Should Corporate America Do More To Stop The Socialist Movement?

Let’s call it a lackluster session at best. After hitting new all-time high points, the S&P 500 and the NASDAQ tried, but couldn’t pull away on Wednesday.

That being said, there never was a sense of panic and buyers nibbled at the deepest pullback levels.

Market breadth was largely even, except the 52-week milestones, which saw significantly more new highs than new lows.

Lots of investors are waiting for earnings, including the slate that posted after the close, headlined by Facebook (FB).

The biggest names came through big time.

Facebook (FB)

Management led the company to records in revenue, profits, and users. Even the revelation that management is bracing for a fine in the neighborhood of $3.0 to $5.0 billion from the Federal Trade Commission (FTC ) didn’t bother investors. On the contrary, considering the strength of user growth and activity, it’s clear people don’t mind the bad behavior or money-making efforts of Facebook as long as the product is free.

• Beat: Revenue
• Beat: Earnings
• Beat: Monthly Average Users +8% to 2.38 Billion
• In-Line: Daily Active Users +8%

The company saw mobile ad revenue climb to 93% of the total from 91%, as capital expenditure (CAPEX) investments popped to $3.96 billion. 

The new hip metric was a winner. The Average Revenue Per User (ARPU) climbed to $6.42. The street was looking for $6.39. By the way, the company’s headcount surged to 37,773 +36%, which is huge.

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Microsoft (MSFT)

• Beat: Revenue $30.57 billion
• Beat: Earnings
• Operating income: $10.3 billion +25%
• Returned $7.4 billion to investors via dividends and buybacks

It’s all about the cloud, and boy did the company shine in this business segment - $9.6 billion +41% year-to-year.

Business Segments, Percentage Change Y/Y Constant Currency:

• Office Commercial products and cloud services: +14%
• Office 365 Commercial: + 31%
• Office Consumer products and cloud services: +10%
• LinkedIn: +29%
• Dynamics products and cloud services: +15%
• Dynamics 365: +44%
• Server products and cloud services: +27%
• Azure: +75%
• Enterprise Services: +5%
• Windows OEM: +9%
• Windows Commercial products and cloud services: +20%
• Search advertising excluding traffic acquisition costs: +14%
• Surface: +25%
• Gaming: +7%
• Xbox software and services: +15%

Additional Big Beats

For these stocks and their shareholders, life is a bowl of cherries (at least for today).

• Lam Research (LRCX): Beat on revenue and earnings and hiked current quarter guidance
• Citrix (CTXS): Beat on revenue and earnings and guided higher
• PayPal (PYPL): In-Line on revenue and beat on earnings -revealed users first time (40 million)
• Align (ALGN): Beat on revenue and earnings

   For some shareholders, today will be all about sour lemons.

• Tesla (TSLA) reported last night. The loss of $2.90 was substantially more than Wall Street consensus ($0.69)
• Xilinx (XLNX) also got hammered in after-hours trading after the company posted quarterly financial results

Should corporate America do more to stop the Socialist movement?

Abigail Disney, the great-niece of Walt Disney, has essentially declared war on CEO Robert Iger’s compensation package. His $65 million was an increase of more than 23%, even as the stock went the exact opposite direction last year. Since then, the stock has gotten hot, breaking out to an all-time high. 

Has Iger done enough to justify his paycheck, and are all the scare tactics by the left even close to being honest?

Disney by the Numbers

Revenue Trends:

• 2015: $52.5
• 2016: $55.6
• 2017: $55.1
• 2018: $59.4

I would say without looking at his peers, Iger’s pay seems egregious, but the stock performance has dwarfed his main rivals. 

I think corporate America is blowing it big time. The billions in buybacks in stocks will lose value while management also lays off workers. Disney is not the poster child for this, but it’s an easy target and should get comfortable with the notion it will be a symbol of unbridled corporate greed.

Portfolio Approach

Today’s Session

The market will see the NASDAQ and S&P open higher, but a big miss and poor guidance at 3M (MMM) is weighing heavily on the Dow Jones Industrial Average.

Beyond that problem, I’m thrilled with earnings results in general, but reactions to misses and earnings are so punitive it, underscores how difficult it is to be an investor these days.

Business investments is surging according to the Durable Goods report this morning – this is something that wasn’t supposed to happen this year because the effects of the tax cuts were assumed to be over.