Early Thoughts on Q3 Earnings

Titan's Takeaway: No company has been immune from turbulent market headwinds, but we have reason to remain optimistic with earnings reports so far. Inflation, supply chain issues, and macroeconomic uncertainty continue to be factors affecting company revenue and operating margins. We'll be watching companies' key signposts closely.

It's Grace from the Investor Relations team and on today’s Titan Flash we’re discussing what our team will be watching for with Q3 earnings.

It will be a busy couple of weeks ahead as companies report their earnings for the turbulent third quarter that ended on September 30, including dozens of Titan holdings. We’ll talk financials with Schwab, retail and entertainment with Hasbro, and take a look at semiconductors with ASML, a holding in Offshore. 

To start on financials, Charles Schwab released earnings earlier this week, and both sales and earnings topped analyst expectations. Schwab management called the results the "strongest quarterly performance in company history," with net income reaching a record $2 billion and ”record third-quarter retail inflows.” 

Schwab is a major benefactor from the rising rate environment as they earn more interest on the cash held by their clients, but they have started seeing investors shift cash into money market funds that provide higher yield, but less profit for Schwab. Schwab’s earnings call isn’t until next week, but we’ll be tuned in to learn more about changes in cash management.

Titan Opportunities’ holding Hasbro (HAS) reported revenue in line with expectations, however the company’s 16.1% operating margin came in below expectations of 18.4%. This was likely a result of supply chain fears from retailers, higher promotions, and higher costs due to increased inventory. 

Full year revenue and margin guidance was reiterated – the company expects strong performance in Q4 from its flagship game publisher Wizards of the Coast, responsible for household names like Dungeons and Dragons. While we can admit the quarter was somewhat disappointing, the top-line is catalyst rich through the next 12 months with the Dungeons and Dragons movie coming soon. 

Our Offshore holding, semiconductor manufacturer ASML, reported their Q3 earnings on Wednesday morning. Despite macroeconomic concerns and diverging demand dynamics per market segment, ASML shared encouraging numbers and a relatively positive outlook. The manufacturer saw record bookings in the third quarter of around 8.9 billion euros. Operating margin and revenue both came in above expectation, at 33.5% and 5.7 billion euros respectively. We’ll be monitoring a couple of key drivers: bookings (accepted sales orders), DUV shipments (one of their key systems), and sales margins. Many think ASML will be insulated from the broader cycle in semis at the moment. We remain cautious. 

Next week we look forward to more earnings, and are especially eager to see what consumer focused companies such as VISA and LVMH report. We’ll keep you posted on our thoughts.

The information provided is meant for educational and informational purposes only, and is not intended to serve as a recommendation to buy or sell any security and is not an offer to buy or sell a security.