Tag Archives: Earnings Projections

World

Business Losses From Russia Top $59 Billion as Sanctions Hit

Leave a comment

Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy and sales and shutdowns continue, according to a review of public statements and securities filings.

Almost 1,000 Western businesses have pledged to exit or cut back operations in Russia, following its invasion of Ukraine, according to Yale researchers.

Many are reassessing the reported value of those Russian businesses, as a weakening local economy and a lack of willing buyers render once-valuable assets worthless. Companies under U.S. and international reporting standards have to take impairment charges, or write-downs, when the value of an asset declines.

SHARE YOUR THOUGHTS

When or how do you expect companies to recover from their losses in Russia? Join the conversation below.

The write-downs to date span a range of industries, from banks and brewers to manufacturers, retailers, restaurants and shipping companies—even a wind-turbine maker and a forestry firm. The fast-food giant

McDonald’s Corp.

expects to record an accounting charge of $1.2 billion to $1.4 billion after agreeing to sell its Russian restaurants to a local licensee;

Exxon Mobil Corp.

took a $3.4 billion charge after halting operations at an oil and gas project in Russia’s Far East; Budweiser brewer

Anheuser-Busch InBev SA

took a $1.1 billion charge after deciding to sell its stake in a Russian joint venture.

“This round of impairments is not the end of it,” said Carla Nunes, a managing director at the risk-consulting firm Kroll LLC. “As the crisis continues, we could see more financial fallout, including indirect impact from the conflict.”

The financial fallout of the conflict isn’t significant for most multinationals, in part because of the relatively small size of the Russian economy. Fewer than 50 companies account for most of the $59 billion tally. Even for those, the Russian losses are typically a relatively small part of their overall finances. McDonald’s, for example, said its Russia and Ukraine businesses represented less than 3% of its operating income last year.

Some companies are writing off assets stranded in Russia. The Irish aircraft leasing company

AerCap Holdings

NV last month took an accounting charge of $2.7 billion, which included writing off the value of more than 100 of its planes that are stuck in the country. The aircraft were leased to Russian airlines. Other leasing companies are taking similar hits.

Other businesses are assuming that they will realize no money from their Russian operations, even before they have finalized exit plans. The British oil major

BP

PLC’s $25.5 billion accounting charge on its Russian holdings last month included writing off $13.5 billion of shares in the oil producer

Rosneft.

The company hasn’t said how or when it plans to divest its Russian assets.

BP’s $25.5 billion accounting charge on its Russian holdings include writing off $13.5 billion of shares in oil producer Rosneft.



Photo:

Yuri Kochetkov/EPA/Shutterstock

Even some companies that are retaining a presence in Russia are writing down assets. The French energy giant

TotalEnergies

SE took a $4.1 billion charge in April on the value of its natural-gas reserves, citing the impact of Western sanctions targeting Russia.

The Securities and Exchange Commission last month told companies that they have to disclose Russian-related losses clearly, and that they shouldn’t adjust revenue to add back the estimated income that has been lost because of Russia.

Bank of New York Mellon Corp.

, which in March said it had stopped new banking business in Russia, appeared to breach this guidance when it reported its results for the first three months of this year. The New York custody bank in April reported $4 billion in revenue under one measure that included $88 million added to reflect income lost because of Russia.

A BNY Mellon spokesman declined to comment.

Investors appear to have mixed reactions to the write-downs, partly because most multinationals have relatively small Russian exposure, academic research suggests.

Financial markets are “rewarding companies for leaving Russia,” a recent study by Yale School of Management found. The share-price gains for companies pulling out have “far surpassed the cost of one-time impairments for companies that have written down the value of their Russian assets,” the researchers concluded.

Bank of New York Mellon said earlier this year that it had stopped new banking business in Russia.



Photo:

Gabriela Bhaskar/Bloomberg News

Research using a different methodology found a more subtle investor reaction. Analysis by Indiana University professor Vivek Astvansh and his co-authors of the short-term market impact of more than 200 corporate announcements revealed a marked trans-Atlantic divide. Investors punished U.S. companies for pulling out of Russia, and non-American companies for not withdrawing, the analysis found.

More write-downs and other Russia-related accounting charges are expected in the coming months, as companies complete their planned departures from the country.

British American Tobacco

PLC, whose brands include Rothmans and Lucky Strike, said on March 11 it had “initiated the process to rapidly transfer our Russian business.” That transfer is still ongoing, according to a BAT spokeswoman. BAT hasn’t taken an impairment in relation to the business.

Accounting specialist

Jack Ciesielski

said companies might hold off announcing a write-down until they have a good handle on how big the loss will be.

“You don’t want to put a number out there until you’re confident that it’s not likely to change,” said Mr. Ciesielski, owner of investment research firm R.G. Associates Inc.

The ruble’s recovery is helping Russia prop up its economy and continue its Ukraine war effort. WSJ’s Dion Rabouin explains how Russia boosted its ailing currency and how it is affecting the global economy. Illustration: Ryan Trefes

Many companies are giving investors rough estimates about what to expect on Russia-related losses.

