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- Fed rate decision – 04/05 – this week’s Federal Reserve rate decision should be of no surprise to most people with a 50bps rate rise expected, which should take the upper bound of the Fed Funds rate to 1%. This is the least of market expectations when it comes to what the Fed may well announce this week. The biggest question will be around the pace of its balance sheet reduction program along with the pace of subsequent rate hikes. Powell’s comments at the IMF that the Fed could well go much harder, and a lot quicker on rate hikes has prompted concern that the Fed may well overplay its hand on rate hikes at a time when the global economy looks set for a sustained slowdown as China continues to lose its battle with Covid. While markets will be looking for clues as to how many more 50bps rate rises could well be coming, we’ll also another eye on the topic of balance sheet reduction, with the potential to also start this week, with a general agreement that we could see $95bn a month, $60bn of that being in treasuries, and $35bn in mortgage-backed securities. From the previous minutes it was also clear that some wanted to go further with no limits on how fast the runoff is done. This suggests that not only will we get a 50bps rate rise this week, we could also see the start of balance sheet runoff, which would be quite an about turn on the part of the central bank given it only stopped adding to its balance sheet in March.
- US non-farm payrolls (Apr) – 06/05 – the March jobs report was a strong one across the board, with 431k jobs added in March, slightly below expectations of 490k. This was more than offset by an upward revision to the February number of 678k to 750k, while the unemployment rate fell to 3.6% from 3.8%. Adding fuel to the fire was a rise in the participation rate to 62.4% while the rise in average hourly earnings pushed up from 5.2% to 5.6% and the highest level since May 2020. Since then, there has been little sign that the US economy has shown any signs of slowing with the latest surveys still showing fairly strong demand, although pricing pressures have started to turn higher again which could start to weigh on consumer sentiment. Vacancies in the US are still at elevated levels and this week’s April jobs report is expected to continue to show strong hiring trends given weekly jobless claims are at levels last seen in the late 1960’s. Expectations are for 400k jobs to be added with the unemployment rate expected to remain steady at 3.6%, while wages are expected to remain steady at 5.6%. As an interesting aside, it’s also worth keeping an eye on the March consumer credit numbers, later in the day, after February’s blow out number of $41.8bn.
- Bank of England rate decision – 05/05 – with UK inflation already at 7% in March and set to go even higher the Bank of England has got a thankless task, especially given the plunge seen in retail sales during the same month. We already know that the some on the MPC are concerned about the negative impact a further rise in interest rates might have on demand, the UK economy and consumer confidence, a factor cited by Jon Cunliffe at the last meeting when he voted to keep rates on hold, but it’s also hard to ignore the impact rising prices also has on those factors. Rising prices are becoming embedded in the price of clothing, furniture, food, drink and restaurants, while a sinking pound adds to that pressure. With input prices at 19.2% further upward pressure in headline inflation is coming, and the Bank of England is likely to be faced with little choice but to raise rates if only to keep pace with the Federal Reserve if only to maintain rate differentials. Some may argue that the Bank of England could get away with raising rates by 25bps incrementally, however such a tentative and weak approach, if not allied with strong forward guidance would only send a signal that the central bank is weak in undertaking to meet its inflation target. The bigger risk for this week is if the central bank does nothing, with a minimum expectation of a 25bps rise to 1%.
- RBA rate decision – 03/05 – with an election looming later this month it would be a surprise if the RBA were to raise rates this week, but one is coming with the most probable outcome being for a rate hike next month. In April, the central bank removed the word “highly” when referring to supportive monetary conditions, as well as removing the word “patient” when it comes to reacting to changes in the factors that are driving inflation higher. This suggests the central bank is becoming much more concerned about rising prices which means that we can probably expect a move imminently, after quarterly CPI jumped to 2.1% from 1.3%. It would be a big surprise if the RBA were to move on rates this week given concerns about the politics of such a move so near to the vote, however I also wouldn’t rule it out. That said the delay in acting also points to the folly of its stubbornness in being too dovish early on this year when it became plain that it would probably need to move sooner rather than later. The RBA has found itself well behind the curve when it comes to its own rate hiking cycle, held hostage by an overly cautious approach to inflation in contrast to the RBNZ which is well out on front. Like the ECB, the RBA had been at pains to insist a rate rise this year was unlikely, a position that was never remotely credible. With the Federal Reserve set to go with a 50bps move later in the week, and the Bank of England also set to move with another 25bps move, this week’s meeting should at least allow Governor Philip Lowe to set the scene for a move next month.
