Markus Andrews

NEW YORK, NEW YORK – OCTOBER 22: Traders work on the floor of the New York Stock Exchange (NYSE) on October 22, 2024 in New York City. The Dow was down over 100 points in morning trading following a drop of over 300 on Monday. (Photo by Spencer Platt/Getty Images)
Spencer Platt | Getty Images News | Getty Images

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Here’s what CNBC TV’s producers were watching as the 30-stock Dow snapped a five-day losing streak, and what’s on the radar for the next session.

Case-Shiller housing numbers

The home price data will be out at 9 a.m., Eastern time.
We’ll have them on “Squawk on the Street.”
The S&P 500 Homebuilders Industry is down 5.8% in the last month.
Lennar is down nearly 7% in a month.
D.R. Horton is down 5.2% in a month.
Pulte is down 6.5% in a month.
NVR is down 4.4% in a month. 

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Lennar in the past month

Alphabet

A slate of Big Tech names report earnings this week. Alphabet is up first on Tuesday afternoon.
Alphabet is flat in the last three months.
The stock is 13% from the July high.

AMD earnings

CNBC’s Seema Mody will cover Advanced Micro Device’s report when it comes out Tuesday afternoon after the bell.
The stock is 30% from the March high, but shares are up 14% in the past three months.
Nvidia is up 24% in three months. It is 2.7% from the new high hit last week.

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Advanced Micro Devices in the past three months

Chipotle

The restaurant chain reports quarterly results after the bell Tuesday.
Chipotle’s interim CEO Scott Boatwright will be on in the 4 p.m. hour of CNBC TV.
The stock is up about 22% in the past three months.
It is up 5.2% in October.
The stock remains 12% from the mid-June high.

McDonald’s

The burger chain reports in the morning.
The stock is down nearly 5.8% in the last week. That’s after an E. coli outbreak that appears to be linked to onions in Quarter Pounder burgers in several states.
The stock is up about 18% in the past three months.
McDonald’s is 6.5% from the 52-week high.

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McDonald’s shares in 2024

Pfizer

The pharma giant is down 6.2% since last reporting three months ago.
Pfizer is 8.5% from the 52-week high.

JetBlue

The airline reports in the morning before the bell.
The stock is up 11.6% in October and roughly 18% in the past three months.
Activist investor Carl Icahn took a big stake in JetBlue earlier this year.
The stock is up nearly 32% so far this year.

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JetBlue shares in the past three months

A big test for the F-35

The strike on Iran by Israel over the weekend was the biggest test yet for Lockheed Martin’s F-35 stealth fighter aircraft.
Northrop Grumman also makes parts of the plane, including the center fuselage along with radar and communications equipment.
RTX holds Pratt & Whitney, which builds the engine for the F-35. Collins Aerospace, also an RTX subsidiary, makes the equipment that informs the pilots of what’s happening around them. Raytheon, another RTX division, is responsible for the weapons systems. This includes the air-to-air missiles and air-to-ground munitions, as well as the navigation system.
A stock reaction might not be imminent because it takes a long time to make and approve orders. However, defense analysts say this weekend’s strike was key for any country deciding between the F-35 and the Eurofighter, which is a possible competitor for sales in the Western world.
Lockheed Martin is 10% from the 52-week high. The stock is up 22.5% so far in 2024.
RTX is right near the high. Shares are up nearly 50% so far in 2024.
Northrop Grumman is 7.8% from the high. The stock is up 9% in 2024.

Other defense companies

Howmet is up 89% so far in 2024. The stock is 4.25% from the recent high.
CACI is up about 70%in 2024, 4% from last week’s high.
BWX Technologies is up 61% in 2024, 3% from last week’s high.
Leidos is up around 57% in 2024. Shares are just off last week’s high.
Tank maker General Dynamics is up 17% year to date. The stock is 3% from last week’s high.
Israel’s Elbit Systems was up nearly 8% Monday, hitting a new high. The company got a contract from the Israel’s Ministry of Defense to supply a new laser-based anti-missile and anti-aircraft system, which has done well in tests. It could cut some costs for the interceptors used by one of Israel’s current air defense systems. Shares of Elbit are up 21% in three months.
Shipbuilder Huntington Ingalls is down nearly 2% so far this year. Shares are 15% from the 52-week high hit back in March. More

The U.S. has made a remarkable economic comeback since the Covid pandemic.
However, some female-headed households continue to struggle.
The poverty rate for families with children headed by women reached 28.5% in 2023.

