Making sense of the markets this week: November 12, 2023 – MoneySense

Disney (and most U.S. companies) surprise to the upside

With 88% of companies in the S&P 500 having now reported results, nearly 9 in 10 have surpassed earnings estimates. Consumers continue to feel worse about the economy, and companies just continue to make more money. It’s quite an odd time to try to make sense of the markets.

U.S. earnings highlights

This is what two American companies reported this week. All figures below are in U.S. dollars.

  • Uber (UBER/NASDAQ): Earnings per share of $0.10 (versus $0.12 predicted), and revenues of $9.29 billion (versus $9.52 billion predicted). 
  • Disney (DIS/NYSE): Earnings per share of $0.82 (versus $0.70 predicted), and revenues of $21.24 billion (versus $21.33 billion predicted).

Disney’s outperformance was chiefly due to ESPN+ subscriptions and continued revenue increases at theme parks. Investors appear to be big supporters of CEO Bob Iger’s announcement that Disney will “aggressively manage” its costs and will now be targeting $7.5 billion in cost reductions (up from a $5.5 billion target earlier in the year). Shares were up 4% in after-hours trading on Wednesday. 

“As we look forward, there are four key building opportunities that will be central to our success: achieving significant and sustained profitability in our streaming business, building ESPN into the preeminent digital sports platform, improving the output and economics of our film studios, and turbocharging growth in our parks and experiences business.” 

— Disney CEO Bob Iger

Uber, on the other hand, had a more subdued day. The earnings miss was contextualized by CEO Dara Khosrowshahi, when he pointed out that gross bookings for people-moving mobility were up 31% year over year (YOY), while UberEats gross bookings were up 18% YOY. The markets appeared to agree with Khosrowshahi’s spin, as shares were up 3% on Tuesday, despite the earnings news.

Canadian fossil fuels profitable—for now

Despite a United Nations report stating that Canadian fossil fuels should be kept in the ground, the sector continued right on pumping out profits this quarter. 

Canadian earnings highlights

Here’s what came out of the earnings report. 

  • Keyera Corp. (KEY/TSX): Earnings per share of $0.36 (versus $0.50 predicted). Revenue of $1.46 billion (versus $1.60 billion estimate).
  • TC Energy Corp. (TRP/TSX): Earnings per share of $1.00 (versus $0.98 predicted). Revenue of $3.94 billion (versus $3.91 billion estimate).
  • Suncor Energy Inc. (SU/TSX): Earnings per share of $1.52 (versus $1.36 predicted). Revenue of $12.64 billion (versus $12.85 billion estimate).

While accounting changes at Keyera resulted in an earnings-per-share miss, shareholders appeared to take the news in stride. Share prices were down less than 1% on Wednesday. Management highlighted the Pipestone expansion being on track and to be completed in the next two months, as well as a recent credit upgrade. The company was in great shape going forward. With net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) at 2.5 times, the company is on the conservative side of its 2.5- to 3-times target range.

TC Energy was up nearly 1% on the day after positive earnings news and the announcement that the new Coastal GasLink was completed ahead of the year-end target. Management also stated that it is taking steps to strengthen the company’s balance sheet, including selling off $5.3 billion in asset sales that will be used to pay down debt.

Despite total barrels of oil produced falling from 724,100 to 690,500 in last year’s third quarter, Suncor outperformed expectations and shares rose 3.7% on Thursday. Investors were forgiving in the decrease of adjusted earnings due to lower crude oil prices and increased royalties.

The company attributed the decrease in adjusted earnings to lower crude prices and a weaker business environment, as well as increased royalties and decreased sales volumes due to international asset divestments.

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