Raphael Stevens

Starbucks topped analysts’ estimates for its fiscal fourth-quarter earnings, but the coffee chain fell short on revenue.
China saw same-store sales shrink by 7% in the quarter, missing Starbucks’ prior forecast of flat same-store sales growth.
U.S. same-store sales increased by 22% in the quarter, rising by 11% on a two-year basis.

Starbucks shift supervisor Adan Miranda wears a face mask as he serves a drink to a customer while standing behind a plexiglass shield in a booth outside the store in Sacramento, Calif., Thursday, May 21, 2020.
Rich Pedroncelli | AP

Starbucks on Thursday reported quarterly revenue that fell short of expectations as Covid-19 resurgences in China weakened sales.
As the global coffee chain battles rising costs and the continued impact of the pandemic, it shared its forecast for fiscal 2022. Its outlook for earnings per share fell short of Wall Street’s estimates, but its revenue prediction topped expectations.

Shares of the company fell more than 4% in extended trading.
Here’s what the company reported for the quarter ended Oct. 3 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $1 adjusted vs. 99 cents expected
Revenue: $8.1 billion vs. $8.21 billion expected

Starbucks reported fiscal four-quarter net income of $1.76 billion, or $1.49 per share, up from $392.6 million, or 33 cents per share, a year earlier.
Excluding the gains from the sale of its South Korean joint venture and an extra week in the reporting period, the coffee giant earned $1 per share, topping the 99 cents per share expected by analysts surveyed by Refinitiv.
Net sales rose 31% to $8.1 billion, falling short of expectations of $8.21 billion. Global same-store sales climbed 17%, missing StreetAccount estimates of 18.3%.

U.S. same-store sales increased by 22% in the quarter, and rose 11% on a two-year basis. Customers spent 3% more on transactions on average. The company’s loyalty program reported 24.8 million active members, up 28% from a year earlier. During the quarter, 51% of customers were Starbucks Rewards members.
Chief Operating Officer and North American President John Culver told analysts that cold beverages accounted for 75% of drink sales during the quarter. Sales of espresso drinks spiked 34%. Culver also said that peak hours are back to pre-pandemic times. Last year, cafes’ busy times shifted to late mornings and early afternoons as consumers swung by for a pick me up.
McDonald’s, Domino’s Pizza and Chipotle Mexican Grill are among the restaurant chains that said staffing challenges dented their latest quarter’s U.S. results. Starbucks executives acknowledged that they also experienced staffing troubles. A day earlier, the company announced it will hike its employees’ wages at least twice in 2022, bringing the pay floor to $15 an hour faster than previously shared. Roughly 70% of Starbucks’ hourly workers joined the company over the last year.
Growth in Starbucks’ international markets was muted. International same-store sales grew by 3%.
In China, the company’s second-largest market, same-store sales shrank by 7%. Starbucks previously predicted flat Chinese same-store sales growth for the quarter. Cities with local Covid-19 cases were hit the hardest by the resurgence of the virus, but cafes that rely on tourism and travel were also hurt.
“At its peak in mid-August, approximately 80% of our stores in China were impacted by the pandemic,” CEO Kevin Johnson told analysts.
The company added 538 net new locations during the quarter. Starbucks has been updating its store footprint, closing some cafes and opening new ones that are better designed for mobile and to-go orders.
Looking to the holiday season, Johnson said that the company is preparing for record-breaking sales. Starbucks is anticipating $3 billion will be added to gift cards.
For fiscal 2022, the coffee chain is anticipating its GAAP earnings per share to shrink by 4% and adjusted earnings per share to rise by at least 10%. Its outlook for earnings falls below Wall Street’s expectations of $3.73, which is more than 15% higher than fiscal 2021. The company said earnings will be at their lowest point in the fiscal second quarter because of wage hikes, but profits will reach their peak by the next quarter.
Starbucks is expecting global same-store sales in the high single digits and net sales of $32.5 billion to $33 billion, above Wall Street’s estimates of $32.07 billion. The company plans to add approximately 2,000 net new cafes to its global footprint. Roughly three-quarters of those new locations are expected to be built outside of the U.S.
The company also announced it would resume its share buyback program during its fiscal first quarter.
Read the full earnings release here.

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Both General Motors and Ford Motor beat Wall Street’s expectations for the third quarter but you wouldn’t know it by their stock prices.
Shares of GM during trading Thursday are relatively flat, while Ford’s stock surged to a new 52-week high.
The differences between the third-quarter earnings reports ranged from outlooks to their autonomous vehicle businesses and stock dividends.

