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- Mid-Week Wrap-Up - October 23rd, 2024
Mid-Week Wrap-Up - October 23rd, 2024
McDonald's E. coli outbreak, Starbucks slumping sales, Coca-Cola earnings, and more
CMG Venture & Mark Roussin
October 23, 2024
Good morning investors!
If this is your first time reading, welcome to The Investor’s Edge — a thriving community of over 20,000 subscribers striving to be better investors with an edge in the market.
Every Wednesday we publish “The Mid-Week Wrap-Up” — your ticket to being well informed and staying ahead in the investment game!
This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.
This article is designed to truly give you that EDGE in the day ahead!
Grab your afternoon pick me up and let’s dive in.
Market Talk
The major indexes are lower to start the week as surging treasury yields are putting pressure on equities.
3 Stories Moving the Market
These are some of the biggest stories so far this week that are having an influence on market action.
McDonald's shares fell nearly 7% after the CDC linked an E. coli outbreak to the company's Quarter Pounder burgers.
The outbreak has resulted in 49 reported cases across 10 states, with 10 hospitalizations and one death in Colorado.
The CDC believes slivered onions, used in the Quarter Pounder and sourced from a single supplier, may be responsible. McDonald’s has removed slivered onions from affected restaurants and paused distribution of the ingredient.
Quarter Pounders will be temporarily unavailable in several Western states. Other menu items, including McDonald's cheeseburgers and Big Macs, are not affected.
👉 EDGE ALERT: While the McDonald’s headlines may seem alarming, this…upgrade to Edge+ to read the full Edge Alert.
📊 EDGE SCORE: We are giving our Edge members a front row seat as we build out the Edge Score Dashboard. This feature will be available for Edge+ members very soon.
Let us know what you think and if you’d like to see any additional information in the dashboard.
Here’s a look at McDonald’s Edge Score:
Starbucks is facing challenges as its latest preliminary results show a 3% drop in net sales to $9.1 billion and adjusted earnings per share of $0.80, falling short of analysts' expectations.
The company attributed the weak performance to declining demand, especially in North America, where same-store sales fell 6% and traffic dropped 10%, despite efforts like more promotions and a broader product range. In China, Starbucks' second-largest market, same-store sales plunged 14%, driven by rising competition that is shifting consumer behavior and forcing the company to rethink its strategy.
CEO Brian Niccol emphasized the need for a fundamental strategy shift under the "Back to Starbucks" plan, aimed at simplifying the menu, fixing pricing, and improving service. He acknowledged these issues are fixable and believes Starbucks has strengths to build on.
However, the company has suspended its fiscal 2025 outlook due to the recent CEO transition and the current state of the business.
📚 EDGE-UCATION: What is outlook or guidance in earnings reports?
Outlook or guidance in the context of earnings reports refers to the company's expectations for its future financial performance, typically for the upcoming quarter, year, or longer-term period. It includes projections or estimates on key metrics such as revenue, earnings per share (EPS), profit margins, and sometimes other factors like capital expenditures, operating costs, or market trends that could affect the business.
Guidance serves as an indicator of the company's confidence in its future prospects and helps investors understand management's expectations. It can significantly impact stock prices, as investors compare the guidance with their own expectations or those of analysts. Positive or upward guidance often boosts investor confidence and can lead to a rise in the company's stock price, while lower or suspended guidance, as seen with Starbucks, can have the opposite effect, leading to a stock decline.
Key elements of earnings guidance might include:
Revenue Projections – Expected sales growth or decline.
Earnings Estimates – Anticipated earnings per share (EPS).
Margin Expectations – Projected operating or profit margins.
Market Conditions – Factors that might affect the business, like competition or economic trends.
Guidance helps shape market expectations and is an important tool for managing investor sentiment.
📊 EDGE SCORE: Here’s a look at Starbuck’s Edge Score:
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Coca-Cola tops earnings estimates, as higher prices offset sluggish demand
Coca-Cola reported strong quarterly earnings and revenue, exceeding analysts' expectations due to higher prices that compensated for weakening demand.
The company posted net income of $2.85 billion, or $0.77 per share, down from $3.09 billion a year ago, but adjusted net sales were flat at $11.95 billion. Organic revenue rose 9%, despite a 1% drop in unit case volume, reflecting lower demand in some international markets.
In North America, volume was flat as declines in water, sports drinks, coffee, and tea were balanced by growth in soda, juice, and plant-based beverages. However, unit case volume fell 2% in regions like Europe, the Middle East, Africa, and Asia Pacific, particularly in China and Turkey.
Globally, Coke’s sparkling soft drinks and soda volumes were flat, while other segments, such as juice and water, saw declines. Coca-Cola raised prices by 10%, with inflation in markets like Argentina contributing 4% of that increase.
For 2024, the company expects organic revenue growth of around 10%, with earnings per share projected to rise 5% to 6%.
📊 EDGE SCORE: Here’s a look at Coca-Cola’s Edge Score:
In Other News
In this section we'll be curating a selection of news headlines we think you'll find interesting. If a topic catches your eye, click the provided links to read more about it.
Boeing reports $6B quarterly loss with big union vote looming
Qualcomm shares fall 5% after report of Arm threat to scrap key license in escalating dispute
Verizon Stock Falls as $2B in One-Time Costs Drag Earnings Lower
AT&T exceeds wireless subscriber estimates on demand for premium plans
Mortgage demand drops to its lowest level since July, as interest rates return to summer highs
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The Second Half
There are several major companies still to report earnings this week, while PMI data, jobless claims, new home sales and consumer sentiment will be in focus on the economic news front.
Earnings Reports
There are still some major earnings this week. At the Investor’s Edge we will be watching Tesla, IBM, Lam Research, UPS, Union Pacific, Tractor Supply, and L3Harris.
Here is the calendar of earnings releases scheduled for the rest of the week:
Source: Earnings Whisper
Economic Reports
The PMI report will be the main focus as we close the week, though there will also be the latest initial jobless claims data, a few housing reports and consumer sentiment.
Here is the full calendar of events scheduled for the remainder of the week:
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Thank you for reading this edition of the Mid-Week Wrap-Up.
Until next time investors!
Mark & Chris
The Investor’s Edge
Disclosure
This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.
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