US companies seem to have adapted to the fact that the US-China trade war may not be resolved any time soon despite the fact that about a third of the S&P 500 companies that have reported earnings so far this quarter have cited the trade war as having an impact on their earnings.
The companies affected by the trade war outlined their contingency plans aimed at coping with the prolonged trade war as well as the slowing economic growth across most European countries and Japan, which has led them to redesign their export operations.
Interestingly, 77% of S&P 500 companies that generate most of their revenues from exports beat analysts’ expectations, while only 66% of firms that generate revenues domestically exceeded consensus estimates, which indicates the strength of the export market.
Most of the companies that have reported their earnings in the second quarter have beaten consensus estimates despite the tough comparison with Q2 2018 where earnings were boosted by the impact of the tax cuts.
However, most analysts expect third-quarter earnings to dip lower given the slowing global economy as well as the tightening US domestic market.
According to the Confederation of British Industry (CBI), both the UK and EU are not adequately prepared for the looming prospect of a no-deal Brexit given the fast-approaching 31st October deadline.
The industry lobby welcomed the preparations being made by the British Government given Michael Gove’s admission that a no-deal scenario was now a real possibility, but warned that given the uniqueness of such an outcome, there are some unavoidable risks.
The CBI released a report titled “What Comes Next? The Business Analysis of No Deal Preparations” after conducting thousands of interviews with UK businesses and analysing the expected efficiency of their contingency plans in mitigating the risks associated with a hard Brexit.
The report indicates that about 24 business sectors out of a total of 27 would be negatively affected by a no-deal Brexit despite the existing contingency plans. The report notes that many large businesses had well-thought-out contingency plans, but smaller firms were less prepared.
Josh Hardie, the CBI's deputy director-general, confirmed: “A deal is absolutely essential if we're to manage the economy in the best way that we can.”
Peugeot SA (EPA:UG), which owns the Vauxhall brand, said yesterday that it would consider moving the production of its Astra-branded vehicles from its UK facility in Ellesmere Port if a no-deal Brexit made it unprofitable to keep operating the factory.
Such a move would threaten at least 1,000 UK jobs given that the PSA Group was planning to manufacture the next generation Astra cars at Ellesmere Port and another German facility, but it was reconsidering its decision given the increasing likelihood of a hard Brexit.
However, the company has promised to work with political leaders to determine the exact impact of a no-deal Brexit scenario, which is currently being pursued by Boris Johnson’s administration, as confirmed by Brexit secretary Michael Gove.
The PSA Group confirmed that it has an alternative facility in mind in case the final terms of Britain’s exit from the European Union were unfavourable to the production of Astra cars in the UK, especially if the EU imposes strict restrictions on British exports to the economic block.
Just Eat Plc (LON:JE) and Takeaway.com NV (AMS:TKWY) today announced a potential merger that would see the two food delivery companies become a single entity worth over £8.2bn at current prices. The move is likely to strengthen Just Eat’s position within the UK.
The news comes after activist investment firm Cat Rock, a Just Eat shareholder, applied pressure on the firm to merge with a bigger rival in order to improve operational efficiencies and to get access to experienced personnel who could unlock the firm’s hidden value.
The merger, if successful, will boost Just Eat’s overall position within Europe given that it is competing against new upstarts Uber Eats and Deliveroo, which have significant funding given that Amazon.com recently invested £575m in Deliveroo.
Just Eat’s business model seems to be working given that the firm reported a pretax profit of £101.7m in 2018 compared to a £76m loss recorded in 2017. The firm operates as iFood in Mexico and Brazil, SkipTheDishes in Canada, and Menulog in Australia and New Zealand.
Starbucks Corp. (NASDAQ: SBUX) recently announced that it was updating its rewards program for Northern America customers to increase the number of redemption options for its customers. The news did not sit well with an analyst at Bernstein who penned a research note warning that the company risked alienating its largest customer segment with new changes to its loyalty program.
The new rewards system does away with the exiting two-tiered structure and offers its customers a much lower threshold for redeeming stars for a cup of coffee, while at the same time raising the threshold for redeeming pricier items. According to the note, the company risks isolating its core group of customers who frequently rely on the rewards programs to supplement their regular coffee budget.
