Happy Sunday! The last market update of November is here, and things have (thankfully) gotten a little quieter.
Let’s dive in and see what happened.
Key Events
Ofgem Increases Energy Price Cap to £4,279 Per Year
On Thursday, Ofgem, the energy regulator, announced that they will be increasing the ‘energy price cap’ once again, from 1st January 2023.
Currently, for a typical household without the energy price guarantee set by the government, an average household would be paying £3,549 per year for their energy. Thanks to the energy price guarantee, this is limited to £2,500 per year (based on average use), which will increase to £3,000 in April 2023.
However, the official energy price cap will increase from £3,549 per year to an astronomical £4,279 per year. The standard unit rate for electricity, if customers were forced to pay this in full, would be 67p per KWh. For gas, the rate would be 17p. The standing charges will stay roughly the same.
Stock Market News
Disney (DIS) – Bob Iger Returns as CEO
On Monday, we got news that Disney’s CEO, Bob Chapek, was leaving the company. Bob Chapek was CEO for only two years and was originally due to extend his position for a further three years, per an extension agreed back in June 2022.
However, Disney has been struggling over the last two years under Chapek’s tenure. Not only because of Covid and the war in Ukraine, but because they have also, in recent months, struggled to appease investors and activists. The company has made several poor PR choices; for example, Disney’s poor manoeuvring around the “don’t say gay” bill in Florida, or the way in which it treated Scarlett Johansson regarding the Black Widow movie, significantly breaching their contract with her. Both of these incidents resulted in huge backlash for the company.
So, in comes Bob Iger – Disney’s CEO for 15 years between 2005-2020 – to save the day and take over as CEO once again. Iger is far from perfect, but he is often considered the main driving force behind acquisitions such as Marvel Entertainment, 20th Century Fox and Lucasfilm, all of which were hugely successful for Disney.
Bob Iger will return as CEO for two years. In that time, his job will be to return the company to a leaner, more efficient state. His main responsibility, though, will be to choose a more appropriate successor and to ensure they are ready to take the reins by the end of 2024.
Dell Technologies (DELL) – Q3 Earnings
Though Dell beat analyst expectations on Monday, the stock soon fell again due to weaker-than-expected guidance for the next quarter. The company reported growth in both the “Server and Networking” and “Storage” segments, but saw large declines in commercial consumer revenue, largely due to a decline in demand for PCs and other hardware and an improving supply chain.
Key Points:
- Revenue of $24,721m, down from $26,424m (-6.4%) a year ago
- The servers and networking segment’s revenue grew 14% YoY
- The storage segment’s revenue grew 10.6% YoY
- Commercial revenue fell by 12.6% YoY
- Consumer revenue fell by 28.9% YoY
- Gross profit of $5,707m, up from $5,534m (+3.1%) a year ago
- Operating profit of $1,762m, up from $1,046m (+68.5%) a year ago
- Profit before tax of $454m
- Profit after tax of $241m
- Diluted income per share of $0.33
- Dividend of $0.33 per share paid on 28th October 2022. The next dividend date has not yet been announced
- Guidance came in lower than expected. Revenue for Q4 is expected (at a midpoint) of $23,500m, down ~16% YoY
Zoom Video Communications (ZM) – Q3 (Fiscal Q3 2023) Earnings
Zoom met analyst expectations when it comes to revenue and beat earnings expectations on Monday, which came in as a bit of a surprise. However, the company reduced revenue guidance slightly, which was met negatively by investors, bringing the stock lower.
Key Points:
- Revenue of $1,102m, up from $1,051m (+4.9%) a year ago, but flat from the previous quarter
- Gross profit of $831m, up from $780m (+6.6%) a year ago
- Operating profit of $67m, down from $291m (-77.1%) a year ago
- Profit before tax of $55m
- Profit after tax of $48m
- Basic income per share of $0.16
- Revenue guidance for Q4 (fiscal Q4 2023) were lowered slightly, to between $1,095m and $1,105m, remaining flat compared to both Q3 and Q2 (i.e., zero revenue growth from those quarters)
- The company stated: “Our revenue growth rate has declined, and we expect our revenue growth rate to generally decline in future periods.”
- During the earnings call, Zoom’s CEO, Eric Yuan said the company is seeing “heightened deal scrutiny for new business”. In other words, it’s taking longer to close deals with enterprise customers due to a competitive environment where companies are trying to cut back on costs
- The number of enterprise customers has increased by 14%, to ~209,300 customers YoY, with a 31% increase in the number of customers paying $100,000 per year (on a trailing 12-month basis)
United Utilities Group (UU) – Fiscal H1 2023 Earnings
On Wednesday, United Utilities released their earnings for the first half of their fiscal year.
The company met analyst expectations for revenue, while beating on earnings, reporting a comfortably profitable half-year compared to a loss in the first half of 2021.
Key Points:
- Revenue of £919.3m, down slightly from £932.3m (-1.4%) a year ago
- Operating profit of £258.5m, down from £332.8m (-22.3%) a year ago
- Profit before tax of £426.3m
- Profit after tax of £353m
- Basic income per share of 51.8p
- Dividend of 15.17p per share, which will be paid on 1st February 2023. Dividends are expected to continue to rise in line with CPIH inflation through to 2025.
- Guidance for the full year suggests revenue will fall by 1% YoY, largely due to lower-than-expected consumption.
- On 30th September 2022, the company had £7,829m in net debt
- Bad debts have stayed stable for the 6 months ended 30th September 2022. This is largely thanks to industry-leading affordability support, helping around 200,000 households. The company also supports the idea of having a nation-wide ‘social tariff’
- The company continues to heavily invest in infrastructure to improve water quality, reduce sewer flooding, implementing the ‘better rivers’ programme and more.
- United Utilities were awarded a 4-star (the highest possible) environmental rating in the EA’s annual assessment, for the fifth time in seven years
Next Week
Company Earnings Reports
Here’s a list of the companies I’ll be covering next week:
- Intuit (INTU) – 29th November
- Salesforce Inc (CRM) – 30th November
Let me know your thoughts on this week’s events, in the comments!
