Category: Company News

Chevron reported quarterly profits that topped Wall Street’s expectations, as the company’s fossil fuel production hit an all-time high and executives forecast solid output gains for 2019.

Shares of the company were up about 3 percent at roughly $118 a share on Friday.

Chevron’s production of oil and natural gas increased 12 percent to 3.1 million barrels per day of oil equivalent in the quarter, bolstered by new liquefied natural gas output from its Wheatstone project in Australia and surging supplies from its wells in the Permian Basin, the top U.S. shale field.

For the full year, Chevron reported record production at 2.93 million barrels per day of oil equivalent. The company expects production to rise by another 4-7 percent this year, based on its forecast for $60 Brent crude oil prices.

“We expect positive production trends to continue in the fist quarter and throughout 2019,” Chevron CEO Mike Wirth said during a conference call on Friday.

Last month, the company announced plans to spend $20 billion on development and exploration for 2019. The budget is focused on short-cycle projects, most of which are projected to generate cash within two years.

Chevron’s profit for the final quarter of 2018 jumped nearly 20 percent, to $3.73 billion, or $1.95 per share. Analysts had been expecting earnings of $1.87 per share, according to Refinitiv.

The earnings beat was largely attributable to lower charges in the quarter due to tax impacts. Chevron faced just $419 million in charges last quarter, compared with $3.46 billion a year ago.

The San Ramon, California-based oil major generated $42.35 billion in revenue, compared with the $46.13 billion forecast by Wall Street.

Chevron’s lower expenses offset a drop in earnings in its main business lines from a year ago.

Profits in Chevron’s upstream business producing oil and natural gas fell nearly 38 percent from the year ago period to $3.29 billion, also due to U.S. tax impacts.

Earnings fell by a third to $859 million in Chevron’s downstream unit, which focuses on refining and selling fuels like gasoline. Profits from international refining operations rose seven-fold to $603 million due to better margins and currency factors. That offset tax impacts that dragged on U.S. downstream earnings.

Chevron has seen tighter profit margins in its downstream business, which focuses on refining and selling fuels like gasoline and diesel.

On Wednesday, Chevron announced it would buy Pasadena Refining System from Brazil’s Petrobras for $350 million. The deal will give Chevron control of a Pasadena, Texas, refinery, its first processing facility in the Houston area and means of processing its growing Permian output.

Earnings season just crossed the halfway mark and stocks are surging.

Better-than-expected quarters from names such as Boeing, Apple, AMD and Facebook pushed the S&P 500 to close its best January in 32 years.

This could be as good as it gets for the market before things turn south, says Barry Bannister, head of U.S. equity strategy at Stifel.

“The problem is the price-to-earnings multiple is about right,” Bannister said on CNBC’s “Trading Nation” on Thursday. “The earnings growth is not that much this year, so the market is fairly valued and that’s the trouble for upside here.”

The S&P 500 should pull in $165 in earnings per share this year, says Bannister, lower than the nearly $170 estimate compiled by FactSet. Bannister’s estimate implies 3 percent earnings growth, half the growth the Street expects.

“The difficult dollar comparisons [and] weak global growth have really weighed on the growth this year, and if earnings growth this year were only 5 percent, the price-to-earnings multiple should be around 16, 17 times. There’s not a lot of upside at this point,” said Bannister.

Based on his earnings estimate and expected valuation, Bannister says an end-of-year target of 2,725 for the S&P 500 sounds realistic. The index is less than 1 percent from that level.

Bannister says one of the biggest risks to this stock market rally is the Federal Reserve and the possibility it pushes the yield curve to invert through its tightening policy. In that event, so-called bond proxy stocks that offer high dividend yields could offer shelter.

“Some of the staples, most of the utilities, do look like a good defensive trade if the Fed has indeed over-tightened,” said Bannister.

However, in some cases, it’s what you keep out of your portfolio that matters.

“If the yield curve does invert … then the industrials and the cyclicals and the materials that I mentioned are going to be under pressure,” he added. “It’s kind of what you avoid not so much as what you own if there is going to be a slowdown that really blows back on the U.S.”