The General Motors world headquarters office is seen at Detroit’s Renaissance Center.
Paul Hennessy | LightRocket | Getty Images

DETROIT – Both Ford Motor and General Motors beat Wall Street’s expectations for the third quarter but shares of GM are flat as Ford’s stock surged to a new 52-week high during trading Thursday morning.
On the surface, results for both automakers were similar. They easily beat the earnings consensus from analysts and slightly topped revenue expectations. They also both partially raised 2021 guidance. But looking deeper into the results and comments from executives, Ford made better progress and painted a more optimistic outlook than GM, according to analysts.

The results pushed Ford’s shares up by as much as 13% to $17.58 a share during trading Thursday. The stock closed at $16.86 a share, up 8.7%, compared with a 2.4% intraday jump for GM, which closed down by less than half a percent to $54.24 a share. GM’s market cap is about $80 billion compared with Ford’s at $66 billion.

The differences between the third-quarter earnings reports ranged from outlooks on earnings and the ongoing shortage of semiconductor chips to their autonomous vehicle businesses and stock dividends.
Here’s more on those topics and others following the Wednesday earnings results from America’s two largest automakers.

Earnings

Ford beat Wall Street’s estimates more than GM did. It also reported a smaller decline in net income than a year earlier, when consumers flocked to dealerships after the easing of lockdowns and stores reopening after closing due to the coronavirus pandemic.  
Ford reported adjusted earnings per share of 51 cents versus 27 cents expected based on average analyst estimates compiled by Refinitiv. Its automotive revenue was $33.21 billion versus expectations of $32.54 billion. Its net income for the quarter was $1.8 billion, down 25% from a year earlier.

GM reported adjusted earnings per share of $1.52 versus 96 cents expected from Refinitiv. Its revenue was $26.78 billion versus $26.51 billion expected. Its net income for the quarter was $2.4 billion, down by 40% compared with a year earlier.
“Yesterday’s large negative market reaction to GM’s solid 3Q but unchanged 2021 outlook, in our view, reflected some disappointment that GM didn’t boost its guidance amid improving industry conditions, and investor concerns that the soft implied 4Q Ebit represents a low exit rate going into 2022,” Deutsche Bank analyst Emmanuel Rosner wrote Thursday in an investor note.

Outlooks

Ford increased its full-year adjusted earnings guidance to between $10.5 billion and $11.5 billion, up from between $9 billion and $10 billion. That compares with GM that maintained its earnings guidance of between $11.5 billion and $13.5 billion but raised expectations for earnings per share to $5.70 to $6.70, up from $5.40 to $6.40 a share.
Ford’s new outlook includes a roughly $900 million operational gain from an investment in EV start-up Rivian from the first quarter that the company plans to recast as a special item in the fourth quarter. This is contingent on Rivian, which has filed for an IPO, going public by the end of the year

Ford also maintained its adjusted free cash flow outlook for the year of between $4 billion and $5 billion, while GM cut its to about $1 billion, down from $1 billion to $2 billion. The decline is due to spending to finish vehicles that were previously built without chips, officials said.
“This is less than what Tesla generated in 3Q alone. While GM FCF is hit hard by working capital this year, one needs to step back and appreciate that 2021 is an historically strong year for the industry in terms of price, mix and cost,” Morgan Stanley analyst Adam Jonas wrote Wednesday in an investor note.
Assuming GM delivers fourth-quarter earnings near the high end of its forecast, that would imply its earnings before interest and taxes, a key performance measure, would be around $2 billion instead of the $2.6 billion Wall Street was hoping to see, Credit Suisse analyst Dan Levy said Wednesday in an investor note.
Levy described Ford’s call in a separate note as “the most bullish” from the automaker in a long time.

Chip supply

Ford’s rosier outlook was directly tied to semiconductor chips, which have been in short supply throughout this year. The parts issue has boosted profits but caused record-low vehicle inventories and automakers to sporadically shutter plants.
Ford’s chip supply in the third quarter greatly improved compared with the company losing nearly half of its expected vehicle production in the second quarter. That compares with GM, which pulled up chip availability from the third quarter to the second quarter. The decisions helped second-quarter results, but the automaker said it expected to lose about 200,000 wholesale units in North America during the back half of the year compared with the first six months.

