With fourth-quarter earnings season largely exceeding Wall Street expectations, the S&P 500 index was set to end a bumpy week, marked by concerns about slowing global growth and the government shutdown, on a high note.
Of the 112 companies in the S&P 500 companies that have reported quarterly results so far, 72.3% have surpassed profit expectations. However, earnings growth estimates for the quarter have dropped to 14.3% from 20.1% at the start of October.
During the week the presented several financial statements of the major airlines in the US, as well as the Swiss banking group UBS, the automotive giant Ford Motor Company, consumer goods giant Procter & Gamble and the pharmaceutical company Johnson & Johnson.
UBS disappointed with quarterly profit
UBS reported lower earnings for the fourth quarter struck by the slowdown in its core business with wealth management, as well as weaker performance in the segment of investment banking. The bank’s profit before taxes is 862 million USD, and on a corrected basis it drops to 860 million USD, but achieved in an environment, which was described by the Chief Executive Officer Sergio Ermotti as “historically heavy”.
The UBS had nearly 8 billion USD new net cash flows in the last quarter by its Welfare Management Unit, which has assets worth over 2 trillion USD. This is a closely monitored indicator of the future earnings of the financial institution.
On the background of ongoing geopolitical tension, customers are increasingly withdrawing from trade and prefer to save money. Adjusted earnings before tax on asset management businesses reported a 22% decline for the quarter.
In December, the bank signalled a reduction in financial indebtedness and weaker trade among rich Asian customers worried about continuing trade conflicts. According to UBS, the moody investor sentiment will also negatively affect the results for the first quarter of this year.
UBS’s net profit for the year is 4.897 billion USD, up from 969 million USD in 2017, when a lump amount of 2.9 billion USD to US tax reform has worsened results. However, performance in 2018 is worse than average analysts’ expectations, which predicted a profit of 4.906 billion USD in 2018.
UBS offers a dividend of 0.70 CHF (0.707 USD) in 2018. The bank also expressed its willingness to buy back its shares worth up to 1 billion USD in 2019.
Ford Motor Q4 adjusted earnings missed estimates
Ford Motor Company posted a loss of 116 million USD for the fourth quarter, more than explained by an accounting charge related to its pensions. But the company said that its fourth-quarter operating income, excluding the pension charge and other one-time items, dropped 28% from a year ago to 1.5 billion USD on sharp declines in China and Europe. Ford’s full-year operating profit, excluding one-time items, also fell 28% to 7 billion USD.
On a per-share basis, excluding one-time items, Ford earned 0.30 USD in the fourth quarter and 1.30 USD for the full year. Both were down from Ford’s results a year ago, in line with the preliminary numbers Ford released last week.
“We have consistently laid the foundation for the global redesign of our business, clearly investing to sharpen our competitiveness so we can better serve customers and invest for the future”, said Ford president and CEO, Jim Hackett. “Ford enters 2019 with a clear vision, a solid plan, and we are now in execution mode”, added he.
On balance, Ford sold a richer mix of vehicles at better prices than it did in the fourth quarter of 2017. But higher costs for key commodities, the costs of the ongoing Takata airbag recall, and losses at Ford’s Chinese joint ventures more than offset the good news.
Procter & Gamble beats market expectations
Procter & Gamble issued strong guidance for the full year fiscal 2019.
In Q2, the company’s net sales came in flat at 17.4 billion USD, driven by growth in the Beauty and Fabric Care segments, offset by declines in the Grooming and Baby and Feminine Care businesses. Moreover, P&G’s organic sales were up 4% YoY on 3% volume growth, with flat pricing and 1% growth in mix across segments, excluding the impacts of foreign exchange, acquisitions and divestitures. In fact, P&G’s solid organic sales growth in Q2 was boosted by a more than 30% gain in organic e-commerce sales. In terms of bottom line, P&G’s core EPS (adjusted) also grew 5% YoY to 1.25 USD, primarily driven by increased net sales.
P&G said it now expects full-year organic sales growth of 2-4% compared with previous guidance of 2-3%. Organic sales exclude items like acquisitions and the impact of foreign currency fluctuations.