October 24, 2024 | Read Online

What You Need To Know For October 24th

Tesla Earnings, Rates Edge Higher, and the Boeing Strike Continues

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Welcome Back!

U.S. Markets had a modest selloff yesterday as treasury rates continued rising. Over the past month, the 10-year has rallied from ~3.6% to 4.24%, an abrupt shift from the decline in rates that started this Spring. Rates have been on the move back higher as 1) fewer rate cuts seem likely 2) inflation seems stickier 3) recession fears cool and 4) worries over how the U.S. spending deficit will drive how high the terminal rate should be. As things stand, we're not sure how much higher rates can go - but we do think they'll be stickier than a lot of folks think.

Let's get into it!

Earnings Corner 📜

Tesla (TSLA) reported earnings that beat estimates, with revenue of $25.18B up 8% y/y (vs. $25.37B expected) and EPS of $0.72 (vs. $0.58 expected). Automotive revenues were up 2% as TSLA saw a 6% increase in deliveries, following 2 consecutive quarters of y/y decline. Profit margins were boosted by $739MM in automotive regulatory credit sales to other car manufacturers. The stock was up 12.1% after Wednesday's close
Starbucks (SBUX) just threw out the kitchen sink - tossing out its 2025 guidance to give new CEO Brian Niccol a fresh plate. They don't report until 10/30/24. Starbucks will reveal more on 10/30/24, but earlier this week they released its fourth-quarter earnings early, with comp sales down 7%, with U.S. stores down 6% and a steep 14% decline in China comps. Niccol emphasized that they need to get back to being the coffee shop that the community loves, as well making sure baristas are better supported (likely with more staffing), throwing a wrench in the old CEO's plans that were highly focused on efficient, mobile ordering. The stock rallied 6% from Tuesday's lows
AT&T (T) reported earnings that beat estimates, with revenue of $29.8B down 0.6% y/y (vs. $30.45B expected) and EPS of $0.60 (vs. $0.57 expected). The wireless provider added 403,000 new subscribers (vs. 393,430 expected), profiting from the adoption of premium, unlimited plans. These higher-tiered offerings have allowed AT&T to compete with the bundled wireless and streaming (Netflix & MAX) packages sold by competitors. The stock was up 4.6% after Wednesday's close
Phillip Morris International (PMI) reported earnings that beat estimates, with revenue of $9.91B up 8.4% y/y (vs. $9.69B expected) and EPS of $1.91 (vs. $1.82 expected). Zyn sales were up 43.6% to 164.6MM cans, as mgmt. explained that shortages of the nicotine pouch are easing with the rollout of new U.S. manufacturing capacity. Smokeless products now make up 38% of PMI's revenue. The stock recorded its biggest gain since 2008 and was up 10.1% at Wednesday's close
GE Vernova (GEV) reported earnings that missed estimates, but mgmt. reaffirmed guidance, and the stock was up 1.3% at Wednesday's close.
Peloton (PTON) shares were up 11% on Wednesday after hedge fund manager David Einhorn called the company significantly undervalued
Raytheon Technologies (RTX) reported earnings that beat estimates, coming 8 days after the defense giant agreed to a $950MM settlement for alleged bribery of Qatari officials and defrauding the DoD. The stock was up 1% at Wednesday's close
Texas Instruments (TI) reported earnings that beat estimates, as chip sales for industrial applications stabilized from last quarter and drove the stock up 4% at Wednesday's close
T-Mobile (TMUS) reported earnings that beat estimates, driven by the best Q3 wireless customer growth in a decade and the lowest Q3 subscriber churn in the company's history. The stock was up 2.8% after Wednesday's close