The manufacturer

ITT Inc.,

which has suspended its operations in Russia, said last month it expects a $60 million to $85 million hit to revenue this year because of a “significant reduction in sales” in the country. That is a small slice of the $2.8 billion in total revenue for the maker of specialty components for the auto, aerospace and energy industries.

As sanctions weaken the Russian economy, businesses still operating there are reassessing their future earnings and booking losses. Ride-sharing giant

Uber Technologies Inc.

in May took a $182 million impairment on the value of its stake in a Russian taxi joint-venture because of forecasts of a protracted recession in the Russian economy. Uber said in February it was looking for opportunities to accelerate its planned sale of the stake.

—Thomas Gryta and Nick Kostov contributed to this article.

Write to Jean Eaglesham at jean.eaglesham@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Stocks Trade Modestly Higher – WSJ

Leave a comment

U.S. stock indexes edged higher Tuesday, reversing course after a profit warning from

Target

cast a pall over the retail sector.

The S&P 500 rose 0.4%. The Nasdaq Composite ticked up 0.4%, while the Dow Jones Industrial Average increased 0.3%. 

Stocks have swung in recent days, buffeted by shifts in views about the strength of the economy and the likely path for central banks and interest rates. A big concern is that central banks could act too aggressively as they combat inflation and trigger a slowdown in economic growth, or even a recession.  

“We’re still in this constant push and pull about where inflation is going to be, where growth is going to be, and whether we’re going to be in a recession or not,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. 

Target shares dropped 3% after the retailer issued a warning that its profit would decline because it needs to cancel orders or offer discounts to clear out unwanted goods, a potential sign of lower consumer spending. Shares of other big retailers followed, with

Walmart

declining more than 2%.

A significant increase in retail inventories and diminishing demand could cause prices to moderate across most consumer goods in the second half of the year, according to Peter Essele, head of portfolio management at Commonwealth Financial Network.

“That would be a good thing for inflation overall and would help buoy markets higher as inflation continues to decline,” Mr. Essele said.

The trade gap in the U.S. for April narrowed to $87.1 billion, shrinking more than economists had forecast, after reaching a record deficit the prior month. A key release this week will be the consumer-price index on Friday, which will be closely watched for signals on whether inflation is weakening or not.  

Ayako Yoshioka, a senior portfolio manager at Wealth Enhancement Group, said year-over-year inflation is likely to peak, but the pace at which higher prices come down remains uncertain.

“As long as inflation remains elevated and continues to come down very slowly, the Fed is going to increase interest rates in order to combat these high inflation rates,” Ms. Yoshioka said. “It’s a very difficult thing for the Fed to engineer a soft landing.”

On Tuesday, the Reserve Bank of Australia lifted its key policy rate by 0.5 percentage point, more than expected. 

“The Australian central bank’s move, it’s a reminder that central banks can surprise on the upside. What does this tell us about what the Fed will do, what the ECB will do?” Mr. Kamal said. “More aggressive tightening directly equals a higher probability of a recession.”

The yield on the benchmark 10-year Treasury note eased to 2.973% from 3.037% on Monday. Yields fall when prices rise. 

“With yields at 3%, it shows that the market hasn’t decided if we’re going to have a recession or if we have one, how severe it’s going to be,” said Julien Lafargue, chief market strategist at Barclays Private Bank. “That is what you would want to own if you expect a recession.”

Traders worked on the floor of the New York Stock Exchange on Friday.



Photo:

justin lane/Shutterstock

In other corporate news,

Kohl’s

shares jumped more than 9% after The Wall Street Journal reported the department-store chain is in exclusive talks to be sold to retail holding company

Franchise Group.

The deal may value the company at about $8 billion. 

Arcade company

Dave & Buster’s Entertainment

rose 2% after reporting a jump in sales growth.

Shares of BuzzFeed climbed 6%, recovering some ground after plunging 41% on Monday after a ban that prevented executives and major investors from selling shares was lifted.

Twitter

shares rose 1% after Elon Musk threatened Monday to end his acquisition of the social-media platform, saying the company didn’t comply with requests for data about spam accounts. 

Casey’s General Stores

is slated to report after markets close.

Overseas, the pan-continental Stoxx Europe 600 slipped 0.3%. In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.2%, while Hong Kong’s Hang Seng Index declined 0.6%. Japan’s Nikkei 225 edged up 0.1%. 

The Japanese yen weakened 0.7%, reaching the lowest level against the dollar since April 2002. The yen has sold off this year as the

Bank of Japan

has remained committed to ultra-easy monetary policy, while many other central banks have begun lifting interest rates to combat rapid inflation. 

