This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
I have really hated this earnings season, and it has just begun.
There have been a few bright spots, no doubt.
PepsiCo (PEP) CEO Ramon Laguarta told me it will be a spring and summer of innovation. Think more power-packed Gatorade powders and tablets for workout freaks like yours truly. Let’s do this!
Speaking of workouts, Chipotle (CMG) CFO Jack Hartung told Yahoo Finance that he’s OK with the chain being the go-to post fat-burning sessions. He was responding to a new WSJ article that suggested workout buffs are supporting the chain’s higher prices.
Then Snowflake’s (SNOW) new CEO, Sridhar Ramaswamy, squeezed in an AI product drop ahead of its earnings. He promised that the cloud computing company would be picking up the pace on artificial intelligence innovations this year, aiming to satisfy the Street’s appetite for newness.
Ramaswamy also called Yahoo Finance “iconic.”
We appreciate that, Sridhar — and we certainly agree!
But all in all, I have hated this earnings season.
Why? Because of all the bad news that is piling up and catching investors off guard.
Surprises have been all over the place.
For instance, one of the early themes this season is higher-than-expected costs for businesses. And it’s not just UPS (UPS) calling out rising gas prices and the return of fuel surcharges or PepsiCo saying inflation is still in their pipeline.
It’s Chipotle seeing higher tech costs to support new restaurant software. Investments like this (and wage increases) held back profits in the first quarter.
It’s Meta (META) materially lifting its full-year capital expenditures guidance and hinting at even bigger spending in 2025 — all because of unknown AI projects. This surprised shareholders and Mark Zuckerberg fans alike.
It’s Ford (F) losing lots of money on EVs because of higher-than-expected costs.
Then there is the weakness emanating from forward-looking sectors such as truckers and railroads.
Trucker J.B. Hunt (JBHT) had this to say on the economic backdrop: “We continue to face inflationary cost pressures despite also facing deflationary pricing pressure.” Brutal acknowledgment. The stock was hammered.
Old Dominion Freight Line (ODFL) stated that the last two years have “felt” like the 2009 recession.
Norfolk Southern (NSC) had this to say this week: “We expect continued mixed impacts from higher international empty shipments as geopolitical tensions remain elevated, but a weak truck market continues to drive stubbornly low truck rates, which will dampen domestic non-premium Intermodal pricing.”
Meanwhile, IBM (IBM) CFO Jim Kavanaugh struck a more cautious note when I asked him about soft sales at its lucrative consulting business.
“We still see very good demand out in the marketplace around large transformational deals, digital transformation,” Kavanaugh said. “We had our largest first quarter in consulting signings in many years. So the demand profile is out there. Our AI bookings for consulting in the first quarter doubled all of 2023.”
“But what we’re seeing, just given the uncertain macroeconomic environment, is … a tightening of discretionary spending, no different than Accenture and all the other consulting companies that are impacting the short-term revenue realization.”
Markets have responded in kind to the dose of badness.
“I really think this is actually a dip buying opportunity. It’s never fun to live through it, but these are normal pullbacks,” Freedom Capital Markets chief global strategist Jay Woods told me on Yahoo Finance’s Opening Bid podcast (listen in below).
Thought I would leave you on a happy note.
Brian Sozzi is Yahoo Finance’s Executive Editor. He is also the host of the ‘Opening Bid‘ podcast. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to come on Yahoo Finance Live? Email Brian Sozzi.
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance