Coffee With Greta: Meta Drags Down Tech

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DJIA Futures: -27 (-0.1%)

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NASDAQ Futures: -86 (-0.6%)

Good morning friends!

Futures are sliding as Meta’s ad-revenue warning drags on tech stocks.

Let’s get right to it!

Meta Slips On Ad Revenue Warning

Meta Platforms (META) shares are down 3.7% ahead of the open despite crushing Q3 expectations. 

Here’s how the social media giant’s results compared to analysts’ estimates: 

  • EPS: $4.39 vs $3.63 expected
  • Revenue: $34.15 billion vs $33.56 billion expected
  • Daily active users: 2.09 billion vs 2.07 billion expected
  • Monthly active users: 3.05 billion, as expected
  • Average revenue per user: $11.23 vs $11.05 expected

Revenue jumped 23% year over year while net income surged 164%.

But Meta widened its Q4 revenue guidance range because of unpredictability over the war in the Middle East. 

On the conference call, the CFO said, “We have observed softer ads in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook.”

Meta expects revenue of $36.5 billion to $40 billion in Q4, which would mark 19% growth at the midpoint of the range. 

Full-year expenses are expected to fall between $87 billion and $89 billion vs $88 billion to $91 billion previously estimated. 

IBM Jumps On Earnings Beat

IBM (IBM) shares are rising 1.4% in premarket trade after beating Q3 expectations on the top and bottom line. 

Here’s how the tech company’s results compared to analysts’ estimates: 

  • Adjusted EPS: $2.20 vs $2.12 expected
  • Revenue: $14.75 billion vs $14.73 billion expected

Total revenue was up 4.6% year over year.

Revenue in IBM’s software segment, which includes its AI platform, jumped 7.8% from a year ago.

Consulting revenue rose 5.6% to $ 5 billion, slower than expectations for 8.7% growth. 

Infrastructure revenue fell 2.4% to $3.3 billion, better than estimates for a 7.5% decline. 

IBM generated $1.7 billion in free cash flow during the quarter and maintained its full-year forecast for free cash flow of about $10.5 billion. 

Southwest Falls After Earnings

Southwest Airlines (LUV) shares are down 2.1% ahead of the open after reporting Q3 earnings in-line with expectations. 

Here’s how the airline’s results compared to analysts’ estimates:

  • Adjusted EPS: $0.38, as expected
  • Revenue: $6.53 billion vs $6.57 billion expected

Revenue rose 4.9% year over year while net income dropped 30%.

Southwest said it plans to slow its capacity growth in 2024 as it sees moderating travel demand. 

The airline plans to expand its flight schedules 10% to 12% year over year in Q1 2024, down from its previous forecast for as much as 16% growth. 

For the full year, Southwest is planning on 6% to 8% capacity growth. 

Ford, UAW Reach Tentative Deal

Ford Motor (F) shares are rising 2.8% in premarket trade after reaching a tentative deal with the United Auto Workers Union.

The automaker announced the deal to end a nearly six-week strike by the union on Wednesday night. 

It reportedly includes 25% pay increases over the terms of the agreement and will increase the top wage to more than $40 per hour. 

It also includes a 68% increase for starting wages to over $28 an hour. 

The agreement also reinstates cost-of-living adjustments, a three-year path to top wages, and right to strike over plant closures. 

The UAW president said in a video, ″We told Ford to pony up and they did. We won things nobody thought was possible.” 

The deal must be approved by local UAW leaders and ratified by a simple majority of Ford’s 57,000 union-represented workers.

Those currently on strike from Ford will return to work while the approval process occurs.

Q3 GDP Expands More Than Expected

The U.S. economy grew more than expected in the third quarter. 

The Commerce Department reported GDP rose at a 4.9% annualized pace last quarter, up from 2.1% in Q2. 

That was better than expectations for 4.7% growth.

Consumer spending jumped 4%, gross private domestic investment surged 8.4%, and government spending and investment rose 4.6%. 

Consumer spending on goods was up 4.8% while spending on services rose 3.6%. 

Weekly Jobless Claims Rise Slightly

Weekly jobless claims rose slightly more than expected last week. 

The Labor Department reported 210,000 Americans filed initial claims for unemployment benefits. 

That was up by 10,000 from the previous week and higher than expectations for 207,000. 

Continuing claims rose by 63,000 to 1.79 million in the week ending October 14. 

That was the fifth straight weekly increase and the highest level since May.

In Case You Missed It

  • New home sales rose more than expected in September as buyers turn to builders amid a shortage of existing homes for sale. The Census Bureau reported new sales surged 12.3% to a seasonally adjusted annual rate of 759,000 units last month. That was better than expectations for 680,000 units and marked the highest level of new home sales since February 2022. New sales were up 33.9% year over year. The median sales price of a new home sold last month fell to $418,800 from $430,300 in August. The supply of new homes for sale fell 10.4% to a 6.9-month supply. 

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