It’s been a busy week for Wall Street.
On Wednesday, Fed Chair Jerome Powell raised rates 50 basis points and reaffirmed his plan to curb inflation. Markets rallied on the news…
Then Thursday market reversed its course… bigtime.
But the Fed’s recent comments aren’t the only thing that is working for the market.
Companies that are posting stellar earnings are being rewarded handsomely.
Right now, we are about 75% through earnings. After last week’s Big Tech flub, this week we saw earnings from big names in pharma and “travel comeback” ridesharing plays.
In today’s Market360, we’ll review some of the most notable earnings for this week.
Let’s jump right in.
Despite reporting better-than-expected earnings results for its first quarter in fiscal year 2022 Tuesday evening, Lyft’s (NASDAQ:LYFT) shares plunged.
The company reported revenue of $875.6 million, which beat analyst estimates for $845.5 million. It also represents a 44% increase over the first quarter in 2021.
Lyft also reported an estimated 17.8 million active riders– a slight decline compared to the fourth quarter of 2021. Even with the slight decline, it’s a nearly 32% improvement over the first-quarter 2021. And revenue per active rider for the first quarter of 2022 came in at $49.18, compared with $45.13 in the first quarter of 2021.
So, what happened?
According to ChartR:
“The primary appeal of ride-hailing, getting customers a driver in minutes at low prices, falls down pretty hard if riders have to wait 15 or 20 minutes for a driver, which is why Lyft is offering financial incentives to attract new drivers. That is a reasonable strategy, but it’s concerning when the company’s economics weren’t stacking up to begin with. The last 17 quarters have seen Lyft burn through more than $6.8 billion — a staggering amount for a company that has never really recovered fully from the pandemic.”
In the wake of a dismal earnings report, LYFT shares dropped 34% after a dismal report.
Lyft’s Portfolio Grader Report Card highlights the financial issues the company is experiencing…
While the company’s revenue has improved as COVID-19 restrictions are being lifted, LYFT is not a travel rebound play worth betting on.
Uber (NYSE:UBER) reported surging revenue on its earnings call Wednesday. The company boasted $6.85 billion in revenue compared to the $6.13 billion that was estimated.
As reported by CNBC:
“Uber said it expects to generate “meaningful positive cash flows” for full-year 2022, which would mark a first for the company. CEO Dara Khosrowshahi said in a statement that April mobility gross bookings exceeded 2019 levels across all regions and use cases.”
But while Uber reported revenue growth, the company also reported a net loss of $5.9 billion for the first quarter. Uber cites its investments in Southeast Asian delivery company Grab, autonomous vehicle company Aurora and Chinese ride sharing company Didi.
During his remarks, Uber CFO Nelson Chai said the company has the liquidity to maintain its positions and wait for a better time to sell.
Like Lyft, Uber’s Portfolio Grader Report Card doesn’t look pretty:
Uber shares lost 7% follow its disappointing report. As Portfolio Grader deduced, rideshare companies are a risky bet right now. Those following my Portfolio Grader would’ve known to stay far away from Lyft and Uber ahead of the companies’ reports and avoided the post-earnings pain.
COVID-19 vaccine maker Pfizer (NYSE:PFE) reported first quarter earnings Tuesday evening. The pharmaceutical giant beat both top- and bottom-line estimates for the first quarter.
As reported by CNBC:
“The company’s first-quarter revenue grew 77% to more than $25 billion compared with the same period last year, driven by $13.2 billion in Covid vaccine sales in the quarter and $1.5 billion in sales of its oral antiviral treatment Paxlovid.”
Pfizer reported net income of $7.8 billion, a 61% increase over the first quarter of 2021. And adjusted first-quarter earnings grew 72% year-over-year to $1.62 per share, compared to earnings of $0.93 per share in the same quarter of last year.
However, the company did cut guidance for 2022:
“The pharmaceutical giant now expects earnings per share of $6.25 to $6.45 for the year, down from its previous outlook of $6.35 to $6.55 per share. Pfizer attributed its lower earnings guidance to research and development costs, as well as foreign exchange as the U.S. dollar strengthened against other currencies.”
That being said, Pfizer is still projecting $98 billion to $102 billion in total sales for 2022.
The following day, shares rose 2.5%.
Let’s take a look at what Portfolio Grader has to say:
As you can see, Pfizer is a strong buy right now. In fact, Portfolio Grader shows it has been since the fall.
Moderna (NASDAQ:MRNA), the other COVID-19 vaccine maker, also reported stellar earnings.
On Tuesday, the company announced that its vaccine sales tripled over the same period last year to $1.7 billion. The company also reported $3.66 billion in net income for the quarter, a threefold increase over the $1.2 billion last year.
During the earnings conference call, CEO Stephane Bancel said Moderna expects stronger vaccine sales in the second half of the year as governments order more shots to get ready for fall.
In an interview on CNBC’s Sqawk Box, Bancel said:
“The virus is mutating to become more and more infectious, and there’s waning immunity. It is going to be really important to boost people in the fall with a better adapted vaccine which is what we’re working towards.”
Moderna maintained its full-year guidance of $21 billion in COVID-19 vaccine sales.
Also, as reported by CNBC:
“Last week, Moderna asked the FDA to authorize its two-dose vaccine for children 6 months to 5 years old, the only age group left in the U.S. that is not yet eligible for a shot. The biotech company is also asking the FDA to authorize its shots for kids ages 6 to 11 and teenagers ages 12 to 17. Moderna expects to finish submitting FDA applications for its pediatric vaccines in the next two weeks…”
The FDA is targeting June for review. If approved, it could be a huge win for the company as children under five haven’t had an approved vaccine yet. MRNA shares rose almost 5% in after-hours trading.
Let’s take a look at Moderna’s Report Card:
While not as strong as PFE, Moderna is still a buy.
Earnings Are Working
The fact of the matter is earnings are working. Stocks that are reporting positive results are being rewarded by the market.
While LYFT plunged 34% following its earnings disappointment, Moderna’s shares rose almost 5% in after-hours trading after posting positive results.
I expect this trend of Wall Street awarding companies that post strong results and punishing companies that report weak results to continue through the rest of this earnings season.
Bottom line: Buying fundamentally superior stocks. This is also true for my Growth Investor stocks, which have posted impressive earnings growth. In fact, most of my Growth Investor companies have revealed double-digit and even triple-digit earnings growth for the latest quarter. Plus, of the 51 Growth Investor companies that have announced so far, we are averaging a 15% positive earnings surprise.
Both Moderna and Pfizer may be rated a “Buy” right now, but I still think there are better opportunities out there in the current inflationary environment.
I’m talking about plays in energy, energy-related stocks and commodity plays. And those are the exact plays I’ve been recommending to my Growth Investor readers.
In fact, just last week I recommended two energy-related stocks and one chemical company, as well as an oil and gas company and a metals company in our Monthly Issue.
P.S. On Tuesday, my InvestorPlace colleague Luke Lango called for an urgent briefing — Divergence 2022 — in order to show folks how to prepare for what could be the biggest wealth-building opportunity of the century. I was fortunate enough to be able to join Luke by patching in from my Florida home. Luke calls this opportunity the “Divergence Window,” and he says these once-a-decade events are able to produce massive gains on the back of market volatility.
In fact, these “Divergence Windows” are when I’ve locked in some of my best gains, too. Also during the briefing, Luke revealed his top pick to play the emerging Divergence Window of 2022 for the shot at up to 1,000% gains within the next 12 months. If you missed the event, you can click here to watch the 1,000% Divergence Window Official Broadcast.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: