Sideways Silliness Persists

Paramount Global kicked off today’s pre-market movers, posting earnings that significantly missed expectations. 🎬

Its adjusted earnings per share of $0.08 and its revenue of $8.13 billion missed the $0.08 and $8.17 billion expected.

The company pointed to several headwinds impacting results. Secular trends like a competitive market streaming market and cable cord-cutting remain persistent. Meanwhile, cyclical headwinds include the global slowdown in advertising activity and inflation pressures impacting consumers’ discretionary spending. Total ad revenue was down 5% YoY, and cord-cutting drove a 4% decline in its affiliate and subscription revenue. 🌬️

Regarding its streaming business, Paramount+ subscriber net additions of 9.9 million were in-line with estimates. It now has 56 million users, as Top Gun: Maverick, 1923, Criminal Minds: Evolution, NFL Sunday games, and other hit content drove engagement. Global Pluto monthly active users (MAUs) rose by 6.5 million to 79 million and beat the 77 million estimate. 📺

Despite its direct-to-consumer (streaming) business meeting engagement expectations, its 2022 loss of $1.82 billion missed its $1.8 billion guidance. However, ad revenue in this business segment rose 4% YoY, and the company looks to narrow its losses further by increasing the prices of its streaming service by one to two dollars, depending on the tier selected.

Executives expect the company to return to earnings growth in 2024. They also plan to merge the Paramount+ and Showtime streaming services into one as they further integrate their cable television and streaming offerings. This could reduce costs and consumer friction further. However, they did also disclose a potential $1.5 billion write-down from its Showtime integration. ✂️

On a related note, a new regulatory filing indicated Buffett’s Berkshire Hathaway boosted its stake in the company by $40 million in the fourth quarter. It now owns more than 93 million shares.

$PARA shares fell 9% on the news but recovered to close down 4%. 🔻

Datadog reported better-than-expected fourth-quarter earnings but issued soft guidance. Its adjusted earnings per share of $0.26 and revenue of $469 million beat the $0.19 and $450.2 million expected. Slowing growth among its cloud computing partners remains a headwind for the monitoring and analytics platform company. Its current-quarter and full-year revenue forecasts of $468 million and $2.08 million fell short of expectations. $DDOG shares fell 7% on the news. 🐶

Shake Shack reported an adjusted loss per share of $0.06, beating the $0.11 consensus estimate. Revenue of $238.5 million and its same-store sales increase of 5.1% were in line with estimates. Last October, the company raised menu prices by mid to high single digits to offset high food and paper inflation. The company told analysts it would protect its margins but does not expect further menu price increases anytime soon. It expects to open 40 U.S. locations and license 25 to 30 locations in 2023. $SHAK shares initially fell close to 7% but recovered to close -3.44%. 🍔

WeWork posted a wider-than-expected fourth-quarter loss and issued weaker-than-expected first-quarter revenue guidance. Its adjusted loss per share was $0.59 (vs. $0.43 expected), and revenue was $848 million (vs. $847 million expected). For the first quarter, it expects $830 to $855 million in revenue, well below the $880 analyst forecast. $WE shares initially dropped more than 10% but managed to close down 3%. 🏢

Nestle, the world’s largest food group, posted a rare earnings miss as rising costs pressured profits. The company says rising input prices drove its gross margin down by 2.60%, even after accounting for the price increases it made in 2022. It expects pricing pressures to continue this year, saying it needs to repair its gross margin while balancing the costs it pushes to consumers. As such, further price increases will be very targeted and only implemented where input cost inflation justifies the increase. The company’s $2.1 billion writedown of the peanut allergy therapy it invested in two years ago also impacted results. Additionally, it forecasted organic sales growth of 6% to 8% in 2023. $NSRGY shares were down 3% today. 🍫

It was another busy day of economic data, with producer prices taking center stage. Let’s recap.

January’s headline producer price index jumped 0.7% MoM and 6% YoY. It marks the largest increase since June and topped the 0.4% expected. Excluding food and energy, core prices rose 0.5% vs. the 0.3% estimate. In addition, the core number excluding trade services increased by 0.6% vs. the 0.2% expected. ♨️

It doesn’t get as much attention as other inflation metrics but can serve as a leading indicator because its measures the prices producers pay on the open market. Disinflation continues as this is the seventh straight month of declines. But today, the market appears to be reacting to the higher MoM increase than expected rather than the longer-term trend in the data.

The U.S. housing market continued to cool in January. Housing starts fell 4.5% MoM and 21.4% YoY to a seasonally adjusted annual rate of 1.31 million. Single-family housing starts, which account for the bulk of homebuilding activity, were down 4.3% MoM. Building permits rose just 0.1% MoM in January and are still down 27.3% YoY to a seasonally adjusted annual rate of 1.339 million. 🏘️

Falling mortgage rates have buoyed homebuilder confidence over the last few months, but the market looks like it will remain soft with rates back on the upswing. 

U.S. manufacturing’s outlook remains bleak. The Philadelphia Fed manufacturing index unexpectedly fell to -24.3 in February, widely missing the consensus estimate of -7.4. 🏭

Digging into the numbers, the indexes tracking new orders, shipments, delivery times, and employee headcount all weakened. In addition, inflationary pressures remained as the prices paid index rose for the first time since April 2022, and prices received fell to their lowest level since February 2021. This indicates a slowdown in manufacturing activity and slimmer margins for producers. 

Labor market conditions remain historically tight, with initial jobless claims spending their fifth straight week below 200,000. Continuing claims rose 16,000 to 1.696 million. 👨‍💼

Meanwhile, several Fed members spoke today. Cleveland Fed President Loretta Mester made headlines. In her speech, she noted there was a compelling case for a 50 bp hike at the last meeting and that the Fed still has more work to do on the inflation front. 📝

The hotter-than-expected producer prices mattered most to the market, given much of the other data is in line with current trends. 

Three tech stocks are dashing higher after hours following positive results. 🤩

First up is DoorDash, which reported an adjusted loss per share that was wider than expected ($1.65 vs. $0.68). Driving the weakness was its acquisition of Finnish food delivery company Wolt and stock-based compensation expenses related to layoffs made during the quarter.

Revenues of $1.82 billion beat estimates by $0.05 billion. The total number of orders it delivered in the fourth quarter rose 27% YOY to 467 million, exceeding the 458 million estimate. 🥡

The company gave upbeat guidance for marketplace gross order volume between $15.1 to $15.5 billion in the current quarter. Analysts had expected $15 billion. Additionally, the company approved a buyback of up to $750 million.

$DASH shares were up nearly 8% on the news. 🔺

Next up is HubSpot, which easily beat fourth-quarter estimates. 📰

Its adjusted earnings per share of $1.11 and revenues of $469.7 million. That topped estimates of $0.83 per share on $446 million in revenue. The company believes it’s ready to take on challenging macroeconomic conditions. As a result, both its current-quarter and full-year guidance exceeded Wall Street’s estimates.

$HUBS shares are up 13% on the news. 📈

Finally, DraftKings reported better-than-expected fourth-quarter results. 🏈

The company’s $855.1 million revenue set a new record for the online-gambling company. Meanwhile, its adjusted loss per share of $0.53 improved from $0.80 a year ago.

Executives have high hopes for 2023, increasing their annual revenue guidance to $2.85 to $3.05 billion. They also reduced their adjusted EBITDA loss forecast to $350 to $450 million. 👍

$DKNG shares were up 6% on the news.