- Next PLC Q1 23 – 05/05 – with the cost-of-living crisis set to get worse the decline in the Next share price since the end of last year speaks to a concern on the part of investors that this part of the UK economy is set find the business environment challenging in the weeks and months ahead. In March, Next downgraded its estimates for 2023 profit growth by £10m to £850m, as well as its revenue guidance by 2%. The downgrade is mainly down to the closure of its websites in Ukraine and Russia, as well as the prospect of lower sales prospects due to the rising cost of living. Despite the lowering of this guidance profits are still expected to rise by 3.3%, while full price sales are predicted to rise by 5%. With the shares already down over 20% year to date there is an argument for asking whether there is worst to come during the summer months. Despite the downgrade the estimates still compare well to the profits seen last year of £823.1m, which was an increase of 10% on 2020 levels. With the latest CPI numbers showing that clothing and household goods are rising sharply in price, shareholders will be hoping that there are no further downgrades, as a result of rising costs. This seems unlikely given recent data on retail sales and headline inflation.
- BP Q1 22 – 03/05 – Along with Shell, BP’s share price has been amongst the best performers year to date on the FTSE100, which is welcome news for shareholders who have had to ride out a turbulent couple of years, as well as billions of dollars in losses, which sent share prices back to levels last seen in 1995. It’s important not to understate how bad 2020 was for the oil and gas industry, as demand collapsed, and oil companies cut production as storage and refinery capacity ran out. BP alone posted a $20.3bn loss in 2020, as it sought to cut its debt levels and right size its business model for the challenges in diversifying away from its legacy business model of fossil fuels. Last year BP laid out a 10-year plan to reduce its oil and gas production by 40%, and boost spending on low carbon energy to $5bn a year, in order to try and meet its climate goals. This suggests that renewables still only make up around a third of its total capex, although it says it expects energy transition spending to increase to around 40% by 2025. This still seems low if BP is to meet its target of generating 50GW of renewable energy by 2030. In 2021 BP managed to post profits of $12.8bn, prompting calls from politicians for a windfall tax and populist accusations of profiteering. That still means over a 2-year period BP lost $8bn, something that tends to get forgotten. There is a case for arguing that the oil companies should be spending more on transitioning away from fossil fuels with BP saying it expects to spend between $14bn and $15bn in 2022 on capex, which seems a little on the low side, although it's perhaps not too surprising given that returns on renewables tend to be lower, and investment in transition areas like natural gas tends to be viewed as controversial. The wider question will be how much of that capex spending goes towards renewables. When BP reported back at the end of last year its CEO Bernard Looney said that in the short term more natural gas was needed, and not less, however as we look ahead to this week’s Q1 numbers, and boost to profits from higher oil and gas prices will be overshadowed by the writing down of its 20% Rosneft stake in the wake of Russia’s invasion of Ukraine. This always had the potential to be an albatross for BP, and so it has proved with the company announcing it would be divesting its stake in the business with CEO Looney stepping down from the Rosneft board. This is likely to prompt a write-down of up to $25bn given the lack of any potential buyer, and thus see the company post a loss, not only for this quarter, but for the year as well.
- Shell Q1 22 – 05/05 – the rise in oil and gas prices has also helped Shell’s share price recover after a similarly difficult 2020, which saw the company post huge losses. The oil company also enjoyed a decent rebound in profitability in 2021, prompting management to announce increase the number of shares it is buying back, by $3.5bn to $8.5bn. Profits for 2021 bounced back to $17.07bn, a decent improvement, but still short of the $19.9bn losses posted in 2020. In Q4 most of its profits boost came from its integrated gas business, coming in at over $4bn. The refining and trading business slipped to a loss of $251m in Q4, largely due to higher costs, and maintenance shutdowns. In the short-term profits are likely to remain a tail wind for the oil and gas industry, as the reluctance to invest in transitional capacity as we move towards renewables, continues to underpin prices, however we should also be aware that Shell, like BP is set to take a hit on its Russian business, albeit a slightly more modest one. Back in March Shell announced that it would be pulling back from its involvement in all Russian hydrocarbons, including its 27.5% stake in the LNG Sakhalin gas field, and that in doing so would cost it in the region of between $4bn to $5bn, across all its businesses. On capex Shell is spending a much higher amount than BP at between $23bn and $27bn and has also, been spending money in the area of renewables, completing the purchase of solar and energy storage developer Savion in the US at the end of last year, as well as winning bids with Scottish Power to develop 5GW of floating wind power in the UK in January this year. Like BP’s results Shell’s numbers this week are likely to be overshadowed by the losses and write-downs in its Russia exposures.
