AkhenOsiris
$AMZN Citi Earnings Preview
Analysts project Amazon’s Q2 revenue to be around $149 billion, which is 40 basis points above the consensus estimates.
They also estimate an 18% year-over-year growth for Amazon Web Services (AWS), slightly above the Street's estimate of 17%.
Amazon’s cloud business stands to benefit from the strong Q4 backlog growth and increasing consumption spend around model training, analysts noted. They believe that $1 billion quarter-over-quarter growth to 18% year-over-year would be healthy compared to peers.
"We saw GCP results as a positive read-thru for AWS, with a 1pt q/q accel. & margin upside suggesting limited pricing pressure," they wrote.
Operating profit is anticipated to come in at $14 billion, 1% above the consensus expectation, but analysts suggest there could be upside potential towards buyside expectations, possibly reaching $15-16 billion, given the beat in Q1, new third-party fees, Prime ad ramp, and limited growth in fulfillment center square footage.
"Biggest risk is 3Q margin guide given high Street expectations, higher freight costs & propensity to bring new fulfillment capacity online in 3Q ahead of holidays,” Citi cautioned.
For guidance, analysts expect Q3 revenue to be between $155.5 billion and $160.5 billion (with the Street at $158.4 billion), suggesting 5% quarter-over-quarter growth at the midpoint.
They project GAAP operating profit to be between $12 billion and $15.5 billion, compared to the consensus of $15.4 billion.
Despite signs of consumer softening, the bank believes Amazon is gaining market share. In terms of margins, recent history and typical Q3 conservatism suggest a profit guide midpoint below the Street, although Q3 margins have improved quarter-over-quarter in retail harvest years.
Given expanding retail margins supported by Prime ad growth and expected AWS acceleration, analysts believe the stock is positioned for a multiple expansion in 2024. AMZN currently trades at 12.8x EV/EBITDA, below its 10-year average of 17x.
"We have highlighted that improving margins support a more traditional P/E valuation framework, and see Amazon's 30.7x Street '25 GAAP EPS as reasonable given 27% expected 2-year GAAP earnings growth CAGR," they said, maintaining a Buy rating on the stock.
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$AMZN Citi Earnings Preview
Analysts project Amazon’s Q2 revenue to be around $149 billion, which is 40 basis points above the consensus estimates.
They also estimate an 18% year-over-year growth for Amazon Web Services (AWS), slightly above the Street's estimate of 17%.
Amazon’s cloud business stands to benefit from the strong Q4 backlog growth and increasing consumption spend around model training, analysts noted. They believe that $1 billion quarter-over-quarter growth to 18% year-over-year would be healthy compared to peers.
"We saw GCP results as a positive read-thru for AWS, with a 1pt q/q accel. & margin upside suggesting limited pricing pressure," they wrote.
Operating profit is anticipated to come in at $14 billion, 1% above the consensus expectation, but analysts suggest there could be upside potential towards buyside expectations, possibly reaching $15-16 billion, given the beat in Q1, new third-party fees, Prime ad ramp, and limited growth in fulfillment center square footage.
"Biggest risk is 3Q margin guide given high Street expectations, higher freight costs & propensity to bring new fulfillment capacity online in 3Q ahead of holidays,” Citi cautioned.
For guidance, analysts expect Q3 revenue to be between $155.5 billion and $160.5 billion (with the Street at $158.4 billion), suggesting 5% quarter-over-quarter growth at the midpoint.
They project GAAP operating profit to be between $12 billion and $15.5 billion, compared to the consensus of $15.4 billion.
Despite signs of consumer softening, the bank believes Amazon is gaining market share. In terms of margins, recent history and typical Q3 conservatism suggest a profit guide midpoint below the Street, although Q3 margins have improved quarter-over-quarter in retail harvest years.
Given expanding retail margins supported by Prime ad growth and expected AWS acceleration, analysts believe the stock is positioned for a multiple expansion in 2024. AMZN currently trades at 12.8x EV/EBITDA, below its 10-year average of 17x.
"We have highlighted that improving margins support a more traditional P/E valuation framework, and see Amazon's 30.7x Street '25 GAAP EPS as reasonable given 27% expected 2-year GAAP earnings growth CAGR," they said, maintaining a Buy rating on the stock.
