Amazon Isn’t the Only Big Winner This Earnings Cycle – Bloomberg
For all the hand-wringing aboutÂ how Amazon.com Inc.â€™s growth aspirations may hurt other companies, thereâ€™s plenty of evidence in third-quarter earnings results that the online retailer isnâ€™t alone in benefiting from robust economic growth.
AmazonÂ blew through forecasts Thursday, triggering a stock surge that made founder Jeff Bezos the worldâ€™s richest person. But the week held other winners too: Results from Microsoft Corp., General Motors Co. and United Parcel Service Inc. all helped elevate U.S. benchmark stock indexes to records. Despite some high-profile blowups, reports by European companies from Volkswagen AG toÂ Atlas Copco AB to luxury-goods giant Kering SAÂ pleasedÂ investors, as did Chinaâ€™s Kweichow Moutai Co., the most valuable distiller.
The U.S. just logged the best back-to-back quarters of GDP growth since 2014, confirming that Hurricanes Harvey and Irma caused less damage to the worldâ€™s largest economy than once thought. Earnings reflected global optimism, even with lingering concerns about Brexit and a Catalan Republic secession in Europe. Hereâ€™s what weâ€™ve learned so far:
Corporate profits rising in major regions
With more than half of the Standard & Poorâ€™s 500 stock index companies reporting, earnings have risen 8.4 percent and sales are up 6.3 percent. In Europe, profit growth for companies in the Stoxx 600 Index is coming in at a surprisingly strong 8 percent, JPMorgan Chase & Co. strategists said Friday. In Asia, earnings per share haveÂ surged 14 percentÂ at 185 companies in the MSCI AC Asia Pacific index that have reported.Â
â€œThe global economic acceleration, which kind of began in late 2016, is really
flowing through,â€ said Patrick Palfrey, an equity strategist with Credit Suisse. â€œThis earnings season is shaping up to be quite strong.â€
Amazon leads surge among tech companies
Amazon is showing investors it can run the newly acquired Whole Foods grocery chain, churn out gadgets, sell more products online and still manage expenses.Â The company trampled forecasts and its shares surged 13 percent Friday to close at a record $1,100.95.
Cloud computing is hot, for both Amazon and Microsoft. Sales at Microsoft rose 12 percent amid buoyant demand for Azure cloud services, used to store and run customersâ€™ applications in Microsoftâ€™s data centers.
Growth in online services, while great for tech firms, helps create both winners and losers elsewhere. Toymaker Mattel Inc.â€™s sales fell 13 percent due in great part to the bankruptcy of retailer Toys â€œRâ€ Us Inc. — done in by competition from Amazon. UPS, however, is poised to benefit as consumers shop online, saying Thursday it expects to ship a record 750 million packages over the holidays in a test of the investments itâ€™s made to expand capacity.
The hurricanes landed only a glancing blow
The hurricanes that raked the U.S. in August and September left plenty of locally heavy devastation but so far have made mainly just ripples in earnings reports for companies other than property insurers like the Travelers Cos.
Drugmaker Amgen Inc. raised its profit forecast for 2017 even with a pretax expense of as much as 18 cents a share stemming damage to a Puerto Rican factory. In Europe, shares of French eyeglass-lens maker Essilor International SA and Ray-Ban owner Luxottica Group SpA jumped, even after the companies said the hurricanes held back their sales amid shop closures. General Motors and Ford Motor Co. both beat profit estimates, aided in part by a surge in demand in September as customers replaced storm-damaged vehicles.
Chinaâ€™s growth lifts earnings around the world
As goes China, so goes much of the industrial world. Caterpillar Inc. on Tuesday surged the most in six months. One reason: An improved outlook for construction in China is propelling the machinery maker toward its first annual sales gain since 2012. China even provided a bright spot in General Electric Co.â€™s dismal Oct. 20 report: Organic orders for health-care equipment rose 20 percent in China, compared with 4 percent in the U.S. and 8 percent in Europe.
Domestic demand helped buoy earnings at some of Chinaâ€™s biggest companies at the same time President Xi Jinping is firming up his status as the nationâ€™s strongest leader in decades. Kweichow Moutai, the worldâ€™s most valuable distiller, more than doubled its profitÂ on popularity of its premium liquors. Even in the saturated mobile-phone market, China Mobile Ltd. reported higher revenue andÂ improvement in profit margins.
Energy companies post uneven results
Earnings in the oilfields have been a tale of two sectors. Producers are experiencing a rebound after a three-year market rout, beating estimates on higher crude prices and a crash diet of cost cuts. Service companies and equipment makers have been less successful, struggling to overcome purchasing cutbacks by drillers who turned frugal during the slump.
With crude now sitting comfortably above $53 a barrel, some 15 percent above a year ago, ConocoPhillips, Statoil ASA and Suncor kicked off earnings season for the worldâ€™s biggest oil companies with profits that easily beat estimates. Exxon Mobil Corp., the worldâ€™s biggest explorer, Total SA and Chevron Corp. also posted strong profits on Friday, though Exxon and Chevron shares fell after the companies reported disappointing production.
Some CEOs land in the hot seat
Just because corporate earnings are doing well globally doesnâ€™t mean everyone is having an easy time. Deutsche Boerse AGÂ Chief Executive OfficerÂ Carsten KengeterÂ resigned Friday amid growing shareholder pressure after he became embroiled in an insider-trading probe, and the companyÂ saidÂ it isnâ€™t likely to meet its full-year earnings targets. United Continental Holdings Inc. shares are still down 11 percent since CEO Oscar Munoz and his team failed to satisfy investors about the 2018 outlook on their Oct. 18 earnings call.
In Japan, scandals linked to Kobe Steel Ltd.â€™s fake data and Nissan Motor Co.â€™s vehicle-inspection practices have cast a pall over the countryâ€™s manufacturing sector. Kobe Steel CEO Hiroya KawasakiÂ andÂ Hiroto Saikawa, his counterpart at Nissan, both had to apologize in public as investigations continue. Kobe Steel reports earnings Monday.
In European banking, CEOs John Cryan of Deutsche Bank AG and Jes Staley of Barclays Plc are under pressure after presiding over their sectorâ€™s biggest earnings disappointments. In both cases, the culprit was sustained, worse-than-feared weakness at their investment banks. Revenue from trading bonds and stocks plunged 30 percent at Deutsche Bank and 31 percent at Barclays.
Lending margins buoy U.S., China banking
Earnings from China Construction Bank Corp.Â on Thursday fueled optimism that interest margins and asset quality are improving, and its three largest rivals including Industrial & Commercial Bank of China Ltd. each climbed. Theyâ€™re all due to post results Monday.
Most U.S. banks beat estimates for revenue and profitÂ after three interest-rate hikes in the past year boosted lending margins. Cost-cutting initiatives helped offset declines in fixed-income trading, while the five biggest U.S. capital markets firms all posted higher-than-expected revenue from investment banking. In a sign of potential concern ahead, Bank of America Corp., Wells Fargo & Co. and some other major banks have increased consumer loan-loss provisions, as have other lenders such as Capital One Financial Corp.Â and Discover Financial Services.
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â€” With assistance by Phil Serafino, Reg Gale, Hannah Levitt, Sofia Horta E Costa, Keith Campbell, and Kenneth Wong
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