Several major companies released their quarterly earnings over the past week and surprises were all over the place. Optimism about the future also is flaring.
Most S&P 500 firms that have reported their earnings so far have beaten market expectations. However, some showed the worst profit declines in years due to weakening demand in certain sectors.
Starting on a positive note, we saw Johnson & Johnson (J&J) exceed market expectations. The company reported an EPS of $2.66 along with revenues of $21.4B compared to an expected EPS of $2.51 and revenues of $21.04B. Bank of America (BAC) also surprised the markets with an EPS of $0.90 and revenues of $25.2B. This was compared to expected EPS of $0.83 and expected revenues of $25.13B.
Morgan Stanley (MS), another financial giant, has beaten the expectations by reporting an EPS of $1.38 and revenues of $13.3B compared to expected $1.32 and $13.25B, respectively. Meanwhile its peer, Goldman Sachs (GS), missed the consensus by reporting an EPS of $5.47 versus $5.54 expected, but revenues exceeded expectations, reporting $11.82B compared to $11.21B expected.
However, both rival firms’ profits declined YoY. Goldman Sachs saw a 33% YoY decline in earnings due to a loss on the sale of GreenSky, while Morgan Stanley saw an 8.5% drop YoY during Q3 compared to the same period a year ago.
Morgan Stanley outperformed Goldman in terms of revenue, seeing a 2% increase. Moreover, despite a 15% drop in consulting revenue, Goldman's investment banking revenue increased by 1% to $1.6B during Q3, mainly driven by the increased revenue from debt and equity underwriting.
Morgan Stanley’s revenue from investment banking however had a tougher time, falling by 27% to $938M as income from debt writing and advisory services declined by more than 30%.
On the other side, automaker giant Tesla missed the market’s consensus reporting $0.66 EPS compared to an expected $0.73, along with $23.4B revenues compared to 24.32B expected. It was the first time Tesla has missed on both earnings and revenue consensus since Q2 of 2019.
The shares of the company fell 9% one day after the earnings release, and analysts revised downward estimates for the company’s Q4 earnings. The company’s CEO and co-founder, Elon Musk said “We dug our own grave with Cybertruck”, commenting that the new truck might take more than a year to generate positive cashflow.
Furthermore, despite Taiwan Semiconductor Manufacturing Co. (TSM) beating market expectations with reporting an EPS of $1.29 compared to $1.15 expected, and revenues of $17.28 versus $16.95 expected, the results showed a decline in both profits and sales for the third consecutive time due to weaker demand in the technology sector.
Next week, more major companies are expected to release their earnings including Alphabet, Microsoft, Visa, and IBM.
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