Facebook, Fed, Microsoft, General Electric and Amazon - 5 Things You Must Know
Here are five things you must know for Thursday, Jan. 31:
1. -- Stock Futures Mixed After Fed Says It Will Be 'Patient' With Rate Hikes
U.S. stock futures pointed to a mixed start for Wall Street on Thursday, Jan. 31, while global stocks extended gains Thursday after the Federal Reserve signaled a pause in its rate hike plans and a series of blue-chip companies posted stronger-than-expected earnings and profit guidance that eased concerns over the prospect of a damaging slowdown in China.
Fed Chairman Jerome Powell said that weakening global growth, along with the lack of U.S. inflationary pressures, meant the central bank was able to "be patient" in its assessment of the need for further policy tightening, while he and his colleagues on the Federal Open Market Committee removed a reference to "further gradual hikes" later this year in the official statement published Wednesday.
"We are now facing a somewhat contradictory picture of generally strong U.S. macroeconomic performance alongside growing evidence of cross-currents," Powell told reporters in Washington. "Common sense risk management suggests patiently waiting greater clarity."
The dovish tilt marked a significant change to the bank's stance it stressed only six weeks ago.
Contracts tied to the Dow Jones Industrial Average fell 33 points, futures for the S&P 500 were up 3 points, and Nasdaq futures rose 35.75 points.
The economic calendar in the U.S. Thursday includes weekly Jobless Claims at 8:30 a.m. ET, the Employment Cost Index for the fourth quarter at 8:30 a.m., and Chicago PMI for January at 9:45 a.m.
The Bureau of Economic Analysis has delayed the Personal Income and Outlays report scheduled for Thursday because data wasn't collected during the U.S. government shutdown.
General Electric Co. (GE) - Get Report posted weaker-than-expected fourth-quarter earnings but saw sales rise solidly, helping shares jump 7.1% in premarket trading.
General Electric said adjusted earnings were 17 cents per share, below analysts' estimates of 22 cents. Revenue rose 5% to $33.28 billion, firmly ahead of the consensus forecast of $32.6 billion. GE also said it was able to retain or generate around $10 billion in cash over the quarter thanks to its dividend cut and the sale of parts of its stake in oil services group Baker Hughes.
DowDuPont Inc. reported fourth-quarter adjusted earnings of 88 cents a share, beating forecasts by 1 cents, but revenue of $20.1 was flat with last year and came in just shy of Wall Street forecasts amid a decline in sales at the company's materials science division. The stock declined 5.7%.
Raytheon Inc. (RTN) - Get Report posted stronger-than-expected fourth-quarter earnings as weapons sales, including Tomahawk missiles, increased over the period. The stock was down 2.3%.
Amazon.com Inc. (AMZN) - Get Report is scheduled to report earnings after the closing bell Thursday.
Amazon, DowDuPont and Raytheon are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AMZN, DWDP or RTN? Learn more now.
2. -- Facebook Surges After Record Fourth-Quarter Profit Tops Estimates
Facebook Inc. (FB) - Get Report surged 11.8% in premarket trading Thursday after the social media giant posted a record fourth-quarter profit that beat analysts' expectations and held onto users despite a wave of negative headline and privacy concerns.
Earnings in the quarter were $6.88 billion, or $2.38 a share, rising from $4.27 billion, or $1.44 a share, a year earlier. Revenue of $16.64 billion rose from $12.97 billion in the year-earlier quarter.
Analysts were looking for earnings of $2.18 a share on revenue of $16.39 billion.
Facebook said daily active user growth jumped 9% in the quarter to 1.52 billion, while monthly active user growth also rose 9%. Average revenue per user, a closely watched metric, grew 19% year over year to $7.37, outpacing analyst estimates.
The company said unique users on its family of apps hit 2.7 billion, while those on its popular Instagram Stories topped 500 million for the first time. Mobile ad revenue - the bulk of Facebook's top line - grew 36% to $15.5 billion in the quarter, and rose 93% in 2018.
Looking ahead, however, Facebook said it expects revenue growth slowing to a mid-single digit rate for the first quarter, and then further still into the final three months of the year, as it works to monetize Stories. Expense growth forecasts were confirmed in the 40% to 50% range and capex estimates were unchanged at between $18 billion and $20 billion, Facebook said.
