Weekly Earnings Review: October 16, 2023- October 20, 2023

     Well earnings season is finally among us, so we will start producing more beefier blog posts and cover a lot more companies over these next few weeks. I had one company report last week that I decided to throw into this weeks post, because I felt that it was pointless to make a post with just one boring company. With the inclusion of that company, we will cover 7 companies that report earnings this week and will give your our thoughts and opinions on how they performed during the quarter and the outlook. There is a lot of controversy going on with a war breaking out in Israel and the House of Representatives with out a speaker. This year seems to be the year of how geopolitics affect the market. There seems to be a lot of confusion with the outlook of the market right now, but inflation numbers still look to be fair and the earnings of major companies will be able to tell us a little bit more about where this is headed. 

Thursday, October 12, 2023

Walgreens Boots Alliance (WBA)-

    Walgreens reported a beat on the top line but showed a miss on the bottom line. The stock has performed terribly this year, as it has been a tough year for this sector in general. The company has hired a new CEO in Tim Wentworth that has a plan to revitalize the company as a whole. This quarter is starting to reflect the efforts as the company is cutting unnecessary expenditures. The company did report a net loss in the quarter with a lot of the blame on the settlements of the lawsuits that the company had to pay. These should subside and they company should return to profitability in a short time. The cash flow was a strong point at $2.3B in operating cash flow, however it was still down compared to last year. The US Healthcare segment continues to keep growing as the company continues to make acquisitions. I think a headliner from the news may help out this company. Rite Aid filed for bankruptcy, which is one of Walgreens top competitors. This will open the door for Walgreens to get some more market share and hopefully allow it to get back on track to its profitable days. The company is in a tough patch right now, but hopefully they grow out of this under Wentworth's leadership.

Tuesday, October 17, 2023

Bank of America (BAC)-

    Bank of America reported a beat on both the top and bottom line compared to analyst's expectations. The company saw a solid quarter, as it is continually improving its NII and growing steadily. The worry some part about these banks is the sentiment of the US consumer. The average consumer has run out of pandemic savings and does not have a lot of cash floating around. I think this can attest to the low level of deposits that the overall banks are seeing. Deposits for Bank of America were down 3% which is a mild decrease. Plus consumers are chasing higher savings rates and are not looking to lock money away in a CD or other instrument to get a higher yield from these bigger banks. Bank of America still sees the economy as healthy but is showing signs of a slowdown. The income grew 10% which was solid for investors to see, as other bigger banks are struggling to see income grow. The Return on Equity and Return of Asset numbers are all continually increasing as well, which are positive signs for the shareholders. I read an article that says the company is offering a 10 year bond with a 6.55% rate, which is extremely attractive for a fixed income instrument. Bank of America is in the same boat as many of the other banks right now. They are not too attractive of an investment with deposits going down and financials not performing as well. I am in for the long-run with Bank of America and the dividend yield is attractive on this one. I will take my dividend and reinvest them in this company as I do not see any signs of this bank going to the way side and they will most likely be around until the day I die. 

Prologis (PLD)-

    Prologis beat expectations on both the revenue and Core FFO metrics. The company also raised guidance on the Core FFO. The stock has struggled mightily this year, with it being down around 10% this year. The Real Estate sector has been an overall struggle this year with vacancy rates becoming a lot higher and businesses more hesitant when it comes to leasing out space. Prologis is a lot safer option because it operates in the industrial sector of the real estate. This sees a lot less volatility as businesses are going to continue renting out warehouses and distribution centers to continue moving their product that drives their revenues. With the consumer becoming more hesitant, it will be likely that the demand for real estate will continue to falter. It will be a lot easier to predict the path of real estate with a more stable economy, but the fluctuations and changing factors cause a lot of questions to loom. Even with the struggling sentiment in the sector, Prologis was able to improve its occupancy rate to 97.1% and posted an all-time high retention rate of 76.8%. The company is continuing to grow in terms of acquiring new properties. They picked up some debt at a favorable rate in order to fund these new projects. Prologis continues to maintain its Debt/EBITDA level at 4. Overall, the quarter was alright and they performed pretty well given the cash rent changes. I expect this stock to see a little bit more downside until we get some stability in the market. For the long term, this is a great REIT to hold and they have a favorable set up for the future. 

