Wall Street Breakfast: Quarterly Earnings Report

Quarterly Earnings Report Roundup

This past week, earnings season took center stage as tech giants delivered their highly anticipated quarterly results. As investors sized up the state of the market, notable companies were at the forefront of the AI revolution. Federal Reserve Chair Jerome Powell also made statements drawing attention, further adding to the market’s focus. Before Powell’s next appearance on 60 Minutes, central bank watchers awaited the release of non-farm payrolls at 8:30 AM ET.

Jobs Day: Policymakers sought additional evidence of potential softening in the labor market and moderation in wage gains to influence the next steps for monetary policy. At present, the situation stands at a “wait-and-see” stance, with the Fed taking a measured approach. The central bank seeks a delicate balancing act, attempting to achieve a so-called soft landing where inflation returns to the 2% level without causing a recession.

If the data align with the central bank’s desires, the number of jobs reported this morning would continue to decline from January onwards as economists anticipated. The consensus lay at 170K, a decrease from December’s 216K and the substantial 504K reported in January 2023. Additionally, the unemployment rate was expected to rise to 3.8% from the 3.7% quoted in December, signaling a positive trend. While surprises have occurred in the past, and monthly statistics can be volatile, the overall three-month rolling average for nonfarm payrolls growth has been steadily declining.

Source: U.S. Department of Labor

Seeking Alpha commentary: “The labor market is still in imbalance; labor demand exceeds labor supply,” stated analyst Damir Tokic. “There is a labor shortage driven by demographics and politics, but further analysis reveals underlying structural issues.” Refer to January Payrolls Preview: The Labor Market Is Still Tight, And That’s A Problem (5 comments)

Surge and Reward

Meta Platforms (META) stunned investors by soaring 15.2% to a record $454.81/share AH on Thursday as its Q4 earnings surpassed expectations. The company’s announcement of its first-ever dividend added further dazzle, as the social media behemoth increased its stock buyback authorization by $50B and provided an optimistic forecast for Q1 revenues. “We had a good quarter as our community and business continue to grow,” declared CEO Mark Zuckerberg. “We’ve made a lot of progress on our vision for advancing AI and the metaverse.” SA analyst Steven Fiorillo commented that “Meta is setting up for a record-breaking year” and he “wouldn’t be surprised if it follows Amazon (AMZN) and Alphabet (GOOGL) in splitting its shares sometime in 2024.” (143 comments)

Earnings and Expectations

Apple (AAPL) faced the spotlight as concerns about the tech giant’s presence in China outweighed the end of four consecutive quarterly sales declines. The stock dipped 2.9% to $181.45/share in extended trading, although Apple’s Services revenue reached an all-time high. “I remain very optimistic about China over the long term,” countered CEO Tim Cook on an earnings call. The earnings report arrived just a day before Apple launched its first new major product in a decade – Vision Pro. “Apple announced a decent set of Q1 results, but the company overall just isn’t growing that fast right now,” noted SA analyst Bill Maurer. (85 comments)

Revenue Resilience

AI took the spotlight at Amazon (AMZN), with the introduction of a new shopping assistant named Rufus that utilizes generative artificial intelligence. Additionally, Q4 operating income exceeded expectations, while the company provided a robust Q1 guidance, propelling AMZN shares up by 7.1% to $170.60. “AWS’ continued long-term focus on customers and feature delivery, coupled with new Gen AI capabilities like Bedrock, Q, and Trainium, are starting to be reflected in our overall results,” stated CEO Andy Jassy. CFO Brian Olsavsky highlighted that revenues are accelerating across all three layers of the Gen AI stack, despite being in relatively early stages. (49 comments)