Earnings Season
Earnings Season 11/21/22
Why read Earnings Season?
Every sales and marketing pro says they want to be an advisor to executives. But, over the years I’ve heard time and again, “I don’t know how to be relevant”. Well here is the thing. Execs don’t think like sales and marketing people, they think like investors, and their language is the language of finance.
Earnings season is designed to help you unpack the business and financial information of the past week, and I don't mean the CNBC headlines. I want to help you pick up an insight, quip or bit of knowledge that you can share with your customers and prospects. To give you that bit of altitude you need to rise above just another product demo or cold email. ?
In every issue:
At the end of this issue: some ways you can incorporate these tips into your business!
-Chris Schaum
758 Companies Released Earnings Information Last Week.?
The Highlights:
Walmart: Market Cap: $400B EPS $1.50 Outperform by 13.64% (This means the stock outperformed what Wall Street analysts thought would happen)
Why we care: Walmart is the leader in one-stop shopping in the US and Mexico. They provide a wonderful view of the economy and consumer sentiment.?
Doug McMillon CEO noted “We see this (change in customer behavior) in our grocery business, in stores and online, in key markets like the U.S. and Mexico. Customers that came to us less frequently in the past are now shopping with us more often, including higher-income customers.”?
So they are both growing their customer base, and the frequency of which customers shop. I wonder where all these new customers use to shop?
John Rainey the CFO said “For example, we've continued to gain grocery market share from households across income demographics, with nearly three-quarters of the share gain coming from those exceeding $100,000 in annual income”
Target: Market Cap: $79B EPS?$1.54 Miss -28.37% (a miss is off of what wall street analysts thought would happen)
Why we care: For years, Target has earned the reputation of being the go-to shopping spot for the middle to upper middle class…unlimited refills on Starbucks while you shop, what’s not to love? Speaking of coffee, Target is betting more on coffee by testing? the “ability for a guest to order a beverage from Starbucks on their way to pick up their drive-up order.”
Remember when Walmart mentioned they’re seeing more higher-income shoppers? They must come from somewhere, and that may be Target. Brian Cornell CEO said “Q3 profitability came in well below our expectations, driven by several factors. First and foremost, we faced an unexpected gross margin rate headwind from a higher than expected mix of promotional sales, as guests moved away from full-price purchases.”
Target customers are shopping bargains, which means, Target isn’t earning as much. Plus, theft is increasing. According to Christina Hennington EVP “While already soft, sales trends in our discretionary categories softened even more in the last few weeks of the quarter, a trend that's persisted into the first few weeks of November.”
There is one important thing I want to highlight. Target was so accustomed to consumers spending at full price that it was baked into their strategy. BUT, consumers' attitudes are shifting, which is affecting Target’s strategies, decreasing their revenue.?
Tyson Foods Market Cap: $23 Billion. Earnings Per Share (EPS) $1.63. Miss by -4.12%
Why we care: Protein AKA meat is Tyson’s primary business and they believe demand stays steady. Some economists feel that in a recession, we will see a big pullback in how much meat people eat.?
Donnie King, CEO, outlined their growth strategy- “Built on five key pillars: transforming our team member experience, growing with our customers to service demand, investing in digital and automation to drive operational excellence, restoring competitiveness in our chicken segment, and leveraging our financial strength to invest in the business and return cash to shareholders.”
Monday.com: Market Cap: $4.6B. EPS ($.51) Miss by -57.5%
Why we care: The rapidly growing CRM has entered a space that was once thought to be impossible, Enterprise. That group is growing 116%, here’s looking at you Salesforce.?
Co-CEO Eran Zinman highlighted “Some of the other competitors avoid their marketing spend, which allowed us to grab a larger percentage. And also, this translates into the actual deals. And the deals that we do see competition, which is only 30% -- 70% we will see still no competition. In the 30% that we do, we see less competitors.”
That's right, by marketing well, monday.com is seeing less competitive deals. Talk about a valuable nugget if you are in the Martech space.
Home Depot: Market Cap: $319B Outperform by 3.16%
Why we care: Home Depot is a business that practically screams the American dream—the ability to build, design, and/or maintain the home of your dreams.??
When it comes to talking points for executive conversations, HD never disappoints. Ted Decker CEO highlighted that “Sales for the third quarter were $38.9 billion, up 5.6% from the same period last year. Comp sales are up 4.3% from the same period last year.”?
HD is also looking all the way through its customer value chain to contractors to rapidly grow their business. “Our pros tell us that finding qualified, skilled labor is a pain point in their business. To that end, we recently announced a Path to Pro platform, connecting skilled tradespeople with hiring trades professionals. This unique and proprietary platform is available at no cost to all Pro Xtra members. It already contains thousands of candidates, and pros have begun posting their open jobs.”
Alibaba: Market Cap: $209B EPS $1.5 Outperform by 9.49%
Why we care: The Chinese tech AND retail giant leads the way in giving the western world a view on the eastern economy and business climate.
Daniel Zhang CEO said: “We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.
Despite these challenges, Alibaba's non-GAAP EBITA increased 29% year-over-year as we continue to enhance our operational efficiencies. This is the result of our pursuit of high-quality development and more importantly, demonstrates the resilience of the Alibaba business ecosystem.”
One question that came up during their earnings call: the potential impact that a shift in the pandemic and the underlying restrictions in China would have on their business. The answer, in detail from Daniel Zhang, is well worth the detailed read.
