Amazon Funding Capex Increases With Stronger Margins

/ / Consumer Discretionary /

Amazon is funding considerable increases in its capital expenditures with an even larger step-up in operating profit gleaned from tight cost controls, UBS analysts say in a research note. The company is controlling its headcount to keep operating expense growth low and expand margins, they say. The company’s capex jumped 80% to about $23 billion in 3Q as Amazon Web Services invests aggressively in AI infrastructure to meet high demand, Davidson analysts say in a research note. But Amazon’s cloud unit has a lot of price efficiencies in its chips that are less expensive to implement, they say.

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Exxon Changing Refining Approach to Optimize Operations

/ / Energy /

Exxon’s refining margins were down in 3Q, but CEO Darren Woods says on a call with analysts that the oil giant is fundamentally changing its approach to its refining process in order to optimize its operations. The company’s cost-savings push, which has resulted in $11.3 billion in cost cuts since 2019, is helping to achieve this goal, he says: “A great example in the refining business has been centralization of the maintenance approach that we’re doing, not just in turnarounds but in our routine day-to-day maintenance.” This move has added value and lowered costs through consolidation and effective execution, Woods says. The company’s 3Q profit falls on lower energy prices and narrowing margins.

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Exxon Mobil (XOM) Q3 2024 Earnings Call Transcript Summary

/ / Energy /

The following is a summary of the Exxon Mobil Corporation (XOM) Q3 2024 Earnings Call Transcript: Financial Performance: ExxonMobil announced Q3 earnings of $8.6 billion, marking one of the best third quarters in the past decade. Year-to-date earnings in 2024 for the Energy Products business have doubled compared to the same period in 2019. The company achieved structural cost savings of $5 billion across the Product Solutions business since 2019. Business Progress: Continued portfolio optimization through divesting less advantaged sites, leading to a reduction in total refinery count to an expected 15 by year-end. Implemented significant improvements in product yield and efficiency, exemplified by the Rotterdam Advanced Hydrocracker and Beaumont expansion. Advanced long laterals drilling in the Pioneer acquisition, with plans for the first ever 20,000-foot laterals. Opportunities: Inaugurated an agreement with Mitsubishi for low carbon ammonia and equity participation, enhancing the development of a new energy value chain in

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McDonald’s Can Recover From Short-Term Struggles, Analysts Say

/ / Consumer Discretionary /

The E. coli outbreak that sickened dozens and international pressures will create near-term headwinds for McDonald’s, UBS analysts say in a research note. However, they predict trends will strengthen in the new year, thanks to new menu items, continued promotions and increased marketing. Same-store sales in 3Q and initial October trends show that the restaurant chain’s momentum was improving, prior to the recent food-safety incident. And while macroeconomic challenges persist overseas, the company is either gaining share or notching improvements in trends across all major markets. Analysts raise their price target to $345 and maintain their buy rating.

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Apple Intelligence Hasn’t Yet Provided Expected Boost

/ / Technology /

Apple’s newly released set of artificial-intelligence features hasn’t provided the boost some had expected for the iPhone maker, Quilter Cheviot’s Ben Barringer says in a note. The iPhone 16 disappointed users as AI capabilities aren’t proving to be overly beneficial yet as Apple Intelligence was only released on Oct. 28, Barringer notes. “Without an obvious catalyst to bring high single digit growth back, investors may be better placed in some of the other Magnificent Seven companies instead,” Barringer says. Apple shares are down 1.6% premarket at $222.29.

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Estée Lauder’s Visibility on Path to Recovery Is Reduced

/ / Consumer Discretionary /

Estée Lauder’s latest results, coupled with its guidance withdrawal, further reduces its visibility on its path to recovery, Morgan Stanley analysts say in a research note. The cosmetics company’s incoming CEO Stéphane de La Faverie will likely need to add aggressive cost-cutting measures and reinvestments behind the company’s portfolio once he takes over the top job, the analysts add. “Bottom line, Estée Lauder is acknowledging incremental weakness in Asia travel retail in guidance, which drives weak second-quarter guidance and withdrawn full-year guidance.” Shares drop 19% to $71.01.

