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| Here’s your daily business briefing. - 🛩️ Q1 2024: Delta beats earnings, posts profit
- 🔍 Deep Dive: Costco sells $200M Gold monthly reports Wells Fargo
- 🚗 BMW EV sales surge amid weak rivals
Thanks for reading!
Shriram
p/Shriram | |
| 1 | | Delta Air Lines announced a profit of $37M, or $0.06 per share, in the first quarter, marking a significant improvement from the previous year's loss of $363M, or $0.57 per share, attributed to record sales. CEO Ed Bastian highlighted robust bookings for leisure and business travel as the peak travel season approaches. More: - In the first quarter, adjusted earnings per share exceeded expectations at $0.45, while adjusted revenue of $12.56B slightly missed analysts' estimates.
- The business surpassed analyst projections by forecasting second-quarter earnings of $2.20 to $2.50 per share.
- Delta restated its prediction for the entire year, which calls for $6 to $7 per share and $3B to $4B in free cash flow.
- Corporate travel sales increased by 14% in the business travel category, with the technology, consumer, and financial services industries seeing the most robust growth.
- After a period of aggressive post-pandemic personnel expansion, Delta has halted hiring and is emphasizing efficiency more.
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What the numbers say: Costco's gold bars are approximately 2% higher than the current spot price, estimated at around $2,357 per ounce. Wells Fargo analysts project that Costco's monthly revenue from gold bar sales could range from $100M to $200M, with sales starting in late summer 2023 and reaching $100M within the company's fiscal first quarter ending in late November 2023. Relevance: Costco's lucrative venture into selling gold bars reflects its adept pricing strategies and customer trust, yielding significant revenue. However, the profit margin from these sales remains modest for Costco due to factors like low premiums and customer cashback offers. More data: In 2024, gold prices surged over 13% due to inflation, geopolitical tensions, and financial instability concerns. Notably, Asian central banks have emerged as key purchasers of gold, suggesting a hedging approach against geopolitical risks and potential downturns in assets like stocks. | | | |
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| 3 | | BMW AG experienced a 41% surge in customer deliveries of fully electric vehicles like the i4, iX1, and i7 during the first quarter compared to last year. Group-wide electric vehicle sales increased by 28% in the first quarter, surpassing competitors such as Tesla and Volkswagen, despite overall flat EV demand in Europe following the withdrawal of government incentives. More: - On Wednesday, BMW shares climbed 1.3%, bringing its YTD gains to 14%, surpassing competitors such as Mercedes-Benz.
- This year, BMW hopes to increase EV sales even more, with a goal of 500,000 units sold and expecting EVs to account for 20% of all deliveries.
- Due to competition and a slowing economy, BMW's sales of cars under the Mini and BMW brands fell 3.8% in the first quarter of 2018.
- Volkswagen AG's EV deliveries fell 3% in Q1, offsetting gains in China with a 24% drop in Europe, while Mercedes-Benz Group AG's EV wholesales declined 8% due to supply chain issues and reduced demand post-subsidy cuts in Germany.
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| 4 | | Automattic Inc., the parent company of WordPress.com, acquired messaging app Beeper for $125M, incorporating Beeper's 27 employees into its workforce, including co-founder Eric Migicovsky, who will lead messaging operations. Beeper, a universal chat application boasting around 100,000 users, consolidates multiple messaging services into a single inbox. More: - Eric Migicovsky, renowned for creating the Pebble smartwatch, encountered an antitrust dispute with Apple regarding Beeper Mini, a tool enabling iMessage functionality on Android devices.
- Despite its hesitance to expand iMessage to Android, Apple aims to introduce RCS (rich communication services) support this year to enhance messaging functionality for iPhone and Android users.
- Automattic's acquisition of Beeper indicates that the company plans to integrate online chatting into its core business plan.
- As part of the agreement, Beeper will leave beta testing and become accessible to a broader user base.
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| 5 | | Diamondback Energy Inc. issued $5.5B in bonds in the U.S. investment-grade market to support its $26B acquisition of Endeavor Energy Resources LP, consisting of five tranches, including a $1B, 40-year security. Initially discussed at around 170 basis points above Treasuries, the 40-year security now yields 142 basis points, with investor orders reaching nearly $35B. More: - The bond offering proceeds will fund Diamondback's corporate needs, including financing part of the cash consideration for the merger and repaying Endeavor's debts if the merger closes.
- Diamondback had already obtained a $1.5B term loan arrangement to fund the acquisition.
- With a $26B valuation, the merger with Endeavour will establish the largest operator concentrating on the abundant Permian Basin.
- Multi-billion dollar bond offerings for mergers are driving a $559.2B borrowing spree in the high-grade market this year, with expectations for increased debt sales in 2024, according to Bloomberg Intelligence analyst Robert Schiffman.
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| 6 | | In a transaction where majority owner One Hotels & Resorts purchased the remaining 35% stake from Proprium Capital Partners, budget hotel chain Motel One Group is now valued at $4.4B. Proprium's sale of its stake for $1.34B marks a substantial return on its initial investment of $70M in 2007, reflecting significant growth in Motel One's value, including debt. More: - The transaction indicates a revival in hospitality sector dealmaking spurred by the post-pandemic travel recovery.
- By the end of last year, Motel One, originally from Germany, had expanded globally, operating 94 hotels with 26,470 rooms in multiple countries, such as the U.K., France, the U.S., and Spain.
- The business intends to grow even more, reaching 117 sites and over 32,000 rooms in 56 cities.
- Motel One experienced a robust 15% increase in third-quarter sales, reaching around $248M, signaling promising performance and growth potential for the company.
- Proprium Capital Partners manages over $4.2B in net assets and operates in diverse sectors, such as hospitality, residential, and logistics.
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- Boeing experienced a decline in airplane deliveries during the first quarter amidst heightened scrutiny, with the majority being 737s, as they delivered 29 planes in March.
- Carnival Corp. is seeking to sell its expansive headquarters near Miami, aiming to capitalize on the real estate asset it has owned for approximately thirty years.
- China's vehicle sales surged in March, rebounding from the previous month's weakness, with retail sales of passenger cars rising 6.0% YoY to 1.687 million units, indicating a potential turning point in demand.
- Uber Technologies unveiled new safety measures globally, including encrypted audio recordings, PIN verification, and live location sharing during rides, prioritizing passenger security, especially for women at night.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Shriram Jeevakumar | |
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