The yield curve inverts when a shorter-term bond yields higher than a longer-term bond. The Fed’s tightening actions typically effect the shorter-end of the curve. The Fed left rates unchanged at its January meeting on Wednesday and said it would be “patient” with future hikes. The central bank next meets in March.

Job growth in January shattered expectations, with nonfarm payrolls surging by 304,000 despite a partial government shutdown that was the longest in history, the Labor Department reported Friday.

The unemployment rate ticked higher to 4 percent, a level where it had last been in June, a likely effect of the shutdown, according to the department. However, officials said federal workers generally were counted as employed during the period because they received pay during the survey week of Jan. 12. On balance, federal government employment actually rose by 1,000.

Economists surveyed by Dow Jones had expected payrolls to rise by 170,000 and the unemployment rate to hold steady at 3.9 percent.

In all, it was a powerful performance at a time when economists increasingly have said they expect growth to slow in 2019. January marked 100 months in a row of positive job creation, by far the longest streak on record.

Stock futures and Treasury yields jumped in response to the better-than-expected report.

The news was not all good, though, as data revisions pushed previous numbers lower.

December’s big initially reported gain of 312,000 was knocked all the way down to 222,000, while November’s rose from 176,000 to 196,000. On net, that took the two months down by 70,000, bringing the three-month average to 241,000. That’s still well above the trend that would be common this far into an economic expansion dating back 9½ years.

For the full year of 2018, the average monthly gain was 223,000.

A separate measure of unemployment that takes into account discouraged workers and those holding part-time positions for economic reasons jumped to 8.1 percent from 7.6 percent, with the January reading being around where it was in January 2018.

Among individual groups, the unemployment rate for Hispanics jumped to 4.9 percent from 4.4 percent in December. The rate for African-Americans rose to 6.8 percent from 6.6 percent while Asians saw a decline to 3.1 percent from 3.3 percent. The rate for whites was 3.5 percent, a notch higher than December’s 3.4 percent.

The job creation saw muted wage growth, with average hourly earnings rising just 3 cents on the month, or 0.1 percent, well below the 0.3 percent expected gain. On a year-over-year basis, though, that still amounted to a 3.2 percent increase, consistent with the past few months and around the highest levels of the recovery.

A Bureau of Labor Statistics official estimated that the shutdown had “no discernable impacts” on the ability to make estimates, though there was some effect on the numbers otherwise.

The most notable came in the count of those working part-time for economic reasons, often referred to as the underemployed. That total jumped nearly 11 percent to 5.1 million.

The household survey’s level of unemployed increased by 241,000, or nearly 4 percent, to 6.5 million, helping to push the unemployment rate higher. The survey’s level of those counted as employed tumbled by 251,000 to 156.7 million. The department uses its establishment survey, which contacts businesses, to formulate the headline monthly job gains.

Multiple sectors helped contribute to the spike in job creation. Services rose by 224,000 and goods-producing industries increased by 72,000.

Leisure and hospitality added 74,000 positions, with the biggest gain coming in bars and restaurants, which rose by 37,000. Construction saw a gain of 52,000, bringing its 12-month total to 338,000.

Elsewhere, health care contributed 42,000, bringing its yearly gain to 368,000. Transportation and warehousing added 27,000 and retail grew by 21,000 following a year where the sector showed a total gain of just 26,000.

Professional and business services were up 30,000 and manufacturing increased by 13,000, bringing that sector’s 12-month total to 261,000.

The average work week remained at 34.5 hours. The labor force participation rate held steady at 63.1 percent while those counted as not in the labor force fell by 639,000 to just over 95 million.

The department also released its full-year revisions, which it does each January. In total, the changes added 36,000 to the count for all of 2018. Revisions to the labor force count saw the civilian noninstitutional population fall by 800,000 and the civilian labor force decrease by 506,000.

Aaron Neinstein, MD, is Assistant Professor of Medicine at the University of California, San Francisco, and Director of Clinical Informatics at the UCSF Center for Digital Health Innovation. He’s also a practicing endocrinologist.

