Top US stocks to watch: J&J, Coca-Cola and Verizon

A slew of companies including Coca-Cola, Verizon, Novartis, Anthem, United Airlines, Harley Davidson and Nasdaq post better-than-expected earnings, J&J disappoints with vaccine sales, Netflix’s subscriber growth slows, and Lyft and Ford establish a new self-driving venture with Argo.

USA (1)

Johnson & Johnson

Johnson & Johnson said revenue jumped 27% in the second quarter and earnings significantly improved, but disappointed the market with its forecast for vaccine sales this year.

Revenue rose to $23.31 billion from $18.33 billion the year before. Growth was led by a 63% surge in income from medical devices as elective procedures recover, a 14% lift in pharmaceutical sales and 9.2% growth from consumer health products. EPS jumped to $2.35 from $1.36.

J&J revealed it expects to make $2.5 billion in revenue this year from its coronavirus vaccine, just a fraction of the $93.8 billion to $94.6 billion in overall revenue it is targeting this year. That has prompted concerns that J&J’s vaccine is falling behind rivals, with Pfizer forecasting $26 billion in vaccine sales and Moderna expecting over $19 billion in sales this year. Notably, J&J has said it is selling its vaccine for non-profit, whereas Pfizer and Moderna are producing for profit.  

Coca-Cola

Coca-Cola reported strong double-digit growth in revenue and profits in the second quarter, prompting it to raise its guidance for the rest of the year.

The company said net revenues were up 42% in the quarter to $10.1 billion, beating the $9.32 billion expected by Wall Street, while comparable EPS jumped 61% to $0.68 and beat the $0.56 forecast. Coca-Cola said the results show it is recovering faster than the wider economy.

Coca-Cola said it is now targeting annual net revenue growth of 12% to 14% rather than its previous goal to deliver ‘high single digit’ growth, and for comparable EPS of around $1.95, some 13% to 15% higher than the year before.

Verizon

Verizon beat expectations in the second quarter after reporting an increase in people shifting over to 5G and growth in wireless revenue, prompting it to raise expectations for the rest of the year.

Total operating revenue increased 10.9% to $33.8 billion in the second quarter, ahead of the $32.74 billion expected by analysts. Adjusted EPS rose to $1.37 from $1.18. Consumer revenue increased over 11% and the 275,000 net additions of postpaid phone subscribers was ahead of the 174,800 expected, while business revenue edged-up 3.7%.

The strong results prompted Verizon to upgrade its guidance for the year and said adjusted EPS will now be between $5.25 to $5.35 rather than its previous target range of $5.00 to $5.15. The upgrade has been driven by expectations that wireless revenue will grow by 3.5% to 4% this year rather than the 3% previously expected.

Netflix

Netflix shares are in play today after releasing second-quarter earnings after the market closed yesterday, revealing it added more subscribers than forecast while missing earnings expectations.

Netflix added 1.54 million new subscribers during the second-quarter. That was ahead of the 1.0 million expected, but that target in turn had been downgraded. Revenue rose to $7.34 billion from $6.14 billion the year before while EPS jumped to $2.97 from $1.59. Revenue was just ahead of analyst expectations but earnings came in below the $3.16 expected by Wall Street.

Netflix said the pandemic has ‘created unusual choppiness in our growth’, reiterating that much growth was brought forward into last year. That has resulted in slower growth in 2021 and caused stronger comparatives. It expects to add 3.5 million new subscribers in the third quarter, which was also downgraded from an original goal of 5.86 million, and is targeting revenue of $7.47 billion. Netflix also confirmed rumours that it was making a push into the gaming market.

Novartis

Novartis beat expectations in the second quarter and left its guidance for the full year unchanged, targeting single-digit growth in revenue and earnings in 2021.

Net sales grew 9% in the second quarter to $12.95 billion and net profit increased to $2.89 billion from $1.86 billion the year before. Revenue was ahead of the $12.52 billion expected by analysts while net profit beat the $2.70 billion forecast. For the first half, revenue increased 7% to $25.36 billion and EPS edged-up 9% to $3.17. Pharmaceutical sales rose 12%, oncology sales rose 7% and Sandoz sales were up 5%, and Novartis said growth would have been higher if it wasn’t for the unwinding of the increase in forward-purchasing during the pandemic the year before.

Novartis left its guidance for the year unchanged, targeting low-to-mid-single-digit growth in net sales at constant currency and mid-single-digit growth in core operating income.

Anthem

Anthem reported lower earnings in the second quarter but still managed to beat expectations as the health insurer raised its guidance for the rest of the year on hopes demand will rebound for non-coronavirus-related healthcare.

Operating revenue grew over 14% in the second quarter to $33.3 billion. Adjusted net income fell to $7.03 per share from $9.20 the year before, but beat the $6.33 expected by analysts. Reported EPS fell to $7.25 from $8.91.

The company raised its guidance for the year and is now expecting adjusted net income of over $25.50 per share compared to its previous $25.10 target.

Baker Hughes

Baker Hughes said revenue and earnings improved in the second quarter and that it expects the oil and gas industry to gradually ramp-up spending this year as the global economy reopens.

Revenue was up 9% year-on-year at $5.14 billion in the three months to the end of June and up 8% from the previous quarter. Adjusted net income of $83 million turned from a $31 million loss the year before but fell from $91 million profit in the first quarter.

