Wall Street Brunch: Tesla Earnings Steal The Spotlight

Summary:

• Tesla’s earnings report is highly anticipated, with analysts expecting $29.73 billion in revenue and $0.86 EPS.
• Boeing’s tentative deal with its union could end a month-long strike, offering a 35% pay hike and improved 401(k) contributions.
• UBS Global Wealth Management is bullish on U.S. equities, citing AI adoption and favorable macroeconomic conditions, with top picks including Meta, Home Depot, and Microsoft.
• TGI Friday’s is preparing for bankruptcy, reflecting the broader trend of casual dining chains struggling against fast-casual competitors like Chipotle.

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Will the numbers improve sentiment after disappointing robotaxi event? (0:17) Durable goods orders expected to drop. (2:16) Boeing has a tentative agreement with union to end strike. (2:56)

The following is an abridged transcript:

Tesla (NASDAQ:TSLA) earnings highlight this week as reporting season gains steam.

Analysts expect the EV maker to post revenue of $29.73 billion and EPS of $0.86 when it issues results on Wednesday. Gross margin is expected to come in at 18.77%.

For the conference call, a point of major emphasis will be Elon Musk’s commentary on the timing of a new mass-market cheaper electric vehicle, as well as the latest updates on FSD, energy storage business and robotaxi developments.

Seeking Alpha analyst Richard Durant, who has a Sell rating on the stock, says the business “faces a critical 12-18 month period, as its investments in self-driving technology are reaching a point where significant progress will be needed for the company to maintain its valuation premium.”

“This is a risky setup, as it is largely unknown, how self-driving performance will improve with access to more data, but the results aren’t particularly encouraging so far.”

But in the bullish camp, Oliver Rodzianko says the recent “We, Robot” event was a success, despite the precipitant stock decline.

“Not only does it show Tesla investors and customers that the company’s plans have a substantial grounding, but the company should be commended for how quickly it embraced a full pivot to autonomous taxis,” he said. “Although Musk previously announced that Tesla’s robotaxis would be on the road by 2020, this doesn’t diminish the groundbreaking achievement of being able to showcase a fully autonomous driving experience in 2024 in a state-of-the-art vehicle design.”

Also on the earnings calendar, on Monday, Nucor (NUE) and Logitech (LOGI) report.

General Electric (GE), Philip Morris (PM), Verizon (VZ), Texas Instruments (TXN), Lockheed Martin (LMT), General Motors (GM) and 3M (MMM) weigh in on Tuesday.

Joining Tesla on Wednesday are Coca-Cola (KO), T-Mobile (TMUS), IBM (IBM), AT&T (T) and Boeing (BA).

Valero (VLO), UPS (UPS), Honeywell (HON), American Airlines (AAL), Northrop Grumman (NOC), Southwest Airlines (LUV), and Dow (DOW) issue results on Thursday.

On Friday, Centene (CNC), HCA (HCA) and Colgate-Palmolive (CL) are up.

On the economic front, September durable goods orders will garner the most attention. The report hits Friday, with economists expecting a -0.9% decline in the headline number and a -0.1% drop in core orders, ex transportation.

Wells Fargo economists say: “Durable goods orders have been volatile in recent months primarily due to swings in aircraft orders.”

“The strong start to the Fed’s easing cycle provides scope for a rebound in equipment spending in the year ahead,” they add. “That said, it will likely take some time for lower rates to filter through the economy and revitalize business demand for durable goods. Looking to September, a decline in industrial production foretells an underwhelming durable goods print.”

In the news this weekend, a union representing around 30,000 Boeing (BA) employees announced a tentative agreement that, if finalized, could end a more-than-month-long strike that has disrupted production.

As part of the deal, Boeing is set to offer its workers a 35% pay hike over four years, sharply higher than its initial offer of 25%, the International Association of Machinists said. Other terms of the deal include a reinstated incentive plan and improved contributions to employees’ 401(k) plans.

“We look forward to our employees voting on the negotiated proposal,” Boeing said.

In addition, Boeing is deciding whether it will sell assets such as underperforming business units to raise cash as it seeks to overcome its recent crises. That’s according to The Wall Street Journal.

The company’s board met last week at the company’s headquarters in Arlington, Va., where they questioned division heads and combed through reports on the condition of each unit.

CEO Kelly Ortberg, who was brought in to fix the company’s operations in early August, wasn’t there for the discussions as he was in strike negotiations.

And happy hour is over.

TGI Friday’s, the bar/restaurant that is given credit for popularizing that term for discount drinks, is looking for financing as it prepares to file for bankruptcy in the coming weeks.

Bloomberg says the company is in talks with lenders to search for a loan that would let it continue running its restaurants through the Chapter 11 process and emerge as an operating company. TGI Friday’s joins the long list of casual dining chains struggling with consumers’ shifting preference for fast-casual eateries like Chipotle (CMG).

The TGI Friday’s on Manhattan’s Upper East Side was one of the world’s first singles bar and it was also where Brian Flanagan (played by Tom Cruise) learned to bartend in “Cocktail.”

For income investors, companies that have an ex-dividend date coming next week include Caterpillar (CAT), CVS Health (CVS), Lowe’s (LOW), Clorox (CLX), and Fastenal (FAST).

Companies forecast to increase their quarterly dividend payouts include Smurfit Westrock (SW) to $0.33 from $0.3025, Hartford Financial Services Group (HIG) to $0.50 from $0.47, Entergy (ETR) to $1.20 from $1.13 and American Electric Power (AEP) to $0.92 from $0.88.

And in the Wall Street Research Corner, UBS Global Wealth Management said it now has an attractive view on U.S. equities, supported in part by growing adoption of artificial intelligence technology.

David Lefkowitz, head of equities Americas, says: “From a macro perspective, the combination of slowing but durable economic growth, healthy earnings growth, and continued Fed rate cuts are all supportive.”

While economic growth is slowing, the country’s labor market is “healthy,” with real wages rising, he said.

He lists his top picks, but it’s good to point out that UBS has had a neutral view on U.S. equities while the S&P 500 has risen more than 20% year to date.

Among the names are Meta (META), Home Depot (HD), Ralph Lauren (RL), Coca-Cola (KO), ExxonMobil (XOM), BofA (BAC), Merck (MRK), Microsoft (MSFT), Freeport-McMoRan (FCX), Equity Residential (EQR) and NextEra Energy (NEE).

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