Cryptocurrencies fell, with bitcoin tumbling 4% and dropping below $30,000. Ether also declined 4%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com

As markets react to interest-rate hikes and the threat of a recession, stocks are dropping closer to bear-market territory. WSJ’s Gunjan Banerji explains what it takes to push stocks back into a bull market and why it’s hard to predict when they’ll turn around. Illustration: Jacob Reynolds

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Microsoft Cuts Earnings and Revenue Forecasts

Leave a comment

Microsoft cited the impact of foreign-exchange rates as the U.S. dollar has strengthened.



Photo:

Mike Segar/REUTERS

Microsoft Corp.

MSFT -2.25%

cut sales and earnings guidance for the current quarter, citing the impact of foreign exchange rates as the stronger U.S. dollar takes a toll.

The software giant said in a securities filing Thursday that it now expects fiscal fourth-quarter sales of between $51.94 billion and $52.74 billion, down from its prior guidance of $52.4 billion to $53.2 billion. The quarter ends June 30.

Earnings are expected to be between $2.24 a share and $2.32 a share, down from prior guidance of $2.28 a share to $2.35 a share.

Microsoft shares fell 2.5% in early trading to $265.60. They are down nearly 21% year to date.

Economic weakness in other parts of the world has helped propel the U.S. dollar to multi-decade highs against its trading partners, which comes as U.S. inflation is at or near its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up more than 6% so far this year and hit its highest level since 2002 last month. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.

A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.

Microsoft said in its earnings report earlier this month that a stronger dollar reduced the software company’s revenue, even though it notched higher profits last quarter.

Microsoft is the latest multinational giant to warn of the stronger dollar’s impact on financials.

Salesforce Inc.

earlier this week cited the stronger dollar in lowering its sales outlook for the year. The business-software company doubled the impact that it expects this year from the stronger dollar to $600 million from its $300 million forecast in March.

“I think the dollar might have even had a stronger quarter than we did,” Salesforce Co-Chief Executive

Marc Benioff

said on the company’s conference call Tuesday.

This article will be updated.

Write to Will Feuer at will.feuer@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Stocks End Higher, Lifted by Retailer Results

Leave a comment

U.S. stocks rose Thursday, with the Dow Jones Industrial Average notching a fifth consecutive day higher, after strong results from retailers lifted sentiment across the market.

The blue chips added 1.6%, while the S&P 500 advanced 2%. The tech-heavy Nasdaq Composite climbed 2.7%, helped by gains in shares of

Apple,

Microsoft,

Amazon.com

and

Tesla.

The outlook for stocks turned cheerier Thursday when several retailers delivered strong results.

Macy’s

reported robust sales growth and lifted its earnings guidance, while discount chains

Dollar General

DG 13.71%

and

Dollar Tree

DLTR 21.87%

beat Wall Street’s earnings expectations.

Last week, results from retailers including Walmart, Target and Kohl’s raised concerns that rising costs are eroding profits while inflation prompts some consumers to rethink their budgets.

“After having a real challenging time with retail last week, you’re starting to see some other signs that not everybody in retail is doing poorly,” said

Wayne Wicker,

chief investment officer at MissionSquare Retirement. “It probably provides a little more confidence that the consumer continues to be reasonably strong.” 

Equity investors have endured a particularly volatile period lately. At the end of last week the S&P 500 fell far enough that it was on track to close at least 20% below its January peak. The benchmark then reversed course to avoid closing in bear market territory.

Despite the advances by major indexes this week, many investors expect markets to remain unsettled for some time to come.

“I think we’re going to still go through some more volatility ahead,” said

Leslie Thompson,

chief investment officer at Spectrum Wealth Management.

Investors have been considering how the Federal Reserve’s plans to tighten monetary policy to combat inflation could weigh on economic growth and the performance of financial markets.

Fed meeting minutes released Wednesday showed that policy makers were in agreement for half-percentage point increases in June and July, in line with previous communication. Major stock indexes closed higher after the release. 

“To some extent, markets have been reassured that the Fed isn’t going to tighten more aggressively than what is expected,” said

Luc Filip,

head of investments at SYZ Private Banking.

Traders worked on the floor of the New York Stock Exchange on Tuesday.



Photo:

justin lane/Shutterstock

Money managers are closely watching fresh data as they gauge the health of the economy. On Thursday a second reading of first-quarter U.S. gross domestic product came in worse than the first with a contraction at an annual rate of 1.5%.

“Economic data has come in weaker than expected lately. We do see this tightening in the economy. How severe the growth slowdown is what markets are thinking about now,” said

Shaniel Ramjee,

a multiasset fund manager at Pictet Asset Management.

Initial jobless claims fell last week and hovered near historic lows, suggesting a mixed economic picture. 

Earnings reports continued to drive moves in individual stocks. Analysts have been scrutinizing results for indications that inflation has begun to weigh on profits.

“We are focusing on earnings and profitability. A lot of stable companies are reporting lower guidance,” Mr. Ramjee said. “Even the tech sector is not immune to margin pressure, especially from input costs like wages.” 

Nvidia

shares rose more than 5% after the chip maker posted record revenue, though its sales outlook for the current quarter came in below Wall Street’s estimates.