‘As we look ahead to the second half of 2021, we see continued signs of global economic recovery that should drive further demand growth for oil and natural gas. Although we recognize the risks presented by the variant strains of the COVID-19 virus, we expect spending and activity levels to gain momentum through the year as the macro environment improves, likely setting up the industry for stronger growth in 2022,’ said Baker Hughes.

United Airlines

United Airlines said it performed better than expected in the second quarter when it released results yesterday, stating it expects the travel industry to continue to bounce back this year and next before making a full recovery in 2023.

Capacity remained less than half of pre-pandemic levels in the quarter and revenue was 52% below what was reported two years before. The airline’s adjusted net loss of $3.91 per share in the quarter narrowed from the $9.31 loss booked the year before and was slightly better than the $3.94 loss forecast by Wall Street.

Capacity should rise 39% in the third quarter from the second, although remain around 26% below pre-pandemic levels. It said it expects to produce an adjusted net profit in the quarter, marking the first return to profit since the end of 2019.

Chipotle

Chipotle reported strong growth in revenue and earnings in the second quarter as it eagerly reopened its restaurants, and said sales this year will benefit from growth from existing sites and the hundreds of new stores it will open.

Revenue increased 38.7% in the second quarter to $1.9 billion and comparable restaurant sales jumped 31.2%, benefiting from weak comparatives from the year before. Digital sales grew over 10% and now account for 48.5% of all sales. Diluted EPS soared to $6.60 from just $0.29.

Chipotle said it is aiming to deliver comparable restaurant sales growth in the low-to-mid single digits over the full year and open 200 new restaurants, having opened 56 new sites in the last quarter.

Harley Davidson

Motorcycle maker Harley Davidson beat expectations in the second quarter as a boom in sales in North America comfortably offset a fall in sales overseas.

Revenue increased 77% in the second quarter to $1.53 billion as it sold 24% more motorcycles, with all that growth coming from the US and Canada. Adjusted EPS of $1.41 marked a huge improvement from the $0.38 loss booked the year before and came in comfortably ahead of analyst expectations for $1.17. Revenue growth accelerated in the second quarter compared to the first considering it rose 37% over the first-half as a whole to $2.95 billion, while interim adjusted EPS of $3.11 soared from just $0.13 the year before.

Harley Davidson said it expects motorcycle revenue to grow 30% to 35% this year and that it will spend between $190 million and $225 million in capital expenditure.

Lithia Motors

Lithia Motors reported record revenue and earnings in the second quarter as demand for cars increased as people continue to prefer travelling alone during the pandemic.

Revenue more than doubled to $6.0 billion from just $2.8 billion the year before. New vehicle sales jumped 130% and used car sales increased almost 96%. Adjusted EPS more than trebled to $11.12 from $3.72 the year before, smashing past the $6.17 expected by analysts.

For the first half, revenue increased 86% to $10.4 billion and adjusted EPS leapt to $17.15 from $5.70.

Nasdaq

Nasdaq reported second quarter results after the markets closed yesterday, revealing it beat expectations and that it expects revenue to grow across all of its businesses this year.  

Net revenue climbed 21% year-on-year to $846 million, driven by a 26% rise from its Solutions division and a 13% lift in Market Services. Adjusted net income of $1.90 per share increased 23% from the $1.54 booked the year before and beat analyst expectations for $1.75. The results were released soon after Nasdaq announced plans to spin-off its Private Markets business.

‘Vibrant capital markets activity and expanding corporate and investor demand for financial technology solutions drove a very strong performance for Nasdaq in the first half of the year,’ said president and chief executive  Adena Friedman. ‘Our performance in new listings and trading as well as our focus growing areas like anti-financial crime and buyside workflow solutions sustained year over year revenue growth across all of our businesses. Each of our businesses has expanded both the diversity and depth of their client-base in recent years and that is what underpins the strength and resiliency of the Nasdaq platform as we move through each quarter.’

Lyft and Ford

Argo AI has announced it has formed a new ‘industry-first collaboration’ with ride-hailing firm Lyft and motor manufacturer Ford to deploy driverless vehicles, starting in Miami and Austin.

Argo will contribute its self-driving tech, Ford will produce and service the cars, and Lyft will operate them for its ride-hailing services. It said plans are being finalised to have a fleet of 1,000 self-driving cars across more markets. Lyft said it expected the first self-driving cars to be on the road in 2023.

Argo has been touted for a listing this year and Lyft is receiving a 2.5% stake in the business as part of the deal. Ford, as well as other carmakers like Volkswagen, already back Argo. Notably, Lyft sold its own self-driving tech for $550 million earlier this year so it could focus on its core activities.

Tesla

Tesla’s chief executive Elon Musk tweeted yesterday that the company plans to open up its charging network to other electric vehicles by the end of this year.

‘We're making our Supercharger network open to other EVs later this year,’ Musk tweeted. Details are lacking, but reports suggest it could start in Germany, Norway and Sweden, where governments are eagerly encouraging consumers to switch to electric vehicles.

How to trade top US stocks

You can trade US stocks with City Index in just four steps:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the company you want to trade in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade 

Build your confidence risk free

More from Equities

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.