Barclays analyst Brian Johnson noted that while Ford’s supply was better in the third quarter, GM still leads in profit margins if you combine the past two quarters.
“Combining the two quarters, Ford would have a 6.7% EBIT margin while GM would have a 10.6% EBIT margin (pro forma adjusting out all Bolt recall costs and recoveries) – showing that GM is still ahead on execution,” he said Thursday in an investor note.

AVs

Analysts seem to be more bullish on Ford’s plans to monetize its Argo AI autonomous vehicle business through a potential spinoff than GM’s plans – for now – to keep its Cruise operations in-house.
“Ford appears ready to monetize Argo, while GM stresses vertical integration between Cruise and GM,” Johnson said, calling it a “meaningful catalyst” for Ford.
In its presentation to investors, Ford noted that executives “fully support Argo AI’s access to public financing.” That compares with GM CEO Mary Barra telling investors Wednesday that the company views vertical integration as “a key differentiator” for its majority-owned subsidiary.

Dividend

Both Ford and GM suspended their dividends to shore up cash last spring as the pandemic shuttered factories and dealerships
Ford on Wednesday said it will reinstate its regular dividend starting in the fourth quarter at 10 cents per share on outstanding common and Class B stock. The payments will be made on Dec. 1 to shareholders as of Nov. 19. The quarterly dividend is expected to cost about $400 million, according to Ford CFO John Lawler.

GM was mum Wednesday on its reinstatement of the dividend. GM CFO Paul Jacobson earlier this month told investors that the company would reinstate the dividend when the market becomes more stable.
Lawler attributed Ford’s dividend reinstatement to the strength of the company’s underlying business. He said Ford is not capital constrained and is confident it can finance an aggressive turnaround plan, which it calls Ford+. The plan includes investing billions in electric and autonomous vehicles as well as paying the dividend.
The size and timing of the dividend reinstatement was surprising to many analysts. BofA Securities analyst John Murphy called Ford’s dividend reinstatement “preemptive” given the current volatility in the automotive market. He as well as other analysts also noted the need for Ford to invest in its turnaround plan.
Some analysts expected Ford’s dividend to be reinstated in 2022 at about half the distribution amount, but investors seem to support the move, which Barclays’ Johnson called “a positive for some of its investor base.”
– CNBC’s Michael Bloom contributed to this report.

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John Doerr on Thursday said he believes the bullish Tesla analysts are probably right and predicted the company will lead the way during the global shift to an all-electric transportation sector.
“They are committed to being a global leader and I believe they will be in the transportation future,” Doerr said at the CNBC ESG Impact summit.
The transportation sector is one of the largest contributors to U.S. greenhouse gas emissions, and the transition towards electric cars and trucks will be a critical solution to fighting climate change.

John Doerr, a senior partner with Kleiner Perkins Caufield & Byers, speaks during the TechCrunch Disrupt SF 2015 conference in San Francisco, California, on Tuesday, Sept. 22, 2015.
David Paul Morris | Bloomberg | Getty Images

Famed venture capitalist John Doerr on Thursday said he believes bullish Tesla analysts are probably right and predicted the company will lead the way during the global transition to an all-electric transportation sector.
“They are committed to being a global leader and I believe they will be in the transportation future,” Doerr said at the CNBC ESG Impact summit.

Doerr’s remarks come after Tesla hit a $1 trillion market cap on Monday following news that Hertz would purchase 100,000 electric vehicles for its rental fleet by the end of 2022. The deal with Hertz brings in a reported $4.2 billion for Tesla in the biggest ever purchase of electric vehicles.
“I think the fundamentals of driving Tesla is the size of the market and the excellence of the product,” Doerr said. “If you haven’t driven a Tesla, people aren’t buying Tesla because it’s green. They’re buying it because it’s a great automobile.”
The transportation sector is one of the largest contributors to U.S. greenhouse gas emissions, accounting for roughly one-third of emissions each year. The transition towards electric cars and trucks will be a critical solution to fighting climate change.
“The powerful thing that Tesla has done beyond creating a trillion-dollar company that’s worth as much as their next four competitors is they’ve put the global auto industry on notice that the future of electric transportation is what consumers will demand when we get cost and prices to be competitive globally.” Doerr said.
Tesla has sold a majority of the electric vehicles in the U.S. in recent years, according to IHS Markit. However, that market share is expected to quickly decline as traditional automakers invest billions in building new electric vehicles to compete against Tesla.

