Top US stocks: Adobe, FedEx and Uber

Adobe and FedEx report after the closing bell, Uber could achieve its goal to become profitable early, US Bancorp and ConocoPhillips strike major deals, Lennar’s outlook disappoints, JPMorgan launches digital bank Chase in the UK, and Robinhood readies its crypto wallet.

USA (1)

Adobe

Adobe will release third quarter earnings after the closing bell today, with the company set to continue flourishing as demand for its creative, marketing and analytics software booms as businesses digitise and more of our daily lives shift online.

Adobe has said it is targeting $3.88 billion in revenue and diluted EPS of $2.27. Analysts are expecting the firm to beat those targets with forecasts that quarterly revenue will rise to $3.89 billion from $3.22 billion the year before, with diluted EPS forecast to rise to $2.29 from $1.97. Notably, Adobe has beaten expectations for eight consecutive quarters.

You can read the full preview ahead of the Adobe earnings and view our technical analysis on the stock here.

FedEx

FedEx will publish first quarter earnings after markets close today, with the firm set to build on the record results delivered in the last quarter as it continues to reap the benefits from an explosion in ecommerce demand since the pandemic started.

Analysts are expecting revenue to rise to $21.90 billion from $19.32 billion the year before and for quarterly reported net income to edge up to $1.36 billion from $1.24 billion, with diluted EPS to follow higher to $4.93 from $4.72. FedEx has beaten expectations for the last five consecutive quarters. Although there are no concerns over demand going forward, the focus will be on how FedEx is performing amid rising costs and a tight labour market ahead of the peak holiday season.

You can read the full preview ahead of the FedEx earnings and view our technical analysis on the stock here.

Uber

Uber upgraded its expectations this morning and said it could achieve the long-awaited goal of becoming profitable in the current quarter.

The ride-hailing and food delivery outfit said it is now on course to deliver quarterly adjusted Ebitda of between a $25 million loss to a $25 million profit in the third quarter, having previously said it would book a loss of around $100 million. It said the upgrade was down to strong improvements in earnings from both divisions and said it is now expecting to see Ebitda of between breakeven and a $100 million profit in the fourth quarter of 2021. Uber was originally targeting to turn profitable at the Ebitda level by the end of this year.

Uber also said it is now expecting gross bookings in the third quarter to be between $22.8 to $23.2 billion, having previously targeted $22 to $24 billion.

US Bancorp

Mitsubishi UFJ Financial Group announced today that it has agreed to sell its personal banking arm that forms part of its US subsidiary MUFG Union Bank to US Bancorp for around $8 billion in cash and shares.

The Japanese firm said the US market was still important but that it was focusing on corporate transactions, allowing US Bancorp to unlock the value of its wider business. The unit being sold had net assets of $15.89 billion at the end of 2020, when it saw net income fall to $38 million from $746 million in 2019.

The total consideration of the deal is set to be around $17.6 billion, formed of $8 billion from US Bancorp and $9.6 billion that will be taken out of the business in the form of dividends and buybacks before the deal completes. US Bancorp’s consideration is to be split around $5.5 billion in cash and 44 million shares in the business, giving the Japanese firm a 2.9% stake in the US bank.

ConocoPhillips

ConocoPhillips has agreed to buy Royal Dutch Shell’s assets in the Permian basin for $9.5 billion as deal-making and consolidation continues in the region.

The deal incudes assets currently producing around 175,000 barrels of oil equivalent per day. They had gross assets worth $10.5 billion at the end of 2020 and booked a $491 million pretax loss last year. ConocoPhillips said the deal was ‘highly accretive on key financial metrics’ as it enhances its existing position in the Permian basin and will lead to better free cashflow generation and improved shareholder returns.

Shell, which will be exiting the region as a result of the sale, said it will return $7 billion to shareholders after the deal completes before the end of 2021.

Airline stocks

Airline stocks including American Airlines, Delta Air Lines, and United Airlines will remain in play after flying higher yesterday after the US confirmed it will open up to fully-vaccinated travellers from the UK and EU starting next month.

American Airlines gained over 3% yesterday while Delta and United both increase 1.7% after the government confirmed borders would open up to people from the UK and the EU early in November. That will allow the airlines to start rebuilding their trans-Atlantic business, building on the stronger recovery in domestic travel over recent months.

Reports suggested that searches for flights from the UK to the US soared by over 700% after the announcement, with the likes of New York, Orlando, Las Vegas, Miami and Los Angeles emerging as favourite destinations.

Lennar

Lennar, the second largest housebuilder in the US, saw an impressive set of results in the third quarter overshadowed by warnings that challenges in the supply chain continue to weigh on the business and a disappointing outlook for the final quarter of 2021.

