Earnings season has clear winners (Tesla), losers (Nokia)
Every earnings season, companies score some surprise wins and unfortunate losses. Major stock moves are never completely off the table — and the past 24 hours have been a big reminder of that.
Shares of Tesla shot up more than 18% in premarket trading Thursday morning after the company posted an unexpected profit of $342 million.
Why it’s a surprise: Wall Street had expected the company would post a net loss as large as $257 million. It’s the first quarter Tesla was profitable since the electric-car maker posted back-to-back profits in the second half of 2018, my CNN Business colleague Jackie Wattles reports. Tesla also said its new factory in Shanghai is ahead of schedule.
Questions remain about the company’s ability to keep up production and meet delivery targets, as well as what demand will look like for the new Model Y, a crossover which could launch next year. But CEO Elon Musk had said the company would be out of the red, and he delivered. That’s good news for a stock that’s been under pressure.
On the other side is Ford, whose shares dropped more than 2% in premarket trading after the company lowered its guidance for the year. Eating into profits: higher warranty costs and incentives to attract North American car buyers, as well as lower sales in China.
Another stock loser: Nokia, whose shares plummeted nearly 20% Thursday. The company cut its profit outlook for 2019 and 2020 and said it would pause dividend payments, citing the high costs associated with launching 5G and keeping its competitors at bay.
Remember: The S&P 500 is expected to suffer a decline in earnings of 4.7% for the third quarter, according to the latest analysis from FactSet analyst John Butters. If this projection is met, it would be the first time the index has reported three consecutive quarters of year-over-year earnings declines since the second quarter of 2016.
Time to say ‘ciao’ to Mario Draghi
It’s a big day for central bank watchers as Mario Draghi, a star in the field, delivers his final press conference as president of the European Central Bank.
Investors don’t expect much in the way of policy announcements after last month’s monetary bazooka, when Draghi pushed interest rates further into negative territory and relaunched the bank’s bond-buying program. Instead, they anticipate more calls for governments to step up to the plate and meet the ECB’s monetary action with their own fiscal stimulus packages.
“We expect a reiteration of the well-known Draghi tones: the risk balance around growth remains negative, all policy instruments remain on the table and the ECB remains an institution ready and able to act — paired with the by now standard plea (still falling on deaf ears) for fiscal policy,” analysts at Bank of America Merrill Lynch wrote in a recent note.
Attention will quickly shift to Christine Lagarde, who takes the reins starting Nov. 1. The former IMF chief will have her hands full.
The scene: The ECB remains sharply divided over the move to reopen the stimulus taps last month. Meaningful fiscal stimulus from Germany or the Netherlands still looks hard to come by. And Europe’s sluggish economy continues to face serious risks.
“The very first thing she will have to do is book a couple of nice team meetings offsite to somehow get this corporate spirit working again,” Carsten Brzeski, chief ING economist in Germany, told me. “She will have to bridge some very big gaps and a high level of frustration.”
Google’s quantum computer can do the impossible
At the nexus of science and business: Google claims it has designed a machine that needs only 200 seconds to solve a problem that would take the world’s fastest supercomputer 10,000 years to figure out. You read that correctly.
The speed achieved by the computer represents a breakthrough called “quantum supremacy,” according to a blog post from the company and an accompanying article in the scientific journal Nature.
The results herald the rise of quantum computers, which can store and process much more information than their classical cousins by tapping into the powerful forces contained in the field of physics known as quantum mechanics, my CNN Business colleague Charles Riley reports.
Google obviously sees big commercial potential, saying it will now try to build “a fault-tolerant quantum computer” as quickly as possible. Some potential applications? Designing lightweight batteries for cars and airplanes, as well as new medicines. It’s also a shot across the bow at China, which wants to dominate quantum computing.
More earnings. 3M, American Airlines, Comcast, Hershey, Southwest Air and Twitter report before US markets open. Amazon, Capital One, Intel and Visa follow after the close.
Mario Draghi’s last press conference as ECB president kicks off at 8:30 a.m. ET.
US durable goods orders for September also post at 8:30 a.m. ET.
Coming tomorrow: Renault, AB InBev and Verizon report earnings.