November 02, 2022
The earnings season has begun, and we’ve got three things for you as we exit the first week of what is expected to be a wild season.
As we mentioned last week, investors had their eyes peeled for looks from big banks like JPMorgan Chase, Morgan Stanley, Wells Fargo, Citigroup, PNC, and Blackrock. However, there’s a few more names on the docket – Delta, PepsiCo, Taiwan Semiconductor, and UnitedHealth Group also made the short-list of high-profile brands reporting this week.
We’ve read over the finer points of their earnings reports this week and tried our best to synthesize the big takeaways from the kickoff…
JPMorgan, Morgan Stanley & other banks caution on economy, question recession talk
The first of the two major banks to report were banking giant JPMorgan Chase and investment bank Morgan Stanley. Both saw their profits fall by more than 20% in the quarter.
For JPMorgan, the majority of the losses came from setting aside funds for “potential future loan losses” and economic uncertainty. Morgan Stanley also set aside funds, albeit to pay regulatory fines; their bottom line was hammered by lower revenue from market activity dragged on profits.
Both shared their qualms about the state of the economy and the market. Morgan Stanley underlined that the pipeline of mergers and acquisitions and initial public offerings being worked on at the bank was robust – but that business leaders need more confidence to proceed.
JPMorgan Chase, and its regularly controversial CEO Jamie Dimon, went “bigger” with its conclusions – it said that it saw “little to no signs of a recession in its businesses” in spite of their preparations for one.
PepsiCo’s revenue rises, thanks to higher prices
Inflation is both cyclical and psychological; millions of people who asked for raises over the last 24 months are now underwater on those raises – and that’s because inflation comes about not just as a byproduct of increased input costs and labor costs, but because companies know they can charge more for their products.
That’s what PepsiCo, the snack and beverage giant, said it was going to do in its latest earnings report. The company posted a modest rise in Q2 net revenue after the prices of their products rose 12%. It has reiterated that the rising prices help counter rising trucking, packaging, and commodity costs.
However, the increasing prices also serve another purpose: Pepsi raised its full-year revenue forecast during its report, citing even more price increases. They said that these price hikes were as a result of “little impact on demand for its sodas and snacks” in spite of inflation.
Other companies are already following suit with Pepsi, raising prices to counteract inflation – which itself is also lending a hand to hotter-than-expected inflation.
Taiwan Semiconductor and Samsung plot strong growth for the semi industry
The semiconductor industry was king for most of 2020 and 2021, before a market-wide setback in 2022.
However, in spite of corrections in the broader market, two of the semiconductor industry’s leading names are still… well, leading. Samsung, which reported “better than feared” earnings last Thursday, spurred hopes that the rest of the sector would have a fire quarter.
At least from early impressions, Taiwan Semiconductor seems to have followed their formula:
They reported yesterday, pulling in a record profit amid concerns that the semi industry is facing troubles. The world’s largest chipmaker posted a 43.5% increase in revenue on the year, with net income up 76% YoY.
As you can probably assume, both estimates bested analysts’ takes – and both offer a warm outlook for an industry deeply instrumental to technology and the global economy.
Is it as bad as it seems?
When some of us were enjoying the latest bull run, things seemed to have turned for the worse, and suddenly, nothing was as clear as it was.
Rumours of a recession began to spread across the internet while the dollar is stronger than ever. Dividend payouts increased, despite the market’s correction, inflation and layoffs. So why are we afraid of inflation when American markets can afford to raise dividend payments? Isn’t the economy slowing down instead?
There’s no secret/standardized formula to confirm this, as there are no standardized financial goals. However, staying informed of macroeconomic events is key to a sound investment strategy.
No one can pinpoint where the economy is heading, but what everyone could do is track their money investments. Knowing how your investments are performing could help you make more informed decisions and improve over time.
If you invest using multiple platforms like Robinhood and Coinbase, you could connect your accounts to Front and track all your assets in one place! You can track your portfolio performance over time and compare it against the S&P 500. You’ll also get a score evaluating the overall health of your portfolio. 🚀