Sales of electric vehicles are expected to comprise less than 4% of U.S. sales in 2021, according to industry forecasters. Of those, all-electric models, such as Teslas, are at just 2.6% of the market, or about 394,000 vehicles, according to forecasts by LMC Automotive.
— CNBC’s Michael Wayland contributed reporting More

Stanley Black & Decker has seen a dramatic increase in the amount of products hung up across the clogged supply chain, CEO Jim Loree told CNBC.
The took maker has about $800 million of in-transit inventory, up from $300 million at the start of the Covid pandemic, he said.
Stanley Black & Decker’s third-quarter results beat forecasts on the top and bottom lines, but the company lowered its full-year outlook.

Toolmaker Stanley Black & Decker has seen a dramatic increase in the amount of products hung up across the clogged supply chain, CEO Jim Loree told CNBC on Thursday.
“The reality is at the beginning of the pandemic, we had about $300 million of in-transit inventory,” Loree said in an interview on “Squawk on the Street.” “Today, we have about $800 million, so half a billion dollars [more] of inventory, most of which is tied up in process of getting from Asia to the developed markets, including that flotilla off the coast of Long Beach.”

Loree’s comments offer additional insight into the problems with global supply chains, as President Joe Biden has made easing West Coast port congestion a high priority in recent weeks, unveiling a plan to expand 24/7 operations at the ports Long Beach, California and Los Angeles. Together, the ports account for about 40% of the shipping containers entering the United States.
Supply chain disruptions contributed to the U.S. economy’s slower-than-expected growth rate in the third quarter. Additionally, higher freight costs as companies try to overcome logistics hurdles are one of many inflationary pressures hitting the economy right now.
Stanley Black & Decker — the parent company of Craftsman, DeWalt and Irwin Industrial Tools — is seeing “massive inflation” across a number of areas, such as steel, Loree said.
“If you take the combination of material inflation, labor inflation and premium transportation costs to deal with some of the supply chain challenges, it’s over a $1 billion of impact. It’s a $16 billion, $17 billion company right now in terms of [annual] revenue. That’s a big nut,” he said. However, Loree said Stanley Black & Decker is able to “recover 100% of that in price, some mix and new products, things like that.”
Loree’s CNBC appearance Thursday came shortly after the company reported better-than-expected third-quarter earnings. Revenues of $4.26 billion topped analyst estimates of $4.25 billion, while earnings per share of $2.77 eclipsed forecasts by 30 cents, according to Refinitiv. Stanley Black & Decker has a market capitalization of nearly $30 billion.
Despite the third-quarter beat, Stanley Black & Decker shares were down about 1.5% in Thursday afternoon trading. Investors may be reacting to the company’s decision to lower its full-year profit outlook, primarily citing the impact from inflation. Stanley Black & Decker now expects adjusted 2021 earnings per share to be between $10.90 to $11.10, down from $11.35 to $11.65.

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As BP CEO John Browne was an early pioneer of clean energy investing in the oil sector to confront climate change.
He says the amount of investment each year to control climate issues will need to increase by over $2 trillion.
He says many companies across sectors today have set science-based targets for reducing carbon, but meaningful plans are not there.

Big Oil CEOs can no longer express doubt that burning of fossil fuels is a large contributor to climate change. Former BP CEO John Browne was way ahead of his time, though, as an oil CEO making renewable energy investments and reducing greenhouse gas emissions over 25 years ago. Now, as oil executives testify before Congress on Thursday about climate change, Browne says the big picture hasn’t really changed — at least not nearly enough to achieve carbon reduction goals.
“I wish the oil industry had done something about this 25 years ago,” Browne, now BeyondNetZero Chair, said at the CNBC ESG Impact summit on Thursday.

Browne said he was pleased to see oil companies are now “at least talking the right language,” and “signaling virtues” but when it comes down to it, “very few are setting targets which really have meaning that have plans to deliver.”

A customer refuels a car at a gas station in San Francisco, California, U.S., on Thursday, Oct. 21, 2021.
David Paul Morris | Bloomberg | Getty Images

The issue isn’t limited to the energy sector. Roughly 1,800 companies have committed to Paris 2050 climate goals, but only 50% of those companies have set carbon reduction targets, and only 10% of those companies have plans to deliver.
“It’s getting the plans to deliver. It’s not just setting the targets. Those plans are in short supply everywhere,” Browne said. 
And even for companies that have plans, the plans will require increasingly large investments.
The amount invested annually will need to rise from $1.2 trillion to $3.5 trillion. “It’s a big change, and that change has to be done every year for the next decade,” Browne said.

