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Q3 Earnings Season: Key Takeaways From Top 26 Companies

Su Kim

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November 10, 2022


The earnings season for Q3 2022 is upon us already and we’ve created this earnings tracker to provide earnings analysis in real time. Given the state of the market, macro influences at play, and consensus forecasts covering a wide spectrum, the results this season are sure to uncover insights that could indicate broader market shifts. This quarterly earnings tracker is meant to be the first step of your earnings analysis every quarter, as we help you monitor the top companies across various industries to deliver critical insights as they unfold.

Following 26 organizations across seven industries, this tracker serves to highlight key themes, trends, and insights from their individual earnings transcripts. Starting Oct 18, with Netflix’s earnings call, through November 10th with JOYY’s earnings, we’ll dynamically update this page with the relevant takeaways and respective earnings transcript snippets designed to give a briefing of the company’s earnings call.

A few macro trends we expect to see mentioned throughout this earnings season include inflation, climbing interest rates, energy prices, and ongoing impacts of the war. Bookmark this page — or add it to your growing tabs — to get our updated analysis as each earnings call concludes. Also, follow AlphaSense on Twitter and LinkedIn to get daily updates.

Don’t do Q3 earnings without AlphaSense.

View Transcript Analysis by Vertical

Jump to section, bold companies held their earnings

FAANG

Netflix, Inc. [NFLX]

Earnings: Tue Oct 18, 2022

  • Netflix reported 3Q22 revenue of $7.93 billion (+5.9% YoY), which was slightly better than guidance of $7.84 billion and consensus estimates of $7.85 billion.  
  • The company also reported paid streaming net additions of +2.41 million vs. company guidance and consensus estimates of +1 million. 
  • The company announced that its ad-supported tier, Basic with Ads (BWA), will launch in the US on 11/3 at $6.99/month, as well as in 11 other markets. The lower price point offering is expected to help drive higher adoption.
  • Management is guiding to 4Q net adds of +4.5 million, revenue guidance of $7.78 billion, operating margins of 4% (vs. 8% in 4Q21), and full-year 2022 and 2023 operating margin of around 19%-20% (excluding FX movements and restructuring costs).

When asked about their new Basic with Ads subscription and demand from advertisers, the COO responded:

“…I would say that the initial demand that we’re seeing is very strong. So people are very excited about the proposition of bringing their brands and their ads to a bunch of consumers around the world that are watching our shows.” – Gregory K. Peters, COO & Chief Product Officer

Tesla [TSLA]

Earnings: Wed Oct 19, 2022

  • TSLA reported mixed results this quarter with revenues and gross margin missing expectations, but EPS beating Street consensus. 3Q22 revenue, adj-EPS, EBITDA were $21.5 billion, $1.05, $4.9 billion versus consensus of $21.9 billion, $0.99 and $4.9 billion, respectively. Lower-than-expected revenue was due to the miss on deliveries and headwinds driven by supply chain issues. 
  • Auto gross margins were 26.8% vs. consensus of 25.7%. Margins reflected higher material and logistics costs and costs related to the production ramp at Berlin and Austin. Giga-Berlin recently reached its production goal of 2k units/week, and Austin is close to meeting the same goal, with both factories currently operating at positive margins.
  • Profitability was impacted by stronger USD, inefficiencies from the ramp in Berlin and Austin, the impact of 4680 cell production, and higher raw material & logistics costs. FX alone impacted the operating margin by ~$250 million vs. last year. 
  • Tesla predicts a long-term volume CAGR of 50% for deliveries which will fall short in 2022 following significant supply chain headwinds and logistics affecting Tesla’s production and delivery capacity. 

Elon Musk had previously mentioned to shareholders that material costs used in production were starting to come down. When asked if this may lead to potential price adjustments, Musk responded: 

“I mean obviously, anyone can just Google what the price of — future price of copper or steel is going to be. It’s just like one Google Search away. And everyone can see that the commodities, on a go-forward basis, are on — dropping a lot. But in electric vehicles, things like battery-grade lithium are still crazy expensive. So we’ve got a mixture of things where prices are dropping and things where prices are increasing.” – Elon R. Musk, Technoking of Tesla, CEO & Director

Alphabet (Google) [GOOG]

Earnings: Tue Oct 25, 2022

  • GOOG’s 3Q22 total revenue grew 6% YoY to US$69.1 billion, falling short of FactSet consensus by 3%. By segment, total Google Services revenue grew 2% YoY to US$61.4 billion, with Google Search/ Other revenues up 4% and 2%, respectively. This was offset by revenues up 2% for Youtube and down 2% doe Google Network. YouTube and Google Network continued to report declining spending in both brand and direct response ads. Additionally, YouTube’s topline was impacted by lower monetization capability as Shorts increased its share of total watch time.
  • Alphabet confirmed its acquisition of Alter, an AI-avatar startup backed by Twitter, for ~$100M. Alter, which started off as Facemoji, will enable Google to improve and ramp up its content offerings. The acquisition was completed about two months ago, the source said, but neither of the companies disclosed it to the public. 
  • Headcount rose 12,765 QoQ, including over 2,600 from the recently closed Mandiant acquisition. Management noted a slowdown in hiring for 4Q22 in an effort to improve operating performance.

