Earnings Week Roundup (Highlights)

Wanted to go through some of the highlights from the earnings plays this week as a lot of them effected positions we hold in the portfolio.

Apple

• Revenue: $89.58 billion versus $77.3 billion expected
• Earnings per share: $1.40 versus $0.99 expected

This company continues to be a monster with a pretty large beat in my eyes. The market seemed to be less impressed as it actually didn’t move much after the earnings beat, but I’m actually a little surprised with this kind of quarter as they really over delivered in every single product line.

And then another cherry on top is that dividends are being increased and a $90 billion dollar share buy back has been authorized. You read that right…$90 billion 🙂

“Apple’s board of directors has declared a cash dividend of $0.22 per share of the Company’s common stock, an increase of 7 percent. The dividend is payable on May 13, 2021 to shareholders of record as of the close of business on May 10, 2021. The board of directors has also authorized an increase of $90 billion to the existing share repurchase program.”

Google

• Revenue: $55.3 billion versus $51.7 billion expected
• Earnings per share: $26.29 versus $15.88 expected

Another big tech name that beat on both top and bottom line was alphabet with some highlights in YouTube ad revenue as well as just general ad spend.

Plus we saw a nice margin expansion (slightly influenced by depreciation change, but still improving).

Also they are in the same page as apple with buy backs. On April 23, 2021, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $50.0 billion of its Class C capital stock.

Still holding my shares.

Facebook

• Revenue: $26.17 billion vs $23.72 billion estimated
• Earnings per share: $3.30 vs $2.61 expected

These results I was most excited to see as it is the largest position in the portfolio. They increased their average price of ads by 30% while delivering 12% more ads year over year for the quarter.

From the above the most exciting number again goes to that 1000 basis point expansion in operating margin! That is just insane to me and why I love tech companies. The number of daily/monthly users has still been growing but at a smaller pace which is expected as the law of large numbers applies. They also mentioned a possibility of headwinds around upgrades for 14.5 IOS upgrade, which we will have to watch in following quarters to see how much of an impact they believe that will have. 

Overall the numbers all seem to be going in the right direction.

Microsoft

• Revenue: $41.7 billion vs $41.03 billion estimated
• Earnings per share: $1.95 vs $1.78 expected

Of the larger tech companies, Microsoft definitely came most inline with expectations. Across all their segments they saw growth and the CEO expects the “digital adoption curve” to accelerate coming out of Covid.

This PowerPoint lays out all the highlights in more details:

https://view.officeapps.live.com/op/view.aspx?src=https://c.s-microsoft.com/en-us/CMSFiles/SlidesFY21Q3.pptx?version=11362add-c471-ec0b-e3c3-ca466892f4cd

The main takeaways would be for me is that Azure cloud revenues are up 50% with the company continuing to position itself for the continued surge in the space over the next 10 years.

Needless to say, I’m buying this stock on any massive pullbacks. For me that would be around the $235-$240 level.

Teladoc

• Revenue: $453.7 million vs $451.9 million estimated
• Earnings per share: $1.31 loss vs $0.54 loss expected

I think it is a common scene in the growth stocks as of late to hit expectations on growth but get hammered. The stock is off about 10% today and I think part of it is due to it hitting revenue, but clearly not paying attention as much to the bottom line with the costs.

Because if I look at guidance nothing has changed from my assumptions when buying the stock at the $170 level. And while the stock still doesn’t trade at a massive discount, I think it still continues to trade around fair value. I expect competition to be a threat to the company, but I will continue to look at the revenue projections and actualization to see if they are hitting their expected targets. So far the 2021 full year guidance is still in line.

Flowers.com

• Revenue: $474 million vs $393 million estimated
• Earnings per share: $0.02 gain vs $$0.09 loss expected

So with flowers, the thesis I had created a week back is holding true. The company continued to see benefits related to Covid in the first quarter and actually made money in a quarter that historically loses (as they make most of their profits in Q4 of each year).

Overall the results we’re solid and the also announced a share buyback program of $40 million, which will also help return value to shareholders. Overall I still hold my $33 price target as the company has delivered and expects FY revenues of around $2 billion in revenue which is in line with my projected model.