Technical Difficulties

One of today’s biggest earnings announcements came from Microsoft, which beat on earnings but missed revenue expectations.

The tech giant’s adjusted earnings per share (EPS) of $3.32 beat the $2.29 expected. Revenues fell short of the $52.94 billion expected at $52.75 billion. 📝

Driving some of the earnings weakness was a $1.2 billion charge associated with cutting 10,000 jobs, revising its hardware lineup, and consolidating leases during the quarter. Like its peers, Microsoft is taking proactive steps to streamline its operations and prioritize its growth initiatives.

In terms of sales, the company’s YoY revenue growth was the slowest since 2016, rising just 2%. 🐌

Getting into product segments, Windows EOM fell 39% YoY, and Xbox content + services fell 12%. These declines were largely expected, as the demand for personal computers (PC) and gaming items pulled back from the covid-period highs.

On the positive side was the company’s cloud revenue. Azure + other cloud services rose 31%, and server products + cloud services rose 20%. Growth in that business, while decelerating, continues to offset weakness in other business segments. 👍

Overall, investors are focused on the positives in this report. Amazon shares also jumped after hours on the back of this cloud news, as it’s investing heavily in Amazon Web Services (AWS).

$MSFT shares are up 4% after hours. We’ll have to wait and see if this news truly is positive or if investors have their heads in the clouds… 🤷

Heavyweights 3M and General Electric reported earnings today, helping move the industrial sector.

Let’s see what they had to say… 👀

3M reported adjusted earnings per share of $2.28 vs. the $2.36 expected, while revenues of $8.1 billion met expectations.

Within its report, it shared a pessimistic outlook for the economy and consumer spending in 2023. As a result, it issued full-year guidance of $8.50 to $9.00 per share, well below the $10.20 analysts are estimating. 

The company also announced that it’s laying off roughly 2,500 manufacturing employees. Economic data has shown a significant decline in manufacturing activity, and we’re now starting to see it show up in major companies’ earnings. 🏭

Lastly, 3M continues to struggle with lawsuits over the potentially faulty earplugs it sold to the military. That continues to be a significant overhang for the company.

As a result of the macro uncertainty and operating risks 3M faces, $MMM shares traded down about 6% on the day. 📉

Meanwhile, General Electric reported better-than-expected earnings in its first report since January’s health care business spinoff. 📝

Its adjusted earnings per share of $1.99 beat the $1.15 expected. And revenue of $21.786 billion topped the $21.558 billion expected.

The company’s commercial aviation unit continues to see robust demand for its jet engines and power equipment as the aviation industry recovers. That’s broken down into aerospace segment revenue (+25%) and profit (+17%) and power equipment revenue (+8%) and profit (+124%). 💪

As for the company’s outlook, it expects revenue growth in the high single digits. It also expects adjusted earnings per share of $1.60 to $2 and free cash flow of $3.4 billion to $4.2 billion.

The one soft spot is its renewable energy business, GE Vernova, which expects a $200 to $600 million loss in 2023. However, investors may overlook that because it expects to spin off its energy business into a separate company next year. So maybe they figure that will be someone else’s mess to fix.🤷

Nonetheless, $GE shares were up about 1%, pushing to one-year highs on the news. 📈

Continuing the industrial sector trend, let’s recap what we heard from defense stocks. 🛡️

First off, stinger missile maker Raytheon Technologies beat earnings and revenue expectations.

Adjusted earnings per share of $1.27 beat the $1.24 expected. And revenues of $18.2 billion topped the $18.09 billion expected. 🔺

The company has benefited from the U.S.’s aid packages to Ukraine, and overall geopolitical tensions remain high. As a result, its missiles and defense unit sales rose 6.2% in the quarter. 

However, it’s also benefiting from the strong tailwind that GE mentioned. Airlines flying older planes for a longer period helped boost the company’s high-margin after-market services, jet engines, and other related parts/services. ✈️

Management says costs will continue to rise in 2023 but offered an upbeat outlook. It expects a full-year adjusted profit of $4.90 to $5.05 per share, while analysts forecast $5.03. 📝

$RTX shares were up about 3% on the day.

Lockheed Martin beat revenue expectations but missed earnings estimates by $0.01 per share.

The company said its backlog increased 11% in the quarter, driven by a 15% in its Aeronautics division. That business unit saw a 7% jump in revenue, largely due to a higher volume of F-35 production contracts. The Biden administration’s plans to request congressional approval for a $20 billion sale of new F-16 jets to Turkey would also benefit the company. 🏭

However, management still expects the fiscal year 2023 earnings of $26.60 to $26.90 per share on $65 to $66 billion in sales. This is marginally different than Wall Street’s expectations of $26.93 per share and $65.74 in revenue.

$LMT shares were up about 2% on the news. 📈