As the run-up to the U.S. presidential election has highlighted, there is a growing share of “childless cat ladies” in this country. There is also a larger share of single women with children.
As marriage rates fell, the number of women heading families rose.

Often, this comes with financial challenges. Many single mothers shoulder the financial responsibility of raising children while also being the primary caretakers, a dynamic that affects their labor market participation and income, according to a recent analysis by the Center for American Progress.
Roughly 75% of single mothers are working, and those with full-time jobs have a median annual income of $40,000, according to the center’s analysis of 2022 data. Single fathers had a median income of $57,000 per year, the analysis shows.
Caregiving demands have largely contributed to a persistent gender pay gap, often referred to as the “motherhood penalty.”
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During the pandemic, caregiving responsibilities hit working women especially hard. Across the board, women in the workforce faced steeper job losses and slower job recovery than men, according to research by the U.S. Census Bureau.

But by most measures, pandemic relief helped more people get on their feet relatively quickly. In fact, the economic comeback has been one of the most remarkable in modern history, Marc Morial, president and CEO of the National Urban League, recently told CNBC.
Yet, even now, the labor force participation rate for women has not fully returned to pre-pandemic levels. In addition to reduced labor force participation, women’s jobs recovery has lagged men’s: Women now hold just over 3.1 million more jobs than they did in February 2020, while men now hold nearly 3.7 million more jobs, according to a separate report by the National Women’s Law Center.
“This is another area where we see returning to a pre-pandemic status quo as not good enough,” said Julie Vogtman, the National Women’s Law Center’s director of job quality.

Pandemic relief helped

“Deeper structural inequities” are hindering meaningful gains in women’s labor force participation, Vogtman said.
Federal relief aid, primarily through the American Rescue Plan Act, did help mitigate employment losses and create the conditions for strong jobs recovery and wage growth. It also saved the care system from collapse and cut child poverty in half, according to Vogtman.
“These were historic investments, and it kept the child-care infrastructure from crumbling,” Vogtman said.
However, “the very programs that drove the recovery have now largely expired and, in their absence, have left women and families struggling and unable to meet the rising costs of goods, especially for child care and housing, two areas where rising costs have outpaced inflation,” Vogtman said.
Another recent poll found that 91% of single moms worry about their financial future.

Many women and families are still struggling

The Good Brigade | Getty

Although inflation has eased, many women struggle to get by with paychecks that cannot keep up with costs for housing, groceries, child care, health care and other expenses, the National Women’s Law Center also found.
At the same time, “the child care crisis, which was simmering prior to the pandemic, has come to a boil,” according to a separate KPMG analysis.
Between 1991 and 2024, the costs for child care rose at nearly twice the pace of overall inflation.
Now, “existing federal programs designed to support child care access among low-income families suffer from chronic underinvestment and structural limitations, leaving many parents and caregivers with impossible choices to make ends meet for their family,” Hailey Gibbs, associate director of early childhood policy at the Center for American Progress, said in a statement.

Poverty is higher for female-headed households

The American Rescue Plan of 2021 temporarily boosted the maximum child tax credit to $3,000 from $2,000, with $600 extra for children under age 6, and families received up to half via monthly payments. 
As a result of the expanded child tax credit, the child poverty rate dropped to a historic low of 5.2% in 2021, according to a Columbia University analysis.
However, in 2022, the rate more than doubled to 12.4% once pandemic relief expired, the U.S. Census Bureau found.

The poverty rate for families with children headed by single women rose even higher, jumping from 11.9% in 2021 to 26.7% a year later. In 2023, it reached 28.5%, the National Women’s Law Center found.
Notably, the terms of the current child tax credit are set to expire at the end of tax year 2025. At that time, the child tax credit is scheduled to drop to a maximum $1,000 per child.