When asked how the current economic conditions compare against prior cycles that Alphabet has managed through, the CEO responded:

“I think compared to the past, I think are going through this… there is more uncertainty as we go through. We definitely see indicators on both sides so that makes it a bit more unique. Number two, I would say the strength of Search both as a product for users as well as for advertisers in terms of delivering ROI through a tough time in the ad market, I think, is great to see.

Third, just like when we went through it last time, ahead of us was a decade of mobile and the opportunities it brought. And to me, sitting now, looking at all the work that’s going on in AI, we’ve been an AI-first company for the past 7 years in all the investments. And it looks like a big opportunity ahead. So keeping all that in mind, focused on the long term, using this moment to be disciplined and prioritize and focus, I think, will set us up well for the next decade ahead.” – Sundar Pichai, CEO & Director

Meta Platforms, Inc. (Facebook) [META]

Earnings: Wed Oct 26, 2022

  • META’s 3Q22 revenue of $27.7 billion declined 4% YoY (+ 2% on a constant currency basis), marginally above Street consensus of $27.3 billion, while operating income fell 46%, missing consensus. EPS of $1.64 also missed Street’s estimates of $1.87. 
  • Management noted that the shift to Reels is helping to increase time spent on Facebook and Instagram but is also apparently providing a quarterly drag of $0.5 billion on income. Company officials said that it will take 12-18 months to close this gap.
  • The Company projects revenue of $30.0 – 32.5 billion (down 3-11% YoY) for Q4. The guidance assumes an FX headwind from a stronger dollar, as well as a drag from the transition to Reels. META also communicated total expenses for the full year to be in a range of $96-101 billion, up from the $85-87 billion expected for FY22. Higher expenses are mainly resulting from increased hiring in FY22, as well as R&D spending related to AI and the metaverse. META also raised its CapEx guidance to $34-39 billion in FY23 from its $32-33 billion outlook for FY22.

When questioned on the higher CapEx guidance, and whether it was a one-time spend or a permanent transition, the CFO responded:

“…I would really think about our CapEx investment as kind of the AI and non-AI components. On the AI side, which really is driving all of the CapEx growth in 2023, we will be pacing that future investment on the basis of the returns that we’re able to see and measure. So frankly, we’re hopeful that there will be a big opportunity to invest more here because we expect that this will be a high ROI area of investment for us…. We do expect this component of our CapEx spend to become more efficient over time, and we’re actively looking for more efficiencies there… The future intensity, I think, is going to depend on the returns that we generate through those increased AI investments.” – Susan Li, CFO

Apple Inc. [AAPL]

Earnings: Thu Oct 27, 2022

  • Apple reported a strong quarter, hitting all-time record for Q4 sales at $90.1 billion, up 8.1% YoY and beating Street consensus of $88.8 billion. iPhone revenue totaled $42.6 billion (+10% YoY) versus the $43.0 billion consensus. Contribution from Mac was strong at $11.5 billion, up 25.4% YoY, benefitting from a demand catch-up after the supply constraints from the previous quarter. 
  • FX headwind was ~600basis points in comparison to ~300basis points impact in the prior quarter, impacting gross margin by 170basis points YoY and 70basis points Q/Q. However, Apple reported sequential margin improvement despite no change to the new iPhone pricing, increased cost for components, and slower growth of Service revenues. 
  • APPL is refraining from providing detailed guidance.

When asked about the performance of the current iPhone generation and its demand in relation to the current macro environment, Tim Cook responded: 

“Customer demand [for the iPhone] was strong and better than we anticipated that it would be. And keep in mind that this is on top of a fiscal year of ’21 that had iPhone revenue grow by 39%, and so it’s a tough compare as well. And so we were happy with it.

In terms of the new products, the 14 and the 14 Pro and Pro Max, the — it’s still very early. But since the beginning, we’ve been constrained on the 14 Pro and the 14 Pro Max and we continue to be constrained today. And so we’re working very hard to fulfill the demand… We had 3 of the top 4 smartphones in the U.S. and the U.K., the top 3 in Urban China, the top 6 in Australia, 4 out of the top 5 in Germany and the top 2 in Japan. And customer satisfaction for the iPhone remains very, very strong at 98%. And so we feel very good about how we performed in Q4. And certainly, the start of the — of this generation would suggest that we’re going to be constrained for a little while on the 14 Pro and 14 Pro Max. But we’re working very hard to try to remedy that.” – Timothy D. Cook, CEO & Director

Amazon.com, Inc. [AMZN]

Earnings: Estimated Thu Oct 27, 2022

  • Amazon reported 3Q22 sales of $127.10 billion, up 15% YoY but missing Street estimates of $127.46 billion. However, the positive impact of a pre-tax valuation gain of $1.1 billion on Rivian Automotive resulted in a $0.06 beat to $0.28. Operating profit of $2.53 billion for the quarter was in line with the company’s guidance of $0.0 billion – $3.5 billion.
  • AWS reported the fastest growth rate for the sixth consecutive quarter, increasing revenue by 27% YoY to $20.54 billion. International experienced a 5% YoY revenue decline to $27.72 billion, while North America increased by 20% to $78.84 billion. Amazon’s Online Stores revenue was up 13% YoY, excluding FX, to $53.49 billion and Physical Stores sales came in at $4.69 billion (up 10% ex-FX).
  • Management communicated Q4 revenue guidance between $140.0 – 148.0 billion and operating income of $0.0 billion to $4.0 billion. 

