In this article, we discuss 5 earnings that surprised Wall Street this week. If you want to see more companies that posted noteworthy earnings recently, click 10 Earnings that Surprised Wall Street This Week.
5. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Exxon Mobil Corporation (NYSE:XOM) is a Texas-based producer of crude oil and natural gas. On July 29, the company posted Q2 non-GAAP earnings per share of $4.14, beating market estimates by $0.25. Exxon Mobil Corporation (NYSE:XOM)’s revenue of $115.68 billion rose 70.8% year over year, beating Street consensus by $4.01 billion. The company generated earnings of $17.9 billion and cash flow from operating activities came in at $20 billion in Q2 2022 on the back of higher production, increased realizations and margins, and robust cost control. As of July 29, the company has posted a 52.55% year to date share price gain.
HSBC analyst Gordon Gray on July 20 raised the price target on Exxon Mobil Corporation (NYSE:XOM) to $97.50 from $92.50 and kept a Hold rating on the shares. The integrated oil sector’s 10% correction in the last month leaves valuations looking attractive as prices of both oil and gas will remain robust even in the face of future demand weakness, the analyst told investors.
Among the hedge funds tracked by Insider Monkey, 83 hedge funds were long Exxon Mobil Corporation (NYSE:XOM) at the end of Q1 2022, up from 71 funds in the prior quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 51.80 million shares worth roughly $4.30 billion.
Here is what Goehring & Rozencwajg Associates has to say about Exxon Mobil Corporation (NYSE:XOM) in its Q3 2021 investor letter:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publicly expressed concerns about both projects.
According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 160
Alphabet Inc. (NASDAQ:GOOG) reported on July 26 its Q2 results. The company reported Q2 GAAP earnings per share of $1.21, missing market estimates by $0.06. The revenue of $69.69 billion climbed 12.6% on a year over year basis, falling short of analysts’ predictions by $110 million. The net income declined to $16 billion compared to last year’s $18.53 billion. Traffic acquisition costs increased 11.8% to $12.2 billion.
On July 27, Susquehanna analyst Shyam Patil lowered the price target on Alphabet Inc. (NASDAQ:GOOG) to $150 from $187 and maintained a Positive rating on the shares. The analyst observed that Q2 results were better than expected, though management did indicate difficult 2H comps, macro uncertainty, and foreign exchange headwinds. He said while Alphabet Inc. (NASDAQ:GOOG) will not be immune to macro challenges, he continues to think that Search should be one of the most resilient categories of digital spend and drive solid support for the company overall.
Among the hedge funds tracked by Insider Monkey, Alphabet Inc. (NASDAQ:GOOG) was part of 160 public stock portfolios at the end of Q1 2022, up from 158 funds in the earlier quarter. Jean-Marie Eveillard’s First Eagle Investment Management is a significant stakeholder of the company, with 23.60 million shares worth about $2 billion.
Here is what Wedgewood Partners has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q2 2022 investor letter:
“Alphabet grew its core search revenues +24% on a +30% year-ago comparison. Despite this stellar top-line performance, shares sold off as the market began to discount fears of a recession. However, the stock has outperformed relative to other holdings as core Google Search has been less affected by disruptions related to Apple’s privacy initiatives. Alphabet’s Cloud segment is generating revenue at a $24 billion run rate but is still running at a loss. We think this business can generate much better margins at some point. In the meantime, the Company has 4% to 5% of shares authorized for repurchase which is an attractive use of capital as the stock trades for about just 18X 2023 consensus estimates.”
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 200
Meta Platforms, Inc. (NASDAQ:META) was incorporated in 2004 and is headquartered in Menlo Park, California. It is a technology firm that operates through two segments – Family of Apps and Reality Labs. On July 27, the company posted a Q2 GAAP EPS of $2.46, falling short of market consensus by $0.09. The revenue declined 0.90% compared to the prior-year quarter, reaching $28.82 billion and missing Street consensus by $130 million. The stock declined about 3.4% as Meta Platforms, Inc. (NASDAQ:META) posted its first revenue decline as a public company and said that Q3 revenue would fall below Street estimates by 6% to 14%. DZ Bank analyst Ingo Wermann on July 29 downgraded Meta Platforms, Inc. (NASDAQ:META) to Sell from Hold with a $140 price target.
