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Today, we look at the Alphabet. Nope.. I don’t mean from A to Z. I am actually referring to GOOGL and its quarterly earnings! This is as humorous as it gets in finance. The capital A in alphabet should have given it away and if you are thinking I forgot the E in Google, then you should know that GOOGL is the symbol for Alphabet’s Class A stock listed in the US. What is most interesting is the official website for the company is abc.xyz .. perhaps, we are looking at A to Z today!
Happy Friday and the weekend ahead! Welcome to this 24th post of investing, not rocket science! Investing Doesn't Have to Be Rocket Science: this is our Non-Expert Guide to Portfolio Management.
A quick recap of this series so far:
In the 1st post: I defined a basic portfolio framework. The objective of this million dollar portfolio is beat inflation and an equity index. The investment style presented here is active portfolio management, without the use of leverage and a time horizon greater than 5 years. The benchmark index is the MSCI ACWI IMI. Typically, there are two posts a week, which includes details of the portfolio and actionable evaluations (Mondays and Fridays).
The portfolio is long 15 stocks, 1 Bond and short 1 stock. You can read all about it in the previous posts here: https://www.claritech.app/blog
From posts 2 to 20: I have evaluated 67 stocks and 4 potential bond additions.
Posts 21 to current, have been focused on the Q1 2023 earnings announcements, particularly of stocks in the portfolio and in the watch-list. 14 companies have made earnings announcements this week (Monday to Thursday, 27th Apr 2023). In this post, we will look at an overview of these announcements, pending a detailed evaluation in future posts.
You can click on the charts, graphs or illustrations to expand or zoom in. There is no remuneration received to evaluate specific companies or to add to the portfolio or the watch-list. The Amazon adverts you see are the source of revenue for this free blog (subject to purchases or subscriptions).
Before we begin, what were expectations from analysts about earnings growth among the companies listed in the S&P500 index in the US and Stoxx600 index in Europe? You can read about it in post 19 of this series here.
Read about the significance of quarterly earnings and a few terms used to assess corporate earnings in post 22 of this series here.
Q12023 – Earnings This Week – Stocks in the Portfolio and the Watch-list
Alphabet announced earnings of US$1.17 per share and Revenue of US$ 69.8 B, beating analyst estimates on both. Revenues were up 3% YoY, EPS was lower compared to the US$ 1.23 in Q1-2022. The company has merged Google Research’s Brain Unit and DeepMind to reflect shift in strategy to AI and starting this quarter, AI costs are shown separately from Other Bets (under “Corporate costs, Unallocated”). AI generated an operating loss of approximately US$ 700 million for the company in Q1 (total was at US$ 3.2Bn which included a one time cost of US$2.5Bn for reduction of staff and office space). Total Operating Income for Q1-2023 was US$ 17.4 Bn, an operating income margin of 25%. The company announced a US$ 70B share buyback plan.
Trends in Company Financials (TTM): while revenue growth has fallen from 41% in Q4 2021 to 5% in Q1 2023, TTM revenues continue to remain stable. Earnings yield remains stable as well, while shareholder yield has a rising trend. Free Cash Flow yield for the current quarter at 4.7% from 3.6% in Q1 2022. Operating income margin at 26%, same as the last quarter.
Microsoft announced earnings of US$ 2.45 per share and revenue of US$ 52.8B, beating analyst estimates on both. Microsoft has three business segments: Revenues for Productivity and Business Processes segment grew 11% YoY at US$ 17.5B, Intelligent Cloud was up 16% at US$ 22.1B and Personal Computing was lower by -9% at US$ 13.3B.
Trends in Company Financials (TTM): Revenues are in a rising trend. Stable net income and earnings yield over the last 12 months. Decline seen in cash flows and in revenue growth from 20% in Q1-2022 to 7% in the current quarter (Q1-2023).
Also among the Mega Caps;
Meta posted earnings of US$ 2.2 per share and Revenue of US$ 28.65B, beating analyst estimates on both. According to a statement by the company, Revenues grew 3% YoY, while expenses rose 10%. EPS declined by -19% compared to Q1-2022. Facebook’s daily Active Users and Monthly Active Users grew 4% and 2% YoY.
