Week ending November 1st, 2024
From Wall Street to Main Street Highlights from the past week
| Market / Macro Economic Summary Markets had another up and down week as the U.S. presidential election is now only days away. While earnings reports on the whole have come in very strong, markets are still trying to digest several macroeconomic events. If you haven’t heard me say this before, let me say it one more time……investors and markets like certainty. During periods of “unknowns,” market volatility tends to rise and stocks are in a nervous cycle where you have good days and bad days and at the week-end they’re little moved. Earnings growth for the current quarter is on track for 5%, slightly above expectations of around 4% growth at the start of the quarter. On the whole, earnings growth is expected to be about 9%, which is well above last year's 1% growth rate. Although the October jobs report came in below expectations, I believe these figures were skewed by last month's hurricanes and labor strikes. I do think the labor market is showing signs of weakness, but by no means do I see any signs of it collapsing. My thoughts: let us just get past the election and all indications are that the markets should continue their slow, upward trajectory. Company Specific / Micro Economic Summary Pfizer (PFE) Shares were down 1.5% on the heels of a top and bottom-line beat. Revenue of $17.7 billion was much better than the Wall Street estimates of $14.9 billion. Earnings per share of $1.06 were also better than the estimates of $0.61 cents. Management highlighted its 14% non-Covid vaccine revenue growth, cost cutting efforts and goal towards expanding future margins. Advanced Micro Devices (AMD) Shares of the chip maker fell 9% on the day despite a top and bottom line beat due mainly to a light guidance for next quarter. Revenue of $6.82 billion was better than the calls for $6.71 billion. Earnings per share of $0.92 was in-line with analyst estimates. CEO Lisa Sue said demand for the datacenter and Ryzen PC processors has been robust and she is confident on gross margin. She also thinks 2025 will being record annual revenue growth in Data Center. Alphabet (GOOGL) Shares ended 7% higher on the trading day as the internet search giant delivered a strong top and bottom-line beat. Earnings per share of $2.12 were higher than the expected $1.85. Revenue of $88.3 billion was also better than the Wall Street expectations of $86.2 billion. CEO Sundar Pichai said cloud revenue growth came in 35% stronger year over year mainly benefiting from AI adoption. Eli Lilly (LLY) Shares fell 6% as the pharmaceutical giant missed on the top and bottom-lines mainly due to issues with supply of its Mounjaro and Zepbound GLP-1 drugs. Revenue came in at $11.4 billion but estimates called for $12.1 billion. Earnings per share of $1.18 also fell short of the calls for $1.47. CEO David Ricks said the FDA removing its shortage designation for its GLP-1 drugs will help ensure cheaper formulations don’t dig into their profits. Microsoft (MSFT) Shares fell 5% on the trading day despite delivering a top and bottom-line beat. I will say I feel as this is sadly the evidence of simply delivering earnings into a bad tape, or a trading day when momentum is lost. The quarter was a rather strong quarter as revenue of $65.6 billion came in better than the calls for $64.6 billion. Earnings per share of $3.30 was much better than the $3.10 Wall Street was looking for. CEO Satya Nadella said Cloud revenue grew 22% year over year as AI-driven transformations have changed workflows, business processes and helping them win more customers. Meta Platforms (META) Same could be said for Facebook shares as they declined 3% despite a very strong quarter. Earnings per share of $6.03 blew past estimates of $5.30. Revenue of $40.6 billion was also stronger than the $40.3 billion analysts expected. CEO Mark Zuckerberg said he is seeing strong momentum in Meta AI, Llama (its natural language model) and AI-powered glasses. Amazon (AMZN) Shares benefited from reporting on Thursday after the bell, after the market had just closed on a very weak trading day. Friday morning the markets were decidedly stronger and helped propel share higher by 7%. Earnings per share of $1.43 were in a different level than the calls for $1.14. Revenue of $159 billion was $2 billion higher on the quarter than the calls for $157 billion. CEO Andy Jassy said they’re excited for what is in store for customers from more holiday deals, the NFL Black Friday game and increased AI infrastructure capabilities coming from AWS. Apple (AAPL) Shares fell slightly or roughly 2% on a good quarter but income that took a one time charge due to a tax decision in Europe. Earnings per share of $1.64 was better than the calls for $1.60. Revenue of $94.93 billion was also slightly higher than Wall Street estimates of $934.58 billion. Iphone revenue grew to $46.22 billion which came in better than the estimate of $45.47 billion. Gross margins of 46.2% also came in just above the estimates of 46%. On the whole, this was the largest week for earnings amidst the tech sector. I am very pleased to have heard all of these tech heavy weights reporting strong quarters and also saying they would all be spending more in the coming year towards AI. This solidified my belief that 2025 will bring continued strength in all things technology and sets us up well for market-leading darling Nvidia. |
| 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 Wealth/Fiduciary Advisor |