“Well, thanks very much for what really is a very good question. Certainly, I'm sure that, we all hope to see an end to the pandemic and a complete return to normalcy for society, for the economy, for our own daily lives. There's nothing that people will want more than to get back to normal, and that would be good news for Alibaba and it would be good news for everyone. Now certainly, Alibaba's businesses are diverse and would be impacted in different ways.
Talking about the consumption part of our business first. I think most importantly, were there to be an end to the pandemic and a complete return to normal life – a normal work, in particular, that would result in a big boost to consumer confidence, and that would certainly be very positive for the Chinese economy as a whole and also for companies like Alibaba.
Consumption is an important engine of economic growth. But for consumers to spend, they need to have confidence and they need to have stable expectations, including stable expectations regarding their own future income. So we're the pandemic to end, the controls to end that would, I believe, result in a big boost to that kind of confidence, resulting in higher consumer spending and also further stimulating the economy. So good news all around.
Secondly, I would say that you could expect to see an impact on the consumption mix in the context of the pandemic and with all the uncertainty, there's been an increased focus on nondiscretionary consumption on daily essentials, food, groceries, things of this nature. And you've, of course, seen a lot of demand for stocking up with people worried about potential supply disruptions, lack of access to necessities and essentials. So a lot of demand for people to stock up.
Now, of course, were the situation to change, were the pandemic to ease, then I think you could certainly expect to see a corresponding increase in discretionary type of spending. So that would be a change we could expect to see.
Secondly, if we look at our 2B businesses, for example, our cloud computing. I think certainly, all enterprises across the board understand that digitalization is the future, but at the same time, how much they will invest in any period does come down to their own current business performance and their expectations of the future.
So companies have to decide how much they're willing to invest and they have to be sure they're living within their means. So, I think, after the pandemic is over, things have returned to normal, we would expect to see companies gaining more confidence in their future growth prospects and being willing to devote more resources to digitalization. I think that would be good news for our cloud business.
So for Alibaba, I do think it's important that we always be looking to the future, and of course, hold out hope for the future. In terms of our consumer oriented categories and offerings, we're already very complete and we will continue to look forward to rolling out and developing new categories going forward at the end of the pandemic and not just goods, but also services, including travel and tourism services.
At the same time, we need to continue to maintain a proactive approach to developing new digital offerings and solutions and rolling out cloud based solutions that help and empower customers to generate data, to leverage their data and to extract value from their data. And I think this will all be very positive going forward.
Want to learn even more, check out my course:
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This Week: 172 Companies are filing their earnings.
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Highlights:
Dell: $31B market cap.
Why we care: The US tech giant is one of the bell weathers of corporate IT spend. If you take, Dell, Apple, Salesforce and Oracle…. You have a massive view into IT spending and corporate priorities.?
Zoom: $18B market cap.
Why we care: One concept. Phone service. Zoom is trying to build a new revenue stream after seeing major competition in their primary video conference business.?
Autodesk: $50B market cap.
Why we care: This is one of the most important businesses you probably have never heard of. Autodesk helps build some of the biggest things in the world. Autodesk can give you a big insight into large construction projects. Highways, skyscrapers, industrial facilities—you name it.?
Dollar Tree: $37B market cap.
Why we care: Walmart can’t be everywhere, and where they can’t be…there is Dollar Tree. Talk about a health check for the “flyover” parts of the country.
Deere and Company AKA John Deere: $122B market cap.
Why we care: Farming, construction, landscaping, and a LOT more run on Deere, John Deere. How companies and individuals invest in large capital equipment purchases like John Deere says a lot about how businesses view their future. Plus, a lot of people are looking for updates in the “right to repair” debate.
Conferences Coming Up:
Why conferences are important: When a company gives a presentation at a conference, oftentimes they are made public. If you cover these sectors, you’ll want to track these.
Information Technology & Communication Services?
November 28: Credit Suisse 26th Annual Technology Conference ?
December 5: Raymond James Technology Investors Conference ?
December 5: UBS Global Media, Telecoms Communications, Technology (TMT) Conference ?
December 7: Barclays Global Technology, Media and Telecommunications Conference?
Health Care
November 29: Piper Sandler 34th Annual Healthcare Conference ?
November 29: Evercore ISI 5th Annual HealthCONx Conference
Consumer Discretionary & Consumer Staples?
November 29: Barclays Eat, Sleep, Play Conference ?
November 30: Jefferies Sports Betting & iGaming Summit ?
Financials & Real Estate
November 29: UBS Global Real Estate CEO/CFO Conference ?
Industrials
November 30: Credit Suisse 10th Annual Industrials Conference ?
Energy & Utilities
November 29: Goldman Sachs Carbonomics CEO Day ?
Materials
November 29: Bank of America European Chemicals Conference ?
November 29: Bank of America Global Research Materials & Infrastructure Conference
Investor Specific & Multi-Sector
November 28: German Equity Capital Market Forum, Deutsche Borse, FFM ?
November 28: UBS Global Emerging Markets One-on-One Conference ?
December 1: Barclays European Investment Grade Credit Conference ?
Government Data Releases Next week:
Why we care: While alternative data is on the road to taking over, nothing moves the market like government data. Understanding this data can help craft your messaging and deals.?
November 21: Chicago Fed Activity
November 23: Durable Goods
November 23: Core Capital Equipment Orders
November 23: Jobless claims
November 23: New Home Sales
How to turn this information into MONEY.
Thanks for reading!
If you have a tip or feedback, I’d love to hear it.
Head of Partnerships @ Martus | The ERP- and sector-agnostic budgeting, reporting and forecasting solution | The Thunderbroom changed my lIfe - ask me how!
2 年Excited that you're sharing this knowledge, Chris. Much appreciated!