Supply Chain Pain and Record Revenues: Recapping a Decisive Earnings Week

Last week was a huge one for earnings, with Facebook (or Meta), Alphabet, Amazon, Apple … and a ton of other major companies reporting earnings. Here is what you need to know to digest those earnings and set your portfolio up for the next big stock market moves.

Facebook ($FB)

Facebook reported mixed earnings after hours on Monday, posting a revenue miss and an EPS beat.

Revenue: $29.01 billion, which missed expectations of $29.57 billion
EPS: $3.22 per share, which beat expectations of $3.17 per share
Q4 Guidance: $31.5 billion to $34 billion, lower than expectations of $34.8 billion
Daily Active Users: 1.93 billion, which matched analyst expectations

Facebook, which will soon change its name to Meta Platforms Inc., also announced it would be increasing its stock buyback program by an additional $50 billion. The stock initially fell on the release, trading as low as $309.60 that afternoon, but recovered most of its losses over the following days, closing the week at $323.61.

Alphabet ($GOOG, $GOOGL)

Alphabet reported their most profitable quarter in history after hours on Tuesday, with a beat on both revenue and EPS expectations.

Revenue: $65.12 billion beat expectations of $63.34 billion
EPS: $27.99 per share beat expectations of $23.48 per share
Q4 Guidance: $31.5 billion to $34 billion missed expectations of $34.8 billion
Daily Active Users: 1.93 billion matched analyst expectations

Alphabet fell short with $4.99 billion in Youtube ad revenue, missing the street expectation of $5.07. CFO Ruth Porat attributed the miss to the “modest impact” of Apple’s privacy changes. $GOOG traded higher off the report, reaching a new all-time high of $2,982.36 on Wednesday.

Microsoft ($MSFT)

Microsoft also reported their most profitable quarter in history after hours on Tuesday, and also beat street expectations of revenue and EPS.

Revenue: $45.32 billion, which beat expectations of $43.97 billion
EPS: $2.27 per share, which beat expectations of $2.07 per share
Q4 Guidance: $50.15 billion to $51.05 billion, higher than expectations of $48.92 billion
Intelligent Cloud Revenue: $16.96 billion, higher than expectations of $16.51 billion

Microsoft reported an enormous 50% year-over-year growth from Azure and cloud services, surpassing analyst expectations of 47%. Following the report the stock traded significantly higher, reaching a new all-time high of $330.65 on Friday. Microsoft has now surpassed Apple as the largest publicly traded company in the world.

Boeing ($BA)

Boeing reported an earnings flop Wednesday morning, missing on both EPS and revenue.

Revenue: $15.3 billion missed expectations of $17.2 billion
Adjusted EPS: -$0.19 per share missed expectations of -$0.15 per share

Boeing reported 85 commercial airplane deliveries in Q3, less than analysts’ expectations of 96. Boeing announced that many of its 737 MAX planes, which had their use suspended in March of 2019, will be returning to circulation for flight and delivery. The company did not offer forward guidance. The stock opened higher but ultimately traded downward off the news, bottoming Thursday morning at $204.60.

Ford ($F)

Ford reported an earnings smash after hours on Wednesday, beating Wall Street’s expectations on revenue and nearly doubling expected earnings-per-share.

Revenue: $33.21 billion beat expectations of $32.54 billion
Adjusted EPS: $0.51 per share beat expectations of $0.27 per share

Ford raised its full-year adjusted earnings guidance by 15.79%, from $9 billion-$10 billion dollars up to $10.5 billion-$11.5 billion. Ford shares traded considerably higher off the news, reaching as high as $17.58. Forget 52 week high, Ford hasn’t traded that high since August of 2002!

Amazon ($AMZN)

Amazon reported an earnings disappointment after hours on Thursday, missing expectations of both revenue and EPS.

Revenue: $110.81 billion missed expectations of $111.6 billion
EPS: $6.12 per share missed expectations of $8.92 per share
Q4 Sales Guidance: $130 billion to $140 billion, lower than Street expectations of $142.1 billion

Amazon reported growth in the third quarter, but not enough to match Wall Street’s high bar. If fourth-quarter guidance is accurate, that slowing growth trend is set to continue. Amazon cited the tight supply chain, increased cost of shipping, labor shortages & wage inflation as hurdles it will have to climb over the holiday season to come. Following the report, shares of Amazon traded down -2.15%.

Apple ($AAPL)

Apple reported earnings after hours on Thursday, beating expectations of both revenue and EPS.

Revenue: $81.41 billion beat expectations of $73.3 billion
EPS: $1.30 per share beat expectations of $1.00 per share
iPhone Revenue: $39.57 billion beat expectations of $34.01 billion
Gross Margin: 43.3%, higher than expectations of 41.9%

Apple did not offer guidance but cautioned investors that growth in the fourth quarter may not be as robust as it was in the third. Following the call, shares of Apple fell nearly 4% in early trading, before closing off the lows at $149.80, down -1.82% for the day.

The bottom line

This week several of the largest companies in the world reported their earnings. Companies weren’t only judged on their performance over the quarter, but on how they could climb the wall of worry that comes with labor shortages, wage inflation, higher supply costs, longer shipping times & regulatory scrutiny, to name a few.

Companies that receive most of their revenue from digital services like Microsoft and Alphabet thrived. Ford surprised analysts with their ability to navigate the chip shortage in a way other automakers haven’t. For other businesses like Amazon and Shopify, supply chain issues were too strong and the stocks were punished as a result.

Many of these issues are likely to persist through the fourth quarter holiday season. It will be worth watching how companies navigate these headwinds during the most profitable season of the year. As always, but especially during precarious times like these: remain disciplined.

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