- IAG Q1 22 – 06/05 – the recent updates from US airlines prompted a decent uplift in expectations for revenues and profits over the course of the rest of this year. Last month we heard from the likes of Delta, United Airlines, and American Airlines by saying they expect to return to profit this year, as business travel and leisure travel started to return to more normal levels of activity. In February IAG reported a full year loss after tax of €2.9bn, following on from last year’s €7.45bn deficit. While this was still a significant improvement it highlighted the extent of the challenges facing the sector. The return of transatlantic travel in November last year did improve the Q4 performance, with a loss of €278m, compared to a €1.48bn loss over the same period a year ago. Current passenger capacity plans for 2022 were for 65% of 2019 levels for Q1, rising to 85% over the rest of the year. With respect to the outlook the airline said it expects to return to operating profit in Q2, assuming no further Covid-19 restrictions, or other setbacks, although higher fuel prices might delay that. That said finances continue to be a concern with some speculation that the airline might need to raise additional funds, while there is also pressure from the likes of France and Germany over the ownership structure of the business since Brexit. This could force it to consider the sale of its British Airways brand to address these concerns, which would be no bad thing given that under IAG’s ownership the brand has become tired and tatty.
- Pfizer Q1 22- 03/05 – as we come out of the other side of Covid the share prices of various vaccine makers have started to slide back from the record highs of last year. Pfizer has done particularly well given its position at the top of the vaccine supply chain, as well as its decision to partner with BioNTech SE to distribute its MRNA vaccine. 2021 was a record year for the company generating $81.3bn in revenues, compared to $41.9bn in 2020. For 2022 annual revenues are expected to rise to a record $102bn, after the company increased its prices, with over half expected to come from its new Covid pill and the vaccine, to the tune of $54bn, an absolutely eye watering sum, while profits for 2022 are expected to rise to $6.35-$6.55c a share. Pfizer says it expects to spend $11.5bn in R&D this year.
- Uber Q1 22 – 04/05 – Uber’s more diversified business model helped it beat expectations on its Q4 numbers as revenues rose to $5.8bn, above consensus expectations of $5.4bn. Its Uber Eats business managed to turn over more revenue than the rides business with a 78% increase to $2.42bn, helping it to generate a positive return on an adjusted EBITDA basis of $86m. Ride hailing still generated $2.28bn however it is becoming clear that the pandemic is a double-edged sword for Uber. While Omicron is hampering the rebound in its mobility business, the deals to include groceries, alcohol on top of restaurant orders is boosting the delivery business no end. For Q1 the company expects gross bookings to remain steady at $26bn, slightly below consensus, and adjusted EBITDA of $100m to $130m. Losses are expected to come in at $0.28c a share.
