The reporting season has been better than expected so far. Not only the major US tech companies are performing well, but also banks and - no surprise - luxury goods companies.
3 August 2023. FRANKFURT (Börse Frankfurt). The setback on the stock markets once again draws attention to corporate reports that are published these days. "Expectations for the reporting season were high," reports Marc Richter, who trades foreign stocks at Baader Bank. So far, he says, they have not been disappointed. "So far, about half of the S&P 500 companies have opened their books. About 80 percent have exceeded expectations." It's not just the big U.S. technology stocks that have impressed, notes Walter Vorhauser of Oddo BHF. "The second tier is also doing better than suspected."
Alphabet: Share price up 44 percent
According to Richter, the figures from Google parent Alphabet (US02079K3059), for example, went down very well. "The big tech companies don't mind the rise in interest rates because they have so much money anyway that they don't need to take out loans." He also said the sluggish economy hasn't hurt Alphabet. "Advertising revenue was actually up 25 percent over the first half of 2022." In addition, the cloud and AI divisions performed very well. Usage figures for the AI chatbot Bard rose rapidly. "After the figures were presented, all analysts raised their price target for Alphabet." Currently, the stock is trading at 117 euros, up 44 percent since the beginning of the year. However, the highs of 2021 at over 132 euros have not yet been reached again. "We could see those again soon, though."
Richter
JPMorgan benefits from higher interest rates
Also making happy faces was U.S. bank JPMorgan Chase (US46625H1005), which opened the U.S. reporting season. "It was a super start. The surplus was an almost unimaginable $14.5 billion," Richter notes. JPMorgan benefited from higher interest rates, but its bond, equity and commodities businesses also did well. Revenues increased to $41.3 billion. "The results of the Federal Reserve's bank stress test released a few weeks ago already showed: The March banking crisis is over." JPMorgan shares are currently at 141 euros, heading for the all-time high of late 2021. "They have been going up day by day for several weeks."
Hermès: Chinese buying continues unabated
Hermès International (FR0000052292) is also going up and up - and even for the long term. At the beginning of the week, the price climbed above 2,000 euros to the all-time high of 2,050 euros, currently it is 1,936 euros. De luxury goods group was able to increase its sales in the first half of the year by 22 percent to almost 6.7 billion euros. Net profit was 2.2 billion euros, up from 1.6 billion euros a year earlier. "Demand from China and the U.S. in particular was strong - and that despite a weak economy in China. Luxury just always goes," Richter explains. Over the past five years, the Hermès share price has quadrupled, while that of LVMH (FR0000121014) has tripled.
AMD as AI winner?
AMD (Advanced Micro Devices) (US0079031078) is also among the positive surprises, as Walter Vorhauser reports. The U.S. chip company reported declining sales, but earnings per share were higher than expected. However, the group's statements on its AI division were particularly well received. AMD said it has made great strides in AI solutions for data centers. "AI engagements increased more than sevenfold in the quarter." Currently, AMD is trading around 100 euros on the Frankfurt Stock Exchange, up from just 60 euros at the beginning of the year.
Solar companies sell off
The solar sector, on the other hand, is currently disappointing. "U.S. inverter supplier Enphase Energy (US29355A1079) led the way with a significantly reduced revenue forecast for the third quarter," Vorhauser notes. Israeli solar company SolarEdge Technologies (US83417M1045) then also disappointed with its second-quarter revenue, and its third-quarter outlook was also well below expectations. The stock plummeted by double digits. Currently, SolarEdge is trading at 182 euros, at the end of 2022 it was still 263 euros. Bucking the industry trend is First Solar (US3364331070), as Vorhauser also notes. "First Solar increased sales by more than 30 percent."
Signs still green
As far as the rest of the reporting season is concerned, Marc Richter is confident. "There will certainly be disappointments, but there will also be many positive surprises." With regard to the economy, he also does not expect any major headwinds for the stock markets - at least in the absence of external shocks. "The 'soft landing' of the U.S. economy seems to be succeeding." In addition, people are now already looking ahead to possible interest rate cuts, he said. "And the stock market is where the future is played out." Vorhauser, on the other hand, expects higher interest rates to be reflected in corporate figures sooner or later. "Things are still looking good, but that can change quickly."
by: Anna-Maria Borse © 3 August 2023, Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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