According to Insider Monkey’s data, Meta Platforms, Inc. (NASDAQ:META) was part of 200 hedge fund portfolios at the end of March 2022, down from 224 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management featured as a prominent stakeholder of the company, with 11.19 million shares worth about $2.50 billion.
Here is what Boyar Value Group has to say about Meta Platforms, Inc. (NASDAQ:META) in its Q4 2021 investor letter:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms Inc. (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) reported its FQ4 results on July 26. The company announced Q4 GAAP earnings per share of $2.23, missing market consensus estimates by $0.07. The revenue of $51.87 billion jumped 12.4% year over year, below Street forecasts by $490 million. The company announced that Windows revenue declined by more than $300 million. However, Microsoft Corporation (NASDAQ:MSFT) returned $12.4 billion to shareholders in terms of buybacks and dividends during the second quarter, up 19% year-over-year.
On July 27, JPMorgan analyst Mark Murphy lowered the price target on Microsoft Corporation (NASDAQ:MSFT) to $305 from $320 and kept an Overweight rating on the shares. The company reported a “better-than-feared” FQ4 and guidance for fiscal 2023, the analyst told investors in a research note. Microsoft Corporation (NASDAQ:MSFT) removed the word “healthy” from its double-digit growth guidance and reassured that hiring will decrease, and the analyst expects “modestly downward estimate revisions”. However, he sees the degradation as gradual and comparatively limited in severity versus the overall tech space. Microsoft Corporation (NASDAQ:MSFT) is the “best house in a gradually deteriorating neighborhood”, the analyst added.
Among the hedge funds tracked by Insider Monkey, 259 funds were bullish on Microsoft Corporation (NASDAQ:MSFT) at the end of March 2022, compared to 262 funds in the last quarter. Chris Hohn’s TCI Fund Management held a notable stake in the company, consisting of 17.2 million shares worth $5.3 billion.
Here is what Carillon Clarivest Capital Appreciation Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) reported its Q2 results on July 28. The company posted a loss per share of $0.20, falling short of market consensus by $0.12. The revenue climbed 7.2% year over year to $121.20 billion, beating Street estimates by $2.04 billion. For its Q3 2022 guidance, Amazon.com, Inc. (NASDAQ:AMZN) expects net sales to fall between $125.0 billion to $130.0 billion, compared to a $126.58 billion consensus. This guidance factors in a negative impact of roughly 390 basis points due to foreign exchange headwinds.
On July 29, UBS analyst Lloyd Walmsley raised the price target on Amazon.com, Inc. (NASDAQ:AMZN) to $180 from $167 and maintained a Buy rating on the shares. The company posted strong Q2 results with “robust” backlog growth, while its Q3 revenue growth guidance of 13% to 17% also exceeded expectations, the analyst told investors. The analyst added that Amazon.com, Inc. (NASDAQ:AMZN)’s fulfillment expense and COGS were both below his estimates, though these were somewhat negated by increased marketing expenditure.
According to Insider Monkey’s data, 271 hedge funds were bullish on Amazon.com, Inc. (NASDAQ:AMZN) at the end of March 2022, compared to 279 funds in the last quarter. Jaime Sterne’s Skye Global Management is a significant stakeholder in the company, with 740,500 shares worth $2.4 billion.
Here is what Oakmark Select Fund has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2022 investor letter:
“Amazon (NASDAQ:AMZN) is the leading e-commerce and cloud-computing provider in the world. Two-thirds of U.S. households are Amazon Prime subscribers, and over half of all online product searches now start on Amazon. We believe the company’s strong customer loyalty and massive infrastructure are significant barriers to entry in a growing e-commerce market. Separately, Amazon Web Services (“AWS”) controls nearly half of the market in cloud computing. We believe AWS has become utility-like in nature and scale and we expect healthy growth moving forward as IT workloads continue moving to the cloud. More recently, concerns about rising investment spending have weighed on the stock-as they have in times past-providing us another opportunity to purchase shares at a very attractive price. At our purchase price and valuing AWS like its peers, an investor isn’t paying much of anything for the immensely valuable e-commerce franchise.”
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