- Peloton Q3 22 – 06/05 – the last few months have been a horror show for Peloton’s share price, with shares trading at record lows, a huge contrast to how the shares were doing during lockdown. The back to normal trade as well as a number of business missteps have seen this particular bubble burst spectacularly. When the company reported in Q2 investors had to absorb yet another downgrade. At the end of Q1 management slashed full year revenue guidance from $5.4bn, to a range of $4.4bn to $4.8bn, which at the time was somewhat of a surprise. After a dismal Q2, the company went further cutting it further to $3.7bn to $3.8bn. Q3 revenue is now expected to come just below $1bn, with an EBITDA loss of between $125m to $140m. CEO John Foley has set to be replaced, kicked upstairs to the position of executive chairman to be replaced by Barry McCarthy who used to be CFO at Netflix. Peloton also said it is also cutting 2,800 jobs as it looks to make savings of $800m as it restructures the business. There has been widespread speculation that the business could be subject to takeover interest with the likes of Apple, Amazon, Nike and Disney all variously linked with the business, and while Peloton CEO Barry McCarthy has ruled out a sale, there may come a point where shareholders thrown in the towel and invite one. Last month the company raised its subscription prices, while at the same time as slashing the price of its hardware, that is its treadmills and bikes in an attempt to reach new clients. The cost of a bike will cost $1,445, instead of $1,745 while its treadmill has been reduced to $2,695 from $2,845, though given that shipping and set up costs $250 and $350 respectively you have to wonder why they bothered at all. At those sorts of prices, buyers don’t tend to be less price sensitive. The company is also testing a rental option. Losses are expected to come in at $0.81c a share.
- AMC Entertainment Q1 22 – 06/05 – caught up in the meme stock frenzy over a year ago AMC shares have seen a lot of the froth blown off them on the last few months are and are now back trading at the sort of levels they were pre-pandemic. Nonetheless they remain prone to significant bouts of volatility, and even with the relaxation of most restrictions are still some ways from returning to profit. At the end of last year AMC reported Q4 revenues of $1.17bn, its best performance in two years, and above expectations. The company still reported a loss of between $134m, however this was much better than last years $946m Q4 loss. In March the cinema chain hit the headlines again, this time for paying $27.9m for a 22% stake in gold miner Hycroft Mining. Having just about survived a near death experience last year because of the pandemic, shareholders could be forgiven for asking what on earth management and CEO Adam Aron is playing at given the company still has net debts of over $9bn. Expectations for Q1 were set quite low at the end of last year, but the bar was raised for the remaining quarters, although it will probably take a lot more than the sale of branded popcorn to get those debt levels down to more manageable levels. Management will be hoping that the release of the new Batman film, and Sonic the Hedgehog 2 got people through the doors and pushing those revenue numbers up. Losses for Q1 are expected to come in at $0.55c a share.
30
2022-04
2022-04-30
The week ahead: Bank of England, Federal Reserve to raise rates, RBA, BP, Shell and Next results
previous
- Fed rate decision – 04/05 – this week’s Federal Reserve rate decision should be of no surprise to most people with a 50bps rate rise expected, which should take the upper bound of the Fed Funds rate to 1%. This is the least of market expectations when it comes to what the Fed may well announce this week. The biggest question will be around the pace of its balance sheet reduction program along with the pace of subsequent rate hikes. Powell’s comments at the IMF that the Fed could well go much harder, and a lot quicker on rate hikes has prompted concern that the Fed may well overplay its hand on rate hikes at a time when the global economy looks set for a sustained slowdown as China continues to lose its battle with Covid. While markets will be looking for clues as to how many more 50bps rate rises could well be coming, we’ll also another eye on the topic of balance sheet reduction, with the potential to also start this week, with a general agreement that we could see $95bn a month, $60bn of that being in treasuries, and $35bn in mortgage-backed securities. From the previous minutes it was also clear that some wanted to go further with no limits on how fast the runoff is done. This suggests that not only will we get a 50bps rate rise this week, we could also see the start of balance sheet runoff, which would be quite an about turn on the part of the central bank given it only stopped adding to its balance sheet in March.
- US non-farm payrolls (Apr) – 06/05 – the March jobs report was a strong one across the board, with 431k jobs added in March, slightly below expectations of 490k. This was more than offset by an upward revision to the February number of 678k to 750k, while the unemployment rate fell to 3.6% from 3.8%. Adding fuel to the fire was a rise in the participation rate to 62.4% while the rise in average hourly earnings pushed up from 5.2% to 5.6% and the highest level since May 2020. Since then, there has been little sign that the US economy has shown any signs of slowing with the latest surveys still showing fairly strong demand, although pricing pressures have started to turn higher again which could start to weigh on consumer sentiment. Vacancies in the US are still at elevated levels and this week’s April jobs report is expected to continue to show strong hiring trends given weekly jobless claims are at levels last seen in the late 1960’s. Expectations are for 400k jobs to be added with the unemployment rate expected to remain steady at 3.6%, while wages are expected to remain steady at 5.6%. As an interesting aside, it’s also worth keeping an eye on the March consumer credit numbers, later in the day, after February’s blow out number of $41.8bn.