Some of the perks of the new program is that customers will now earn two stars for every dollar they spend at any of the company’s outlets, while they can redeem a cup of coffee for 25 stars. It remains to be seen whether the program shall attract more customers to the company’s store given that foot traffic at most of its North American stores has been declining for a while now.
We should give the company credit for designing the new loyalty program, which is not an easy task, but we’ll have to wait a bit longer for the results to be seen.
9 months ago
According to recent filing by British oil major BP (NYSE: BP), the company’s CEO Bob Dudley was paid a total of $14.7 million in 2018, which was a slight drop from the $15.1 million he was paid in 2017. The pay cut was triggered by a vote passed by the majority of the company’s shareholders in 2016 that slashed the CEOs pay by 40% after they refused to accept the company’s chosen pay policy.
The debate on whether CEOs of public companies are being paid way too much has been raging for a while in the public domain and debate is split into two camps with opposing opinions on the issue. However, my view is that CEOs should be paid an appropriate amount based on their contribution to the company’s profitability and strategic direction.
There are companies such as Apple that have slashed the CEOs pay when the company’s profits fell, which usually results in the CEO and management team working harder to raise profits and earn higher pay and bonuses. There is no exact figure that all CEOs should be paid, but the key is to ensure that shareholders have a say in how much the CEO should be paid.
As the debate continues, just remember that most people want higher pay, but the key to earning more is to increase the value you bring to a company.
Recent data released by the US Customs and Border Protection (CBP) Agency revealed that US importers are incurring much higher costs when purchasing customs bonds for goods imported from China. The spike in the costs of such bonds can be directly attributed to the trade war being waged by the US and China that has seen each country impose retaliatory tariffs against imports from their nemesis.
Many economists have argued against the imposition of the tariffs on Chinese imports saying that they will raise manufacturing costs, which will result in higher prices for US consumers. Although there is broad agreement about the negative impact of tariffs on consumers, the government has granted various exemptions to different sectors that were most negatively affected by the tariffs.
However, despite the exemptions some importers are suffering under the burden of higher costs of customs bonds that have to be paid to the CBP as security for their imports. Many other manufacturers who are indirectly affected by the tariffs are also suffering similar consequences and sometimes it is almost impossible to pass on the extra costs to consumers.
These developments should be a warning to the US government that a protracted trade war might have more negative consequences on the US manufacturing sector than has been currently priced in by the markets.
9 months ago
BlackBerry Ltd. (NYSE: BB) stock has been on a roll this year given that it is already up 24.9% since January and its latest earnings report might be another reason for the stock to keep rising. The company’s latest earnings report revealed that the company had generated a net income of $51 million, which is quite good given that it had posted a loss in a similar period last year, which caused its stock to rally 4.4% premarket.
The positive earnings report is a good signal, but should not be the only metric that an investor uses to gauge the future profitability of the company. Other measures that can help predict a stock’s future performance include the percentage of its stock held by institutional investors as well as that held by company insiders.
The reasoning behind these two metrics is that most institutions usually plan on holding a stock for a considerable period of time such as several quarters or years, which implies that the said institutions actually believe in the company’s future profitability. Most institutional investors are pension funds, endowment funds and mutual funds, which is good sign for blackberry given that currently institutions own over 55% of its outstanding shares.
The percentage of stock held by company executives is also a strong indicator of whether they believe in the company’s future or not. Company insiders currently own over 10% of Blackberry stock, which is also a major positive.
The Bank of Japan today revealed that its buying of Japanese government bonds in the month of March totaled 5.95 trillion yen, which is the lowest level ever achieved under current Governor Haruhiko Kuroda. The BoJ has been on a buying spree since Haruhiko Kuroda took over the reins in March 2013, which is a sign that maybe the central bank has finally realized that its easing program is not working anymore.
The BoJ was the first major bank to embrace quantitative easing following the asset bubble crash of 1992 from which the country’s economy has never fully recovered. Since that time the BoJ has maintained extremely low interest rates as well as implemented a quantitative easing program where it has been buying Japanese government bonds.