Shares of

Williams-Sonoma

jumped 13% after the retailer posted profits that beat analysts’ expectations. Macy’s shares climbed 19% after it raised full-year earnings guidance.

Dollar Tree shares advanced nearly 22% and Dollar General shares rose nearly 14% after the discount retail chains reported profits higher than expectations.

Shares of

VMware

added 3.4% after

Broadcom

confirmed that it will acquire the cloud computing firm for $61 billion in cash and stock. Broadcom shares rose 3%.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note rose to 2.756%, from 2.746% Wednesday. Yields rise as bond prices fall.

Global oil benchmark Brent crude added 3% to trade at $117.40 a barrel.

Overseas, the pan-continental Stoxx Europe 600 rose 0.8%. In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.5% while Hong Kong’s Hang Seng fell 0.3%. Japan’s Nikkei 225 also declined 0.3%. 

South Korea’s central bank raised a key policy rate to 1.75% on Thursday and signaled it would tighten policy further to keep fighting against high inflation. 

Write to Karen Langley at karen.langley@wsj.com and Anna Hirtenstein at anna.hirtenstein@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Stocks Drop in Volatile Trading

Leave a comment

U.S. stock indexes opened lower and a selloff in technology stocks deepened, weighed down by growing investor concerns about the outlook for economic growth. 

The S&P 500 fell 1.0% Tuesday, while the Dow Jones Industrial Average lost 0.5%. Contracts for the tech-heavy Nasdaq Composite slid 1.8%. 

The losses point to a sharp turnaround from Monday, when major U.S. indexes rallied after a volatile trading session the previous week. But a profit and revenue warning later on Monday from social-media company

Snap

sent investor sentiment souring again. Asian indexes broadly fell amid declines in technology stocks. European markets also traded lower.

Snap’s shares fell 34% premarket Tuesday as investors digested comments that the macroeconomic environment has deteriorated more than expected. Worries about disruptions to Snap’s advertising revenue rippled to other tech stocks that have been battered this year.

Meta Platforms

shed 8.1% before the opening bell and Google-parent

Alphabet

fell 4.4%.

Investors are confronting a range of signals as they try to map out the trajectory of the U.S. economy. Many have grown worried that the Federal Reserve’s plans for monetary tightening to tamp down inflation could tip the economy into a recession.

Disappointing earnings and warnings across the corporate landscape have exacerbated those fears.

Abercrombie & Fitch

became the latest retailer Tuesday to dent investor sentiment after it swung to a first-quarter loss amid higher costs. The company’s shares tumbled 31% premarket. 

Worries about slowing growth amid higher inflation have been among the catalysts that have sent the S&P 500 falling 17% through Monday from its January high. Investors are now keeping a close watch on whether the S&P 500 enters bear market territory, defined as a drop of at least 20% from a recent high. On Friday, the benchmark index came close to finishing in a bear market, though it was saved by a late-session rally.

There have been glimmers of optimism, however, such as on Monday, when

JPMorgan Chase

said U.S. consumers appear to be in good financial health. But that sanguine depiction was quickly counterbalanced by the disclosure from Snap, a company that had never issued a revenue warning before.

“We’re going to have this roller-coaster ride for some time, as investors cling onto more optimistic data points and get fresh disappointment when there’s another downbeat reading coming through,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “We don’t yet know the full path of interest-rate rises or how resilient consumers will be.” 

Despite Tuesday’s broad premarket technology selloff, there were bright spots in the market.

Zoom Video Communications

advanced 4.9% before the opening bell after the videoconferencing services company raised its profit outlook.

Later Tuesday, Fed Chairman

Jerome Powell

will give remarks at an economic summit in Las Vegas. Investors will be looking for fresh clues about his outlook for inflation, the economy and the path of interest-rate increases.

Several pieces of economic data are also due Tuesday, including U.S. new-home sales data and gauges of U.S. manufacturing activity. Earlier Tuesday, data firm S&P Global said its Purchasing Managers Index for the eurozone’s services and manufacturing sectors fell in May from the month before. Factories in Europe and Japan reported a weakening of new orders amid higher costs and prices, a sign that manufacturing output will slow further over coming months.

Tuesday’s selloff in technology stocks in the premarket session sent investors scooping up government bonds, with the yield on the benchmark 10-year U.S. Treasury note falling to 2.819%, from 2.857% Monday. Yields fall when bond prices rise. 

Gold, considered another haven asset, advanced 0.3% to $1,853.70 a troy ounce.

Traders worked on the floor of the New York Stock Exchange on Monday.



Photo:

Spencer Platt/Getty Images

Brent crude, the international oil benchmark, rose 0.2% to $113.66 a barrel, reversing losses from earlier in the session. 

“You’ve got this push and pull with oil prices—oil prices are being kept down somewhat by global growth, which is not a great signifier for the health of the global economy,” Ms. Streeter said. “But at the same time, it’s not dropping any further because of concerns about tight supply.” 