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There’s still time to lower your taxes or boost your refund for 2024, financial experts say.
You can boost pre-tax 401(k) plan contributions, increase withholdings or make payments to the IRS.
You may also weigh bunching deductions, such as charitable gifts, for a bigger tax break.

Westend61 | Westend61 | Getty Images

There’s still time to lower your taxes or boost your refund for 2024, financial experts say.
Typically, there’s a refund when you overpay taxes during the year via withholdings or estimated payments. You can expect a tax bill when you don’t pay enough.

Since the Tax Cuts and Jobs Act of 2017, or TCJA, there are fewer ways to reduce your taxes, said certified financial planner and enrolled agent Tricia Rosen, founder of Access Financial Planning in Newburyport, Massachusetts.
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When filing taxes, you take the standard deduction or total itemized tax breaks, whichever is larger.
Enacted by former President Donald Trump, the TCJA doubled the standard deduction, which means fewer people claim itemized tax breaks for charitable gifts, medical expenses or state and local taxes.
“It’s tough to get over the standard deduction, especially if you’re married,” Rosen said. For 2024, the standard deduction is $29,200 for married couples filing jointly and $14,600 for single filers.

However, there are some year-end tax planning strategies to consider, experts say. 

Boost pre-tax 401(k) contributions

There’s still time to increase your pretax 401(k) contributions for 2024, which reduces your adjusted gross income, Rosen said.
Pre-tax deferrals provide an upfront tax break, but you’ll pay regular income taxes on withdrawals in retirement.
For 2024, employees can defer up to $23,000 into 401(k) plans, up from $22,500 in 2023. Workers age 50 and older can save an extra $7,500 for catch-up contributions.

Increase paycheck withholdings

If you’re expecting a tax bill, you can increase paycheck withholdings or make payments to the IRS, according to Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.Often, taxpayers make withholding elections once via Form W-4, but “there’s a whole slew of things that can change,” such as second jobs, marriage, divorce or birth of a child that may impact your situation, Lucas previously told CNBC. 

Consider ‘bunching deductions’ 

As year-end approaches, you can tally your itemized deductions to see if you’re close to exceeding the standard deduction, Rosen said.
Depending on your goals, you could weigh “bunching deductions” into a single year to reach the itemized deduction threshold, she said.
For example, you could combine charitable gifts for multiple years into a single one rather than making donations yearly.
Typically, Rosen runs projections both ways to see how it could impact a client’s taxes for the current year. More

The Cisco logo is on display at the Mobile World Congress in Barcelona, Spain, on February 26, 2024. 
Charlie Perez | Nurphoto | Getty Images

Investors seeking stable income and diversification may appreciate adding dividend stocks to their portfolio.
Finding the right names takes some additional legwork, and investors will want to consider the names highlighted by Wall Street analysts. These professionals make recommendations after thoroughly analyzing a company’s financial strength and its ability to pay consistent dividends.

Here are three dividend-paying stocks, highlighted by Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.

Energy Transfer

The first dividend stock pick this week is Energy Transfer (ET), a midstream energy company with over 130,000 miles of pipeline and related infrastructure across 44 states. Structured as a limited partnership, ET offers a dividend yield of 7.8%.
Energy Transfer is scheduled to announce its quarterly results on Nov. 6. Heading into Q3 earnings, RBC Capital analyst Elvira Scotto adjusted her estimates for U.S. midstream companies. The analyst modestly raised the price target for ET stock to $20 from $19 and reiterated a buy rating.
Scotto is optimistic about ET due to its exposure to the Permian Basin. Also, the analyst views the company as one of the potential data center/AI beneficiaries and thinks that this positive is not factored into the stock price.
The analyst raised the estimates for ET to reflect the impact of the acquisition of WTG Midstream Holdings, completed in July 2024. The revised estimates also reflect the favorable impact of Sunoco’s acquisition of NuStar Energy, as Energy Transfer owns about 21% of the outstanding common units of Sunoco.

