Abbott posted good 3Q results. The company was able to generate revenues of $ 10.9 billion and net income of $ 1.4 per share, which was significantly better than not only our forecasts of $ 9.6 billion and $ 0.94, but also the market consensus of $ 9.6 billion and $ 0.93. Earlier we wrote that we admit that we are too conservative in our assessment of the dynamics of the results for the third quarter. COVID test sales totaled $ 1.9 billion, more than triple our $ 600 million forecast. Excluding COVID test sales, organic sales growth was 11.7% Q3 2019. We love Abbott’s business and keep our valuation at $ 140 per share
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Johnson & Johnson has improved its annual forecast
Johnson & Johnson posted good 3Q results. J&J’s quarterly revenue amounted to $ 23.34 billion against $ 21.08 billion a year earlier, with an average market forecast of $ 23.64 billion. Revenue for the consumer health products division increased 5.3% to $ 3.7 billion, beating market consensus. Pharmaceuticals revenue rose 13.8% to $ 12.99 billion. Pharmaceuticals continued to grow above the market average, overcoming lingering COVID-19 exposure and generic headwinds. Medical device revenues rose 8% to $ 6.64 billion, falling short of market expectations. Net income in July-September rose to $ 3.67 billion, or $ 1.37 per share, up from $ 3.55 billion, or $ 1.33 per share, in the same period last year. Earnings excluding one-off factors were $ 2.6 per share, beating the consensus forecast of $ 2.35 per share.
The company ramps up investments in the hydrogen economy
Air Products and Chemicals announced plans to invest $ 4.5 billion to build the world’s largest blue hydrogen (H2) plant in East Louisiana with a total production capacity of approximately 1,850 tonnes per day. The company intends to build and commission its own 700-mile pipeline to export its products around the world. The project, which is slated to launch in 2026, will be the third low-carbon H2 megaproject in the company’s last 1.5 years. At present, Air Products and Chemicals’ investment program for the development of capital investments in the low carbon H2 segment will be approximately $ 9 billion. The company’s total production capacity by 2026 will be able to increase to 4 thousand tons per day. By comparison, Plug Power has confirmed its plan to produce 500 tonnes of green hydrogen per day by 2025 and over 1,000 tonnes per day by 2028.
We were optimistic about the results of the symposium
Plug Power hosted a symposium late last week announcing further plans to build a “hydrogen pipeline” or holistic hydrogen ecosystem in the US and around the world. We were optimistic about the results of the event and believe that the announced plans will allow the company to strengthen its financial profile by increasing revenue in new areas of activity. The company has expressed confidence in meeting or even exceeding its financial targets for 2024. We increasingly believe in the corporate transformation of the company as it expands into adjacent verticals such as stationary power and fuel. We believe that the company’s expertise in logistics solutions can be used for other areas of growth. We maintain a positive attitude towards the Plug Power business. Our target estimate for the fair value of the company’s shares is $ 41.
Best week in the past three months
American indices ended last week with growth, and the dynamics turned out to be the best over the past three months. The capitalization of the S&P 500 increased 1.8%, while the Nasdaq 100 rose 2.2%. In recent weeks, investors have been worried about the situation around the rise in energy prices, disruption of supply chains and inflationary expectations. However, the corporate reporting season, which traditionally begins with the results of the largest banks, has inspired optimism among investors. Quarterly financial results exceeded market expectations, as banks demonstrated strong profitability due to the release of loan loss provisions created during the lockdown last year and an increase in income from investment banking, including M&A transactions. The market will continue to closely monitor corporate reports throughout the week, especially for the results of the largest technology companies, which may set the further trajectory of the movement of stock indices. We believe that during the current week the market indicators will continue to rise, however, we assume that there may be unpleasant surprises in the reporting season, due to which the volatility increases.
Better-than-expected results, but disappointing 4Q forecast
As we expected, Delta Airlines’ 3Q results turned out to be better than expected, however, investors were alarmed by rather conservative expectations of management for 4Q, which provoked sales in the company’s shares, which led to a 5% decrease in capitalization at the end of yesterday’s trading session. Delta’s adjusted net income per share for the past quarter was $ 0.3 versus our estimate of $ 0.21. Adjusted operating revenue excluding refinery sales was $ 8.3 billion, 66% of 2019 levels. Management noted that domestic flights and flights to Latin America continued to recover moderately, but transatlantic flights showed the best performance in the third quarter. Compared to 2019, domestic flights decreased by 28%, international flights by 58%, and transatlantic flights by 65%. The management said corporate flights dismantled good performance in July, but stopped growing in August and September.
