Top US stocks to watch: Robinhood, Amazon and Comcast

Robinhood completes its IPO, Amazon takes centre stage when markets close today, and earnings seasons continues with results out from Facebook, PayPal, Ford, Qualcomm, Comcast, Mastercard, Yum Brands, Textron, Northrop and Hershey.

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Robinhood

Robinhood has completed its eagerly-awaited IPO today, raising $2.1 billion and starting life out as a public company with a valuation of $31.8 billion.

The trading app, which has exploded in popularity with young first-time traders and investors, sold 55 million shares at $38 each, at the bottom-end of its $38 to $42 price range.

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. But the company is also facing regulatory pressure as authorities continue to look at its role in the frenzy in meme stock trading earlier this year.  

Amazon

Amazon will release second quarter results after the markets close today, with investors hoping it can follow the stellar earnings reported by other members of Big Tech this week.

Amazon’s guidance issued at the end of the first quarter shows the company is aiming to grow quarterly net sales by 24% to 30% year-on-year to between $110.0 billion and $116.0 billion and for operating income to come in between $4.5 billion and $8.0 billion compared to the $5.8 billion booked the year before.

Analysts are expecting Amazon to hit the top-end of its guidance, anticipating quarterly net sales of $115.14 billion and operating income of $7.7 billion. Building on that, Wall Street expects net income per share to rise to $12.32 per diluted share from $10.30 the year before.

Comcast

Comcast beat expectations in the second quarter and resumed its share buyback programme after successfully reducing its debt.

Revenue climbed over 20% higher year-on-year to $28.55 billion and adjusted EPS of $0.84 jumped from $0.69 the year before. That beat Wall Street expectations for revenue of $27.18 billion and EPS of $0.67. Comcast also resumed share buybacks in the quarter, earlier than expected, having put them on hold to focus on repaying debt that built up when it purchased Sky, returning $500 million and a further $1.2 billion in dividends in the quarter.

The company continued to add new wireless and internet customers to its books but continued to lose cable customers, while NBCUniversal’s theme parks have now reopened. Sky delivered double-digit revenue growth in the UK.

Mastercard

Mastercard delivered higher profits than anticipated in the second quarter as it benefits from the reopening of the global economy.

The payments giant said net revenue rose 36% year-on-year to $4.5 billion as domestic and cross-border spending continued to recover from the pandemic. Adjusted net income rose to $1.95 per share from $1.36 the year before, beating the $1.75 forecast by Wall Street.

Gross dollar volumes rose 33% in the period while cross-border volumes jumped 58%. Mastercard said the fact international travel still has to bounce back provides further potential upside to pursue going forward.

Hershey

Sweet treat maker Hershey delivered double-digit growth across the board in the second quarter as people continue to gorge on chocolate at home and eat more on-the-go as the pandemic eases and people head back out.

Net sales grew 16.5% in the period to $1.98 billion and net income increased 12.4% to $301.2 million. Adjusted EPS followed 12.2% higher to $1.47.

Hershey updated its full year guidance to reflect the stronger than expected performance and to include the contribution expected from its acquisition of Lily’s Sweets. It is now targeting annual net sales growth of 6% to 8%, up from 4% to 6% previously. It reaffirmed its adjusted EPS target for 2021 at between $6.79 to $6.92 compared to the $6.29 booked in 2020.

Yum Brands

Yum Brands delivered strong growth in the second quarter and said sales were above pre-pandemic levels as customers flock back to its restaurants as vaccination programmes progress and the pandemic eases.

Comparable sales at KFC rose 30% year-on-year, well ahead of the 21.6% forecast, while Pizza Hut sales improved 10% versus the 9.6% estimate from analysts. Taco Bell also returned to growth. Adjusted net income of $1.16 per share rose from $0.82 and beat the $0.96 expected by analysts.

‘On the basis of these strong results, we're reinstating our long-term growth algorithm and revising the unit growth component of this algorithm from 4% unit growth to between 4% and 5% unit growth. The resilience of our diversified global business positions us perfectly to drive growth and maximize value creation for all our stakeholders for years to come,’ said chief executive David Gibbs.

Merck

Merck met expectations in the second quarter as demand for its medicines and products bounced back after being hit hard last year.

Sales rose 22% in the period to $11.40 billion but GAAP EPS almost halved to $0.48 from $0.92 due to a $1.7 billion charge related to its acquisition of Pandion and drug development. Revenue was some $100 million higher than expected while EPS was in-line with Wall Street’s expectations.

