Ghost Global (Apple | Procter & Gamble | Renault | Amazon)

Even Apple’s earnings fell

Apple has released results for its third quarter for FY 2022. The company reported only a 2% increase in revenue, bringing it to $83 billion and setting third quarter records in North America, South America, Europe and the Asia Pacific region.

The company is pleased with this achievement in the face of external challenges such as supply constraints, foreign exchange headwinds and the halt of operations in Russia.

iPhone revenue set a record of $40.7 billion, rising 3%. Although Mac revenue dropped 10% to $7.4 billion, the company is confident that its investment in the product is fueling growth in Apple’s installed customer base, as almost half of customers purchasing a Mac this quarter were new users. iPad revenue dropped 2% to $7.2 billion and revenue from Wearables, Home, and Accessories was down 8% to just over $8 billion. The company blamed these decreases on macroeconomic conditions. Service revenue was up 12% to reach $19.6 billion, setting revenue records in Music, Cloud Services, Apple Care, and Payment Services. Essentially, iPhone and services carried the team as the two largest segments.

Product gross margin fell by 150 basis points to 34.5%. Services gross margin improved by 170 basis points to 71.5%. Overall, gross margin was flat year-on-year at 43.3%, an impressive performance that helped protect a modest improvement in gross margin.

By the time we reach the bottom of the income statement, we find that diluted earnings per share fell by 7.7% year-on-year, as the inflationary pressures on operating expenses hurt the business.

Still, the company is optimistic about the strength of its ecosystem, citing all-time highs in all major product categories throughout geographic segments. There are now over 860 million paid subscriptions across Apple’s platform. The company has placed emphasis on improving service offerings such as Apple Music, Apple TV+ and Apple Arcade. Apple is also optimistic about its presence in the enterprise market, highlighting Bank of America providing iPhones to all its financial advisors and IT company, Wipro, investing in MacBook Air for its new graduates.

Pampering shareholders

The Procter & Gamble Company (P&G), owners of brands such as Pampers, Ariel laundry products, Oral-B and Head and Shoulders, has released results for its 2022 financial year.

Organic sales (excluding forex impacts and acquisitions / disposals) increased by 7% for the full year, including a 2% increase in volume. In the final quarter, volumes were down 1% thanks to lockdowns in China and the impact of Russia and pricing was 8% higher as inflation came through. Net sales were up 3% in the fourth quarter and 5% for the full year.

Organic sales in the US were up 6% (and 24% over three years), while in European Focus markets they were up 3%. Excluding Russia, organic sales in European Focus markets grew by 7%. Organic sales in the Greater China region were down 11%, largely due to Covid-19 lockdowns. This is obviously a temporary issue.

Full year core earnings per share (EPS) increased by 3% despite the pressures from commodities, freight and foreign exchange. Looking at online channels, eCommerce sales increased by 11% and now represent 14% of total revenue in P&G’s biggest market, the US.

P&G anticipates volatility in the coming financial year from foreign exchange rates, freight costs, materials, fuel, energy and wage inflation. Still, positive earnings growth is more than some of the world’s most exciting companies can say.

“Renaulution”: silly name, good results

Groupe Renault, the French automobile manufacturer, has released results for the first half of its 2022 financial year. Despite a reduction in unit sales of 11.9% (around 136,000 units), net debt has fallen by €1.2 billion to €426 million. This was achieved through a strong increase in operating margin from 2.1% to 4.7%, driving a period in which cash generation reached a 10-year high.

The company feels confident about the success of its “Renaulution,” a strategy which focuses on three levels of transformation.

The first is the company’s go-to-market approach which puts value above volume. Renault has been focusing on improving its current product mix, such as its hybrid and electric cars.  Over the last 18 months, the company has completely replaced diesel with hybrid cars.

The second level is described as a “product offensive enabling commercial successes.” This includes the production of new offerings such as the Mégane E-TECH which was placed second in the Car of the Year competition.

The third level is the renewal of the company’s competitiveness. The company has also found success in its Arkana and Dacia models and has high expectations for its new Austral, C-SUV. On the third level, Renault has lowered its break-even point by over 40% and is confident that it will weather the energy-shortage storm due to low reliance on Russian gas.

The company has upgraded its outlook for the full financial year, something that investors always love seeing.

Amazon takes a major knock from its non-core assets

Amazon has announced its Q2 results for its 2022 financial year, with a spectacular net loss of $2 billion vs. a net profit of $7.8 billion a year ago. In case you’re wondering how this is possible, a valuation loss of $3.9 billion on the stake in Rivian Automotive in this quarter might give you a clue.

On a trailing twelve months basis, worldwide net sales increased by 10%. They were up 7% in this quarter vs. the comparable quarter. Operating income was crushed by rising inflation, which is leading to higher fuel, trucking, air and ocean shipping rates. Operating margin was just 2.7% in this quarter vs. 6.8% in the comparable period.

The company has emphasised its efforts to make its Prime membership more valuable through innovations such as airing the premiere of the new Lord of the Rings film as well as obtaining exclusive rights to air NFL Thursday Night Football games. Amazon is also pleased with its improvement in customer experience, citing improved delivery speed and in-stock inventory levels.

Numbers are what really count though, with a 57% decrease in operating income. Because markets are volatile and ridiculous, the share price is up nearly 20% in the past month.

Looking at Amazon Web Services, the part of the group that makes the most money, revenue was up 33% in this quarter and operating income grew 28%. There was some margin compression even in this area of the business, which is part of what hurt the broader story.

Amazon expects sales growth of between 13% and 17% in the next quarter, despite the preceding three quarters of single digit sales growth. The company also had its 2-day Prime Day event in July this year instead of June as in 2021, which is expected to have a positive impact on its Q3 results.

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