Overall, Scotto is bullish about ET’s extensive asset footprint and believes that it is “well positioned to generate meaningful cash flow growth, which when combined with its stronger balance sheet, should allow ET to return more cash to unitholders mostly through distribution increases.”
Scotto ranks No. 25 among more than 9,100 analysts tracked by TipRanks. Her ratings have been profitable 69% of the time, delivering an average return of 21.6%. See Energy Transfer Ownership Structure on TipRanks.

Diamondback Energy

We move to independent oil and natural gas company Diamondback Energy (FANG). The company is focused on the reserves in the Permian Basin and bolstered its business by acquiring Endeavor Energy. For the second quarter, FANG paid a base cash dividend of 90 cents per share and a variable dividend of $1.44 per share.
Recently, JPMorgan analyst Arun Jayaram boosted the price target for FANG stock to $205 from $182 and reaffirmed a buy rating on the stock, noting that the company is “hitting the ground running” in terms of its Endeavor merger integration. He added that Diamondback seems to be rapidly advancing toward its $550 million per year synergy target.
FANG is scheduled to announce its Q3 results on Nov. 4. Jayaram feels that the possibility of Diamondback announcing a better-than-anticipated capital-efficient outlook for 2025 could act as one of the catalysts for its stock. The analyst expects the company to issue improved guidance based on solid well productivity trends and notable efficiency gains since the first quarter of the year.
The analyst contends that FANG stock deserves a premium valuation due to superior capital efficiency compared to peers and improved inventory position since the completion of the Endeavor deal. He highlighted that Diamondback is well-positioned at the low end of the cost curve in the Midland Basin and remains focused on further enhancing its efficiency.
Overall, Jayaram believes that Diamondback continues to be one of the best operators in U.S. shale and could deliver flat to low-single-digit volume growth while returning 50% of free cash flow to shareholders on a quarterly basis.
Jayaram ranks No. 893 among more than 9,100 analysts tracked by TipRanks. His ratings have been successful 53% of the time, delivering an average return of 8.6%. See Diamondback Energy Stock Charts on TipRanks.

Cisco Systems

This week’s third dividend stock is networking giant Cisco (CSCO). CSCO offers a dividend yield of 2.9%.
Tigress Financial analyst Ivan Feinseth slightly raised the price target for CSCO stock to $78 from $76 and reaffirmed a buy rating on the stock. The analyst expects the company to benefit from its shift to smart artificial intelligence-driven networks and the increase in cybersecurity integration, given the rise in enterprise spending on high-speed network and network security.
Moreover, the analyst expects Cisco to gain from the shift in its focus from hardware to software and subscription-based services, mainly in cloud and security solutions. Feinseth anticipates that this transition will drive higher margins and increase the consistency of recurring revenues.
He expects the company’s $28 billion acquisition of Splunk to support its AI and security software development, enhance its go-to-market ability and customer service, and boost its subscription and recurring revenue.
Finally, Feinseth is confident about Cisco’s ability to increase shareholder returns, with the company committed to returning 50% of its free cash flow to shareholders via dividends and share repurchases. The company has increased its dividend every year since it started paying them in 2011.
Feinseth ranks No. 185 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 14%. See Cisco Stock Buybacks on TipRanks. More

If, like me, you haven’t shopped for a used car in a few years, prepare for massive sticker shock.
Used vehicle prices have skyrocketed, and it’s more difficult to negotiate now that pricing is more transparent.
A Jeep was at the top of my daughter’s wish list, and Wranglers, especially, have held their value.

When I was a teenager, I bought my first car. It was a Toyota Tercel with a few hundred miles on it and cost less than $10,000. Granted, this was 30 years ago.
Now that I have a daughter turning 17, I envisioned a similar scenario. She has worked — and saved — since the age of 13, and I assumed she could at least pitch in for a reasonably priced pre-owned model.

But, boy, has the used car market changed. For starters, prices have increased enormously.
Anyone who has stayed away from the car market in recent years is in for a massive shock, Ivan Drury, Edmunds’ director of insights, told me. “It does not resemble anything that you were accustomed to.”

