In this article, we discuss 10 latest earnings that surprised Wall Street. If you want to see more companies that posted noteworthy earnings recently, click 5 Latest Earnings that Surprised Wall Street.
The S&P 500 index has gained about 8% in the last month, and 4.15% in the last 5 days as of market close on July 29. Similarly, the tech-heavy NASDAQ-100, which has consistently run red in 2022, registered a gain of 11.76% over the last month and about 4.5% in the last five days. This is a result of prominent companies, including banks and tech giants, reporting strong corporate earnings for the second quarter of 2022, offering some relief to investors amid concerns about rising inflation and the Fed’s tightening policies.
Paul Kim, CEO of Simplify Asset Management in New York, told Reuters on July 20 that corporate earnings have exceeded Wall Street expectations, and the interest rate and inflationary impact has not largely cut into revenues. However, he reiterated that “the macro picture hasn’t changed”, as the market is still witnessing declining earnings on the back of soaring inflation pressures, consistent rate hikes, and forex headwinds. He believes the market rally seen in the June quarter is not sustainable.
Market analysts warned in early July that high profit forecasts despite the increasing threats of recession will probably trigger another equity selloff, which will result in battered share prices yet again. The stock market last peaked in January 2022, and since then it has lost over $20 trillion in value as companies struggle to adapt to the highly dynamic macro environment. Some of the companies that posted earnings for the second quarter of 2022 this week and surprised Wall Street included Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT).
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Our Methodology
We selected the companies that posted their Q2 2022 earnings recently and their results surprised Wall Street. This list includes prominent firms that exceeded Street expectations and the ones that missed market consensus estimates as well. We have ranked the stocks according to the hedge fund sentiment as of Q1 2022, which was assessed from Insider Monkey’s database of more than 900 elite hedge funds.
Earnings that Surprised Wall Street This Week
10. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 34
Roku, Inc. (NASDAQ:ROKU) was incorporated in 2002 and is headquartered in San Jose, California. The company operates a TV streaming platform. On July 28, Roku, Inc. (NASDAQ:ROKU) posted a Q2 GAAP loss per share of $0.82, missing Street consensus by $0.13. The second quarter revenue of $764.4 million rose 18.50% year over year but fell short of market estimates by $40.24 million and Wall Street growth expectations of 25% were not met either. The company cited “significant slowdown” in TV advertising spend due to the macro backdrop for the Q2 results. In its guidance for Q3 2022, Roku, Inc. (NASDAQ:ROKU) reported a total net revenue of $700 million, compared to a $902.66 million Street consensus. The company expects a net loss of $190 million and an EBITDA loss of $75 million. The stock slid almost 22% after earnings for Q2 and a disappointing guidance was issued on July 28.
On July 29, Macquarie analyst Tim Nollen lowered the price target on Roku, Inc. (NASDAQ:ROKU) to $90 from $125 after the company posted a weak Q2, reported Q3 guidance significantly below his estimate, and withdrew full year guidance. However, he reiterated an Outperform rating on the stock as he remains positive about Roku, Inc. (NASDAQ:ROKU) “beyond this tough period” and pointed to active account growth as “one bright spot” in the company’s latest quarterly report.
According to Insider Monkey’s data, 34 hedge funds were bullish on Roku, Inc. (NASDAQ:ROKU) at the end of Q1 2022, down from 43 funds in the earlier quarter. Cathie Wood’s ARK Investment Management held the biggest stake in the company, comprising 8.2 million shares worth over $1 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT), Roku, Inc. (NASDAQ:ROKU) surprised Wall Street with Q2 earnings results this week.
Here is what RGA Investment Advisors has to say about Roku, Inc. (NASDAQ:ROKU) in its Q4 2021 investor letter:
“Since we bought Roku, no stock has contributed more to our returns and no stock has been more volatile in our portfolio. This is now our third drawdown in the stock of over 30% and our second of over 60%. Fortunately (or tactically) before the two 60% drawdowns we had trimmed our positions by at least a third, though unfortunately that meant we still held large slices of the stock on the way down. Despite the stock having soared too far, too fast and thinking it was due for a period of digestion, we believe over our timeframe even the former highs will be rewarded with a good result. We have often pointed out that volatility in companies like Roku is the market’s way of grappling with a really wide range of potential outcomes and that remains as true today as ever, though the range of outcomes continues to narrow for the better for Roku.