Let’s start with a prediction: By 2025, everyone with diabetes will be tracking their blood sugar with devices called continuous glucose monitors, and it will be common for many people without diabetes to dabble in tracking, too.

This may sound like a bold statement coming from an endocrinologist (we’re the specialists who manage diabetes), but hear me out. In my practice, I primarily treat people with diabetes, and over the years, technology to help manage the disease has made remarkable strides.

People with diabetes now have alternatives to pricking their fingers with a sharp needle to measure their blood glucose level multiple times per day. Early continuous glucose monitoring systems — the first was released in 1999 by the medical device maker Medtronic — while helpful in some cases, were not widely used because they were painful to insert, bulky, inaccurate, very expensive and still required many calibrations every day with fingersticks.

The technology has improved dramatically. Two of the newest devices, the Dexcom G6 and Abbott Freestyle Libre , no longer require fingerstick calibrations, are FDA-approved for people to make insulin-dosing decisions, and are much easier to insert.

Anybody who has ever done a fingerstick blood glucose knows that it hurts. Inserting a device instead is much less painful than a fingerstick, and the needlestick happens much less frequently. Both devices transmit glucose levels to a smartphone, either wirelessly and continuously, or with a wave of a smartphone over the sensor. Accordingly, continuous glucose monitoring (CGM) use has increased in Americans with type 1 diabetes, from 6 percent in 2011 to 38 percent in 2018. I expect these technologies to continue to get even better — they will get smaller, more accurate, and even smarter as better algorithms are developed and collaborations from between the device companies and tech companies like Alphabet or Apple.

This is a positive trend. For the approximately 1.5 million Americans with type 1 diabetes, CGM has moved far beyond novelty and should represent standard of care.

But, I believe CGM has much larger potential. That includes people with type 2 diabetes (approximately 30 million American adults), the even larger group with pre-diabetes (approximately 81 million American adults), and potentially almost anybody.

I recently saw a 70-year-old patient with type 2 diabetes and heart disease who takes a medication known as metformin to manage his condition, but he has resisted making any changes to his diet. When he saw his own data from a glucose monitor, with no explanation even needed from me, he immediately identified the daily morning spike in his blood glucose level, and also its source: His daily glass of orange juice and banana.

If he had instead done a fingerprick, he wouldn’t have been aware of these large glucose spikes. Seeing them, he made changes to his diet and reported an immediate improvement in his glucose levels.

(I shared the data with his permission).

The patient then cut these items from his diet and reported an immediate improvement in his blood sugar levels.

Another patient case is a 37-year-old man without diabetes. He noticed, by wearing a continuous glucose monitor for a while, that a particular soup from a particular hospital cafe caused a surprisingly sustained elevation in glucose.

I can report that this person has taken this feedback seriously, because this person is… well me. Do I have diabetes? No. But I decided to wear the device to both to help me understand the experiences of my patients (which I embarrassingly chronicled here in 2012), and because I have a history of borderline high cholesterol. Between my cholesterol levels and these data, I decided that my metabolism and insulin resistance levels were likely putting me at higher risk for heart disease, so I immediately made substantial changes in my diet.

These two examples show how immediate feedback is powerful. And this applies even for people who do not have diabetes but may have risk factors for diabetes, such as being overweight, or having a family history of the disease.

There is no proven benefit to everyone using a continuous blood sugar tracker all the time — but, I think we will soon discover that many people can benefit from using it at least for a short period. As in the examples above, people can quickly gain valuable insights on the health impacts of lifestyle choices, including food, stress levels, sleep amounts, and activity levels.

We need more scientific studies are needed to prove that monitoring blood glucose levels will hep people who haven’t been diagnosed with diabetes to be healthier or live longer. But I expect that the value of using a device to measure it will continue to increase, as our ability to interpret and act on the data improves. In my practice, I have found my patients love being able to do a video visit or email with me about their blood sugar data, and learn from reviewing the data together. We need many more tools that help doctors guide patients to more easily use and interpret that data towards adjusting medications or habits.

