Friday’s earnings had a number of mixed results, with MS strong and COF weak, GE strong and INTC weak, and SLB strong and JCI weak. The results are slowly filling in the macro picture for the global economy heading into 2013. SLB’s strong earnings vs. JCI’s weak numbers offer further evidence on the macro environment.
Schlumberger, the largest U.S. oil services company, ended 2012 on a strong note, beating earnings and revenue estimates, and maintaining its 2013 outlook. SLB CEO:
We capped the year with revenues of over $42 billion, up by 14%, with the International Areas growing by $4 billion, or 15%, their strongest growth by far since 2008…Significant revenue growth was recorded in the Latin America and Middle East and Asia Areas…The world macroeconomic environment remains uncertain while the GDP growth outlook for 2013 remains unchanged. Global oil demand is expected to grow at similar levels to 2012.
SLB stock closed up more than 4%, near the highs of the day.
In contrast, JCI closed lower after its results. Johnson Controls makes automotive systems and building controls, has a $21 billion market cap, and 65% of its sales from outside the U.S. Here is the important quote from the Johnson Controls CEO:
Our first quarter results were in-line with the expectations we announced during our earnings release last October. Global demand in our markets was softer than a year ago, but we benefitted from the strong backlog of business we had entering the fiscal year…European demand continued to soften and we began restructuring initiatives in the third and fourth quarters of fiscal 2012 to improve our performance in the region. We expect to realize the benefits of those actions in the second half of the year.”
The rest of the release breaks down differences in the businesses by region. JCI’s automotive business has been strongest in the U.S., and weakest in Europe, with Asia up slightly. It’s building controls segment has been quite strong in China, but weaker elsewhere. Overall, JCI lowered guidance for the 1st half of 2013, primarily because of continued weakness in the European auto market, and the stock closed down 3%.
The earnings picture continues to highlight U.S. housing, U.S. autos, and emerging market industrial production as areas of recent strength, while European exposure in most sectors is the usual culprit for weak demand.
Markets overnight:
- Asia mixed the past 2 days on little news. The Japanese yen continues its volatile ways, rallying 1% overnight after the BoJ did not announce any new stimulus measures
- Europe was up about 0.5% yesterday, flat today. German Investor Confidence numbers hit their highest level in more than 2 years today.
- SPX futures are flat after the 3 day weekend. The Jan25th weekly straddle was pricing in a slightly higher than 1% move for this week, as of Friday’s close (9.5 implied vol)
- The dollar and Treasury bonds are lower, and commodities are a touch higher.
- Dupont (DD) reported better than expected results, and is trading up 2%, while Verizon reported weak results on pension costs and hurricane Sandy, trading down 2%.