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- Tuesday's Scoop: Cruising ☀️
Hey friend - take a second and share the scoop!
Here’s what you need to know today…
Big Picture
Companies are having a harder time paying their debt.
Expect a slower pace of new movies and series this year.
Office buildings are being converted to apartments in record numbers.
The Market: ⬆️ +0.3%
S&P 500: 4,864.60
1Mo: +2% | 1Yr: +21% | 5Yr: +83%
The market continued its streak of new high scores today despite mixed corporate financial updates. Broadly, corporate profits are getting squeezed as sales slow and companies run out of room to raise prices.
Cities have started converting office buildings into apartments at a record clip. A report from apartment site RentCafe revealed a 4x growth in conversions over the last four years, with more than 55,000 offices set to become homes this year. Local and state governments have incentivized builders to shift space left dormant by remote work toward something that can bring down rent prices. DC, New York, Dallas, and Chicago are leading the charge.
The slate of new movies and series will likely be smaller this year after a steep decline in film production. Data from FilmLA revealed a 32% decrease in filming activity in Los Angeles County last year. Entertainment companies put production on hold for months due to failed negotiations with striking actors and writers demanding reasonable pay and protections regarding the use of Artificial Intelligence. Overall, film production last year was barely higher than in 2020, when the pandemic forced the industry into lockdowns.
Companies face more difficulty paying their debt. S&P Global reported an 80% increase in corporate defaults last year to the highest level in seven years, outside of the lockdown-related spike. Companies have increased their debt by 18% since 2020, and now borrowing costs have climbed significantly. S&P Global expects higher defaults this year, particularly in the retail and media industries.
How are you feeling about the economy? |
Company Scoops 🗣️🌎💰
💡How are these companies doing? Judge their decisions. Investing starts with an opinion.
 Procter & Gamble | Price Pushing Procter & Gamble continued its streak of price hikes across all its consumer products, from razors to diapers, achieving higher revenue while selling less stuff. The consumer brands giant improved its profitability as supply costs fell. |
 Shell | Oil Spill Nigerian officials have opened an investigation into an oil spill from Shell's pipeline in the Niger Delta. Shell announced it was selling its Nigerian operations earlier in the week after years of conflict and poor financial returns. |
 Lockheed Martin | Weapons Delays Lockheed Martin reported plenty of demand for its fighter jets and missile systems, given the rising geopolitical conflicts worldwide, but supply chain issues have slowed production. The defense contractor's sales and profit sank last quarter. |
 Johnson & Johnson | Healthy Sales J&J notched strong profits last quarter as an increase in surgeries boosted medical device demand, and sales surged for its blockbuster psoriasis drug. The healthcare giant paid $700M to settle lawsuits about its cancer-linked talc powder. |
 Netflix | Stronger Stream Netflix blew away expectations by adding over 13 million subscribers over the holidays, boosting revenue with a 70% surge in subscribers to its new tier with ads. Netflix will expand further into live content, partnering with WWE Raw. |
(These links only work for 24 hours while the story is live.)
Inside Scoop 🤓
What does it mean when a company beats earnings?
Earnings season is full of “beats” and “misses” headlines. The news articles are talking about whether the company reported more or less profit/revenue/whatever for the quarter than investors expected.
Wall Street analysts make projections, and then media outlets compare the reported financial figures to the average of the analysts' expectations. Having a bit more or less revenue (sales) or earnings (profit) than the average of a range of expectations isn't typically something to worry about, especially when it's only three months of a company's lifetime. The important stuff is the report's context and whether the company feels confident about the future.
One important thing to keep in mind: Beats and misses are just short-term relative terms, so they’re not that helpful for understanding the company’s financial health. A company can “beat” and still report declining sales and profits if analysts projected a decline. The company may have lost a little less money than expected, but it still lost money. The same is true the other way. A company could report surging profits, but if analysts had high expectations, it would be classified as a “miss.” Make sure to read into the news a little more closely.
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