For used cars, the average listing price is now $25,361, according to the latest report from Cox Automotive, a giant jump from just five years ago, before the pandemic disrupted supply chains and sent prices for new and used vehicles skyrocketing.
“Affordability remains challenging for consumers, and supply is more constrained at lower price points,” the report said.
For new cars, the average transaction price is $47,823 as of October, near an all-time high. There are fewer options available at lower prices. Spoiler alert: It’s nearly impossible to find a car for less than $30,000.

Now, 10% of all vehicles sold cost more than $70,000, up from 3% five years ago, according to Edmunds. Just 0.3% of new vehicles sold now cost less than $20,000, compared with 8% five years ago, Edmunds found.

Cars these days are loaded with high-tech features, including touch screens, 360-degree cameras and heated seats, which have driven prices up substantially, according to Drury.
“Technology is flooded across the dash and all through the vehicle,” he said. “They are so capable, it’s borderline crazy.”

Hunting down a used Jeep

A Jeep was at the top of my daughter’s wish list, and Wranglers, especially, have held their value.
A recent iSeeCars study analyzed more than 2 million cars to see which used models are priced the lowest and offer the longest remaining lifespan. A 10-year-old Wrangler Unlimited ranked a respectable 18th among SUVs on the list.
But the average price for a 10-year-old Wrangler is still $23,381, and older cars with more mileage will increase the cost of ownership, experts say. 
Plus, we wanted something newer, since, in 2018, Wrangler rolled out advanced safety features and made significant improvements in fuel efficiency and technology, compared with older models.
That means paying more upfront: A Jeep Wrangler “is not the cheap car from 10-15 years ago,” Drury said.

A Jeep dealership in Shrewsbury, New Jersey
Jessica Dickler | CNBC

Sites such as Cars.com and Carvana have helped level the marketplace, but prices were still high online. We had better luck searching used inventories at dealerships within a 50-mile radius from home. A Jeep Chrysler Dodge dealership in Shrewsbury, New Jersey, had two 2021 models that fit our criteria and our budget.
According to Drury, it’s harder for car buyers to negotiate now that prices are more transparent. Dealerships do offer incentives but are less willing to knock down the sticker price. “Because we have so much information, it’s very difficult to charge a different price from your competitors,” Drury said.
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The best bet is to snag a financing offer, he advised, which could mean saving money by securing a lower interest rate on an auto loan. The average interest rate on a four-year used car loan is currently 8.21%, according to Bankrate.com, but good credit scores often pave the way to substantially better loan terms.
Still, we were able to negotiate down a few fees that were tacked on at the point of sale.  
In the end, though, we did spend more than we initially planned — and that didn’t include the added expense of insuring a teen driver.
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Royal Caribbean’s “Icon of the Seas,” billed as the world’s largest cruise ship, sails from the Port of Miami in Miami, Florida, on its maiden cruise, on Jan. 27, 2024.
Marco Bello | Afp | Getty Images

The demand for cruises is still going strong — and it doesn’t appear to be letting up anytime soon.
The industry was the last to recover from the Covid pandemic, but once it did, it has been enjoying strong pricing and booking momentum. While pricing growth is starting to normalize somewhat, it is still well above the rate of inflation, said Patrick Scholes, travel and leisure analyst at Truist.

“Cruise companies are having a moment right now,” he said in an interview with CNBC.
Despite price increases, cruises are still cheaper than land-based lodging. That’s helping the industry stand out as some weakness creeps into other areas of the travel sector. For instance, on Wednesday, Hilton CEO Christopher Nassetta said during the company’s quarterly earnings call that U.S. leisure travel demand “is flat, maybe even a little bit down.”
“The Cruise industry’s continued strength in bookings/demand, whilst cracks form across much of the rest of the travel market, is primarily driven by the combination of the still significant discount to land-based vacations coupled with the relatively elevated service levels,” Barclays analyst Brandt Montour said in a note last week.
As of the second quarter, on a weighted-average basis, the big three cruise operators reported net revenue per diems 17% above 2019, he wrote. Net revenue per diem is the net revenue per passenger cruise day. Caribbean hotel room prices are about 54% ahead of 2019 and U.S. resort prices are up 24%, said Montour, quoting figures from data analytics firm STR.

