Here are the takeaways from today's Morning Brief. sign up Every morning you will receive the following message in your inbox:
So I started practicing one of my three hobbies: reading an awful lot of financial statements (good luck guessing the other two).
I definitely take this habit too seriously, but the reality is that this hobby has led to an interesting theme so far this earnings season: stumbling iconic companies in a still-robust economy. It helps bring some interesting themes to the surface.
There are a few stumbles on the noteworthy list:
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Tesla: Weak quarterly numbers, a concerning earnings release with no guidance, and cautious post-EPS analyst comments all contribute to the stock's decline. Wedbush analyst and Tesla watcher Dan Ives had some choice words about the company on Yahoo Finance Live.
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Intel: Weak quarterly numbers, lackluster Q1 guidance, cautious post-EPS analyst commentary, and yet another stock hit. Intel CEO Pat Gelsinger offered his trademark energetic commentary on results and prospects in the video above.
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Levi: Due to poor performance in the department store channel, the new CEO fired 10-15% of employees. Levi's CFO Harmit Singh sounds a little more cautious about Yahoo Finance than when we last spoke a few months ago.
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City: As Yahoo Finance's David Hollerith reported, it was just an all-around terrible earnings day as CEO Jane Fraser reorganizes the bank, including cutting thousands of jobs.
As I read these reports and earnings calls, I can't help but wonder why this is happening at this point in the business cycle. Will something similar happen to rivals of the aforementioned companies? Do Tesla's comments suggest a weak outlook for Ford and GM next week? Does the fact that Levi's sales at department stores are sluggish mean that Macy's performance was poor in February?
What will these companies and their leaders (such as Levi's new CEO Michelle Gass, who is said to have not done a very good job at Kohl's) do next?
There are definitely more questions than answers when it comes to these companies.
But I think there is one conclusion to consider when looking at stocks in February, March, or any time.
There is a reason for the poor earnings and outlook. Very often, they reflect poor execution relative to competitors, structural challenges in the industry, or both. Executives may hype things up and say things will get better soon, but in reality they often don't, and in some cases, things get worse.
And in this context, a seemingly “cheap” stock trading at a P/E of 6 times forward earnings is nothing more than a value trap.
Read the transcript of the earnings call now and become a better investor!
Brian Sozzi I'm the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @BrianSozzi And even more linkedin. Have a tip about a deal, merger, activist situation, or more? Email brian.sozzi@yahoofinance.com.
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