Amazon posted earnings of US$ 0,31 per share and Revenue of US$ 127.4B, beating analyst estimates on both. Revenues have grown 9.4% while EPS has improved from a loss of -0.37 per share in Q1-2022. According to a statement from the company, revenue in North America was up 11% YoY while international revenues were up 1% (or 9% excluding changes in foreign currency rates). AWS revenues grew 16% YoY to US$ 21.4B. Total Operating income rose to US$ 4.8B compared to US$ 3.7B in Q1-2022. Operating income at AWS declined to US$ 5.1 Bn compared to US$ 6.5B in Q1-2022. Free cash flow, while still negative, showed improvement.
Banco Santander posted earnings of € 0.15 per share and Revenue of € 13.92B beating analyst estimates on both. According to the company press release; the net earnings was up 8% YoY excluding a special tax in Spain of 225million applicable to this year. Deposits grew 6%, number of customers grew 5% and total loans increased 3% YoY.
Trends in Company Financials (TTM): Revenue, Earnings Yield, Operating income margin and Net income remain broadly stable in the last twelve months. Revenue Growth has dipped from 22% in Q1 last year to about 4% this year. Shareholder yield has risen in Q1 2023. Free Cash flow flat compared to the previous quarter.
UBS posted earnings of CHF 0.45 per share and Revenue of CHF 7.77 B, missing analyst estimates on both. According to a company statement, an increase in provisions of US$ 665 Million related to a litigation in the US from the 2008 financial crisis resulted in a dip of -45% in earnings and a rise in operating expenses of 9% YoY. The company also saw a drop in revenues of -8% YoY. The company is expected to commence the takeover of Credit Suisse in Q2 this year.
Trends in Company Financials (TTM): The company is seeing declines in Revenue, Net Income, Revenue Growth, Operating Income and Earnings Yield. Free Cash flow is flat compared to the previous quarter and shareholder yield has risen QoQ.
Standard Chartered posted earnings of GBP 0.4 per share and Revenues of GBP 4.4 Billion, beating estimates on EPS and missing estimates on Revenues. According to a company statement, revenues grew 8% YoY while expenses rose 5%. Net interest income improved YoY and margins improved QoQ.
Trends in Company Financials (TTM): Operating Income Margin, Net Income, Revenues and Earnings Yield see stability. Free Cash flow sees improvement. Revenue Growth looks to have turned a corner and begins to see improvement.
ICICI Bank posted earnings of INR 12.83 per share and Revenue of INR 227.5 B, meeting analyst expectations on Revenues but missing expectations on EPS, which was up 30% YoY. Net Interest Income increased 40% YoY. Deposits grew 10% while its loan book rose 18% YoY.
Trends in Company Financials (TTM): The bank sees rising trends in Revenues, Net Income, Revenue Growth and Operating Income Margin. Stable earnings Yield in the last twelve months. The firm sees challenges in its free cash flow and shareholder yield.
ABB posted earnings of CHF 0.59 per share and Revenue of CHF 7.85B, beating analyst expectations on both. According to a company statement, the order book was flat YoY, while revenues grew 13% and earnings per share rose 78% YoY. With no supply constraints, the company was able to convert backlog into deliveries.
Trends in Company Financials (TTM): The company sees stable revenues, net income, revenue growth, operating income margin and earnings yield. Shareholder yield has declined slightly compared to the previous quarter while free cash has improved QoQ, but remains in a declining trend for the past 12 months.
TE Connectivity posted earnings of US$ 1.65 per share and revenue of US$ 4.16 B, beating analyst estimates on both. According to a statement from the company, Revenues grew 3.8% compared to Q1 2022 while operating margin fell from 17.6% to 12.9%. EPS declined -21% from Q1 2022.
Trends in Company Financials (TTM): Improvements in Revenue and Free Cash Flow. Net income, Operating income margin and Earnings yield stable in the last 12 months. Decline seen in Revenue growth and Shareholder yield.