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Dimitry Nakhla | Babylon Capital®
NOTABLE EARNINGS REPORTS THIS WEEK 7/30 - 8/2 🗓️
𝐓𝐮𝐞𝐬𝐝𝐚𝐲🗓️
AM☀️
$SPGI $PG $PFE $ITW $PYPL $WSO $AMT
PM🌓
$MSFT $AMD $SYK $SBUX $CP
𝐖𝐞𝐝𝐧𝐞𝐬𝐝𝐚𝐲🗓️
AM☀️
$MA $ADP $TMUS $HUM $BA $GEHC $KKR $WAT $WING
PM🌓
$META $QCOM $ARM $LRCX $FICO $AFL
𝐓𝐡𝐮𝐫𝐬𝐝𝐚𝐲🗓️
AM☀️
$CI $ICE $RACE $APD $GWW $MRNA $CMI $HSY $XPO
PM🌓
$AAPL $AMZN $VRTX $MELI $INTC $COIN $BKNG $NET $RMD $OLED $DKNG
𝐅𝐫𝐢𝐝𝐚𝐲🗓️
AM☀️
$XOM $CVX $CHD
#stocks #investing
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NOTABLE EARNINGS REPORTS THIS WEEK 7/30 - 8/2 🗓️
𝐓𝐮𝐞𝐬𝐝𝐚𝐲🗓️
AM☀️
$SPGI $PG $PFE $ITW $PYPL $WSO $AMT
PM🌓
$MSFT $AMD $SYK $SBUX $CP
𝐖𝐞𝐝𝐧𝐞𝐬𝐝𝐚𝐲🗓️
AM☀️
$MA $ADP $TMUS $HUM $BA $GEHC $KKR $WAT $WING
PM🌓
$META $QCOM $ARM $LRCX $FICO $AFL
𝐓𝐡𝐮𝐫𝐬𝐝𝐚𝐲🗓️
AM☀️
$CI $ICE $RACE $APD $GWW $MRNA $CMI $HSY $XPO
PM🌓
$AAPL $AMZN $VRTX $MELI $INTC $COIN $BKNG $NET $RMD $OLED $DKNG
𝐅𝐫𝐢𝐝𝐚𝐲🗓️
AM☀️
$XOM $CVX $CHD
#stocks #investing
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Offshore
Photo
Invest In Assets 📈
RT @InvestInAssets: Howard Marks once said:
“I tell my father’s story of the gambler who one day hears about a race with only one horse in it, so he bet the rent money. Halfway around the track the horse jumped over the fence and ran away”
Here are 10 lessons that will make you an better investor: https://t.co/rOY4fY2Rn2
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RT @InvestInAssets: Howard Marks once said:
“I tell my father’s story of the gambler who one day hears about a race with only one horse in it, so he bet the rent money. Halfway around the track the horse jumped over the fence and ran away”
Here are 10 lessons that will make you an better investor: https://t.co/rOY4fY2Rn2
tweet
Offshore
Video
Bamboo
Ever made an investment decision you still regret? Watch to learn how emotions can affect your investing journey and how to avoid regrettable choices. https://t.co/R1MO96fttu
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Ever made an investment decision you still regret? Watch to learn how emotions can affect your investing journey and how to avoid regrettable choices. https://t.co/R1MO96fttu
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Offshore
Photo
Dimitry Nakhla | Babylon Capital®
S&P Global $SPGI reports a strong Q2 👇🏽
•Revenue: $3.55B (+14% YoY) ✅
•Adjusted EPS: $4.04 (+30% YoY) ✅
GUIDANCE 📈
•FY Revenue Growth: 8%-10% (6%-8% prior)
•Adjusted EPS: $14.35-$14.60 ($14.33 prior)
#stocks #investing https://t.co/YwFGbirsqC
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S&P Global $SPGI reports a strong Q2 👇🏽
•Revenue: $3.55B (+14% YoY) ✅
•Adjusted EPS: $4.04 (+30% YoY) ✅
GUIDANCE 📈
•FY Revenue Growth: 8%-10% (6%-8% prior)
•Adjusted EPS: $14.35-$14.60 ($14.33 prior)
#stocks #investing https://t.co/YwFGbirsqC
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Offshore
Photo
Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $MCD 🧘🏽♂️
•NTM P/E Ratio: 21.24x
•10-Year Mean: 23.35x
•NTM FCF Yield: 4.53%
•10-Year Mean: 4.07%
As you can see, $MCD appears to be trading below fair value
Going forward, investors can receive ~10% MORE in earnings per share & ~11% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $MCD is a quality business
BALANCE SHEET🆗
•Cash & Short-Term Inv: $838.00M
•Long-Term Debt: $37.21B
$MCD has a decent balance sheet*, a BBB+ S&P Credit Rating, & ~7x FFO Interest Coverage Ratio
* $MCD owns plenty of land, with a total value of $7.08B as of Dec 2023
RETURN ON CAPITAL✅
•2019: 22.0%
•2020: 16.4%
•2021: 21.7%
•2022: 23.1%
•2023: 23.4%
•LTM: 25.5%
$MCD has strong return metrics, highlighting the financial efficiency of the business
REVENUES🆗
•2018: $21.26B
•2023: $25.49B
•CAGR: 3.69%
FREE CASH FLOW✅
•2018: $4.22B
•2023: $7.25B
•CAGR: 11.43%
NORMALIZED EPS✅
•2013: $5.55
•2023: $11.94
•CAGR: 7.96%
SHARE BUYBACKS✅
•2013 Shares Outstanding: 1.00B
•LTM Shares Outstanding: 726.85M