The company said it delivered 15,199 homes in the quarter, up 10% from last year, and saw a 5% rise in new orders. Its backlog at the end of the period was up 31% to 25,819 homes. Revenue rose 18% to $6.9 billion as a result, and better margins meant net earnings more than doubled to $1.4 billion from $666.4 million.

Lennar said the ‘unprecedented supply chain challenges’ are expected to continue for the foreseeable future, prompting it to cut the number of houses it expects to complete in the fourth quarter.

JPMorgan

JPMorgan has intensified competition in the British banking market after launching its digital retail bank named Chase, introducing Brits to its slew of products for the first time starting with its new take on current accounts.

The US bank originally announced the plans back in January when it said the digital bank, which has been built from scratch, would allow customers to utilise the modern way of online banking backed by a large and trusted financial institution. The launch marks the first entry into the retail banking sector outside of North America for JPMorgan, intensifying rivalry with the likes of Barclays, Natwest, Lloyds and HSBC.

The UK is set to be the testbed for Chase, which will be launched in other European countries if it proves successful. It is offering incentives to attract customers such as 1% cashback on debit card spending and high-interest saving tools.

Johnson & Johnson

Johnson & Johnson has said a second dose of its single-shot Covid-19 vaccine boosts the effectiveness and offers enhanced protection against the virus.

J&J said having a second dose around two months after the first proved 94% effective in its latest trial, up from 70% after one dose. It will build on the calls for the US and other countries to push ahead with booster shots.

A separate study also revealed that its single-shit vaccine was proving 79% effective at preventing Covid-19 cases in those who have had it in the US and 81% effective at stopping people from having to enter hospital compared to unvaccinated people.

Activision Blizzard

Video game outfit Activision Blizzard said this morning that it is continuing to work with regulators on how to resolve a number of workplace complaints and is actively trying to improve its policies and procedures to facilitate a better environment for staff.

‘We are deeply committed to making Activision Blizzard one of the best, most inclusive places to work anywhere. There is absolutely no place anywhere in our Company for discrimination, harassment, or unequal treatment of any kind. While we continue to work in good faith with regulators to address and resolve past workplace issues, we also continue to move ahead with our own initiatives to ensure that we are the very best place to work. We remain committed to addressing all workplace issues in a forthright and prompt manner,’ said CEO Bobby Kotick.

Reports suggests the SEC has subpoenaed Activision over how it handled matters involving several current and former employees, and comes at a time when the firm is caught up in allegations of harassment and equal pay violations. Activision said it has already taken action including making ‘significant changes to personnel, exiting a number of employees’. It is also bringing in a new chief people officer, Julie Hodges, who is joining from Disney.

Lucid Group

Lucid Group, better known as Lucid Motors, is in play today after confirming its Air Dream Edition Range, which is due to be launched later this year, boasts 100 miles more range than its closest competitor, Tesla.

The firm achieved an Environmental Protection Agency rating of 520 miles, over 100 miles more than Tesla’s Model S that can cover 405 miles on a single charge and has become the first car to breach the 500-mile mark.

Robinhood

Robinhood is testing a new crypto wallet and cryptocurrency transfer features in an effort to make it easier for users to send and receive the likes of bitcoin, according to reports from Bloomberg.

The report said there was evidence of the company’s work on features that had appeared in a beta version of its iPhone app. Investors have been eagerly waiting for the firm to launch these new products, with the wallet set to help it become a central hub for people to store their crypto investments. It has been seen as an area where it has lacked presence against the likes of Coinbase, which already has crypto wallets as part of its key offering.

The date of any launch is yet to be confirmed.

Analyst Recommendations: Enphase, Big Lots and Vail Resorts

Enphase Energy was given an Overweight rating by KeyBanc as it initiated coverage on the stock, citing the strong prospects within the solar industry.

Big Lots was downgraded to Neutral from Overweight by Piper Sandler over concerns that the end of stimulus will hurt sales at the retailer.

Vail Resorts was upgraded to Overweight from Sector Weight by KeyBanc ahead of an anticipated rise in demand for winter vacations.

D R Horton had its target price raised to $129 from $128 by JPMorgan after raising its guidance for the final quarter of 2021.

Oshkosh had its target price cut to $105 from $150 by Jefferies due to concerns over near-term deliveries and uncertainty in the defence sector.

Steven Madden had its target price upped to $50 from $44 by Jefferies on the belief it has a resilient supply chain in the current challenging environment.

Mirati Therapeutics had its target price increased to $175 from $160 by Oppenheimer.

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