Stocks in the news
Visa's Q2 results showed that the company has benefitted from resilient consumer spending, with strong demand for travel, dining, and entertainment leading to a 10% increase in U.S. payment volume and a 32% increase in cross-border volume (excluding Europe). However, payment volume growth began to tick lower in March, with a 2% decrease in U.S. ticket size mainly to blame for the deceleration in growth. Visa expects slower volume trends to persist through the rest of the quarter and is lapping peak fuel prices from last summer in Q3, which will negatively impact the volume growth rate. The CEO sees a long runway for growth and intends to bring more buyers onto its network.
Meanwhile, Chipotle Mexican Grill (CMG) exceeded its high-single-digit comp growth forecast, serving up comps of +10.9% in Q1. Q1 earnings of $10.50 per share crushed estimates and marked CMG's widest beat in over five years. Transaction trends were positive throughout Q1, and CMG benefited from a recovery in the lower-income consumer. Restaurant-level margins expanded by roughly 490 bps to 25.6%, fueled by higher sales, labor efficiencies, and continually lower avocado prices. CMG expects positive momentum to continue into Q2 and FY23, with input costs likely to remain stable over the next quarter. As a result, the company projects Q2 and FY23 comp growth in the mid-to-high single-digit percentage range and expects to open 255 to 285 new restaurants, including 10 to 15 relocations to add a Chipotlane (drive-thru). Overall, CMG's commitment to strengthening its operations, targeting areas of inefficiency, and implementing ideas to keep guests and employees happy manifested in the excellent top and bottom-line figures in Q1, lighting a fire under the stock.
Microsoft reported higher-than-expected earnings per share (EPS) in Q3 (Mar), the largest EPS beat in the past eight quarters, which boosted its stock price by 7.5%. Azure, which grew +27% (or +31% in constant currency), showed a slowdown in growth from the previous quarters but still performed better than expected given the macro headwinds. Teams usage reached an all-time high, LinkedIn saw record engagement, and gaming set monthly active user records. Commercial revenue was up 19% in constant currency, and Microsoft saw share gains in various areas. The company is in the process of acquiring Activision Blizzard, but the UK Competition and Markets Authority (CMA) has said it will block the deal, which could jeopardize it.
Alphabet's Q1 earnings report showed a stabilization in ad spending, a surprise turn to profitability in the Cloud segment, and an improvement in the operating margin by six percentage points. YouTube ad revenue decreased nearly 3%, but the company announced an $70 billion stock buyback authorization. AI is now Google's primary focus, and it will be deployed across all its product areas, including the advertising business.
Texas Instruments exceeded earnings expectations in Q1 but its flat Q2 outlook has left investors concerned about demand. The company's two primary end markets, industrial and automotive, grew as forecasted, while its personal electronics business struggled. However, investors may have been expecting better results, especially within TXN's primary industrial end market, following Analog Devices' positive report in mid-February. Despite seeing flat growth sequentially in the industrial market, TXN did not comment on the level of stability and strength within this market. TXN's Q2 guidance is similar to its Q1 forecast, with adjusted EPS of 1.68-1.88 and revenues of $4.17-4.53. The company did not provide specifics surrounding end markets, which may be contributing to concerns about demand. Nonetheless, the industrial and automotive markets, which make up 65% of TXN's revenues, are expected to see higher levels of chip content as applications such as automation and vehicle electrification continue to gain momentum.