Costs will also have to continue to fall for the technology to become ubiquitous. The cheapest option, the Abbott FreeStyle Libre, has arranged deals with most insurance plans to provide two sensors (lasting two weeks each) for $75, but this price will still be out of reach for many people.

Finally, our understanding of diabetes itself will change. A group of researchers at Stanford recently found found that when people without known diabetes put on a continuous glucose monitor and ate different types of meals, the ways their bodies responded varied widely — something they called “glucotypes.” This mirrors my own findings when I wore the device.

Soon, rather than speaking about the two commonly defined categories of diabetes — type 1 or type 2 — there will be dozens of smaller categories representing people who have different genetic profiles, physiological patterns (including those “glucotypes”), and even different behavioral types. We will find that there are no neat categories of people who have diabetes or don’t have diabetes, but rather a continuum of risk. Rather than giving everyone the same pill, or same insulin dose, we will find that each of these different patterns benefit from unique combinations of pills and different behavioral and lifestyle therapies. We will need artificial intelligence to help us determine these different patterns, what they mean, and what we should do with them.

The next five years will be an incredible time, as fingersticks disappear from diabetes, prices fall and the increasing ubiquity of blood sugar tracking opens new opportunities to understand, avoid, or treat disease.

WATCH: This diabetic biohacker is making insulin in a lab to prove it can be cheaper.

After Amazon dropped on its earnings report, Wall Street analysts mostly stuck by the internet juggernaut, tweaking estimates and lowering price targets slightly.

Amazon shares dropped sharply during its earnings call and are down just around 4 percent in pre-market trading Friday to $1,644. Some analysts did warn choppy trading could be ahead ahead due to uncertainty in India, higher investment spending, slowing growth, and a weaker outlook.

Goldman Sachs analyst Heath Terry was one of the few standouts, actually raising his 12-month price target to $2100. “We continue to believe Amazon represents the best risk/reward in Internet given the relatively early-stage shift of workloads to the cloud, the transition of traditional retail online, and share gains in its advertising business, the long-term benefits of each we believe the market continues to underestimate for Amazon,” Terry wrote.

Barclays analyst Ross Sandler lowered his price target and thought that, “stepping back, the 20% pullback in Amazon since September 2018 (vs. -7% S&P), in our view, prices in much of the concerns around growth & pace of margin expansion in retail, and we would let the dust settle & add on weakness.”

RBC’s Mark Mahaney said in his earnings recap note, “Amazon traded off 5% in the aftermarket because: a)
it was a Modest Beat & Mixed Quarter AND stock was up 14% YTD (3% yesterday), implying high expectations; b) cautious Q&A commentary around impact of potential India regulations; & c) commentary suggesting ’19 would see step-up in investment spend…That said, we view the Amazon Long Thesis as Very Well Intact.”

Also commenting on the stock trading lower was Youssef Squali from SunTrust who said, “We believe the stock is down after-hours on a soft 1Q19 rev/Op. Inc. guide, risk from India’s new ecom regulation, prospects for higher investments in 2019, all on the back of a stock that’s outperformed peers.”

Justin Post from Bank of America kept his $2100 price target and said, ” A mixed and somewhat uneventful quarter for Amazon, with some ongoing deceleration but generally healthy growth for Amazon’s higher margin businesses (AWS strength remains a key reason to own the stock).” Post thinks the second half could be better than 1H.

J.P. Morgan’s Doug Anmuth lowered his price target but pointed out that, “as one investor suggested last night about 4Q earnings, “there’s a little bit in here for everybody.”

Deutsche Bank’s Lloyd Walmsley also raised his price target and said, “We think Amazon is ultimately going to substantially expand its physical footprint and push further into healthcare and shipping/logistics, opening up its addressable markets further. Notwithstanding the volatility in the shares, we think valuations remain compelling..”

PiperJaffray Michael Olson slightly raised his price target and titled his note to clients with, “Don’t be scared.”

