Yahoo Finance Mediocre Earnings After the Bell; Selloff Continues
Markets had a hard time today reconciling the first U.S. credit rating downgrade in 12 years, when Fitch Ratings — one of the “big three” credit rating agencies — lowered its rating from the usual AAA to AA+. The reason for the move is the same as it was a dozen years ago: Congress is kicking the can on increasing its debt ceiling, which, if not raised, would cause the U.S. to default on its debts. Last time, it was also a Democratic White House and a Republican-led House of Representatives that saw this issue emerge.
In any case, market indices were down across the board today. All the majors opened normal trading in the red and stayed there, closing off session lows, but not by much. The Dow shed -331 points, -0.93%, while the Nasdaq dropped -309 points, -2.17%. The S&P 500 and small-cap Russell 2000 were down -1.39% and -1.37%, respectively. So far, August looks to be giving back a significant amount of July gains, just in the first two days of the new month’s trading.
Qualcomm QCOM is the latest major company to post mixed results in its quarterly report this afternoon: while fiscal Q3 earnings of $1.87 per share bettered the $1.81 in the Zacks consensus, revenues of $8.45 billion came up short of the $8.51 billion. Revenue guidance for fiscal Q4 are for a range of $8.1-8.9 billion, with a midpoint lower than the consensus $8.69 billion. A -25% drop in handset chip sales year over year and a slower recovery in China contributed to the performance. Shares are down -4.5% on the release.
MGM Resorts MGM, however, outperformed estimates on both top and bottom lines, with earnings of 59 cents per share beating the 53 cents expected, and sales of $3.94 billion in the quarter easily surpassing the $3.76 billion consensus. Its MGM China business in Macau has surprised to the upside, notching +5% growth over 2019 (pre-Covid) levels, +21% on the key EBITDAR metric. However, after cranking +48% higher year to date, investors are selling this news; MGM is -7% in today’s after-market.
PayPal PYPL reported in-line earnings at $1.16 per share on $7.29 billion in quarterly revenues, up nearly +7% year over year. Guidance for Q3 looks to be slightly above previous estimates, as Payment Volume grew +11% year over year. That said, Operating Margin of +21.4% in the quarter missed consensus expectations of +22%, and this may be adding fuel to the -7.5% selloff in today’s late trading. PayPal has also been an underperformer year to date.
Etsy ETSY posted beats on both top and bottom lines this afternoon, with earnings of 45 cents per share improving by 4 cents over the Zacks consensus, on revenues of $629 million in the quarter. Gross merchandising came in at $3.01 billion, -20% year to date, even as the company noted Etsy Active Buyers reached an all-time high in the quarter. Shares are selling off -5% after normal hours.
Closing on a positive note, DoorDash DASH shares are up +4% on its Q2 report out after today’s bell, missing on the bottom line to -44 cents per share by -2 cents, while revenues outpaced estimates: $2.13 billion from $2.05 billion. Guidance was also raised for the delivery service firm, on Gross Orders of $16.47 billion versus $16.1 billion anticipated and Total Orders +25% year over year.
Tomorrow, the Q2 earnings season parade continues, highlighted by Apple AAPL and Amazon AMZN earnings after the close. It also brings us the next series of data on the state of the domestic labor market — namely, Initial and Continuing Jobless Claims. We’ll also see preliminary U.S. Productivity for Q2, S&P PMI and ISM Services data, both for July, and Factory Orders for June. But we don’t expect any of these data points to reverse market trajectories on their own; likely it will take Friday’s Employment Situation report to bring us this possibility.
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