Corporate Finance and Earnings: A Closer Look
As the market opens today, pre-market futures are down, but better than earlier. Last night, reports emerged that Israel’s military had retaliated against Iran’s thwarted missile attack, marking an unprecedented event as never before had Iran launched an offensive on its long-time regional rival Israel. The retaliation now appears to have been narrow and contained, so this morning we don’t foresee the start of a new world war.
Corporate Finance
Procter & Gamble (PG) released fiscal Q3 earnings ahead of today’s opening bell, posting a +7% earnings beat to $1.52 per share (from $1.42 in the Zacks consensus) but missing on the top line by -1.4% — to $20.2 billion actual from $20.48 billion anticipated. Shares are down -2% in today’s early trading, even as earnings guidance for next quarter was increased. Lower price points for retail goods may be a headwind for P&G, but a weaker economy does help the interest-rate cut outlook.
American Express (AXP) posted beats on both top and bottom lines in its Q1 report ahead of today’s open. Earnings of $3.33 per share easily surpassed the $2.97 in the Zacks consensus, by a margin of +12%. Revenues for the quarter reached $15.8 billion, +0.28% better than the $15.76 billion expected. Strong credit quality (especially relative to other credit card services) has helped push AmEx business past pre-Covid levels, although in-line guidance appears conservative. Shares had been trading lower, but are now breakeven.
Fifth Third Bank (FITB) also reported Q1 results this morning. Earnings of 76 cents per share outperformed by a nickel from expectations, while $2.1 billion in revenues notched a +0.75% beat on the top line. This is the company’s fourth-straight earnings beat, but shares are still down at this hour. Regional banks in particular have been taking it on the chin as of late, though FITB shares are off -2% year to date, including this morning’s “sell the news” action.
There are plenty of near-term headwinds in this market. The good news, however, is that valuations for stocks that had spun out into another orbit as of late March have come back to more reasonable levels in the past 2+ weeks.
Q1 earnings season picks up the pace as of Monday, with a big PCE report expected a week from today. These results — and Q1 earnings are performing well thus far, overall — will give us a more defined picture on the economy and the Fed’s potential moves on interest rates.
Ally Financial Inc. (NYSE:ALLY) disclosed its financial outcomes for the first quarter of 2024, showcasing a mix of solid performance and strategic initiatives aimed at bolstering future growth. The company announced an adjusted EPS of $0.45 and a $2 billion revenue, with a net interest margin (NIM) of 3.16% that is expected to expand in the upcoming quarter. A record 3.8 million applications were decisioned in dealer financial services, and nearly $10 billion of originations were booked. Ally Bank experienced significant growth, adding over 100,000 customers and increasing deposits by $2.9 billion. The company's corporate finance business generated a robust 31% return on equity for the quarter. Additionally, Ally Financial completed the sale of Ally Lending and utilized the securitization market to deconsolidate retail auto loans, enhancing its capital position and streamlining its balance sheet.
