4 Under-the-Radar Earnings You Might Have Missed

An early winner in the retail sector space so far was Chipotle Mexican Grill (CMG)

Managing Editor
Nov 3, 2023 at 3:09 PM
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Subscribers to Chart of the Week received this commentary on Sunday, October 29.

We are in the thick of third-quarter earnings season, and trying to keep track of the slew of reports can be overwhelming for any investor. Big Tech behemoths like Alphabet (GOOGL) and Meta Platforms (META) get their headlines, but there are so many other corporate reports out there that help read the Wall Street tea leaves. Below are four companies that just reported earnings, with results worthy of a deep dive due to their potential broad-market impact.

First up is steel producer Cleveland-Cliffs (CLF), which reported on Monday night an adjusted third-quarter earnings of 52 cents per share on revenue of $5.61 billion, blowing past respective estimates of 43 cents on $5.58 billion. Thanks to external sales volumes of steel products, specifically strong automotive shipments, the company said it will use the free cash flow to reduce debt and buy back shares. CLF gapped higher by 8.9% Tuesday morning and is trading at its highest level since early August, with a 16% year-over-year lead.

If infrastructure stocks like CLF are on the mend it bodes well for the U.S. economy, but its also notable that steel stocks for the time being are unfazed by the recent auto sector weakness. The impact of the United Auto Workers strike won’t yet be felt in this corporate report, but auto stocks like Ford Motor (F) and General Motors (GM) began their sharp drawdown way before the UAW formed picket lines. So far, the impact hasn’t reached any subsidiaries.

Next up is Waste Management (WM), a Schaeffer’s Top 2023 pick. On Tuesday night, the company reported adjusted third-quarter earnings of $1.63 per share on $5.20 billion in revenue, the former of which topped analyst estimates. Thanks to nine price-target hikes the next morning, WM added 6.1% on Oct. 25, breaking out to its highest level since early August. The bull gap has helped the stock hold its year-to-date breakeven level. Similar to Cleveland-Cliffs, Waste Management touted free cash flow and ‘lower anticipated capital spending’ in its report. If defensive stocks like CLF and WM have weathered the last five months and are indicating cash flow comforts heading into 2024, there is some broad market implications to mine there.

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Alphabet and Meta Platforms get all the tech headlines, but Texas Instruments’ (TXN) report may be more instrumental to the health of the semiconductor sector. The chipmaker on Tuesday night reported adjusted third-quarter earnings of $1.85 per share that topped Wall Street estimates, but the $4.53 billion in revenue fell short of the $4.58 billion projections. Texas Instruments’ fourth-quarter guidance also missed expectations due to vendors reducing orders amid slow economic growth.

After 17 price-target cuts, TXN shed 3.5% on Oct. 25, falling to a three-year low of $140.13. The stock is now 12.7% lower in 2023 and has shed 25% off its July 25 annual high of $188.12. This report should be a shot across the bow for tech sector bulls. The company usually reports earnings earlier than its semiconductor peers, so this could be a harbinger of some serious earnings pain for heavyweights like Advance Micro Devices (AMD), Nvidia (NVDA), and Micron (MU).

An early winner in the retail sector space so far this season is Chipotle Mexican Grill (CMG). On Thursday night, the burrito chain reported adjusted third-quarter profits of $11.36 per share on $2.47 billion in revenue, the former of which topped estimates, while the latter came in line. Four price-target hikes have ensued as of Friday morning’s writing, with CMG gapping higher by 7.3% and padding its 40% year-to-date lead.

Analysts were impressed with the report despite industry-wide softening, with Morgan Stanley calling Chipotle an “impressive growth story that continues to hold up.” Wall Street seems all-in on CMG, but is a lot more cautious about its competition, so it will be interesting to monitor the consumer discretionary and restaurant sector in the next few weeks to see if the Chipotle can halo lift its peers.

In a vacuum, these four earnings reports probably offer more questions than answers: are non-cyclical stocks about to have a moment heading into 2024? Are the tech troubles only just beginning? Is Chipotle lapping the competition? Whatever takeaways are gathered from these four under-the-radar reports, the one common thread is that there is widespread uncertainty in the stock market right now. But while most news outlets unpack the minutiae of Big Tech earnings and wring their hands over bond yields, these four stocks offer a glimpse of the earnings season undercurrent.

 

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