Lenovo, which gave up its title as the world’s largest PC maker to HP Inc in the quarter through June, lost $72mn compared with a profit of $173mn for the same period last year.
It was the company’s first quarterly loss since September 2015 and lagged analysts’ average forecast of a $5.29mn profit, sending the stock down as much as 5% to a year-low of HK$4.52 during yesterday’s trade.
The outlook for the rest of the year was challenging as component shortages would dive costs higher, possibly forcing the company to raise its selling price to protect margins, executives said.
“Most of the component cost is stabilising except memory...and the price is still going up,” Lenovo chief operating officer Gianfranco Lanci said on an earnings call.
Memory prices rises would continue “at least until the end of the year”, albeit at a slower rate than the past two quarters, he said, a product of exploding global demand for semiconductors.
Auto industry demand was also pushing up the price of batteries, he said.
While personal computer makers around the world are struggling as consumers switch to mobile devices, Lenovo’s core PC business is declining more rapidly than many of its competitors’. Lenovo posted a 6% decline in PC shipments in the quarter, compared with a 3% fall globally. Its PC revenue was flat at $7bn.
“Overall, it will be very challenging for them to improve their PC performance in the short-term with the component price rise that’s here to stay,” said analyst Mo Jia, of industry consultancy Canalys.
Despite the challenging outlook, chairman and chief executive Yang Yuanqing was upbeat about the prospects for margins and the struggling mobile business.
He pointed to a $110mn sequential improvement in operational pretax income, which he attributed to improvement in the mobile and data centre businesses.
“Not only did this gave me more confidence we will turn around our mobile business in the second half of FY2018, I think the entire Lenovo is entering a new phase of growth,” he said.
Gap
Clothing retailer Gap reported better-than-expected second-quarter results and raised its full-year profit forecast, helped by strong demand for Old Navy products, fewer discounts and better managing inventory.
Gap’s same-store sales increased 1% in the three months ended July 29, rising for the third straight quarter.
Analysts were expecting sales to be flat year-over-year, according to research firm Consensus Metrix.
The results mirror a trend among US retailers: department stores such as Macy’s and JC Penney Co have struggled, while apparel retailers like Ralph Lauren Corp and Urban Outfitters have benefited as they better managed inventory and gave fewer discounts.
Since becoming Gap’s chief executive in 2015, Art Peck has reinvigorated the Old Navy brand, its biggest revenue contributor, through celebrity tie-ups, social media campaigns and better styles — dresses, pants, mid-tops and shorts did well in the latest quarter.
Same-store sales at Old Navy rose 5%, beating analysts’ estimate of 3.1%. Old Navy’s sales have now risen in seven of the past ten quarters, a bright spot for the company as its Gap and Banana Republic brands struggle.
Peck has also focused on Gap’s supply chain, taking a leaf out of the book of fast-fashion retailers such as Zara and H&M, by reducing the time taken to bring latest fashion from the ramp to stores.
Peck on Thursday held up the swift turnaround time at Athleta, its active wear brand, as an example of initiatives that have driven double-digit growth in the brand this year.
The company’s total revenue fell 1.4% to $3.799bn, edging past analysts’ estimate of $3.77bn, according to Thomson Reuters I/B/E/S.
Gap’s net income more than doubled to $271mn, helped by an insurance-related gain and year-ago restructuring costs.
Applied Materials
Applied Materials, the world’s largest supplier of tools used to make semiconductors, reported a better-than-expected quarterly profit helped by strong growth in its semiconductor and display businesses.
Shares of the company rose 4.2% to $44.95 in extended trading on Thursday.
Applied Materials, whose results are seen as the bellwether for the chip industry, has been benefiting from higher demand for 3D NAND memory chips from smartphone makers and the shift to organic light-emitting diode technology for displays.
Revenue from its semiconductor business, the company’s largest, rose 41.8% to $2.53bn, in line with analysts’ estimates, according to financial data and analytics firm FactSet.
“Broader product portfolio in a growing spending environment for both semis and display is enabling solid revenue and earnings growth,” Jagadish Iyer analyst at Summit Redstone Partners said.
In August, analysts at Gartner forecast worldwide semiconductor capital spending to increase 10.2% in 2017, to $77.7bn mostly driven by continued aggressive investment in memory chips.
Revenue from Applied Materials’ display business — which makes displays for televisions, PCs and smartphones — rose nearly 31% to $410mn beating estimates of $402.4mn, according to FactSet.
“Pervasive demand for electronics means that our markets are getting larger and substantially less cyclical,” chief executive Gary Dickerson said on a post-earnings call.
