Top US stocks to watch: Uber, Lyft and EA
Joshua Warner August 4, 2021 1:42 PM
Uber reports later today following Lyft’s earnings yesterday, gaming stocks including EA, Activision Blizzard and Sony are in play, MGM Resorts strikes a $4.4 billion deal, Kraft Heinz, Amgen, CVS Health and BorgWarner beat expectations, and Facebook’s rivalry with Snap intensifies.
Uber is due to release second quarter results after the markets close today, with investors eagerly awaiting to see how much the company has been able to capitalise in the recovery in travel amid a shortage of drivers.
Analysts are expecting revenue to rise to $3.74 billion from $2.24 billion the year before. The adjusted Ebitda loss is expected to narrow to $325.1 million from the $837.0 million loss booked last year, with the loss per share to follow to $0.51 from $1.02.
Profitability is key considering Uber has previously said it expected to be profitable at the adjusted Ebitda level by the end of the year and investors will want to see evidence that it is moving in the right direction. The fear is that the need to get back to pre-pandemic levels of activity will delay its journey to escaping the red.
Those results come after Lyft’s quarterly results released yesterday, posting its first ever positive adjusted Ebitda much earlier than expected.
Revenue rose to $765.0 million from $339.3 million the year before when travel was hit by the pandemic, and that was also an improvement from $609.0 million in the first quarter of 2021. It also posted its first ever adjusted Ebitda of $23.8 million compared to a hefty loss the year before. That was much better than expected, with analysts forecasting revenue of $697.0 million and for a loss of just under $50 million. Lyft had wanted to become profitable at that level toward the end of this year.
The company, which is exclusively focused on ride-hailing in the US, added 3.6 million new drivers in the last three months alone, although warned of the threat driver shortages poses to the business. The company said it plans to remain profitable going forward but warned revenue per ride was likely to fall over the coming quarters.
EA will release first quarter results after the markets close today, following in the footsteps of Activision Blizzard and Take-Two Interactive.
Analysts are expecting net income to drop to $268.9 million from $365.0 million the year before and for EPS to plunge to $0.50 from $1.25. Hit games like Apex Legends and Battlefield are expected to continue driving topline growth and investors will also be looking for news on how new acquisitions – including of Codemasters, Glu Mobile and Metalhead – are helping improve the business.
The results will be eagerly watched after Activision Blizzard reported yesterday and revealed large jumps in revenue and earnings but disappointed with its outlook. Meanwhile, Take-Two Interactive’s results earlier this week also revealed a rise in earnings despite a drop in revenue, but this was overshadowed by news it has decided to delay two key titles.
Activision Blizzard said it expected demand for its favourite titles like ‘Candy Crush’ and ‘Call of Duty’ to remain resilient going forward after performing better than expected in the second quarter, although its outlook disappointed the markets.
The company revealed a 19% jump in revenue to $2.3 billion and that EPS rose to $1.12 from $0.75. Both metrics came in ahead of the $2.1 billion in revenue and $0.81 guided by the company.
It also raised its outlook for the full year and said it is targeting revenue of $8.5 billion and EPS of $3.08. Still, that guidance disappointed markets as they were hoping for annual revenue closer to $8.7 billion.
Sticking to gaming, Sony reported record results in the first quarter of its financial year as the surge in demand for its tech, spanning everything from Playstation consoles to TVs, continued.
Overall sales jumped 15% to JPY2,256.8 billion and operating income rose 26% to hit a new record of $280.1 billion. That came in ahead of the JPY207.96 billion profit expected by analysts. Sales growth was driven by growth from its gaming, music, image and hardware divisions.
Sony also raised its forecast for the full year and is now targeting operating income of JPY980 billion compared to its previous target of JPY930 billion, while leaving its annual sales target unchanged at JPY9,700 billion.
MGM Resorts has struck a deal to sell its stake in MGM Growth Properties to VICI Properties for $4.4 billion, offloading a portfolio of resorts and properties in Las Vegas and other parts of the US.
MGM Resorts said the price, worth $43 per MGM Properties share, was at a 15.9% premium and 149% higher than the IPO price. The deal values MGM Properties at $17.2 billion in total, including $5.7 billion of debt that VICI will be taking on as part of the transaction.
The deal is expected to be completed in the first half of 2022 and MGM said it will retain a 1% share in the VICI operating partnership, which is worth around $370 million.
Kraft Heinz said it will perform better than first thought this year as it beat expectations in the second quarter, although warned that cost inflation and other headwinds remain a challenge.