Sales of its cancer drug Keytrude jumped 23% in the period to $4.2 billion, sales of its GARDASIL vaccine against HPV rose 77% to $1.2 billion and its animal health products saw sales rise 34% to $1.5 billion. The strong growth rates partly reflect weaker comparatives from last year when more people delayed treating illnesses when the pandemic hit.  

Northrop Grumman

Northrop Grumman said it delivered ‘outstanding’ results in the second quarter, prompting it to raise expectations for the rest of the year.

Total sales of $9.15 billion came in higher than expected and improved from$8.88 billion the year before, while adjusted net earnings rose to $6.42 from $6.01 and beat forecasts of $5.84. Its Mission and Space Systems divisions drove topline growth, while earnings were flattered by the profit made selling its IT services business. Still, net earnings grew 13% when this and other one-off measures were excluded.

Northrop said it is now targeting sales of $35.80 to $36.20 billion and adjusted EPS of $24.40 to $24.80 in 2021. It was previously targeting sales of $35.3 and $35.7 billion and EPS of $24.00 to $24.50.

Textron

Textron, the owner of a sprawling number of businesses in aircraft, defence, industrial and finance sectors, reported strong growth in the second quarter and raised its expectations for the full year.

Revenue climbed 29% year-on-year to $3.19 billion, coming in above the $2.97 billion expected by analysts. Net income of $193 million turned from a $92 million loss the year before while EPS of $0.80 swung from a $0.40 loss. It said revenue grew across all its manufacturing segments and delivered a solid margin in most divisions.

The performance prompted Textron to raise its guidance for the full year. It is targeting adjusted EPS of $3.00 to $3.24 per share compared to the previous target of $2.80 to $3.00. It also raised its operating cashflow target by $200 million. ‘As the economy strengthens, our outlook reflects continued growth in business aviation, improving execution on new programs at Systems, ongoing investments in Future Vertical Lift at Bell and strong retail demand in our end-markets at Industrial,’ said Textron.

Facebook

Facebook shares lost ground in extended trading yesterday as the social media giant’s warnings of slower growth overshadowed strong growth in the second quarter.

Total revenue rose 56% to $29.08 billion and net income more than doubled to $10.4 billion, or to $3.61 per share. The topline was ahead of expectations and EPS was better than the $3.03 forecast by Wall Street. However, the 7% growth in monthly active users to 2.9 billion was slightly less than expected and slower than the 8% growth delivered in the first quarter.

In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth,’ Facebook warned. It also flagged the continued challenges posed by regulatory pressure and the recent changes to Apple’s operating system.

PayPal

PayPal reported second quarter results after markets closed yesterday, when it largely beat expectations and tweaked its full year guidance.

The payment giant said total payments volume grew 40% in the period, above the 33.9% forecast by analysts. However, the 17% growth in revenue to $6.24 billion was less than the 19% growth expected. GAAP EPS fell 23% year-on-year to $1.00 but came in higher than the $0.73 forecast.

PayPal said it now expects total payments volume to grow by 33% to 35% this year and reaffirmed its revenue target. It is aiming for annual GAAP EPS of around $3.49, down from $3.54 last year.

Ford

Automaker Ford upped expectations for 2021 yesterday as it confirmed it wants to shift toward making cars to order rather than churning them out to sit in dealerships.

Revenue rose 38% in the second quarter to $19.4 billion and EPS jumped to $0.28 from $0.14 the year before. It said it is now aiming for adjusted Ebit of $9 to $10 billion, up around $3.5 billion from its previous target.

Ford said it did not lose as much production as expected in the quarter due to the shortage in semiconductors, but said production should be around 30% higher in the second half of 2021 compared to the first. It also raised its cashflow target for the year.

Qualcomm

Qualcomm said it plans to continue bolstering supplies of semiconductors amid the global supply shortage, allowing it to post a better outlook than anticipated by analysts.

Revenue rose 65% to $8.06 billion while EPS more than doubled to $1.77 from $0.74. That is impressive considering the chip shortage, with Qualcomm stating it still expects to improve supplies from multiple manufacturers in the fourth quarter after successfully mitigating the problems in the third.

It said chip revenue should come in at around $7.25 billion in the final quarter of the financial year, ahead of the $6.83 billion expected by analysts. EPS should be between $1.78 and $1.98.

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