Wednesday, October 18, 2023

Tesla (TSLA)-

    Tesla disappointed extremely this quarter, but has a lot of answers to the looming questions. The company missed on both the bottom and top lines in comparison with expectations. The main theme in this quarter that shunned investors, was the margins compressing significantly. With the company continually decreasing the prices on the models, the margins will continually get weaker. The car market faces a tough situation with rising interest rates and student loan payments resuming. The Cybertruck is taking a massive toll on the expenses side of the Income Statement, as the costs keep accumulating and delays hurting production. Tesla has said that the launch date for deliveries will begin on November 30th, but Elon stated that the project didn't turn out to what he thought it would be. This project has weighed significantly on profits and the vehicle sees an extension on the time it is going to take to become cash flow positive. Tesla seems to be falling back into a sense of normality when comparing this company with automaker competitors. This leaves value investors in a state of concern as valuation seems to be too high if this is how Tesla is going to perform. Here's a catch, Tesla has a lot of other revenue sources and this is one of the main reasons that I continue to stay invested. The battery storage and battery charging stations are going to major players in the future success of this company. With contracts already secured with a lot of competitors for charging rights, Tesla looks to produce a lot of revenue in this department as TAM continues to grow. On another note, the company struggled with having to close down production plants for upgrades and other business. They were still able to see production go up by 18% and deliveries also rose by 27%. The main key for Tesla is to find the optimal price-point in selling its car. The market is definitely tough right now, but the diversification and innovation of this company will make this a winner over the next 10 years or so. 

Thursday, October 19, 2023

AT&T Inc. (T)-

    AT&T may be heading on the right track and starting to right the ship! The company beat on both the top and bottom line, in comparison with analysts expectations. The company also raised their Free Cash Flow guidance from $16.2B to $16.5B. I expect Free Cash Flow to keep growing if the company can continually grow its telecom and broadband services. AT&T saw 468,000 net postpaid phone adds and achieved their goal of surpassing 8 million AT&T Fiber subscriptions. These are both solid signs of growth in the core business and can lead to the higher Free Cash Flow metric. Unfortunately, AT&T still has loads of debt on its balance sheet after some capital allocation mistakes. On the bright side, these mistakes have been sold off in order to focus on growing the core business. However, a lot of the cash that is generated is going to end up being used on paying back the debt. The dividend yield is extremely attractive, but you might be better off throwing money into T-bills with a pretty attractive "risk-free" rate. Overall, I think this quarter shows some signs that AT&T is heading back in the right direction and hopefully can continue this wave. I look for them to continue knocking off debt and starting to reward shareholders more and more with a revitalization of the dividend growth.

Union Pacific Corporation (UNP)-

    Union Pacific missed on the top line, but beat earnings on the bottom line. Revenue came in on a miss with a 10% decline compared to last year. The main proponent to this decline was the fuel surcharge programs did not perform as well. Cash Flows from Operations came in at $6 billion, which is about $1 billion lower than last years total. The cash returned to shareholders was about half the $6 billion through both dividends and share repurchases. Union Pacific did not change its guidance for the full year but with the company relying heavily on fuel and a lot of uncertainty in oil prices, there could be a potential for an impact in those regards. One of my favorite metrics of the quarter was that Freight Car velocity increased by 5%. I like to see efficiency as company will be able to move product both faster and be able to move more product. This industry is facing a tough economic environment as supply chains are still a little messed up. One article that I read talks about the impact of the drought and the panama canal causing supplies to take longer to get to destinations. I like the CEO Jim Vena trying to change the performance of the business. Overall, things look to be headed in the right direction. I think once we return to a more normal economic environment, things will start to pan out for this company. There's still a lot of work to be done by the management team, but this quarter was not too shabby for them.

    

Thank you for reading!

Disclaimer: This is not advice to buy or sell stocks based on my recommendations, this advice is very opinionated and interpretive of facts presented in earnings.