Past Week Dominated By Corporate Earnings Stories

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Past week dominated by good news and a few corporate earnings (0:25). Taiwan Semiconductor and Intel and Broadcom (3:30). Medtronic down after results; healthcare sector sentiment (5:00). Highlighting earnings next week – Nvidia, Berkshire Hathaway (9:00). Walmart’s cautious outlook (11:40). Fed’s favorite inflation gauge coming (13:15).

Transcript

Rena Sherbill: Brian Stewart, our director of news at Seeking Alpha, welcome back to Wall Street Breakfast. Great to have you.

Brian Stewart: Great to be here, Rena.

RS: So talk to us about the markets. February 21, here we are. What do you have top of mind, middle of mind, lower than that if you’d care to share?

BS: I think this past week was dominated by few corporate earnings stories. I don’t know that there was a firm direction given to the market by macro.

I think we’re still trying to feel out the Fed, feel out the administration, the Trump administration. So I think that, the back and forth of individual stocks was kind of the news for last week.

And in in general, the news was relatively good.

RS: What what made it good? What was the good news?

BS: Well, just putting out a few of the of the highlights. AppLovin (APP) had a brilliant earnings reports. It’s benefiting from a focus shift to AI and e-commerce. It’s a software platform that advertisers use to enhance the marketing in content. And so it’s a good B2B play if you’re trying to get the temperature of the market in general.

The the stock surged 24% on the earnings report and continued higher in the following session. It was off 11% on sort of profit taking. So there are some valuation worries, but in general, its results were a sign that AI is still filtering its way through company results.

And so if you’re an investor who can pick the next company that’s going to see the big AI boost, you can still get in pre-catalyst for some of these stocks.

And another one for last week that had a big move was Analog Devices (ADI). It had better inspected earnings and guidance. Its bookings were gradually improving and increased its share buyback program. And that had the stock up 18% over the past week.

RS: Any other names that you would add into the good news list?

BS: I think ADI gives us a good boost to the chip sector in general. So you saw Micron (MU) up 14% in the past week and Texas Instruments (TXN) up 9% in the past week.

NVIDIA (NVDA) was up as well. I’m sure we’re gonna talk about that when we are looking into to next week, but looking into the chips, something that was an interesting story in itself was Intel (INTC).

It got a boost after Taiwan Semiconductor (TSM) and Broadcom (AVGO) were reported to have interest in buying parts of Intel. So breaking it up, Intel has been a long running turnaround hope. So the company is looking to get off the mat. And the M&A news I think is an interesting test of the new administration and what its regulatory oversight will be in terms of approving or not approving deals.

This one has a a lot of complexities, especially with the overseas elements of Taiwan Semiconductor. I mean, there’s no deal in place now, so it there’s really nothing for the Trump administration to say, but I think it’s a good litmus test.

I think if you’re interested in this sector, I think watching the headlines surrounding Intel and possible M&A activity could be a good sign of the feeling for both players within the space about consolidation as AI becomes more important and then also what the administration is going to do.

RS: What’s the public sentiment around the deal happening?

BS: I think it’s still up in the air. Generally speaking, the Trump administration was viewed as pro business, lower regulation. But, obviously, one of his other tenants is a nationalist bent, a, protectionist bent with the tariffs and immigration policy.

So while it might look the other way in terms of general antitrust concerns in terms of deal making, the foreign aspect of parts of this deal might be problematic. That’s why I think it’s a a good test to see where sentiment actually lies within the administration.

RS: And then any other names to add to the good news list and anybody to include the bad news or not as good news list?

BS: I think Alibaba (BABA) is one to look at. It was only up 6% in the past week, got a mild boost after its earnings reports. It’s up 7% post earnings, but that was after already running up significantly in anticipation to the earnings. It was actually up eight sessions in a row in the days running up to the earnings announcement and is up 67% since mid January.

The post earnings boost came with strong AI related revenue, and that’s been the hope over the past month is that those results would fulfill the promise that the company would show a big boost in AI.

And so since that was fulfilled, there was no letdown after the huge run up ahead of the earnings.

I think that’s a good sign again for the AI trade that there are still pockets where that has not been baked into the the stock price yet.

RS: Anything on more of the bad news side that you’d care to add?

BS: Just for balance, we might as well mention that there were a couple of downside earnings reports in the past week. Medtronic (MDT) was down, it fell 7% on its results.

It’s basically flat over the last twelve months. It beat on its earnings and missed on revenue. Investors feel that the bid to high single digit growth rates that the company’s been showing are disappointing. It’s kind of sluggish growth. And honestly, the stock has been in the doldrums for a long time now.

It came down during the pandemic as people pushed off – it’s a medical device company – and so as people pushed off some surgeries because the medical community was obviously focused on COVID, that cut into its revenue and it hasn’t been able to recover yet.

It’s basically the same levels now as it was in October of twenty twenty two. So the stock has had a hard time kind of coming back after that post COVID drop. So it’s it’s worth kind of looking at.

You and I had talked about in the past couple weeks with the pharmaceutical companies coming out, that there has been a long standing post COVID hangover in the the health care sector, generally speaking.

So I think that’s something to watch going forward is when do these companies get into the next cycle of growth.

And then just as another company that was on the downside, Unilever (UL), which is a consumer goods company, was down after its earnings. And the larger thing to note there is just that one of the worries was commodity inflation.

So it’s just a sign that inflation remains problematic for some of these consumer facing companies.

RS: What are you seeing in terms of public sentiment, analyst sentiment, Wall Street sentiment about the health care sector?