Verizon (VZ) reported earnings that beat estimates, with revenue of $33.3B nearly flat y/y (vs. $33.43B expected) and EPS of $1.19 (vs. $1.18 expected). As the wireless market becomes saturated and consumers wait longer to upgrade their phones (now an average of 40 months), VZ has doubled down on high-speed internet. However, mgmt. announced that associated capex will be higher than expected at $17.5B-$18.5B (vs. $17.57B expected). The stock was down 2.2% at Wednesday's close
Boeing (BA) reported earnings that missed estimates, with Revenue of $17.84B down 1.4% y/y (vs. $17.94B expected) and EPS of -$10.44 (vs. -$8.82 expected). In his first earnings call, new CEO Kelly Ortberg emphasized cost cutting and suggested BA may begin to generate positive cash flows in the second half of 2025 (vs. prior plans to stabilize by the end of 2024). The stock was down 1.76% at Wednesday's close. Even worse, the Boeing machinists rejected a new labor agreement that would've given them a 35% pay raise over 4 years, extending a strike that's lasted 5 weeks now
Lockheed Martin (LMT) reported earnings that beat estimates, with revenue of $17.1B up 1.34% y/y (vs. $17.37B expected) and EPS of $6.84 (vs. $6.44 expected). Aeronautics unit sales (which make up 38% of overall revenue) were dragged down 3% due to contractual and funding delays for the F-35 fighter. The stock was down 7.3% at Wednesday's close
Boston Scientific (BSX) reported earnings that beat estimates, but the stock stumbled as mgmt. announced it was temporarily pausing trials on its Farapulse PFA product. The stock was down 0.64% at Wednesday's close
Coca-Cola (KO) reported earnings that beat estimates, with higher prices offsetting weak consumer demand, and the stock down 2% at Wednesday's close
Danaher Corporation (DHR) reported earnings that beat estimates, but the stock was down 5.9% at Wednesday's close
GE Aerospace (GE) reported earnings that beat estimates, but weak sales in the commercial engines and defense and propulsion segments drove the stock down 6.5% at Wednesday's close
General Dynamics (GD) reported earnings that missed estimates, with strong performance from its defense segment, but poor business jet deliveries hurting the top and bottom line. The stock was down 0.5% at Wednesday's close
IBM (IBM) reported earnings that beat estimates, but disappointing consulting and infrastructure revenue drove the stock down 3% after Wednesday's close
ServiceNow (NOW) reported earnings that beat estimates, with revenue growth of over 22% y/y, but mgmt.'s growth outlook disappointed investors, with the stock down 2.5% after Wednesday's close
Sherwin Williams (SHW) reported earnings that missed estimates, with mgmt. citing a weak demand environment, driving the stock down 5% at Wednesday's close
Thermo Fisher Scientific (TMO) reported earnings that beat estimates but missed on revenue, with the stock down 1.67% at Wednesday's close

