By Kyle Prevost on April 26, 2024
Estimated reading time: 8 minutes

Making sense of the markets this week: April 28, 2024

By Kyle Prevost on April 26, 2024
Estimated reading time: 8 minutes

Google to the moon, Meta, IBM, and Canadian railway stocks are down, automakers have a good earnings day, Verizon and AT&T look to be in better shape than BCE.

Photo by Alex Dudar on Unsplash

Kyle Prevost, creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course, shares financial headlines and offers context for Canadian investors.

Google starts paying out

Several big tech names made waves this week, but for very different reasons.

Tech earnings highlights

All amounts in U.S. dollars.

Alphabet (GOOGL/NASDAQ): Earnings per share came in at $1.89 (versus $1.51 predicted) on revenues of $80.54 billion (versus $78.59 billion predicted).
Microsoft (MSFT/NASDAQ): Earnings per share of $2.94 (versus $2.82 predicted), and revenues of $61.86 billion (versus $60.80 predicted).
Meta/Facebook (META/NASDAQ): Earnings per share coming in at $4.71 (versus $4.32 predicted) and revenues of $36.46 billion (versus $36.16 predicted).
IBM (IBM/NYSE): Earnings per share of $1.68 (versus $1.60 predicted) and revenues of $14.46 billion (versus $14.55 billion predicted).

Alphabet crushed earnings and revenues on Thursday, sending shares up 14% in after-hours trading. Perhaps the biggest news was that Alphabet revealed it would be rewarding shareholders not only with a $70-billion stock buyback, but also the company’s first-ever dividend. The dividend will be $0.20 and the company intends to make it a quarterly payout.

While not as overwhelming as Alphabet’s announcement, Microsoft also had a solid earnings day on Thursday. Shares rose 5% on earnings announcement. Total revenue was up 17% year over year, highlighted by 31% growth in cloud services.

Meta had been enjoying a great run so far this year, but the good times were rudely interrupted by Wednesday’s earnings announcement. With its earnings per share and revenues news, you would think the market reaction would be fairly muted. Instead, the stock was down more than 16% in after-hours trading on a reduced revenue forecast for the rest of the year. The $3.5-billion loss on its Reality Labs unit (tasked with building the metaverse) continues to frustrate investors.

IBM shares were also down this week after announcing earnings and revenues. Shares were down 9% in after-hours trading on Wednesday after a lukewarm earnings statement, despite the announcement of a mega $6.4 billion takeover of HashiCorp.

Canadian railway investors get bumpy ride

It was a rough first quarter for Canada’s two large railways. Both stocks were down about 5% in Wednesday’s early trading after announcing earnings in line with expectations.

Rail earnings highlights

Here’s what was released this week.

Canadian National Railway (CNR/TSX): Earnings per share of $1.72 (versus $1.72 predicted). Revenues were $4.25 billion (versus $4.28 predicted).
Canadian Pacific Kansas City Ltd (CP/TSX): Earnings per share of $0.93 (versus $0.94 predicted). Revenue of $3.53 billion (versus $3.52 predicted).

The slight drop in revenues and earnings was largely the result of port congestion and decreased cargo loads due to militants in Yemen creating Red Sea shipping lane issues. Since mid-December, hundreds of vessels have been rerouted around the horn of Africa, resulting in large delays at the Port of Halifax.

The Vancouver port also experienced difficulties, with German shipping company Hapag-Lloyd telling its customers, “All marine terminals in Vancouver continue to manage through heavy congestion, resulting from an inadequate supply of rail cars from major Class 1 railways.”

CNR reported that higher labour costs were also a minor factor in decreased profits, and that cost pressure certainly won’t be helped by the looming railways workers’ strike.

Despite the slow quarter, CNR was quite confident that increased commodity demand and easing supply chain issues would lead to strong performance for the rest of 2024. Management backed up its bullish statements with a 7% dividend increase to 84.5 cents from 79 cents.

You can read more about CNR and CPKR in my article on Canada’s dividend kings at MillionDollarJourney.com.

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Driving up share prices

All three big American car companies had positive earnings reports on Wednesday.

American auto earnings hightlights

All figures are in U.S. currency.

Ford (F/NYSE): Earnings per share of $0.49 (versus $0.42 predicted). Revenue of $39.89 billion (versus $40.10 billion predicted).
General Motors (GM/NYSE): Earnings per share of $2.62 (versus $2.15 predicted). Revenue of $43.01 billion (versus $41.92 billion predicted).
Tesla (TSLA/NASDAQ): Earnings per share of $2.02 (versus $1.98 predicted). Revenue of $4.47 billion (versus $4.38 billion predicted).

Shares of Ford were up 2.39% on the day as its solid sales of trucks offset electric vehicle (EV) losses. The automaker expects to lose between $5 billion and $5.5 billion on EVs this year.

Revenue was hurt by a delay in sales of F-150 trucks. The delay was due to addressing quality issues. CEO Jim Farley stated that the company “avoided about 12 recalls” by correcting these issues before trucks went out the door.

Meanwhile, over at GM, shares increased about 6.5% on Monday after the company announced a substantial earnings and revenue beat. Like Ford, GM’s gains were mostly due to truck sales. Total revenues were up 7.6% year-over-year, and CEO Mary Barra stated in a letter to shareholders, “As we continue to strengthen our [internal combustion engine] portfolio, scale EVs and reinvest in the business, we are very focused on capital efficiency, enhancing profitability and free cash flow, and we will continue to take steps to create shareholder value.

Tesla shareholders might be excused for getting a bit car sick after so many stops and starts over the last couple of weeks. After news broke that Tesla would be laying off 14,000 employees (10% of its workforce) and that EV sales were down around the world, Tesla’s share price bottomed out at a 40% loss year to date. Then, in a charismatic earnings call on Wednesday, Tesla CEO Elon Musk completely changed the stock’s momentum, made a few announcements, and suddenly the stock rocketed up more than 13% in after-hours trading.

So what was the brilliant earnings news, one might ask? Well, Tesla did very slightly beat earnings and revenue estimates, but the bigger stimulus was Musk’s revelation that new, cheaper Tesla models would be available in “early 2025, if not late this year.” Musk also announced opportunities for Tesla’s AI systems to be licensed out to other carmakers and made vague promises of a robo-taxi service at some point in the future.

I remain skeptical and will be sticking to my Tesla prediction from the start of the year (that Tesla would fall 30% by December 2024).

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Please hold for more profits

Both major U.S. telecoms had fairly uneventful earnings days this week, with revenues and earnings coming in close to projections.

Telecom earnings hightlights

Here are what U.S. telecommunications released this week. (All figures in U.S. dollars.)

Verizon (V/NYSE): Earnings per share of $1.15 (versus $1.13 predicted). Revenue of US$33.21 billion (versus $32.98 billion predicted).
AT&T (T/NYSE): Earnings per share of $0.55 (versus $0.53 predicted). Revenue of $30.03 billion (versus $30.53 billion predicted).

Shares were up slightly as earnings were down year-over-year but had decreased at a lower rate than market-watchers had predicted.

Meanwhile, in Canada, the share price of BCE Inc. (BCE/TSX) has come under pressure and is down nearly 16% year-to-date. With the dividend yield closing in on an unprecedented high of nearly 9%, many have begun to question just how sustainable that dividend is. With some “interesting” free cash flow accounting practices being more closely scrutinized, a dividend cut appears nearly inevitable, barring some fairly quick changes in revenue or expenses in 2024.

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About Kyle Prevost

Kyle Prevost is a financial educator, author and speaker. He is also the creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course.