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Estee Lauder Investors Spooked As F2Q Guide Bleak

/ / Consumer Discretionary /

Estee Lauder pulls guidance for its current fiscal year, but what insight it did provide for the current quarter spooked investors badly. The cosmetics company projects a F2Q sales drop between 8% and 6%, and adjusted EPS well below what analysts were expecting. The main culprit is the ongoing problems in China and the Asia retail market. While outgoing CEO Fabrizio Freda expects stimulus measures there to eventually stabilize the high-end beauty market, it’s going to take some time. Estee Lauder does buy some breathing room for new leadership, with a halved dividend to free up some resources. Estee Lauder plunges 23% premarket to $66.55.

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AMD Stock Pressure Suggests Raised Guidance Was Largely Anticipated

/ / Technology /

Advanced Micro Devices’ guidance was generally in-line but many were expecting more upside for the business, particularly in its data center segment, says Susquehanna Financial Group’s Christopher Rolland in a research note. The chip maker reported a sharp rise in quarterly sales on demand for its AI chips and other products for data centers. CEO Lisa Su raised her projection for AMD’s sales of AI chips this year to $5 billion from a $4.5 billion forecast in July. “While the company did raise 2024 MI300 revenue guidance to >$5B, we believe the negative stock reaction suggests the $500M raise was largely anticipated by investors,” says Rolland. AMD sinks 10% to $149.71.

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Alphabet’s 3Q Bolsters Optimism Around Google’s Long-Term Prospects

/ / Technology /

Alphabet’s latest results give analysts at Wedbush confidence that the parent company of Google is set to manage a period of transition. Alphabet’s 3Q results were powered by strong performance in its cloud-computing division, while Google’s search engine and YouTube video platform both reported slowing revenue growth for a second straight quarter. The analysts note Google’s integration of Gemini into its core services is starting to result in tangible results across consumer and enterprise products. “We continue to believe the structural risks to Google’s search dominance are overblown, and we are optimistic on the longer-term prospects of the search business as Google manages through this period of transition,” say the analysts, who raise their price target to $210 from $205. Shares rise 6.6% to $180.92 in early trading.

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McDonald’s U.S. Orders Slowed While Spending Rose in 3Q

/ / Consumer Discretionary /

McDonald’s logged a small gain in U.S. comparable sales during 3Q as it pulled in slightly fewer orders year-over-year but guests spent more on average with each order. The fast-food chain says effective value marketing of its core menu and growth in digital sales and delivery contributed to the 0.3% U.S. comparable sales increase. But analysts had been targeting a 0.7% gain, according to FactSet, thinking that the chain would outperform its U.S. competitors in a tight spending environment for eating out. McDonald’s slides 2.3% to $290.01 premarket.

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McDonald’s Overseas Sales Fell More Than Expected in 3Q

/ / Consumer Discretionary /

McDonald’s recorded fewer comparable sales for 3Q due to shortfalls in its international markets that were worse than Wall Street had anticipated. Comps in the fast-food chain’s international operated markets were down 2.1%, led by poor sales in France and the U.K. The company’s international developmental licensed markets saw comps drop 3.5% due to the war in the Middle East and weakening sales in China, which more than offset growth in Latin America. Analysts had been expecting comps in both market groups to slip just 1.2%, according to FactSet. Investors had been bracing for some weakness overseas after Domino’s Pizza recently missed 3Q international sales projections.

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McDonald’s Fights for Struggling Consumers

/ / Consumer Discretionary /

McDonald’s says that families and lower-income customers continue to feel pinched across many global markets, making for a challenging environment for fast-food. McDonald’s is pushing its international franchisees to offer more value options, and expects to stay conservative with any price increases. “Consumers are certainly remaining resistant to pricing,” McDonald’s CFO Ian Borden says during an earnings call.

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