In Europe, the pan-continental Stoxx Europe 600 lost 0.6%. In Asia, Hong Kong’s Hang Seng fell 1.7%. Japan’s Nikkei 225 lost 0.9% while China’s Shanghai Composite declined 2.4%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Stocks Open Mixed Ahead of Fed Meeting

Leave a comment

U.S. stock indexes were mixed at the opening Tuesday as investors geared up for the Federal Reserve’s policy decision this week and evaluated a batch of earnings.

The S&P 500 rose 0.3% in early trading. The benchmark stocks gauge rose 0.6% Monday, its third gain in four trading days. The technology-focused Nasdaq Composite added 0.4% while the Dow Jones Industrial Average was about flat.

Those moves belied a tense mood among investors expecting the central bank to accelerate its tightening of monetary policy this week, the latest step in inflation-fighting efforts that have already raised borrowing costs throughout the economy this year, scrambling stock and bond markets.

Traders are reacting to a slew of big companies’ latest reports and financial forecasts. Pfizer fell 0.7% after forecasting lower revenue than predicted by analysts. Investment firm KKR rose about 2% after swinging to a loss.

Estee Lauder

lost 4.4% after the company lowered its revenue and earnings outlook.

Elliott Investment Management disclosed a roughly 6% stake in Western Digital, pushing shares of the data-storage company up 12%.

Rockwell Automation

said quarterly earnings tumbled, sending shares down 14%.

The yield on 10-year Treasury notes topped 3% for a second straight day before slipping back to 2.928%, compared with 2.995% Monday. Yields, which move inversely to bond prices and are a reference for borrowing costs throughout the economy, have shot to their highest levels since 2018 in anticipation of higher interest rates.

They have also dragged up government borrowing costs globally. The yield on 10-year German government bonds, the benchmark in Europe, surpassed 1% Tuesday for the first time since 2015, before slipping back to 0.935%.

Overseas stock markets wavered. The Stoxx Europe 600 gained about 0.3%, led by shares of banks and oil-and-gas companies on a busy day for earnings in the region.

BP shares rose 3.1% after the oil producer reported underlying profit of $6.2 billion, when stripping out a pretax accounting charge related to its decision to exit its Russia holdings.

BNP Paribas

posted a jump in earnings, sending shares of the French lender 4.3% higher.

Sweden’s OMX Stockholm All-Share steadied, edging up 0.1%. On Monday, the market was among the worst affected by a flash crash in European shares sparked by an erroneous sale by

Citigroup.

Mainland Chinese markets were closed for a public holiday. Hong Kong’s Hang Seng edged up 0.1%.

All eyes are on the Federal Reserve’s next steps.



Photo:

BRENDAN MCDERMID/REUTERS

All eyes are on the Fed’s next steps as the central bank tries to tap the brakes on the fastest pace of inflation in decades. Rising rates have combined with coronavirus shutdowns in China and the war in Ukraine to send jitters through stock markets this year.

Rate-setting officials will gather Tuesday for a two-day policy meeting. At its conclusion Wednesday, the Fed is expected to raise interest rates by a half percentage point, the first such increase in 22 years and following on from a quarter-point rise in March.

Investors will also seek details from Chairman

Jerome Powell

on the central bank’s plans to reduce its bondholdings. Officials have recently indicated that they will allow $95 billion in securities to mature every month, unwinding another form of stimulus lavished on markets during the pandemic.

“It appears that the war in Ukraine hasn’t derailed the Fed in the slightest,” said

Gregory Perdon,

co-chief investment officer at

Arbuthnot Latham.

Financial conditions have already tightened significantly, Mr. Perdon added, pointing to a strengthening dollar, the increase in Treasury yields and rising mortgage rates.

Earnings season continues apace.

Airbnb,

ABNB -4.98%

Starbucks,

Lyft

and

American International Group

are on the block after markets close.

Broadly positive corporate reports have failed to steady the market in recent weeks. Earnings growth is in line with historical norms at about 11% annually, according to Deutsche Bank analysts, while margins have remained near record levels despite rising input prices.

In commodities, Brent-crude futures prices slipped 1% to $106.55 a barrel. Traders are awaiting a meeting of ministers from OPEC members and their allies including Russia on Thursday, and monitoring shutdowns in China that are curbing fuel demand.

A European Union proposal to ban Russian crude oil by the end of the year is due to be circulated to member states Tuesday.

Federal Reserve Chairman Jerome Powell has indicated that the central bank is likely to raise interest rates by a half percentage point at its meeting. Photo: Samuel Corum/Getty Images

Write to Joe Wallace at joe.wallace@wsj.com and Matt Grossman at matt.grossman@wsj.com.

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Facebook earnings beat sends Meta stock soaring, but sales hit slowest growth in a decade

Leave a comment

Meta Platforms Inc. is the latest tech giant to feel an economic pinch, as Facebook’s parent company reported its slowest sales growth in a decade Wednesday and issued lukewarm revenue guidance.

