Delta Says Premium Airline Imitators May Struggle to Catch Up

/ / Consumer Discretionary /

Delta CEO Ed Bastian has a message for competitors who want to start chasing high end travel business: good luck. “It’s really hard to change course,” Bastian says. Rivals are adding more premium seating, bundling products to try to upsell passengers, and investing in free Wi-Fi, but Bastian says they may have trouble catching up to the investments Delta has already made. “We’ve been on this for years,” he says. “We’re not going to change course. If anything, we’re just going to continue to accelerate.”

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IBM Poised for ‘Solid’ Q3 Results Amid Persistent GenAI Consulting Strength, RBC Says

/ / Technology /

International Business Machines (IBM) is expected to post “solid” Q3 results amid continued strength in generative artificial intelligence consulting as well as free cash flow performance, RBC Capital Markets said Thursday. The technology giant is scheduled to report Q3 results Oct. 23. RBC expects adjusted earnings of $2.24 per share on revenue of about $15.08 billion. “Peer results would suggest continued strength in consulting, while software traction likely remains the larger catalyst for sentiment improvement,” RBC analysts, including Matthew Swanson, said in a note to clients. “We continue to look for greater software traction, particularly from Red Hat, which management expects to reaccelerate in the 2H, as 1H strength was largely driven by better-than-expected infrastructure performance late in the refresh cycle as well as GenAI supporting consulting, while ‘discretionary spend’ saw headwinds,” the analysts said. RBC raised its price target on the IBM stock to $250 from $211 while maintaining

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Domino’s Pizza Q3 Profit Beat Offsets Slight Sales Miss

/ / Consumer Discretionary /

Domino’s Pizza Inc. (DPZ) said Thursday it had net income of $146.9 million, or $4.19 a share, for its fiscal third quarter to Sept. 8, up from $175.6 million, or $4.18 a share, in the year-earlier period. Revenue rose to $1.080 billion from $1.027 billion a year ago. The FactSet consensus was for EPS of $3.64 and revenue of $1.099 billion. U.S. same-store sales rose 3%, while international same-store sales were up 0.8%. “Our third quarter results once again demonstrated that our Hungry for MORE strategy is resonating, despite a pressured global marketplace,” CEO Russell Weiner said in prepared remarks. The company is now expecting full-year global retail sales growth of about 6% and full-year income from operations growth of about 8%. For 2025, it expects retail sales growth to be roughly in line with 2024 expectations. The stock was flat premarket but has gained 0.2% in the year to

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Domino’s Pizza Delivered 3Q Sales Miss, Outlook Cut

/ / Consumer Discretionary /

Domino’s Pizza recorded weaker sales growth in the summer quarter than analysts had been expecting and lowered its top line guidance for the year. Total third-quarter revenue was up 5% at $1.08 billion, but analysts had been looking for closer to $1.1 billion, according to FactSet. The growth was driven by higher order volumes and prices, but partially offset by a customer shift toward less profitable products. Domino’s has been leaning on pizza deals and promotions to drive traffic as consumer spending remains pressured. The company said it now expects global retail sales to rise 6% this fiscal year, down from a previous outlook for 7% or higher growth.

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Alphabet Might Get Broken Up. It Could Be Good for the Stock.

/ / Technology /

The Justice Department has suggested a breakup of Alphabet’s Google as a potential way to address its de facto search monopoly. The company is fighting back against the prospect. If it happens, however, investors might not be all that upset. “The government seems to be pursuing a sweeping agenda that will impact numerous industries and products, with significant unintended consequences for consumers, businesses, and American competitiveness,” wrote Lee-Anne Mulholland, Alphabet’s vice president of regulatory affairs in a Tuesday blog post. To call it a big deal would be an understatement. A breakup of a monopoly hasn’t happened since AT&T was split into pieces in the 1980s. The Justice Department has until Nov. 20 to decide on what specific remedy it is seeking. U.S. District Judge Amit Mehta, who ruled in August that Google has a monopoly in search, is expected to rule next year on what action should be taken.

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TSMC Could Sustain Revenue Growth Momentum Over Next Five Years

/ / Technology /

TSMC could continue to post a revenue compound annual growth rate of 15%-20% over the next five years, driven by both AI chip demand and the outsourcing by integrated device manufacturers, Morgan Stanley analysts say in a research note. TSMC’s gross margin could improve slightly to 55.5% in 4Q from 55% in 3Q, driven by strong AI chip demand and a further increase in Apple’s 3-nanometer chip output, they say. The Taiwanese semiconductor maker could maintain its gross margin around 55% in 2025 and beyond after its successful wafer price hike, which is set to take effect next year, they say. Given expectations of at least a 10% price increase for AI chips, 6% for other high-performance computing chips and 3% for smartphone chips, the 2025 price hike could average 4%-5%, lifting its gross margin by 2-3 percentage points, they add.

