Why iPhone 6s Is Too Perfect For Apple’s Own Good
Congrats to Madhav A., a software engineer at Bosch in Michigan, for winning the first-ever Morning Brew quiz prize! Look out for the next weekly quiz in Friday’s issue for your chance to be the next winner!
“We’re seeing extreme conditions unlike anything we have ever experienced before” — Apple CEO Tim Cook, referring to tough overseas conditions slowing plans for international expansion. More on Apple and its mixed earnings report later on.
- U.S. stocks continued their choppy action with a fantastic Tuesday, assisted by gains in oil and some surprisingly positive earnings reports—although investors await the decision from the Federal Reserve’s policy meeting later today
- Chinese stocks were hammered over 6% on Tuesday (and then fell another 2.5% last night), reaching their lowest levels in over a year after it was revealed that capital outflows reached $1 trillion in 2015 (that’s a lot of people pulling their money from China)
- After influential Weight Watchers shareholder and spokeswoman Oprah Winfrey posted a video on Twitter of herself 26 pounds lighter, shares fattened up by 20%
Apple Wins Today, Loses Tomorrow
Amidst a deteriorating narrative around commodity prices and China (hint: it’s a big market), Apple was able to deliver on (and beat) earnings once again, while narrowly missing on revenue and (perhaps most importantly) iPhone sales. Ironically, Apple lowered its guidance for the next quarter because the iPhone 6s was just that good. That’s right: both analysts and the CEO believe the new iPhone was so much better than the last version that users don’t want to upgrade anytime soon. Top-tier company problems, right?
Sprint Beats Expectations; AT&T Meets Them
Sprint’s earnings were a case of “losing is winning,” as their 21 cents per share loss topped expectations of a loss of 26 cents. The carrier’s current cost-cutting program also means that the company expects 2016 operating income between $100 million and $300 million—a far cry from the previously expected loss of $250 million. As a result, Sprint shares were up over 18% on the day. Meanwhile, competitor AT&T saw shares dip 2% after hours, with earnings in line with expectations while revenues were mildly disappointing.
P&G Gets By…For Now
Consumer products giant Procter & Gamble released earnings yesterday, announcing an overall sales increase of around 3%—but the story doesn’t end there. P&G has been struggling due to unstable currency markets in developing countries, where the firm has attempted recent expansion efforts. The strong U.S. dollar has thrown a wrench in those plans, and it’s affecting the company’s bottom line. Product price increases (3% across the board) saved the day this time, but next quarter is a new chapter.
AIG Takes Some Advice
“Too big to succeed” were the words of activist investor Carl Icahn after AIG’s poor financial performance last year. And now it looks like the largest American insurance firm is listening to the criticism: management has decided to completely reorganize its current business structure. The new plan includes spinning off nine business units, selling its financial advisory group and returning $25 billion to investors. The hope is to transform AIG into a leaner company with significantly fewer operating expenses.
- JPMorgan to pay $1.42 billion to Lehman Brothers
- Periscope integrates with GoPro to bring live streaming to action cameras
- Twitter stops showing ads to some of its most valuable users
- Twitter names AmEx executive Leslie Berland as CMO
- Monday: McDonald’s (+), Halliburton (-), D.R. Horton (-) Earnings
- Tuesday: Apple (+/-), AT&T (+/-), 3M (+), Coach (+), DuPont (-), Johnson & Johnson (+), Procter & Gamble (+), Sprint (+) Earnings; Consumer Confidence (+)
- Wednesday: Facebook, eBay, Fiat Chrysler, Las Vegas Sands, PayPal, Qualcomm, Texas Instruments, Biogen, Boeing, United Technologies Earnings; New Home Sales; FOMC Meeting Announcement
- Thursday: Amazon, Microsoft, Alibaba, Ford, Altria, Caterpillar, Celgene, Electronic Arts, JetBlue, Time Warner Cable, Under Armour, Visa Earnings; Weekly Jobless Claims; Durable Goods Orders
- Friday: U.S. Q4 GDP; MasterCard, Chevron, Phillips 66, Siemens, Xerox Earnings
CHEAP GAS, EMPTY OFFICES
Oil companies aren’t the only ones feeling the heat as oil flirts with $30 a barrel—the market for office space in Houston is sweating it out in 2016 too. Last year’s $100 oil peak spiked developers’ interest in building more office space, but with oil companies leading Houston’s economy, landlords are now searching for any takers. Here’s what’s happening:
- Houston is cooking up a recipe for disaster, with rising supply and falling demand—and there’s 7.9 million square feet still in the pipeline for 2016.
- Although this bust is less dire than the 1980s oil disaster, Houston is looking at 7.6 million square feet of sublease space currently on the market—the equivalent of just over two Empire State Buildings.
- So what’s the bright side? With little to no market activity, landlords have been able to hold rent rates steady, as they are unwilling to “bet against themselves.”
INTERVIEW QUESTION OF THE DAY
What makes two companies with the same EBITDA have different EBITDA multiples? (Answer)
BUSINESS TERM OF THE DAY
Quanto Swap — A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries’ interest rates.
FOOD FOR THOUGHT
54 million: number of U.S. households that currently have Amazon Prime, according to Consumer Intelligence Research Partners. That’s a 35% jump from the previous year, and it means that nearly one in two U.S. households now subscribes to Amazon Prime. Not bad, Amazon.