Top US stocks to watch: Exxon, P&G and Caterpillar

Results from Exxon, Chevron, P&G, Caterpillar, Restaurant Brands, Pinterest, Amazon, Gilead Sciences and Linde round-off the week, Robinhood’s IPO disappoints, problems escalate for US-listed Chinese companies, and Facebook’s acquisition of Kustomer draws unwanted attention.

USA (1)

Exxon Mobil

Exxon Mobil reported a significantly improved set of results today as the company reaped the benefits of higher prices as the global economy reopens.

The oil and gas giant reported earnings of $4.69 billion in the second quarter, turning from the $1.08 billion loss the year before and almost doubling from what was booked in the first quarter amid rising prices. It also generated over $9.6 billion worth of cashflow, enough to fund its dividend, investments and cut debt, having made just $43 million the year before.

The company said it was benefiting from its reduced cost structure and also flagged that its chemicals division reported its best performance ever. However, investors are still waiting to see how Exxon plans to return cash to shareholders.

Chevron

Those results follow on from Chevron, which beat expectations and restarted its share buyback programme when it released second quarter results late yesterday.

Revenue more than doubled year-on-year to $36 billion from $16 billion. The company reported earnings of $8.3 billion compared to the $8.3 billion loss booked the year before when the pandemic hit.

The improving environment means that was the largest profit booked in six quarters and was accompanied by the resumption of share buybacks worth $2 to $3 billion each year.

P&G

Procter & Gamble capped off its latest financial year with a strong performance in the fourth quarter and said it expects to deliver further progress in the new year despite several headwinds facing the business.

P&G’s net sales rose 7% in the fourth quarter to $18.9 billion, ahead of the $18.4 billion forecast by Wall Street. EPS increased 6% to $1.13. That delivered a 7% rise in annual sales to $76.1 billion and an 11% jump in EPS to $5.50. Health care products led growth with sales up 18%, followed by Beauty at 11% and Grooming at 10%. Volumes and prices largely improved across the board and it also benefited from favourable foreign exchange rates.

The company said it expects to ‘continue to grow top-line and bottom-line and to deliver another year of strong cash return to shareholders despite a challenging cost and operating environment’ and said sales should grow 2% to 4% and EPS should rise 6% to 9% in the new year.

Caterpillar

Caterpillar, known for making industrial equipment like diggers, beat expectations in the latest quarter as demand for equipment bounces back from the pandemic.

Sales soared 29% in the second quarter to $12.9 billion, driven by the recovery in demand for its equipment and services and adjustments made to the inventory held by dealers. Adjusted EPS of $2.60 rose from $1.27 the year before and beat the $2.40 forecast by Wall Street.

Caterpillar said its operations generated $4.0 billion in cashflow during the first half and returned $800 million to shareholders, leaving it with around $10.8 billion in cash at the end of the period.

Restaurant Brands

Restaurant Brands said sales growth continued to accelerate in the second quarter and that volumes had returned to pre-pandemic levels as restrictions in the US and Canada ease and customers flock back to restaurants.

Revenue rose to $1.43 billion from $1.04 billion the year before, coming in ahead of the $1.37 billion forecast. Diluted EPS surged to $0.84 from $0.35. Tim Hortons, which took the biggest hit when the pandemic hit, reported 33% sales growth while Burger King sales grew 37.9%. Popeye’s sales were up 10.5%. Notably, digital sales were 60% higher year-on-year and up 15% from the first quarter.

‘We also announced an increase in our share buyback authorization to $1 billion over the next two years, demonstrating our confidence in the value creation opportunity we have ahead of us with our three iconic brands, scalable business model, expanding digital strength and dedicated franchise partners,’ said chief executive Jose Cil.

Pinterest

Pinterest spooked the markets when it warned revenue growth would slow considerably over the coming quarters, overshadowing a stellar set of second quarter results.

Revenue more than doubled to $613 million in the second quarter and monthly active users grew 9% to 454 million. Net income of $69.4 million was a big improvement from the $100.7 million loss booked the year before.

That beat analyst expectations, but the stellar results were overshadowed by warnings that topline growth will slow to around the low 40%s in the third quarter from 125% in the second. 

Amazon

Amazon posted stunning growth when it reported second quarter results after the closing bell yesterday, but this was overshadowed by warnings of a slowdown in growth.

Revenue rose to $113 billion from just $88.9 billion the year before but missed the $115 billion expected by analysts, while EPS of $15.12 rose from $10.30 and came in well ahead of the $12.28 forecast. Sales in North America increased 22% year-on-year, international sales were up 36% and its cloud-computing division AWS, which drives profits, reported 37% topline growth.

However, the stellar results were overshadowed by warnings that growth will slow over the coming quarters as it comes up against tougher comparatives from when business boomed last year when the pandemic erupted.

Gilead Sciences

Gilead Sciences tightened its guidance for the full year after delivering strong growth in the latest quarter after the markets closed yesterday.

Revenue rose 21% to $6.2 billion in the second quarter, driven by higher demand for a number of drugs including Veklury, Biktarvy and its hepatitis C products. Diluted EPS of $1.21 compared to a $2.66 loss the year before. Adjusted EPS rose 68%.

Gilead said it is now expecting annual sales of $24.4 to $25.0 billion this year and EPS of $4.70 to $5.05. It was previously targeting revenue of $23.7 to $25.1 billion and EPS of $6.75 to $7.45.

Linde

Industrial gas giant Linde upgraded its guidance for the second time this year as it continues to build momentum.

Revenue was up 19% year-on-year to $7.58 billion and that was also 5% higher than the first quarter. Adjusted EPS jumped 42% to $2.70, ahead of Linde’s guidance for $2.50 to $2.55 and above the $2.54 forecast by Wall Street.

Linde raised its guidance now expects adjusted EPS to grow by 23% to 25% year-on-year to a range of $10.10 to $10.30, marking the second upgrade made since the start of the year. Third quarter EPS should be 21% to 26% higher year-on-year.

Robinhood

Robinhood’s start to life as a public company got off to a rocky start after the trading platform closed lower on its first day of trading following its IPO yesterday.

The company priced its IPO at $38 per share, at the low end of its desired range, and closed down at $34.8 yesterday. The valuation may have proven too high or the increasing regulatory pressure facing the business may have posed a deterrent. Notably, Robinhood said it would reserve 20% to 35% of its shares for its customers.

The company has gone public at a time when demand is rising, with its monthly active users having risen to over 21 million at the end of June from under 12 million at the end of 2020.

Read our full guide to the Robinhood IPO here.

Didi and Chinese stocks

The fallout from the regulatory crackdown in China on US-listed stocks continues to escalate after reports from Reuters suggested the SEC has stopped processing registrations of US IPOs and other security sales by Chinese firms until it figures out new rules.

The report said the SEC is looking to draft new rules for how companies report should report the potentially extreme regulatory changes in China and the general impact of the government to increase transparency with investors. Until then, it has asked firms to stop submitting registrations for securities, according to unnamed sources.

Data from Reuters suggests 418 Chinese companies are listed in the US. The crackdown came just days after the most recent listing was completed by ride-hailing firm Didi which, along with other Chinese stocks spanning Alibaba to TAL Education, have lost ground in recent weeks.

Tesla

A fire broke out at Tesla’s ‘Megapack’ battery division in Australia, which is one of the largest battery testing facilities in the world, during testing, according to authorities.

The fire occurred on Friday morning during a trial of an energy project named Victorian Big Battery. Nobody was injured and the site was evacuated but the cause of the fire is not yet known. Tesla is working with partner Neoen on the project.

Facebook

The UK’s Competition & Markets Authority has launched an investigation into Facebook’s acquisition of customer relationship management platform Kustomer.

The CMA said it fears the combination could lessen competition in the market and said an initial decision will be made by September 27. Facebook announced the acquisition back in November to help it improve WhatsApp.

Notably, Reuters reported last week that the deal could be facing a full-blown antitrust investigation in the EU sometime in August.

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