My top 10 things to watch Friday, December 9, 2022 1. Wholesale inflation: JUST PLAIN BAD. The government says November producer prices rose 0.3% overall against a forecast 0.2% rise. Excluding food and energy double estimate of core rates: +0.4%. US stock futures, up sharply before the numbers, fell after the release. Bond yields are rising. Consumer prices for November are released Tuesday morning when the Federal Reserve’s two-day December meeting begins. The PPI keeps the pressure on the Fed. Food inflation mitigated by Costco. 2. Costco (COST): Total revenue of $54.44 billion for the first quarter of fiscal 2023 and earnings per share of $3.07 – both missed estimates. Dues revenue was $1 billion. EPS includes a 15 cent charge to reduce the fleet and a 12 cent drag due to the strong dollar. Booming food trade. Inflation: a bit of light at the end of the tunnel. The prices of corn, flour, sugar, butter are all lower, even steak. Temporary discounts work: TV sales up, but smaller screens. Looking ahead, we are encouraged by the planned increase in membership fees and the special dividend. Costco hopes to open 24 net stores this fiscal year. Wall Street analysts cut their price targets, including at Citi, Stifel, Wells Fargo and Loop Capital. 3. The FTC is suing to block Microsoft’s (MSFT) proposed purchase of video game company Activision Blizzard (ATVI) for $68.7 billion. Reacting to the government’s antitrust allegations, Microsoft said, “We have been committed from day one to resolving competition issues, including making proposed concessions to the FTC earlier this week.” The software and cloud giant is eagerly awaiting legal action. 4. Deutsche Bank upgrades Club holding Estee Lauder (EL) to buy on hold. Analysts cite as positives: Tom Ford, relaxed China Covid policies. Price target raised to $266 per share from $209. 5. Lululemon (LULU) shares fall 7% premarket. The third quarter beats on revenue and EPS. But a little light indications on the T4. But how weak is the company really? Inventory at the end of the third quarter was $1.7 billion, a year-over-year dollar growth of 85%. Total comparable store sales up 22% vs. an expected 19% increase. The breakdown at constant exchange rates is a 17% increase in stores and a 34% increase in digital. Management is pleased with the start of the busy holiday shopping season. 6. Broadcom (AVGO) announces better than expected quarterly results, optimistic forecasts and an increase in the dividend. Semiconductor solutions provider’s network revenues are strong; strong hyper-scale; complete. 7. Citi raises 3M (MMM) price target to $126 per share from $117; still sees favorable budgetary winds emerging. Citi analysts raised PTs on a range of other industrials, including Club holding Honeywell (HON). 8. Wells Fargo puts Netflix (NFLX) at equal weight overweight (pending buy), raising its price target to $400 per share from $300. 9. Baird raises price target for RH (RH), formerly known as Restoration Hardware, to $300 per share from $275; keep a neutral note. Analysts note a beat in the third quarter and an increase in forecasts. 10. Chewy (CHWY): Better than expected quarter and higher expectations. Non-discretionary consumables and strong health care. Automation pays off. Ended the third quarter with 20.5 million customers. (Jim Cramer’s Charitable Trust is long COST, MSFT, EL, and HON. See here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a transaction. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
My top 10 things to watch Friday, December 9, 2022
1. Wholesale inflation: JUST PLAIN BAD. The government says November producer prices rose 0.3% overall against a forecast 0.2% rise. Excluding food and energy double estimate of core rates: +0.4%. US stock futures, up sharply before the numbers, fell after the release. Bond yields are rising. Consumer prices for November are released Tuesday morning when the Federal Reserve’s two-day December meeting begins. The PPI keeps the pressure on the Fed. Food inflation mitigated by Costco.
2.Costco (COST): Total revenue of $54.44 billion for the first quarter of fiscal 2023 and earnings per share of $3.07 – two missed estimates. Dues revenue was $1 billion. EPS includes a 15 cent charge to reduce the fleet and a 12 cent drag due to the strong dollar. Booming food trade. Inflation: a bit of light at the end of the tunnel. The prices of corn, flour, sugar, butter are all lower, even steak. Temporary discounts work: TV sales up, but smaller screens. Looking ahead, we are encouraged by the planned increase in membership fees and the special dividend. Costco hopes to open 24 net stores this fiscal year. Wall Street analysts cut their price targets, including at Citi, Stifel, Wells Fargo and Loop Capital.