Glencore confirmed trading profits this year will beat its guidance range of $2.2 billion to $3.2 billion. The company has exceeded the top end of its range for the last three consecutive years. However, 2022 was an extraordinary year with disruptions and war causing commodity prices to rise. The company also kept its production guidance for the full year of 2023 unchanged. This is broadly flat compared to 2022.
GlaxoSmithKline posted earnings of GBP 0.37 per share and revenue of GBP 6.95B, beating analyst estimates on both. Revenues was lower by -3% compared to Q1 2022 and EPS was lower by -18% YoY. The company affirmed its full year guidance in a statement, revenue growth is expected to be between 6 to 8% and operating profit is expected to rise between 10 to 12%. Dividends expected in 2023 is 54p per share (3.7%).
Orange confirmed its full year target for 2023. Revenues for Q1-2023 grew 1.3% compared to Q1-2022. Africa and Middle East contributed to growth with a rise of 9.1% in Revenues followed by Europe with a +3.8% rise YoY.
EBay posted earnings of US$ 1.11 per share and Revenue of US$ 2.51B, beating analyst estimates on both. Revenues were flat YoY while EPS declined -5%. Q12023 – Earnings
Other Earnings announced this week:
Coca Cola posted earnings of US$ 0.68 per share and Revenue of US$ 11B beating analyst estimates on both. The company has raised prices to mitigate the impact of inflation despite which volume grew 3% for the quarter. Volume in North America was flat, dropped 3% in Europe, Middle East and Africa and rose in Asia and Latin America. The company has projected a revenue growth of 7% in 2023.
General Electric posted earnings of US$ 0.27 per share and Revenue of US$ 13.7B beating analyst estimates on both. YoY EPS sees a +10% rise while Revenues dipped -17%. GE raised the low end of its full-year EPS forecast, helped by its aviation business, which makes engines for Boeing’s 787 and it’s joint venture with French Safran SA powers the 737 Max and Airbus 320neos. The company now expects 2023 adjusted profit per share of $1.70 to $2.00
McDonald’s posted earnings of US$ 2.63 per share and Revenue of US$ 5.9B beating analyst estimates on both. EPS grew +15% YoY and Revenues at +4% YoY. The company reported a rise in consumers in its US business for the third consecutive quarter.
“At McDonald’s, we perform well in good times and in bad, so that gives us optimism as we go through the rest of the year,” CEO Chris Kempczinski said on the company’s conference call. (quote from CNBC).
United Parcel Service reported earnings of US$ 2.2 per share and Revenue of US$ 22.9B, missing analyst estimates on Revenue but beating on EPS. The company expects a full year Revenue of US$ 97 Billion. Revenues for Q1 were lower by 6% YoY and EPS was -27% YoY. U.S. Domestic Package revenues decreased 0.9% YoY driven by a 5.4% decrease in average daily volume, offset by a 4.8% increase in revenue per piece. International revenues were down 6.8% year over year due to a 6.2% reduction in average daily volume due to lower domestic volume and softness in China’s trade lanes.
Visa reported earnings of US$ 2.09 per share and Revenues of US$ 8B beating analyst estimates on both. EPS increased +16% YoY while Revenues grew 11% YoY. Payments volume rose 10% over Q1 last year.
PepsiCo reported earnings of US$ 1.5 per share and Revenues of US$ 17.85B beating analyst estimates on both. EPS grew 16% YoY while Revenues rose +10%. Overall, volumes were lower by -2% while prices were up +16%. The company raised its 2023 revenue outlook from a 6% growth to 8%.
Last week’s post covered the earnings announcements from Bank of America, Goldman Sachs, Morgan Stanley, ASML Holding, Netflix and Tesla. You can read about it in post (#20) here.
Summary of today’s post:
The stocks covered today is not a complete list, it only covers certain selected stocks. As mentioned earlier, this is a summary of the earnings announcement, pending a detailed evaluation in future posts. Some of the stocks discussed, such as Meta, Amazon, Microsoft and Ebay have risen more than 5% this week.
If you would like us to evaluate specific stocks or you want to share your experience (even if they are unpleasant), please visit the contact page and submit a feedback.
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