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Verizon impresses with wireless services, while 3M struggles on guidance. (0:15) Netflix snags the rights to WWE Raw. (3:33) Goldman Sachs picks its favorite return-on-equity growth stocks. (4:23)
The following is an abridged transcript
Our top story so far
Earnings season kicks up another gear.
Verizon (VZ) shares rose after the telecom reported fourth-quarter revenue that topped estimates, aided by strong growth in its wireless unit.
For the period ending Dec. 31, Verizon earned an adjusted $1.08 per share as revenue declined 0.6% year-over-year to $35.1 billion. Aiding the quarter was a 3.2% year-over-year increase in wireless service revenue to $19.4 billion as the company added 1.46 million retail postpaid net additions during the quarter.
3M (MMM) slumped after the maker of Scotch tape and other products provided earnings guidance for 2024 that was less than expected. The company now sees earnings adjusted for one-time items in the range of $9.35 a share to $9.75 a share for the year, compared with the consensus estimate of $9.82.
Revenue for the fourth quarter was better than expected, falling less 1% from a year earlier to $7.69 billion, compared with the consensus estimate of $7.72 billion.
General Electric (GE) shares retreated from a six-year high hit on Monday. The company estimated earnings adjusted for one-time items would be $0.60 to $0.65 in the first quarter of 2024, compared with the average estimate of $0.69 among Wall Street analysts.
Also among this morning’s results
Procter & Gamble (PG) posted mixed Q2 numbers. Organic sale rose 4% during the quarter vs. +4.6% consensus. Pricing was up 4% and there was a neutral effect from mix, while volume fell 1%.
Johnson & Johnson (JNJ) topped Q4 expectations thanks to the outperformance of its pharma and MedTech segments following the spinoff of its consumer care division Kenvue (KVUE).
And RTX (RTX) shares bounced on earnings and revenue that came in ahead of forecasts.
In today’s trading
Stocks are finding traction tough to come by as investors digested the earnings news, with little on the economic calendar to prompt a broader move. The Dow (DJI) trails the S&P (SP500) and Nasdaq (COMP.IND).
Treasury yields are moving higher.
Notably, traders are still reining in their expectations for a Fed rate cut in the first quarter. Fed funds futures now price in just a 40% chance of a quarter-point cut at the March meeting, down from around 50% on Friday. The odds were close to 90% in the second week of this month.
Tony Pasquareillo, who heads hedge fund coverage for Goldman Sachs, say in “the context of slightly higher rates, certain parts of the market have come under significant pressure. At the same time, however, US mega cap tech has been untouched.”
“To be clear, it’s not just that the Magnificent Seven has been outperforming the other bits — it’s that the Magnificent Seven has been ripping higher in an outright sense (see NVDA’s +20% gain YTD),” he adds. “To revisit an observation from last summer, the market is very clearly showing its hand on what is — and what is not — considered to be a ‘long duration’ asset.”
Looking to other active stocks
Alibaba’s (BABA) stock jumped after the New York Times reported that Co-Founder Jack Ma has been buying up shares in the company.
And Plug Power PLUG) rose sharply after CEO Andy Marsh said it finalized a term-sheet negotiation with the Department of Energy for a $1.6 billion loan facility that he says “will support the development, construction and ownership of up to six hydrogen-production facilities.”
In other news of note
The Netflix (NFLX) news keeps coming.
The streaming company announced that starting in January 2025, it will become the exclusive home of TKO Group’s (TKO) WWE Raw in the U.S., Canada, U.K. and Latin America, with more countries added over time.
In addition, starting next year Netflix will become the home for all WWE shows and specials outside the U.S., including Smackdown, NXT and its premium live events such as WrestleMania, SummerSlam and the Royal Rumble.
Since its inception in 1993, WWE Raw has been on linear television, most recently on Comcast’s (CMCSA) USA Network. The deal is slated to last 10 years and be worth “in excess” of $5 billion, TKO Group said in a filing. Netflix also has an option to extend for an additional 10 years and opt out after the first five years of the deal.
And in the Wall Street Research Corner
Goldman Sachs shook up the constituents of its return-on equity growth basket, with some new additions.
Strategists expect the ROE on the S&P 500 to expand slightly in 2024, driven by EBIT margins, since neither taxes nor interest expense should affect ROE this year. EBIT margins should benefit from faster cooling of inflation and unit labor costs.
The basket highlights 50 stocks with the highest consensus expected of ROE growth during the next 12 months.
New additions include Estee Lauder (EL), Kinder Morgan (KMI), Citigroup (C), Illumina (ILMN), Universal Health Services (UHS), Generac Holdings (GNRC), Broadridge Financial (BR), Jabil (JBL), Zebra Tech (ZBRA), IBM (IBM) and Dominion Energy (D).