When asked about the driving factors that led to net loss for the international segment, Amazon’s CFO responded: 

“On international, international is always a mix of profitability in more established countries of Europe and Japan, offset by emerging countries and investments in Prime benefits. I think the biggest issue quarter-over-quarter, the increase in losses versus Q2 was tied to some additional operating costs in Europe. We’ve seen higher fuel costs there, even more certainly in the United States. And Prime Day always has lesser profitability because there’s just a lot of deals… As far as new normal, we’re working very hard to make sure that current profitability is not the new normal, and we’ll see how quickly we can make improvements. A lot of the improvements that I talked about on a macro level, capital efficiency, operations improvements are as important internationally as they are in North America.” – Brian T. Olsavsky, Senior VP & CFO

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Energy

ExxonMobil Corporation [XOM]

Earnings: Fri Oct 28, 2022

  • XOM reported strong results for the quarter with total revenue of $112 billion, beating estimates of $103 billion, and adjusted EPS of $4.45 surpassing Street’s expectations of $3.89.The company benefitted from the diversification of its portfolio as natural gas realizations offset lower crude realizations. Additionally, XOM saw record production volumes from the Permian and also reported the highest North American refining throughout the quarter, doing its part to help the US meet its energy needs.
  • Asset sales and divestments resulted in $2.7 billion in cash proceeds this quarter, with YTD proceeds of nearly $4 billion. This includes the sales of XTO Energy Canada and the Romania Upstream affiliate. The company also announced the sale of its interest in the Aera oil production operation in California, expected to close next quarter.
  • For 4Q, upstream production was guided higher vs. 3Q with Permian growth partially offset by divestments (e.g., Aera), while turnarounds are guided to a $230-430 million impact (3Q: ~$400 million). Energy Products, Chemical Products, and Specialty Products are all guided to higher maintenance QoQ in 4Q. 2022 CAPEX guidance remains $21-24 billion, or a 27-45% increase versus $16.6 billion in 2021

When asked about macro events such as demand, SPR drives, China reopening, the EU embargo, and Russian crew impact on Exxon’s outlook for refining, the CFO explained how they have a robust strategy to stay competitive.

“…I would add finally that a lot of work has been going into making sure that we are positioning those facilities and our Downstream in our refineries to be robust to an evolving demand landscape. And so if you look at where we are investing in refining, it’s for sites that have integrated chemicals, lubricants and fast-growing clean fuels business. And we think that gives us a structural advantage versus broader industry.” – Kathryn A. Mikells, Senior VP & CFO

ConocoPhillips [COP]

Earnings: Thu Nov 3, 2022

  • COP reported a 6% beat on both CFO and EPS of $7.2 billion and $3.60, respectively, while operating costs fell ~5% WoW on a per-BOE basis. COP delivered record quarterly production of 1.75 MMBoe/d (1% above Street), crude and gas realizations that exceeded Street estimates. However, 3Q CapEx increased to ~$2.2 billion (not including acquisitions), ~8% above Street, leading to management increasing full-year guidance by ~4%, to $8.1 billion from $7.8B.
  • For the fourth quarter, COP expects production of 1.74-1.80 MMBoe/d, in line with Street estimates, resulting in 2022 production of 1.74 MMBoe/d, unchanged q/q. Given COP’s recently-increased CapEx guide, the company’s expected 4Q spend totals ~$2.2 billion (excluding acquisitions), roughly 6% above Street.
  • COP announced an 11% increase in the quarterly base dividend to $0.51/share and increased its share buyback authorization by $20 billion.

When asked about their LNG strategy and how it fits in their portfolio Ryan M. Lance, the Chairman & CEO, stated the following:

“And then when you look at the transactions that we’ve done over the last couple of years, we have a growing resource position in the U.S. so creating more demand and — just makes a lot of sense coming out of the U.S. So as we step back and we started thinking about it, combined with our views of the energy transition and the view that LNG is going to be a necessary fuel that can replace coal, similar to the way the gas has done that in the United States and reduced the emissions profile in the U.S. So we think this is something the globe is going to be needing as we go through this energy transition.” -Ryan M. Lance, Chairman & CEO

BP PLC [BP]