The company forecast fourth-quarter adjusted profit of 86- 94 cents per share and net sales of $3.85bn to $4bn.
Hochschild Mining
Precious metals miner Hochschild Mining’s pre-tax profit fell 33.8% in the first half of the year, hurt by higher costs.
Attributable silver production rose 8.9% to 8.9mn ounces in the six months ended June 30, and the company said it was on track to deliver attributable production of 37mn silver equivalent ounces for 2017. All-in-sustaining-costs (AISC) rose 10.1% to $12 per silver equivalent ounce, but was slightly ahead of its guidance of $12.20-12.7.
However, the company said it expects 2017 AISC to be in line with the $12.2-12.7 per silver equivalent ounce guidance.
The company, which has mining operations in Peru, Chile and Argentina, reported a pretax profit of $39.9mn for the six months ended June 30, compared with $60.3mn a year earlier.
Higher investment in exploration-led growth and the cancellation of benefits from a Patagonian port late last year as well as refilling at one of its mines in Peru led to an increase in overall costs.
Revenue rose marginally to $340.8mn in the six months.
TMK
TMK, Russia’s largest maker of steel pipes for the oil and gas industry, said on Friday its first-half core earnings, or EBITDA, rose 2% year on year and would rise further in the second half due to stronger sales in the United States.
TMK, controlled by Russian businessman Dmitry Pumpyansky, said it was still on track for stable margins but stronger financial results in 2017 compared with the previous year.
“Continued improvement in the US oil and gas market has enabled TMK to benefit from stronger demand and pricing,” Chief Executive Alexander Shiryaev said in a statement.
“Drilling activity and E&P (exploration and production) spending in the US continue to grow and, alongside our stable performance in Russia, this will support stronger group EBITDA in the second half,” he added.
Its adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) totalled $275mn in January-June compared with $269mn a year ago. TMK’s first-half net profit was down to $23mn from $71mn a year ago, while revenue rose 27% to $2.1bn.
TMK’s US business began contributing positive EBITDA in the first quarter of this year after seven quarters in the red, on the back of strongly recovering US drilling rig activity, Citi said in a preview on TMK’s results. TMK’s total debt decreased to $3.0bn as of June 30 from $3.1bn as of March 31 partially due to rouble depreciation against the dollar.
Estee Lauder
Estee Lauder Cos forecast full-year profit and sales ahead of Street views and posted higher-than-expected quarterly results as it sold more cosmetics from brands such as MAC and Tom Ford.
Shares of the company, which said it would launch a second limited edition makeup collection from Victoria Beckham next month, rose 4.3% before the bell yesterday.
Sales in Estee Lauder’s makeup unit, which sells brands such as Smashbox and La Mer, surged 16% to $1.31bn. The business accounts for more than 44% of total revenue. Sales were boosted by the acquisition of Too Faced and BECCA Cosmetics late last year, which added about 3.5 percentage points to sales growth.
Coupled with that, double-digit growth in sales in China and at duty-free stores at airports and online, helped drive revenue up 9% to $2.89bn in the fourth quarter ended June 30.
Analysts on average had expected sales of $2.85bn, according to Thomson Reuters I/B/E/S.
Estee Lauder is poised for growth due to its distribution to well-performing beauty retailers, such as ULTA Beauty, online players, and as demand for its products from a growing middle class in China has been strengthening, Oppenheimer & Co analysts said in a pre-earnings client note. Net income attributable to Estee Lauder rose to $229mn, or 61 cents per share, in the fourth quarter ended June 30, from $94mn, or 25 cents per share, a year earlier.
Deere & Co
Deere & Co reported a second straight quarter of lower- than-expected sales yesterday as demand remained sluggish for its trademark green tractors and harvesting combines, sending the company’s shares down 7% in pre-market trading.
Net income attributable to Deere jumped 31.3% to $641.8mn, or $1.97 per share, in the third quarter ended July 30, from a year earlier.
The company’s shares fell 4.1% to $118.90 in pre-market trading yesterday.
Expectations were high for the company heading into the quarter, analysts said, as it has surprised Wall Street in the past few quarters with its ability to control costs amid weak demand.
Bumper corn and soybeans harvests in the United States have driven down crop prices, leaving farmers with less cash to spend on farm equipment.
Total equipment sales in the third quarter ended July 30 rose to $6.83bn from $5.86bn, but came in below the average analyst estimate of $6.92bn, according to Thomson Reuters I/B/E/S.
However, Deere eked out a slim beat on profit, helped by lower effective tax rate.