“We need to convert the conviction into conduct and actually step up to the plate with the authorities that various agencies have,” said former Treasury Department Deputy Secretary Sarah Bloom Raskin, who spoke with Browne at ESG Impact.
The U.S. government Financial Stability Oversight Council held a meeting of multiple agencies last week on climate risks.
“We need to start to create for the private sector the milestones, the measurable guideposts in which to operate,” she said, adding it is the “only way there will be real momentum to what the ESG movement is meant to accomplish.”
For his old peers in the oil and gas sector, Browne said it is a difficult transition to make because shareholders in the energy sector demand dividends and cash flow to be returned to investors in what is a maturing business.
BP is again at the forefront of efforts to transition, scaling back its oil and gas production, and deciding to reduce shareholder return programs to increase renewable energy investment. But even among the European majors which have moved more quickly to embrace energy transition as a business model, tensions with investors remain.
Browne’s comments came a day after activist investor Dan Loeb of Third Point Management said Royal Dutch Shell should be broken up into multiple companies because it can’t satisfy all shareholder needs or attract new shareholders trying to combine an old energy company with a new one.
“That is a push pull,” Browne said. Oil and has companies have to balance the investment in new clean energy projects, against investments other specialist firms are making in renewable energy, and against their investor expectations for shareholder returns. “It is all a balancing act,” he said. More

The White House on Thursday unveiled a new plan to overhaul health care as part of President Joe Biden’s broader $1.75 trillion domestic spending package.
Biden plans to expand Medicare – the federal health insurance program for the elderly – to cover hearing benefits.
His plan would also provide tax credits to up to 4 million uninsured Americans in states that have not expanded Medicaid under the Affordable Care Act.

U.S. President Joe Biden speaks about the status of coronavirus disease (COVID-19) vaccinations and his administration’s ongoing pandemic response in the State Dining Room at the White House in Washington, May 4, 2021.
Jonathan Ernst | Reuters

The White House on Thursday unveiled a new plan to expand several federal health-insurance programs to lower costs to consumers as part of President Joe Biden’s broader $1.75 trillion domestic spending package.
Biden plans to expand Medicare and Medicaid — the federal health insurance programs for the elderly and poor — as well as the Affordable Care Act, more commonly known as Obamacare, according to a fact sheet released by the White House.

Under the expansion, Medicare would provide hearing benefits.
Biden’s plan would also provide tax credits to up to 4 million uninsured Americans in states that have not expanded Medicaid under the ACA. He also plans to reduce premiums for some 9 million people who get coverage through the ACA by an average of $600 per person.
Notably, there was no mention of prescription drug pricing reform, a policy Democrats and some Republicans have announced strong support for in the past. Dental and vision benefits for Medicare recipients were also absent from the plan.
Here’s what the plan said:

Strengthen the Affordable Care Act and reduce premiums for 9 million Americans. The framework will reduce premiums for more than 9 million Americans who buy insurance through the Affordable Care Act Marketplace by an average of $600 per person per year. For example, a family of four earning $80,000 per year would save nearly $3,000 per year, or $246 per month, on health insurance premiums. Experts predict that more than 3 million people who would otherwise be uninsured will gain health insurance.
Close the Medicaid coverage gap, leading 4 million uninsured people to gain coverage. The Build Back Better framework will deliver health-care coverage through Affordable Care Act premium tax credits to up to 4 million uninsured people in states that have locked them out of Medicaid. A 40-year-old in the coverage gap would have to pay $450 per month for benchmark coverage — more than half of their income in many cases. The framework provides individuals $0 premiums, finally making health care affordable and accessible.
Expand Medicare to cover hearing benefits. Only 30% of seniors over the age of 70 who could benefit from hearing aids have ever used them. The Build Back Better framework will expand Medicare to cover hearing services, so that older Americans can access the affordable care they need.

Biden is scheduled to deliver remarks on the plan at 11:30 a.m. ET, before departing for a week of summits in Europe.

The announcement comes after haggling over how to pay for the plan threatened to further delay the Build Back Better agenda. Still, the caucus managed to coalesce around a handful of revenue raisers broadly aimed at big business and those Americans who make more than $400,000 annually.
— CNBC’s Christina Wilkie and Thomas Franck contributed to this report.

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