Earnings: Tue Nov 1, 2022

  • BP reported strong quarterly earnings of $8.2 billion (+ 3.3 billion YoY), exceeding market expectations by 33% due to higher commodity prices and strong refining margins. 3Q EBIT of $13.8 billion was also 30% ahead of a consensus. Within the divisions, the strongest performers were in Gas & Low carbon Energy (+103% YoY), reflecting an exceptional gas marketing and trading result.
  • BP guides 2022 production to be higher on an underlying basis, primarily driven by the better performance in 3Q22 as 4Q22 upstream production is expected to be lower QoQ.
  • BP raised its 2022 CapEx guidance to $15.5 billion from the upper end of the $14-15 billion range, pending that the Archaea transaction closes this year.
  • The company also expects higher industry refining margins, the benefits of which will be partially offset by elevated energy prices, a higher level of turnaround activity, and operational impacts following the shutdown of the BP-Husky Toledo refinery in Ohio, US.
  • BP expects Q4’22 share repurchases of $2.9 billion, which follows the $3.5 billion program from Q3’22

An investor was curious about the long-term value of California’s Low Fuel Carbon Standard (LFCS) credits with the evaluation of the acquisition Archaea, a biogas company in the US that BP acquired a couple of months ago. CFO & Director Murray Auchincloss replied:

“They’ve got a fantastic hopper of 80 development along with the 50 facilities they are already operating, with the capacity to grow production from 6 MBD to 30 MBD. We see huge opportunity inside this. And we remain very comfortable that we’ll hit the double-digit returns that we talked to the market about. And I think we’ll go well beyond that. I think there are going to be interesting opportunities in hydrogen, CCUS with it. Synfuels will start to come into play as well given the new IRA.” – Murray Auchincloss, CFO & Director

Occidental Petroleum Corporation [OXY]

Earnings: Tue Nov 8, 2022

  • OXY reported 3Q22 adjusted EPS and cash flow of $2.44 and $4.70 billion vs. FactSet consensus of $2.48 and $4.65 billion. Reported capex was $1.15  billion vs. consensus estimates of $1.17  billion. 3Q FCF was $3.55  billion vs. consensus forecasts of $3.48  billion. Total production of 1,180 MBOE/d beat Consensus estimates by 2%, while oil production of 622 MBO/d was +1% vs. Consensus.
  • Based on 4Q22 guidance, implied FY22 production is tracking towards the upper half of prior guidance (with lower Permian production offset by higher performance in the Gulf of Mexico, International and Rockies) and oil production towards the lower-half of range (likely due to PSC impact to Oman oil production and lower Permian production partially offset by better Gulf of Mexico production).
  • OXY’s low carbon ventures (LCV) began construction of the world’s largest direct air capture (DAC) plant during the quarter. The first facility is expected to be operational in late 2024 and OXY’s DAC development base case calls for 100 plants by 2035.

When asked about sequestering CO2 versus utilizing it and how this may have changed the way to think about the amount of debt that would be used, the OXY’s CEO responded:

“My view is that the world cannot afford a climate transition without — by cutting out completely oil and gas production. Oil production is going to be needed for decades to come and using CO2 in enhanced oil recovery is a way to produce a net 0 emission oil. And to have that as the fuel source, it’s low cost, lower cost than other options, it would help with the transition, it would help to fund the transition. So I think that oil is needed for us, for our company, in particular, we have 2 billion barrels of resources available for further development in our enhanced oil recovery assets.” – Vicki A. Hollub, CEO & Director

National Grid [NGG]

Earnings: Thu Nov 10, 2022

  • Underlying operating profit of £2,117 million was above consensus by 4.8% and EPS of 32.4p was 2.2% above consensus.
  • FY23 EPS is estimated to increase by ~7% YoY to ~70p, which is above expectations, driven by upgraded FY23 earnings, FX rate, and other underlying business, net of £65mn contributions to customers.
  • National Grid expects to invest £40 billion (up from £30-£35 billion) over the five-year period to FY26 while delivering asset growth of 8-10% CAGR and EPS CAGR of 6-8%. Half of the growth is driven by macro (higher inflation) and FX (stronger dollar), with the other half driven by CapEx-driven asset base growth in regulated businesses driving earnings growth.

The energy crisis in Europe is a growing concern with winter approaching. When probed for high–level comments on the outlook, the CEO responded:

“So for electricity, our expected view is that there is sufficient generation to meet demand. Plant margin is about 6.3%. Those that are close to this will know that’s very similar to what we’ve seen in previous winters. And on the gas side, there’s about 600 million cubic meters a day available against a 1 in 20-year peak demand of about 480 million. So again, plenty of gas available. Quite rightly as a prudent system operator, as you’d expect, with everything that’s going on in Europe and with the Russian-Ukraine situation, they’ve set out and downside scenarios. But to be clear, they’re not what they’re expecting. What they’re expecting is there is sufficient generation to meet demand.” – John Pettigrew, CEO & Executive Director

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Industrials

Raytheon [RTX]

Earnings: Tue Oct 25, 2022

  • Adjusted EPS fell to $1.21 in 3Q from $1.26 the prior year, but beat Street consensus of $1.14. Revenue increased 5%YoY to $16.95 billion, though it missed the $17.25 billion estimate mainly due to lingering supply and labor constraints that impacted the aerospace and defense arm of the company. However, solid performance from Pratt & Whitney helped facilitate stronger operating leverage and allowed consolidated RTX EBIT to meet expectations 
  • RTX lowered its full-year revenue outlook to $67 billion – $67.3 billion from $67.75 billion – $68.75 billion. The lowered guidance reflects softer results for Intelligence & Space and Missiles & Defense. Within Collins, commercial aftermarket, and OE both rose double digits in sales while the military saw a single-digit decline. 