By reducing its shares outstanding 27.3%, $MCD increased its EPS by 37.5% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 57.0%
•LTM Operating Margins: 45.7%
•LTM Net Income Margins: 32.2%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~10% MORE in EPS & ~11% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $MCD has to grow earnings at a 10.62% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (10.62%) required growth rate:
2024E: $12.01 (0.6% YoY) *FY Dec
2025E: $13.16 (9.6% YoY)
2026E: $14.33 (8.9% YoY)
$MCD has a good track record of meeting analyst estimates ~2 years out, so let’s assume $MCD ends 2026 with $14.33 in EPS & see its CAGR potential assuming different multiples
24x P/E: $343.92💵 … ~14.2% CAGR
23x P/E: $329.59💵 … ~12.3% CAGR
22x P/E: $315.26💵 … ~10.4% CAGR
21 P/E: $300.93💵 … ~8.4% CAGR
As you can see, $MCD appears to have attractive return potential IF we assume >22x earnings, a multiple below its 10-year mean & a multiple that’s not too far off from 20x which is where $MCD has a history of bottoming at — implying a decent margin of safety
Today at $261💵 $MCD appears to be a worthwhile consideration for investment, especially for investors looking to establish a position in a strong dividend grower with relatively low volatility
#stocks #investing
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𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.
𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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A sober valuation analysis on $MCD 🧘🏽♂️
•NTM P/E Ratio: 21.24x
•10-Year Mean: 23.35x
•NTM FCF Yield: 4.53%
•10-Year Mean: 4.07%
As you can see, $MCD appears to be trading below fair value
Going forward, investors can receive ~10% MORE in earnings per share & ~11% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $MCD is a quality business
BALANCE SHEET🆗
•Cash & Short-Term Inv: $838.00M
•Long-Term Debt: $37.21B
$MCD has a decent balance sheet*, a BBB+ S&P Credit Rating, & ~7x FFO Interest Coverage Ratio
* $MCD owns plenty of land, with a total value of $7.08B as of Dec 2023
RETURN ON CAPITAL✅
•2019: 22.0%
•2020: 16.4%
•2021: 21.7%
•2022: 23.1%
•2023: 23.4%
•LTM: 25.5%
$MCD has strong return metrics, highlighting the financial efficiency of the business
REVENUES🆗
•2018: $21.26B
•2023: $25.49B
•CAGR: 3.69%
FREE CASH FLOW✅
•2018: $4.22B
•2023: $7.25B
•CAGR: 11.43%
NORMALIZED EPS✅
•2013: $5.55
•2023: $11.94
•CAGR: 7.96%
SHARE BUYBACKS✅
•2013 Shares Outstanding: 1.00B
•LTM Shares Outstanding: 726.85M
By reducing its shares outstanding 27.3%, $MCD increased its EPS by 37.5% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 57.0%
•LTM Operating Margins: 45.7%
•LTM Net Income Margins: 32.2%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~10% MORE in EPS & ~11% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $MCD has to grow earnings at a 10.62% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (10.62%) required growth rate:
2024E: $12.01 (0.6% YoY) *FY Dec
2025E: $13.16 (9.6% YoY)
2026E: $14.33 (8.9% YoY)
$MCD has a good track record of meeting analyst estimates ~2 years out, so let’s assume $MCD ends 2026 with $14.33 in EPS & see its CAGR potential assuming different multiples
24x P/E: $343.92💵 … ~14.2% CAGR
23x P/E: $329.59💵 … ~12.3% CAGR
22x P/E: $315.26💵 … ~10.4% CAGR
21 P/E: $300.93💵 … ~8.4% CAGR
As you can see, $MCD appears to have attractive return potential IF we assume >22x earnings, a multiple below its 10-year mean & a multiple that’s not too far off from 20x which is where $MCD has a history of bottoming at — implying a decent margin of safety
Today at $261💵 $MCD appears to be a worthwhile consideration for investment, especially for investors looking to establish a position in a strong dividend grower with relatively low volatility
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.
𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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