GDP REPORT
The U.S. economy slowed down in the first quarter of the year due to inflation and interest rate increases. Gross domestic product, which measures goods and services produced, increased only 1.1% – falling below the expected 2%. This followed a 2.6% GDP increase in the fourth quarter of last year. The personal consumption expenditures price index, an inflation measure monitored by the Federal Reserve, increased by 4.2%. Consumer spending increased by 3.7%, exports rose by 4.8%, but gross private domestic investment fell by 12.5%, which contributed to the slowdown in growth. The report did not impact the stock market initially, but it shook bond markets with Treasury rates rising.
META SHARES JUMP AMID POSITIVE EARNINGS REPORT
Meta, the parent company of Facebook, reported higher-than-expected sales and issued a promising outlook for the current quarter. The company’s first quarter rose 3% to $28.65 billion as a result of higher Daily Active Users, Monthly Active Users, and Average Revenue per User. For the second quarter, Meta expects revenue of $29.5 billion to $32 billion, higher than Refinitiv’s projected sales of $29.5 billion. However, although Meta’s Reality Labs unit brought in $339 million in sales, it also recorded an operating loss of $3.99 billion. Net income fell by 24% due to restructuring charges but the shares increased by 12%.
AMERICAN AIRLINES MEETS EXPECTATIONS AND EXPRESSES OPTIMISTIC OUTLOOK
American Airlines made a $10 million profit in the first quarter of the year and revenue increased by 37% to $12.19 billion – almost what analysts estimated. The earnings per share met analysts’ estimates at 5 cents – excluding the charges related to debt refinancing. Additionally, the company’s net income of $10 million is a significant improvement over last year’s loss of $1.64 billion. For the second quarter of the year, the airline forecasts an adjusted per-share profit of $1.20 to $1.40, which is at the high end of what analysts were forecasting. However, American Airlines predicts a 2% to 4% decrease in revenue per available seat mile despite the anticipated capacity increase of up to 5.5%.
MORNING EARNINGS REPORTS
Comcast exceeded expectations with higher earnings per share and revenue, despite losing 614,000 cable TV subscribers. The media business’s revenue dropped nearly 40% compared to last year, although excluding major sporting events, revenue was still down by approximately 2%.
Meanwhile, Merck reported total revenue of $14.5 billion during the quarter, with revenue growth of 11% when COVID drug was excluded. Merck’s adjusted earnings per share were $1.40 for the period, beating expectations.
Finally, Eli Lilly’s revenue fell 11% compared to the same quarter last year, but still slightly topped analysts’ expectations at $6.96 billion. The company booked net income of $1.3 billion, or $1.49 per share, a 29% decline from the first quarter of 2022.
INTERNATIONAL NEWS
Deutsche Bank (DBK), one of the biggest banks in Germany, plans to reduce costs by cutting 800 senior back-office staff. This comes as CEO Christian Sewing tries to respond to a slowdown in trading, which has been a big part of the bank’s growth. During the first quarter of the year, revenue from fixed-income trading fell 17%, but the corporate bank’s revenue increased by 35% – allowing the bank to report its strongest top line since 2016. Furthermore, DBK aims to save an additional €500 million ($553 million) annually to bring its medium-term target to €2.5 billion, and in order to accomplish this, the bank is reducing its management board to nine members instead of ten, and shrinking its corporate bank, investment bank, and wealth management teams. Nevertheless, DBK plans to hire more bankers and clients from Credit Suisse Group AG.
