Top US stocks to watch: AmEx, Intel and Honeywell

AmEx beats expectations as the economy recovers, Intel shrugs-off supply issues with chips, Honeywell surprises as the travel industry bounces back, Twitter and Snap grow users faster than forecast, Magna is to buy Veoneer, and Amazon and Walmart are dealt a severe blow in India.

USA (1)

American Express

American Express posted better-than-expected earnings in the second quarter as it was able to release more reserves thanks to the improving economic picture and a pick-up in consumer spending.

Revenue jumped by one-third year-on-year to $10.24 billion. EPS of $2.80 rose from just $0.29 the year before and came in ahead of the $1.67 expected by analysts. American Express saw its bottom-line get a $606 million boost from the release of reserves.

‘As we look ahead, we are increasingly optimistic that the momentum we’ve generated will continue given the strength we see in our core business, particularly in the US, even as the pace of the recovery remains uneven in different regions around the world. Based on current trends, we are confident in our ability to be within the high end of the range of EPS expectations we had for 2020 in 2022,’ the company said.

Intel

Intel allayed fears concerning the global shortage in chips as it comfortably beat its own targets and smashed analyst expectations when it released second quarter results yesterday, prompting the firm to raise its guidance for the full year.

Non-GAAP revenue rose 2% to $18.5 billion, a major surprise considering Intel had guided for a figure closer to $17.8 billion. EPS climbed 4% to $1.24 from $1.19 and was also well head of the $1.05 target – which analysts expected Intel to miss.

It said it is now aiming to deliver non-GAAP revenue of $73.5 billion this year and GAAP EPS of $4.09, up from a previous EPS target of $4.00. That would compare to last year’s $77.86 billion in revenue and $4.94 in EPS.

Honeywell

Honeywell said it beat its own guidance in the second quarter as several of its end markets, including travel and construction, continued to recover from the pandemic, prompting it raise expectations for the rest of the year.

The company reported an 18% jump in sales and a 15% rise in organic sales, with all four divisions reporting growth and better margins. Adjusted EPS jumped 60% to $2.02 and beat the $1.94 expected by analysts, while reported EPS increased to $2.04 from $1.53.

Honeywell raised its targets for the full year and is now aiming for $34.6 to $35.2 billion in annual revenue and adjusted EPS of $7.95 to $8.10. It was previously targeting $34.00 to $34.80 billion in revenue and EPS of $7.75 to $8.00

Twitter

Twitter beat expectations when it released second quarter results after the markets closed yesterday by delivering faster user and revenue growth.

Revenue rose to $1.19 billion from just $683 million the year before. That was ahead of the top-end of its own guidance range and better than the $1.06 billion expected by Wall Street. Users grew to 206 million from 186 million the year before, marginally ahead of analyst expectations. It reported an operating profit of $30 million, swinging from a $274 million loss.

Twitter said it is targeting revenue of $1.22 billion to $1.30 billion in the third quarter, which was also a more buoyant outlook versus the $1.17 billion forecast.

Snap

Snap also breezed past expectations with its quarterly results as it delivered the fastest growth in revenue and users in four years.

Daily active users grew 23% to 293.0 million, above the 22% growth forecast, while revenue more than doubled to $982 million, ahead of the $845.5 million expected by Wall Street. Adjusted Ebitda of $117 million was a surprise considering Snap said it expected to breakeven at best.

It said third-quarter revenue should be between $1.07 billion and $1.09 billion and to end the period with around 301 million users, representing 21% growth.

Schlumberger

Oilfield service giant Schlumberger delivered a set of significantly improved financial results in the latest quarter and said this gives it confidence about the rest of 2021.

Revenue in the second quarter came in at $5.6 billion, up 5% year-on-year and 8% from the previous quarter as the oil industry starts to get back on its feet and prices rise. EPS of $0.30 swung from a $2.47 loss the year before and improved from the $0.21 profit booked in the first quarter. Revenue inched-up 7% internationally but was led by an 11% increase in North America.

‘Globally, the second-quarter revenue growth was led by Reservoir Performance and Well Construction, where activity intensified beyond the seasonal recovery,’ said chief executive Olivier Le Peuch. ‘The quarter marks a leap forward in achieving our full-year financial targets with the potential for further upside given the right conditions.’

Magna International

Magna International, the Canadian car parts maker, has agreed to buy vehicle safety firm Veoneer in an all-cash deal valuing the Swedish outfit at $3.8 billion.

Magna will pay $31.25 in cash for each Veoneer share and the acquisition is set to expand its position in the advanced driver assistance systems market, particularly in Asia. Magna intends to semi-spin-off Veoneer’s sensor and driver policy software platform and operate it as an independent business unit like Veoneer does now.

‘We expect the combined entity to be an industry leader in active safety solutions, to enhance its position in complete ADAS systems, and to be well-positioned for the transition towards higher levels of autonomy. The acquisition is also consistent with our go-forward strategy to accelerate investment in high-growth areas,’ said Magna’s chief executive Swamy Kotagiri.

Tesla

Tesla is reported to have written to authorities in India asking for them to lower import taxes currently slapped on electric vehicles in order to encourage more adoption.

A fully-assembled electric car priced under $40,000 is currently subject to a 60% import tax while more expensive ones face a tax of 100%, but Tesla is arguing a rate of closer to 40% would be more appropriate, according to unnamed sources cited by Reuters. The argument is that it would lower prices to make cars more affordable while still incentivising foreign firms to produce locally if the demand is there.

The government has championed high import taxes in order to encourage domestic production, so it is unclear whether Tesla’s request will be considered.  

Amazon and Walmart

An Indian court has rejected attempts by Amazon and Walmart’s Flipkart to halt an antitrust investigation being carried out to look at allegations stifled competition and favoured certain sellers on their ecommerce platforms.

The news deals a big blow to both companies in what is seen as a huge growth market. The investigation has been on hold for over a year after the firms argued against it, claiming it was unjustified. However, the court said ‘by no stretch of the imagination can [the] inquiry be quashed at this stage’.

It said the appeals were ‘devoid of merit and deserved to be dismissed’.

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