Net sales dipped 0.5% year-on-year to $6.61 billion but came in ahead of analyst expectations for $6.55 billion. Adjusted EPS of $0.78 also fell from $0.80 the year before but came in ahead of the $0.72 forecast. Heinz is coming up against tougher comparatives following the boom in demand for food at home during lockdown, a trend that is largely continuing while people continue to work from home.
In fact, Heinz is now expecting adjusted Ebitda in 2021 to surpass pre-pandemic levels booked in 2019 and said it should deliver low-single digit percentage decline in adjusted Ebitda in the third quarter and organic net sales.
Amgen beat expectations when it released quarterly results yesterday but warned that the pandemic is expected to weigh on demand for the rest of the year.
Revenue increased 5% year-on-year in the second quarter to $6.52 billion, in-line with expectations. Adjusted EPS edged-up 4% to $4.38 and came in ahead of the $4.10 expected by Wall Street, although that was flattered by the reduction in shares from its buyback programme. Overall adjusted net income was up 2% to $3.11 billion while report net income plunged 74% to $464 million.
Amgen said demand for wider healthcare is continuing to improve as the pandemic prompted people to delay treatment for other things last year, but said activity remains well below pre-pandemic levels and warned that it expected this to continue for the remainder of the year.
CVS Health reported better than expected earnings in the latest quarter and raised its expectations for the full year
Revenue rose over 11% to $72.6 billion in the second quarter, but adjusted EPS fell to $2.42 from $2.64 the year before. Still, that was better than the $2.06 expected by analysts. Topline growth was driven by a recovery in demand for prescription drugs and over-the-counter medicines as the US vaccination programme progresses.
CVS said it is now targeting adjusted EPS of $7.70 to $7.80 in 2021 compared to its original goal of $6.24 to $6.36, and said it expects to generate more cashflow than first anticipated.
Dating firm Match Group delivered strong growth in revenue and earnings in the latest quarter when it released results yesterday and posted a better than expected outlook for the next quarter, but warned growth was recovering slower in Asia than its other markets.
Revenue rose 27% in the second quarter to $708 million and adjusted Ebitda rose 15% to $263 million. Overall growth in paying users increased 15% to 15 million from 13 million a year earlier. Tinder’s revenue was up 26% while its other brands delivered faster growth of 28%, with both divisions growing paying users.
Match Group said it expects third quarter revenue of between $790 and $805 million, ahead of the $766.4 million expected by analysts. For the full year it is targeting revenue of $3.0 to $3.02 billion. It warned Asia was not recovering as quickly as the US and European markets.
Marathon Petroleum posted its first profit since the pandemic erupted when it released second quarter results this morning, driven by the recovery in demand for oil as the global economy reopens.
Adjusted net income of $437 million turned from a $868 million loss the year before when the pandemic erupted and demand for oil collapsed. However, it would have remained in the red if it wasn’t boosted by $11.6 billion of pre-tax benefits.
‘This quarter, we closed the Speedway sale and, as part of our capital return commitment, announced $10 billion of the proceeds would be allocated to share repurchases. We have repurchased approximately $1 billion of shares, achieved our targeted structural debt reduction of $2.5 billion, and are commencing the next steps towards completing the remaining $9 billion return of capital over the next 12 to 16 months,’ said chief executive Michael Hennigan.
Auto parts maker BorgWarner raised its full year guidance this morning after beating expectations in the second quarter thanks to the surge in demand for new cars.
Adjusted EPS of $1.08 turned from a $0.14 loss the year before and came in well ahead of the $0.81 forecast by analysts. Revenue jumped 164% to $3.75 billion as demand for new vehicles increased and also came in higher than the $3.48 billion expected by Wall Street.
BorgWarner said it is now expecting adjusted EPS of $4.15 to $4.40 compared to its previous target range of $4.00 to $4.35, but said this assumes there are no more disruptions to production spawning from the pandemic.
Facebook and Snap
Facebook has intensified competition with Snap after launching new features on its Whatsapp messenging service that will allow users to send disappearing photos and videos – the primary feature that propelled Snapchat into popularity.
The feature is being called View Once and will see photos and videos disappear after it has been viewed by the recipient.
Snap has been growing its user base over the past year, having added 55 million new users over the 12 months to the end of June. But will that be impacted considering Facebook touts over 2.8 billion users, 1.9 billion of which use Facebook products daily?
Apple is reportedly teaming up with PayBright, owned by Affirm Holdings, to launch a ‘buy now, pay later’ service that would allow people to buy Apple products spanning iPhones to Mac computers in Canada and pay for them over 12 to 24 months, according to Bloomberg.
The service is expected to be launched this month. Buy now, pay later has become a hot area lately, with Square announcing a mega $29 billion merger with Afterpay just this week.
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