There’s been a lot of talk about American exceptionalism, and it has undoubtedly helped deliver a strong run for US markets over the past year, but macro data continues to set a tone of confusion. US CPI inflation data over the past week was OK, but core CPI got slightly better, and this discrepancy does little for clarity.
It begs the question of how long the stock market run can last and whether Donald Trump’s form of isolationism will be a boon or a curse, but as a host of Wall Street banks delivered robust and even record-breaking profits, no one is really thinking about the answers just yet.
JPMorgan Chase (JPM:NYSE), Wells Fargo (WFC:NYSE), Goldman Sachs (GS:NYSE), and Citigroup (C:NYSE) all reported better-than-expected earnings, on largely better revenues (barring Wells Fargo). This comes as banks benefit from the optimism of major companies about the economy and the upcoming presidency of Donald Trump and the greed to borrow to finance large projects in addition to the acceleration of growth in investment banking businesses, according to The Wall Street Journal.
Deal making is back with a vengeance and if the incoming president follows through on promises for deregulation and lower taxes, the outlook for 2025 will continue to generate a lot of excitement among banking bosses.
Goldman Sachs chief executive David Solomon talked up a ‘meaningful shift in CEO confidence’ post-election while JPMorgan Chase’s Jamie Dimon spoke of business optimism leading to hopes of more favourable conditions to come.
SHAKE SHACK
Investors lost their appetites for Shake Shack (SHAK:NYSE) this week, shares plunging 13% to $117 after the burger chain served up (13 Jan) long-term forecasts that appeared to indicate a coming growth slowdown.
Led by former Papa John’s boss Rob Lynch, the fast-casual restaurant chain said it now sees potential for at least 1,500 company-operated stores over time. That represents a massive upgrade on the 450-target provided at the time of the company’s 2015 IPO (initial public offering).
However, Shake Shack also set out three-year targets pointing to low teens percentage annual revenue growth and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) growth in the low to mid-teens percentage range. Eagle-eyed investors spotted these targets were below the 15% year-on-year sales growth and 48% adjusted EBITDA growth Shake Shack cooked up in the fourth quarter to 25 December 2024.
MODERNA
Moderna (MRNA:NASDAQ) was the biggest faller in the S&P 500 index this week, plunging more than 20% after the biotechnology firm slashed its 2025 sales forecast by a billion dollars and increased cost savings plans.
Ahead of presenting at the J.P. Morgan annual healthcare conference on Monday (13 Jan) the company projected annual 2025 revenue of between $1.5 billion to £2 billion, down from $2.5 billion to $3.5 billion previously.
The company said it aims to deliver one billion of cost savings in 2025 and plans an additional $0.5 billion in 2026. It expects to end 2025 with cash and investments of approximately $6 billion.
Analysts at Berenberg believe the latest downgrade to forecasts indicates Moderna is losing Covid-19 market share faster than anticipated.
Noting management’s guidance of $6 billion of annual revenue to achieve breakeven, Berenberg believes Moderna will likely need to raise capital or cut spending more aggressively than planned.
On a positive note, Berenberg sees increasing risk from a takeover by a large pharma company looking to add Moderna’s leading mRNA platform to its portfolio.
AIR PRODUCTS & CHEMICALS
It was a week of mixed fortunes for US industrial gas giant Air Products & Chemicals (APD:NYSE). The company’s first quarter earnings of $2.96 billion beat analysts’ expectations sending shares 5% higher, over the past year shares have gained 18% to $308 (at the time of writing).
However, boardroom troubles are brewing for the US industrial gas giant.
Activist investor Mantle Ridge wants Air Products to lay out a succession plan for its ‘ageing’ CEO, who has served at the helm for a decade, allocate its capital differently and scale back on risky projects. The only way Ridge and others can action this is for him and other activist investors to win seats on Air Products nine-member board.
On 13 January, Ridge won support from a second proxy advisory firm – ISS (Institutional Shareholder Services) who want Ridge and four of his directors to be elected to the Air Products’ board.
In addition, last week another proxy advisory firm Glass Lewis urged investors to elect all four directors supportive of Ridge to the board at Air Products annual meeting scheduled for 23 January. Air Products responded to shareholders saying the election of any Mantle Ridge nominee ‘could create extraordinary confusion’ for investors about the direction and leadership of the company.