Here’s what the other big analysts had to say:

“3 Reasons We Believe Amazon Will Be Able to Drive Higher Earnings Power: The good news is 1) Amazon still has a scaling bucket of high margin AWS, advertising and subscription revenue streams that we see enabling the company to re-invest and drive faster growth. Consider that we now have $14bn in net retail losses (from investment) in 2019 vs $12bn in 2018… 2) They have done this before across multiple categories and industries (retail – category by category, AWS, logistics, etc) and 3) AMZN has been planting investment seeds in multiple areas over the past few years that are likely to be the key to driving reacceleration… We fully acknowledge building/scaling these business could take time…but valuation isn’t stretched compared to growth.”

“Amazon reported Q4 profitability just above consensus forecasts, with operating income margin expanding ~170bps y/y (vs. +580bps in Q3) driven by AWS, advertising, and operational efficiencies, offset by deleverage in marketing primarily from sales hiring..We continue to believe AMZN represents the best risk/reward in Internet given the relatively early-stage shift of workloads to the cloud, the transition of traditional retail online, and share gains in its advertising business, the long-term benefits of each we believe the market continues to underestimate for Amazon…”

“Amazon reported mixed 4Q results that will fuel lingering questions around topline growth, but we do not view trends as thesis changing, despite guidance for slower growth and an outlook for increasing investment… We could see the shares tread water near term around top-line concerns but with profitability solid and improving, the shares look increasingly supported on a valuation basis and we see plenty of room for revenue to continue growing across retail, AWS and advertising… The 1Q guide likely bakes India risk into a weaker top line but likely was not reflected fully in potential operating income savings from slower growth in India given negative unit economics (see our note Feedback from India on the eCommerce Regulations )… AWS growth came in better than expected, and the cloud business remains well positioned to deliver robust growth for years ahead at attractive margins. Advertising, which likely is still growing at around the 50% YoY pace, is also a high-margin business opportunity that can grow on-platform and off of Amazon. We think Amazon is ultimately going to substantially expand its physical footprint and push further into healthcare and shipping/logistics, opening up its addressable markets further…”

“As one investor suggested last night about 4Q earnings, “there’s a little bit in here for everybody.” We agree.. Increased investments will be the primary focus, but we still expect 60 bps of operating margin expansion in 2019 and we don’t believe management’s comments suggesting accelerated spending were that different from what we and consensus had been projecting… Importantly, while 2018 was an abnormal margin expansion year, we think there’s very little chance that AMZN de-levers in 2019 given the scale & efficiencies it has built into its businesses… Uncertainty in India, along w/a higher 4Q base, takes early 2019 revenue acceleration off the table… But we still expect AMZN to grow revenue 18% FXN for the year and operating income by 30%. And we want AMZN to invest into long-term growth opportunities…”

“Amazon’s 4Q18 results were overall better than expected. Revenue was at the high end of guidance and slightly above expectations, with N.A. Retail in-line and AWS and Int’l Retail slightly above. Operating Income (OI) was above guidance and expectations. While AWS’ OI margin declined slightly m/m, it remains healthy (29%) and incremental margins remain >35%. Similarly, noise from various factors (Prime account change, device sales, Whole Foods comp) continues to cloud organic trends somewhat. With investors focusing on the high-end of mgmt’s guidance, Q1 revenue guidance was in-line and OI guidance is slightly above. That said, uncertainty in India (new regs) and potentially higher investment spending is worth monitoring.”