When benchmarked against peers in the industry, Raytheon’s margin movement was quite volatile this quarter. The CFO provides insights into why that was the case: 

“The first thing that’s really dragging down the margins this year relative to our initial expectations are the lack of productivity. And that lack of productivity has principally been driven by the delay in material receipts, which is obviously jamming up the production and development cycles within the businesses, and it’s most notable at RMD.” – Neil G. Mitchill, Executive VP & CFO

Caterpillar [CAT]

Earnings: Thu Oct 27, 2022

  • CAT reported a strong quarter, with EPS, sales, and margins all beating consensus. The company reported adjusted EPS of $3.95 vs. the Street’s $3.16 and while the YOY manufacturing cost headwind got bigger, it was more than offset by further price increases, which drove the margin expansion of 16.2% compared to consensus estimate of 14.3%. 
  • Operating margins were strong across all segments, with construction industries segment margins of 19.4% leading the pack with a 250 basis points outperformance. Resource industries and Energy & Transport also outperformed consensus expectations by 200basis points each. 
  • CAT expects Q4 sales to be the highest quarter of the year, in line with typical seasonality. Adjusted operating margin is expected to be strong as pricing should offset manufacturing costs in Q4. For 2022, CapEx is expected at ~$1.4b (was ~$1.5 billion), restructuring expense at ~$800 million (was $600 million) and global tax rate at ~23% (was 24%), while short-term incentive compensation expense is expected at ~$1.6 billion (unchanged).

When asked about how electrification will impact TAM of certain vehicles from a project win, the Chairman of the Board & CEO, D. James Umpleby, answered:

“So the profitability around diesel engine versus batteries, there’s a lot of puts and takes there. And again, we are still working our way through what our services model would be and all that. We are excited about the opportunities that exist. And one of the things that we believe positions us very well is the fact that we have an Energy & Transportation segment, which allows us to have additional opportunities with our mining customers to help them get the site ready.” – D. James Umpleby, CEO and Chairman of the Board

Honeywell [HON]

Earnings: Thu Oct 27, 2022

  • HON posted Q3 adj EPS of $2.25, beating Street Consensus of $2.15, driven by stronger segment margins of 21.8% (vs consensus of 21.2%). All four HON segments topped OM expectations, led by Safety & Productivity (100 basis points beat vs Consensus) Aerospace (50 basis points beat) and PMT (+40 basis points beat). Q3 revenue met expectations but the 9% organic growth YoY topped 8% Consensus, offset by higher FX. 
  • HON is raising the low end of the EPS guide, now expecting FY’22 EPS of $8.70 – $8.80 (from $8.55 -$8.80) w/ firmer OM expansion and slightly better organic growth more than offsetting rising FX headwinds.

When asked about the company’s 11% price increase (double the average), the CFO responded:

“I think the most difficult spot for us has been in Aerospace… [but] we’ve done better than you probably would expect in the long-cycle businesses going and repricing the backlog because we have seen inflation there. So we have had some good success in our projects businesses going back and getting price. The products businesses are definitely the bigger driver of all of that, as you would imagine. And so that’s — I would say PMT, HBT, SPS are all having very strong pricing power in the products businesses in particular.” – Gregory Peter Lewis, Senior VP & CFO

Emerson Electric [EMR]

Earnings: Estimated Tue Nov 1, 2022

  • Emerson Electric reported a strong end to its fiscal year with 4Q22 total revenue of $5.26 billion, in-line with consensus, and adjusted EPS of $1.53, beating consensus by $0.14. Segment profit beat consensus by $0.25, driven by all segments.
  • Management announced the sale of a 55% stake of the HVAC-focused Climate Technologies business to Blackstone, valuing the entity at $14 billion. Emerson ultimately plans to divest all of Climate Technologies but this initial sale accelerates Emerson’s strategic pivot to an automation pure-play.
  • EMR established FY23 adjusted EPS guidance at $4.00 – $4.15 (excluding restructuring/other, amortization), with revenue +7-9%, and core sales +6.5 – 8.5%. The company also communicated 1Q23 adjusted EPS guidance of $0.85-0.89 vs. $0.79 the year prior, on continuing sales up 6-8% YoY.

Emerson’s 4th quarter and full-year earnings call also included the announcement of their majority share in their Climate Technologies business. In the opening statement, the company’s President addressed the news:

“Today, we achieved a significant milestone in this portfolio transformation by announcing the sale of a majority interest of the Climate Technologies business to Blackstone. Emerson, going forward, will be a unique automation company with a cohesive higher-growth portfolio exposed to diverse end markets and aligned to the world’s secular trends, including digital transformation, sustainability, energy security and near-shoring.” – Surendralal Lanca Karsanbhai, President, CEO & Director

Cummins [CMI]

Earnings: Thu Nov 3, 2022

  • Cummins reported 3Q adjusted EPS of $2.82 and diluted EPS of $3.21, which missed the Street’s $4.83 estimate. Total revenue of $7.33 billion increased 22.9% YoY and came in above Street consensus of $6.62 billion. Although all segments beat sales expectations, the company reported an operating miss due to lower-than-expected margin performance across all segments. The miss is also partly due to decreased benefits from volumes and lapped strong pricing actions taken last year. Weaker results in China also drove lower JV income.
  • Despite operating miss, management noted that demand remains strong as the company maintained its sales outlook for 2022, but did lower its earnings from JV expectations given the weaker China market. The updated FY22 sales guidance (Ex Meritor) had revenue up +8% (unchanged) with an EBITDA margin target of ~15.0% (prior: ~15.5%).

