Before the bell: earnings season in full swing

U.S. markets continue to set records, although some big names like Tesla are disappointing. Today, the focus shifts to LVMH and Intel.

Every earnings season has its winners and losers. While the S&P 500 closed at another all-time high yesterday, some stocks took heavy hits. Tesla (-8.2%) slid sharply after weak results, while other big names like IBM (-7.2%) and health insurer UnitedHealth Group (-4.8%) also disappointed. Even strong results from Alphabet (+0.9%) failed to spark much enthusiasm among investors. One of the biggest shocks came from chemical producer Dow (-17.5%), which warned of market overcapacity and halved its dividend—a worrying signal for sector peer Solvay.

In Asia, markets in Hong Kong and Japan are easing this morning after sharp gains in recent days following news of a trade deal between Japan and the U.S. Today, all eyes are on Proximus and Orange Belgium, which announced plans to collaborate on fiber network rollouts in Wallonia to reduce costs.

Expensive luxury

Nearly 100 billion euro. That’s how much market value luxury group LVMH has lost so far this year. To put this into perspective: that’s almost as much as AB InBev, Belgium’s largest listed company, is worth. It’s an unusual sight for European investors, as LVMH has long been considered a model of how to create shareholder value with its strong growth profile. We fear the company could shed even more market value soon. Its leather goods division—home to brands like Louis Vuitton—is no longer growing, with organic sales down 9% (analysts had expected a decline of 7.8%). In Japan, sales plummeted by 28%. That said, the situation isn’t catastrophic. While net profit fell 22% in the first half, LVMH still produces annual profits worth several billion euro (5.7 billion euro in H1 alone). The issue? With shrinking revenue and profit, LVMH’s current market capitalization of 234 billion euro is no longer cheap without a clear turnaround. We expect a negative opening for the stock today.

When will tariffs bite?

Has the full impact of trade tariffs yet to be felt? That seems to be the case based on this earnings season. Margins have come under pressure due to higher tariffs, but revenue at many companies has held up or even exceeded expectations. Take Intel, where quarterly revenue came in 1 billion dollar higher than expected at 12.9 billion dollar. A strong performance that even surprised Intel’s management: “We had assumed that the implementation of tariffs in Q2 might create headwinds and further destabilize the economy. None of that has happened,” said the CFO during yesterday’s earnings call. The question now is how the rest of the year will unfold. Management fears that tariffs may have caused companies to stockpile inventories in Q2, which could result in weaker revenue in coming quarters. Despite the stronger revenue, Intel is not generating much profit. For the next quarter, the company expects to barely break even. The CEO is pushing ahead with a restructuring plan involving 15% job cuts and aggressive cost savings. Given the weak profit outlook, we expect a lower opening for the stock today.

Did you know…

that the penny stock Healthcare Triangle was the most traded stock on U.S. markets yesterday by volume? A staggering 15% of all shares traded were Healthcare Triangle shares. It’s yet another sign that meme stocks are making a comeback—this stock opened 138% higher without any news.

This article was translated from Dutch and was originally published on Spaarvarkens.be.