations to better serve multiple countries.

In another industry, FMC Corp. (FMC), a major supplier of insecticides, herbicides, fungicides, and crop nutrition, faced significant pressure after lowering its guidance. The company experienced a significant reduction in expected revenue and adjusted EBITDA for the second quarter, causing concerns among investors. FMC attributed the lower-than-expected volumes to a sudden reduction in inventory by its channel partners, which became evident towards the end of May and persisted throughout the quarter. This industry-based guidance cut raises concerns for other fertilizer and nutrient stocks as they head into the upcoming earnings season.

On a different note, Helen of Troy (HELE), a manufacturer of houseware and beauty products, witnessed a significant increase in its stock price following better-than-expected earnings in the first quarter. The company's restructuring efforts, known as "Project Pegasus," and minor operational adjustments contributed to improved sales. While overall demand remained weak during the quarter, some of Helen of Troy's Leadership Brands outperformed the market and gained market share. Cost reduction initiatives resulted in improved gross margins and a sizable earnings beat. The company remains cautious about the economic outlook and maintains a focus on reducing inventory and aligning orders with consumer demand. Despite the positive results, caution is advised as the company moves forward, given the challenges faced by the industry and its competitors' acknowledgment of a challenging economy.