- Bank of England rate decision – 05/05 – with UK inflation already at 7% in March and set to go even higher the Bank of England has got a thankless task, especially given the plunge seen in retail sales during the same month. We already know that the some on the MPC are concerned about the negative impact a further rise in interest rates might have on demand, the UK economy and consumer confidence, a factor cited by Jon Cunliffe at the last meeting when he voted to keep rates on hold, but it’s also hard to ignore the impact rising prices also has on those factors. Rising prices are becoming embedded in the price of clothing, furniture, food, drink and restaurants, while a sinking pound adds to that pressure. With input prices at 19.2% further upward pressure in headline inflation is coming, and the Bank of England is likely to be faced with little choice but to raise rates if only to keep pace with the Federal Reserve if only to maintain rate differentials. Some may argue that the Bank of England could get away with raising rates by 25bps incrementally, however such a tentative and weak approach, if not allied with strong forward guidance would only send a signal that the central bank is weak in undertaking to meet its inflation target. The bigger risk for this week is if the central bank does nothing, with a minimum expectation of a 25bps rise to 1%.
- RBA rate decision – 03/05 – with an election looming later this month it would be a surprise if the RBA were to raise rates this week, but one is coming with the most probable outcome being for a rate hike next month. In April, the central bank removed the word “highly” when referring to supportive monetary conditions, as well as removing the word “patient” when it comes to reacting to changes in the factors that are driving inflation higher. This suggests the central bank is becoming much more concerned about rising prices which means that we can probably expect a move imminently, after quarterly CPI jumped to 2.1% from 1.3%. It would be a big surprise if the RBA were to move on rates this week given concerns about the politics of such a move so near to the vote, however I also wouldn’t rule it out. That said the delay in acting also points to the folly of its stubbornness in being too dovish early on this year when it became plain that it would probably need to move sooner rather than later. The RBA has found itself well behind the curve when it comes to its own rate hiking cycle, held hostage by an overly cautious approach to inflation in contrast to the RBNZ which is well out on front. Like the ECB, the RBA had been at pains to insist a rate rise this year was unlikely, a position that was never remotely credible. With the Federal Reserve set to go with a 50bps move later in the week, and the Bank of England also set to move with another 25bps move, this week’s meeting should at least allow Governor Philip Lowe to set the scene for a move next month.
- Next PLC Q1 23 – 05/05 – with the cost-of-living crisis set to get worse the decline in the Next share price since the end of last year speaks to a concern on the part of investors that this part of the UK economy is set find the business environment challenging in the weeks and months ahead. In March, Next downgraded its estimates for 2023 profit growth by £10m to £850m, as well as its revenue guidance by 2%. The downgrade is mainly down to the closure of its websites in Ukraine and Russia, as well as the prospect of lower sales prospects due to the rising cost of living. Despite the lowering of this guidance profits are still expected to rise by 3.3%, while full price sales are predicted to rise by 5%. With the shares already down over 20% year to date there is an argument for asking whether there is worst to come during the summer months. Despite the downgrade the estimates still compare well to the profits seen last year of £823.1m, which was an increase of 10% on 2020 levels. With the latest CPI numbers showing that clothing and household goods are rising sharply in price, shareholders will be hoping that there are no further downgrades, as a result of rising costs. This seems unlikely given recent data on retail sales and headline inflation.