"I think it's worth emphasizing that while I'm excited about the road map that we have and it's going to be great over the long term, the growth of the business over the next year, a few quarters or the near term is going to be mostly based on the growth of (Instagram) Stories and the core News Feed work," CEO Mark Zuckerberg told investors on a conference call late Wednesday. "We have a lot of work still to go there to monetize at the same levels as News Feed. And I'm confident that we're going to get there, but I want to make sure that we're giving the right outlook on how we expect the near future to go."
"Bottom line, the long knives have been out against Facebook for quite some time, but the upside to the numbers should put them to rest for the time being," said Jim Cramer and the Action Alerts PLUS team, which holds Facebook in its portfolio. "Although revenue growth will continue to slow in 2019 and pressure on margins will continue, these results showed how the company is managing the transition it laid out for some quarters now."
3. -- Microsoft's Revenue Misses Expectations
Microsoft Corp. (MSFT) - Get Report fell 2.1% in premarket trading after the software giant's fiscal second-quarter revenue missed analysts' estimates despite strong gains from its cloud computing segment.
Microsoft reported fiscal second-quarter adjusted earnings of $1.10 a share, 1 cent better than analysts' expectations. But revenue of $32.47 billion fell just short of Wall Street's estimates of $32.51 billion.
Cloud computing generated $9.38 billion in revenue for the company, a 20% year-over-year increase.
"Our strong commercial cloud results reflect our deep and growing partnerships with leading companies in every industry including retail, financial services, and healthcare," said Satya Nadella, CEO of Microsoft. "We are delivering differentiated value across the cloud and edge as we work to earn customer trust every day."
Microsoft doesn't break out specific sales numbers for its Azure cloud computing platform, but it did say that revenue from it increased 76% in the quarter from a year earlier.
Microsoft's More Personal Computing segment posted revenue of $12.99 billion, below forecasts of $13.08 billion. Windows OEM saw a 5% year-on-year-revenue decrease.
"We believe the quarter was solid and serves to support our view that the cloud space remains in secular growth mode," said Jim Cramer and the Action Alerts PLUS team, which holds Microsoft in its portfolio.
4. -- Tesla's Fourth-Quarter Profit Disappoints
Tesla Inc. (TSLA) - Get Report , the electric vehicle company, reported fourth-quarter adjusted profit of $1.93 a share, missing analysts' estimates of $2.20, as revenue rose to $7.23 billion and topped forecasts of $7.12 billion.
Shares fell 4.2% in premarket trading.
The company, founded by CEO Elon Musk, also reported cash and cash equivalents of $3.7 billion as of the end of the fourth quarter. The company wrote in a letter to investors that it has "sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019."
Tesla has $1.5 billion in convertible debt that matures this year, including $920 million due for repayment in March.
- Tesla Tops Revenue Estimates but Misses on Earnings, Says It Can Pay $920B Debt
- Tesla Earnings: This Is a Hypergrowth Company?
Looking ahead, Tesla said it expects to deliver between 360,000 and 400,000 total vehicles in 2019, which represents a growth of about 45% to 65% from 2018. In the current quarter, the company also plans to begin delivering vehicles to Europe and to China, which Tesla pointed to as its next big frontier of demand for the Model 3.
Responding to a question on a conference call about global demand for the Model 3, Musk said that "my best guess for demand for the Model 3 is 700,000 or 800,000 units per year, in a strong economy," and 40% less than that in a recession.
Musk also announced that Chief Financial Officer Deepak Ahuja planned to retire, and would be replaced by Zach Kirkhorn, now a vice president of finance at Tesla.
5. -- PayPal Slides After Weaker-Than-Expected Outlook
PayPal Holdings Inc. (PYPL) - Get Report was falling 4.2% in premarket trading after the payments company reported fourth-quarter earnings that beat expectations and issued a first-quarter outlook that came up short.
PayPal reported adjusted earnings per share of 69 cents, beating Wall Street's estimates of 66 cents. Revenue of $4.23 billion just missed analysts' estimates of $4.24 billion.
PayPal's Venmo processed $19 billion of payments in the fourth quarter, an 80% year-over-year increase.
Full-year adjusted earnings were $2.42 a share on revenue of $15.45 billion.
For 2019, PayPal said it expects adjusted earnings of between $2.84 to $2.91 a share; Wall Street had been expecting full-year EPS of $2.89. Revenue was seen at $17.85 billion to $18.1 billion vs. analysts' views of $18.04 billion.
PayPal is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells the stock? Learn more now.
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