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Today's Headlines 🍿

Here's a look at the most popular WFH locations. Per Bloomberg, there's a growing shift from cities to the suburbs where workers are getting better bang for their buck. The top five spots in 2023 all had ~35% of employed people primarily WFH: Apex & Holly Springs NC; Austin, TX; Charlotte, NC; and Santa Monica, CA.
The new federal tax rate brackets just dropped. The IRS ties their adjustment formulas to inflation which means that those who make the same YoY will pay less in taxes (raising the income threshold for each bracket). At the top end, individuals making more than $626k and married couples filing jointly making more than $751k will pay 37%
U.S. existing home sales fell unexpectedly to a 14-year low, with a -1% decrease of an annualized rate of 3.84 million homes. Demand has been weak and inventory has been on the rise due to the higher mortgage rate environment
McDonald's quarter pounders have been linked to an E. coli outbreak that has sickened 49 people and resulted in the passing of one elderly person. Most of the illnesses are concentrated in Colorado and Nebraska … according to the Company's USA President the "contaminated product" has made its way through the "supply chain already"
Remember the Apple Vision Pro? Well it looks like a dud, with Apple scaling back production and potentially stopping producing this version by the end of 2024. Apple wants to focus on a mass market, cheaper option in the future vs. this unpopular $3.5k product
Jamie Dimon is reportedly privately supporting Kamala Harris and would be open for a Cabinet position. Typically outspoken, Dimon supposedly joins business leaders like Bill Gates (who gave $50MM to a Harris fund-raising group) who are keeping their opinions quiet, wary of retaliation from President Trump
The DoJ has written to Elon Musk's PAC, cautioning him that giving cash payments to voters might violate federal law
Monroe Capital, a direct lender with $20B of AUM has sold a majority stake to Wendel, an European firm. The French investment company is taking a 75% stake and committing $1.1B in fresh capital to expand the Chicago-based firm's middle market business
Blackstone and Apollo are among the private credit firms pushing for more private investment grade transactions. Historically run by large banks, the market offers untapped potential for the duo, both of which are trying to earn a reputation as "plain-vanilla lenders." BX saw its IG private credit assets rise 40% to $90B YoY, while Apollo now manages ~$275B in "high grade capital solutions"
Disney's succession plan is marching on: an announcement is expected in early 2026, with Iger's contract set to end in late 2026. James Gorman the former CEO and Chairman of Morgan Stanley, will be taking on the Chairman role in 2025. Viewed as the architect of Disney's modern media empire — having led acquisitions of Pixar, Marvel, and Star Wars — Iger has bumped back his retirement date five times
U.S. college freshman enrollment declined more than -5% y/y, the largest decline since 2020, although overall enrollment rose 2.9% y/y
Fed Reserve Bank of Minneapolis President Neel Kashkari expects rate cuts to be slow over the next several months. Kashkari announced on Monday that he backed last month's larger cut but would need to see "real evidence that the labor market is weakening quickly" to maintain that magnitude
Shortseller Carson Block says to close your eyes and buy large cap stocks. The Muddy Waters Capital founder made a name for himself betting against overvalued names, but he's now arguing that inflows from retirement funds will drive up the S&P 500, especially the Mag 7
To get a seat at this years World Series you're going to have to shell out at least $1.1k . Hosted by the Yankee's and Dodgers, the New York and LA supermarkets are driving prices to recent records — the average resale price for the series was $1.6k compared to $884 last year and $1.3k in 2022
A years of losses and a failed merger with JetBlue, spirits are rising at Spirit Airlines. The budget airline's shares surged 26% in pre-market trading Wednesday on news that Frontier is exploring a potential acquisition of the company which would unfold through Spirit's bankruptcy and restructuring process
OpenAI's ex-CTO Mira Murati is launching her own startup. Aiming to raise $100MM, Murati plans to focus on constructing AI products around proprietary models. Murati, briefly interim CEO during Sam Altman's removal, isn't the only executive to depart OpenAI recently — the company's chief research officer and research VP said they were leaving the same day as Murati … a potential brain drain?
Netflix scrapped their video game studio plans. The streaming giant shuttered "Blue" before it ever released a game. The studio had been backed by a range of industry veterans with experience with mega-franchises like Overwatch and Halo, but apparently that wasn't enough to get original I.P. out the door
Walmart just lost their Sam's Club CTO Cheryl Ainoa. Walmart recently announced that executives would have to relocate to the Arkansas HQ, while some employees had the option to hit up Hoboken. After five years at the company, Ainoa has decided to quit rather than move to Arkansas, bucking the trend in a largely compliant workforce
24 Hours after the New York Liberty edged out the Minnesota Lynx for the WNBA title, the league's players voted to opt out of their next contract. Driven by accelerating attendance and ratings, the WNBA signed a media deal 6x larger than its previous one. Players are demanding revenue share, higher salaries, and better pregnancy and retirement benefits

M&A Transactions💭

AC Ventures, provider of early-stage technology venture funds, reached a definitive agreement to be acquired for $319.0M by Mitsubushu (TKS: 8058).

Global Experience Specialists, operator of a global exhibition and trade show management company, has reached a definitive agreement to be acquired for $535.0M by Truelink Capital. Moelis & Company advised on the sale.

Bridge, developer of an application programming interface, was acquired for $1.1B by Stripe.

