Top US stocks to watch: Kroger, Adobe and Lennar

Kroger upgrades its outlook, Adobe will report results after markets close, Lennar and Honest Co beat expectations, US airlines and a number of Australian companies are hit by outages, JPMorgan set to buy UK firm Nutmeg, and Aon and Willis Towers face challenges to their merger.

USA (1)

Kroger

Kroger has raised its guidance and launched a new $1 billion share buyback as it posted first-quarter results.

Sales dipped to $41.3 billion from $41.5 billion the year before. Adjusted EPS dropped to $1.19 from $1.22 while reported EPS suffered a much larger fall to $0.18 from $1.52.

Kroger said good momentum has prompted it to raise its guidance for the rest of the year. It is now expecting same-store sales to fall 2.5% to 4% this year compared to its previous forecast for a 3% to 5% decline. Adjusted diluted EPS should be in the range of $2.95 to $3.10 this year, upgraded from its previous target range of $2.75 to $2.95.

Adobe

Software giant Adobe will release second-quarter results after markets close later today.

The strong start made in the first quarter is expected to have continued into the second, with Adobe aiming to deliver revenue of $3.72 billion compared to $3.12 billion the year before, driven by double-digit growth across its core segments.

GAAP EPS should come in at $2.09 compared to $2.27 the year before, while the non-GAAP figure should rise to $2.81 from $2.45. Its quarterly updates are usually short and sweet, so the main focus above the results will be if Adobe upgrades the full-year guidance provided in March that aims to grow annual revenue by 20% to $15.45 billion and for GAAP EPS to more than double to $9.13.

Lennar

Housebuilder Lennar reported second-quarter earnings after markets closed on Wednesday, revealing it beat expectations as it prepares to spin-off some of its assets

Revenue jumped 22% in the quarter to $6.4 billion and diluted EPS rose to $2.65 from $1.65 the year before. That was well ahead of expectations, with Wall Street forecasting $5.91 billion of revenue and EPS of $2.34.

Lennar said it was postponing the proposed spin-off of certain assets of the business so it can bulk up the unit. It is now hoping to separate $5 billion to $6 billion worth of assets compared to its previous target of $3 billion to $5 billion.

Honest Co

Honest Co reported first-quarter results after the markets closed yesterday, representing its first update since the health and wellness firm went public in May.

Revenue grew by 12% in the first three months of 2021 to $81 million, ahead of the 8% to 11% growth it had expected. That is more impressive considering sales jumped 36% in the year-ago quarter. The rise was driven by skin, personal care, household and wellness products, which offset a mild decline from its core diapers and wipes business.

Digital revenue was up just 2% year-on-year while sales in retail stores jumped 25% as consumers started to head out to shop more.

Boeing and Airbus

The UK has signed a near-identical truce with the US over the dispute about aircraft subsidies following the agreement struck between the EU and the US earlier this week.

The EU and the US agreed to suspend retaliatory tariffs slapped on everything from European wine to American tobacco whilst they work out a wider deal on aircraft subsidies over the next five years before the EU-US summit this week. The UK has now signed a similar truce with the US.

US airlines

Talking of planes, American Airlines, Southwest Airlines, United Airlines and Delta Air Lines faced an outage earlier today, according to monitoring website Downdetector.

Over 1000 outages were reported at Southwest Airlines at its peak, over 400 were flagged at Delta Air Lines while over 300 were reported at American Airlines and United Airlines. Outages completely subsided within 90 minutes.

Notably, Southwest Airlines was forced to cancel hundreds of flights on Wednesday after suffering a technical glitch connecting to the third-party that provides critical weather information.

Akamai Technologies

US airlines were not the only ones to suffer IT problems, with a number of Australian companies reporting outages and pointing the finger at Akamai Technologies.

The issue hit Australia’s central bank, its postal service and a number of banks and businesses. Virgin Australia said it was one of many businesses to have been hit because of an ‘outage with the Akamai content delivery system’ but that the issue had now been resolved.

JPMorgan

JPMorgan has agreed to buy the largest wealth manager in the UK, Nutmeg, to help complement its plans to launch a new digital bank under the Chase brand later this year.

The price has not been disclosed but could be sizeable considering Nutmeg has over 140,000 clients and over £3.5 billion in assets under management.

‘We are building Chase in the UK from scratch using the very latest technology and putting the customer's experience at the heart of our offering, principles that Nutmeg shares with us,’ said Sanoke Viswanathan, the chief executive of the bank’s international consumer division.

Ford

Ford Motors will pay the Brazilian state of Bahia around BRL2.5 billion after deciding to close down its plants in the country, according to a local newspaper.

The payment, equal to around $495 million, is designed to reimburse the state for subsidies that have already been paid since it opened a plant in the area back in 2001.

It follows on from Ford’s decision to close its three Brazilian plants back in January, which will result in it booking around $4.1 billion in charges.

Amazon and Walmart

Amazon and Walmart’s Flipkart have both launched appeals against the revival of an antitrust investigation that has been launched by regulators in India, which allege the pair favour certain sellers and use discounts to suppress rivals.

A filing made by Flipkart yesterday said the investigation could cause ‘irreparable injury’ if it was to continue whilst the appeal was being considered and urged them to end the original one. Reports suggest Amazon has filed a similar challenge, according to Reuters.

It was reported earlier this week that authorities were expediting the investigation.

Illumina

The European Commission plans to make decision on whether to approve Illumina’s $7.1 billion acquisition of Grail by July 27, it was revealed today.

The US life sciences company agreed to buy the cancer test maker in September 2020 and has been in a dispute with the EC after it decided to investigate the deal even though it falls outside the criteria that usually prompts a further look by regulators.

Illumina is now pursuing a two-pronged attack, one chasing litigation against the original decision to investigate the deal and the other following the usual vetting process and arguing its case as to why the deal should be given the green light.

Aon and Willis Towers

Aon and Willis Towers Watson released a joint statement yesterday that said they disagree with the US Justice Department’s efforts to block their proposed merger on claims it will reduce competition and could lead to higher prices.

The statement said the department’s decision ‘reflects a lack of understanding of our business’. However, the pair make up two of the so-called Big Three global insurer brokers.

‘Aon and Willis Towers Watson operate across broad, competitive areas of the economy and our proposed combination will accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace. While this proposed combination was not developed with the pandemic in mind, the impact of the pandemic underscores the need to address similar systemic risks including cyber threats, climate change and the growing health and wealth gap which our combined firm will more capably address,’ the two companies said.

Didi Chuxing

Ride-hailing service Didi Chuxing’s has grabbed the attention of regulators in China as it prepares to launch an IPO in the US, according to reports from Reuters.

The listing could be the largest to be launched in the US this year but Didi has now grabbed the attention of regulators that have been cracking down on the big names that run huge digital platforms such as Alibaba and Tencent, who are also listed in the US.

It is thought authorities are investigating whether Didi uses anti-competitive practices to squeeze-out smaller rivals and whether its pricing mechanism is transparent enough.

Mister Car Wash

Mister Car Wash, the largest car wash chain in the US 344 locations across the country, has filed to go public on the New York Stock Exchange.

The company said it plans to sell 31.25 million new shares for $15 to $17 each. Existing investors will sell a further 6.25 million shares. In total, the IPO could raise up to $638 million for the company and its shareholders and earn an initial valuation of around $5 billion.

Revenue in the first three months of 2021 rose to $175.5 million from $155.3 million the year before, with pretax profits rising to almost $33 million from $6.8 million.

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