- BP Q1 22 – 03/05 – Along with Shell, BP’s share price has been amongst the best performers year to date on the FTSE100, which is welcome news for shareholders who have had to ride out a turbulent couple of years, as well as billions of dollars in losses, which sent share prices back to levels last seen in 1995. It’s important not to understate how bad 2020 was for the oil and gas industry, as demand collapsed, and oil companies cut production as storage and refinery capacity ran out. BP alone posted a $20.3bn loss in 2020, as it sought to cut its debt levels and right size its business model for the challenges in diversifying away from its legacy business model of fossil fuels. Last year BP laid out a 10-year plan to reduce its oil and gas production by 40%, and boost spending on low carbon energy to $5bn a year, in order to try and meet its climate goals. This suggests that renewables still only make up around a third of its total capex, although it says it expects energy transition spending to increase to around 40% by 2025. This still seems low if BP is to meet its target of generating 50GW of renewable energy by 2030. In 2021 BP managed to post profits of $12.8bn, prompting calls from politicians for a windfall tax and populist accusations of profiteering. That still means over a 2-year period BP lost $8bn, something that tends to get forgotten. There is a case for arguing that the oil companies should be spending more on transitioning away from fossil fuels with BP saying it expects to spend between $14bn and $15bn in 2022 on capex, which seems a little on the low side, although it's perhaps not too surprising given that returns on renewables tend to be lower, and investment in transition areas like natural gas tends to be viewed as controversial. The wider question will be how much of that capex spending goes towards renewables. When BP reported back at the end of last year its CEO Bernard Looney said that in the short term more natural gas was needed, and not less, however as we look ahead to this week’s Q1 numbers, and boost to profits from higher oil and gas prices will be overshadowed by the writing down of its 20% Rosneft stake in the wake of Russia’s invasion of Ukraine. This always had the potential to be an albatross for BP, and so it has proved with the company announcing it would be divesting its stake in the business with CEO Looney stepping down from the Rosneft board. This is likely to prompt a write-down of up to $25bn given the lack of any potential buyer, and thus see the company post a loss, not only for this quarter, but for the year as well.
- Shell Q1 22 – 05/05 – the rise in oil and gas prices has also helped Shell’s share price recover after a similarly difficult 2020, which saw the company post huge losses. The oil company also enjoyed a decent rebound in profitability in 2021, prompting management to announce increase the number of shares it is buying back, by $3.5bn to $8.5bn. Profits for 2021 bounced back to $17.07bn, a decent improvement, but still short of the $19.9bn losses posted in 2020. In Q4 most of its profits boost came from its integrated gas business, coming in at over $4bn. The refining and trading business slipped to a loss of $251m in Q4, largely due to higher costs, and maintenance shutdowns. In the short-term profits are likely to remain a tail wind for the oil and gas industry, as the reluctance to invest in transitional capacity as we move towards renewables, continues to underpin prices, however we should also be aware that Shell, like BP is set to take a hit on its Russian business, albeit a slightly more modest one. Back in March Shell announced that it would be pulling back from its involvement in all Russian hydrocarbons, including its 27.5% stake in the LNG Sakhalin gas field, and that in doing so would cost it in the region of between $4bn to $5bn, across all its businesses. On capex Shell is spending a much higher amount than BP at between $23bn and $27bn and has also, been spending money in the area of renewables, completing the purchase of solar and energy storage developer Savion in the US at the end of last year, as well as winning bids with Scottish Power to develop 5GW of floating wind power in the UK in January this year. Like BP’s results Shell’s numbers this week are likely to be overshadowed by the losses and write-downs in its Russia exposures.
- IAG Q1 22 – 06/05 – the recent updates from US airlines prompted a decent uplift in expectations for revenues and profits over the course of the rest of this year. Last month we heard from the likes of Delta, United Airlines, and American Airlines by saying they expect to return to profit this year, as business travel and leisure travel started to return to more normal levels of activity. In February IAG reported a full year loss after tax of €2.9bn, following on from last year’s €7.45bn deficit. While this was still a significant improvement it highlighted the extent of the challenges facing the sector. The return of transatlantic travel in November last year did improve the Q4 performance, with a loss of €278m, compared to a €1.48bn loss over the same period a year ago. Current passenger capacity plans for 2022 were for 65% of 2019 levels for Q1, rising to 85% over the rest of the year. With respect to the outlook the airline said it expects to return to operating profit in Q2, assuming no further Covid-19 restrictions, or other setbacks, although higher fuel prices might delay that. That said finances continue to be a concern with some speculation that the airline might need to raise additional funds, while there is also pressure from the likes of France and Germany over the ownership structure of the business since Brexit. This could force it to consider the sale of its British Airways brand to address these concerns, which would be no bad thing given that under IAG’s ownership the brand has become tired and tatty.
