Buyers Strike As Debt Ceiling Looms

Expectations for chipmaker Nvidia were pretty high coming into its earnings report, as shares were up almost 200% since October. Despite all the hype, the stock still beat expectations and hit new all-time highs after hours. Let’s see why. 👇

Its first-quarter adjusted earnings per share were $1.09 vs. the $0.92 expected. Revenues of $7.19 billion also topped the consensus view. Helping drive the strength was record Data Center revenue of $4.28 billion. 💾

The market was focused heavily on artificial intelligence (AI) as the company’s next primary growth driver…and it delivered. Executives now expect second-quarter revenue of $11 billion (+-2%), far surpassing the $7.15 billion expected by analysts.

CEO Jensen Huang’s comments provided more color on the trends Nvidia seeks to capitalize on. 💬

• “The computer industry is going through two simultaneous transitions – accelerated computing and generative AI.”
• “A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service, and business process.”
• “Our entire data center family of products ….. is in production. We are significantly increasing our supply to meet surging demand for them.”

Clearly, investors are excited about what the future holds, as $NVDA shares rise 28% after hours to new all-time highs. We’ll have to see if Nvidia can continue to deliver on these high expectations in the future. 😮

Meanwhile, competitor Analog Devices sunk after beating estimates but warning of a slowdown. ⚠️

The semiconductor company, specializing in data conversion, signal processing, and power management technology, reported adjusted earnings per share (EPS) of $2.83 on revenues of $3.26 billion. That topped the $2.75 and $3.21 billion consensus estimates. 

Its CEO said, “Looking into the second half, we expect revenue to moderate given the continued economic uncertainty and normalizing supply chains.” As a result, the company expects third-quarter adjusted EPS of $2.42 to $2.62 and revenues of $3 to $3.2 billion. That was mixed vs. Wall Street’s view of $2.65 and $3.16 billion. 🔺

$ADI shares fell more than 8% as investors processed the news.

Several retailers reported today, many of which have a significant mall presence. Let’s see how they fared and what they said about the U.S. consumer. 🏬

First up is Kohl’s, which reported an unexpected first-quarter profit. Profitability improved as freight costs declined, and the company became more pointed with its promotional activity after getting inventory levels back under control. That led to adjusted earnings per share of $0.13, beating the $0.42 loss expected. Revenue of $3.36 billion and comparable-store sales declines of 4.3% were essentially in line with expectations.

The Kohl’s brand has struggled to remain relevant among consumers, but executives stressed the changes they’re making are paying dividends. The company is opening more Sephora shops, expanding into categories like pet and home decor, and featuring gift-giving items ahead of key holidays. With that said, the “middle-income consumer,” which is the core of its customer base, remains pinched by high inflation and economic uncertainty. 😬

The company remains the target of activist investors who have successfully pushed a CEO and board of directors. Last year, it also failed to sell itself to Vitamin Shoppe owner Franchise Group.

Like other “old school” retailers, Kohl’s has a lot of work to do in reinventing itself for today’s consumers. $KSS shares rose 7% today but are still trading at the same level as the late 1990s. 🤷

Abercrombie & Fitch also reported a surprise profit and raised its guidance. Its adjusted earnings per share of $0.39 on revenues of $836 million beat the expected $0.05 loss and $815 million in revenues. Same-store sales were also up 3% vs. the 1% decline expected. Additionally, executives raised their net sales growth from 1%-3% to 2%-4%. They also increased their operating margin outlook from 4%-5% to 5%-6%. That sent $ANF shares up over 30% on the day. 🤩

Next up is Express, which we spoke about two months ago as bankruptcy fears rose. While shares rebounded with the market since then, today’s earnings have it pushing back toward their all-time lows. $EXPR shares were down more than 15% on the day. 📉

Its adjusted loss per share of $0.99 and revenues of $383.3 million missed the $0.79 and $389 million consensus estimates. Same-store sales fell 14% due to what executives described as “a combination of external factors and challenges in our product assortments.” Consumers remain price sensitive as they reduce discretionary spending, causing Express and its competitors to increase promotions. As a result, it’s being hit on both the revenue and margin side, as its financials reflect.

American Eagle Outfitters also didn’t fare well. Although its adjusted earnings per share and revenue matched estimates, it cut its operating income outlook. It now expects $250 to $270 million vs. the $270 to $310 million range it forecasted in March. It also anticipates full-year revenue to be flat to down low single-digits vs. flat to up single-digits. Its brand performance remains mixed, with Aerie’s comparable-store sales up 2% and American Eagle’s down 2%. Lastly, store revenue rose 5% while digital revenue fell 4%. $AEO shares are down 16% after the bell. 🦅

Lastly, we’ll mention Guess. The retailer lost $0.22 per share on revenues of $570 million. That compared to estimates of a $0.28 per share loss on $556 million in revenue. Executives expect fiscal 2024 revenue growth of 2% to 4% and adjusted earnings per share of $2.60 to $2.90. They also increased the dividend from 22.5 cents per share to 30 cents. $GES shares are up about 2% after hours. 🔺

This issue is already very beefy, but we can’t go without at least mentioning two tech stocks falling after hours. ✌️

First up is Snowflake, which is melting down after issuing a weaker-than-expected forecast. 🫠

The cloud-based data storage company’s adjusted earnings per share of $0.15 beat Wall Street’s view by $0.10. And revenues of $623.6 million also topped the $609 million estimate. More specifically, product revenue of $590.1 million beat the company’s guidance of $568 to $573 million. And its net retention rate was 151%

However, its guidance is where things fell apart. 😬

Executives now expect product revenue of $620 to $625 million in Q2 vs. the $649 million consensus view. They also expect a non-GAAP operating margin of 2%. For the full year, they see product revenue of $2.6 billion vs. their last estimate of $2.7 billion. Non-GAAP operating margin of 5% was down from 6%. And to end positively, they raised adjusted free cash flow margin expectations by 1% to 26%.

Despite management’s attempt to reassure shareholders, the market remains unsure whether the company is headed in the right direction. $SNOW shares are down 11% after the bell. ❄️

Meanwhile, global software company UiPath didn’t fare much better. The maker of robotic process automation software also failed to impress Wall Street with its forecast. 👎

Its Q1 non-GAAP earnings per share of $0.11 beat by $0.02. Revenues of $289.59 million and annual recurring revenue (ARR) of $1.249 billion also topped estimates. However, executives forecast second-quarter revenues of $279 to $284 million, below the $284 million expected. 

With so many companies meeting (or beating) expectations this earnings season, the market is showing little mercy towards those with weak forecasts. As a result, $PATH shares fell 9% after hours. 📉