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So has begun execution on one of my three hobbies: reading an insane amount of earnings call transcripts (go ahead and guess the other two, have at it).
While I definitely take this practice way too seriously, the reality is this hobby helps bring to surface an interesting theme thus far in earnings season: stumbling iconic companies inside a still-solid economy.
A couple of stumblers for your watch list:
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Tesla: Weak quarterly numbers, worrying earnings call with no guidance, cautious post-EPS analyst commentary, all leading to a stock hammering. 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, uninspiring Q1 guidance, cautious post-EPS analyst commentary, another stock hammering. Intel CEO Pat Gelsinger offered up his trademark energetic take on the results and outlook in the above video.
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Levi’s: Ugly performance in the department store channel, new CEO laying off 10% to 15% of the workforce. Levi’s CFO Harmit Singh sounded a touch more cautious on Yahoo Finance than when we last talked to him several months ago.
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Citi: Just all-around dreadful earnings day as CEO Jane Fraser restructures the bank, including thousands of layoffs as reported by Yahoo Finance’s David Hollerith.
Going through these reports and earnings calls, I can’t help but think about why this is happening at this point in the economic cycle. Will it be happening to the rivals of the aforementioned companies? Does Tesla’s commentary signal weak outlook from Ford’s and GM’s earnings next week? Does Levi’s soft sales at department stores mean bad results from Macy’s in February?
What’s next for these companies and their leaders (like Levi’s new CEO Michelle Gass, who’s credited with not doing a great job at Kohl’s)?
More questions than answers on these companies, no doubt.
But I fancy one conclusion that should be factored in when you are eyeing a stock in February, March, or whenever.
Bad earnings and outlooks are bad earnings and outlooks for a reason. Very often they reflect poor execution relative to a competitor, structural industry challenges, or both. Execs may hype that things will get better soon, but they often don’t — and sometimes they get worse.
And in this context, a stock that may seem “cheap” trading on a PE multiple of 6x forward earnings is nothing more than a value trap.
Go read some earnings call transcripts today and become a better investor!
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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