The US market continues to endure a rollercoaster ride but the S&P 500 and Nasdaq indices still reached record levels on 17 July.
Earlier in the week, speculation President Donald Trump might be about to fire Federal Reserve chair Jerome Powell created real nervousness in the markets but this subsequently eased.
The second-quarter earnings season got off to a decent enough start as the US banks put out their numbers although, despite several names beating expectations, share prices largely struggled to make any progress. The sector having already enjoyed a strong run from their April lows.
Among the gainers was Advanced Micro Devices (AMD:NASDAQ) which benefited from the US government giving the green light to resume sales of certain AI chips to China.
Life science specialist Waters Corp (WAT:NYSE) came under pressure as investors reacted negatively to news of a $17.5 billion deal to acquire Beckton Dickinson’s (BDX:NYSE) biosciences and diagnostic solutions business.
NETFLIX
Streaming giant Netflix may have beaten expectations with its latest quarterly results on 17 July but this was not enough to get the market excited as the shares fell in after-hours trading.
The company also upgraded its full-year revenue and cash flow guidance but that was not enough to sustain the momentum in a share price which has doubled over the last 12 months.
Earnings per share for the second quarter came in at $7.19 versus the $7.08 consensus, while revenue was a smidge higher than anticipated at $11.08 billion versus $11.07 billion. Revenue guidance for the full year was increased from a range of $43.5 billion to $44.5 billion to between $44.8 billion and $45.2 billion and free cash flow is expected to be between $8 billion and $8.5 billion compared with the previous guidance of around $8 billion.
A big driver of the company’s earnings and revenue beat was foreign exchange movements as the company benefited from weakness in the dollar, rather than being driven by increased demand. Full-year margin guidance suggests profitability will ease from here as the company plans to spend heavily to market marquee releases in the second half of 2025, including new series of Stranger Things and Wednesday.
The company continues to expand in live events and is also integrating generative AI which is helping on production costs, is being put to use in visual effects and is helping to tailor recommendations to users.
The advertising business is also taking off, after ad-supported tiers were introduced to the platform in November 2022.
PEPSICO
Sodas and snacks powerhouse PepsiCo (PEP:NASDAQ) put on 2% to $137.95 in pre-market trading after serving up (17 July) forecast-busting second-quarter sales and earnings, as continued positive momentum in the international business offset softer demand for its products in North America.
Sales edged up 1% to $22.73 billion in the quarter, ahead of the $22.27 billion Wall Street was calling for and including organic growth of 2.1%, while earnings per share of $2.12 topped the $2.03 analysts expected.
The big area of disappointment was the North America division, which includes Quaker Foods and Frito-Lay, where volumes fell 1%. However, CEO Ramon Laguarta insisted PepsiCo is accelerating initiatives to improve its North America performance, including ‘more portfolio innovation and cost optimization activities that aim to stimulate growth and profitability’.
As a result, PepsiCo felt confident enough to reiterate its full-year 2025 guidance for low-single-digit organic revenue growth and broadly flat earnings per share.
JOHNSON & JOHNSON
Pharmaceutical and personal care products maker Johnson & Johnson (JNJ:NYSE) put in a sparkling performance this week, beating forecasts and raising its full-year forecast, sending its shares close to their highs for the year.
Revenue of $23.74 billion and adjusted EPS (earnings per share) of $2.77 breezed past the consensus of $22.85 billion and $2.68, leading the firm to increase its full-year sales outlook to a range of $93.2 billion to $93.6 billion against the average analyst estimate of $91.4 billion.
Chief executive Joaquin Duato said growth in the quarter was driven in part by sales of cancer and depression drugs and in part by medical devices, with Abiomed, the unit which makes cardiovascular implants, performing particularly well.
Duato said J&J’s portfolio and pipeline positioned it for ‘elevated growth in the second half of the year, with game-changing approvals and submissions anticipated in areas like lung and bladder cancer, major depressive disorder, psoriasis, surgery and cardiovascular, which will extend and improve lives in transformative ways’.
Asked about tariffs on the analyst call, the chief executive revealed the company now expected a cost of around $200 million rather than the $400 million it had originally forecast in April, although he admitted ‘It’s hard to know what is going to happen ultimately.’
