From Wall Street to Main Street
Highlights from the past week
Market / Macro Economic Summary
Markets faltered just a tad as the indexes came off their recent highs. On the week, the Nasdaq lost 0.7% but has gained 16.4% for the year so far. The S&P 500 followed suit with a decline of 0.3% on the week but up 13% on the year. The Dow Jones Industrial Average was down 0.1% last week but has increased 8.7% year-to-date. Economic data week showed a surprisingly resilient U.S. economy, with key indicators consistently beating expectations. Second-quarter GDP growth was revised higher to an impressive 3.8% annualized rate, exceeding the 3.3% forecast and the economy’s long-term trend. This strong performance was largely driven by consumer spending, which also came in well above expectations. This positive trend continued into August, with both personal income and spending rising more than anticipated, suggesting consumers are still a powerful force in the economy. Looking ahead, this momentum seems likely to continue, with models like the Atlanta Fed’s GDPNow projecting strong third-quarter growth. In short, regardless of markets being near all-time highs, the consumer is strong/resilient, the Federal Reserve is projected to lower rates and the economy stands to hold up remarkably well. All very good for stocks.
Company Specific / Micro Economic Summary
AutoZone (AZO)
Shares initially dropped by approximately 2.9% in pre-market trading immediately following the Q4 2025 earnings release, primarily reacting to an earnings miss despite sales hitting expectations. The company reported diluted earnings per share (EPS) of $48.71, which fell short of the analyst consensus estimate of $50.93, while actual quarterly revenues of $6.24 billion came in virtually in line with Wall Street forecasts. Key highlights from the call revealed impressive operational momentum, particularly the 12.5% growth in domestic commercial same-store sales and the opening of 141 net new stores, though the earnings decline was largely driven by a non-cash LIFO (Last-In, First-Out) accounting charge of approximately $80 million and higher operating expenses tied to growth initiatives. Ultimately, the results were tempered by these strategic investment costs, leading CEO Phil Daniele to maintain an optimistic outlook, commenting that the company will “aggressively open stores in the new year” to continue gaining market share.
Micron (MU)
Shares saw a modest jump of approximately 1.13% in after-hours trading following the release of its Q4 2025 results, driven by strong AI optimism despite the stock’s significant prior run-up. The company reported adjusted earnings per share of $3.03, which substantially beat the analyst consensus estimate of $2.77. Revenues came in at $11.32 billion, also surpassing the estimated $11.11 billion. A key highlight from the quarter was the continued, accelerating demand from the AI sector, particularly for High Bandwidth Memory (HBM) and high-capacity data center products, which drove record DRAM revenue. The strong demand enabled the company to issue robust fiscal Q1 2026 guidance, and CEO Sanjay Mehrotra underscored the company’s strategic success by stating that “AI is the driver of our growth” and emphasizing that memory will capture a significant portion of the trillions of dollars expected to be invested in AI infrastructure over the coming years.
Costco (COST)
Shares traded slightly lower despite reporting a beat on both the top and bottom lines, as the retailer’s robust performance was largely anticipated by the market. The company reported adjusted earnings per share (EPS) of 5.87, topping the analyst consensus estimate of approximately 5.81, while total revenue came in at 86.16 billion, narrowly surpassing the 86.08 billion forecast. A standout feature of the quarter was the exceptional strength in its loyalty program, with membership fee revenue jumping 14% year-over-year, alongside strong comparable sales growth of 5.7%. Addressing the operational success and member value, CEO Ron Vachris highlighted that the recently expanded exclusive morning hours for Executive members were “very well received” and contributed an estimated 1% boost to weekly U.S. sales, underscoring the company’s strategy of deepening member engagement.
KB Homes (KB)
Stock remained relatively steady, showing only a slight fractional movement after reporting its fiscal Q3 2025 earnings, as a beat on profitability was offset by broader market caution and reduced forward guidance. The company reported adjusted earnings per share (EPS) of 1.61, easily surpassing the analyst consensus estimate of 1.50, while total revenues of 1.62 billion narrowly exceeded the anticipated 1.59 billion. A key operational highlight from the quarter was the significant reduction in build times, coupled with ongoing capital returns, including the repurchase of over 188 million in shares. Looking ahead, CEO Jeffrey Mezger affirmed the company’s commitment to returning to its core “built-to-order” model to capture higher margins, stating, “We are pleased with the solid financial results that we achieved… as we continued to make meaningful progress in reducing both our build times and costs to build.”
Parting Thoughts
We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week!
Regards,
Erick J. Palacios, MBA Brent Buckmaster
President & Wealth/Fiduciary Advisor Wealth/Fiduciary Advisor