The stock market rally suffered declines, in part on reports that President Joe Biden will propose nearly doubling the capital gains tax rate on the wealthy. But the Dow Jones, S&P 500 and Nasdaq all closed the week only slightly lower, while the Bitcoin price plunged. Medical plays such as Tenet Healthcare (THC) and Intuitive Surgical (ISRG) soared as earnings rebound with elective procedures. Snap (SNAP) and ASML (ASML) also were earnings winners, while Netflix (NFLX) and United Airlines (UAL) sold off on results.
Stocks Retreat Amid Earnings, Biden Tax Plan
The Dow Jones, S&P 500 and Nasdaq composite all fell modestly for the week. Reports that President Biden will push for nearly doubling the capital tax rate on millionaires weighed on Wall Street, while earnings season is picking up. Hospitals and medical products makers were winners, airlines and steel stocks sold off on results, even as business improves. Netflix plunged on weak subscriber growth.
Hospitals Soar As Pandemic Wanes
Hospital operators HCA Healthcare (HCA) and Tenet Healthcare (THC) both blew past Q1 earnings estimates and raised 2021 guidance as the vaccination rollout boosts deferred care and elective procedures. Tenet nearly doubled Q1 EPS estimates while HCA saw EPS surge 78%. Both raised 2021 guidance. THC stock jumped, hitting a five-year high. HCA stock cleared a buy point, setting a record high.
Medical Products Makers Jump
Robotic-surgical systems maker Intuitive Surgical (ISRG) reported a 31% EPS gain to $3.52 with revenue up 18% $1.29 billion. Cardiovascular products maker Edwards Lifesciences (EW) reported EPS up 8% and sales climbing 8% to $1.22 billion. With the pandemic fading, elective surgeries are picking up again.
Fuel Cells May Be On The Verge Of A Big Breakthrough
Netflix Badly Misses Subscriber Goal
Netflix (NFLX) added 3.98 million new streaming subscribers in the first quarter, missing its own target of 6 million. For the second quarter, it expects to add 1 million new subscribers. Netflix blamed a “pull forward” of customers last year because of the Covid-19 pandemic. It also cited a light content slate in Q1, due in part to Covid-related production delays. On the plus side, Netflix earnings jumped 139% and revenue grew 24% to $7.16 billion, both easily beating.
Chip Gear Makers Beat Targets
Semiconductor equipment suppliers ASML (ASML) and Lam Research (LRCX) delivered beat-and-raise March-quarter reports amid heightened capital spending by chipmakers. Netherlands-based ASML said its earnings jumped 240% in local currency while sales rose 79% in the first quarter. Lam Research’s EPS popped 88% while sales increased 54% to $3.85 billion.
Chip giant Intel (INTC) easily topped Q1 targets thanks to strong PC processor sales. But it disappointed with its second-quarter earnings forecast.
Skyworks (SWKS) will buy the Infrastructure & Automotive business of Silicon Labs (SLAB) for $2.75 billion cash. Skyworks has primarily been a wireless chip maker and a key Apple iPhone supplier. But the auto chip business is a fast-growing business. Both stocks rose Friday.
Snap Jumps As Users, Revenue Fuel Earnings
Snap (SNAP) reported an adjusted profit, defying expectations. Revenue soared 66% to $770 million, while daily active jumped 22% to 280 million, both the biggest gains in three years. And, for the first time, Android users on Snapchat passed Apple. Shares jumped Friday.
Six Key Earnings Reports In Pivotal Week For Market Rally
Airlines See ‘Pent-Up Demand’
United Airlines (UAL) said it saw a “clear path to profitability” on a continued rebound in travel demand, even as the carrier’s first-quarter results missed expectations. But as the airline began offering new flights abroad — to Greece, Iceland and Croatia — it said a full recovery in business travel could still be a ways off. Elsewhere, American Airlines (AAL) had mixed Q1 results. Earnings from Southwest Airlines (LUV) topped forecasts, and the carrier expressed optimism about the summer amid “pent-up demand for leisure travel.” Spirit Airlines (SAVE) and Alaska Air (ALK) also topped.
Steel Profits Soar With Prices
Cleveland-Cliffs (CLF), Steel Dynamics (STLD) and Nucor (NUE) posted record Q1 earnings and predicted still better in Q2 as rising demand and low inventories push steel prices to new highs. On Thursday, Cleveland-Cliffs reported a 675% rise in profit from a year ago, fueled by transformative 2020 acquisitions. Nucor EPS more than tripled and Steel Dynamics more than doubled to $2.10. Cleveland-Cliffs, which updated 2021 guidance just three weeks earlier, hiked its full-year EBITDA outlook 14% to $4 billion and now assumes that hot-rolled coil steel will average $1,100 per net ton for the rest of 202, 13% above the March 30 forecast.
CLF stock edged lower for the week while STLD rose slightly and NUE slipped 2%.
Copper miner Freeport-McMoRan (FCX) reported Q1 EPS of 51 cents vs. a 16-cent year-ago loss, as its average realized copper price surged to $3.94 from $2.43 a year ago. Sales were slightly below estimates, but Freeport blamed the timing of shipments. It sees 20% copper volume growth in 2021 and 15% in 2022.