When asked why R&D spending was up considerably, Cummins CEO spoke on the new technologies that they continue to invest in.

“We have, as you noted, taken up our R&D spend, in particular in the Engine business and the New Power business where we have strategic investments in the fuel-agnostic platform and growing investments in electrolyzers and other key New Power technologies.” – Jennifer W. Rumsey, President, CEO & Director

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Tech, Media, Telecom

Microsoft Corporation [MSFT]

Earnings: Tue Oct 25, 2022

  • MSFT’s revenue increased 11% YoY to $50.1, beating expectations of $49.6 billion. Server products and cloud services sales increased 22% to $20.3 billion, driven by Azure and other cloud services revenue growth of 35%. Supply chain issues around servers and IT equipment helped fuel the growth as businesses turned to providers with key infrastructure already in place. Management also noted Windows sales dropped 15% YoY, indicating a slow-down in computer sales. 
  • MSFT forecasts double-digit revenue and operating income growth this fiscal year, driven by 22% to 24% growth in its cloud segment, but tempered by ongoing declining of demand for PCs. Despite weakness in the consumer segments, the company believes that it can grow its commercial business ~20% this year in constant currency

CEO Satya Nadella said Microsoft plans to continue investing in AI, including its own applications like GitHub Copilot and partnerships with companies including OpenAI and Mattel.

“The OpenAI partnership is a very critical partnership for us… And of course, we then productized it as part of Azure OpenAI services. And that’s what you’re seeing both being used by our own first-party applications, whether it’s the GitHub Copilot or Designer, even inside MATCH… But overall, this is an area of huge investment. The AI moment clearly has arrived. And it’s going to be part of every product.” – Satya Nadella, CEO

Comcast [CMCSA]

Earnings: Thu Oct 27, 2022

  • Comcast reported revenue of $29.8 billion, down 1.5% YoY and narrowly beating estimates of $29.71 billion. Its Cable Communications segment added a net 333,000 wireless customer lines, its best quarterly result on record, leading to wireless revenue growth of $30.8% YoY.
  • The Company reported a net loss of $4.6 billion, mainly due to an $8.6 billion write-down on its Sky TV operations. Omitting the write-down, the company reported adjusted earnings of $4.2 billion, or $0.96 per share, beating Wall Street’s expectations of $0.90 EPS and marking a 10.3% increase YoY.

Comcast’s CEO, David Watson, commented on its broadband product roadmap and its potential to generate significant growth moving forward.

“We’re anticipating longer-term growth in broadband, and real opportunities in every segment. In terms of mid-splits, we’re rolling it out right now, delivering multi-gig download speeds and upload speeds that are 200 to 300 megabits, which is up to 10x faster than our current upload speed. So that will be deployed to 20% of our footprint by the end of this year and will be, by the end of ’25, serving the vast majority of our footprint with mid-split. And then on the back of this, DOCSIS 4.0 will be in the market in the second half of ’23 with multi-gig symmetrical speeds. And the vast majority of our footprint will begin the process in ’25. So we do all of this with the CapEx intensity of around 11%.” – David Watson, CEO

Ansys [ANSS]

Earnings: Estimated Thu Nov 3, 2022

  • Ansys reported 3Q22 revenue of $472.5 million, an increase of 7% YoY, as well as EPS of $1.77, beating Street’s estimates of $1.64. The engineering software firm also reported third-quarter 2022 ACV growth of 12% in constant currency, with each geography delivering double-digit growth and a strong performance by subscription lease licenses.
  • The company expects revenue growth to drop in Q4, forecasting $621.3 million – $656.3 million in revenue, which would represent a YoY revenue decline of 5.2%. For the 2022 calendar year, the company forecasts revenue of about $2 billion, signaling an annualized sales growth rate between 4.5% and 6.3%.
  • Earlier this week, Ansys announced the general availability of its Ansys Gateway solution with AWS, which allows those customers with constrained computing capacity to scale up with Amazon and perform more computations. 

CEO Ajei Gopal said the semiconductor, aerospace and defense, and automotive segments continued to be top performers for Ansys, as clients’ R&D spend remained high despite macroeconomic headwinds.

