The third-quarter earnings season has largely concluded, revealing generally positive outcomes. Data indicates a substantial 13.4% increase in earnings per share among S&P 500 companies. This figure, if sustained, would mark the fourth consecutive quarter of double-digit earnings growth, surpassing the 12% growth observed in the second quarter of the year. Initial expectations for the quarter were considerably lower, with analysts projecting a 7.9% increase in earnings per share for S&P 500 companies. Several major companies, including Oracle and Broadcom, released their quarterly results this week, providing additional insights into the current economic landscape.
Broadcom's AI-Driven Success and Lululemon's Leadership Change
Broadcom (AVGO) experienced a surge in its stock price after hours, climbing 3% on the heels of a strong earnings report. The chipmaker credited robust demand for its AI chips as a key driver of record revenue in its fiscal fourth quarter. Looking ahead, Broadcom anticipates its AI revenue will double in the first quarter of the coming year.
- Q4 Revenue: $18.0 billion, a 28% year-over-year increase, fueled primarily by a 74% year-over-year surge in AI semiconductor revenue.
- Q1 Forecast: Anticipated total revenue of \$19.1 billion, with an adjusted EBITDA of 67%. AI semiconductor revenue is projected to double year-over-year to $8.2 billion, driven by custom AI accelerators and Ethernet AI switches.
Lululemon (LULU) announced that CEO Calvin McDonald will be stepping down from his position and from the company’s board, effective January 31st. McDonald will remain as a senior advisor until the end of March to assist with the transition. The company did not immediately name a permanent replacement. The current CFO, Meghan Frank, and Chief Commercial Officer, André Maestrini, will serve as interim co-CEOs. McDonald's tenure, which began in 2018, saw significant expansion of Lululemon's product line and growth in its Chinese market. During his time as CEO, Lululemon's stock rose 42.8%. Following the earnings announcement, the stock jumped approximately 10% in after-hours trading.
Costco's Strong Performance and Lululemon's Turnaround
Costco (COST) reported results that exceeded Wall Street's expectations across all key metrics in its fiscal first quarter.
- Adjusted Earnings Per Share: $4.50, surpassing the consensus estimate of $4.28.
- Revenue: $67.3 billion, slightly above the expected $67.1 billion.
- Same-Store Sales Growth: Overall increase of 6.4%, exceeding the anticipated 5.9%. Canada led the growth at 9%, followed by international business at 6.8%, and US sales at 5.9%.
- E-commerce Sales: Increased by 20.5%, up from 13.2% in the same period last year.
- Membership Fee Revenue: Rose 14% year-over-year to $1.33 billion, exceeding estimates of $1.29 billion.
The market reaction to Costco's report was muted. Currently, analyst ratings consist of 24 Buys, 16 Holds, and 1 Sell.
Lululemon's stock experienced a 10% surge in extended trading after the apparel retailer announced earnings that surpassed expectations, along with a positive full-year profit forecast. CEO Calvin McDonald expressed optimism about the company's progress in its turnaround plan.
- Diluted Profits: Rose to $2.59 per share, exceeding the forecast of $2.22 per share.
- Revenue: Increased 7% year-over-year to $2.6 billion, surpassing estimates of $2.47 billion. This growth was primarily driven by an 18% increase in international sales. Same-store sales in the Americas declined 5%.
- Fourth Quarter Guidance: Net revenue is projected to range from $3.5 billion to $3.58 billion, aligning with the consensus estimate of \$3.56 billion.
- Full Year Forecast: Net revenue is anticipated to be between $10.96 billion and $11 billion, representing a 4% growth.
FAQs
Why is Broadcom's stock price increasing, and what is driving their revenue growth?
Broadcom's stock is up due to strong earnings, driven primarily by a surge in demand for their AI chips. They anticipate their AI revenue will continue to grow significantly in the coming year.
What's happening with Lululemon's leadership, and how is the stock reacting?
Lululemon's CEO, Calvin McDonald, is stepping down, and the CFO and Chief Commercial Officer will serve as interim co-CEOs. Despite the leadership change, Lululemon's stock jumped approximately 10% after the earnings announcement.
How did Costco perform this quarter, and what were the key highlights?
Costco exceeded Wall Street expectations with strong adjusted earnings per share, revenue, and same-store sales growth. A key highlight was the 20.5% increase in e-commerce sales and a 14% rise in membership fee revenue.
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