Top US stocks to watch: Morgan Stanley, TSMC and UnitedHealth

Morgan Stanley, US Bancorp and Bank of NY Mellon all beat expectations, TSMC expects more growth after delivering record results, Mastercard’s ban in India could cause problems, UnitedHealth raises its guidance, and Beyond Meat makes a bigger push into China.

USA (1)

Morgan Stanley

Morgan Stanley’s earnings dropped in the second quarter but smashed expectations as all parts of its business delivered strong topline growth.

The bank reported net revenue of $14.75 billion compared to $13.66 billion the year before, with net income rising to $3.51 billion from $3.19 billion. Diluted EPS of $1.85 fell from $1.96 the year before, but still beat the $1.65 forecast by analysts.

Its investment banking arm delivered record results in the quarter while its institutional securities and wealth management businesses both delivered significant growth. The bank doubled its quarterly dividend to $0.70 per share and said it has raised its stock repurchase programme to buyback $12 billion worth of shares over the next 12 months.

US Bancorp

US Bancorp reported higher quarterly earnings that beat expectations as all three of its payments businesses saw activity return to 2019 levels for the first time since the start of the pandemic and credit quality came in better than expected for the second consecutive quarter.  

Net income in the second quarter jumped to $1.98 billion from $689 million the year before, with diluted EPS following higher to $1.28 from $0.41. That was better than the $1.14 forecast by Wall Street analysts.

‘Our capital and liquidity positions remain strong and following the results of the Federal Reserve’s stress test in late June we announced that we will recommend that our board of directors approve a 9.5% increase in our common dividend payable in the third quarter. As we head into the second half of 2021, we are well positioned to benefit from improving economic conditions; however, we are even more excited about the significant secular growth opportunities we see driving industry leading returns over the longer term,’ said chief executive Andy Cecere.

Bank of NY Mellon

Bank of NY Mellon also posted better-than-expected quarterly earnings and said shareholder distributions will experience a significant step-up from the third quarter.

Net income in the second quarter edged up 10% to $991 million from $901 million the year before. Diluted EPS inched up to $1.13 from $1.01 the year before and beat the $1.01 expected by analysts. That performance came despite a 1% drop in revenue to $4.0 billion. The company said it will up its dividend for the third quarter by 10% to $0.34 and intends to buyback up to $6 billion worth of stock through to the fourth quarter of 2022.

‘As we continued to generate further excess capital in the quarter, we were pleased with the results of this year’s supervisory stress tests. The stress capital buffer framework allows us to start returning our significant excess capital to our shareholders beginning in the third quarter,’ said chief executive Todd Gibbons.

Taiwan Semiconductor

Taiwan Semiconductor, better known as TSMC, hinted it plans to build new factories in the US and Japan to capitalise on a surge in demand for chips as it posted record results in the second quarter and said it expects strong growth to continue going forward.

Net profit in the quarter to the end of June came in at T$134.4 billion compared to T$120.8 billion the year before, but that was just below the T$136.5 billion forecast by analysts. Revenue was up almost 20% thanks to a surge in demand for chips needed for the automotive industry and high-performance computers.

In dollar terms, quarterly revenue rose to 28% to $13.29 billion and TSMC said it expects to deliver third-quarter revenue of between $14.6 billion and $14.9 billion.

UnitedHealth

Health insurer UnitedHealth raised its ambitions for the rest of the year after reporting strong topline growth and beating earnings expectations in the latest quarter.

Revenue rose 15% in the second quarter to $71.3 billion from $62.1 billion the year before but earnings from operations dropped to $6.0 billion from $6.7 billion because of the deferral of care the year before during the pandemic. Adjusted net earnings of $4.70 beat expectations of $4.43, marking at least the eighth consecutive quarter it has beaten Wall Street estimates.

UnitedHealth raised its guidance for the full-year following the strong performance and it is now targeting annual adjusted net earnings of between $18.30 to $18.80 compared to its initial target range of $18.10 to $18.60.  

Mastercard

India’s decision to ban Mastercard for failing to comply with rules on how to store customer data has caused significant disruption for the country’s financial sector, according to reports from Reuters.

The Reserve Bank of India said yesterday that new Mastercard cards will stop from July 22 after failing to comply with rules introduced in 2018 for companies to store payments data locally. A similar move was made against American Express in April, but Mastercard is a much bigger player in India with around 11 domestic and foreign banks using it for debit and credit cards.

Visa is expected to reap the benefits, but the report suggests a transition could take as long as five months.

Alphabet

Meanwhile, Google is reported to be building a second cluster of data centres in and around the Indian capital of New Delhi to capitalise on growing demand in a key market, Reuters reported.

‘We have seen enormous growth in demand for Google cloud services in India so expanding our footprint in a new cloud region gives us the ability to offer more capacity for growth over many years,’ said Thomas Kurian, CEO at Google Cloud, at a news conference earlier this week. ‘It's a large commitment from us in capital and infrastructure investment and it's designed to allow us to capture the opportunity that we see around growth.’

A formal announcement is expected to be made today, with investors hoping for more clarity on the cost of its new investment.

Johnson & Johnson

Johnson & Johnson, also known as J&J, is recalling five brands of aerosol sunscreen products after detecting a carcinogenic chemical in some samples.

The company has urged customers to stop using the products, namely five Neutrogena and Aveeno branded sunscreens, after testing showed low levels of benzene in some samples. The company said the recall was being conducted ‘out of an abundance of caution’.

Benzene is not an ingredient of its sunscreen products and J&J is now investigating how it has managed to get into its goods.

Nike

A manufacturer making Nike trainers has had to suspend production at three of its plants in Vietnam following an outbreak of coronavirus, the country’s government announced today.

South Korean outfit Changshin Vietnam has put production on hold at three sites in Dong Nai province and will remain closed until July 20, impacting the 42,000 workers employed across the factories.

Facebook

One of the EU’s leading privacy watchdogs has turned down calls from its peers in Germany to stop Facebook from processing personal data from its WhatsApp messaging subsidiary.

The European Data Protection Board said the conditions for it to take action had not been met after the German regulator argued against WhatsApp’s new terms of conditions and the proposal to process data through Facebook.

However, the EDPB did request Ireland’s Data Protection Commissioner to open a statutory investigation as soon as possible. The buck has been passed as Facebook’s European headquarters is based in Ireland.

Beyond Meat

Beyond Meat has launched an online store in China using JD.com’s ecommerce platform in an effort to boost sales and capitalise on growing demand for meat substitutes.

The partnership with JD.com will see it offer Beyond Meat’s products across four major cities including Beijing and Shanghai, but the pair are ultimately aiming to make them available in 300 cities. Products will be delivered from JD.com’s warehouses within 48 hours of being ordered.

Beyond Meat already sells its products in China through the hospitality industry through deals with the likes of Starbucks and Yum China, but the deal with JD.com represents the entry into the retail market. It follows on from it establishing its first factory in the country near Shanghai.

NortonLifeLock

Cybersecurity outfit NortonLifeLock is in advanced discussions with smaller UK peer Avast about a possible takeover offer.

NortonLifeLock has until August 11 to announce whether it intends to make a firm offer or walk away. Reports suggest a deal could value Avast at around $8 billion, sending shares in the FTSE 100 company soaring today.

‘A combination of NortonLifeLock and Avast would bring together two companies with aligned visions, highly complementary business profiles and a joint commitment to innovation that helps protect and empower people to live their digital lives safely. We would draw on the best of both companies to ensure that the combination would benefit our customers, reward our employees and maximise long term value for all shareholders,’ the company said.

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