We Live In Extraordinary Times

Today’s biggest earnings report by far was from Netflix, which delivered a solid showing.

The streaming giant’s earnings per share of $0.12 missed estimates of $0.45 by a wide margin. Driving the miss was a loss related to euro-denominated debt. The company reiterated that the U.S. Dollar’s depreciation during the quarter is a financial loss as opposed to an operational one. 💱

Revenues of $7.85 billion were in line with expectations, but margins of 7% topped estimates.

The primary number investors are focused on is its global paid net subscribers. It added 7.66 million subs in Q4, soaring past estimates of 4.57 million. The results also included its ad-supported service, which launched in November. However, the company did not disclose what portion of new subscribers selected this tier. 📺

Additionally, executives said they will still report subscriber numbers in future earnings reports, but they’ll no longer provide guidance. The change comes as the company shifts its focus to revenue instead of membership growth as its primary top-line metric. 💰

A higher subscriber count and a higher average price per membership caused the company to predict revenue growth of 4% in Q1. This is higher than the 3.7% Wall Street projected. It’s also rolling out additional features like its paid sharing program during the quarter, which could boost revenues.

Finally, the company disclosed that co-CEO Reed Hastings is stepping down from his position and transitioning to executive chairman. Greg Peters, who is currently chief operating officer, will replace him as co-CEO alongside Ted Sarandos. 👨‍💼

$NFLX shares were up about 7% after hours on the news. 👏

The Treasury Department is taking “extraordinary measures” to pay the federal government’s bills after hitting its debt limit.

While we’re not sure an almost annual event qualifies as “extraordinary,” let’s roll with it and explain what’s happening. 📝

First off, the current $31.4 trillion debt limit was hit on Thursday. As a result, Janet Yellen says the Treasury is suspending new investments in two federal government pension plans until early June. These include the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.

These suspensions should allow the government to pay its obligations until early June. However, Yellen is urging Congress to increase or suspend the debt limit promptly. With that said, the Biden administration is not expected to prioritize negotiations for a debt limit bill until after the April 18th tax deadline. 📆

In the meantime, politicians will continue using the debt limit to push their agendas. Republicans have already called for significant spending cuts to balance the budget and reduce the overall debt burden. And given their majority in the house of representatives, it’s likely that the debt ceiling debate will be settled before June.

So, in other words, we’re kicking the can down the road for a few months. But we can expect the rhetoric and market reactions to continue until a resolution is reached. 🗫

Ultimately this all matters because it impacts the U.S.’s credit rating. If the government were to default on its debt, that would cause investors to lose faith in the government’s ability to pay and raise its borrowing costs. And while many countries around the globe have defaulted before, the U.S. has not. That’s partially why the U.S. Dollar is the world’s reserve currency. 💵

The bad news is this conversation isn’t going anywhere. The good news is that means you’ve got plenty of time to learn about it.

If you want a place to start, The Brookings Institute has a good breakdown of what you need to know. And also, check out this because you’ll inevitably hear the term “trillion-dollar coin” if you haven’t already. 👀

Earnings season continues; let’s recap today’s most prominent reports.

Consumer goods giant Procter & Gamble beat revenue and met earnings expectations. 📈

The company reported adjusted earnings per share (EPS) of $1.59 and revenues of $20.77 billion vs. the $20.73 billion expected. 

The YoY declines in revenue and profit were primarily driven by declining volumes, with all of the company’s divisions reporting declining sales volumes. Executives noted that roughly half of the 6% decrease is due to weakening consumer demand, while the other half is due to overseas factors. 📦

Despite falling sales volume, the company will continue with planned price hikes. It even increased its full-year sales growth range by 1% to 4% to 5% and lowered its foreign exchange impact by 1% to 5%.

CEO Jon Moeller had this to say about the current macroeconomic backdrop; “The world seems to want everything to be better, as do I.” … “That’s not really the reality. It’s not the time to be taking guidance to the top range of possibility.”

Investors took the cautious comments to heart, sending $PG shares down roughly 2%. 🔻

National bank KeyCorp reported earnings and revenue that missed expectations.

Earnings per share of $0.38 missed the $0.54 expected. Driving the decline was a deterioration in credit quality, including a provision for credit losses of $265 million. This was up from just $4 million in the prior-year quarter. Allowance for loan and lease losses also rose 26% YoY to $1.33 billion. 📈

Revenues fell 2.5% YoY to $1.89 billion, below the estimated $1.92 billion. The rise in net interest income and strong average loan growth supported revenues. However, a 26.2% drop in non-interest income weighed on the bank’s results. This non-interest income primarily includes mortgage income and investment banking/debt placement fees.

Investors are also concerned with the bank’s deteriorating capital ratios. That, combined with uncertainty over the consumer banking business in the current economy, pushed $KEY shares down 4.55% on the day. 📉

And TAL Education is worth noting because of investors’ recent focus on Chinese stocks. 🔍

The online education company reported earnings per share of $0.02 vs. the estimates for a $0.04 loss. Meanwhile, revenues of $232.7 million missed estimates of $239.8 million.

$TAL shares were down 2%, extending their pullback following a strong run. ◀️