Carnival CEO Josh Weinstein agreed those so-called cracks elsewhere can help boost his business.

“If that’s true that the consumer is slowing down in other sectors, that really bodes well for us to be able to take them into our demand profile because we will be of value. We give a better experience at a better price than they can achieve elsewhere,” he said in an interview with CNBC’s “Money Movers” after reporting a third-quarter earnings and revenue beat on Sept 30.
Royal Caribbean is set to release its quarterly results on Tuesday, followed by Norwegian Cruise Line Holdings’ report on Wednesday.

Gap wider than it appears

A price gap between hotels and cruises is not new. That’s largely because a lot of hotel demand comes from business travel, while cruise demand is purely from leisure travelers, who are much more price sensitive, explained UBS leisure analyst Robin Farley.
Yet that gap has become even wider than it appears over the last several years, her research shows. That means the cruise lines may have more room to grow, she said.
One reason is the increase in direct bookings for cruises since 2019, according to Farley. That means fewer commissions paid out to travel agents, which is included in gross per diems but netted out of the net per diem line.
“While not disclosed by companies, we believe there has been a meaningful increase in passengers booking directly since 2019,” she wrote. “If the share of cruises booked directly grew by 5 to 10 [percentage points], we calculate that could add close to 200bps to reported net per diems even though it would not mean any growth in gross per diems, or actual ticket price.”
Separately, all three major cruise lines have increased the bundled and presold onboard revenue since 2019, which also is included in their per diems, Farley said. That could suggest another 300 basis point gap between cruise and hotel price growth that doesn’t show up in the metrics, she argued. One basis point equals 0.01%.
Farley sees another potential 350 basis point gap for Royal Caribbean because of its CocoCay private island, which has a water park, zip line and other attractions for which passengers pay an additional cost.

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Royal Caribbean year to date

On top of that, all three cruise lines have been rolling out high-speed internet access through Starlink onboard, which could also boost passenger revenue.
“The wider that gap, the better the opportunity for the cruise lines to have upside,” Farley said in an interview with CNBC.
Meanwhile, every bit of increased pricing helps the cruise operators. Truist’s Scholes’ proprietary research on real bookings for next year shows the price is up mid- to high-single digits. Wall Street is only expecting about 3% growth, but it could easily be 5% or more, he said.
That matters because the industry has extremely high fixed costs.
“One extra point of pricing is extremely material to profitability,” Scholes said. “Almost 90% flows through to the bottom line.”

Investing in cruise stocks

Wall Street analysts are largely bullish on cruise operators’ prospects.
“If we think back to 10 years ago before Covid, these companies were competing against themselves,” said Scholes. Now, they are competing against Orlando theme parks and Las Vegas vacations with more attractions available to passengers.
“They are casting a much wider net now,” he said.

Water slides at the Thrill Island waterpark onboard the Royal Caribbean Icon of the Seas cruise ship at PortMiami in Miami, Florida, US, on Thursday, Jan. 11, 2024.
Bloomberg | Bloomberg | Getty Images

Royal Caribbean was the first to up the private-island ante with CocoCay.
“This private island is a really unique offering. It’s not just a nice beach. It has all those amenities that they can charge for,” said UBS’ Farley, who has a buy rating on the stock.
The company’s Icon of the Seas, which officially debuted in January, received a lot of fanfare as the world’s largest cruise ship. Royal Caribbean’s latest ship, Utopia of the Seas, set sail this summer. The fact that the latter offers three- and four-night weekend getaways shows it is really going after first-time cruise passengers, Farley noted.
“They have had so many home runs,” she said.
Royal Caribbean has an average rating of overweight by the analysts covering the stock, but it has about 1% downside to the average price target, per FactSet. The stock has already rallied nearly 56% year to date.
Carnival also has an average rating of overweight by the analysts covering the stock and 12% upside to the average price target, FactSet shows.