“Customers have multiyear R&D product road maps, and the competitive environment for customers is more challenging today than it’s ever been. And so they understand the lessons of the past, which is that if you see concerns in the headlines and you pull your R&D investment back when those concerns are passed, you’re now behind and you lose market share, and that’s to your detriment…

“And so the investment in R&D activity continues unabated, and our value proposition is tied to R&D because, as I’ve said, again, repeatedly, we make R&D more efficient and we help customers drive products to market faster. So that’s where our excitement comes from. It comes from what we’re seeing from a forecast perspective, what we’re seeing from the field, and what we’re seeing with our customers entering the products in the market we serve.” – Ajei Gopal, President, CEO & Director

Warner Bros. Discovery Inc. [WBD]

Earnings: Estimated Fri Nov 4, 2022

  • Warner Bros. Discovery third-quarter revenue was $9.82 billion, missing analyst estimates of $10.36 billion and marking an 8% decline YoY.
  • The media company reported a loss of $2.3 billion, or $0.95 per share, including $1.5 billion in restructuring costs from the merger of AT&T’s WarnerMedia and Discovery. The company expects to complete the restructuring by the end of 2024 at a total cost between $3.2 billion and $4.3 billion.
  • Warner Bros. Discovery expects full-year adjusted earnings of $9.2 billion and $12 billion in 2023, noting that advertising headwinds remain a variable.

Warner Bro’s commented on the $2.0 billion of content write-offs this quarter, reaffirming that this restructuring is part of its near-term focus to generate $1 billion in streaming earnings by 2025.

“The fact is we have these tentpoles, the strength of HBO right now by people domestically and around the world, where we do have HBO in a few markets as being the highest-quality, best-curated service, as well as the production of content coming out of Warner Bros., that’s really our strength… we’re leaning in. We’re spending more money this year than we’ve ever spent historically…. And all those write-offs that we took shows off these platforms, we didn’t take one show off a platform that was going to help us in any way. It’s going to help us to get it off the platform so that we could now invest in with the knowledge of what is working and replace those shows with content that has a chance to be more successful, have larger audiences, and we’re reallocating the capital.” – David M. Zaslav, President, CEO & Director

JOYY Inc. [YY]

Earnings: Wed Nov 16, 2022

  • JOYY reported $598.1 million in revenues despite global macroeconomic uncertainties and the seasonality impact of the Ramadan holiday in the Middle East. Notably, the Bigo segment expanded its non-GAAP net profit to $86.3 million and improved its non-GAAP net margin to 17.2%.
  • The company noted fewer live-streaming shows and fewer users willing to pay as COVID-19 restrictions relax and more people travel; additionally, consumer demand for products has also been curbed by inflation overseas.
  • The number of monthly active users (MAU) for Bigo Live grew 2.8% YoY to 32.6 million in 2Q22, potentially due to its new user community function.
  • On August 2022, the company announced its agreement with Shopline to purchase Shopline’s Series B preferred shares for $180 million and its plans to consolidate its financials. Shopline is an independent cross-border e-commerce SaaS platform.

When asked about the competitive landscape of the live-streaming and the short video industry in the overseas market, the CEO commented:

“We believe that there has been increasing competition in the short video sector, given that we have so many new products coming into the sector including increasing the larger companies like Google and Facebook as well as TikTok. But if we look at live-streaming, especially social live-streaming, we don’t believe that the competitive landscape has changed that much. I would believe that for social live-streaming, this is a product and sector that is hugely reliant on the community and the sticky connection among the users.”  Xueling Li, Co-Founder, Chairman & CEO

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M&A IPOs to watch in Pharma and Biotech.

Life Sciences

Johnson & Johnson [JNJ]

Earnings: Tue Oct 18, 2022

  • JNJ reported strong 3Q22 results as organic sales grew 8.2% to $23.8 billion. Both sales and adj. EPS ($2.55) beat consensus by 2% despite FX pressures and continued macroeconomic challenges. 
  • By segment: Pharmaceutical margins declined from 43.8% to 41.9%, primarily driven by unfavorable currency and cost of products sold. MedTech margins remained flat at 25.5%, as commodity inflation and increased investment in R&D were offset by supply chain efficiencies and sales marketing and administrative leveraging. Consumer health margins improved by 10 basis points despite inflationary pressures driven by price actions and investment prioritization.
  • JNJ lowered 2022 reported revenue guidance by ~$500 million at the midpoint based on the assumption of an anticipated incremental F/X headwind, to a range of $93.3 billion-$93.5 billion vs. prior guidance of $93.3 billion-$94.3 billion, but reaffirmed growth rate of 7% at the midpoint.

When asked about the macro trends impacting the company’s MedTech segment, management responded:

“In the United States, we started to see surgical procedures tick up predominantly at the latter part of the quarter. We do see diagnostic procedures more in the mid-single digits, so colonoscopies as an example, in quarter 3. So we’re expecting that to continue. Now you’ll recall that we’re anniversary-ing Omicron hitting kind of in the Thanksgiving time frame in December, so that should be a healthy comp, but we also expect in a very focused micro surges in the winter surge.” – Ashley A. McEvoy, Executive VP & Worldwide Chairman of MedTech

Merck & Co., Inc. [MRK]

Earnings: Thu Oct 27, 2022

  • MRK reported both a strong top and bottom-line beat in 3Q22 with total revenue of $15.0 billion vs. Street consensus of $14.0 billion and EPS of $1.85 vs. consensus of $1.73. The strong performance was due to key brands – Gardasil (12% above consensus), Lagevrio (92% above consensus), and Keytruda (1% above consensus).
  • FY22 top-line guidance was raised and narrowed to $58.5-$59.0 billion vs. $57.5-$58.5 billion prior, with bottom-line guidance also raised to $7.32-$7.37 vs. $7.25-$7.35 prior.
  • Capital deployment and business development were a big focus on the call though nothing incremental was shared.

