Earnings Roundup: MSFT, SN, FTAI
It’s a down day for the broad market and, unfortunately, our three recently reporting companies.
This is a step back day, but nothing in the reports of these companies causes me to question the health of their businesses. That means we’re sticking with them but will be monitoring shares closely for any signs of ongoing weakness in the days ahead.
On to the reports:
SharkNinja (SN) is selling off despite a beat and raise Q3 report. Revenue grew 35% to $1.43 billion (beating by 9.2%) while EPS of $1.21 beat by $0.08. Management raised full-year guidance, saying revenue should be +27% to 28% (was +22% to 24%) to $5.22 - $5.26 billion (consensus was $5.23 billion) and EPS should be $4.13 - $4.24, the high end of which matches consensus.
It may be that EPS guidance is a bit shy of what the market wanted, but there was also some talk about diversifying production outside of China to mitigate tariff risk in 2025. That “strategy” probably isn’t so important if Harris wins next week.
Management is calling for lots of new products next year, including 15 expected in Q3 2025. They are also revamping the e-commerce site.
The word on the Street is that SN just ran too hot into earnings and this is a buyable pullback. I don’t disagree but am not jumping on the stock today. Let’s let things settle down then consider moving back to buy. HOLD HALF
FTAI Aviation (FTAI) came into yesterday’s earnings report trading near all-time highs, and shares are giving a bit back today after delivering a $15 million EBITDA beat ($232 million) and EPS of $0.76, a penny shy of consensus. As is typical from FTAI, the press release didn’t give a ton of details, but more were given on the conference call (held this morning).
Flipping to that, management talked about a record quarter for onboarding new customers (19 new) and no evidence of customers reverting to old maintenance methods. So far so good. The new FTAI Canada business included a couple low/no-margin contracts, and that drove the margin underperformance in the quarter but should normalize after the end of Q4. Longer term, management sees margin expansion through price increases, cost cutting and efficiency gains, including a 3X output in FTAI Canada with a similar workforce to now (can’t wait to hear more about this!). Management also expects to enter Asian markets. We came into earnings with a hold rating and are sticking with that for now, but we’re getting tempted. We’re up 115%. HOLD
Microsoft (MSFT) shares are also having a tough day (-5%) after the company beat on both the top and bottom lines. The “issues” are that Azure growth is expected to decelerate into the next quarter, and losses in OpenAI will drag on MSFT’s bottom line for several quarters ahead.
On the flip side, the Azure slowdown is supposedly due to limited supply, not demand, and management discussed more supply coming on in future quarters, so this should be a temporary headwind. Few analysts are going to move MSFT from a “Buy” to a “Sell” on this report, though a few are saying they don’t see the stock doing much in the near term.
I don’t disagree with that, especially given some uncertainty around how next week’s election will pan out. If you’re an investor, I say stick with it and look to buy once the market settles down. MSFT stock is back to where it was three weeks ago. Looking for it to firm up here. BUY
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