The latest data raises questions about the effectiveness of quantitative easing programs in general given how Japan’s economy has never recovered despite the years of aggressive easing. The European Central Bank is also running a quantitative easing program, which it is willing to extend for a longer period that was expected.
I believe that the BoJ’s current dilemma should be a warning sign to the ECB about the dangers of a lengthy QE program, which in many cases usually turns the program into a major hindrance for economic recovery and growth in the long-term.
5 months ago
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US companies seem to have adapted to the fact that the US-China trade war may not be resolved any time soon despite the fact that about a third of the S&P 500 companies that have reported earnings so far this quarter have cited the trade war as having an impact on their earnings.
The companies affected by the trade war outlined their contingency plans aimed at coping with the prolonged trade war as well as the slowing economic growth across most European countries and Japan, which has led them to redesign their export operations.
Interestingly, 77% of S&P 500 companies that generate most of their revenues from exports beat analysts’ expectations, while only 66% of firms that generate revenues domestically exceeded consensus estimates, which indicates the strength of the export market.
Most of the companies that have reported their earnings in the second quarter have beaten consensus estimates despite the tough comparison with Q2 2018 where earnings were boosted by the impact of the tax cuts.
However, most analysts expect third-quarter earnings to dip lower given the slowing global economy as well as the tightening US domestic market.
According to the Confederation of British Industry (CBI), both the UK and EU are not adequately prepared for the looming prospect of a no-deal Brexit given the fast-approaching 31st October deadline.
The industry lobby welcomed the preparations being made by the British Government given Michael Gove’s admission that a no-deal scenario was now a real possibility, but warned that given the uniqueness of such an outcome, there are some unavoidable risks.
The CBI released a report titled “What Comes Next? The Business Analysis of No Deal Preparations” after conducting thousands of interviews with UK businesses and analysing the expected efficiency of their contingency plans in mitigating the risks associated with a hard Brexit.
The report indicates that about 24 business sectors out of a total of 27 would be negatively affected by a no-deal Brexit despite the existing contingency plans. The report notes that many large businesses had well-thought-out contingency plans, but smaller firms were less prepared.
Josh Hardie, the CBI's deputy director-general, confirmed: “A deal is absolutely essential if we're to manage the economy in the best way that we can.”
Peugeot SA (EPA:UG), which owns the Vauxhall brand, said yesterday that it would consider moving the production of its Astra-branded vehicles from its UK facility in Ellesmere Port if a no-deal Brexit made it unprofitable to keep operating the factory.
Such a move would threaten at least 1,000 UK jobs given that the PSA Group was planning to manufacture the next generation Astra cars at Ellesmere Port and another German facility, but it was reconsidering its decision given the increasing likelihood of a hard Brexit.
However, the company has promised to work with political leaders to determine the exact impact of a no-deal Brexit scenario, which is currently being pursued by Boris Johnson’s administration, as confirmed by Brexit secretary Michael Gove.
The PSA Group confirmed that it has an alternative facility in mind in case the final terms of Britain’s exit from the European Union were unfavourable to the production of Astra cars in the UK, especially if the EU imposes strict restrictions on British exports to the economic block.
Just Eat Plc (LON:JE) and Takeaway.com NV (AMS:TKWY) today announced a potential merger that would see the two food delivery companies become a single entity worth over £8.2bn at current prices. The move is likely to strengthen Just Eat’s position within the UK.
The news comes after activist investment firm Cat Rock, a Just Eat shareholder, applied pressure on the firm to merge with a bigger rival in order to improve operational efficiencies and to get access to experienced personnel who could unlock the firm’s hidden value.
The merger, if successful, will boost Just Eat’s overall position within Europe given that it is competing against new upstarts Uber Eats and Deliveroo, which have significant funding given that Amazon.com recently invested £575m in Deliveroo.
Just Eat’s business model seems to be working given that the firm reported a pretax profit of £101.7m in 2018 compared to a £76m loss recorded in 2017. The firm operates as iFood in Mexico and Brazil, SkipTheDishes in Canada, and Menulog in Australia and New Zealand.