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PepsiCo’s Promotional Approach at Core of Debate

/ / Consumer Staples /

The key debate around PepsiCo remains on 2025 and whether its investments on value and promotions can lead to an acceleration in organic sales growth, particularly at Frito, while still driving earnings per share growth on algorithm, Citi analyst Filippo Falorni says in a research note. The beverage giant should see a gradual improvement in organic sales growth to 2.7% in 2025 from 2% in 2024, with slightly below-algo 2025 earnings per share growth on reinvestment, Falorni says. Citi raises its 2024 EPS estimates to $8.14 from $8.10 previously, and its 2025 EPS views to $8.55 from $8.50.

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Qualcomm Seen Missing AI Gains, Gets Rating Cut by KeyBanc

/ / Technology /

Qualcomm used to look like an edge AI play thanks to its position in handsets and PCs, but since these end markets haven’t yet materialized meaningfully, it isn’t seen benefiting from a replacement cycle or getting a market premium until that happens, KeyBanc Capital Markets says in a note, cutting its rating on the stock to sector weight. Apple is seen ramping up its internal modem in stages in coming years, and this could be tough to overcome, with full impact of the modem coming out representing a $1.55-$1.65 headwind to earnings, KeyBanc adds. In addition, price competition means Qualcomm will start to lose market share to Mediatek in mid-to-low-end smartphones. Qualcomm shares rise 0.3% at $167.42.

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Boeing Delivered Handful Of 737 MAX Jets Last Month

/ / Industrials /

Boeing managed to deliver a small number of 737 MAX jets after a strike by machinists shut down the Renton, Wash., factory that builds the planes. But deliveries are expected to slow substantially as the walkout stretches into its second month. The jet maker delivered 33 planes last month, including 28 737s. That’s down form 40 jets overall in August and 32 737s. The company says it was able to slip out some delivery-ready planes after the strike started September 13. Analysts estimate Boeing built 10 737s in September, well off the company’s goal of 38 per month.

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Open AI Losses to Drag on Microsoft in 2025

/ / Technology /

Slow AI adoption may be a bigger drag on Microsoft performance than previously expected. Oppenheimer’s Timothy Horan says in a report that Open AI losses for Microsoft could be in the $2 billion-$3 billion range in 2025 and may mean that current consensus estimates for revenue and EPS are also too high. “We reiterate the Street is likely overestimating near-term AI revenues as enterprise adoption and infrastructure remains a bottleneck,” Horan says, who downgrades the its rating to perform from outperform. This may be only a near-term issue however, since Microsoft is investing in a once-in-a-generation technology which could deprioritize expanding margins in the short-term.

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Lockheed Martin Remains ‘Prime’ Defense Stock Amid Escalating Global Tensions, RBC Says

/ / Industrials /

Lockheed Martin (LMT) is the “prime” defense stock to own amid escalating global tensions, while the company’s recently increased share repurchase authorization supports an expected improvement in free cash flows, RBC Capital Markets said. The war in the Middle East “has elevated the global threat level, which we believe will support greater urgency around the (2025 US Department of Defense) budget process and could contribute to higher international sales,” the brokerage said in a client note emailed Monday. Historical trends show that the defense industry usually outperforms during periods of monetary easing by an average of 23%, with “greater outperformance 12 months after the start of easing,” RBC analyst Ken Herbert wrote. Last month, the Federal Reserve cut its benchmark lending rate by 50 basis points to a range of 4.75% to 5%. “We believe the beginning of a new easing period, coupled with increased geopolitical tensions recently, will increase

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DOJ To File Remedies Framework Against Google: JP Morgan Sees Alphabet EPS To Drop 10%, ‘Negative Headlines’ Likely

/ / Technology /

JP Morgan analyst Doug Anmuth expects negative headlines for Google’s parent-company Alphabet, Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) when the Department of Justice (DOJ) proposes a broad and punitive set of potential remedies against the company this week. The DOJ is expected to file a high-level framework for potential remedies on Tuesday in its search distribution trial against Google. Anmuth said he expects the DOJ to file a “wide-ranging and far-reaching set of potential remedies, most likely more than the DOJ thinks it could ultimately win.” The JP Morgan analyst sees five potential remedies which could include: No exclusive default search agreements for Google across all browsers, OEMs and carriers The separation of Android & Chrome from Google The separation of Google Search ads from Google Limitations on how Google can implement AI in search Data sharing, including providing API or patent access to search competitors Anmuth predicted Google could see up to a 10% hit on

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