“In AMZN’s Q4’18 reported results & Q1’19 commentary, we believe that AMZN climbed many of the “walls of worry” that had dominated company debates over the past 3-4 months (fears of slower end demand, overall rates of growth, etc.). However, investor debates quickly pivoted to how accounting nuance, eCommerce mix shift (between 1P and 3P), more pronounced advertising Q4 decel & forward margin commentary (gross & EBIT) could act as potential headwinds in 2019 (year of investing vs year of efficiencies). As reflected in our modest estimate changes, we don’t think the puts/takes result in a new narrative for Amazon (just a need to digest some nuances). We still remain focused on multiple pathways to sustainable revenue growth (cloud, advertising, category/geo expansion for eCommerce) & that overall gross/EBIT margins should continue to expand in 2019 and beyond…”

“AMZN reported rev & OI largely in-line with consensus, and guided in-line at the high-end of the range… The biggest question we are pondering coming off the print is whether AMZN leaning into heavier investments in 2019 will lead to accelerating growth rates (as was the case in 16/17) or suboptimal teens growth with contracting margin… AWS continues to be the stand-out performer with revenue exceeding our expectations at +46% Y/Y. Stepping back, the 20% pullback in AMZN since September 2018 (vs. -7% S&P), in our view, prices in much of the concerns around growth & pace of margin expansion in retail, and we would let the dust settle & add on weakness…”

“See 2H better than 1H; A mixed and somewhat uneventful quarter for Amazon, with some ongoing deceleration but generally healthy growth for Amazon’s higher margin businesses (AWS strength remains a key reason to own the stock)… The drop in retail gross margin growth and slowing unit growth is a concern, with risk of increased retail investments… We continue to belive the stock could see better relative performance starting in the late Spring as y/y revenue deceleration moderates and Street gains better visibility on 2019 investment initiatives…”

“We believe the stock is down after-hours on a soft 1Q19 rev/Op. Inc. guide, risk from India’s new ecom regulation, prospects for higher investments in 2019, all on the back of a stock that’s outperformed peers… We maintain a Buy rating and adjust our ests and PT to $2,220 from $2,250 to reflect solid 4Q18 results, which topped Street expectations, and prospects for 14% and 25% CAGRs for revenue and EBITDA over the next 5 yrs… The growing weight of service revenue (39% of revs, growing at +48% Y/Y in 2018 like-for-like, by our estimate), is a boon to top line growth and profitability over time…”

“AMZN’s 4Q clearly showed some slowing trends across various parts of the business (surprisingly not in its online store sales, though we believe that is enjoying a lift from AMZN devices and a Whole Foods reporting nuance… Recognizing that N.A. and Prime came up short, it is fair to question the magnitude of the trajectory upwards. However, that trajectory is still one pointed nicely upwards and it remains through higher margin segments. Although none of this is “unknown” to the Street, the reality is that based on our estimates, AMZN is now trading ~14x FY20E EBITDA, and the out years grow even more (meaningfully) attractive from here, suggesting AMZN will actually begin to become cheaper than its retailing peers/victims… As such, we reiterate our Buy as we believe that through the slowing sales, investors will begin to fully view the profit potential and oddly enough trade a focus around sales for one around valuation…”

“Amazon reported revenue and op income slightly above consensus for Q4… Online stores and AWS were above estimates, while physical stores, 3rd-party seller services, subscription and other were all slightly below consensus. AWS growth was 46% y/y FXN in Q4 (unchanged from Q3)… The mid-point of Q1 op income guidance is 7% below consensus, on a revenue mid-point 5% below the Street… The company’s op income upside in Q4 was not as significant as some had hoped, a reminder that Amazon continues to heavily invest to drive growth… Minimal Q4 op income upside and comments about 2019 spending is concerning for some investors, but we believe 2019 opex comments were not intended to suggest a material margin impact…”

Chris Christie told CNBC Friday that a 2020 Democratic presidential nomination of Sen. Elizabeth Warren would be a “gift” to President Donald Trump‘s efforts to keep the White House for Republicans.

Christie, former New Jersey governor and unsuccessful 2016 GOP presidential candidate, suggested that Warren’s liberal agenda won’t resonate with American voters.

“Please, Lord, nominate her,” Christie said in a “Squawk Box” interview, slamming Warren’s proposed wealth tax as a message that “people who make money suck, and we’d like to take their money from them.”

Christie argued Democrats would be better served nominating centrist Joe Biden, if he were to run for president, saying the former vice president might be able to siphon off some of Trump’s working-class base by relating to them with his middle class upbringing.