Podcast Summary
Earnings season shapes up with notable reports: Verizon's wireless revenue beats, 3M's guidance falls short, GE estimates lower Q1 earnings, Procter & Gamble sees mixed results, J&J topped expectations, Raytheon reports ahead of forecasts, Dow trails S&P and Nasdaq, treasury yields rise, Fed rate cut expectations lowered
Key takeaway from today's market update is that earnings season is continuing to shape up with some notable reports. Verizon saw a rise in shares after reporting stronger-than-expected wireless revenue, while 3M's earnings guidance for 2024 fell short of expectations. General Electric also saw a drop in shares after estimating lower first-quarter earnings. Procter and Gamble posted mixed results, with organic sales growth coming in below expectations, but pricing and mix offsetting the decline in volume. Johnson and Johnson topped expectations, thanks to the strong performance of its pharma and medtech segments following the spin-off of its consumer care division. Raytheon also saw a boost after reporting earnings and revenue that came in ahead of forecasts. However, the broader market is finding it tough to gain traction as investors digest the earnings news, with little economic data to provide additional direction. The Dow is trailing the S&P and Nasdaq, and treasury yields are moving higher. Notably, expectations for a Fed rate cut in Q1 are being reined in, with only a 40% chance of a quarter-point cut at the March meeting, down from around 50% on Friday.
US Tech Giants Outperform Despite Higher Rates: US tech giants, including NVIDIA, have outperformed the market with gains over 20%, while other parts face pressure. Individual stocks like Alibaba and Plug Power saw gains following company news, and Netflix made a major deal worth over $5 billion.
The US mega cap tech sector, specifically the Magnificent Seven, has been outperforming the rest of the market significantly, even with slightly higher interest rates. These companies, such as NVIDIA, have seen gains of over 20% year to date. In contrast, other parts of the market have come under pressure. Elsewhere, individual stocks like Alibaba and Plug Power experienced gains following company news. Alibaba's cofounder Jack Ma bought shares, while Plug Power finalized a loan facility agreement with the Department of Energy. Netflix made headlines with a major deal to become the exclusive home of WWE's Raw and other shows in multiple regions, a deal worth over $5 billion. Goldman Sachs also announced updates to its return on equity growth basket, with new additions expected to drive slight expansion in the S&P 500's ROE in 2024. Despite this, interest expense and taxes are not expected to impact ROE this year.
Wall Street lunch discussion reveals expected improvement in EBIT margins and presentation of 50 high ROE growth stocks: Wall Street experts predict EBIT margins will improve due to decreasing inflation and unit labor costs. 50 stocks with the highest consensus expected ROE growth over the next 12 months were presented, including new additions like Estee Lauder, Kinder Morgan, Citigroup, and IBM.
Learning from today's Wall Street lunch discussion is that EBIT margins are expected to improve due to the faster cooling off of inflation and unit labor costs. Additionally, a basket of 50 stocks with the highest consensus expected ROE growth over the next 12 months was presented, featuring new additions such as Estee Lauder, Kinder Morgan, Citigroup, Illumina, Universal Health Services, Generac Holdings, Broadridge Financial, Jabil, Zebra Tech, IBM, and Dominion Energy. Investors interested in these stocks and more can find the full list in the Seeking Alpha story. Stay tuned for links to the stories in the show net section, and remember that these episodes will be available with transcriptions at seekingalpha.com/wse. For comprehensive news, analysis, ratings, and data on stocks and ETFs, visit seekingalpha.com/subscriptions.