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Carnival year to date

During its third-quarter earnings report, the company posted record operating income and raised its estimate for 2024 adjusted earnings before interest, taxes, depreciation and amortization as a result of strong demand and cost-saving opportunities. Carnival also said cumulative advanced booked positions for the full-year 2025 is above the previous 2024 record, with prices ahead of the prior year.
Nearly half of next year is booked — and that doesn’t include the benefit of its new island, Celebration Key, Farley pointed out. The island will be more along the lines of Royal Caribbean’s CocoCay and is set to be launched in July, she said.
“It is a nice catalyst for Carnival,” she said. “It is creating a new destination [and] that tends to drive new interest.”
However, Scholes said his research shows that out of the three major cruise lines, the Carnival brand is facing the most pricing competition from private cruise operator, MSC.
Shares of Carnival have underperformed the market, gaining about 13% year to date. In comparison, he S&P 500 is up about 22%.
Lastly, Norwegian Cruise Line Holdings has an average analyst rating of overweight and about 4% upside to the average price target, according to FactSet.
One of the firms bullish on Norwegian is Citi, which upgraded the stock to buy from neutral on Oct. 9. The call sent shares 11% higher that day. The firm also raised its price target to $30 from $20, suggesting 29% upside from Thursday’s close.

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Norwegian Cruise Lines stock year to date

“NCLH’s shift in strategy gives us confidence that the considerable pricing opportunity will not be offset by runaway costs,” analyst James Hardiman wrote in an Oct. 9 note.
Investors should anticipate a 23% compound annual growth rate for earnings per share over three years, he said. However, that percentage could be closer to 30% if Norwegian can keep its 2.5% yield-to-cost spread, he added.
While Norwegian hasn’t officially announced a CocoCay-type private island experience, Scholes is betting it will have a competitive product by 2026.
The stock has also underperformed the broader market, up nearly 16% so far this year.

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Kenvue, a unit of Johnson & Johnson’s consumer health business.
CFOTO | Future Publishing | Getty Images

Company: Kenvue Inc (KVUE)

Business: Kenvue is a consumer health company. The company operates through three segments: Self Care, Skin Health and Beauty, and Essential Health. Self Care product categories include pain care; cough cold allergy; and “other self care.” The Skin Health and Beauty segment’s product categories include face and body care and hair, sun and others. The Essential Health segment’s product categories include oral care, baby care and other essential health. Its differentiated portfolio of brands includes Tylenol, Neutrogena, Listerine, Johnson’s, Band-Aid, Aveeno, Zyrtec and Nicorette. The company sells and distributes its product portfolio in more than 165 countries across its four regions. The four region consists of North America, Asia Pacific (APAC), Europe, Middle East, and Africa (EMEA), and Latin America (LATAM).
Stock Market Value: $43.36B ($22.64 per share)

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Kenvue shares in 2024

Activist: Starboard Value

Ownership: n/a
Average Cost: n/a
Activist Commentary: Starboard is a very successful activist investor and has extensive experience helping companies focus on operational efficiency and margin improvement. Starboard has taken a total of 152 prior activist campaigns in its history and has an average return of 25.02% versus 13.65% for the Russell 2000 over the same period. In 51 of these situations, Starboard had an operational thesis as part of its activist campaign, and it made an average return of 36.19% versus 15.29% for the Russell 2000 over the same period.

What’s happening

On Oct. 21, news broke that Starboard Value took a position in Kenvue. The firm thinks there is an opportunity to improve revenue growth and margins in the Skin Health and Beauty segment.

Behind the scenes

Kenvue is a consumer health company specializing in Self Care, Skin Health and Beauty, and Essential Health, with world-class brands that are synonymous with these three categories such as Tylenol, Neutrogena and Neosporin. The company was spun out of Johnson & Johnson in May 2023, which by all accounts seemed like a smart move by management as the consumer health sector lacked synergies with J&J’s core competencies of pharma and medtech. Coupled with the fact that consumer health only made up 16% of total sales for J&J prior to the spin, it was hard to argue against the merit of this separation that now allows a separate company to prioritize these great brands and businesses.

