Ugly Earnings from Majors Like Microsoft and McDonald's Hit Wall Street

Andrew Klips |

Ugly Earnings from Majors Like Microsoft and McDonalds Hit Wall StreetGoogle (GOOG) released a disappointing earnings report on Thursday that helped guide the tech-heavy Nasdaq exchange more than 1 percent into the red. Coupling reports after the closing bell yesterday with Friday morning reports, more big board staples are disclosing financials that are coming-up shy of Wall Street’s expectations.

Notable laggards resulting from less-than-expected earnings include, Microsoft Corp. (MSFT), McDonald’s Corp. (MCD), General Electric Co. (GE) and Chipotle Mexican Grill Inc. (CMG).

Yesterday evening, Microsoft reported a 22 percent drop – from $17.37 billion to $16 billion - in its fiscal first quarter revenue, citing challenges in the broad PC market and lowered inventories of Windows 7 as part of the transition to Windows 8 operating system. Windows 8 is expected to finally debut next Friday.

The Redman, Washington-based tech firm said profits for the quarter equaled $4.47 billion, or 53 cents per share, as compared to profit of $5.74 billion, or 68 cents per share, in the year prior quarter. Analysts were calling-for $16.5 billion in revenue and 56 cents per share in earnings.

The company did defer about $1.35 billion in sales related to it Office software and in pre-sales for Windows 8. Shares fell about 2 percent in early Friday trading from Thursday’s $29.50 closing price.

McDonald’s also missed analyst predictions by posting a 3 percent drop in third-quarter profit to $1.46 billion, or $1.43 per share. In the year prior quarter, McDonald’s reported profit of $1.51 billion, or $1.45 per share. Revenue during the latest quarter edged-down 0.2 percent to $7.15 billion. Analysts were calling for revenue of $7.14 billion and earnings per share of $1.47.

Like many other companies with heavy sales generated overseas, an unfavorable forex market hampered profits. Excluding currency fluctuations, revenue was up 4 percent.

Shareholders of the world’s biggest burger chain aren’t singing “I’m Loving it” to the latest financials as shares are down more than 3 percent in early trading from yesterday’s closing price of $92.86.

Shares of General Electric are down about 3 percent to $22.10 in Friday morning trading after the U.S.’s largest conglomerate posted a 2.8 percent increase in third quarter revenue to $36.35 billion from $35.36 billion the year earlier, but missed Wall Street estimates of $36.94 billion. A weak currency exchange cost earnings $1.1 billion, according to the Fairfield, Connecticut-based company.

GE reported a profit of $3.49 billion, or 33 cents a share, versus $3.22 billion, or 22 cents a share, a year earlier. Analysts were calling for 36 cents per share in earnings.

Chipotle shares are getting crushed by more than 14 percent to $243 each in early trading after providing an earnings miss and weak forecast after Thursday’s closing bell. The Denver-based burrito maker notched an 18 percent climb in third-quarter revenue to $700.5 million and a quarterly profit of $72.3 million, or $2.27 per share, compared to $60.4 million, or $1.90 per share last year. The increases missed analyst forecasts of earnings of $2.30 per share and $702 million in revenue.

What hurt Chipotle the most is a deceleration in growth. Once one of the most-loved restaurant plays that regularly posted double digit gains in same-store sales, Chipotle has cooled in growth and its shares have suffered; losing more than 40 percent from April highs of $442.40 a share. Last quarter, same-store sales grew by 4.8 percent, short of 5.4 percent growth analysts expected.

Early in October, influential hedge fund manager David Einhorn, who runs the $7.7 billion fund at Greenlight Capital, call Chipotle’s market cap a “nosebleed valuation” and indicated the company was a viable short option as competition for Yum Brands (YUM) stiffens through its Taco Bell restaurants.

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Companies

Symbol Name Price Change % Volume
AMRK A-Mark Precious Metals Inc. 16.05 -0.08 -0.50 19,039
CMG Chipotle Mexican Grill Inc. 423.50 2.77 0.66 996,508
GE General Electric Co 29.62 0.09 0.30 36,120,040
GOOG Alphabet Inc. 777.29 2.28 0.29 1,585,333
MCD McDonald\'s Corporation 115.36 0.57 0.50 4,188,694
MSFT Microsoft Corporation 57.60 0.20 0.35 29,910,788
YUM Yum! Brands Inc. 90.81 1.00 1.11 3,610,802

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