Video game maker Electronic Arts needs some new hit games. Fast.
The company reported holiday sales that missed forecasts and also issued a tepid outlook for the next quarter. Shares of Electronic Arts (EA) plunged more than 10% in after hours trading Tuesday.
EA CEO Andrew Wilson was unusually blunt about the company’s recent struggles. He said in the earnings release that it was a “difficult quarter for Electronic Arts and we did not perform to our expectations.”
Competition from hot mobile games and multiplayer action titles like the insanely popular Fortnite is hurting EA. Wilson said “the video game industry continues to grow through a year of intense competition and transformational change,” while EA COO and CFO Blake Jorgensen noted that it was “a tumultuous year in the video game industry.”
Shares of Take-Two Interactive (TTWO), which will report its latest earnings Wednesday morning, fell after hours too. So did shares of Activision Blizzard (ATVI). The Call of Duty maker reports its results on February 12.
No new “Star Wars” movie? No problem.
Disney (DIS) reported sales and earnings that topped Wall Street’s forecasts for the latest quarter. That’s despite the fact that box office revenue plunged 27% from a year ago, largely due to the lack of a new movie about Jedi Masters and the Force. (“The Last Jedi” helped lift Disney in the final three months of 2017.)
So how did Disney wind up beating expectations? The House of Mouse posted solid growth at its TV networks and theme parks. Disney said that its Disney-branded channels helped lift the cable unit, offsetting continued weakness at ESPN. And a boom in political ad spending helped ABC’s sales and profit. Disney also got a lift from its theme park unit, with increased tourist spending at its US theme parks and Hong Kong Disneyland.
Shares of Disney rose nearly 2% in after hours trading on the news.
Wall Street continues to put 2018’s brutal ending in the rearview mirror.
All three major indexes finished at their highest levels since early December.
Consumer stocks led the steady march higher. Estée Lauder (EL) surged 12% on strong sales and guidance. Ralph Lauren (RL) bounced 8% after it boosted its guidance.
New York-listed BP (BP) shares jumped 3% on strong results that show its US shale investments are paying off.
Even Google owner Alphabet (GOOGL) closed higher 1%, shaking off a knee-jerk selloff late Monday after it reported results.
Senator Bernie Sanders and former Goldman Sachs CEO Lloyd Blankfein are having it out on Twitter over stock buybacks.
Blankfein tweeted earlier Tuesday that buybacks get “reinvested in higher growth businesses that boost the economy and jobs.”
Sanders quickly fired back:
Former Goldman Sachs CEO Lloyd Blankfein promised “unrestrained tweeting” when he left the investment bank at the end of 2018.
He finally delivered. On Tuesday, Blankfein sent his first tweet since leaving the bank, and took to social media to defend stock buybacks:
Senate Minority Leader Chuck Schumer and Senator Bernie Sanders recently published an op-ed in the New York Times arguing that stock buybacks are a form of “corporate self-indulgence” and feed income inequality. They said they intend to introduce legislation to limit their use.
It’s nothing but clear, blue skies for Boeing. Shares of Boeing (BA) rose nearly 3% Tuesday and closed at a new all-time high of above $410 after the jet maker announced a partnership with supersonic plane maker Aerion.
Terms of the deal were not disclosed, but Boeing said it made “made a significant investment” in Aerion to help it develop new technology for ridiculously fast business travel.
Aerion’s AS2 plane will be able to travel at 1,000 miles per hour — 70% faster than current business jets. That will cut about three hours off the time of a transatlantic flight. Aerion has said it expects the first flight to take place in 2023.
Boeing’s investment could help the company take even more market share from European rival Airbus. Boeing’s stock has already soared 26% this year because of strong earnings, making it the best performer in the Dow.
Retail sales will grow between 3.8% and 4.4% this year, industry group National Retail Federation (NRF) estimated on Tuesday.
That’s down slightly from the 4.6% increase in sales in 2018, the group said.
But NRF said that retailers remain in a strong position, despite the volatile stock market and ongoing trade war with China.
“We believe the underlying state of the economy is sound,” said NRF CEO Matthew Shay, pointing to low unemployment, rising wages, and high consumer confidence.
Companies like Walmart (WMT) and Target (TGT) have gotten a boost from low interest rates and a drop in gas prices. Shay cautioned, however, that increasing tariffs on Chinese goods or future government shutdowns could damage retail.
Inequality is a growing trend that should concern investors, according to Torsten Slok, a chief international economist at Deutsche Bank.
He told First Move anchor Julia Chatterley that investors are finally taking notice of an issue they previously brushed aside.
For example, the number of children out-earning their parents continues to decline. “The trend is not your friend there,” Slok said.
Slok pointed that the world has experienced chasms over the frustration caused by inequality, including Brexit, yellow vests protests in France and the rise of populism.
Those and other issues, including a decline in the rate of home ownership, change “the economic agenda very significantly,” Slok said.
The US stock market hasn’t been this high since early December.
All three major indexes are trading at two-month highs.
The broad rally was led by consumer stocks. Estée Lauder (EL) surged 12% on strong sales and its optimistic guidance. Ralph Lauren (RL) rallied 7% after posting solid holiday sales. TripAdvisor (TRIP), which reports results next week, jumped 5%.
The Consumer Discretionary Select Sector SPDR ETF (XLY) was up nearly 1%.
Meanwhile, Google owner Alphabet (GOOGL) continues to stage a comeback. Alphabet shares tumbled Monday evening after it posted results, but the company has trimmed its losses to less than 1%.
A key measure of the health of the service sector dipped slightly in January, adding to evidence of a slowdown on the horizon.
The Institute for Supply Management’s non-manufacturing purchasing managers index came in at 56.7, which still indicates expansion, but at a slower pace than it has set in recent months. The reading hit a high of 60.8 in September of 2018 and has been sagging since.
The decrease came almost entirely from new orders, which dipped to a 14-month low, especially those from overseas.
On Tuesday IHS Markit released its own calculation of service industry activity, which came in below its average from 2018. Services account for about 80% of US GDP.
The ISM’s manufacturing index had showed a rebound in January from a relatively weak December number, reassuring markets that a downturn may not be quite as immediate as many had feared with market turmoil, political squabbles, and trade tensions at the end of the year.
Apple shares are continuing to get a post-earnings bump. That has vaulted the iPhone maker back to the top of the world’s most valuable company rankings. For now at least.
Shares of Apple (AAPL) are up more than 12% since the company reported results last week that weren’t as bad as feared. (The company already warned of slowing iPhone demand in China earlier this year.)
Apple is now worth about $823.5 billion, which puts it narrowly ahead of rivals Microsoft (MSFT) and Amazon (AMZN) – which are worth around $820 billion and $815 billion respectively.
So don’t be surprised to see these three continue to trade places at the top over the next few months. Don’t forget about Google owner Alphabet (GOOGL) either. Although its stock is down slightly Tuesday on concerns about its latest earnings, Alphabet isn’t far behind tech’s other big three in market cap. It’s still worth $785 billion.
All three major US indexes opened higher Tuesday.
Google parent company Alphabet (GOOGL) fell roughly 1%, a day after the company reported earnings. While revenue was higher last quarter, the company is now paying more to support its advertising business.
Shares of Estee Lauder (EL) surged 12% after the beauty company reported that quarterly sales surpassed $4 billion for the first time.
Procter & Gamble (PG) bought organic tampon brand L. on Tuesday.
“This acquisition is a perfect complement to our Always and Tampax portfolio,” said Jennifer Davis, P&G’s global president of feminine care. The companies did not reveal terms of the deal.
The move will help P&G grow its feminine care division and reach women looking for tampons, pads, liners and wipes with organic cotton. Consumer products with natural ingredients are among the fastest growing in the industry.
P&G has been on a buying spree. The deal fits into its recent strategy of acquiring small brands, such as Native deodorant and Bevel razors, to fit into its lineup of huge brands like Tide, Bounty, Charmin, and Crest.
Ralph Lauren (RL) shares opened up 7% after posting solid third-quarter sales growth, which includes the busy holiday shopping season.
Global sales for the quarter were up 6%, with sales in Europe increasing the most. The Polo maker’s quarterly revenue also beat estimates, increasing 5% to $1.7 billion. It also said it expects this year’s revenue to be up slightly.
Shares of Estée Lauder (EL) are surging 12%.
In its second-quarter earnings report, the company said its quarterly sales surpassed $4 billion for the first time. It also raised its full-year guidance.
Estée Lauder’s strongest sales came from the Asia/Pacific region, as well as some of its brands, including the flagship line, its fragrances and MAC Cosmetics.
CEO Fabrizio Freda said the company had an “impressive first-half performance.” Estée Lauder expects this year’s sales to rise between 5% and 6% compared to 2018.
Our Donna Borak reports that Federal Reserve Chairman Jerome Powell met with President Donald Trump yesterday. The meeting comes weeks after White House aides floated the idea of inviting the former investment banker to sit with Trump in person to allay his concerns about a string of rate hikes.
Trump hasn’t been the biggest fan of Powell and the Fed’s rate changes. The president has attacked him on Twitter and expressed hope that central bankers would keep rates steady. But, such a move could risk letting the economy overheat amid continued strong hiring.
The President’s dissatisfaction over increased market volatility heightened late last year, leading Trump to ask advisers whether he could fire Powell, even though it’s unclear whether presidents can legally fire their Fed chairs.
US futures are pointing higher this morning.
The Dow and the S&P 500 closed up 0.7% on Monday, while the Nasdaq jumped 1.2%.
Investors are keeping tabs on Estee Lauder (EL), Ralph Lauren (RL) and Viacom (VIAB), which are set to release earnings before the open.
Disney (DIS), Electronic Arts (EA), Plantronics (PLT) and Snap (SNAP) will follow after the close.
We’ll also be watching the State of the Union. The address is typically an American president’s most-watched speech of the year, and President Trump is expected to lay out his agenda for the coming year.
Shares in BP (BP) jumped 3.7% in London after the company wowed investors with its results for 2018.
BP went big on US shale last year, buying major oil assets from mining firm BHP (BBL) for $10.5 billion. The investment paid off: profits in 2018 more than doubled over the previous year to $12.7 billion.
BP also said its oil and gas output soared to 3.7 million barrels a day, an 8.2% increase from 2017.
The US shale boom has helped oil and gas companies overcome major volatility in energy prices over the past few months. Recent earnings from Shell (RYDBF) and Exxon Mobil (XOM) have also topped analyst expectations.
Alphabet (GOOGL), the parent company of Google, said yesterday that its revenue for the final quarter of 2018 increased to $39.3 billion.
The jump, about 22% from the same period a year earlier, was better than expected.
It was fueled in large part by Google’s advertising business. Sales in that business rose 20% over the previous year to $32.6 billion.
The numbers are remarkable given that the tech sector’s data privacy practices are under more scrutiny now than ever, from both regulators and consumers alike.
But the company is also paying more to support its advertising business. Alphabet said its traffic and acquisition cost — the money it pays to companies to run its ads and services — was $7.4 billion during the quarter, up from $6.5 billion a year ago.
And its operating margin for the quarter fell to 21%— a noteworthy dip from 24% a year ago.
Alphabet’s stock dropped roughly 3% in premarket trading.
