Tuesday's First Moves: WFC Mixed Earnings, JNJ Beat & Raise, DPZ Slides

SPEAKER_1 (0:00)

We continue to follow some of the movers here, names to watch, and I'm joined by Diane King Hall. Looking as we continue on the banks, and this one is all about Wells Fargo. Let's touch on that one. Good morning, Diane.

Diane King Hall (0:11)

Yeah, similar to across the board, a mixed bag, right? Wells Fargo, mixed results when we look at both the top and bottom line, although the CEO is saying the consumer is still strong and their consumer business is strong, but mixed in terms of its headline level results. Earnings coming in at $1.87 per share. That was better than expected on the bottom line. The street was looking for $1.85. Revenue coming in at $21.87 billion. The street was looking for $22.32 billion, so that was weaker than expected on revenue. So that's a miss there. So modest earnings, but the revenue and interest income actually fell short of estimates. Net interest income did increase 5% to $12.52 billion, but again, that was weaker than expected. This is the money that Wells earns on loans and investments after paying interest to depositors. There is a key metric that investors often look at for across the banks here.

Larger loan and investment balances helped, along with older fixed rate assets, just resetting at higher rates here. So that was on the helping side, but offsetting that growth was lower rates on floating rate assets and higher deposit costs as more commercial customers hold interest in paying accounts. Consumer health, the behavior looks better. Overall, the CEO says consumers are spending more, delinquencies remain low and deposit and investment balances have grown. In fact, that in terms of consumer banking, where you see the momentum primary checking accounts, they've grown year over year for 14 quarters. In a row there, they've added more than 650,000 credit card accounts. Premier client assets increased 10%. They say average consumer loans grew 4%.

So Wells is adding customers. So that's on the bright side, but investors focusing more on the weakness here. And so you can see shares are shaving this morning a little bit off the lows, but under some pressure, extending some of the weakness we've seen so far this year in Wells Fargo.

SPEAKER_1 (2:14)

Yeah, right here at 9:27 a.m., the CFO of Wells Fargo said trading activities slowed sharply in the final weeks of September, which you touched on. I don't necessarily love that part of the story. Citi told us that they want to wait and see the macro outlook, the market conditions, even though profits been soaring. So there is, even though these numbers are mostly good numbers, you can't deny it, there still is this sense of caution. Let's talk about Johnson & Johnson.

Diane King Hall (2:41)

That's a great breakdown there in terms of the banks there. And obviously a hat tip to Jane Frazier over there, Citi, for those better than expected overall numbers, but we know that stock has been dinged. Over in JNJ, it's a weaker picture there, those shares under pressure down by about 4%, even though JNJ did beat expectations on the bottom line. Earnings coming in at 259 per share. The street was looking for 253 there.

Revenue also a slim beat there, 25.4 billion. The street was looking for 25 and a quarter billion there for JNJ, but they flagged some impact on MedTech. That was the weakest spot there. And some of that has to do with the geopolitical conflict. They mentioned sales outside the US were essentially flat there. Again, revenue 25.4 billion total, 25

and about a quarter billion was what was expected there. The drug business is what power growth here. You had pharmaceuticals, Tramifa leading there. Those sales surged 68%. Stellara, that did decline. There's been competition in that space, but they've been looking for other ways to offset that. So you had some offsetting of that decline in Stellara there. But MedTech, again, is the weakness here. MedTech sales rose, but by just 2.5% to 8.6 billion. So that was below expectations. The company flagged the Middle East conflict. They told Reuters about this. And then European austerity measures and pricing pressure in China. So it's the bigger picture globally that's causing some weakness in MedTech sales. And that's why that stock is being dinged.

SPEAKER_1 (4:17)

Yeah, down about 4% right now. And last but not least, let's touch on Domino's, which is down 4% as well.

Diane King Hall (4:23)

So this is a read-through on the consumer, obviously. Now, Domino's did actually do better than expected. But those comparable store sales is where there is some concern here. On the top line, they earned one revenue of 1.186 billion. That was better than expected. Earnings coming in at 4.60, the street was just looking for 4.36. But comps just increased slightly, up 3.0% of a percent. Now, it is actually an improvement from the prior quarter, where we saw just an increase of a tenth of a percent there. But there's still slow growth here at its existing locations. International comps increased 2.0%.