After a difficult February, US stocks made a reasonable start to March as rate expectations continue to fluctuate.
Hints from Raphael Bostic, the president of Atlanta's Federal Reserve Bank, that rates might not move much higher than 5.25% from the current 4.75% soothed investors who were getting concerned rates were heading higher for longer.
Software firm Salesforce (CRM:NYSE) was the week's big winner but fertiliser firm Mosaic (MOS:NYSE) and DexCom (DXCM:NASDAQ) also made double-digit gains. The latter, which makes glucose monitoring systems for diabetes management, was boosted as the US Medicare system announced it would expand its coverage on the monitors for a broader group to people with type 2 diabetics in April.
TV provider DISH Network (DISH:NASDAQ) lost further ground as it continued to feel the impact of a recent ransomware attack. Hospital and healthcare operator Universal Health Services (UHS:NYSE) was also under pressure as it faced higher staffing costs thanks to a shortage of nurses and other medical professionals.
SALESFORCE
Enterprise software firm Salesforce (CRM:NYSE) shares surged more than 15% after reporting fourth-quarter results that trumped consensus expectations. Earnings per share, EPS, of $1.68 and revenue of $8.38 billion substantially beat the $1.36 and $8 billion expected by analysts.
Subscription and support revenues, by far its main sales driver, increased 14% year-on-year to $7.79 billion, sending reassuring signals to investors over software spending. In Q1 of fiscal 20224, Salesforce expects EPS of about $1.60, better than the consensus of $1.32, on revenue predicted to fall between $8.16 billion and $8.18 billion, compared to the consensus of $8.05 billion.
In the wake of the results there were widespread forecast upgrades, with analysts at BMO Capital raising its target price for the stock from $185 to $230, in line with JPMorgan analysts. Jefferies placed a $250 target on the shares.
COSTCO
Wholesaler Costco (COST:NASDAQ) saw its shares slip after-market following a disappointing second-quarter trading update.
For the three months to February, the firm posted a 6.5% rise in revenue to $54.2 billion, missing analysts' estimates of $55.6 billion, with ecommerce sales down by double digits due to lower demand for non-essential items.
‘We've seen some weakness in big-ticket discretionary items’, said chief financial officer Richard Galanti, singling out electronics and housewares as two of the worst-performing categories during the quarter.
Online sales of items like appliances and computers fell by 15% in the second quarter, while in-store sales were down 11% on the previous year.
In food, the firm noted it had seen higher demand for its own-label products which is consistent with shoppers trading down due to the cost-of-living crisis.
Retail giant Walmart (WMT:NYSE) warned last week consumers were shifting their spending towards essentials like food and consumables and away from discretionary purchases.
MONSTER BEVERAGE
Shares in Monster Beverage (MNST:NASDAQ) were flat on the week at $101.30, falling before recovering after the energy drinks developer and seller's fourth quarter sales and earnings (28 February) missed expectations as revenue growth slowed and operating margins were squeezed.
Sales bubbled up 6.2% to a record $1.51 billion in the three months to December 2022, but this was shy of estimates as overseas sales were translated back into the strong US dollar, while operating income fell from $412.9 million to $394.4 million year-on-year amid higher warehousing and other costs.
Encouragingly however, sales growth accelerated again in January and management sounded more positive about the margin environment and outlook than in previous quarters.
Vice chairman and co-CEO Hilton Schlosberg said he was pleased to report ‘another quarter of continued revenue growth’ and stressed the energy drinks category continues to ‘expand globally’. Schlosberg added that gross margins had increased ‘on a sequential quarterly basis’ thanks to price increases and ‘certain of our supply chain challenges moderating’.