“The revenue headwinds” will likely lead to a slowdown in investments, Meta Chief Executive Mark Zuckerberg said in a webcast presentation with analysts late Wednesday.

Nonetheless, Meta’s stock 
FB,
-3.32%
jumped more than 18% in after-hours trading Wednesday, after the company formerly known as Facebook disclosed first-quarter earnings of $7.47 billion, or $2.72 a share, down from $9.5 billion, or $3.30 a share last year, on sales of $27.9 billion, up 7% from $26.2 billion a year ago.

Earnings beat the average forecast for profit of $2.56 a share, but sales fell short of the consensus of $28.3 billion, according to analysts polled by FactSet.

Meta issued a second-quarter revenue forecast of $28 billion to $30 billion, while analysts were forecasting $30.7 billion. Facebook executives have cited inflation, supply-chain issues, the war in Ukraine, European economic headwinds, increased competition from services such as TikTok and changes Apple Inc. 
AAPL,
-0.15%
made to its mobile operating system that make it more difficult for apps to track consumers in ads.

For more: Meta CFO cries ‘wolf’ again with bleak Facebook outlook — but he may be right this time

In a white paper published by Apple on Tuesday, Kinshuk Jerath, a professor of business in the marketing division at Columbia Business School, concluded it would be speculative to claim billions of advertising dollars moved from companies like Meta to Apple because of Apple’s move.

“This outlook reflects a continuation of the trends impacting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine,” Meta Chief Financial Officer David Wehner said in a statement announcing the results. “Our guidance assumes foreign currency will be approximately a 3% headwind to year-over-year growth in the second quarter, based on current exchange rates.”

In the webcast presentation, Zuckerberg acknowledged the impact of TikTok and Apple, but said Meta was confident in its Reels short-form videos and artificial intelligence to address each company, respectively. He added that the company’s push into metaverse will also boost revenue, especially in advertising.

The mixed results arrive on the heels of lighter-than-expected sales and earnings from Google parent Alphabet Inc
GOOGL,
-3.67%

GOOG,
-3.75%
on Tuesday, deepening concerns that companies dependent on advertising may face a rough patch with a war raging in Ukraine and inflation burning through the pocketbooks of consumers. Snap Inc.
SNAP,
-5.58%
warned of a “challenging operating environment” when it reported results last week, though Pinterest Inc.
PINS,
-2.86%
shares also soared after earnings on Wednesday.

Daily active users, or DAUs, a crucial metric for Meta’s growth globally, increased 4% to 1.96 billion, topping analyst expectations of 1.95 billion. The uptick largely allayed investors, who have openly fret over decreased user engagement on Facebook’s platforms.

“The growth in (DAUs) is a good sign for Facebook, especially coming off of Q4 2021 when it experienced its first-ever decline in DAUs. But it’s also clear that Facebook is still struggling to bring in new users, and it’s becoming increasingly difficult for Instagram to pick up the slack,” said Evelyn Mitchell, an analyst at Insider Intelligence. “Most of the growth in both [monthly active users] and DAUs in Q1 came from the rest of the world, not the US and Canada, which monetizes at a better rate.”

Read more: These 21 large-cap stocks have now crashed at least 50%

Meta’s stock has been among the worst in tech this year, plummeting 48% so far, while the broader S&P 500 index
SPX,
+0.21%
has dipped 12% in 2022.

Read original article here

Business

DocuSign Stock Plunged on Soft Outlook

Leave a comment

Shares of

DocuSign Inc.

DOCU -20.10%

fell 20% Friday, wiping out the stock’s pandemic-era gains, after the e-signature software maker released softer-than-expected guidance for its fiscal 2023.

The company said Thursday evening that it expects full-year revenue to be between $2.47 billion to $2.48 billion, lower than the $2.61 billion that analysts surveyed by FactSet had been expecting.

The company also said it expects subscription revenue growth to slow, forecasting a range of $2.39 billion to $2.41 billion.

Billings, which reflect new-customer sales, subscription renewals and add-on sales for existing customers, are expected to come in between $2.71 billion and $2.73 billion, also a substantial slowdown from 2021.

The company warned in December that its growth would likely be hampered as people returned to more normalized working and buying patterns as the pandemic faded. The company said at the time that it would invest in increasing its sales efforts, increase marketing spending and spend more on product innovation.

DocuSign fits into a category of companies that made working from home easier to manage and benefitted as businesses adapted to remote and paperless environments. But its business has taken a hit as the pandemic fades and more offices begin calling their employees back to in-person work.

Its share price tripled in 2020, but fell almost 32% last year. Shares closed Friday at $75.01 and are down 51% so far this year.

DocuSign CEO Dan Springer discussed the e-signature company in March 2019.



Photo:

David Paul Morris/Bloomberg News

Despite the forecasted slowdown, Chief Executive Officer

Dan Springer

said the company’s digital-signature business will continue to grow.

“As people begin to return to the office, they are not returning to paper,” Mr. Springer said. “eSignature and the broader Agreement Cloud will only continue to gain prominence in the evolving Anywhere Economy.”

