Claims, Income, Spending & Q3 Earnings: A Full Plate

Thursday, October 31, 2019

More economic grist for the mill in today’s pre-market activity, along with a continued deluge of new quarterly earnings reports, continue one of the busiest weeks for Q3 earnings season. Today’s news is also sandwiched between major employment reports yesterday (ADP (NASDAQ:ADP) private-sector payrolls) and tomorrow (BLS non-farm payrolls). And the Fed cut rates another quarter point yesterday afternoon. And — oh yeah — Happy Halloween!

Initial Jobless Claims rose to 218K last week, from a slightly upwardly revised 213K the previous week. These numbers are still in the range of a strong U.S. labor market, which last month saw the Unemployment Rate drop to near-50-year lows at 3.5%. Continuing Claims stayed almost exactly the same in its latest read (two weeks in arrears), ticking up from 1.683 million to 1.69 million — also consistent with a strong jobs environment.

The Q3 Employment Cost Index was in-line with estimates at +0.7%, up 10 basis points from 0.6% reported in Q2. So while employment remains strong, paying for the workforce is only getting very gradually more expensive.

Personal Income for September also hit estimates exactly at +0.3%, though down a tad from August’s 0.4%. Consumer Spending, also for September, reached +0.2%, missing the consensus 0.3% slightly, but still better than the +0.1% read in the previous month. September Core Personal Consumer Expenditures (PCE) — what the Fed weighs heavily when directing financial policy — was flat, as opposed to the +0.1% expected. Year over year, PCE is at a very low 1.3% — evidence that inflation is barely hitting the current economy.

After the Fed cut interest rates to 1.75% — the first time below 2% since mid-2018 — analysts, for the most part, now expect rates to hold steady going forward, pending new economic data. Nothing we’ve seen reported this morning ought to disrupt this narrative in the near term.

Q3 Earnings Update

Pharma giant and Zacks Rank #2 (Buy)-rated Bristol Myers-Squibb (NYSE:BMY) outperformed expectations in its Q3 earnings report this morning, posting $1.17 per share which beat the Zacks consensus by 11 cents (and better than the $1.09 from the year-ago quarter). Revenues for the quarter beat estimates by 3.54% to $6.01 billion, ahead of the $5.69 billion in Q3 2018.

The company also upped full-year earnings guidance slightly, even though it is seeing diminishing sales results from cancer treatment Optivo. Though Bristol Myers has only gained 9.4% year to date (less than half of the S&P 500 overall), shares are still down another 1.23% in today’s pre-market. For more on BMY’s earnings, click here.

Dunkin’ Brands (NASDAQ:DNKN) , also a Zacks Rank #2 stock, was mixed in its Q3 earnings release this morning, putting up 90 cents per share versus 81 cents expected (83 cents a year ago) on $355.88 million which fell a tad short (-0.81%) of estimates. Dunkin’ has not posted an earnings miss since Q3 of 2017, and though it is trading down from its peak in early September, shares are up 15.4% year to date. For more on DNKN’s earnings, click here.

Royal Dutch-Shell RDS.A, a Zacks Rank #3 (Hold)-rated oil supermajor, was also mixed for the quarter: a 20-cent beat on the bottom line to $1.18 per share was countered by an 11.8% sequential drop in revenues to $89.5 billion. Lower oil and gas prices are to blame. Shares are down 2.75% in early trading. For more on RDS.A’s earnings, click here.

Mark Vickery

Senior Editor

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