Shares fell in a volatile week.
Chipotle Sees Gains Ahead
Chipotle Mexican Grill (CMG) earnings grew 74% while sales climbed 23%, both accelerating for a second straight quarter amid surging digital orders, though revenue came in light. Still, it sees Q2 same-store sales rising in the “high twenties to 30%.” Shares fell, but are still near highs. BJ’s Restaurants (BJRI) topped expectations. Shares rose.
Apple Debuts Tracking Devices
Apple (AAPL) introduced lost item trackers called AirTags at its spring product launch event. AirTags will compete with products from privately held Tile, Samsung and others. With AirTags, users can find missing items like car keys, backpacks, purses and luggage using their iPhones. Apple also unveiled its first iMac computers running Apple Silicon instead of Intel chips. Plus, Apple announced new iPad Pro tablets and an updated Apple TV 4K set-top box for streaming video.
Railway Bidding War Heats Up
A bidding war erupted between Canadian National Railway (CNI) and Canadian Pacific Railway (CP) for Kansas City Southern (KSU). KSU stock skyrocketed for the week. Last month, CP agreed to buy Kansas City Southern in a deal that’s now worth $25 billion. But on Tuesday, CN offered $30 billion. Either deal would create the first freight-rail network connecting Canada, the U.S. and Mexico. CP reported Q1 EPS edged up 1% as revenue fell 4% to $1.96 billion.
Texas Crash Triggers Tesla Probe
Two men were killed after a Tesla (TSLA) 2019 Model S that appeared to not be driven by anyone crashed into a tree and caught fire in Texas on April 17. CEO Elon Musk said driver-assistance features were not enabled. But police said they were issuing warrants on Tesla to retrieve data from the car. The National Highway Traffic Safety Administration has also opened a probe into the crash, joining many Tesla crash investigations. Several members of Congress urged a full investigation. Tesla stock fell slightly.
Medical Giants Top Sales Views
Johnson & Johnson (JNJ) reported a 13% EPS gain with sales up 8% to $22.3 billion, both beating. Abbott Laboratories (ABT) Abbott’s EPS leapt 103%, topping some forecasts while missing others. Sales grew 35% on an as-reported basis to $10.5 billion.
Homebuilders Beat Earnings Views
D.R. Horton (DHI) easily beat views, with EPS up 95% and revenue up 43% to $6.45 billion. Tri Pointe Homes (TPH) reported Q1 EPS jumped 146%. Sales climbed 21% to $716.68 million, but slightly missed. NVR (NVR) reported EPS grew 41%, narrowly beat as sales grew 29% to $1.96 billion.
AutoNation (AN) grew earnings 207%, beating handily. Revenue rose 27% to $5.90 billion. Same-store sales increased 22% for new vehicles and 28% for used vehicles vs. the year-ago pandemic-hit first quarter. Smaller auto dealer Lithia Motors (LAD) posted a 193% EPS jump as revenue jumped 55% to $4.34 billion.
Wireless Giants Beat Views
Verizon (VZ) reported Q1 EPS rose 4%, narrowly beating, as revenue climbed 4% to $32.9 billion. Wireless service revenue rose 2.4% to $16.7 billion as more customers upgraded to premium unlimited data plans. Verizon said it lost 178,000 postpaid wireless phone subscribers vs. estimates for a 198,000 loss. AT&T (T) EPS grew 2% as revenue climbed 2.7% to $43.9 billion, both beating. WarnerMedia revenue, including HBO Max, rose 9.8% to $8.5 billion as advertising rebounded. AT&T added 595,000 postpaid wireless phone customers vs. estimates for a 216,000 gain.
News In Brief
IBM (IBM) earnings fell 4%, beating views. Revenue climbed just 1% to $17.7 billion, but that followed four quarters of declines. Shares jumped to a 52-week high.
UiPath (PATH) jumped 23% in its debut after the business software developer raised $1.3 billion in its IPO, pricing above range.
Pool Corp. (POOL), a distributor of swimming pool supplies, broke out after hiking full-year earnings forecasts and reporting first-quarter results that beat expectations. The company attributed the gains to pandemic-era “home-centric trends.” It said it expected “strong growth tempered by tougher comps in the back half of the year.”
Tractor Supply (TSCO), a retail chain that sells a wide range of outdoor and farming supplies, reported first-quarter results that beat expectations. The company also raised its full fiscal-year financial earnings and sales outlook.
Boeing (BA) extended the standard retirement age to 70 from 65 for its CEO Dave Calhoun. Calhoun has been CEO since Jan. 13, 2020, taking over after the 737 Max crashes. Calhoun said that Boeing is unlikely to reinstate its dividend soon as cash flow remains negative.
Lockheed Martin (LMT) reported mixed Q1 earnings results as its F-35 stealth fighter program saw a decline in sales. The defense contractor slightly raised its full-year EPS and sales targets.
American Express (AXP) easily beat quarterly earnings estimates, but revenue came in light. Shares fell Friday.
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