Roku today is trading at lower multiples than at any point as a public company, meanwhile its revenue and margin composition has evolved from majority hardware to vast majority platform– in other words, each $1 of revenue is much more valuable today than ever before for Roku. Roku today is a profitable company for the first time in its history. Roku today has a multitude of investment opportunities within its own platform that can drive considerable value. Early in 2021 at higher prices, one had to believe the company would grow accounts internationally to justify valuations. This was so, because the company has so quickly achieved substantial penetration of the US market with 56.4m reported household customers of the ~130m total US households, that further growth in the US household count will be challenging and because prices were so high. Today, one merely needs to believe that with around 60 million households (the expectation for the yet reported year-end 2021 number), ARPU has a strong enough growth tailwind to reach $100 within a reasonable time, without relying on any incremental account growth. For context, as of Q3 this year, ARPU was $40, up 49% year-over-year and we know it will be higher in Q4. Growth in ARPU is underpinned by the continuing migration of viewer hours to CTV. The subforces behind this are increasing the penetration of Roku devices within households (go from one Roku to TV to 2-4), increasing the hours that each house watches (getting from shy of 4 hours to the nearly 8 hours an average American household watches TV) and broadening the content on the platform, increasing the share of inventory with content companies and more hours (like live sports viewing) shifting from linear to CTV. We further believe the opportunity to become the bundler and/or hub of household content subscriptions is growing, as evidenced by the rise in credit card pings per user from 1 to 1.3 per month and its continuing ascension. In this respect, Roku has the right to win with their installed base, because the experience is exponentially better than legacy and competing offerings…” (Click here to see the full text)
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
Chevron Corporation (NYSE:CVX) operates as an integrated energy and chemicals company worldwide. Chevron Corporation (NYSE:CVX) reported its Q2 results on July 29, posting non-GAAP earnings per share of $5.82, beating market estimates by $0.79. The revenue of $68.76 billion climbed about 83% on a year-over-year basis and exceeded market estimates by $11.07 billion. The company had $13.8 billion of cash flow from operations and a free cash flow of $10.6 billion. Chevron Corporation (NYSE:CVX) recorded a profit of $8.6 billion, compared to $3.2 billion in the prior-year quarter. The ROCE was 26% and the debt ratio was below 15%, and the company increased the annual share repurchase guidance range to $15 billion. The stock rose 3.6% after the company posted the second quarter earnings.
On July 20, HSBC analyst Gordon Gray upgraded Chevron Corporation (NYSE:CVX) to Buy from Hold with a price target of $167, down from $183. The company has been one of the worst performers in the oil and gas sector in the last month, which has brought valuation back to levels that justify an upgrade, the analyst told investors. He said that Chevron Corporation (NYSE:CVX) offers “a clear line of sight on buybacks” and he believes there is “plenty of room” for buyback guidance to be increased again.
Among the hedge funds tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway was the largest stakeholder of the company at the end of March 2022, with 159 million shares worth $26 billion. According to Insider Monkey’s data, a total of 53 hedge funds were bullish on Chevron Corporation (NYSE:CVX) in the first quarter of 2022.
Here is what ClearBridge Investments Large Cap Value Strategy has to say about Chevron Corporation (NYSE:CVX) in its Q1 2022 investor letter:
“The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holding Chevron (NYSE:CVX) benefited from higher commodity prices and was among the top contributors to first-quarter performance.”
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
The Coca-Cola Company (NYSE:KO) was founded in 1886 and is headquartered in Atlanta, Georgia. It operates as a multinational beverage company. On July 26, The Coca-Cola Company (NYSE:KO) posted a Q2 non-GAAP EPS of $0.70, outperforming estimates by $0.03. The revenue of $11.3 billion jumped 11.9% year over year, exceeding Wall Street consensus by $730 million. The company also reiterated its FY 2022 outlook, and it expects to deliver organic revenue growth of 12% to 13%, constant currency EPS growth of 14% to 15%, and comparable EPS growth of 5% to 6%. The stock rose 1.27% after the company posted solid Q2 results and reaffirmed guidance for the year.
Deutsche Bank analyst Steve Powers on July 27 raised the price target on The Coca-Cola Company (NYSE:KO) to $65 from $64 and kept a Hold rating on the shares after the Q2 results.