AbbVie Inc. [ABBV]

Earnings: Fri Oct 28, 2022

  • ABBV reported their fourth consecutive top-line miss with 3Q22 revenue of $14.8 billion and missing Street consensus of $15.0 billion, primarily driven by aesthetics segment weakness resulting from lower consumer demand and FX headwind, as well as a Ubrelvy miss.
  • FY22 total revenue guidance was decreased to $58.2 billion from $58.9 billion and adjusted EPS guidance was lowered to $13.84-$13.88 from $13.78-$13.98 prior.
    Management stated on a high note that the lower end of 2023 EPS guidance would represent floor earnings and that they do not expect 2024 EPS to be lower than the initial 2023 EPS guidance.
  • Additionally, CEO Richard Gonzalez has no plans to leave in 2023; preparations for succession have been underway since 2016 and Gonzalez will likely stay on as Executive Chairman following the appointment of a new CEO

Capital deployment and business development were a big focus during the call. When asked about the overall BD landscape, AbbVie’s CEO responded:

“But just to the BD landscape, we continue to, frankly, see a portfolio of opportunities we are interested in and are continuing to look at. So as we sit here today, our focus, our urgency on business development has not changed. We do see a list of potential places to play. Obviously, we’ve got to bring them through to fruition which we’re working to do. But that is our priority because we continue to believe the best thing we can do for long-term value creation is to invest in the sustainability of our business, which is investing in the pipeline of the future in both what we do internally and through BD. So that’s our priority. And I do see opportunities, but obviously, we remain committed also to not hold cash.” – Robert M. Davis, President, CEO & Director

Pfizer Inc. [PFE]

Earnings: Tue Nov 1, 2022

  • Pfizer reported 3Q22 revenues of $22.6 billion, beating consensus forecasts of $21.1 billion. EPS of $1.78 also beat Street consensus of $1.39. The top-line beat was driven by Comirnaty, which came in at $4.40 billion (vs. Cons of $2.66 billion). Paxlovid sales came in at $7.51 billion in line with Consensus. The EPS beat was driven by higher sales, lower R&D spending, and a lower tax rate.
  • PFE raised FY22 revenue guidance by ~1% at the midpoint and is now guiding to revenues of $99.5 billion-$102 billion vs. $98 billion-$102 billion prior. Full-year EPS is now expected in the range of $6.40-$6.50 vs. $6.30-$6.45 prior. The company noted that excluding F/X, they would have raised revenue/EPS guidance by ~$1.7 billion/$0.19, respectively. The guidance update provided, however, does include ~700mn/$0.09 of headwind related to F/X impact

When asked to elaborate on Pfizer’s single-dose COVID vaccine, and the commercial market’s willingness to pay $110 – $130 for the dose, management responded:

“As I mentioned before, the number of deaths and almost $16 billion worth of cost in the U.S. alone in terms of COVID was pretty substantial. So I think we feel confident that this range will be seen as highly cost-effective and definitely one that will help to enable and ensure appropriate access and reimbursement to the vaccine.” Annaliesa Anderson, Senior VP and Chief Scientific Officer for Bacterial Vaccines – Vaccine Research & Development Unit

AstraZeneca [AZN]

Earnings: Thu Nov 10, 2022

  • AstraZeneca reported revenue of $10.98 billion for the quarter, narrowly beating estimates. Revenue grew 19% compared to the same period last year, buffered by sales of its key cancer drugs, Tagrisso and Imfinzi.
  • The British drugmaker reported net income of $1.64 billion, or $1.67 earnings per share, beating estimates of $1.52.
  • AstraZeneca also announced it would withdraw its application for Covid vaccine Vaxzevria with the FDA. Despite that, the company upgraded its full-year guidance and anticipates at least 18 Phase III trial readouts in 2023.

AstraZeneca’s CEO, Pascal Soriot, said R&D investment would continue as several drugs in the pipeline show high potential.

“So we will maximize the value of each key asset we have. They all have large potential. But of course, it will require R&D investment. So certainly, our goal is to continue investing in R&D at the same level, as we’ve said before, which is in the low 20s… And by the way, maybe I should also have added that the Rare Disease early pipeline is starting to mature, and over the next 2 to 3 years, we’re very excited to see the kind of products we could actually bring to Phase III and then to patients. So all of this takes us back to continued investment in R&D. There’s no question.” – Pascal Soriot, CEO & Executive Director

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Su Kim

An educator and strategist by training, Su Kim is the Product Marketing Manager for the Financial Services vertical at AlphaSense. Previously, she managed a client portfolio of S&P 100 companies in the industrials sector in one of the top 3 banks in the U.S.


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