- Pfizer Q1 22- 03/05 – as we come out of the other side of Covid the share prices of various vaccine makers have started to slide back from the record highs of last year. Pfizer has done particularly well given its position at the top of the vaccine supply chain, as well as its decision to partner with BioNTech SE to distribute its MRNA vaccine. 2021 was a record year for the company generating $81.3bn in revenues, compared to $41.9bn in 2020. For 2022 annual revenues are expected to rise to a record $102bn, after the company increased its prices, with over half expected to come from its new Covid pill and the vaccine, to the tune of $54bn, an absolutely eye watering sum, while profits for 2022 are expected to rise to $6.35-$6.55c a share. Pfizer says it expects to spend $11.5bn in R&D this year.
- Uber Q1 22 – 04/05 – Uber’s more diversified business model helped it beat expectations on its Q4 numbers as revenues rose to $5.8bn, above consensus expectations of $5.4bn. Its Uber Eats business managed to turn over more revenue than the rides business with a 78% increase to $2.42bn, helping it to generate a positive return on an adjusted EBITDA basis of $86m. Ride hailing still generated $2.28bn however it is becoming clear that the pandemic is a double-edged sword for Uber. While Omicron is hampering the rebound in its mobility business, the deals to include groceries, alcohol on top of restaurant orders is boosting the delivery business no end. For Q1 the company expects gross bookings to remain steady at $26bn, slightly below consensus, and adjusted EBITDA of $100m to $130m. Losses are expected to come in at $0.28c a share.
- Peloton Q3 22 – 06/05 – the last few months have been a horror show for Peloton’s share price, with shares trading at record lows, a huge contrast to how the shares were doing during lockdown. The back to normal trade as well as a number of business missteps have seen this particular bubble burst spectacularly. When the company reported in Q2 investors had to absorb yet another downgrade. At the end of Q1 management slashed full year revenue guidance from $5.4bn, to a range of $4.4bn to $4.8bn, which at the time was somewhat of a surprise. After a dismal Q2, the company went further cutting it further to $3.7bn to $3.8bn. Q3 revenue is now expected to come just below $1bn, with an EBITDA loss of between $125m to $140m. CEO John Foley has set to be replaced, kicked upstairs to the position of executive chairman to be replaced by Barry McCarthy who used to be CFO at Netflix. Peloton also said it is also cutting 2,800 jobs as it looks to make savings of $800m as it restructures the business. There has been widespread speculation that the business could be subject to takeover interest with the likes of Apple, Amazon, Nike and Disney all variously linked with the business, and while Peloton CEO Barry McCarthy has ruled out a sale, there may come a point where shareholders thrown in the towel and invite one. Last month the company raised its subscription prices, while at the same time as slashing the price of its hardware, that is its treadmills and bikes in an attempt to reach new clients. The cost of a bike will cost $1,445, instead of $1,745 while its treadmill has been reduced to $2,695 from $2,845, though given that shipping and set up costs $250 and $350 respectively you have to wonder why they bothered at all. At those sorts of prices, buyers don’t tend to be less price sensitive. The company is also testing a rental option. Losses are expected to come in at $0.81c a share.
- AMC Entertainment Q1 22 – 06/05 – caught up in the meme stock frenzy over a year ago AMC shares have seen a lot of the froth blown off them on the last few months are and are now back trading at the sort of levels they were pre-pandemic. Nonetheless they remain prone to significant bouts of volatility, and even with the relaxation of most restrictions are still some ways from returning to profit. At the end of last year AMC reported Q4 revenues of $1.17bn, its best performance in two years, and above expectations. The company still reported a loss of between $134m, however this was much better than last years $946m Q4 loss. In March the cinema chain hit the headlines again, this time for paying $27.9m for a 22% stake in gold miner Hycroft Mining. Having just about survived a near death experience last year because of the pandemic, shareholders could be forgiven for asking what on earth management and CEO Adam Aron is playing at given the company still has net debts of over $9bn. Expectations for Q1 were set quite low at the end of last year, but the bar was raised for the remaining quarters, although it will probably take a lot more than the sale of branded popcorn to get those debt levels down to more manageable levels. Management will be hoping that the release of the new Batman film, and Sonic the Hedgehog 2 got people through the doors and pushing those revenue numbers up. Losses for Q1 are expected to come in at $0.55c a share.