According to Insider Monkey’s data, 64 hedge funds were bullish on The Coca-Cola Company (NYSE:KO) at the end of Q1 2022, compared to 70 funds in the prior quarter. Rajiv Jain’s GQG Partners is a prominent stakeholder of the company, with roughly 13 million shares worth $801.5 million.
7. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
The Procter & Gamble Company (NYSE:PG) is an American multinational company that provides branded consumer packaged goods worldwide. The Procter & Gamble Company (NYSE:PG) posted on July 29 an FQ4 non-GAAP EPS of $1.21, missing estimates by $0.02. The revenue of $19.52 billion rose 3.0% year over year, outperforming Street forecasts by $110 million. The Procter & Gamble Company (NYSE:PG) expects fiscal year 2023 sales growth to be in-line or up 2% compared to the earlier fiscal year. Organic sales growth is expected to fall between 3% to 5%. The Procter & Gamble Company (NYSE:PG) projects diluted net EPS growth to be in-line or climb 4% compared to the fiscal 2022 EPS of $5.81. The shares slid about 4% as the profits and future guidance let the market down. According to the company management, the rampant inflation hit the company hard, and The Procter & Gamble Company (NYSE:PG) posted relatively strong results in the second quarter.
Wells Fargo analyst Chris Carey on July 22 reiterated an Overweight rating on The Procter & Gamble Company (NYSE:PG) and lowered the price target on the shares to $160 from $170. According to the analyst, The Procter & Gamble Company (NYSE:PG) is uniquely positioned to reflect the current macro outlook into its guidance for the rest of the year and FY23, concluding a long debate on a reset and enabling the narrative to focus on the go-forward.
Among the hedge funds tracked by Insider Monkey, 72 funds were bullish on The Procter & Gamble Company (NYSE:PG) at the end of Q1 2022, up from 67 funds in the prior quarter. Ray Dalio’s Bridgewater Associates is a prominent shareholder of the company, with a position worth over $1 billion.
6. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 76
AbbVie Inc. (NYSE:ABBV) is an Illinois-based manufacturer and distributor of pharmaceuticals. The company reported on July 29 Q2 non-GAAP earnings per share of $3.37, topping market consensus by $0.06. AbbVie Inc. (NYSE:ABBV) posted a revenue of $14.58 billion, up 4.4% year-over-year but falling short of analysts’ predictions by $60 million. The international sales of Humira, the company’s primary drug, declined 13.8% on a year over year basis given competition from biosimilars. The company reaffirmed its 2022 adjusted diluted EPS guidance of $13.78 to $13.98, compared to the prior outlook of $13.92 to $14.12 and a $13.90 consensus. AbbVie Inc. (NYSE:ABBV) lowered its revenue guidance for 2022 to $58.9 billion, compared to its previous guidance of $59.4 billion. The guidance was also less than the consensus estimate of $59.53 billion.
On July 29, Piper Sandler analyst Christopher Raymond reaffirmed an Overweight rating on AbbVie Inc. (NYSE:ABBV) and lowered the price target on the shares to $155 from $160. The analyst acknowledged that the second straight revenue miss is not ideal, especially for a stock that is generally considered to be a safe haven both within the healthcare sector and more broadly in a recessionary backdrop. However, the analyst believes that the investors’ benefit of the doubt is warranted, as a “look under the hood” delivers a likely case for top-line reacceleration in the second half of 2022.
Among the hedge funds tracked by Insider Monkey, 76 funds reported owning long positions in AbbVie Inc. (NYSE:ABBV) at the end of Q1 2022, down from 82 funds in the earlier quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the leading position holder in the company, with 4.65 million shares worth over $754 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT), investors are monitoring AbbVie Inc. (NYSE:ABBV) amid the recent earnings season.
Here is what Carillon Clarivest Capital Appreciation Fund has to say about AbbVie Inc. (NYSE:ABBV) in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. AbbVie (NYSE:ABBV) is a research-based biopharmaceutical company. Shares gained after the company reported earnings that missed revenue but beat earnings-per-share estimates. Discussion around the report was mixed but skewed positive.”
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Disclosure: None. 10 Latest Earnings that Surprised Wall Street is originally published on Insider Monkey.
