Tuesday, April 23, 2024

Markets march higher as tensions in the Mid-East lessen

Dow advanced 263, advancers over decliners almost 5-1 & NAZ was up 245.  The MLP index added 1+ to the 283s & the REIT index went up 3+ to 360.  Junk bond funds remained higher & Treasuries continued to be purchased, taking yields a little lower.  Oil gained 1+ to the 83s & gold was off 10 to 2335 (more on both below).

AMJ (Alerian MLP Index tracking fund)

PepsiCo (PEP), a Dividend Aristocrat, quarterly earnings & revenue that beat expectations, despite weaker US demand caused by Quaker Oats recalls & backlash to higher prices for its drinks & snacks.  First-qtr EPS rose to $1.48, up from $1.40 per share a year earlier.  Excluding items, EPS was $1.61.  Net sales rose 2.3% to $18.2B. Organic revenue, which excludes acquisitions, divestitures & foreign exchange, increased 2.7% in the qtr.  But volume is still under pressure.  PEP, along with many of its rivals, has seen its volume fall in response to higher prices for its Gatorade, Fritos & other products in its portfolio.  Chinese consumers are cautious & saving more money, but they're still buying more of its products, according to CEO Ramon Laguarta.  Even in Europe, which has also struggled with higher grocery prices, beverage volume increased 7% & snack volume rose 2%.  PEP also reiterated its 2024 outlook.  For the full year, the company is expecting organic revenue will rise at least 4% & core constant currency EPS will climb at least 8%.  “As we look ahead, we continue to expect a normalization and moderation in category growth rates versus the last few years,” PEP execs said.  “We also continue to expect that consumers will remain watchful with their budgets and choiceful with their purchases.”  The stock fell 5.13.

PepsiCo earnings beat but recalls, weak lower-income consumer hurt U.S. sales

Kimberly-Clark (KMB), a Dividend Aristocrat, posted first-qtr 2024 results, with the bottom line increasing year over year & surpassing the estimate.  The top line also surpassed the consensus mark but declined year over year.  Taking into account a solid start to fiscal 2024, management raised its annual guidance.  Adjusted EPS was $2.01, surpassing the forecast of $1.61.  The bottom line increased 20% year over year, courtesy of higher adjusted operating profit.  Reduced net interest, effective tax rate as well as increased equity income were upsides.  Total sales totaled $5.149M, surpassing the estimate of $5,075M.  The metric inched down 1% compared with the year-ago period's figure. Unfavorable foreign currency rates affected sales by nearly 5% & the divestiture of its tissue & K-C Professional business in Brazil dented sales by about 1%.  Organic sales increased 6% on the back of a 4% rise in price stemming from pricing actions undertaken to tackle increased local costs in hyperinflationary economies, especially across Argentina.  Product mix & volume were favorable by 1% each, with strength across North America, Developing and& Emerging (D&E) markets, & Developed Markets.  Management anticipates organic net sales to increase in mid-single-digit percentage compared with the earlier view of low-to-mid single-digit growth.  Reported net sales growth is likely to reflect an unfavorable currency impact to the tune of nearly 400 bps & a 120-bps headwind from divestitures.  The adjusted operating profit is projected to grow at a low-teens percentage rate at a constant-currency (cc) basis in 2024.  Earlier, the company had projected the metric to grow at a high single-digit to low double-digit rate on a cc basis.  Adjusted EPS is now anticipated to grow at a low-teens percentage rate at cc compared with the previous expectation of a high single-digit growth.  The stock rose 7.07.

Kimberly-Clark (KMB) Tops Q1 Earnings Estimates, Ups FY24 View

JetBlue (JBLU) lowered its 2024 revenue forecast, a setback as it tries to return to profitability.  The carrier said 2nd-qtr revenue would likely drop as much as 10.5% on the year, more than double the decline analysts expected.  JBLU forecast full-year sales would drop in the low single digits, also below expectations, after estimating flat sales for the year in its Jan report.  It has been on a cost-cutting spree, culling unprofitable routes, & focusing on those with steady demand & high sales for premium seats. The carrier last month called off its merger agreement with budget carrier Spirit Airlines (SAVE) after a judge blocked that $3.8B deal on antitrust grounds.  Today's outlook update shows a growing divide between JBLU & its larger rivals that have big intl networks which have forecast profits, strong revenue & record demand this summer.  “As we look to the full year, significant elevated capacity in our Latin [America] region, which represents a large portion of JBLU's network, will likely continue to pressure revenue and we expect a setback in our expectations for the full year,” Joanna Geraghty, who became CEO in Feb, said.  “We have full confidence that continuing to take action on our refocused standalone strategy is the right path forward to ultimately return to profitability again.”  Geraghty said the airline expects lower capacity next year.  In the first 3 months of 2024 JBLU lost $2.11 per share, compared with a loss of 58¢ a share, in the same period of 2023.  Adjusting for one-time items, including break-up charges related to the failed SAVE merger, JBLU lost 43¢, narrower than the 52¢ adjusted loss expected.  Revenue dropped 5.1% from last year to $2.2B, matching revenue expectations.   “As we look to the full year, significant elevated capacity in our Latin [America] region, which represents a large portion of JetBlue’s network, will likely continue to pressure revenue and we expect a setback in our expectations for the full year,” Joanna Geraghty said.  “We have full confidence that continuing to take action on our refocused standalone strategy is the right path forward to ultimately return to profitability again.”  JBLU stock fell 1.41.

JetBlue shares tumble 15% after airline lowers 2024 revenue outlook

Gold prices steadied after hitting a more than 2-week low on diminishing fears about an escalation of tensions in the Middle East, with investors awaiting key economic data for further clarity on the timeline on US interest rate cuts.  Spot gold was little changed at $2327 per ounce after earlier hitting its lowest since Apr 5.  Bullion's Mar to Apr rally drove it up by nearly $400 to an all-time high of $2431 on Apr 12.  Gold futures settled 0.2% lower at $2342.  Israeli strikes intensified across Gaza in some of the heaviest shelling in weeks, but with fears of a wider conflict receding after Iran said last week it had no plan to retaliate following an apparent Israeli drone attack, financial markets showed signs of sharper appetite for risk.  That has meant gold, traditionally seen as a haven from risk, has lost ground.

Gold Holds Steady as Focus Turns to U.S. Economic Data

Oil futures finished higher as traders continued to monitor developments in the Middle East & weighed the potential that tensions in the oil-rich region could lead to disruptions in the world's crude supplies.  West Texas Intermediate crude for Jun climbed by $1.46 (1.8%) to settle at $83.36 a barrel.  Jun Brent, the global benchmark, added $1.42 (1.6%) to $88.42 a barrel.  Brent & WTI both settled at their highest in a week.  The conflict in the Middle East has undoubtedly exacerbated tensions in an already volatile region.  While the recent attacks have been downplayed, the potential for further escalation cannot be entirely dismissed.  However, there's a lesson to be gleaned from this situation, particularly in how swiftly demand responded to higher oil & gasoline prices, as evidenced by the increase in US oil stockpiles.

Oil prices finish higher as traders weigh potential for disruptions to Middle East supplies

Fighting in the Mid-East has settled, at least to some degree.  Obviously the future remains uncertain which has ended gold's rally while stimulating interest in risky investments (stocks).  More earnings are coming, especially from the big name tech companies.

Dow Jones Industrials 

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