Top US Stocks: PepsiCo, Facebook and J&J

PepsiCo

Beverage and snack giant PepsiCo beat expectations in the third quarter and once again raised its guidance for the rest of the year as restrictions ease and demand bounces back in markets across the globe.

Revenue rose to $21.18 billion in the third quarter from $18.09 billion the year before, with core EPS rising to $1.79 from $1.66. That was better than the $19.39 billion in revenue and $1.73 in core EPS expected by Wall Street, marking at least the 11^th consecutive quarter that it has beaten forecasts.

Revenue improved across all divisions, with North America and Europe up by single-digit percentages while growth elsewhere such as Latin America, Asia and Africa grew by strong double-digit percentages of over 27%.

PepsiCo said it is now expecting to deliver 8% organic revenue growth over the full year, up from its previous target of 6%, and reiterated hopes of growing core EPS by 12% to ‘at least’ $6.20 from $5.52 last year. It also reiterated plans to return $5.8 billion in dividends and $106 million in buybacks during 2021 as a whole, with the buyback programme already completed.

Facebook

Facebook is in play today following the major outage that knocked its apps and services offline yesterday and ahead of a whistle-blower testifying before US Congress today.

Frances Haugen revealed herself as the whistle-blower that has leaked info to the media in recent weeks and months, having alleged the company prioritises profits over safety. ‘The company's leadership knows ways to make Facebook and Instagram safer and won't make the necessary changes because they have put their immense profits before people,’ she is expected to say later today. ‘It is accountable to no one’.

That comes after the lengthy outage that knocked the social media platform, alongside Instagram and Whatsapp, offline for almost six hours yesterday, sending shares over 4% lower. That prevented the 3.5 billion people that use the services from accessing the apps and services, sending messages or updating their news feeds. Services are now back up and running, but has prompted individuals and businesses that rely on the company’s services to consider their dependency on Facebook and its products.

Johnson & Johnson

Johnson & Johnson confirmed it has filed data in order to get its single-shot Covid-19 vaccine approved to be used as a booster shot for adults in the US.

J&J said the latest data shows a booster jab of its vaccine given 56 days after the initial dose provided 94% protection against mild to moderate symptomatic Covid-19 and 100% protection from severe or critical symptoms for at least two weeks after the booster shot. It also said a booster shot given six months after the first jab led to a nine-fold increase in antibodies one week later, climbing to 12-fold higher four weeks after the booster.

J&J said it plans to submit data to other regulatory bodies, including the World Health Organisation. J&J’s vaccine is currently authorised for emergency use in the US.

Tesla

Tesla has been ordered to pay $130 million to a former worker after a federal judge ruled they suffered from a racially hostile work environment, according to the Wall Street Journal.

The report said the jury found the electric carmaker did not take enough action to prevent Owen Diaz from being racially harassed whilst working at the Fremont factory between 2015 and 2016. It said Tesla was ordered to pay $6.9 million in compensatory damages and $130 million in punitive damages.

‘While we strongly believe that these facts don't justify the verdict reached by the jury in San Francisco, we do recognize that in 2015 and 2016 we were not perfect,’ Tesla said in a statement. It is not clear whether Tesla will appeal the verdict.

General Dynamics

General Dynamics announced its subsidiary Gulfstream Aerospace has launched two brand new business jets.

The G800 boasts the longest range of any aircraft launched by Gulfstream whilst the G400 is the first new entrant to the large-cabin class in over a decade. The G800 is powered by engines designed by London-listed Rolls Royce and can carry up to 19 passengers, while the G400 uses engines made by Pratt & Whitley and can carry a maximum of 12 passengers.

Both aircraft are equipped with Gulfstream’s new Symmetry Flight Deck that features electronically-linked active control sidesticks, which it said is an industry first.

Veoneer, Qualcomm and Magna International

Veoneer announced yesterday that it has struck a deal to sell itself to SSW Partners for $4.5 billion, prompting it to terminate its plans to merge with Magna International.

SSW Partners will buy the whole of Veoneer for $37 per share. Upon completion, it will sell Veoneer’s Arriver sensor and driving platform to Qualcomm and keep hold of Veoneer’s business that supplies Tier 1 suppliers.

The price sits at a 18% premium to the existing offer on the table from Magna International, and an 86% premium to the Veoneer share price before Magna tabled its first bid.

AT&T

HBO Max, owned by communications giant AT&T, has unveiled plans to launch in 27 countries as it embarks on its European rollout next year, adding it will be ‘attractively priced’ with a new yearly subscription as competition intensifies with rivals like Netflix and Disney+.

The service, which will bring together content from Warner Bros, HBO, DC, Cartoon Network and Max Originals for the first time in Europe, will be initially launched in Sweden, Denmark, Norway, Finland, Spain and Andorra later this month before expanding into Central & Eastern Europe, plus Portugal, in 2022. That will be followed by entry into the likes of the Netherlands, Turkey and Greece. It said movies made by Warner Bros will be available on the platform 45 days after they have been released in theatres.

HBO Max said it plans to offer a new yearly subscription to provide 12-months of service for the price of eight in some countries including Spain and Finland, bringing the monthly cost down to around EUR5.99. It is also planning to cut prices in the Nordics and maintain flat prices in Spain.

General Motors

General Motors has announced plans to open a new facility to accelerate development of cheaper and longer-range batteries for electric vehicles.

The Wallace Battery Innovation Center will be built on GM’s existing campus of the Global Technical Center in Michigan. It is expected to open in the middle of 2022 and GM plans to treble the initial footprint as demand increases. The first prototypes are expected to roll-off the production line in the fourth quarter of 2022.

‘The facility will play a pivotal role in advancing GM’s vision of an all-electric future and help pave the way to widespread adoption of EVs, building on more than a decade of advanced battery development at GM research and development. GM will also use the facility to integrate the work of GM-affiliated battery innovators, helping the company to reach its stated goal of at least 60% lower battery costs with the next generation of Ultium,’ GM said.

Udemy

Udemy filed for an initial public offering this morning as the online learning platform seeks to capitalise on strong growth prospects.

The company did not reveal the size or value of its offering, but will undoubtedly be hoping to secure an uplift in value from the $3.3 billion earned in its last funding round almost a year ago. The company did reveal that revenue rose over 55% in 2020 to $429.9 million but that it remained in the red with a $77.6 million net loss.

Udemy said 42% of Fortune 100 companies were using its corporate learning platform at the end of June, and it is also in the process of launching a direct-to-consumer subscription service.

Analyst Recommendations

Lordstown Motors was downgraded to Underweight from Equal-Weight by Morgan Stanley, which said the price it has sold its Ohio factory to Foxconn was less than one-fifth of previous estimates.

Foot Locker had its price target cut to $61 from $82 by Cowen & Co over concerns that margins could come under pressure as restriction hamper output in the key production hub of Vietnam.

News Corp had its price target raised to $30 from $29 by JPMorgan, which believes the strong demand for advertising will benefit the company and its major deals signed with Facebook and Google.

Range Resources had its price target raised to $26 from $21 by Wells Fargo after being impressed by its commitment to deleverage its balance sheet.

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