At a glance, post-spin, the company seemed poised to flourish. It has stronger brand recognition than peers like Colgate-Palmolive, Haleon, and P&G. It also has lower threat from private-label alternatives than peers, with private labels only having a 6% share of Kenvue’s product categories compared to a peer median of 10%. Additionally, Kenvue operates in extremely attractive end markets with structural tailwinds, including an increasingly health-conscious consumer and a growing middle class in emerging markets, that provide a strong foundation for low to mid-single digit revenue growth. Despite their enticing market position and superior brand quality, the company has traded poorly since its spin with the lowest valuation multiple of its peers at 18-times – staggeringly lower than the peer median of 25-times. As a result, the company has delivered a -15% total shareholder return since the IPO compared to a peer median of 6% shareholder return over the same period.
Kenvue has struggled with its organic growth in a way that it seems to have not expected. The company missed its post spin FY23 guidance for organic growth by 75 basis points, even after previously lowering their guidance by 25 basis points. Kenvue expects a 3.3% compound annual growth rate compared to a 4% median for peers. This is not a huge difference, but an issue that can easily be identified and rectified. Self Care delivered a strong year of 8.4% organic growth, and Essential Health grew ahead of expectations at 3.6% organic growth, so these sectors are not the issue. The challenge for the company lies within Skin Health and Beauty, which delivered only 1.8% organic growth despite peers growing 4.4% from CY19-CY23. If you were to take Skin Health and Beauty out of the picture, Kenvue’s organic growth from FY19-FY23 would have been 5.1%, significantly outperforming the consolidated market growth of 4%.
Starboard’s path to value creation involves management adopting a “marketing first” strategy and embracing omni-channel and digital marketing. Skin Health and Beauty has been proven to be a marketing business whose growth can be greatly aided by social media. This can make marketing an extremely powerful and profitable tool for companies that know how to use it. L’Oreal’s acquisition of CeraVe in 2017 serves as a strong example of this. After acquiring CeraVe for $1.3 billion, L’Oreal launched a hyper-focused digital marketing campaign that included iconic advertising material such as the witty “Michael CeraVe” campaign. While it may seem goofy, these strategies really work: Just look at CeraVe’s sales growth of 10-times over the first five years after the acquisition. Starboard plans to tackle the issues with the Skin Health and Beauty business head on, as it appears to be the key obstacle preventing Kenvue from creating immense shareholder value. There is no doubt about the strength of Kenvue’s brands and products in this sector — highlighted by two shining stars, Neutrogena and Aveeno — that remain highly regarded and widely purchased. A better marketing plan will not only increase the top line at Skin Health and Beauty but also should improve the operating margins, which are presently 12% versus a peer median of 17%.
Kenvue seems to already be making strides towards this business model, as they increased FY24 advertising spend to 11.1% of sales compared to 8.7% for FY23. This budget increase reflects a shift toward a “marketing first” approach, particularly through social media, as evidenced by their recent Neutrogena Collagen Bank product launch. First, the company introduced the product on TikTok prior to in-store distribution. Next, it partnered with major celebrity Hailee Steinfeld to be the face of the product, who currently has over 25 million social media followers. Lastly, the company introduced it in the early innings of the Collagen Bank beauty trend.
As far as activist campaigns go, there are two extremes. There are Herculean, heavy-lift campaigns, where the activist comes in pushing for a complete overhaul of the board, capital allocation, management team and operations. Then there is the “pushing an open-door” campaign — situations where the activist and company are aligned, there are clear paths to value creation and engagement is constructive. By all accounts, this situation is the latter. Kenvue has a solid business with iconic brands and one underperforming segment in Skin Health and Beauty. Starboard believes this can be remedied by embracing a marketing-driven culture, and this is already happening. Management has committed to prioritizing marketing. They have already begun pushing a marketing-first mentality with increased social media campaigns and celebrity partnerships. Starboard has not made any public demands for board representation, and we expect that they will monitor Kenvue’s progress as an active shareholder before making any decisions in this regard. However, the firm does not have that much time to spare as the nomination window for directors is between Nov. 11 and Dec. 11. It is possible that Starboard will nominate some directors just to preserve its rights while it is talking with management and monitoring the progress.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More