Wilson Sons (BVMF: PORT3), an integrated port and maritime logistics operator, has reached a definitive agreement to be acquired for $788.83M by MSC Mediterranean Shipping Company.

SecureWorks (NAS: SCWX), a cybersecurity provider, entered into a definitive agreement to be acquired for $120.0M by Sophos. Morgan Stanley, Piper Sandler, and Wells Fargo advised on the sale.

Sandy Spring Bancorp (NAS: SASR), a community-oriented banking organization, has reached a definitive agreement to be acquired for $1.6B by Atlantic Union Bank (NYS: AUB). Keefe, Bruyette & Woods advised on the sale.

LiveIntent, developer of a people-based marketing platform, was acquired for $250.0M by Zeta Global Holdings (NYS: ZETA). Houlihan Lokey advised on the sale.

JDE Peet's (AMS: JDEP), the world's largest pure-play coffee and tea group, has entered into a definitive agreement to be acquired for $2.16B by JAB Holdings Company. The transaction values the company at $3.18B.

Iscvina Manufacturing, manufacturer of semiconductors, was acquired for $300.0M by ISC Global Innovation (KRK: 095340).

ELAN Co (TKS: 6099), operates in the medical industry, was acquired for $236.55M by M3 (TKS: 2413).

Deflecto, manufacturer of extruded and molded plastic products, was acquired for $103.7M by Acacia Research Corporation (NAS: ACTG). TD Cowen advised on the sale.

Carnegie Investment Bank, operator of an investment banking firm, has reached a definitive agreement to be acquired for $1.16B by DNB Bank (OSL: DNB).

BCC Engineering, provider of engineering services, has reached a definitive agreement to be acquired for $230.0M by Parsons (NYS: PSN).

Voortman Cookies, operator of a bakery, has entered into a definitive agreement to be acquired for $305.0M by Second Nature Brands. Goldman Sachs advised on the sale.

Visual Lease, developer of cloud-based lease accounting, has reached a definitive agreement to be acquired for $272.5M by CoStar Group (NAS: CSGP). Shea & Company advised on the sale.

Veritone One, operator of an AI powered advertising platform, was acquired for $104.0M by Oxford Road.

Sharecare, a digital healthcare platform, was acquired for $540.0M by Altaris Capital Partners. Houlihan Lokey and MTS Health Partners advised on the sale.

Monroe Capital, a specialty finance company, has reached a definitive agreement to be acquired for $1.13B by Wendel Group (PAR: MF). Goldman Sachs advised on the sale.

iCM Microelectronics, designer of integrated circuits, was acquired for $150.24M by 3Peak (SHG: 688536).

Electricity North West, provider of electric utilities, was acquired for $2.77B by Iberdrola (MAD: IBE). Jefferies advised on the sale.

The Energy & Marine Insurance Business in Copenhagen, Denmark of Alm. Brand (CSE: ALMB) was acquired for $236.33M by Gard. Danske Bank advised on the sale.

Philippine Coastal Storage and Pipeline, operator of a storage and pipeline facility, has entered into a definitive agreement to be acquired for $460.0M by I Squared Capital.

Private Placement Transactions💭

Zip, developer of an intake and procurement orchestration platform, raised $190.0M of Series D venture funding led by BOND Capital at a pre-money valuation of $2.01B.

Seaport Therapeutics, operator of a biopharmaceutical company, raised $225.0M of Series B venture funding led by General Atlantic.

Physical Intelligence, operator of a general purpose AI company, raised $300.0M of venture funding from undisclosed investors at a pre-money valuation of $1.7B.

Didi Autonomous Driving, developer and researcher of autonomous driving systems, raised $298.0M of Series C venture funding led by Guangzhou Automobile.

Nimble, designer of a robotic system, raised $106.0M of Series C venture funding led by FedEx and Cedar Pine at a pre-money valuation of $894.0M.

Alpha-9 Oncology, operator of a radiopharmaceutical company, raised $175.0M of Series C venture funding led by Lightspeed Venture Partners and Ascenta Capital.