The worse-than-expected guidance came even as DocuSign topped analysts’ expectations for revenue in the fiscal fourth quarter. The company reported adjusted earnings of 48 cents a share on revenue of $580.8 million. Analysts were expecting adjusted earnings of 48 cents a share on revenue of $562 million.

DocuSign also said its board has authorized it to buy back $200 million worth of shares. At the same time, the company said Chief Revenue Officer Loren Alhadeff intends to resign.

Still, analysts at Oppenheimer on Friday removed their $250 price target on the stock and downgraded DocuSign to perform from outperform.

“The guidance shows that the challenges seen then with respect to sales execution and resetting post-Covid consumption patterns remain near- to medium-term headwinds,” the analysts wrote.

Write to Will Feuer at will.feuer@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Facebook’s Stock Plunges After Profit Declines

Leave a comment

Facebook parent

Meta Platforms Inc.

startled investors with a sharper-than-expected decline in profits and a gloomy outlook in its first earnings report since Chief Executive

Mark Zuckerberg

outlined a pivot to the metaverse.

Meta shares plunged after the results were announced, dropping more than 20%. If shares dropped that much when trading opens on Thursday, it would wipe more than $175 billion from the tech giant’s market capitalization.

The company said it expected revenue growth to slow because users were spending less time on its more lucrative services. Meta cited inflation as a weight on advertiser spending and estimated that ad-tracking changes introduced by

Apple Inc.

last year would cost Meta some $10 billion this year.

Meta also lost about a million daily users globally and stagnated in the U.S. and Canada, two of the company’s most profitable markets, the results show.

The results show Facebook’s business under pressure on a number of fronts at a moment when Mr. Zuckerberg is betting the company’s future on VR headsets, AR glasses and virtual worlds, known as the metaverse, in which users can live and work.

A tech industry battle is taking shape over the metaverse. WSJ tech reporter Meghan Bobrowsky explains the concept and why tech companies like Facebook, Roblox and Epic Games are investing billions to develop this digital space. Photo: Storyblocks

“Although our direction is clear, it seems that our path ahead is not quite perfectly defined,” Mr. Zuckerberg told investors during a conference call Wednesday.

Meta executives said they expected first-quarter revenue between $27 billion and $29 billion, representing year-over-year growth between 3% and 11%. Anything below 11% would mark the slowest period of quarterly growth in the company’s history.

Mr. Zuckerberg said the company is investing heavily in its TikTok rival, called Reels, and focused on attracting young-adult users, although those segments aren’t currently as profitable as others. Reels doesn’t make the kind of money that Meta generates on older features such as the news feed and Stories, which allows people to post videos and images that disappear after 24 hours.

“I’m confident that leaning harder into these trends is the right short-term trade-off,” he said, noting that Reels is the company’s fastest-growing product.

Executives likened the shift to Reels to the company’s prior strategic transitions, including its shift to mobile from web about a decade ago and the more recent embrace of Stories.

Meta faces multiple antitrust investigations around the world, for what some government officials describe as its pattern of using its clout to squeeze out smaller rivals. During the call, Mr. Zuckerberg and other executives repeatedly emphasized that Meta faces stiff competition from TikTok for users’ time, particularly the younger demographic.

SHARE YOUR THOUGHTS

What is your reaction to Meta’s quarterly report? Join the conversation below.

Meta’s results were in contrast to fellow digital-ad giant and Google parent Alphabet Inc., which on Tuesday reported blockbuster results that sent shares climbing more than 7% on Wednesday.

Meta executives said the company is working at a disadvantage because of Apple’s changes that require apps to ask users for permission to track their activity and share it with other apps or websites. The move has been at the center of an intensifying fight between the iPhone maker and companies such as Meta that use such tracking technology to sell digital ads.

“It’s not really apples to apples for us. And as a result, we believe Google’s search ads business could have benefited relative to ours,” said Meta Chief Financial Officer

David Wehner.

Mr. Wehner also pointed to Apple’s business relationship with Google, adding that “the incentive clearly exists for this policy discrepancy to continue.”

The company reported a $10.3 billion profit for the fourth quarter, below analyst expectations of $10.9 billion and a small decline compared with a year earlier. The decline marked Meta’s first in net income growth since the second quarter of 2019.

Meta also for the first time broke out its Reality Labs segment, which offered investors insight into the health of the virtual- and augmented-reality consumer business unit that is at the heart of the metaverse efforts.

The Facebook Files

A series offering an unparalleled look inside the social-media giant’s failings—and its unwillingness or inability to address them.

The Reality Labs unit posted a $3.3 billion loss, an amount that has grown consistently in recent quarters.

Upon announcing the name change in October, Mr. Zuckerberg said that the company expected “to invest many billions of dollars for years to come before the metaverse reaches scale.”

