| Here’s your daily business briefing. - 🏰 Disney beats analysts, streaming nears break-even
- 🔍 Deep Dive: Tesla China shipments dip despite sector growth
- 💼 UBS records first profit post Credit Suisse acquisition
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Disney ($DIS) exceeded analyst estimates in its fiscal second-quarter earnings, with adjusted earnings per share reaching $1.21, while revenue closely matched expectations at $22.08B. Notably, Disney's streaming segment, including Disney+ and Hulu, achieved its first-ever combined profit, with a significantly reduced loss of $18M when factoring in ESPN+, compared to $659M a year earlier. More: - The company's shares dropped by 10% as it missed revenue estimates for the fourth quarter in a row and provided guidance suggesting a weaker third quarter for experiences.
- Entertainment streaming revenue (excluding ESPN+) grew by 13% to $5.64B, resulting in an operating income of $47M, compared to a $587M loss in the previous year.
- Disney+ Core subscribers grew by over 6 million to reach 117.6 million global customers, while total Hulu subscribers rose by 1% to 50.2 million, with ESPN+ subscribers dropping by 2% to 24.8 million.
- Revenue from U.S. parks and experiences increased by 7% to $5.96B, while international sales surged significantly by 29% to $1.52B.
- However, Disney's conventional TV business faced challenges, as ESPN's revenue increased by 3% to $4.21B while operating income decreased by 9% to $799M.
- Disney's portfolio's linear network revenue, excluding ESPN, dropped 8% to $2.77B while operating income plummeted 22% to $752M.
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What the numbers say: In April, Tesla Inc.'s ($TSLA) shipments from its Shanghai factory amounted to 62,167 units, reflecting an 18% decrease compared to the same month in 2023. However, despite Tesla's decline, the new-energy car market in China witnessed growth, with wholesale deliveries of new-energy passenger vehicles estimated at 800,000 units, indicating a 33% YoY increase. Relevance: Tesla's shipment decline amid a burgeoning market underscores its challenges in China's competitive automobile sector, accentuated by the strong performance of Chinese EV brands such as Nio, BYD, and Li Auto, alongside tech-related offerings from companies like Xiaomi and brands linked to Huawei, highlighting the market's intense competition and diversity. More data: Nio doubled April deliveries to 15,620 vehicles, while BYD's sales surged 49% to 312,048 passenger vehicles. Li Auto grew slightly to 25,787 vehicles, and Xiaomi received over 76,000 orders for its SU7 EV, with Huawei-associated car brands selling 29,632 cars. Elon Musk's recent China visit secured government approval for Tesla's driver-assistance system amidst an EV price war and government subsidies, showcasing fierce competition and state support for the EV sector. | | | |
| 3 | | UBS reported its first quarterly profit since acquiring Credit Suisse, with net profits reaching $1.8B, triple the analysts' forecast, driven by improved wealth management and investment banking revenues. Following the earnings report, UBS shares ($UBS) surged 10%, erasing much of the previous month's losses, as the company remains committed to meeting its 2024 capital return goals. More: - The wealth management business saw a net influx of $27B in new assets, with division revenues increasing by 11% to $6.1B
- The investment bank at UBS had a 16% increase in revenue to $2.8B, which helped the total revenue reach $12.7B, a 15% gain.
- UBS opposed Swiss finance department proposals to raise the bank's capital requirements, potentially necessitating an additional $15B to $25B in capital for UBS.
- The bank surprised analysts by rapidly winding down Credit Suisse's investment bank and loan portfolio, reducing the projected loss from the bad bank division to $2.5B, down from $4B previously estimated.
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| 4 | | Target ($TGT) is broadening its Cat & Jack children's brand at Hudson's Bay Co. in Canada with new items like swimwear and outerwear, marking its inaugural wholesale venture, set to launch next year. Additionally, Target is exploring sales opportunities in Europe and the Americas, prioritizing its wholesale strategy outside the U.S., with the Hudson's Bay deal marking its return to Canada after exiting the market due to losses. More: - Target seeks growth following three consecutive quarters of sales decline, attributed to decreased consumer spending on non-essential items amid inflation and rising interest rates.
- Private-label products such as Cat & Jack, contributing roughly $3B in yearly sales, play a vital role in Target's revenue, accounting for nearly one-third of its total sales.
- In addition to launching new lines and exclusive items like Diane von Furstenberg collections and Stanley brand tumblers, Target has been growing its store brands.
- The retailer plans to open 300 new stores, renovate existing locations, and introduce Target Circle 360, a paid membership program, to compete with Amazon and Walmart.
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| 5 | | WK Kellogg Co. ($KLG) surpassed Wall Street expectations for quarterly sales, with first-quarter sales reaching $707M, surpassing analysts' average estimate of $697.8M. The company reported a net income of $33M, or $0.37 per share, compared to $24M, or $0.28 per share, in the same period last year. More: - Increased product prices counteracted the impact of declining demand for the Froot Loops maker's ready-to-eat breakfast items and snacks.
- Pricing increased 6.3% during the reported quarter, but volumes decreased 7%.
- WK Kellogg reiterated its annual adjusted net sales growth forecast, maintaining a range of down 1% to up 1%.
- Kellanova ($K), WK Kellogg's parent company, outperformed expectations with quarterly net sales of $3.20B, exceeding analysts' projected $3.16B.
- Kellanova's varied product range and premium pricing mitigated the effects of consumers shifting to lower-priced alternatives despite a 3.1% decline in organic sales volumes, as prices rose by 8.5% in the quarter.
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| 6 | | Global Infrastructure Partners and Canada Pension Plan Investment Board will acquire Allete Inc., a Minnesota utility owner, for approximately $3.9B, including all outstanding shares at $67 per share in cash, representing a 19% premium to Allete's pre-deal closing price. The total deal value, including debt assumption, is estimated at $6.2B. More: - The acquisition coincides with a notable increase in U.S. electricity demand, propelled by factors including the establishment of data centers, new manufacturing facilities, and endeavors to electrify a larger portion of the economy.
- Allete shares ($ALE) fell 1% after the deal announcement, following a 5.6% gain on initial reports of the acquisition.
- Allete's Minnesota Power utility engages in clean-energy development activities and serves 150,000 consumers.
- JPMorgan Securities LLC is acting as Allete's primary financial adviser for the deal, anticipated to be finalized in mid-2025, pending shareholder and regulatory clearance.
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| 7 | | Quick Hits: - Equinox launches "Optimize," a $40,000 annual program, offering personalized health services like personal training, nutrition coaching, sleep optimization, and massage therapy.
- Nintendo intends to unveil the successor to its popular Switch console by March 2025, as confirmed by the company's president, Shuntaro Furukawa, in a statement on Tuesday.
- United and American airlines struck an $8.5B deal for a Chicago O'Hare Airport overhaul after expressing cost concerns, with a deadline until May for carrier review of the city's latest proposal.
- Azazie, a DTC bridal brand, has inaugurated its first physical location, Azazie Studio, reserved for private events, bridal celebrations, style appointments, and influencer engagements, with no public access.
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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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