Are they looking for some catalyst to move the chains for health care stocks? Are GLP-1s not making enough of a dent in some of the players? Is it stock specific? What are your thoughts or what are your what are you seeing from the market there?

BS: Just using Medtronic as the jumping off point. Some of the commentary after those earnings came out was just there was no visibility of when the next catalyst for that stock was, where the next wave of large growth.

So the company might be executing well in terms of moving the products that it has, but it’s just not clear where that next jump forward was gonna come from. And I think that’s probably true of a lot of these companies.

We were talking before about how the COVID darlings, the pharmaceutical companies that got a big boost from COVID, that was a lot of investment that they put into those drugs. So they basically put their pipeline on hold to move over to COVID during that time. And so I think some of them have had a hard time getting back to diversifying their R&D in such a way that they can get the next big one.

And I do think that the weight loss drug boost is built into the stocks. There’s a lot of competition in that area now. And so as new data comes out and new products hit on on that front, I think they’re all running into a crowded market.

So I do think there’s a look of what the next big – you don’t wanna call it a fad or a trend, but for lack of a better word, the next big health care trend is gonna be.

Yeah. It will be interesting to see given how the GLP ones have pretty much taken over society. It’ll be interesting to see what either what’s Part of the problem is that, you know, they’ve already taken over.

Right? So where’s where’s the next grow? Like, you know and and everybody, you know, whatever the your sort of political feelings on it, everybody got the vaccine for COVID. Everybody was, you know, taking, the test for COVID.

And so, there was sort of full saturation for those kind of things. So, what’s the drug that’s or the the product that’s going to kind of tap into the broadest possible public adoption?

Because obviously if you go through, healthcare companies, you’re gonna find a few winners. You know, companies that that had an excellent, you know, an excellent test for a cancer drug or something like that.

I mean, it’s pretty easy to to find big winners in the healthcare space. But when you’re talking about the health care space in general, you kind of need those kind of, overarching themes that are going to drive the entire sector.

RS: So looking to next week, you mentioned some big names coming up. We have Nvidia coming up on Wednesday.

We had Raul Shah on Investing Experts this week talking about Hims and Hers Health (HIMS) and why he’s bullish on the stock and looking forward to those earnings on Monday, which also has Berkshire Hathaway (BRK.A) (BRK.B), a bunch of names reporting.

What are the ones that you think the market is going to be most reacting to or most interested in?

BS: Berkshire’s always gonna make headlines because people are gonna look for Buffett’s macro assessments. So it’s not going to be the results of the company specifically, but more about what Warren Buffett sees generally for the market. So watch for headlines there.

I think in terms of the the healthcare conversation, I think HIMS is a good company to look at just in terms of being a low price direct to customer company, having a different business model than a Merck (MRK) or Pfizer (PFE).

Seeing how its results are going, especially as we talk about weight loss drugs, that’s obviously a huge part of their business. So I think that that’s definitely interesting.

Other than those names, NVIDIA obviously is the the big one coming out. I think if you’re talking about the AI trade, that’ll be a good litmus test of how that’s going. Especially look for commentary from them about DeepSeek specifically and growing competition in the AI space generally.

Also, they might have something to say about trade concerns, both tariffs and restrictions of selling certain ships to certain countries. So there there might be questions asked in the earnings conference call about that. So that would be interesting to look at.

And then just in a totally different sector, Home Depot (HD) and Lowe’s (LOW) are both reporting next week. Home Depot especially saw a lot of strength in the second half of last year, but has been choppy lately.

A lot of that is concerns about the housing market with interest rates going up and the the price of loans going up.

But this could go either way for Home Depot if housing stock is getting older because home building is slowing down and its home equity loans become more expensive so people can’t pay to hire a contractor to come do their addition.

You might see more do it yourself upgrades in houses, which would benefit Home Depot. So I would look at their commentary both about the housing market in general and just how consumers are responding.

RS: And a stock we mentioned last episode that reported this week was Walmart (WMT), and we talked about maybe they’re going to comment on the tariff concerns.

Do you have any insight or takeaways there or updates for listeners?

BS: Walmart was down after its earnings down about 6%. The outlook was cautious. So I think the worry there was that the consumer in general is starting to to slow spending.

You and I talked last week about how Walmart might benefit from people replacing some of their purchases with lower cost things. As they move down the cost spectrum that Walmart might be the beneficiary, where people land as they start start squeezing their budget.

However, if they’re having trouble grabbing customers even in the high inflationary environment, that might be a sign that people stop spending in general.

So I think there’s an eye on the consumer. The recent economic news has been relatively strong, Jobs report and so forth. Next week, the GDP report is coming out. That’s back. We’re looking at some revised data, for the previous quarter. So that’s not gonna be any new information.

But I do think that Walmart can act as kind of an economic indicator in itself, and it shows a little bit of worry on investors’ part and on corporate executives’ part about how much the consumer is gonna hold it up.

RS: Anything else to say about the macro picture?

BS: No. Just that next week is also going to see the PCE indicator released. That’s the Fed’s favorite inflation gauge.

Inflation data from last week was much stronger than expected, kind of sparked a mini panic about the Fed, really pushed back expectations. That’s come back a little, in the past week. People have moderated their expectations.

Still, the next meeting for the Fed is still expected to be no interest rate cut, and then the meeting after that in May also expected to be no cut. But now in the June/July framework, people are starting to think that the next cut might happen.

So that PCE indicator is going to give a good idea of, it’s either gonna confirm the sort of hot inflation that we saw a week ago, or if it gives a different indication, it might move that expectation a little bit. So if you’re looking at interest rates, that’s the next big piece of data coming out.

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