Investors said the pairing of slower revenue growth with higher spending on initiatives like the metaverse is a troubling combination. “I’m going to spend a lot of time creating this new thing and I’m getting less revenue: It’s not a match made in heaven,” said

Kim Forrest,

chief investment officer of investment firm Bokeh Capital.

The latest earnings come as Meta continues to face criticism from lawmakers and users over revelations in The Wall Street Journal’s “Facebook Files” series, which showed that the company knows its platforms are riddled with flaws that cause harm. Those articles spurred congressional hearings, prompted a rebuke from Facebook’s own oversight board and led the company to halt work on a version of its Instagram app focused on children.

The company has also endured a series of executive departures in recent months. Most notably, Chief Technology Officer

Mike Schroepfer,

head of Facebook’s cryptocurrency efforts

David Marcus

and the head of the company’s Messenger unit,

Stan Chudnovsky,

all announced their exits in the last months of 2021.

How the Biggest Companies Are Performing

Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com and Salvador Rodriguez at salvador.rodriguez@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Procter & Gamble Says Prices Will Keep Going Up

Leave a comment

Procter & Gamble Co.

PG 3.36%

is betting the world’s consumers will remain undeterred by higher prices on household staples from Pampers diapers to Gillette razors.

The Cincinnati-based consumer-products company said sales increased 6% in the quarter ended Dec. 31 compared with a year earlier, fueled in part by the company’s largest average price increases since the spring of 2019.

Executives on Wednesday said its price increases will continue throughout 2022, and predicted higher profitability and improved margins in coming quarters even as labor, freight and raw-materials costs continue to balloon due to the global supply-chain turmoil.

“The consumer is very resilient and very focused on these categories of clean home and health and hygiene,” P&G finance chief

Andre Schulten

said in an interview.

P&G shares gained more than 3% Wednesday to close at $162.

U.S. inflation in 2021 hit its fastest pace in nearly four decades, as pandemic supply-and-demand imbalances pushed up prices on everything from used cars to household staples.

Pricing on average rose 3% in the latest quarter, P&G said, and price increases accounted for half of the company’s revenue growth in the period. Higher volumes accounted for the other half. P&G reported revenue of $21 billion for the quarter.

The added revenue helped offset soaring prices for raw materials, labor and transportation of goods, as supply-chain woes continue to weigh on almost every industry.

SHARE YOUR THOUGHTS

How has your spending on household staples changed over the course of the pandemic? Join the conversation below.

P&G’s core earnings per share rose 1%, to $1.66, from the same period a year earlier. Margins fell despite the added revenues and cost cutting. The company has spent big to keep factories running and products in stock as much as possible, said Chief Executive

Jon Moeller,

who took over the company in November.

On Wednesday, executives said there is no relief in sight from higher costs for labor, transportation of goods and raw materials such as fuel, resin and pulp. “The flexibility that we’ve talked about that our supply people have generated doesn’t come for free,” said Mr. Schulten, the CFO. “When we need to shift to alternate materials, when we need to shift to alternate suppliers, all our sources of materials geographically, that comes at a premium.”

P&G, which has posted more consistent sales gains than rivals throughout the pandemic, raised its revenue forecast for the fiscal year ending June 30, even as the company said costs will be higher than previously projected.

P&G said it expects to commit $2.8 billion more to commodity, freight and foreign-exchange costs this fiscal year. The figure is about $500 million more than it forecast last quarter. Its earnings estimates remained unchanged.

As the cost of groceries, clothing and electronics have gone up in the U.S., prices in Japan have stayed low. WSJ’s Peter Landers goes shopping in Tokyo to explain why steady prices, though good for your wallet, can be a sign of a slow-growing economy. Photo: Richard B. Levine/Zuma Press; Kim Kyung Hoon/Reuters

Mr. Schulten said that in addition to absorbing higher prices, consumers also are switching to pricier, higher-end products, such as trading liquid laundry detergent for costlier single-dose pods.

A broad range of consumer-products companies, including P&G rivals

Unilever

PLC and

Kimberly-Clark Corp.

, have implemented price increases to offset higher costs amid snags in the global supply chain.

The recent rise in Covid-19 cases due to the fast-spreading Omicron variant didn’t spur the kind of hoarding behavior that led to shortages of toilet paper, cleaners and other products during previous surges, he said.

Sales jumped for products to treat respiratory issues, driving a 20% revenue increase for P&G’s personal-health unit, which includes Vicks and NyQuil brands.

P&G now expects organic sales, which strips out deals and currency moves, to grow 4% to 5% for the fiscal year, up from the previous forecast for growth of 2% to 4%.

How the Biggest Companies Are Performing

Corrections & Amplifications
“The flexibility that we’ve talked about that our supply people have generated doesn’t come for free,” said P&G finance chief Andre Schulten. “When we need to shift to alternate materials, when we need to shift to alternate suppliers, all our sources of materials geographically, that comes at a premium.” An earlier version of this article incorrectly attributed the quote to Chief Executive Jon Moeller. (Corrected on Jan. 19)

Write to Sharon Terlep at sharon.terlep@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here