Good results, but revenue fell short of consensus
Domino’s Pizza in the third quarter of fiscal year 2021, which ended on September 12, increased its net profit by 21.5%, but received worse-than-expected revenue, which triggered a drop in quotations, but towards the end of the trading series, the decline in securities was practically bought out. Domino’s Pizza’s revenue grew 3.1% to $ 998 million versus $ 967.7 million a year earlier, slightly below the consensus forecast of $ 1.04 billion. Net income rose to $ 120.4 million, or $ 3.24 based on share, up from $ 99.1 million, or $ 2.49 per share, received in the comparable period last year. Adjusted earnings were also $ 3.24 per share, better than market expectations of $ 3.11 per share.
SpaceX
Last week, SpaceX’s valuation topped $ 100 billion in a secondary stock sale. Current investors sold 755 million shares at $ 560 each. Thus, during the deal, SpaceX did not raise new capital funds. The new estimate is 33% higher than the previous $ 74 billion, which Elon Musk’s company received during the last investment round in February this year. Then the company managed to sell 850 million shares and raise almost $ 1.2 billion. Since SpaceX is not a public company, it is not obliged to disclose for what purpose the new capital is being raised. However, information appeared in the media that the space company intends to invest in the development of its Starship and Starlink projects. It is noteworthy that in September of this year, SpaceX successfully launched a crew into space, consisting entirely of space tourists. For the first time in history, civilians went into orbit without professional astronauts.
Starlink is developing high-speed internet that can be accessed from anywhere in the world. To date, SpaceX has launched 1,740 satellites into orbit as part of this project. As part of the public beta testing, the Starlink network is used by more than 100 thousand people in 14 countries around the world. The subscription fee is $ 99 per month. The preferred configuration for covering the entire planet with the Internet has almost 30,000 satellites deployed at nine altitudes, ranging from 340 km to 614 km. SpaceX noted that it has significantly improved the engines of its satellites, as well as the control system, so the risk of collision with large objects in orbit is practically zero. The Starlink project is expected to cover the earth’s axis closer to 2027.
Starship is the next generation reusable launch vehicle for space travel to transport passengers and cargo into orbit and to the surface of the Moon and Mars. SpaceX has successfully completed several short Starship test launches in South Texas. The company is currently awaiting regulatory approval for a test flight into Earth orbit. The Falcon 9 rocket can carry 60 Starlink satellites into orbit simultaneously, while the Starship can transport 400 satellites at once.
SpaceX got serious about in March 2017, when the company managed to vertically land its rocket and then reuse it. Rocket reuse is fundamental to the availability of space exploration as it drastically reduces the cost of a flight. In May 2019, SpaceX received an estimate of $ 33 billion during the next investment round, following which the company was able to raise $ 536 million. Thanks to the successful development of the Starlink and Starship projects, the company’s value tripled in 2.5 years.
Space exploration is a capital-intensive business that will not be profitable anytime soon. Nevertheless, there is high competition in the market, since the winner will not only manage to skim the cream off the market, but also run a highly profitable business with high barriers. SpaceX competes with Blue Origin, founded by billionaire Jeff Bezos, founder of Amazon, United Launch Alliance, created by aerospace giants Boeing and Lockheed Martin, sensational Virgin Galactic, created by Richard Branson, founder of the famous Virgin brand, as well as other lesser-known companies and government organizations from different countries.
We Raise Our Target Valuation for Airbnb Stock
We’re raising our target price for Airbnb stock from $ 160 to $ 220. First, we expect the growth of the alternative housing market to continue in the long term. According to our estimates, the share of alternative housing in the global rental market has increased from 24%, recorded before the pandemic, to 33% as of now, and almost peaked in absolute terms at $ 200 billion. According to our estimates, the traditional rental market, on the contrary, has declined in 2021 by 40% to $ 400 billion, while at the end of 2019 its volume was $ 640 billion. The change in consumer preferences during the pandemic will continue to support the alternative housing market and Airbnb’s business in particular.
Constellation has improved its forecast for the 2nd half of the 2022 fiscal year
Constellation Brands posted strong results for the second quarter of fiscal 2022, primarily driven by its brewery division. Beer shipments in the last quarter increased by 12% yoy primarily due to the strong dynamics of the Modelo division, whose sales increased by 16%, while the Corona division, which accounts for 11% of the beer portfolio, showed more modest growth rate at the level of 3%. Constellation Brands management improved its beer division revenue forecast by 2H21 from 7-9% to 9-11%. Revenues from the sale of wines and spirits increased by 15% year-on-year. Expectations for the division’s revenue growth in 3Q22 remain high on the back of the expansion of the product line, including wine seltzer, as well as the geographic expansion of the SVEDKA RTD division. Due to worsening sales in the “strong seltzers” category, the company made a one-time write-off of $ 80 mn and slightly downgraded its forecasts for the next quarter. The management plans to reduce the focus on this segment while, according to the press release, Constellation Brands’ medium-term sales growth rates are not based on the dynamics of the “strong seltzer” category.