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Earnings Summary: AMD Jumps, Ebay Dumps, Visa Stumbles, Starbucks Rumbles

Courtesy of ZeroHedge View original post here.

It's a tale of two worlds after hours, when Starbucks jumped and Visa slumped after reporting calendar Q2 earnings.

Starting with the former, Starbucks reported a 46 cent loss in fiscal Q3, down sharply from the 32 cent profit a year ago if better than the 62 cent consensus loss, due to a deep sales decline in its latest quarter, with consumers buying more per order, but visiting much less frequently. Global same-store sales tumbled by a record 40% in the quarter, which also was just slightly better than the 42% expected. Revenue, meanwhile, was $4.2 billion, better than the $4.06 billion estimate.

Some more Q3 details:

  • Americas comp -41%, estimate -43%
  • International comps -37%, estimate -42.5%
  • China comps -19%, estimate -21.7%

While global comparable store sales fell 40% in the quarter, average tickets grew by double digits across all markets, rising by 25% on average in the US. As Bloomberg notes, "the idea here is families or individuals who are placing to-go orders are placing bigger orders. Importantly for Starbuck’s top and bottom lines, that’s helped to offset a severe drop in global comparable transactions (which fell 51% in the quarter)." The company also said that 97% of its company-operated stores are open globally, while 87% of licensed stores are open (such as locations inside airports and colleges.)

On the uglier side, GAAP operating margins contracted to -16.7%, down from 16.4% in the prior year which the company claimed was primarily due to the Covid-19 outbreak. There was also some impact from restructuring activities associated with U.S. Stores.

When it comes to margins in this Covid quarter, of all quarters, investors may be giving Starbucks the benefit of the doubt on that one: The shares are up around 3.2% in after-hours trading. – Bloomberg

Looking ahead, the coffee chain said it sees covid Impact moderating meaningfully in 4Q, and now expects Q4 revenue decline of 10-15%, with comp sales falling 12-17%, although how the company has so much visibility at a time when nobody knows if tomorrow's baseball games will be canceled is anyone's guess.

Below is what Starbucks CEO Kevin Johnson had to say in the earnings release:

“We are pleased to share that the vast majority of Starbucks stores around the world have reopened and our global business is steadily recovering, demonstrating the relevance of the Starbucks brand and the trust we have built with our customers. As we continue to drive the recovery, we are also building resilience for the future by accelerating the transformation of our business in ways that will elevate the customer and partner experience and drive long-term growth. We firmly believe that we are well positioned to regain the positive business momentum we had before the pandemic began and look forward to reigniting our ‘Growth at Scale’ agenda.”

As Bloomberg notes, what is missing here is any clue of how things have gone in the first few weeks of July: "We want to know how the varied pace of different U.S. states reopening has impacted sales and store operations. Finally, with China further ahead in its recovery from Covid-19, what are the longer-term impacts from the virus we are not yet seeing here in the U.S.?"

The result however, was good enough to send the stock higher after hours…

… which is more than we can say for Visa, whose stock is sliding after hours… 

… after missing on the top line while beating on EPS:

  • Q3 net revenue $4.8 billion, down -18% q/q, estimate $4.84 billion
  • Q3 adjusted EPS $1.06 vs. $1.39 q/q, estimate $1.03

The company said spending on its cards dropped 10% in the quarter, although that trend is starting to improve in more recent weeks with total spending on its cards actually up nearly 10% in the week ended July 21. That turnaround is driven largely by online spending. So-called card present transactions – or spending that happened in store – are still down about 10% that week it appears.

Debit is also accounting for a lot of the gains: while spending on the firm’s credit cards remains down about 10% in the week ended July 21, spending on debit cards is up almost 30%.

Cross-border spending – this a key metric for Visa because its among the most profitable transactions on its network – dropped about 37%. That’s worse than the 36% decline analysts were anticipating. But what may have sent the stock sharply lower is that for the second quarter, the company refused to provide a full-year outlook.

* * *

Here are some other notable earnings after hours:

AMD surging after boosting full year revenue guidance which in light of Intel's recent troubles was to be expected:

  • Sees FY Rev. About +32%, Saw About +20% to +30% Y/Y
  • Q2 adjusted gross margin 44% vs. 41% y/y, estimate 44%
  • Q2 enterprise, embedded and semi-custom revenue $565 million, +62% q/q, estimate $530.3 million

AMD stock is up 8% in after hours, which is certainly a relief for investors who’ve piled into the stock recently. The company is showing that it’s making those consistent gains that CEO Lisa Su projected, but – as Bloomberg tech reporter Ian King writes – "if you look behind the numbers, things are still in their very early stages. Their Enterprise business actually lost money – that’s the server-related business that also includes chips used in game consoles. We’re still in the investment phase."

* * *

EBay shares are down, even though the company reported 2Q revenue that beat expectations and an upbeat outlook showing that the Covid-19 pandemic is benefiting EBay as more shoppers go online for what they need and small businesses use platforms like EBay to reach shoppers when they can’t open physical stores.

  • 2Q Net Rev. $2.87B, Est. $2.80B
  • 2Q Adj EPS Cont Ops $1.08, Est. $1.06
  • 2Q Adj EPS Cont Ops $1.08, Est. $1.06; Boosts Yr Outlook
  • Co. Sees 3Q Adj EPS Cont Ops 81c to 87c, Est. 81c
  • Co. Sees 3Q Net Rev. $2.64B to $2.71B, Est. $2.55B
  • Co. Sees FY Adj EPS Cont Ops $3.47 to $3.59, Saw $3 to $3.10
  • Co. Sees FY Net Rev. $10.56B to $10.75B, Saw $9.56B to $9.76B

EBay reported that it added 8 million new buyers in the second quarter, more than the previous six quarters combined. Now EBay has to keep those shoppers engaged so they keep returning and it’s not just a one-time bump.

Looking ahead, eBay now expects net revenue between $2.64 billion and $2.71 billion for the third quarter, much higher than the $2.54 billion analysts in a Bloomberg survey were calling for. And that’s because more consumers are turning to online marketplaces for their shopping even as cities around the world continue to slowly reopen.

And yet the stock is down. Several analysts who follow EBay are scratching their heads why shares are down following a pretty strong quarter and upbeat outlook, with Bloomberg quoting Morningstar analyst RJ Hottovy who suggests that "It could be something as simple as profit taking following the company’s recent run."

* * *

Denny's shares were down after the company reported adjusted loss per share for the second quarter that was wider than the average analyst estimate.

  • 2Q adjusted loss per share 25c vs. EPS 23c y/y, estimate loss/share 18c
  • 2Q operating revenue $40.2 million, -74% y/y, estimate $43.7 million
  • 2Q domestic system-wide same store sales -56.9%, estimate -61.1% (Consensus Metrix, average of 6 estimates)
  • Unable to Provide An Updated Outlook at This Time

Consumers just aren’t clamoring for Grand Slams during the pandemic: the company saw a same-store sales decrease of almost 60%. Denny’s, like other restaurants centered on a dine-in experience, has seen demand plummet amid widespread lockdowns. While the company said 97% of its U.S. locations were operating as of last week, they have had to reduce hours, streamline menus and put more emphasis on takeout and delivery. That has hurt same-store sales, which fell 56.9% in the U.S. last quarter. The figure improved to negative 29% for the week ended June 24, but an increase in Covid-19 cases meant renewed dining room closures, resulting in a “slight decline” in same-store sales in July.

Shares fell as much as 4.2% in after-market trading after the company missed overly optimistic analyst expectations across the board.

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